[Federal Register Volume 75, Number 175 (Friday, September 10, 2010)]
[Notices]
[Pages 55376-55381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-22623]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29410; File No. 812-13661]
Transamerica Asset Management, Inc. et al.; Notice of Application
September 3, 2010
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 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(a)
under the Act.
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Summary of the Application: The requested order would (a) permit
certain series of registered open-end management investment companies
to acquire shares of other registered open-end management investment
companies or unit investment trusts (``UITs'') registered under the Act
that are within or outside of the same group of investment companies as
the acquiring 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: Transamerica Asset Management, Inc. (the ``Adviser''),
Transamerica Funds (``TF''), Transamerica Partners Funds Group
(``TPFG''), Transamerica Partners Funds Group II (``TPFGII''),
Transamerica Partners Portfolios (``TPP'') and Transamerica Series
Trust (``TST'') (collectively, TF, TPFG, TPFGII, TPP, and TST, the
``Trusts'').
Filing Dates: The application was filed on May 28, 2009 and amended
on November 20, 2009 and August 17, 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 September 27, 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, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090; Applicants: Adviser, 570
Carillon Parkway, St Petersburg, Florida 33716.
FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-6873, 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 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. The Trusts are open-end management investment companies
registered under the Act. Each Trust is comprised of separate series
(the ``Funds'') that pursue distinctive investment objectives and
strategies.\1\ TF and TST are statutory trusts organized under the laws
of Delaware. TPFG and TPFGII are business trusts organized under the
laws of Massachusetts. TPP is organized as a New York trust. TPFG and
TPFGII include Funds that operate as feeder trusts in a master-feeder
structure in reliance on section 12(d)(1)(E) of the Act, with TPP as
their common corresponding master trust.\2\ TST includes Funds that are
offered solely to insurance company separate accounts (``Separate
Accounts'') that fund variable annuity and variable life contracts
issued by insurance companies. The Separate Accounts may be registered
under the Act (``Registered Separate Accounts'') or unregistered under
the Act (``Unregistered Separate Accounts''). The Adviser, a Florida
corporation, is
[[Page 55377]]
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). The Adviser serves as investment adviser to each of the Funds.
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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 company and any series thereof that
is part of the same ``group of investment companies,'' as defined in
section 12(d)(1)(G)(ii) of the Act, as the Trusts and that is, or
may in the future be advised by the Adviser or any entity
controlling, controlled by, or under common control with the Adviser
(included in the term ``Funds.''). All existing 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 do so only in accordance 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. Applicants request relief to permit (a) certain Funds (each, a
``Fund of Funds'') to acquire shares of (i) other Funds (``Affiliated
Underlying Funds'') and (ii) registered open-end management investment
companies (the ``Unaffiliated Funds'') and UITs (``Unaffiliated
Trusts,'' and together with the Unaffiliated Funds, the ``Unaffiliated
Underlying Funds'') \3\ 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 (collectively, the Affiliated Underlying
Funds and the Unaffiliated Underlying Funds are ``Underlying Funds'');
(b) the Affiliated Underlying Funds, or their principal underwriters
and any broker or dealer registered under the Securities Exchange Act
of 1934 (``Broker'') to sell shares of the Affiliated Underlying Funds
to the Fund of Funds; and (c) the Unaffiliated Funds, or their
principal underwriters and any Broker to sell shares of the
Unaffiliated Funds to the Funds of Funds. Applicants also request an
order under sections 6(c) and 17(b) of the Act to permit Underlying
Funds that are affiliated persons of Fund of Funds to sell their shares
to and redeem their shares from the Fund of Funds.
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\3\ Certain of the Unaffiliated Underlying 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 (each, an
``ETF'').
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3. Applicants also request an exemption under section 6(c) of the
Act to permit any Fund that may invest in Affiliated Underlying Funds
in reliance on section 12(d)(1)(G) of the Act (``Same Group Fund of
Funds'') and that is eligible to invest in securities (as defined in
section 2(a)(36) of the Act) in reliance on rule 12d1-2 under the Act,
to also invest, consistent with its investment objectives, 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'').
4. Consistent with its fiduciary obligations under the Act, each
Same Group Fund of Funds' board of trustees or directors will review
the advisory fees charged by the Same Group Fund of Funds' 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
Investments in Underlying Funds by Fund of Funds
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act prohibits a registered investment
company from acquiring shares of any other 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 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 Affiliated Underlying
Funds and Unaffiliated Funds, their principal underwriters and any
Broker to sell shares to the Funds of Funds in excess of the limits set
forth in sections 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
Underlying 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 Underlying Fund, applicants
propose a condition prohibiting: (a) Any investment adviser within the
meaning of section 2(a)(20)(A) of the Act to a Fund of Funds (``Fund of
Funds' Adviser''), any person controlling, controlled by or under
common control with the Fund of Funds' Adviser and any investment
company or 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 Fund
of Funds' Adviser or any person controlling, controlled by or under
common control with the Fund of Funds' Adviser (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 (``Fund of Funds'
Subadviser''), any person controlling, controlled by or under common
control with the Fund of Funds' 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 Fund of Funds' Subadviser or any person
controlling, controlled by or under common control with the Fund of
Funds' Subadviser (collectively, the ``Subadviser Group'') from
controlling (individually or in the aggregate) an Unaffiliated
Underlying Fund within the meaning of section 2(a)(9) of the Act.
5. Applicants further state that condition 2 precludes a Fund of
Funds, a Fund of Funds' Adviser, any Fund of Funds' 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 Underlying Fund, with respect to transactions between
the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated
Underlying Fund or the Unaffiliated Underlying 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 Fund or
[[Page 55378]]
sponsor to an Unaffiliated Trust) from causing an Unaffiliated
Underlying 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, Fund of Fund's Adviser, Fund of Funds' Subadviser, or
employee of the Fund of Funds, or a person of which any such officer,
director, trustee, investment adviser, Fund of Funds' Subadviser,
member of an advisory board, or employee is an affiliated person (each,
an ``Underwriting Affiliate,'' except that any person whose
relationship to the Unaffiliated Underlying 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 Underwriting Affiliate
is an ``Affiliated Underwriting.''
6. As an additional assurance that an Unaffiliated Fund 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 Fund in excess of the limit in section 12(d)(1)(A)(i),
condition 8 requires that the Fund of Funds and Unaffiliated Fund
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 Fund (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 Fund, 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 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 directors or trustees
who are not ``interested persons,'' as defined in section 2(a)(19) of
the Act (``Independent Board Members''), 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 Fund of Funds' Adviser 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 Fund pursuant to rule 12b-1 under the Act) received
from an Unaffiliated Underlying Fund by the Fund of Funds' Adviser, or
an affiliated person of the Fund of Funds' Adviser, other than any
advisory fees paid to the Fund of Funds' Adviser or an affiliated
person of the Fund of Funds' Adviser by an Unaffiliated Fund, in
connection with the investment by the Fund of Funds in the Unaffiliated
Underlying 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 National Association of Securities Dealers (``NASD Conduct Rule
2830''),\5\ 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.
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\5\ Any reference to NASD Conduct Rule 2830 includes any
successor or replacement rule to NASD Conduct Rule 2830 that may be
adopted by the Financial Industry Regulatory Authority.
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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 insurance 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 of the Fund of Funds'
Adviser 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.\6\
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\6\ 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
[[Page 55379]]
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
requirements 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 Underlying Fund.\7\ 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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\7\ Applicants note that a Fund of Funds generally would
purchase and sell shares of an Unaffiliated Underlying Fund that
operates as an ETF through secondary market transactions at market
prices rather than through principal transactions with the
Unaffiliated Underlying Fund at net asset value. To the extent that
a Fund of Funds purchases or redeems shares from an ETF that is an
affiliated person, or an affiliated person of 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) for those transactions.
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Other Investments by Same Group Fund 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 Fund 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 Fund of
Funds to invest in Other Investments. Applicants assert that permitting
the Same Group Fund 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
A. Investments in Underlying Funds by Funds of Funds
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The members of the Group will not control (individually or in
the aggregate) an Unaffiliated Underlying 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 Underlying
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
Underlying Fund, the Group or the Subadviser Group, each in the
aggregate, becomes a holder of more than 25% of the outstanding voting
securities of the Unaffiliated Underlying 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 Underlying Fund in the same proportion as the vote of all
other holders of the Unaffiliated Underlying Fund's shares. This
condition will not apply to the Subadviser Group with respect to the
Unaffiliated Underlying Fund for which the Fund of Funds' Subadviser or
a person controlling, controlled by, or under common control with the
Fund of Funds' Subadviser acts as the investment adviser within the
meaning section 2(a)(20)(A) of the Act (in the case of an Unaffiliated
Fund) or as the sponsor (in the case of an Unaffiliated Trust). A
Registered Separate Account will seek voting instructions from its
contract holders and will vote its shares of an Unaffiliated Underlying
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 (a) vote its shares of the Unaffiliated
Underlying Fund in the same proportion as the vote of all other holders
of the Unaffiliated Underlying Fund's shares; or (b) seek voting
instructions from its 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 shares of an
Unaffiliated Underlying Fund to influence the terms of any services or
transactions between the Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Underlying Fund or an Unaffiliated Fund Affiliate.
3. The Board of each Fund of Funds, including a majority of the
Independent Board Members, will adopt procedures reasonably designed to
assure that the Funds of Funds' Adviser and any Fund of Funds'
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 Underlying 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
[[Page 55380]]
Unaffiliated Fund exceeds the limit of section 12(d)(1)(A)(i) of the
Act, the Board of the Unaffiliated Fund, including a majority of the
Independent Board Members, will determine that any consideration paid
by the Unaffiliated Fund 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 Fund; (b) is within the range
of consideration that the Unaffiliated 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 Unaffiliated Fund 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 Fund or sponsor to an Unaffiliated Trust) will cause an
Unaffiliated Underlying Fund to purchase a security in an Affiliated
Underwriting.
6. The Board of an Unaffiliated Fund, including a majority of the
Independent Board Members, will adopt procedures reasonably designed to
monitor any purchases of securities by the Unaffiliated Fund in an
Affiliated Underwriting, once an investment by a Fund of Funds in the
securities of the Unaffiliated Fund 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 Fund 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 shares of the Unaffiliated Fund. The
Board of the Unaffiliated Fund will consider, among other things: (a)
Whether the purchases were consistent with the investment objectives
and policies of the Unaffiliated Fund; (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 Fund in Affiliated
Underwritings and the amount purchased directly from an Underwriting
Affiliate have changed significantly from prior years. The Board of the
Unaffiliated Fund 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 Fund 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 Fund exceeds the limit of section 12(d)(1)(A)(i) of the
Act, 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 determinations of the
Unaffiliated Fund's Board were made.
8. Prior to an investment in shares of an Unaffiliated Fund in
excess of the limit in section 12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Fund will execute a Participation Agreement
stating, without limitation, that their boards of directors or trustees
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 Fund in
excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds will
notify the Unaffiliated Fund of the investment. At such time, the Fund
of Funds also will transmit to the Unaffiliated Fund a list of the
names of each Fund of Funds Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the Unaffiliated Fund of any changes to the
list as soon as reasonably practicable after a change occurs. The
Unaffiliated Fund 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. Prior to reliance on the requested order and subsequently 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 Independent Board Members, 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, the services
provided under the advisory contract(s) of any Underlying Fund in which
the Fund of Funds may invest. This 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 Funds of Funds' Adviser will waive fees otherwise payable
to it by the Fund of Funds in an amount at least equal to any
compensation (including fees received pursuant to a plan adopted by an
Unaffiliated Fund pursuant to rule 12b-1 under the Act) received by the
Fund of Funds' Adviser or an affiliated person of the Fund of Funds'
Adviser from an Unaffiliated Underlying Fund, other than any advisory
fees paid to the Fund of Funds' Adviser or its affiliated person by the
Unaffiliated Fund, in connection with the investment by the Fund of
Funds in the Unaffiliated Underlying Fund. Any Fund of Funds'
Subadviser will waive fees otherwise payable to the Fund of Funds'
Subadviser, directly or indirectly, by the Fund of Funds in an amount
at least equal to any compensation received from an Unaffiliated
Underlying Fund by the Fund of Funds' Subadviser, or an affiliated
person of the Fund of Funds' Subadviser, other than any advisory fees
paid to the Fund of Funds' Subadviser or its affiliated person by an
Unaffiliated Fund, in connection with the investment by the Fund of
Funds in the Unaffiliated Underlying Fund made at the direction of the
Fund of Funds' Subadviser. In the event that the Fund of Funds'
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
[[Page 55381]]
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.
B. Other Investments by Same Group Fund of Funds
Applicants agree that the relief to permit the Same Group Fund of
Funds to invest in Other Investments shall be subject to the following
condition:
13. 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.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-22623 Filed 9-9-10; 8:45 am]
BILLING CODE 8010-01-P