25346 Federal Register / Vol. 72, No. 86 / Friday, May 4, 2007 / Notices 

Applicants state that the proposed sale 

by the Trust of a portion of its assets to 

the Healthcare Trust in exchange for the 

securities of the Healthcare Trust will be 

based on the fair value of those assets 

computed on the day of the proposed 

transfer in the same manner as for 

purposes of the daily net asset valuation 

for the Trust. Applicants further state 

that such assets are anticipated to 

consist largely or exclusively of cash 

and short-term fixed income 

instruments and thus will likely pose 

few, if any, issues with respect to 

valuation. The Healthcare Trust shares 

distributed by the Trust in the 

Transaction will be valued based on the 

value of the Healthcare Trust’s assets. 

‘‘Value’’ for those purposes will be 

determined in accordance with the 

provisions of section 2(a)(41) of the Act 

and rule 2a–4 under the Act. 

4. With respect to the Transaction, 

each of the Trust’s Board and the 

Healthcare Trust’s Board, including a 

majority of the Disinterested Directors of 

each Board, determined that the 

participation in the Transaction is in the 

best interests of the Trust or the 

Healthcare Trust, as applicable, and that 

the interests of the existing shareholders 

of the Trust or the Healthcare Trust, as 

applicable, will not be diluted as a 

result of the Transaction. These 

findings, and the basis upon which the 

findings were made, will be recorded 

fully in the minute book of the Trust or 

the Healthcare Trust, as applicable. 

5. Applicants state that the 

Transaction will be consistent with the 

stated investment policies of the Trust 

and the Healthcare Trust as disclosed to 

shareholders. The distribution of the 

Healthcare Trust shares will not initially 

change the position of the Trust’s 

shareholders with respect to the 

underlying investments that they then 

own. A proxy statement/prospectus of 

the Trust and the Healthcare Trust is 

being used to solicit the approval of the 

Trust’s shareholders of the Transaction 

at a vote to take place following the 

issuance of the exemptive order. The 

Trust’s shareholders will have the 

opportunity to vote on the Transaction 

after having received disclosure 

concerning the Transaction. 

6. Applicants also seek an order under 

section 17(d) of the Act and rule 17d– 

1 under the Act. Section 17(d) and rule 

17d–1 prohibit affiliated persons from 

participating in joint arrangements with 

a registered investment company unless 

authorized by the Commission. In 

passing on applications for these orders, 

rule 17d–1 provides that the 

Commission will consider whether the 

participation of the investment 

company is consistent with the 

provisions, policies and purposes of the 

Act, and the extent to which the 

participation is on a basis different from 

or less advantageous than that of the 

other participants. Applicants request 

an order pursuant to rule 17d–1 to the 

extent that the participation of the 

applicants in the Transaction may be 

deemed to constitute a prohibited joint 

transaction. 

7. Applicants state that the 

Transaction will not place any of the 

Trust, the Healthcare Trust, or existing 

shareholders of the Trust in a position 

less advantageous than that of any other 

person. As noted, the value of the 

Trust’s assets transferred to the 

Healthcare Trust (and the common 

shares received in return) will be based 

on their fair value as computed on the 

day of the transfer in accordance with 

the requirements of the Act. The shares 

of the Healthcare Trust will be 

distributed as a dividend to the 

shareholders, leaving the shareholders 

in the same investment posture 

immediately following the Transaction 

as before, subject only to changes in 

market price of the underlying assets 

subsequent to the Transaction. 

8. Applicants assert that the 

Transaction has been proposed in order 

to benefit the shareholders of the Trust 

as well as the Healthcare Trust, and 

neither Gabelli nor any other affiliated 

person of the Trust or the Healthcare 

Trust will receive fees solely as a result 

of the Transaction. The fee indirectly 

payable to Gabelli by the Healthcare 

Trust’s shareholders will be the same as 

the fee currently indirectly payable to 

Gabelli by the Trust’s shareholders. In 

addition, by creating the Healthcare 

Trust through the Transaction, the Trust 

is effectively enabling its shareholders 

to receive securities without the costs 

associated with a public offering. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–8504 Filed 5–3–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

27807; 812–13286] 

Old Westbury Funds, Inc. and 

Bessemer Investment Management 

LLC; Notice of Application 

April 27, 2007. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of application for an 

order under section 6(c) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) for an exemption from section 

15(a) of the Act and rule 18f–2 under 

the Act, as well as from certain 

disclosure requirements. 

APPLICANTS: Old Westbury Funds, Inc. 

(the ‘‘Corporation’’) and Bessemer 

Investment Management LLC (the 

‘‘Adviser’’). 

FILING DATES: The application was filed 

on April 24, 2006, and amended on 

April 26, 2007. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the application will be 

issued unless the Commission orders a 

hearing. Interested persons may request 

a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on May 22, 2007, and 

should be accompanied by proof of 

service on the applicants, in the form of 

an affidavit, or, for lawyers, a certificate 

of service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities & 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090; 

Applicants, c/o Robert M. Kurucza, 

Morrison & Foerster LLP, 2000 

Pennsylvania Avenue, NW., Suite 5500, 

Washington, DC 20006. 

FOR FURTHER INFORMATION CONTACT: 

Bruce R. MacNeil, Senior Counsel, at 

(202) 551–6817 or Julia Kim Gilmer, 

Branch Chief, at (202) 551–6821 

(Division of Investment Management, 

Office of Investment Company 

Regulation). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained for a fee at the 

Commission’s Public Reference Branch, 

100 F Street, NE., Washington, DC 

20549–0102 (telephone (202) 551–5850). 

Applicants’ Representations 

1. The Corporation, a Maryland 

corporation, is registered under the Act 

as an open-end management investment 

company. The Corporation currently is 

comprised of seven series (each a 

‘‘Fund’’ and collectively, the ‘‘Funds’’), 

each with separate investment 


cprice-sewell on DSK89S0YB1PROD with NOTICES
Federal Register / Vol. 72, No. 86 / Friday, May 4, 2007 / Notices 25347 

1Applicants also request relief with respect to 

future series of the Corporation and any other 

existing or future registered open-end management 

investment company or series thereof that: (a) Is 

advised by the Adviser, (b) uses the management 

structure described in the application; and (c) 

complies with the terms and conditions of the 

application (included in the term ‘‘Funds’’). The 

only existing registered open-end management 

investment company that currently intends to rely 

on the requested order is named as an applicant. All 

references to the term ‘‘Adviser’’ include: (a) the 

Adviser, and (b) any entity controlling, controlled 

by, or under common control with the Adviser. If 

the name of any Fund contains the name of a 

Subadviser (as defined below), the name of the 

Adviser will precede the name of the Subadviser. 

objectives, policies and restrictions.1

The Adviser is registered as an 

investment adviser under the 

Investment Advisers Act of 1940 

(‘‘Advisers Act’’) and serves as 

investment adviser to each of the Funds 

pursuant to an investment advisory 

agreement (‘‘Advisory Agreement’’) with 

the Corporation. The Advisory 

Agreement has been approved by the 

Corporation’s board of directors (the 

‘‘Board’’), including a majority of the 

directors who are not ‘‘interested 

persons,’’ as defined in section 2(a)(19) 

of the Act, of the Corporation or the 

Adviser (‘‘Independent Directors’’), as 

well as by the shareholders of each 

Fund. 

2. Under the terms of the Advisory 

Agreement, the Adviser provides 

investment advisory services to each 

Fund, supervises the investment 

program for each Fund, and has the 

authority, subject to Board approval, to 

enter into investment subadvisory 

agreements (‘‘Subadvisory Agreements’’) 

with one or more subadvisers 

(‘‘Subadvisers’’). Each Subadviser is 

registered under the Advisers Act. The 

Adviser monitors and evaluates the 

Subadvisers and recommends to the 

Board their hiring, retention or 

termination. Subadvisers recommended 

to the Board by the Adviser are selected 

and approved by the Board, including a 

majority of the Independent Directors. 

Each Subadviser has discretionary 

authority to invest the assets or a 

portion of the assets of a particular 

Fund. The Adviser compensates each 

Subadviser out of the fees paid to the 

Adviser under the Advisory Agreement. 

3. Applicants request an order to 

permit the Adviser, subject to Board 

approval, to enter into and materially 

amend Subadvisory Agreements 

without obtaining shareholder approval. 

The requested relief will not extend to 

any Subadviser that is an affiliated 

person, as defined in section 2(a)(3) of 

the Act, of the Corporation or of the 

Adviser, other than by reason of serving 

as a Subadviser to one or more of the 

Funds (‘‘Affiliated Sub-Adviser’’). 

4. Applicants also request an 

exemption from the various disclosure 

provisions described below that may 

require a Fund to disclose fees paid by 

the Adviser to each Subadviser. An 

exemption is requested to permit the 

Corporation to disclose for each Fund 

(as both a dollar amount and as a 

percentage of each Fund’s net assets): (a) 

The aggregate fees paid to the Adviser 

and any Affiliated Subadvisers; and (b) 

the aggregate fees paid to Subadvisers 

other than Affiliated Subadvisers 

(collectively ‘‘Aggregate Fee 

Disclosure’’). For any Fund that employs 

an Affiliated Subadviser, the Fund will 

provide separate disclosure of any fees 

paid to the Affiliated Subadviser. 

Applicants’ Legal Analysis 

1. Section 15(a) of the Act provides, 

in relevant part, that it is unlawful for 

any person to act as an investment 

adviser to a registered investment 

company except under a written 

contract that has been approved by the 

vote of a majority of the company’s 

outstanding voting securities. Rule 18f– 

2 under the Act provides that each 

series or class of stock in a series 

company affected by a matter must 

approve such matter if the Act requires 

shareholder approval. 

2. Form N–1A is the registration 

statement used by open-end investment 

companies. Item 14(a)(3) of Form N–1A 

requires disclosure of the method and 

amount of the investment adviser’s 

compensation. 

3. Rule 20a–1 under the Act requires 

proxies solicited with respect to an 

investment company to comply with 

Schedule 14A under the Securities 

Exchange Act of 1934 (‘‘1934 Act’’). 

Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) 

and 22(c)(9) of Schedule 14A, taken 

together, require a proxy statement for a 

shareholder meeting at which the 

advisory contract will be voted upon to 

include the ‘‘rate of compensation of the 

investment adviser,’’ the ‘‘aggregate 

amount of the investment adviser’s 

fees,’’ a description of the ‘‘terms of the 

contract to be acted upon,’’ and, if a 

change in the advisory fee is proposed, 

the existing and proposed fees and the 

difference between the two fees. 

4. Form N–SAR is the semi-annual 

report filed with the Commission by 

registered investment companies. Item 

48 of Form N–SAR requires investment 

companies to disclose the rate schedule 

for fees paid to their investment 

advisers, including the Subadvisers. 

5. Regulation S–X sets forth the 

requirements for financial statements 

required to be included as part of 

investment company registration 

statements and shareholder reports filed 

with the Commission. Sections 6– 

07(2)(a), (b), and (c) of Regulation S–X 

require that investment companies 

include in their financial statements 

information about investment advisory 

fees. 

6. Section 6(c) of the Act provides that 

the Commission may exempt any 

person, security, or transaction or any 

class or classes of persons, securities, or 

transactions from any provisions of the 

Act, or from any rule thereunder, if such 

exemption is necessary or appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. Applicants 

state that their requested relief meets 

this standard for the reasons discussed 

below. 

7. Applicants assert that the 

shareholders are relying on the 

Adviser’s experience to select the 

Subadviser best suited to achieve a 

Fund’s investment objectives. 

Applicants assert that, from the 

perspective of the investor, the role of 

the Subadvisers is comparable to that of 

the individual portfolio managers 

employed by traditional investment 

company advisory firms. Applicants 

state that requiring shareholder 

approval of each Subadvisory 

Agreement would impose costs and 

unnecessary delays on the Funds, and 

may preclude the Adviser from acting 

promptly in a manner considered 

advisable by the Board. Applicants note 

that the Advisory Agreement and any 

Subadvisory Agreement with an 

Affiliated Subadviser will remain 

subject to section 15(a) of the Act and 

rule 18f–2 under the Act. 

8. Applicants assert that some 

Subadvisers use a ‘‘posted’’ rate 

schedule to set their fees. Applicants 

state that while Subadvisers are willing 

to negotiate fees that are lower than 

those posted on the schedule, they are 

reluctant to do so where the fees are 

disclosed to other prospective and 

existing customers. Applicants submit 

that the requested relief will benefit 

Fund shareholders because it would 

improve the Adviser’s ability to 

negotiate the fees paid to the 

Subadvisers. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 

1. Before a Fund may rely on the 

order requested in the application, the 

operation of the Fund in the manner 

described in the application will be 

approved by a majority of the Fund’s 

outstanding voting securities, as defined 


cprice-sewell on DSK89S0YB1PROD with NOTICES
25348 Federal Register / Vol. 72, No. 86 / Friday, May 4, 2007 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(iii). 

4 17 CFR 240.19b–4(f)(6). 

5The Exchange has asked the Commission to 

waive the 30-day operative delay required by Rule 

19b–4(f)(6)(iii), 17 CFR 240.19b–4(f)(6)(iii). See 

discussion infra Section III. 

in the Act, or, in the case of a Fund 

whose public shareholders purchased 

shares on the basis of a prospectus 

containing the disclosure contemplated 

by condition 2 below, by the sole initial 

shareholder before offering the Fund’s 

shares to the public. 

2. Each Fund will disclose in its 

prospectus the existence, substance, and 

effect of any order granted pursuant to 

the application. In addition, each Fund 

will hold itself out to the public as 

employing the management structure 

described in the application. The 

prospectus will prominently disclose 

that the Adviser has ultimate 

responsibility, subject to oversight by 

the Board, to oversee Subadvisers and 

recommend their hiring, termination, 

and replacement. 

3. Within 90 days of the hiring of a 

new Subadviser, the affected Fund 

shareholders will be furnished all the 

information about the new Subadviser 

that would be included in a proxy 

statement, except as modified to permit 

Aggregate Fee Disclosure. This 

information will include Aggregate Fee 

Disclosure and any change in such 

disclosure caused by the addition of the 

new Subadviser. To meet this 

obligation, the Fund will provide 

shareholders within 90 days of the 

hiring of a new Subadviser with an 

information statement meeting the 

requirements of Regulation 14C, 

Schedule 14C, and Item 22 of Schedule 

14A under the 1934 Act, except as 

modified by the order to permit 

Aggregate Fee Disclosure. 

4. The Adviser will not enter into a 

Subadvisory Agreement with any 

Affiliated Subadviser without that 

agreement, including the compensation 

to be paid thereunder, being approved 

by the shareholders of the applicable 

Fund. 

5. At all times, at least a majority of 

the Board will be Independent 

Directors, and the nomination of new or 

additional Independent Directors will 

be placed within the discretion of the 

then-existing Independent Directors. 

6. When a Subadviser change is 

proposed for a Fund with an Affiliated 

Subadviser, the Board, including a 

majority of the Independent Directors, 

will make a separate finding, reflected 

in the Board minutes, that the change is 

in the best interests of the Fund and its 

shareholders and does not involve a 

conflict of interest from which the 

Adviser or the Affiliated Subadviser 

derives an inappropriate advantage. 

7. The Adviser will provide general 

management services to each Fund, 

including overall supervisory 

responsibility for the general 

management and investment of the 

Fund’s assets, and, subject to review 

and approval of the Board, will: (a) Set 

each Fund’s overall investment 

strategies, (b) evaluate, select and 

recommend Subadvisers to manage all 

or a part of a Fund’s assets, (c) allocate 

and, when appropriate, reallocate a 

Fund’s assets among multiple 

Subadvisers; (d) monitor and evaluate 

the performance of the Subadvisers, and 

(e) implement procedures reasonably 

designed to ensure that the Subadvisers 

comply with each relevant Fund’s 

investment objective, policies and 

restrictions. 

8. No director or officer of the Funds 

or the Adviser, will own directly or 

indirectly (other than through a pooled 

investment vehicle that is not controlled 

by such person), any interest in a 

Subadviser, except for: (a) ownership of 

interests in the Adviser or any entity 

that controls, is controlled by, or is 

under common control with the 

Adviser, or (b) ownership of less than 

1% of the outstanding securities of any 

class of equity or debt of a publicly 

traded company that is either a 

Subadviser or an entity that controls, is 

controlled by, or is under common 

control with a Subadviser. 

9. The Adviser will provide the 

Board, no less frequently than quarterly, 

with information about the Adviser’s 

profitability on a per-Fund basis. Such 

information will reflect the impact on 

the profitability of the hiring or 

termination of any Subadviser during 

the applicable quarter. 

10. Each Fund will disclose in its 

registration statement the Aggregate Fee 

Disclosure. 

11. The requested order will expire on 

the effective date of rule 15a–5 under 

the Act, if adopted. 

12. Whenever a Subadviser is hired or 

terminated, the Adviser will provide the 

Board with information showing the 

expected impact on the Adviser’s 

profitability. 

13. Independent legal counsel, as 

defined in rule 0–1(a)(6) under the 1940 

Act, will be engaged to represent the 

Independent Directors. The selection of 

such counsel will be within the 

discretion of the then existing 

Independent Directors. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–8506 Filed 5–3–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55676; File No. SR–CBOE– 

2007–40] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Extend the Duration of 

CBOE Rule 6.45A(b) Pertaining to 

Orders Represented in Open Outcry 

April 27, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on April 25, 

2007, the Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been 

substantially prepared by the CBOE. 

The Exchange filed the proposal as a 

‘‘non-controversial’’ proposed rule 

change pursuant to Section 

19(b)(3)(A)(iii) of the Act 3 and Rule 

19b–4(f)(6) thereunder,4 which renders 

it effective upon filing with the 

Commission.5 The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The CBOE proposes to extend the 

duration of CBOE Rule 6.45A(b) (the 

‘‘Rule’’), relating to the allocation of 

orders represented in open outcry in 

equity option classes designated by the 

Exchange to be traded on the CBOE 

Hybrid Trading System (‘‘Hybrid’’) 

through July 31, 2007. No other changes 

are being made to the Rule. The text of 

the proposed rule change is available at 

CBOE, the Commission’s Public 

Reference Room, and (http:// 

www.cboe.org/Legal). 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

CBOE included statements concerning 

the purpose of, and basis for, the 


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