[Federal Register Volume 84, Number 194 (Monday, October 7, 2019)]
[Notices]
[Pages 53507-53509]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21810]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33653; 812-14993]
Calvert Fund, et al.
October 2, 2019.
AGENCY: Securities and Exchange Commission (the ``Commission'').
ACTION: Notice.
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Notice of application for an order under sections 6(c) and 17(b) of
the Investment Company Act of 1940 (``Act'') for exemptions from
section 17(a) of the Act, and under section 17(d) of the Act and rule
17d-1 thereunder to permit certain joint transactions.
Summary of Application: Applicants request an order (``Requested
Order'') to permit certain registered investment companies to invest a
portion of their assets in certain fixed rate notes issued in
connection with a community investment program sponsored by an
affiliated non-profit corporation.
Applicants: Calvert Fund, Calvert Impact Fund, Inc., Calvert Management
Series, Calvert Responsible Index Series, Inc., Calvert Social
Investment Fund, Calvert Variable Series, Inc., Calvert World Values
Fund, Inc. (collectively, the ``Calvert Funds''), and Calvert Research
and Management (``CRM'' and, collectively with the Calvert Funds, the
``Applicants'').
Filing Dates: The application was filed on December 27, 2018 and
amended on May 29, 2019.
Hearing or Notification of Hearing: An order granting the requested
relief 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 28, 2019, and should be accompanied by proof of
service on the applicants, in the form of an affidavit, or, for
lawyers, a certificate of service. Pursuant to rule 0-5 under the Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, 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: the Calvert Funds,
1825 Connecticut Ave. NW, Suite 400, Washington, DC 20009 and Katy D.
Burke, Calvert Research and Management, Two International Place,
Boston, MA 02110.
FOR FURTHER INFORMATION CONTACT: Jill Ehrlich, Senior Counsel, at (202)
551-6819, or David J. Marcinkus, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's website by searching for the file number, or an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. Each Calvert Fund is registered under the Act as an open-end
management investment company that offers one or more series of shares.
Calvert Fund, Calvert Management Series, and Calvert Social Investment
Fund are each organized as a business trust under the laws of the
Commonwealth of Massachusetts. Calvert World Values Fund, Inc., Calvert
Responsible Index Series, Inc., Calvert Variable Series, Inc., and
Calvert Impact Fund, Inc. are each organized as corporations under the
laws of the state of Maryland. All of the Calvert Funds are advised by
CRM, an investment adviser registered under the Investment Advisers Act
of 1940 (the ``Advisers Act'').\1\ CRM is a business trust established
under the laws of the Commonwealth of Massachusetts.
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\1\ Applicants request that the order apply not only to the
Applicants, but that it also extend to any other existing or future
series of the Calvert Funds and to any existing or future registered
investment management companies or series thereof (collectively with
the Calvert Funds, the ``Funds'' and each a ``Fund'') that are, or
may in the future be, advised by CRM or any entity controlling,
controlled by, or under common control (within the meaning of
section 2(a)(9) of the Act) with CRM, or any successor in interest
to any such entity (each and collectively, the ``Adviser''). For
purposes of the Requested Order, ``successor'' is limited to any
entity that results from a reorganization into another jurisdiction
or a change in the type of business organization. The Adviser of
each Fund will be an investment adviser registered under the
Advisers Act. All entities that currently intend to rely on the
Requested Order have been named as Applicants, and any other entity
that relies on the Requested Order in the future will comply with
the terms and conditions of the application.
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2. Although each of the Calvert Funds has distinct investment
objectives and policies, a guiding philosophy of each Calvert Fund is
an interest in fostering environmental, social, and governance
(``ESG'') initiatives by investing a small percentage of its net assets
pursuant to special non-principal investment strategies, including high
social impact (``HSI'') investment opportunities such as the CIN
Program (as defined below). HSI investments may be made by the Calvert
Funds in a variety of ways, including through the purchase of debt
securities. The registration statement of any Fund relying on the
Requested Order will include disclosure designed to inform investors
about the risks that may be associated with HSI investing, including
the fact that such investments may offer a rate of return below the
market rate prevailing at the time of the investment.
3. Calvert Impact Capital, Inc. (``CIC'') \2\ is a non-profit
corporation that was organized for the purpose of, among other things,
making loans to (and other investments in) organizations aligned with
CIC's mission and increasing public awareness and knowledge of the
concept of socially responsible investing. CIC focuses its work on
offering investors the ability to support organizations that strengthen
communities and sustain the planet. Applicants state that CIC is exempt
from registration as an investment company under section 3(c)(10)(A) of
the Act.
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\2\ Effective October 31, 2017, Calvert Social Investment
Foundation, Inc. changed its legal name to Calvert Impact Capital,
Inc.
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4. The Community Investment Notes Program (the ``CIN Program'')
sponsored by CIC is designed to provide financing solutions to
organizations seeking to address an array of social and environmental
problems. In connection with the CIN Program, CIC issues notes \3\
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with fixed rates of interest to domestic individuals and institutional
investors (``Noteholders''). CIC currently offers the notes to
investors with various set terms and interest rates. A potential
investor can select the particular note in which it would like to
invest from the current offerings based on the term of the note and
corresponding fixed interest rate (currently ranging from zero to four
percent). The operating expenses associated with the administration of
CIC's CIN Program are treated by CIC as part of its general operating
expenses, and there is no fee assessed upon Noteholders for their
investment in the notes.
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\3\ Applicants state that such notes are exempt from
registration under section 3(a)(4) of the Securities Act of 1933.
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5. From 1998 to 2016, the Calvert Funds' HSI investments included
the acquisition of notes (the ``Existing Notes'') issued through the
CIN Program in accordance with an exemptive order issued by the
Commission in 1998 (the ``1998 Order'').\4\ The 1998 Order permitted
certain Calvert Funds to invest a portion of their assets in the
Existing Notes.\5\ The Calvert Funds' former investment adviser,
Calvert Investment Management, Inc. (``CIM'') was the adviser to the
registrants relying on the 1998 Order. The Calvert Funds stopped
relying on the 1998 Order to make additional investments in notes
issued through the CIN Program following the purchase, on December 30,
2016, by CRM of substantially all of the business assets of CIM.
Following this transaction, CRM became the Calvert Funds' investment
adviser on December 31, 2016.
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\4\ Investment Company Act Release Nos. 23306 (July 8, 1998)
(notice) and 23376 (Aug. 4, 1998) (order).
\5\ As of December 31, 2018, the Existing Notes held by the
Calvert Funds represented $54.12 million of the approximately
$410.10 million in notes issued pursuant to the CIN Program. This
amount represents approximately 13% of the notes issued pursuant to
the CIN Program and approximately 37% of the $145.81 million of
notes maturing in 2019.
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6. From 1998 to 2016, the Boards of Directors/Trustees
(collectively, the ``Funds' Board'') of the Calvert Funds that invested
in the Existing Notes and other HSI investments gained experience with
respect to the oversight of HSI investing. CRM and the Funds' Board
have determined that the ability to continue to invest through the CIN
Program would be appropriate for the Calvert Funds, including making
additional investments in notes issued by CIC through the CIN Program
(such notes together with the Existing Notes, the ``Notes'').
7. The Funds' Board has authorized each Calvert Fund to invest up
to 3% of its net assets in HSI investments. The decision to participate
in the CIN Program would be made by the Adviser in a manner consistent
with the investment objectives and policies adopted by the Funds'
Board, disclosure provided to the Funds' shareholders, the fiduciary
duties of the Adviser, and subject to the oversight of the Funds'
Board. The Adviser would not receive any compensation for the Funds'
investments in the Notes (aside from the potential impact on a Fund's
asset-based advisory fee). Information about the Calvert Funds'
investments in the CIN Program is presented to the Funds' Board on a
quarterly basis, thereby mitigating potential conflicts that CRM may
have with the CIN Program.
8. Responsibility for the business, property, and affairs of CIC is
vested in its Board of Directors (the ``CIC Board''). The CIC Board and
the Funds' Board share certain common trustees/directors, as described
in the application. Currently, there is one common trustee/director
between the CIC Board (comprised of thirteen directors) and the Funds'
Board (comprised of eight directors/trustees). Further, CRM supports
CIC in a number of ways. CRM has licensed use of the Calvert name to
CIC and has committed to make an annual $250,000 donation to CIC in
each of five consecutive years beginning in 2018. Additionally, in
response to requests from intermediaries for information about impact
investing or CIC, representatives of a limited purpose broker-dealer
affiliated with CRM may direct such intermediaries to CIC.\6\
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\6\ Neither CRM nor the affiliated broker-dealer would receive
any compensation in connection with the foregoing activity, and
neither CRM nor the affiliated broker-dealer anticipates involvement
in suitability determinations or in selling the Notes directly to
individuals or organizations on an agency basis.
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Applicants' Legal Analysis
In light of the overlapping Board members, the Calvert Funds'
ownership in the Notes, and the other potential means of affiliation
described in the application, CIC may be deemed to be an affiliated
person of each of the Calvert Funds for purposes of section 17(a) and
17(d) of the Act. Additionally, because the Calvert Funds are
affiliated persons of one another through their common investment
adviser, each of the Funds might be deemed to be participating in a
joint transaction with each other Fund through investments in the Notes
within the scope of section 17(d). Applicants submit that the Requested
Order would be consistent with the standards of sections 6(c), 17(b),
and 17(d) of the Act and rule 17d-1 under the Act.
Applicants' Conditions
Applicants agree that the Requested Order will be subject to the
following conditions:
1. The Funds' Board will be responsible for reviewing the CIN
Program not less frequently than annually. The Funds may continue to
participate in the CIN Program through investment in the Notes only if,
at the time of such review, the Funds' Board concludes that (i)
continued participation in the CIN Program by the Funds remains
consistent with the investment objectives and policies of each of the
Funds; and (ii) such participation is not on a basis that is less
advantageous than that of other Noteholders of the same class.
2. The Funds will invest in the Notes only in accordance with the
investment objectives, policies and restrictions of the applicable Fund
as disclosed in its registration statement, and the Funds will not be
permitted to acquire the Notes to an extent greater than that which is
permitted under the terms of their prospectus at the time of such
investment and any limits approved by those members of the Funds' Board
who are not ``interested persons'' of the Funds as defined by section
2(a)(19) of the Act.
3. The Adviser will not invest in CIC by directly purchasing Notes
for its own account. Neither the Adviser nor any entity controlling,
controlled by, or under common control with (within the meaning of
section 2(a)(9) of the Act) the Adviser will receive any compensation
for the Funds' investment in the Notes or for services provided to CIC
in connection with the Funds' investment in the Notes, provided that:
(i) The market value of the Notes in which the Funds may, from time to
time, invest will be included in the calculation of any investment
advisory fee payable by a Fund to its Adviser pursuant to the terms of
an investment advisory contract that satisfies the requirements of
section 15(a) of the Act and subject to section 36 of the Act, where
such fee is calculated based on a percentage of the average daily net
assets of any such Fund; and (ii) in response to requests from
intermediaries for information about impact investing or CIC,
representatives of an entity affiliated with the Adviser may direct
such intermediaries to CIC, provided that such activities would not
affect the value of, or interest paid under the terms of, any Note
purchased by a Fund in reliance on the Requested Order.
4. All Noteholders will participate in the income (losses)
generated by the assets underlying the Notes in
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proportion to their respective investments.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-21810 Filed 10-4-19; 8:45 am]
BILLING CODE 8011-01-P