

[Federal Register: October 4, 2007 (Volume 72, Number 192)]
[Notices]               
[Page 56813-56814]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04oc07-116]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28009; 812-13412]

 
Vanguard STAR Funds, et al.; Notice of Application

September 28, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (``Act'') for an exemption from rule 12d1-2(a) 
under the Act.

-----------------------------------------------------------------------

Summary of Application:  Applicants request an order to permit funds of 
funds relying on rule 12d1-2 under the Act to invest in certain 
financial instruments.

Applicants:  Vanguard STAR funds, Vanguard Chester Funds, Vanguard 
Trustees' Equity Fund, Vanguard Variable Insurance Funds (collectively, 
the ``Trusts''), The Vanguard Group, Inc. (``VGI'') and Vanguard 
Marketing Corporation (``VMC'').

Filing Dates: The application was filed on August 10, 2007, and amended 
on September 24 and 28, 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 October 23, 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, Commission, 100 F Street, NE., Washington, DC 
20549-1090; Applicants, c/o Nathan M. Will, The Vanguard Group, Inc., 
P.O. Box 2600, Valley Forge, PA 19482.

FOR FURTHER INFORMATION CONTACT: Donna Tumminio, Law Clerk, at (202) 
551-6826, or Michael W. Mundt, 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 Branch, 100 F Street, NE., Washington, DC 
20549-0104 (telephone (202) 551-8090).

Applicants' Representations

    1. The Trusts are Delaware statutory trusts and are registered 
under the Act as open-end management investment companies. The Trusts 
offer separate series (``Funds'') that may invest in other registered 
investment companies in reliance on section 12(d)(1)(G) of the Act and 
rule 12d1-2 under the Act (``Underlying Funds''). Applicants propose 
that the Funds be permitted to invest in futures contracts, options on 
futures contracts, swap agreements, derivatives, and other financial 
instruments that may not be securities within the meaning of section 
2(a)(36) of the Act (``Other Investments''), in addition to Underlying 
Funds.\1\
---------------------------------------------------------------------------

    \1\ Other Investments do not include shares of any registered 
investment companies that are not part of the ``same group of 
investment companies,'' as defined in section 12(d)(1)(G)(ii) of the 
Act, as the Trusts. Applicants request that the relief also apply to 
any future Fund, whether organized as an investment company or as a 
series thereof, which is advised by VGI or any entity controlling, 
controlled by or under common control with VGI and which is part of 
the same group of investment companies as the Funds.
---------------------------------------------------------------------------

    2. VGI is a Pennsylvania corporation that is wholly and jointly 
owned by certain registered investment companies. VGI is registered as 
an investment adviser under the Investment Advisers Act of 1940 and as 
a transfer agent under the Securities Exchange Act of 1934 (``Exchange 
Act''). VGI provides each of the Funds with corporate management, 
administrative, transfer agency, and, in some cases, investment 
advisory services. VMC is a registered broker-dealer under the Exchange 
Act and is a wholly owned subsidiary of VGI. VMC provides all 
distribution and marketing services for the Funds.

Applicants' Legal Analysis

    1. Section 12(d)(1)(A) of the Act provides that no registered 
investment company (``acquiring company'') may acquire securities of 
another investment company (``acquired company'') if such securities 
represent more than 3% of the acquired company's outstanding voting 
stock or more than 5% of the acquiring company's total assets, or if 
such securities, together with the securities of other investment 
companies, represent more than 10% of the acquiring company's total 
assets. Section 12(d)(1)(B) of the Act provides that no registered 
open-end investment company may sell its securities 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 cause more than 
10% of the acquired company's voting stock to be owned by investment 
companies.
    2. Section 12(d)(1)(G) of the Act provides that section 12(d)(1) 
will not apply to securities of an acquired company purchased by an 
acquiring company if: (i) The acquiring company and acquired company 
are part of the

[[Page 56814]]

same group of investment companies; (ii) the acquiring company holds 
only securities of acquired companies that are part of the same group 
of investment companies, government securities, and short-term paper; 
(iii) the aggregate sales loads and distribution-related fees of the 
acquiring company and the acquired company are not excessive under 
rules adopted pursuant to section 22(b) or section 22(c) of the Act by 
a securities association registered under section 15A of the Exchange 
Act or by the Commission; and (iv) the acquired company has a policy 
that prohibits it from acquiring securities of registered open-end 
management investment companies or registered unit investment trusts in 
reliance on section 12(d)(1)(F) or (G) of the Act.
    3. Rule 12d1-2 under the Act permits a registered open-end 
investment company or a registered unit investment trust that relies on 
section 12(d)(1)(G) of the Act to acquire, in addition to securities 
issued by another registered investment company in the same group of 
investment companies, government securities, and short-term paper: (1) 
Securities issued by an investment company that is not in the same 
group of investment companies, when the acquisition is in reliance on 
section 12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) securities (other 
than securities issued by an investment company); and (3) securities 
issued by a money market fund, when the investment is in reliance on 
rule 12d1-1 under the Act. For the purposes of rule 12d1-2, 
``securities'' means any security as defined in section 2(a)(36) of the 
Act.
    4. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction from any provisions of the Act, or 
from any rule under 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 policies and 
provisions of the Act.
    5. Applicants state that the proposed arrangement would comply with 
the provisions of rule 12d1-2 under the Act, but for the fact that the 
Funds may invest a portion of their assets in Other Investments. 
Applicants request an order under section 6(c) of the Act for an 
exemption from rule 12d1-2(a) to allow the Funds to invest in Other 
Investments. Applicants assert that permitting the Funds to invest in 
Other Investments as described in the application would not raise any 
of the concerns that the requirements of section 12(d)(1) were designed 
to address.

Applicants' Conditions

    Applicants agree that the order granting the requested relief will 
be subject to the following conditions:
    1. Prior to approving any investment advisory agreement under 
section 15 of the Act, the board of trustees of the appropriate Fund, 
including a majority of the trustees who are not ``interested 
persons,'' as defined in section 2(a)(19) of the Act, will find that 
the advisory fees, if any, charged under the agreement are based on 
services provided that are in addition to, rather than duplicative of, 
services provided pursuant to any Underlying Fund's advisory agreement. 
Such finding, and the basis upon which the finding is made, will be 
recorded fully in the minute books of the appropriate Fund.
    2. Applicants will comply with all provisions of rule 12d1-2 under 
the Act, except for paragraph (a)(2), to the extent that it restricts 
any Fund from investing in Other Investments as described in the 
application.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-19639 Filed 10-3-07; 8:45 am]

BILLING CODE 8011-01-P
