Transamerica Asset Management, Inc. et al.; Notice of Application, 55376-55381 [2010-22623]
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Federal Register / Vol. 75, No. 175 / Friday, September 10, 2010 / Notices
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2a–7 under the Act; or (iv) listed on or
traded on any foreign securities
exchange or board of trade that satisfies
regulatory requirements under the law
of the jurisdiction in which such foreign
securities exchange or board of trade is
organized similar to those that apply to
a national securities exchange or a
national market system for securities.
4. Each Fund and its Manager will
maintain and preserve, for the life of
each Fund and at least six years
thereafter, all accounts, books, and other
documents constituting the record
forming the basis for the audited
financial statements that are to be
provided to the Fund Investors, and
each annual report of such Fund
required to be sent to the Fund
Investors, and agree that all such
records will be subject to examination
by the Commission and its staff.6
5. The Manager will send to each
Fund Investor who had an Interest in
the Fund, at any time during the fiscal
year then ended, Fund financial
statements that have been audited by
that Fund’s independent accountants.
At the end of each fiscal year, the
Manager will make a valuation or have
a valuation made of all of the assets of
the Fund as of such fiscal year end in
a manner consistent with customary
practice with respect to the valuation of
assets of the kind held by the Fund. In
addition, within 120 days after the end
of each fiscal year of the Fund, the
Manager of a Fund shall send a report
to each person who was a Fund Investor
at any time during the fiscal year then
ended setting forth tax information
necessary for the preparation by the
Fund Investor of his or her Federal and
State income tax returns and a report of
the investment activities of the Fund
during that year.
6. Whenever a Fund makes a purchase
from or sale to an entity that is affiliated
with the Fund by reason of a Tudor
Group director, officer, or employee (a)
serving as an officer, director, general
partner or investment adviser of the
entity or (b) having a 5% or more
investment in the entity, that individual
will not participate in the determination
by the Fund of whether or not to effect
the purchase or sale.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–22622 Filed 9–9–10; 8:45 am]
BILLING CODE 8010–01–P
6 Each Fund will preserve the accounts, books
and other documents required to be maintained in
an easily accessible place for the first two years.
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notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
[Investment Company Act Release No.
and Exchange Commission, 100 F
29410; File No. 812–13661]
Street, NE., Washington, DC 20549–
1090; Applicants: Adviser, 570 Carillon
Transamerica Asset Management, Inc.
Parkway, St Petersburg, Florida 33716.
et al.; Notice of Application
FOR FURTHER INFORMATION CONTACT:
September 3, 2010
Laura J. Riegel, Senior Counsel, at (202)
AGENCY: Securities and Exchange
551–6873, or Michael W. Mundt,
Commission (‘‘Commission’’).
Assistant Director, at (202) 551–6821
ACTION: Notice of an application for an
(Division of Investment Management,
order under section 12(d)(1)(J) of the
Office of Investment Company
Investment Company Act of 1940 (the
Regulation).
‘‘Act’’) for an exemption from sections
SUPPLEMENTARY INFORMATION: The
12(d)(1)(A) and (B) of the Act, under
following is a summary of the
sections 6(c) and 17(b) of the Act for an
exemption from section 17(a) of the Act, application. The complete application
may be obtained via the Commission’s
and under section 6(c) of the Act for an
Web site by searching for the file
exemption from rule 12d1–2(a) under
number, or an applicant using the
the Act.
Company name box, at https://
www.sec.gov/search/search.htm or by
Summary of the Application: The
requested order would (a) permit certain calling (202) 551–8090.
Applicants’ Representations:
series of registered open-end
1. The Trusts are open-end
management investment companies to
management investment companies
acquire shares of other registered openend management investment companies registered under the Act. Each Trust is
comprised of separate series (the
or unit investment trusts (‘‘UITs’’)
‘‘Funds’’) that pursue distinctive
registered under the Act that are within
investment objectives and strategies.1
or outside of the same group of
TF and TST are statutory trusts
investment companies as the acquiring
organized under the laws of Delaware.
investment companies, and (b) permit
TPFG and TPFGII are business trusts
certain series of registered open-end
organized under the laws of
management investment companies
relying on rule 12d1–2 under the Act to Massachusetts. TPP is organized as a
New York trust. TPFG and TPFGII
invest in certain financial instruments.
include Funds that operate as feeder
Applicants: Transamerica Asset
trusts in a master-feeder structure in
Management, Inc. (the ‘‘Adviser’’),
reliance on section 12(d)(1)(E) of the
Transamerica Funds (‘‘TF’’),
Act, with TPP as their common
Transamerica Partners Funds Group
corresponding master trust.2 TST
(‘‘TPFG’’), Transamerica Partners Funds
includes Funds that are offered solely to
Group II (‘‘TPFGII’’), Transamerica
insurance company separate accounts
Partners Portfolios (‘‘TPP’’) and
(‘‘Separate Accounts’’) that fund variable
Transamerica Series Trust (‘‘TST’’)
annuity and variable life contracts
(collectively, TF, TPFG, TPFGII, TPP,
issued by insurance companies. The
and TST, the ‘‘Trusts’’).
Separate Accounts may be registered
Filing Dates: The application was
under the Act (‘‘Registered Separate
filed on May 28, 2009 and amended on
Accounts’’) or unregistered under the
November 20, 2009 and August 17,
Act (‘‘Unregistered Separate Accounts’’).
2010.
Hearing or Notification of Hearing: An The Adviser, a Florida corporation, is
order granting the application will be
1 Applicants request that the order extend to any
issued unless the Commission orders a
future series of the Trusts and any other existing or
hearing. Interested persons may request future registered open-end management investment
a hearing by writing to the
company and any series thereof that is part of the
same ‘‘group of investment companies,’’ as defined
Commission’s Secretary and serving
in section 12(d)(1)(G)(ii) of the Act, as the Trusts
applicants with a copy of the request,
and that is, or may in the future be advised by the
personally or by mail. Hearing requests
Adviser or any entity controlling, controlled by, or
should be received by the Commission
under common control with the Adviser (included
in the term ‘‘Funds.’’). All existing entities that
by 5:30 p.m. on September 27, 2010,
currently intend to rely on the requested order are
and should be accompanied by proof of
named as applicants. Any other entity that relies on
service on applicants, in the form of an
the order in the future will do so only in accordance
affidavit or, for lawyers, a certificate of
with the terms and conditions of the application.
2 A Fund of Funds may not invest in an
service. Hearing requests should state
Underlying Fund that operates as a feeder fund
the nature of the writer’s interest, the
unless the feeder fund is part of the same group of
reason for the request, and the issues
investment companies (as defined in section
contested. Persons who wish to be
12(d)(1)(G)(ii)) of the Act as its corresponding
master fund.
notified of a hearing may request
SECURITIES AND EXCHANGE
COMMISSION
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registered under the Investment
Advisers Act of 1940 (the ‘‘Advisers
Act’’). The Adviser serves as investment
adviser to each of the Funds.
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.
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
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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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
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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
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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
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
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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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.
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
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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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
3. Section 17(b) of the Act authorizes
the Commission to grant an order
permitting a transaction otherwise
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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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.
Other Investments by Same Group Fund
of Funds
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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
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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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
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55379
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
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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
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16:29 Sep 09, 2010
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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
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Fmt 4703
Sfmt 4703
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
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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
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62823, File No. 4–51]
Joint Industry Plan; Order Approving
Amendment To Add EDGA Exchange,
Inc. and EDGX Exchange, Inc. as
Participants to National Market System
Plan Establishing Procedures Under
Rule 605 of Regulation NMS
srobinson on DSKHWCL6B1PROD with NOTICES
September 1, 2010.
I. Introduction
On March 30, 2010, EDGA Exchange,
Inc. (‘‘EDGA’’) and EDGX Exchange, Inc.
(‘‘EDGX’’) submitted to the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) in accordance with
Section 11A of the Securities Exchange
Act of 1934 (‘‘Act’’) 1 and Rule 608 of
Regulation NMS,2 a proposed
amendment to the national market
1 15
2 17
U.S.C. 78k–1.
CFR 242.608.
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16:29 Sep 09, 2010
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system plan establishing procedures
under Rule 605 of Regulation NMS
(‘‘Joint-SRO Plan’’ or ‘‘Plan’’).3 Under the
proposed amendment, EGDA and EDGX
would be added as participants to the
Joint-SRO Plan. Notice of filing and an
order granting temporary effectiveness
of the proposal were published in the
Federal Register on April 9, 2010.4 The
Commission did not receive any
comments on the proposed amendment.
This order approves the amendment on
a permanent basis.
II. Discussion
The Joint-SRO Plan establishes
procedures for market centers to follow
in making their monthly reports
required pursuant to Rule 605 of
Regulation NMS, available to the public
in a uniform, readily accessible, and
usable electronic format. The current
participants to the Joint-SRO Plan are
the American Stock Exchange LLC (n/k/
a NYSE Amex, Inc.), BATS Exchange,
Inc., Boston Stock Exchange, Inc. (n/k/
a NASDAQ OMX BX, Inc.), Chicago
Board Options Exchange, Incorporated,
Chicago Stock Exchange, Inc.,
Cincinnati Stock Exchange, Inc. (n/k/a
National Stock ExchangeSM),
International Securities Exchange, LLC,
The NASDAQ Stock Market LLC,
National Association of Securities
Dealers, Inc. (n/k/a Financial Industry
Regulatory Authority, Inc.), New York
Stock Exchange, Inc. (n/k/a New York
Stock Exchange LLC), Pacific Exchange,
Inc. (n/k/a NYSE Arca, Inc.), and
Philadelphia Stock Exchange, Inc. (n/k/
a NASDAQ OMX PHLX, Inc.). The
proposed amendment would add EDGA
and EDGX as participants to the JointSRO Plan.
Section III(b) of the Joint-SRO Plan
provides that a national securities
exchange or national securities
association may become a party to the
Plan by: (i) Executing a copy of the Plan,
as then in effect (with the only changes
being the addition of the new
participant’s name in Section 11(a) of
the Plan and the new participant’s
single-digit code in Section VI(a)(1) of
the Plan) and (ii) submitting such
executed plan to the Commission for
approval. Each of EDGA and EDGX has
submitted a signed copy of the JointSRO Plan to the Commission in
3 17 CFR 242.605. On April 12, 2001, the
Commission approved a national market system
plan for the purpose of establishing procedures for
market centers to follow in making their monthly
reports available to the public under Rule 11Ac1–
5 under the Act (n/k/a Rule 605 of Regulation
NMS). See Securities Exchange Act Release No.
44177 (April 12, 2001), 66 FR 19814 (April 17,
2001).
4 See Securities Exchange Act Release No. 61824
(April 1, 2010), 75 FR 18246 (April 9, 2010).
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55381
accordance with the procedures set
forth in the Plan regarding new
participants.
The Commission finds that the
amendment to the Joint-SRO Plan is
consistent with the requirements of the
Act and the rules and regulations
thereunder. Specifically, the
Commission finds that the proposed
amendment, which permits EDGA and
EDGX to become participants to the
Joint-SRO Plan, is consistent with the
requirements of Section 11A of the Act,5
and Rule 608 of Regulation NMS.6 The
Plan established appropriate procedures
for market centers to follow in making
their monthly reports required pursuant
to Rule 605 of Regulation NMS,
available to the public in a uniform,
readily accessible, and usable electronic
format. The amendment to include
EDGA and EDGX as participants in the
Joint-SRO Plan should contribute to the
maintenance of fair and orderly markets
and remove impediments to and perfect
the mechanisms of a national market
system by facilitating the uniform
public disclosure of order execution
information by all market centers. The
Commission believes that it is necessary
and appropriate in the public interest,
for the maintenance of fair and orderly
markets, to remove impediments to, and
perfect mechanisms of, a national
market system to allow EDGA and
EDGX to become participants in the
Joint-SRO Plan. The Commission finds,
therefore, that approving amendment to
the Joint-SRO Plan is appropriate and
consistent with Section 11A of the Act.7
IV. Conclusion
It is therefore ordered, pursuant to
Section 11A(a)(3)(B) of the Act 8 and
Rule 608 of Regulation NMS,9 that the
amendment to the Joint-SRO Plan to add
EDGA and EDGX as participants to the
Joint-SRO Plan is approved and EDGA
and EDGX are authorized to each act
jointly with the other participants to the
Joint-SRO Plan in planning, developing,
operating, or regulating the Plan as a
means of facilitating a national market
system.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–22552 Filed 9–9–10; 8:45 am]
BILLING CODE 8010–01–P
5 15
U.S.C. 78k–1.
CFR 242.608.
7 15 U.S.C. 78k–1.
8 15 U.S.C. 78k–1(a)(3)(B).
9 17 CFR 242.608.
10 17 CFR 200.30–3(a)(29).
6 17
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]]>Agencies
[Federal Register Volume 75, Number 175 (Friday, September 10, 2010)]
[Notices]
[Pages 55376-55381]
From the Federal Register Online via the Government Printing 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 https://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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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'').
---------------------------------------------------------------------------
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
