Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices 25795 

challenging the record to the agency (i.e., law 

enforcement agency) that contributed the 

questioned information, or direct challenge 

as to the accuracy or completeness of any 

entry on the criminal history record to the 

Assistant Director, Federal Bureau of 

Investigation Identification Division, 

Washington, DC 20537–9700 (as set forth in 

28 CFR 16.30 through 16.34). In the latter 

case, the FBI forwards the challenge to the 

agency that submitted the data and requests 

that agency to verify or correct the challenged 

entry. Upon receipt of an official 

communication directly from the agency that 

contributed the original information, the FBI 

Identification Division makes any changes 

necessary in accordance with the information 

supplied by that agency. The Licensee must 

allow at least ten (10) days for an individual 

to initiate an action challenging the results of 

an FBI criminal history records check after 

the record is made available for his/her 

review. The Licensee may make a final 

determination for unescorted access to 

radioactive material or other property based 

on the criminal history records check, only 

upon receipt of the FBI’s ultimate 

confirmation or correction of the record. 

Upon a final adverse determination for 

unescorted access to radioactive material or 

other property, the Licensee shall provide the 

individual its documented basis for denial. 

During this review process for assuring 

correct and complete information, unescorted 

access to radioactive material or other 

property shall not be granted to an 

individual. 

Protection of Information 

1. Each Licensee who obtains a criminal 

history records check for an individual, 

pursuant to this Order, shall establish and 

maintain a system of files and procedures for 

protecting the record and the personal 

information from unauthorized disclosure. 

2. The Licensee may not disclose the 

record nor personal information collected 

and maintained to persons other than the 

subject individual, his/her representative, or 

to those who have a need to access the 

information in performing assigned duties in 

the process of determining unescorted access 

to the radioactive material or other property. 

No individual authorized to have access to 

the information may redisseminate the 

information to any other individual who does 

not have a need-to-know. 

3. The personal information obtained on an 

individual from a criminal history records 

check may be transferred to another Licensee 

if the Licensee holding the criminal history 

record receives the individual’s written 

request to redisseminate the information 

contained in his/her file, and the gaining 

Licensee verifies information such as the 

individual’s name, date of birth, social 

security number, sex, and other applicable 

physical characteristics for identification 

purposes. 

4. The Licensee shall make criminal 

history records, obtained under this section, 

available for examination by an authorized 

representative of the NRC to determine 

compliance with the regulations and laws. 

5. The Licensee shall retain all fingerprint 

and criminal history records received from 

the FBI, or a copy, if the individual’s file has 

been transferred, for three (3) years after 

termination of employment or denial to 

unescorted access to radioactive material or 

other property. After the required three (3) 

year period, these documents shall be 

destroyed by a method that will prevent 

reconstruction of the information in whole, 

or in part. 

Attachment 3—Trustworthiness and 

Reliability Requirements 

In order to ensure the safe handling, use, 

and control radioactive material or other 

property, each licensee shall control and 

limit access to radioactive material or other 

property to those individuals who have 

established the need-to-know, and are 

considered to be trustworthy and reliable. 

Licensees shall document the basis for 

concluding that there is reasonable assurance 

that the individuals that are granted 

unescorted access to radioactive material or 

other property are trustworthy and reliable, 

and do not constitute an unreasonable risk 

for malevolent activities. 

The Licensee shall comply with the 

requirements of this Attachment: 

1. The trustworthiness and reliability of an 

individual shall be determined based on a 

background investigation: 

(a) The background investigation shall 

address at least the past three (3) years, and, 

at a minimum, include verification of 

employment, education, and personal 

references. The licensee shall also, to the 

extent possible, obtain independent 

information to corroborate the information 

provided by the employee (i.e., seeking 

references not supplied by the individual). 

(b) If an individual’s employment has been 

less than the required three (3) year period, 

educational references may be used in lieu of 

employment history. 

The licensee’s background investigation 

requirements may be satisfied for an 

individual that has an active Federal security 

clearance. 

2. The licensee shall retain documentation 

regarding the trustworthiness and reliability 

of individual employees for three years after 

the individual’s employment ends. 

[FR Doc. E7–8762 Filed 5–4–07; 8:45 am] 

BILLING CODE 7590–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

27812; 812–13340] 

First Trust Exchange-Traded Fund, et 

al.; Notice of Application 

April 30, 2007. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 12(d)(1)(J) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) for exemption from sections 

12(d)(1)(A) and (B) of the Act and under 

sections 6(c) and 17(b) of the Act for an 

exemption from section 17(a) of the Act. 

SUMMARY OF THE APPLICATION: The 

applicants request an order to permit 

certain management investment 

companies and unit investment trusts 

registered under the Act to acquire 

shares of certain open-end management 

investment companies registered under 

the Act that are outside the same group 

of investment companies. 

APPLICANTS: First Trust ExchangeTraded Fund (‘‘Initial Trust’’), First 

Trust Exchange-Traded Fund II (‘‘Trust 

II’’), and First Trust Exchange-Traded 

AlphaDEX Fund (‘‘AlphaDEX Trust’’) 

(collectively, the ‘‘Existing Trusts’’), 

First Trust Advisors L.P. (the 

‘‘Advisor’’) and First Trust Portfolios 

L.P. (the ‘‘Distributor’’). 

FILING DATES: The application was filed 

on November 7, 2006, and amended on 

April 27, 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 29, 2007, and 

should be accompanied by proof of 

service on 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 

and Exchange Commission, 100 F 

Street, NE., Washington, DC 20549–

1090; Applicants, 1001 Warrenville 

Road, Lisle, Illinois 60532. 

FOR FURTHER INFORMATION CONTACT: 

Barbara T. Heussler, Senior Counsel, at 

(202) 551–6990, or Mary Kay Frech, 

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 Public 

Reference Desk, U.S. Securities and 

Exchange Commission, 100 F Street, 

NE., Washington DC 20549–0102 

(telephone (202) 551–5850). 

Applicants’ Representations 

1. The Existing Trusts, Massachusetts 

business trusts, are each an open-end 


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1Applicants request that the order also extend to 

any other existing and future series of the Existing 

Trusts and any other registered open-end 

management investment companies and their series 

that may be created in the future and are part of 

the same group of investment companies within the 

meaning of section 12(d)(1)(G)(ii) of the Act, as the 

Existing Trusts (together with the Existing Trusts, 

if they have no series, and any series of an Existing 

Trust, the ‘‘Index Funds’’). 

2In the matter of First Trust Exchange-Traded 

Fund, et al., Investment Company Act Release Nos. 

27051 (August 26, 2005) (notice) and 27068 

(September 20, 2005) (order). 

3All Index Funds that currently intend to rely on 

the requested order are named as applicants. Any 

other entity that relies on the order in the future 

will comply with the terms and conditions of the 

application. An Investing Fund may rely on the 

requested order only to invest in the Index Funds 

and not in any other registered investment 

company. 

4An ‘‘Investing Fund Affiliate’’ is an Investing 

Fund Adviser, Investing Fund Subadviser, Sponsor, 

promoter, or principal underwriter of an Investing 

Fund, and any person controlling, controlled by, or 

under common control with any of those entities. 

An ‘‘Index Fund Affiliate’’ is an investment adviser, 

investment subadviser, promoter, or principal 

underwriter of an Index Fund, and any person 

controlling, controlled by, or under common 

control with any of those entities. 

management investment company 

registered under the Act and organized 

as a series fund.1 The Initial Trust 

currently has twelve series. Trust II and 

the AlphaDEX Trust currently do not 

have series. The Existing Trusts and 

their series operate as exchange-traded 

funds that redeem their shares in large 

aggregations (‘‘Creation Units’’) in 

reliance on an order previously granted 

by the Commission (‘‘ETF Order’’).2 The 

Advisor is registered as an investment 

adviser under the Investment Advisers 

Act of 1940 (‘‘Advisers Act’’). The 

Advisor or an entity controlling, 

controlled by or under common control 

with the Advisor will serve as 

investment adviser to the Index Funds. 

The Advisor may enter into subadvisory agreements with sub-advisors 

with respect to particular Index Funds 

(each, a ‘‘Sub-Advisor’’). The Distributor 

is registered as a broker-dealer under the 

Securities Exchange Act of 1934. 

2. Applicants request relief to: (a) 

Permit management investment 

companies or series thereof (‘‘Investing 

Management Companies’’) and unit 

investment trusts or series thereof 

(‘‘Investing Trusts’’ and, together with 

Investing Management Companies, 

‘‘Investing Funds’’) registered under the 

Act, that are not part of the same group 

of investment companies as an Index 

Fund within the meaning of section 

12(d)(1)(G)(ii) of the Act, to acquire, and 

such Index Fund to sell, shares of such 

Index Fund beyond the limits of 

sections 12(d)(1)(A) and (B) of the Act; 

(b) permit principal underwriters, and 

any other brokers or dealers (‘‘Brokers’’) 

to sell shares of any Index Fund to an 

Investing Fund in excess of the limits 

prescribed by section 12(d)(1)(B) of the 

Act; and (c) exempt such transactions 

from section 17(a) of the Act.3

3. Each Investing Management 

Company will be advised by an 

investment adviser within the meaning 

of section 2(a)(20)(A) of the Act 

(‘‘Investing Fund Adviser’’) and may be 

advised by one or more investment 

advisers within the meaning of section 

2(a)(20)(B) of the Act (each an 

‘‘Investing Fund Subadviser’’). Any 

Investing Fund Adviser or Investing 

Fund Subadviser will be registered as an 

investment adviser under the Advisers 

Act. Each Investing Trust will be 

sponsored by a sponsor (‘‘Sponsor’’). 

4. Applicants state that the Index 

Funds will offer the Investing Funds 

simple and efficient vehicles to achieve 

their asset allocation or diversification 

objectives. Applicants state that the 

Index Funds will also provide high 

quality and low cost professional 

investment program alternatives to 

Investing Funds that do not have 

sufficient assets to operate a comparable 

fund. 

Applicants’ Legal Analysis 

A. Section 12(d)(1) 

1. Section 12(d)(1)(A) of the Act, in 

relevant part, prohibits a registered 

investment company from acquiring 

shares of an investment company if the 

securities represent more than 3% of the 

total outstanding voting stock of the 

acquired company, more than 5% of the 

total assets of the acquiring company, 

or, together with the securities of any 

other investment companies, more than 

10% of the total assets of the acquiring 

company. Section 12(d)(1)(B) of the Act 

prohibits a registered open-end 

investment company, its principal 

underwriter, and any broker or dealer 

from selling its shares to another 

investment company if the sale will 

cause the acquiring company to own 

more than 3% of the acquired 

company’s voting stock, or if the sale 

will cause more than 10% of the 

acquired company’s voting stock to be 

owned by investment companies 

generally. 

2. Section 12(d)(1)(J) 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 provision of section 12(d)(1) if the 

exemption is consistent with the public 

interest and the protection of investors. 

Applicants seek an exemption under 

section 12(d)(1)(J) of the Act to permit 

Investing Funds to acquire shares of the 

Index Funds in excess of the limits in 

section 12(d)(1)(A) of the Act, and an 

Index Fund, any principal underwriter 

for an Index Fund and any Broker to sell 

shares of an Index Fund to an Investing 

Fund in excess of the limits of section 

12(d)(1)(B) of the Act. 

3. Applicants state that the proposed 

arrangement and conditions will 

adequately address the policy concerns 

underlying sections 12(d)(1)(A) and (B) 

of the Act, which include concerns 

about large scale redemptions of the 

acquired fund’s shares, excessive 

layering of fees, and overly complex 

fund structures. Accordingly, applicants 

believe that the requested exemption is 

consistent with the public interest and 

the protection of investors. 

4. Applicants believe that neither the 

Investing Fund nor an Investing Fund 

Affiliate would be able to exert undue 

influence over the Index Funds.4 To 

limit the control that an Investing Fund 

may have over an Index Fund, 

applicants propose a condition 

prohibiting the Investing Fund Adviser 

or Sponsor, any person controlling, 

controlled by, or under common control 

with the Investing Fund Adviser or 

Sponsor, and any investment company 

and any issuer that would be an 

investment company but for sections 

3(c)(1) or 3(c)(7) of the Act that is 

advised or sponsored by the Investing 

Fund Adviser or Sponsor, or any person 

controlling, controlled by, or under 

common control with the Investing 

Fund Adviser or Sponsor (‘‘Investing 

Fund Adviser/ Sponsor Group’’) from 

controlling (individually or in the 

aggregate) an Index Fund within the 

meaning of section 2(a)(9) of the Act. 

The same prohibition would apply to 

any Investing Fund Subadviser, any 

person controlling, controlled by or 

under common control with the 

Investing Fund Subadviser, and any 

investment company or issuer that 

would be an investment company but 

for section 3(c)(1) or 3(c)(7) of the Act 

(or portion of such investment company 

or issuer) advised or sponsored by the 

Investing Fund Subadviser or any 

person controlling, controlled by or 

under common control with the 

Investing Fund Subadviser (‘‘Subadviser 

Group’’). Applicants propose other 

conditions to limit the potential for 

undue influence over the Index Funds, 

including that no Investing Fund or 

Investing Fund Affiliate (except to the 

extent it is acting in its capacity as an 

investment adviser to an Index Fund) 

will cause an Index Fund to purchase a 

security in an offering of securities 

during the existence of any 

underwriting or selling syndicate of 


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5Applicants acknowledge that receipt of any 

compensation by (a) an affiliated person of an 

Investing Fund, or an affiliated person of such 

person, for the purchase by the Investing Fund of 

shares of an Index Fund or (b) an affiliated person 

of an Index Fund, or an affiliated person of such 

person, for the sale by the Index Fund of its shares 

to an Investing Fund is subject to section 17(e) of 

the Act. The Participation Agreement also will 

include this acknowledgment. 

6To the extent that purchases and sales of shares 

of an Index Fund occur in the secondary market 

and not through principal transactions directly 

between an Investing Fund and an Index Fund, 

relief from section 17(a) would not be necessary. 

However, the requested relief would apply to direct 

sales of shares in Creation Units by an Index Fund 

to an Investing Fund and redemptions of those 

shares. The requested relief is also intended to 

cover the in-kind transactions that would 

accompany such sales and redemptions, as 

described in the application for the ETF Order. 

which a principal underwriter is an 

Underwriting Affiliate (‘‘Affiliated 

Underwriting’’). An ‘‘Underwriting 

Affiliate’’ is a principal underwriter in 

any underwriting or selling syndicate 

that is an officer, director, member of an 

advisory board, Investing Fund Advisor, 

Investing Fund Subadviser, Sponsor, or 

employee of the Investing Fund, or a 

person of which any such officer, 

director, member of an advisory board, 

Investing Fund Adviser, Investing Fund 

Subadviser, Sponsor or employee is an 

affiliated person. An Underwriting 

Affiliate does not include a person 

whose relationship to an Index Fund is 

covered by section 10(f) of the Act. 

5. Applicants do not believe that the 

proposed arrangement will involve 

excessive layering of fees. The board of 

directors or trustees of any Investing 

Management Company, including a 

majority of the directors or trustees who 

are not ‘‘interested persons’’ (within the 

meaning of section 2(a)(19) of the Act) 

(‘‘Disinterested Trustees’’), will find that 

the advisory fees charged under the 

advisory contract are based on services 

provided that will be in addition to, 

rather than duplicative of, the services 

provided under the advisory contract(s) 

of any Index Fund in which the 

Investing Management Company may 

invest. In addition, an Investing Fund 

Adviser, or trustee or Sponsor of an 

Investing Trust will waive fees 

otherwise payable to it by the Investing 

Management Company or Investing 

Trust in an amount at least equal to any 

compensation (including fees received 

pursuant to any plan adopted by an 

Index Fund under rule 12b–1 under the 

Act) received by the Investing Fund 

Adviser or trustee or Sponsor to the 

Investing Trust or an affiliated person of 

the Investing Fund Adviser, trustee or 

Sponsor from the Index Funds in 

connection with the investment by the 

Investment Management Company or 

Investing Trust in the Index Fund. 

Applicants state that any sales loads or 

service fees charged with respect to 

shares of the Investing Fund will not 

exceed the limits applicable to a fund of 

funds as set forth in Rule 2830 of the 

Conduct Rules of the NASD (‘‘NASD 

Conduct Rules’’). 

6. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that no Index Fund will 

acquire securities of any other 

investment company or company 

relying on section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act, except 

to the extent permitted by rule 12d1–1 

under the Act or an exemptive order 

that allows the Index Fund to purchase 

shares of an affiliated money market 

fund for short-term cash management 

purposes. Before an Investing Fund 

invests in an Index Fund beyond the 

limits of section 12(d)(1)(A)(i) of the 

Act, a participation agreement will be 

entered into between the Index Fund 

and the Investing Fund (‘‘Participation 

Agreement’’). The Participation 

Agreement will require the Investing 

Fund to adhere to the terms and 

conditions of the requested order. The 

Participation Agreement will include an 

acknowledgment from the Investing 

Fund that it may rely on the requested 

order only to invest in the Index Funds 

and not in any other registered 

investment company. Applicants 

represent that each Investing Fund will 

represent in the Participation 

Agreement that if it exceeds the 5% or 

10% limitation in section 12(d)(1)(A)(ii) 

and (iii) of the Act, it will disclose in 

its prospectus that it may invest in the 

Index Funds, and disclose in ‘‘plain 

English’’ in its prospectus the unique 

characteristics of doing so, including 

but not limited to, the expense structure 

and any additional expenses of 

investing in the Index Funds. Each 

Investing Fund will also be required to 

represent in the Participation 

Agreement that it will comply with the 

disclosure requirements set forth in 

Investment Company Act Release No. 

27399 (June 20, 2006). 

7. Applicants also note that an Index 

Fund may choose to reject a direct 

purchase by an Investing Fund. To the 

extent that an Investing Fund purchases 

shares of an Index Fund in the 

secondary market, the Index Fund 

would still retain its ability to reject 

purchases of its shares through its 

decision to enter into the Participation 

Agreement prior to any investment by 

an Investing Fund in excess of the limits 

of section 12(d)(1)(A)(i). 

B. Section 17(a) 

1. Section 17(a) of the Act generally 

prohibits sales or purchases of securities 

between a registered investment 

company and any affiliated person of 

the company. Section 2(a)(3) of the Act 

defines an ‘‘affiliated person’’ of another 

person to include any person 5% or 

more of whose outstanding voting 

securities are directly or indirectly 

owned, controlled, or held with power 

to vote by the other person. 

2. Applicants seek relief from section 

17(a) to permit an Index Fund that is an 

affiliated person of an Investing Fund 

because the Investing Fund holds 5% or 

more of the Index Fund’s shares to sell 

its shares to and redeem its shares from 

an Investing Fund.5 Applicants believe 

that any proposed transactions directly 

between an Index Fund and an 

Investing Fund will be consistent with 

the policies of each Index Fund and 

Investing Fund. The Participation 

Agreement will require any Investing 

Fund that purchases shares from an 

Index Fund to represent that the 

purchase of shares from the Index Fund 

by the Investing Fund will be 

accomplished in compliance with the 

investment restrictions of the Investing 

Fund and will be consistent with the 

investment policies set forth in the 

Investing Funds’ registration statement.6

3. Section 17(b) of the Act authorizes 

the Commission to grant an order 

permitting a transaction otherwise 

prohibited by section 17(a) if it finds 

that: (i) The terms of the proposed 

transaction are fair and reasonable and 

do not involve overreaching on the part 

of any person concerned; (ii) the 

proposed transaction is consistent with 

the policies of each registered 

investment company involved; and (iii) 

the proposed transaction is consistent 

with the general purposes of the Act. 

Section 6(c) of the Act permits the 

Commission to exempt any person or 

transaction from any provision of the 

Act 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. 

4. Applicants submit that the 

proposed transactions satisfy the 

standards for relief under sections 17(b) 

and 6(c) of the Act. Applicants state that 

the terms of the transactions are fair and 

reasonable and do not involve 

overreaching. Applicants note that any 

consideration paid by an Investing Fund 

for the purchase or redemption of shares 

directly from an Index Fund will be 

based on the net asset value of the Index 

Fund. Applicants state that the 


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proposed transactions will be consistent 

with the policies of each Index Fund 

and Investing Fund and with the general 

purposes of the Act. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 

1. The members of the Investing Fund 

Adviser/Sponsor Group will not control 

(individually or in the aggregate) an 

Index Fund within the meaning of 

section 2(a)(9) of the Act. The members 

of the Subadviser Group will not control 

(individually or in the aggregate) an 

Index Fund within the meaning of 

section 2(a)(9) of the Act. If, as a result 

of a decrease in the outstanding voting 

securities of an Index Fund, the 

Investing Fund Adviser/Sponsor Group 

or the Subadviser Group, each in the 

aggregate, becomes a holder of more 

than 25% of the outstanding voting 

securities of the Index Fund, it will vote 

its shares of the Index Fund in the same 

proportion as the vote of all other 

holders of the Index Fund’s shares. This 

condition does not apply to the 

Subadviser Group with respect to an 

Index Fund for which the Investing 

Fund Subadviser or a person 

controlling, controlled by, or under 

common control with the Investing 

Fund Subadviser acts as the investment 

adviser within the meaning of section 

2(a)(20)(A) of the Act. 

2. No Investing Fund or Investing 

Fund Affiliate will cause any existing or 

potential investment by the Investing 

Fund in an Index Fund to influence the 

terms of any services or transactions 

between the Investing Fund or an 

Investing Fund Affiliate and the Index 

Fund or Index Fund Affiliate. 

3. The board of directors or trustees of 

an Investing Management Company, 

including a majority of the Disinterested 

Trustees, will adopt procedures 

reasonably designed to assure that the 

Investing Fund Adviser and any 

Investing Fund Subadviser are 

conducting the investment program of 

the Investing Management Company 

without taking into account any 

consideration received by the Investing 

Management Company or an Investing 

Fund Affiliate from an Index Fund or an 

Index Fund Affiliate in connection with 

any services or transactions. 

4. Once an investment by an Investing 

Fund in the securities of an Index Fund 

exceeds the limit in section 

12(d)(1)(A)(i) of the Act, the board of 

trustees of the Index Fund, including a 

majority of the Disinterested Trustees, 

will determine that any consideration 

paid by the Index Fund to the Investing 

Fund or an Investing Fund Affiliate in 

connection with any services or 

transactions: (a) Is fair and reasonable in 

relation to the nature and quality of the 

services and benefits received by the 

Index Fund; (b) is within the range of 

consideration that the Index Fund 

would be required to pay to another 

unaffiliated entity in connection with 

the same services or transactions; and 

(c) does not involve overreaching on the 

part of any person concerned. This 

condition does not apply with respect to 

any services or transactions between an 

Index Fund and its investment 

adviser(s), or any person controlling, 

controlled by, or under common control 

with such investment adviser(s). 

5. No Investing Fund or Investing 

Fund Affiliate (except to the extent it is 

acting in its capacity as an investment 

adviser to an Index Fund) will cause an 

Index Fund to purchase a security in 

any Affiliated Underwriting. 

6. The board of trustees of the Index 

Fund, including a majority of the 

Disinterested Trustees, will adopt 

procedures reasonably designed to 

monitor any purchases of securities by 

an Index Fund in an Affiliated 

Underwriting once an investment by an 

Investing Fund in Shares of the Index 

Fund exceeds the limit in section 

12(d)(1)(A)(i) of the Act, including any 

purchases made directly from an 

Underwriting Affiliate. The board will 

review these purchases periodically, but 

no less frequently than annually, to 

determine whether the purchases were 

influenced by the investment by the 

Investing Fund in the Index Fund. The 

board will consider, among other things: 

(i) Whether the purchases were 

consistent with the investment 

objectives and policies of the Index 

Fund; (ii) how the performance of 

securities purchased in an Affiliated 

Underwriting compares to the 

performance of comparable securities 

purchased during a comparable period 

of time in underwritings other than 

Affiliated Underwritings or to a 

benchmark such as a comparable market 

index; and (iii) whether the amount of 

securities purchased by the Index Fund 

in Affiliated Underwritings and the 

amount purchased directly from an 

Underwriting Affiliate have changed 

significantly from prior years. The board 

shall take any appropriate actions based 

on its review, including, if appropriate, 

the institution of procedures designed to 

assure that purchases of securities in 

Affiliated Underwritings are in the best 

interest of shareholders. 

7. Each Index Fund shall maintain 

and preserve permanently in an easily 

accessible place a written copy of the 

procedures described in the preceding 

condition, and any modifications, and 

shall maintain and preserve for a period 

of not less than six years from the end 

of the fiscal year in which any purchase 

in an Affiliated Underwriting occurred, 

the first two years in an easily accessible 

place, a written record of each purchase 

of securities in Affiliated Underwritings 

once an investment by an Investing 

Fund in the Shares of the Index Fund 

exceeds the limit in section 

12(d)(1)(A)(i) setting forth from whom 

the securities were acquired, the 

identity of the underwriting syndicate’s 

members, the terms of the purchase, and 

the information or materials upon 

which the board’s determinations were 

made. 

8. Prior to investing in an Index Fund 

in excess of the limits in section 

12(d)(1)(A)(i), each Investing Fund and 

the Index Fund will execute a 

Participation Agreement stating, 

without limitation, that their boards of 

directors/trustees and their investment 

advisers, or their Sponsors and trustees, 

as applicable, understand the terms and 

conditions of the order and agree to 

fulfill their responsibilities under the 

order. At the time of its investment in 

shares of an Index Fund in excess of the 

limit in section 12(d)(1)(A)(i), an 

Investing Fund will notify the Index 

Fund of the investment. At such time, 

the Investing Fund will also transmit to 

the Index Fund a list of the names of 

each Investing Fund Affiliate and 

Underwriting Affiliate. The Investing 

Fund will notify the Index Fund of any 

changes to the list of the names as soon 

as reasonably practicable after a change 

occurs. The Index Fund and the 

Investing Fund will maintain and 

preserve a copy of the order, the 

Participation Agreement, and the list 

with any updated information for the 

duration of the investment and for a 

period of not less than six years 

thereafter, the first two years in an 

easily accessible place. 

9. Prior to approving any advisory 

contract under section 15 of the Act, the 

board of directors/trustees of each 

Investing Management Company, 

including a majority of the Disinterested 

Trustees, will find that the advisory fees 

charged under such advisory contract 

are based on services provided that will 

be in addition to, rather than 

duplicative of, the services provided 

under the advisory contract(s) of any 

Index Fund in which the Investing 

Management Company may invest. 

These findings and their basis will be 

recorded fully in the minute books of 

the appropriate Investing Management 

Company. 

10. An Investing Fund Adviser, or 

trustee or Sponsor of an Investing Trust 

will waive fees otherwise payable to it 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices 25799 

1HTGC was organized on December 18, 2003. On 

February 22, 2005, HTGC filed with the 

Commission its registration statement on Form N–

2 under the Securities Act of 1933, as amended, in 

connection with its initial public offering of 

common stock (the ‘‘IPO’’) and elected to be 

regulated as a BDC on the same date. Section 

2(a)(48) defines a BDC to be any closed-end 

investment company that operates for the purpose 

of making investments in securities described in 

sections 55(a)(1) through 55(a)(3) of the Act and 

makes available significant managerial assistance 

with respect to the issuers of such securities. On 

June 11, 2005, HTGC completed its IPO. 

2The Commission has issued an order under 

Section 61(a)(3)(B) of the Act approving the 2006 

Plan and the grant of options to Non-employee 

Directors under the 2006 Plan. Hercules Technology 

Growth Capital, Inc., Investment Company Act 

Release Nos. 27668 (Jan. 19, 2007) (notice) and 

27669 (Feb. 15, 2007) (order). 

by the Investing Management Company 

or Investing Trust in an amount at least 

equal to any compensation (including 

fees received pursuant to any plan 

adopted by an Index Fund under rule 

12–1 under the Act) received from an 

Index Fund by the Investing Fund 

Adviser, trustee, or Sponsor to the 

Investing Trust or an affiliated person of 

the Investing Fund Adviser, trustee or 

Sponsor, other than any advisory fees 

paid to the Investing Fund Adviser, 

trustee or Sponsor or an affiliated 

person of the Investing Fund Adviser, 

trustee or Sponsor by the Index Fund, 

in connection with the investment by 

the Investing Management Company or 

Investing Trust in the Index Fund. Any 

Investing Fund Subadviser will waive 

fees otherwise payable to the Investing 

Fund Subadviser, directly or indirectly, 

by the Investing Management Company 

in an amount at least equal to any 

compensation received from an Index 

Fund by the Investing Fund Subadviser, 

or an affiliated person of the Investing 

Fund Subadviser, other than any 

advisory fees paid to the Investing Fund 

Subadviser or its affiliated person by the 

Index Fund in connection with the 

investment by the Investing 

Management Company in the Index 

Fund made at the direction of the 

Investing Fund Subadviser. In the event 

that the Investing Fund Subadviser 

waives fees, the benefit of the waiver 

will be passed through to the Investing 

Management Company. 

11. Any sales charges and/or service 

fees charged with respect to shares of an 

Investing Fund will not exceed the 

limits applicable to a fund of funds as 

set forth in Rule 2830 of the NASD 

Conduct Rules. 

12. No Index Fund will acquire 

securities of any investment company or 

company relying on section 3(c)(1) or 

3(c)(7) of the Act in excess of the limits 

contained in section 12(d)(1)(A) of the 

Act, except to the extent permitted by 

rule 12d1–1 under the Act or an 

exemptive order that allows the Index 

Fund to purchase shares of an affiliated 

money market fund for short-term cash 

management purposes. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–8595 Filed 5–4–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

27815; 812–13312] 

Hercules Technology Growth Capital, 

Inc.; Notice of Application 

May 2, 2007. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 6(c) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) for an exemption from sections 

23(a), 23(b) and 63 of the Act, and under 

sections 57(a)(4) and 57(i) of the Act and 

rule 17d–1 under the Act authorizing 

certain joint transactions otherwise 

prohibited by section 57(a)(4) of the Act. 

SUMMARY OF THE APPLICATION: Applicant, 

Hercules Technology Growth Capital, 

Inc. (‘‘HTGC’’) requests an order to 

permit it to issue shares of its restricted 

common stock as part of the 

compensation packages for certain of its 

employees and directors, and certain 

employees of its wholly-owned 

consolidated subsidiaries. 

FILING DATES: The application was filed 

on July 7, 2006 and amended on April 

4, 2007 and May 1, 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 

HTGC 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 HTGC, 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 

and Exchange Commission, 100 F 

Street, NE., Washington, DC 20549–

1090. HTGC, c/o Manuel A. Henriquez, 

Chairman of the Board and Chief 

Executive Officer, HTGC, 400 Hamilton 

Avenue, Suite 310, Palo Alto, California 

94301. 

FOR FURTHER INFORMATION CONTACT: 

Laura J. Riegel, Senior Counsel, at (202) 

551–6873, or Nadya B. Roytblat, 

Assistant Director, 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 Desk, 

100 F Street, NE., Washington, DC 

20549–0102 (tel. 202–551–5850). 

Applicant’s Representations 

1. HTGC, a Maryland corporation, is 

an internally managed, non-diversified, 

closed-end investment company that 

has elected to be regulated as a business 

development company (‘‘BDC’’) under 

the Act.1 HTGC is a specialty finance 

company that provides debt and equity 

growth capital to technology-related and 

life-science companies at all stages of 

development. Shares of HTGC’s 

common stock are traded on The 

NASDAQ Global Market under the 

symbol ‘‘HTGC.’’ As of December 31, 

2006, there were 21,927,034 shares of 

HTGC’s common stock outstanding. As 

of that date, HTGC had 26 employees, 

including the employees of its whollyowned consolidated subsidiaries. 

2. HTGC currently has a four member 

board of directors (‘‘Board’’) of whom 

one is considered to be an ‘‘interested 

person’’ of HTGC within the meaning of 

section 2(a)(19) of the Act and three are 

not-interested persons (‘‘Non-interested 

Directors’’). HTGC has three directors 

who are not officers of employees of 

HTGC (the ‘‘Non-employee Directors’’). 

Currently, HTGC’s Non-employee 

Directors are all Non-interested 

Directors, but it is possible that HTGC 

may have Non-employee Directors in 

the future who are interested persons of 

HTGC. 

3. In May, 2006, HTGC adopted the 

2006 Non-employee Director Plan (the 

‘‘2006 Plan’’) for the purpose of 

advancing the interests of HTGC by 

providing for the grant of awards under 

the 2006 Plan to eligible directors of 

HTGC who are Non-employee 

Directors.2 HTGC proposes to amend 


pwalker on PROD1PC71 with NOTICES