[Federal Register Volume 75, Number 112 (Friday, June 11, 2010)]
[Notices]
[Pages 33369-33374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14052]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29294; File No. 812-13706]
EQ Advisors Trust, et al.; Notice of Application
June 4, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under section 12(d)(1)(J) of
the Investment Company Act of 1940 (``Act'') for an exemption from
sections 12(d)(1)(A) and (B) of the Act, under sections 6(c) and 17(b)
of the Act for an exemption from section 17(a) of the Act and under
section 6(c) of the Act for an exemption from rule 12d1-2 under the
Act.
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SUMMARY: Summary of the Application: Applicants request an order that
would (a) permit certain series of registered open-end management
investment companies to acquire shares of other registered open-end
management investment companies and unit investment trusts (``UITs'')
that are within or outside the same group of investment companies, and
(b) permit certain series of registered open-end management investment
companies relying on rule 12d1-2 under the Act to invest in certain
financial instruments.
Applicants: EQ Advisors Trust, AXA Premier VIP Trust (together with
EQ Advisors Trust, the ``Trusts'') and AXA Equitable Life Insurance
Company (the ``Manager'').
DATES: Filing Dates: The application was filed on September 29, 2009
and amended on March 17, 2010 and June 3, 2010.
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 June 29, 2010, 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, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090; Applicants: c/o Steven M. Joenk, AXA
Equitable Life Insurance Company, 1290 Avenue of the Americas, New
York, New York 10104.
FOR FURTHER INFORMATION CONTACT: John Yoder, Senior Counsel, at (202)
551-6878, or Michael W. Mundt, Assistant Director, at (202) 551-6821
(Office of Investment Company Regulation, Division of Investment
Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site 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 Trust is organized as a Delaware statutory trust. Each
Trust is registered under the Act as an open-end management investment
company and offers multiple series (``Funds'').\1\ Each Trust is
offered to (a) insurance company separate accounts registered under the
Act (``Registered Separate Accounts'') and insurance company separate
accounts exempt from registration under the Act (``Unregistered
Separate Accounts,'' and together with the Registered Separate
Accounts, ``Separate Accounts'') in connection with the variable life
insurance contracts and variable annuity certificates and contracts
(``Variable Contracts'') issued by the Manager and other affiliated or
unaffiliated insurance companies, (b) retirement plans, including the
401(k) plan sponsored by the Manager and (c) series of each Trust.
Certain Funds pursue their investment objectives through a master-
feeder arrangement in reliance on section 12(d)(1)(E) of the Act.\2\
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\1\ Applicants request that the order extend to any future
series of the Trusts, and any other existing or future registered
open-end management investment companies and their series that are
part of the same group of investment companies, as defined in
section 12(d)(1)(G)(ii) of the Act, as the Trusts and are, or may in
the future be, advised by the Manager or any other investment
adviser controlling, controlled by, or under common control with the
Manager (included in the term, ``Funds''). All entities 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.
\2\ A Fund of Funds may not invest in an Underlying Fund that
operates as a feeder fund unless the feeder fund is part of the same
group of investment companies (as defined in section 12(d)(1)(G)(ii)
of the Act) as its corresponding master fund.
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2. The Manager is a New York stock life insurance company
registered under the Investment Advisers Act of 1940 (``Advisers Act'')
and serves as investment adviser to the Trusts. The Manager is a wholly
owned subsidiary of AXA Financial, Inc., a holding company. AXA
Financial, Inc., is a wholly owned subsidiary of AXA, a French holding
company for an international group of insurance and related financial
services companies.
3. Applicants request relief to permit: (a) A Fund (a ``Fund of
Funds'') to acquire shares of registered open-end management investment
companies or their series (the ``Unaffiliated Investment Companies'')
and UITs 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
Fund of Funds (``Unaffiliated Trusts,'' and
[[Page 33370]]
together with the Unaffiliated Investment Companies, the ``Unaffiliated
Funds''); \3\ (b) the Unaffiliated Funds, their principal underwriters
and any broker or dealer registered under the Securities Exchange Act
of 1934 (``Broker'') to sell shares of the Unaffiliated Funds to the
Fund of Funds; (c) the Funds of Funds to acquire shares of other Funds
in the ``same group of investment companies'' (as defined in section
12(d)(1)(G)(ii) of the Act) as the Fund of Funds (collectively, the
``Affiliated Funds,'' and together with the Unaffiliated Funds, the
``Underlying Funds''); and (d) the Affiliated Funds, their principal
underwriters and any Broker to sell shares of the Affiliated Funds to
the Fund of Funds. Applicants also request an order under sections 6(c)
and 17(b) of the Act to exempt applicants from section 17(a) to the
extent necessary to permit Underlying Funds to sell their shares to
Funds of Funds and redeem their shares from Funds of Funds.
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\3\ Certain of the Unaffiliated Funds may be registered under
the Act as either UITs or open-end management investment companies
and have obtained exemptions from the Commission necessary to permit
their shares to be listed and traded on a national securities
exchange at negotiated prices (``ETFs'').
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4. Applicants also request an exemption to the extent necessary to
permit Funds that invest in Underlying Funds in reliance on section
12(d)(1)(G) of the Act, and that are eligible to invest in securities
(as defined in section 2(a)(36) of the Act) in reliance on rule 12d1-2
under the Act (``Same Group Funds of Funds''), to also invest, to the
extent consistent with their investment objective, policies, strategies
and limitations, in financial instruments that may not be securities
within the meaning of section 2(a)(36) of the Act (``Other
Investments'').
5. Consistent with its fiduciary obligations under the Act, each
Same Group Fund of Fund's board of trustees will review the advisory
fees charged by the Same Group Fund of Fund's investment adviser to
ensure that they are based on services provided that are in addition
to, rather than duplicative of, services provided pursuant to the
advisory agreement of any investment company in which the Same Group
Fund of Funds may invest.
Applicants' Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act 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 from selling the shares of the investment company 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 from the limitations of sections 12(d)(1)(A) and
(B) to the extent necessary to permit the Funds of Funds to acquire
shares of the Underlying Funds in excess of the limits set forth in
section 12(d)(1)(A) of the Act and to permit the Underlying Funds,
their principal underwriters and any Broker to sell shares to the Funds
of Funds in excess of the limits set forth in section 12(d)(1)(B) of
the Act.
3. Applicants state that the proposed arrangement will not give
rise to the policy concerns underlying sections 12(d)(1)(A) and (B),
which include concerns about undue influence by a fund of funds or its
affiliated persons over underlying funds, 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 state that the proposed arrangement will not result
in undue influence by a Fund of Funds or its affiliated persons over
the Underlying Funds. The concern about undue influence does not arise
in connection with a Fund of Funds' investment in the Affiliated Funds,
since they are part of the same group of investment companies. To limit
the control that a Fund of Funds or its affiliated persons may have
over an Unaffiliated Fund, applicants propose a condition prohibiting:
(a) The Manager and any person controlling, controlled by or under
common control with the Manager, any investment company and any issuer
that would be an investment company but for section 3(c)(1) or section
3(c)(7) of the Act advised or sponsored by the Manager or any person
controlling, controlled by or under common control with the Manager
(collectively, the ``Group''), and (b) any investment adviser within
the meaning of section 2(a)(20)(B) of the Act to a Fund of Funds
(``Subadviser''), any person controlling, controlled by or under common
control with the 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 Subadviser or any person controlling, controlled by or
under common control with the Subadviser (collectively, the
``Subadviser Group'') from controlling (individually or in the
aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9)
of the Act.
5. Applicants further state that condition 2 precludes a Fund of
Funds, the Manager, any Subadviser, promoter or principal underwriter
of a Fund of Funds, and any person controlling, controlled by or under
common control with any of those entities (each, a ``Fund of Funds
Affiliate'') from taking advantage of an Unaffiliated Fund, with
respect to transactions between the Fund of Funds or a Fund of Funds
Affiliate and the Unaffiliated Fund or the Unaffiliated Fund's
investment adviser(s), sponsor, promoter, principal underwriter or any
person controlling, controlled by or under common control with any of
these entities (each, an ``Unaffiliated Fund Affiliate''). Condition 5
precludes a Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Unaffiliated Investment Company or sponsor to an Unaffiliated Trust)
from causing an Unaffiliated Fund to purchase a security in an offering
of securities during the existence of any underwriting or selling
syndicate of which a principal underwriter is an officer, director,
trustee, member of an advisory board, investment adviser, Subadviser,
or employee of the Fund of Funds, or a person of which any such
officer, director, trustee, investment adviser, Subadviser, member of
an advisory board, or employee is an affiliated person (each, an
``Underwriting Affiliate,'' except any person whose relationship to the
Unaffiliated Fund is covered by section 10(f) of the Act is not an
Underwriting Affiliate). An offering of securities during the existence
of any underwriting or selling syndicate of which a principal
underwriter is an
[[Page 33371]]
Underwriting Affiliate is an ``Affiliated Underwriting.''
6. As an additional assurance that an Unaffiliated Investment
Company understands the implications of an investment by a Fund of
Funds under the requested order, prior to a Fund of Funds' investment
in the Unaffiliated Investment Company in excess of the limit in
section 12(d)(1)(A)(i), condition 8 requires that the Fund of Funds and
Unaffiliated Investment Company execute an agreement stating, without
limitation, that their boards of directors or trustees (``Boards'') and
their investment advisers understand the terms and conditions of the
order and agree to fulfill their responsibilities under the order
(``Participation Agreement''). Applicants note that an Unaffiliated
Investment Company (other than an ETF whose shares are purchased by a
Fund of Funds in the secondary market) will retain the right to reject
an investment by a Fund of Funds.\4\
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\4\ An Unaffiliated Investment Company, including an ETF, would
retain its right to reject any initial investment by a Fund of Funds
in excess of the limit in section 12(d)(1)(A)(i) of the Act by
declining to execute the Participation Agreement with the Fund of
Funds.
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7. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. With respect to investment advisory
fees, applicants state that, in connection with the approval of any
investment advisory contract under section 15 of the Act, the Board of
each Fund of Funds, including a majority of the trustees who are not
``interested persons,'' as defined in section 2(a)(19) of the Act
(``Independent Trustees''), will find that the advisory fees charged
under the advisory contract are based on services provided that are in
addition to, rather than duplicative of, services provided pursuant to
any Underlying Fund's advisory contract(s). Applicants further state
that the Manager will waive fees otherwise payable to it by a Fund of
Funds in an amount at least equal to any compensation (including fees
received pursuant to any plan adopted by an Unaffiliated Investment
Company pursuant to rule 12b-1 under the Act) received from an
Unaffiliated Fund by the Manager, or an affiliated person of the
Manager, other than any advisory fees paid to the Manager or an
affiliated person of the Manager by an Unaffiliated Investment Company,
in connection with the investment by the Fund of Funds in the
Unaffiliated Fund.
8. Applicants state that with respect to Registered Separate
Accounts that invest in a Fund of Funds, no sales load will be charged
at the Fund of Funds level or at the Underlying Fund level. Other sales
charges and service fees, as defined in Rule 2830 of the Conduct Rules
of the NASD (``NASD Conduct Rule 2830''), if any, will only be charged
at the Fund of Funds level or at the Underlying Fund level, not both.
With respect to other investments in a Fund of Funds, any sales charges
and/or service fees charged with respect to shares of the Fund of Funds
will not exceed the limits applicable to funds of funds as set forth in
NASD Conduct Rule 2830.
9. Applicants represent that each Fund of Funds will represent in
the Participation Agreement that no insurance company sponsoring a
Registered Separate Account funding Variable Contracts will be
permitted to invest in the Fund of Funds unless the insurance company
has certified to the Fund of Funds that the aggregate of all fees and
charges associated with each contract that invests in the Fund of
Funds, including fees and charges at the Separate Account, Fund of
Funds, and Underlying Fund levels, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks
assumed by the insurance company.
10. Applicants state that the proposed arrangement will not create
an overly complex fund structure. Applicants note that an Underlying
Fund will be prohibited from acquiring 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), except to the
extent that such Underlying Fund: (a) acquires such securities in
compliance with section 12(d)(1)(E) of the Act; (b) receives securities
of another investment company as a dividend or as a result of a plan of
reorganization of a company (other than a plan devised for the purpose
of evading section 12(d)(1) of the Act); or (c) acquires (or is deemed
to have acquired) securities of another investment company pursuant to
exemptive relief from the Commission permitting such Underlying Fund
to: (i) acquire securities of one or more investment companies for
short-term cash management purposes, or (ii) engage in interfund
borrowing and lending transactions.
B. Section 17(a)
1. Section 17(a) of the Act generally prohibits sales or purchases
of securities between a registered investment company and its
affiliated persons or affiliated persons of such persons. Section
2(a)(3) of the Act defines an ``affiliated person'' of another person
to include (a) any person directly or indirectly owning, controlling,
or holding with power to vote, 5% or more of the outstanding voting
securities of the other person; (b) 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; and (c) any
person directly or indirectly controlling, controlled by, or under
common control with the other person.
2. Applicants state that the Funds of Funds and the Affiliated
Funds may be deemed to be under common control and therefore affiliated
persons of one another. Applicants also state that the Funds of Funds
and the Underlying Funds may be deemed to be affiliated persons of one
another if a Fund of Funds acquires 5% or more of an Underlying Fund's
outstanding voting securities. In light of these possible affiliations,
section 17(a) could prevent an Underlying Fund from selling shares to
and redeeming shares from a Fund of Funds.\5\
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\5\ Applicants acknowledge that receipt of any compensation by
(a) an affiliated person of a Funds of Funds, or an affiliated
person of such person, for the purchase by the Fund of Funds of
shares of an Underlying Fund or (b) an affiliated person of an
Underlying Fund, or an affiliated person of such person, for the
sale by the Underlying Fund of its shares to a Fund of Funds may be
prohibited by section 17(e)(1) of the Act. The Participation
Agreement also will include this acknowledgement.
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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 (a) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (b) the proposed transaction is consistent with the policies
of each registered investment company involved; and (c) 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
transactions 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, as the
terms are fair and reasonable and do not involve overreaching.
Applicants state that the terms upon which an Underlying Fund will sell
its shares to or purchase its shares from a Fund of Funds will be based
on the net asset value of each
[[Page 33372]]
Underlying Fund.\6\ Applicants also state that the proposed
transactions will be consistent with the policies of each Fund of Funds
and Underlying Fund, and with the general purposes of the Act.
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\6\ Applicants note that a Fund of Funds generally would
purchase and sell shares of an Underlying Fund that operates as an
ETF through secondary market transactions at market prices rather
than through principal transactions with the Underlying Fund at net
asset value. Applicants would not rely on the requested relief from
section 17(a) for such secondary market transactions. To the extent
that a Fund of Funds purchases or redeems shares from an ETF that is
an affiliated person of the Fund of Funds in exchange for a basket
of specified securities as described in the application for the
exemptive order upon which the ETF relies, applicants also request
relief from section 17(a) of the Act for those in-kind transactions.
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C. Other Investments by Same Group Funds of Funds
1. 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 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.
2. 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.
3. Applicants state that the proposed arrangement would comply with
the provisions of rule 12d1-2 under the Act, but for the fact that the
Same Group Funds of 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 Same Group Funds of
Funds to invest in Other Investments. Applicants assert that permitting
the Same Group Funds of 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 shall
be subject to the following conditions:
Investments in Underlying Funds by Funds of Funds
1. The members of the Group will not control (individually or in
the aggregate) an Unaffiliated Fund within the meaning of section
2(a)(9) of the Act. The members of a Subadviser Group will not control
(individually or in the aggregate) an Unaffiliated 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 Unaffiliated Fund, the Group or
a Subadviser Group, each in the aggregate, becomes a holder of more
than 25% of the outstanding voting securities of the Unaffiliated Fund,
then the Group or the Subadviser Group (except for any member of the
Group or the Subadviser Group that is a Separate Account) will vote its
shares of the Unaffiliated Fund in the same proportion as the vote of
all other holders of the Unaffiliated Fund's shares. This condition
will not apply to a Subadviser Group with respect to an Unaffiliated
Fund for which the Subadviser or a person controlling, controlled by,
or under common control with the Subadviser acts as the investment
adviser within the meaning of section 2(a)(20)(A) of the Act (in the
case of an Unaffiliated Investment Company) or the sponsor (in the case
of an Unaffiliated Trust). A Registered Separate Account will seek
voting instructions from its Variable Contract holders and will vote
its shares of an Unaffiliated Fund in accordance with the instructions
received and will vote those shares for which no instructions were
received in the same proportion as the shares for which instructions
were received. An Unregistered Separate Account will either (i) vote
its shares of the Unaffiliated Fund in the same proportion as the vote
of all other holders of the Unaffiliated Fund's shares; or (ii) seek
voting instructions from its Variable Contract holders and vote its
shares in accordance with the instructions received and vote those
shares for which no instructions were received in the same proportion
as the shares for which instructions were received.
2. No Fund of Funds or Fund of Funds Affiliate will cause any
existing or potential investment by the Fund of Funds in an
Unaffiliated Fund to influence the terms of any services or
transactions between the Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
3. The Board of each Fund of Funds, including a majority of the
Independent Trustees, will adopt procedures reasonably designed to
assure that the Manager and any Subadviser are conducting the
investment program of the Fund of Funds without taking into account any
consideration received by the Fund of Funds or a Fund of Funds
Affiliate from an Unaffiliated Fund or an Unaffiliated Fund Affiliate
in connection with any services or transactions.
4. Once an investment by a Fund of Funds in the securities of an
Unaffiliated Investment Company exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment
Company, including a majority of the Independent Trustees, will
determine that any consideration paid by the Unaffiliated Investment
Company to a Fund of Funds or a Fund of Funds 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 Unaffiliated Investment Company; (b) is within the
range of consideration that the Unaffiliated Investment Company 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 will
not apply with respect to any services or transactions between an
Unaffiliated Investment Company and its investment adviser(s), or any
person controlling, controlled by, or under common control with such
investment adviser(s).
5. No Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Unaffiliated Investment Company or sponsor to an Unaffiliated Trust)
will cause an Unaffiliated Fund
[[Page 33373]]
to purchase a security in any Affiliated Underwriting.
6. The Board of an Unaffiliated Investment Company, including a
majority of the Independent Trustees, will adopt procedures reasonably
designed to monitor any purchases of securities by the Unaffiliated
Investment Company in an Affiliated Underwriting once an investment by
a Fund of Funds in the securities of the Unaffiliated Investment
Company exceeds the limit of section 12(d)(1)(A)(i) of the Act,
including any purchases made directly from an Underwriting Affiliate.
The Board of the Unaffiliated Investment Company will review these
purchases periodically, but no less frequently than annually, to
determine whether the purchases were influenced by the investment by
the Fund of Funds in the Unaffiliated Investment Company. The Board of
the Unaffiliated Investment Company will consider, among other things:
(a) Whether the purchases were consistent with the investment
objectives and policies of the Unaffiliated Investment Company; (b) 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
(c) whether the amount of securities purchased by the Unaffiliated
Investment Company in Affiliated Underwritings and the amount purchased
directly from an Underwriting Affiliate have changed significantly from
prior years. The Board of an Unaffiliated Investment Company will 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 interests of
shareholders.
7. Each Unaffiliated Investment Company will maintain and preserve
permanently in an easily accessible place a written copy of the
procedures described in the preceding condition, and any modifications
to such procedures, and will 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 an Affiliated Underwriting once an investment by a Fund
of Funds in the securities of an Unaffiliated Investment Company
exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth
(a) the party from whom the securities were acquired, (b) the identity
of the underwriting syndicate's members, (c) the terms of the purchase,
and (d) the information or materials upon which the determinations of
the Board of the Unaffiliated Investment Company were made.
8. Prior to its investment in shares of an Unaffiliated Investment
Company in excess of the limit of section 12(d)(1)(A)(i) of the Act,
the Fund of Funds and the Unaffiliated Investment Company will execute
a Participation Agreement stating, without limitation, that their
Boards and their investment advisers 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
Unaffiliated Investment Company in excess of the limit set forth in
section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated
Investment Company of the investment. At such time, the Fund of Funds
will also transmit to the Unaffiliated Investment Company a list of the
names of each Fund of Funds Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the Unaffiliated Investment Company of any
changes to the list as soon as reasonably practicable after a change
occurs. The Unaffiliated Investment Company and the Fund of Funds 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. Before approving any advisory contract under section 15 of the
Act, the Board of each Fund of Funds, including a majority of the
Independent Trustees, shall find that the advisory fees charged under
the advisory contract are based on services provided that are in
addition to, rather than duplicative of, services provided under the
advisory contract(s) of any Underlying Fund in which the Fund of Funds
may invest. Such finding, and the basis upon which the finding was
made, will be recorded fully in the minute books of the appropriate
Fund of Funds.
10. The Manager will waive fees otherwise payable to it by a Fund
of Funds in an amount at least equal to any compensation (including
fees received pursuant to any plan adopted by an Unaffiliated
Investment Company pursuant to rule 12b-1 under the Act) received from
an Unaffiliated Fund by the Manager, or an affiliated person of the
Manager, other than any advisory fees paid to the Manager or its
affiliated person by an Unaffiliated Investment Company, in connection
with the investment by the Fund of Funds in the Unaffiliated Fund. Any
Subadviser will waive fees otherwise payable to the Subadviser,
directly or indirectly, by the Fund of Funds in an amount at least
equal to any compensation received by the Subadviser, or an affiliated
person of the Subadviser, from an Unaffiliated Fund, other than any
advisory fees paid to the Subadviser or an affiliated person of the
Subadviser by an Unaffiliated Investment Company, in connection with
the investment by the Fund of Funds in the Unaffiliated Fund made at
the direction of the Subadviser. In the event that the Subadviser
waives fees, the benefit of the waiver will be passed through to the
Fund of Funds.
11. With respect to Registered Separate Accounts that invest in a
Fund of Funds, no sales load will be charged at the Fund of Funds level
or at the Underlying Fund level. Other sales charges and service fees,
as defined in NASD Conduct Rule 2830, if any, will only be charged at
the Fund of Funds level or at the Underlying Fund level, not both. With
respect to other investments in a Fund of Funds, any sales charges and/
or service fees charged with respect to shares of a Fund of Funds will
not exceed the limits applicable to funds of funds set forth in NASD
Conduct Rule 2830.
12. No Underlying 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 that such Underlying Fund: (a) Acquires such
securities in compliance with section 12(d)(1)(E) of the Act; (b)
receives securities of another investment company as a dividend or as a
result of a plan of reorganization of a company (other than a plan
devised for the purpose of evading section 12(d)(1) of the Act); or (c)
acquires (or is deemed to have acquired) securities of another
investment company pursuant to exemptive relief from the Commission
permitting such Underlying Fund to: (i) Acquire securities of one or
more investment companies for short-term cash management purposes, or
(ii) engage in interfund borrowing and lending transactions.
Other Investments by Same Group Funds of Funds
13. The 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 Same Group Fund of Funds from investing in Other
Investments as described in the application.
[[Page 33374]]
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14052 Filed 6-10-10; 8:45 am]
BILLING CODE 8010-01-P