INVESTMENT MANAGEMENT E-FLASH

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1 INVESTMENT MANAGEMENT E-FLASH SEC ADOPTS FUND DISCLOSURE REQUIREMENTS RE: SUDAN DIVESTMENTS April 25, 2008 As here relevant, the Sudan Accountability and Divestment Act of 2007 ( SDA ) provides registered investment companies (and their related persons) a safe harbor from liability for any action based solely upon the investment company divesting from, or avoiding investment in, securities issued by persons that the investment company determines... conduct or have direct investments in business operations in Sudan. This relief is conditioned on the fund-making disclosures regarding any such divestment in accordance with a rule adopted by the SEC for this purpose. On April 24, 2008, the SEC issued a Release adopting amendments to Form N-CSR and Form N-SAR that allow funds to disclose to the SEC specific information regarding any securities they divest in accordance with the SDA s safe harbor. Release Nos ; IC-28254; available at Highlights of the Release are reviewed below. Effective Date and Transition Period The amendments to the SEC's Forms are effective immediately upon publication of the Release in the Federal Register (expected to occur in the coming week). The Release also notes that the SEC will accommodate divestments that occurred after the enactment of the SDA, but before the effective date of the SEC's Form amendments. Thus, a fund that made a divestment in accordance with the SDA between Dec. 31, 2007 (the date of enactment), and the effective date of the Form amendments, and that filed a Form N-CSR or Form N-SAR after the divestment but before the effective date, will be permitted to disclose the divestment on an amendment to that Form N-CSR or Form N-SAR, if the amendment is filed no later than 10 business days after the date of publication of the Release in the Federal Register.

2 Background As a general matter, the SDA is intended to promote divestiture of companies that conduct "business operations" in Sudan, and was signed into law Dec. 31, Among other things, the SDA (in section 4) amended section 13 of the Investment Company Act by adding new paragraph 13(c), which provides that no person may bring any civil, criminal, or administrative action against any fund (or any employee, officer, director, or investment adviser of the fund) based solely on the fund divesting from, or avoiding investing in, securities issued by persons that the fund determines, using credible information that is available to the public, conduct or have direct investments in certain business operations in Sudan. For these purposes, section 3(d) of the SDA defines these "business operations." However, this limitation on actions does not apply unless the fund discloses the divestments in accordance with SEC regulations. In that regard, the SDA requires the SEC to prescribe relevant regulations not later than 120 days after enactment, and also provides that these rules shall require this disclosure to be included in the next periodic report filed under section 30 of the Investment Company Act following the divestment. It should also be noted that certain provisions of the SDA, including those concerning divestments by funds, terminate 30 days after the President certifies to Congress that the Government of Sudan has undertaken certain actions specified in section 12 of the SDA. Note: For convenience, certain provisions of the SDA are reproduced at the end of this summary. The Amendments To implement these requirements, the SEC is requiring each fund that divests securities in accordance with the SDA to disclose the divestment on the next Form N-CSR (for management investment companies) or Form N-SAR (for unit investment trusts) that it files following the divestment. The specific disclosures include: the issuer s name; exchange ticker symbol; CUSIP number; total number of shares (or, for debt securities, principal amount) divested; and dates that the securities were divested. If the fund continues to hold any securities of the divested issuer, it must also disclose the exchange ticker symbol; CUSIP number; and total number of shares (or, for debt securities, principal amount of such securities) held on the date of filing. Instructions to the Forms clarify that while a fund is not required to disclose such divestments, the limitation on actions provided in the SDA does not apply with respect to a divestment that is not disclosed. In addition, the Instructions state that a fund that divests securities in accordance with the SDA during the period that begins on the fifth business day before the date of filing a Form N-CSR or Form N-SAR and ends on the date of filing, may disclose the divestment in that filing or an amendment thereto. The amendment would have to be filed not later than five business days after the date of the original filing.

3 Finally, the Instructions provide that, for purposes of determining when a divestment should be reported, if a fund divests its holdings in a particular security in a related series of transactions, the fund may deem the divestment to occur at the time of the final transaction in the series. As a result, a fund could choose either to report each transaction in the next Form N-CSR or Form N-SAR filed following the individual transaction, or to report the entire series of transactions in the next Form N-CSR or Form N-SAR filed following the final transaction in the series. The Instructions require a fund that chooses to report the entire series of transactions following the final transaction to separately state each date on which securities were divested and the total number of shares or, for debt securities, the principal amount divested, on each such date. Termination Provision As noted above, certain provisions of the SDA, including those concerning divestments by funds, terminate 30 days after the President certifies to Congress that the Government of Sudan has undertaken certain actions specified in section 12 of the SDA. In the amendments, the SEC included a termination provision in order to clarify that the new disclosure requirements will not apply to divestitures occurring after the investment company provisions of the SDA terminate. Both Form N-CSR and Form N-SAR will provide for termination of the SDA disclosure provisions one year after the date on which the related provisions of the SDA terminate. According to the Release, this one-year period is intended to allow sufficient time for disclosure, after termination of the SDA's provisions, of divestments that occur prior to such termination. * * * * * Text of Certain Provisions of the Sudan Accountability and Divestment Act of Section 3(d) - Business Operations Described - (1) IN GENERAL- Business operations described in this subsection are business operations in Sudan that include power production activities, mineral extraction activities, oil-related activities, or the production of military equipment. (2) EXCEPTIONS- Business operations described in this subsection do not include business operations that the person conducting the business operations can demonstrate-- (A) are conducted under contract directly and exclusively with the regional government of southern Sudan;

4 (B) are conducted under a license from the Office of Foreign Assets Control, or are expressly exempted under Federal law from the requirement to be conducted under such a license; (C) consist of providing goods or services to marginalized populations of Sudan; (D) consist of providing goods or services to an internationally recognized peacekeeping force or humanitarian organization; (E) consist of providing goods or services that are used only to promote health or education; or (F) have been voluntarily suspended. Section 4. SAFE HARBOR FOR CHANGES OF INVESTMENT POLICIES BY ASSET MANAGERS. (a) In General- Section 13 of the Investment Company Act of 1940 (15 U.S.C. 80a-13) is amended by adding at the end the following: `(c) Limitation on Actions- `(1) IN GENERAL- Notwithstanding any other provision of Federal or State law, no person may bring any civil, criminal, or administrative action against any registered investment company, or any employee, officer, director, or investment adviser thereof, based solely upon the investment company divesting from, or avoiding investing in, securities issued by persons that the investment company determines, using credible information that is available to the public, conduct or have direct investments in business operations in Sudan described in section 3(d) of the Sudan Accountability and Divestment Act of `(2) APPLICABILITY- `(A) ACTIONS FOR BREACHES OF FIDUCIARY DUTIES- Paragraph (1) does not prevent a person from bringing an action based on a breach of a fiduciary duty owed to that person with respect to a divestment or non-investment decision, other than as described in paragraph (1). `(B) DISCLOSURES- Paragraph (1) shall not apply to a registered investment company, or any employee, officer, director, or investment adviser thereof, unless the investment company makes disclosures in accordance with regulations prescribed by the Commission.

5 `(3) PERSON DEFINED- For purposes of this subsection the term `person' includes the Federal Government and any State or political subdivision of a State.'. (b) SEC Regulations- Not later than 120 days after the date of the enactment of this Act, the Securities and Exchange Commission shall prescribe regulations, in the public interest and for the protection of investors, to require disclosure by each registered investment company that divests itself of securities in accordance with section 13(c) of the Investment Company Act of Such rules shall require the disclosure to be included in the next periodic report filed with the Commission under section 30 of such Act (15 U.S.C. 80a- 29) following such divestiture. Section 5. SENSE OF CONGRESS REGARDING CERTAIN ERISA PLAN INVESTMENTS. It is the sense of Congress that a fiduciary of an employee benefit plan, as defined in section 3(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(3)), may divest plan assets from, or avoid investing plan assets in, any person the fiduciary determines is conducting or has direct investments in business operations in Sudan described in section 3(d) of this Act, without breaching the responsibilities, obligations, or duties imposed upon the fiduciary by section 404 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1104), if-- (1) the fiduciary makes such determination using credible information that is available to the public; and (2) such divestment or avoidance of investment is conducted in accordance with section of title 29, Code of Federal Regulations (as in effect on the day before the date of the enactment of this Act). For additional information, contact any of the attorneys listed below, or the Reed Smith attorney with whom you regularly work. Authors: Jay S. Neuman jneuman@reedsmith.com Frederick C. Leech fleech@reedsmith.com

6 Other Investment Management Group Attorneys: Andrew P. Cross Stefan Kugler +49 (0) Travis E. Williams Gail C. Jones Leslie K. Ross Rene M. Lochmann +49 (0) Kary A. Moore Alicia G. Powell Rana J. Wright Timothy S. Johnson George F. Magera A. Hope Adams Thao H. Ngo Megan W. Clement Ritu M. Manjunath Stacey C. Palmer Rachel T. Ricci Todd P. Zerega Stephen A. Keen Donald J. Myers C. Grant Anderson Michael B. Richman Jennifer K. Dulski Lisa D. McAnany +44 (0) Justine S. Patrick James G. Whetzel Reed Smith is one of the 15 largest law firms in the world, with more than 1,600 lawyers in 23 offices throughout the United States, Europe, Asia and the Middle East. Founded in 1877, the firm represents leading international businesses from Fortune 100 corporations to mid-market and emerging enterprises. Its attorneys provide litigation services in multi-jurisdictional matters and other high stake disputes, deliver regulatory counsel, and execute the full range of strategic domestic and cross-border transactions. Reed Smith is a preeminent advisor to industries including financial services, life sciences, health care, advertising and media, shipping, international trade and commodities, real estate, manufacturing, and education. For more information, visit reedsmith.com U.S.: New York, Chicago, Los Angeles, Washington, San Francisco, Philadelphia, Pittsburgh, Oakland, Princeton, Northern Virginia, Wilmington, Century City, Richmond Europe: London, Paris, Munich, Birmingham, Greece Asia: Hong Kong, Beijing Middle East: Abu Dhabi, Dubai The contents of this newsletter are for informational purposes only, and do not constitute legal advice.