AQR Capital Management, LLC, et al.; Notice of Application, 40659-40664 [2012-16770]
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Federal Register / Vol. 77, No. 132 / Tuesday, July 10, 2012 / Notices
comments should be received within 60
days of this notice.
Charles Mierzwa,
Chief of Information Resources Management.
[FR Doc. 2012–16795 Filed 7–9–12; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
30128; 812–13833]
AQR Capital Management, LLC, et al.;
Notice of Application
July 3, 2012.
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 sections 17(a)(1) and (2)
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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AGENCY:
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, Sub-Adviser and
the Trust, Two Greenwich Plaza,
Greenwich CT 06830; Distributor: 1290
Broadway, Suite 1100, Denver, CO
80203.
FOR FURTHER INFORMATION CONTACT:
Bruce R. MacNeil, Senior Counsel, at
(202) 551–6879, or Daniele Marchesani,
Branch Chief, 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 Trust is an open-end
SUMMARY OF THE APPLICATION: The
requested order would (a) permit certain management investment company
registered under the Act and organized
registered management investment
as a Delaware statutory trust. The Trust
companies to acquire shares of certain
is comprised of separate series that
registered open-end management
pursue distinct investment objectives
investment companies that are outside
and strategies. The Adviser, a Delaware
the same group of investment
limited liability company, is registered
companies as the acquiring investment
as an investment adviser under the
companies, and (b) permit funds of
Investment Advisers Act of 1940
funds relying on rule 12d1–2 under the
(‘‘Advisers Act’’) and serves as
Act to invest in certain financial
investment adviser to each series of the
instruments.
Trust. The Sub-Adviser, an affiliate of
APPLICANTS: AQR Capital Management,
LLC (the ‘‘Adviser’’), CNH Partners, LLC the Adviser, is a Delaware limited
liability company and is registered as an
(the ‘‘Sub-Adviser’’), AQR Funds (the
investment adviser under the Advisers
‘‘Trust’’) and ALPS Distributors, Inc.
Act. The Sub-Adviser serves as
(the ‘‘Distributor’’).
investment sub-adviser to two series of
DATES: Filing Dates: The application was
the Trust.1 The Distributor is a Colorado
filed on October 14, 2010, and amended
corporation and is registered as a
on January 6, 2011, September 30, 2011,
broker-dealer under the Securities
and June 13, 2012.
Exchange Act of 1934 (the ‘‘Exchange
HEARING OR NOTIFICATION OF HEARING: An Act’’). The Distributor serves as
order granting the application will be
principal underwriter and distributor
issued unless the Commission orders a
for the shares of the Underlying Funds
hearing. Interested persons may request (as defined below).
a hearing by writing to the
2. Applicants request an exemption to
Commission’s Secretary and serving
permit registered management
applicants with a copy of the request,
investment companies that operate as a
personally or by mail. Hearing requests
‘‘fund of funds’’ and that are not part of
should be received by the Commission
the same ‘‘group of investment
by 5:30 p.m. on July 25, 2012, and
should be accompanied by proof of
1 All references to the term ‘‘Adviser’’ or ‘‘SubAdviser’’ include successors-in-interest to the
service on applicants, in the form of an
Adviser or Sub-Adviser, respectively. Successorsaffidavit or, for lawyers, a certificate of
in-interest are limited to any entity resulting from
service. Hearing requests should state
a name change, a reorganization of the Adviser or
the nature of the writer’s interest, the
Sub-Adviser, respectively, into another jurisdiction
or a change in the type of business organization.
reason for the request, and the issues
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companies,’’ within the meaning of
section 12(d)(1)(G)(ii) of the Act, as the
Trust (‘‘Unrelated Funds of Funds’’) to
acquire shares of separate series of the
Trust that do not operate as ‘‘funds of
funds’’ (‘‘Underlying Funds’’) 2 in excess
of the limits in section 12(d)(1)(A) of the
Act, and to permit Underlying Funds,
any principal underwriter for an
Underlying Fund, and any broker or
dealer registered under the Exchange
Act (‘‘Broker’’) to sell shares of an
Underlying Fund to an Unrelated Fund
of Funds in excess of the limits in
section 12(d)(1)(B) of the Act.3
Applicants request that the relief apply
to: (a) Each registered open-end
management investment company or
series thereof that currently or
subsequently is part of the same ‘‘group
of investment companies,’’ within the
meaning of section 12(d)(1)(G)(ii) of the
Act, as the Trust, and that is advised by
the Adviser or Sub-Adviser or any entity
controlling, controlled by, or under
common control with the Adviser or
Sub-Adviser (such registered open-end
management investment companies or
their series are included in the term
‘‘Underlying Funds’’); (b) each
Unrelated Fund of Funds that enters
into a Participation Agreement (as
defined below) with an Underlying
Fund to purchase shares of the
Underlying Fund; and (c) any principal
underwriter to an Underlying Fund or
Broker selling shares of an Underlying
Fund.4
2 As of the date of the Application, the
Underlying Funds include the following series of
the Trust: AQR Global Equity Fund, AQR
International Equity Fund, AQR International Small
Cap Fund, AQR Emerging Markets Fund, AQR
Equity Plus Fund, AQR Small Cap Core Fund, AQR
Small Cap Growth Fund, AQR Diversified Arbitrage
Fund, AQR Momentum Fund, AQR Small Cap
Momentum Fund, AQR International Momentum
Fund, AQR Managed Futures Strategy Fund, AQR
Risk Parity Fund, AQR Multi-Strategy Alternative
Fund, AQR Tax-Managed Momentum Fund, AQR
Tax-Managed Small Cap Momentum Fund, AQR
Tax-Managed International Momentum Fund, AQR
U.S. Defensive Equity Fund, AQR International
Defensive Equity Fund, AQR Emerging Defensive
Equity Fund, AQR Risk-Balanced Commodities
Strategy Fund, AQR Risk-Balanced Commodities
Strategy LV Fund, AQR Moderate Risk-Balanced
Fund and AQR Aggressive Risk-Balanced Fund.
3 Certain of the Underlying Funds may in the
future pursue their investment objective through a
master-feeder arrangement in reliance on section
12(d)(1)(E) of the Act. An Unrelated Fund of Funds
may not invest in an Underlying Fund that operates
as a feeder fund unless the Underlying 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 (each a ‘‘Master Fund’’).
4 All entities that currently intend to rely on the
requested order are named as applicants. Any other
entity that relies on the order in the future will
comply with the terms and conditions of the
application. An Unrelated Fund of Funds may rely
on the requested order only to invest in an
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3. An Underlying Fund may invest up
to 25% of its assets in a wholly-owned
and controlled subsidiary of the
Underlying Fund, organized under the
laws of the Cayman Islands or another
non-U.S. jurisdiction (a ‘‘Cayman Sub’’)
in order to invest in commodity-related
instruments and certain other
instruments. The Adviser and/or the
Sub-Adviser will serve as the
investment adviser to both such
Underlying Fund and Cayman Sub. The
Cayman Sub is created for the purpose
of assuring that the Underlying Fund
continues to qualify as a regulated
investment company for U.S. federal
income tax purposes.
4. Each Unrelated Fund of Funds will
be advised by an investment adviser,
within the meaning of section
2(a)(20)(A) of the Act, that is registered
as an investment adviser under the
Advisers Act (an ‘‘Unrelated Fund of
Funds Adviser’’). An Unrelated Fund of
Funds or its Unrelated Fund of Funds
Adviser may contract with an
investment adviser that meets the
definition of section 2(a)(20)(B) of the
Act (an ‘‘Unrelated Fund of Funds
Subadviser’’). Applicants state that
Unrelated Funds of Funds will be
interested in using the Underlying
Funds as part of their overall investment
strategy.
5. Applicants also request an
exemption to the extent necessary to
permit any existing or future funds that
operate as ‘‘funds of funds’’ and that are
part of the same ‘‘group of investment
companies,’’ within the meaning of
section 12(d)(1)(G)(ii) of the Act, as the
Trusts (‘‘Related Funds of Funds’’) and
which invest in other Underlying Funds
in reliance on section 12(d)(1)(G) of the
Act, and which are also 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
objective, policies, strategies and
limitations, in financial instruments that
may not be securities within the
meaning of section 2(a)(36) of the Act
(‘‘Other Investments’’).5
6. Consistent with its fiduciary
obligations under the Act, each Related
Fund of Fund’s board of trustees will
review the advisory fees charged by the
Underlying Fund and not in any other registered
investment company.
5 Applicants request that the relief apply to each
registered open-end management investment
company or series thereof that operates as a ‘‘fund
of funds’’ and that currently or subsequently is part
of the same ‘‘group of investment companies,’’
within the meaning of section 12(d)(1)(G)(ii) of the
Act, as the Trust, and is advised by the Adviser or
Sub-Adviser or any entity controlling, controlled by
or under common control with the Adviser or SubAdviser.
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Related Fund of Fund’s investment
adviser to ensure that they are based on
services provided that are in addition to,
rather than duplicative of, services
provided pursuant to the advisory
agreement of any investment company
in which the Related Fund of Funds
may invest.
Applicants’ Legal Analysis
Investments in Underlying Funds by
Unrelated Funds of Funds
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act, in
relevant part, prohibits a registered
investment company from acquiring
shares of an investment company if the
securities represent more than 3% of the
total outstanding voting stock of the
acquired company, more than 5% of the
total assets of the acquiring company,
or, together with the securities of any
other investment companies, more than
10% of the total assets of the acquiring
company. Section 12(d)(1)(B) of the Act
prohibits a registered open-end
investment company, its principal
underwriter, and any broker or dealer
from selling the investment company’s
shares 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 to permit
Unrelated Funds of Funds to acquire
shares of the Underlying Funds in
excess of the limits in section
12(d)(1)(A), and an Underlying Fund,
any principal underwriter for an
Underlying Fund, and any Broker to sell
shares of an Underlying Fund to an
Unrelated Fund of Funds in excess of
the limits in section 12(d)(1)(B) of the
Act.
3. Applicants state that the terms and
conditions of the proposed arrangement
will adequately address the policy
concerns underlying sections
12(d)(1)(A) and (B), which include
concerns about undue influence by a
fund of funds over underlying funds,
excessive layering of fees, and overly
complex fund structures. Accordingly,
applicants believe that the requested
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exemption is consistent with the public
interest and the protection of investors.
4. Applicants believe that neither an
Unrelated Fund of Funds nor an
Unrelated Fund of Funds Affiliate
would be able to exert undue influence
over the Underlying Funds.6 To limit
the control that an Unrelated Fund of
Funds may have over an Underlying
Fund, applicants propose a condition
prohibiting the Unrelated Fund of
Funds Adviser, any person controlling,
controlled by, or under common control
with the Unrelated Fund of Funds
Adviser, 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 that is advised or
sponsored by the Unrelated Fund of
Funds Adviser or any person
controlling, controlled by, or under
common control with the Unrelated
Fund of Funds Adviser (the ‘‘Unrelated
Fund of Funds Advisory Group’’) from
controlling (individually or in the
aggregate) an Underlying Fund within
the meaning of section 2(a)(9) of the Act.
The same prohibition would apply to
the Unrelated Fund of Funds
Subadviser, any person controlling,
controlled by or under common control
with the Unrelated 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 Unrelated
Fund of Funds Subadviser or any
person controlling, controlled by or
under common control with the
Unrelated Fund of Funds Subadviser
(the ‘‘Unrelated Fund of Funds
Subadvisory Group’’). Applicants
propose other conditions to limit the
potential for undue influence over the
Underlying Funds, including that no
Unrelated Fund of Funds or Unrelated
Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an
investment adviser to an open-end fund)
will cause an 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
6 An ‘‘Unrelated Fund of Funds Affiliate’’ is an
Unrelated Fund of Funds Adviser, Unrelated Fund
of Funds Subadviser, a promoter, or a principal
underwriter of an Unrelated Fund of Funds, and
any person controlling, controlled by, or under
common control with any of those entities. An
‘‘Underlying Fund Affiliate’’ is an investment
adviser, sponsor, promoter, or principal
underwriter of an Underlying Fund (or its
respective Master Fund or Cayman Sub), and any
person controlling, controlled by, or under common
control with any of those entities.
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Underwriting Affiliate (‘‘Affiliated
Underwriting’’).
5. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. The board of
directors or trustees of each Unrelated
Fund of Funds, including a majority of
the directors or trustees who are not
‘‘interested persons’’ (within the
meaning of section 2(a)(19) of the Act)
(‘‘Independent Trustees’’), will find that
the advisory fees charged under such
advisory contract are based on services
provided that will be in addition to,
rather than duplicative of, the services
provided under the advisory contract(s)
of any Underlying Fund in which the
Unrelated Fund of Funds may invest. In
addition, an Unrelated Fund of Funds
Adviser will waive fees otherwise
payable to it by the Unrelated Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Underlying Fund under rule 12b–1
under the Act) received from an
Underlying Fund by the Unrelated Fund
of Funds Adviser or an affiliated person
of the Unrelated Fund of Funds Adviser,
other than any advisory fees paid to the
Unrelated Fund of Funds Adviser or its
affiliated person, by an Underlying
Fund, in connection with the
investment by the Unrelated Fund of
Funds in the Underlying Fund.
Applicants also state that with respect
to registered separate accounts that
invest in an Unrelated Fund of Funds,
no sales load will be charged at the
Unrelated Fund of Funds level or at the
Underlying Fund level.7 Other sales
charges and service fees, as defined in
Rule 2830 of the Conduct Rules of the
NASD (‘‘NASD Conduct Rules’’), if any,
will only be charged at the Unrelated
Fund of Funds level or at the
Underlying Fund level, not both. With
respect to other investments in an
Unrelated Fund of Funds, any sales
charges and/or service fees charged with
respect to shares of the Unrelated Fund
of Funds will not exceed the limits
applicable to a fund of funds as set forth
7 Applicants represent that each Unrelated Fund
of Funds will represent in the Participation
Agreement (as defined below) that no insurance
company sponsoring a registered separate account
funding variable insurance contracts will be
permitted to invest in the Unrelated Fund of Funds
unless the insurance company has certified to the
Unrelated Fund of Funds that the aggregate of all
fees and charges associated with each contract that
invests in the Unrelated Fund of Funds, including
fees and charges at the separate account, Unrelated
Fund of Funds, and Underlying Fund levels, will
be reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks
assumed by the insurance company.
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in Rule 2830 of the NASD Conduct
Rules.8
6. Applicants submit that the
proposed arrangement will not create an
overly complex fund structure.
Applicants note that no Underlying
Fund will acquire 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) of the Act, except
in certain circumstances identified in
condition 12 below. Applicants also
represent that to ensure that Unrelated
Funds of Funds comply with the terms
and conditions of the requested
exemption from section 12(d)(1)(A) of
the Act, an Unrelated Fund of Funds
must enter into a participation
agreement between the Trust, on behalf
of the relevant Underlying Fund, and
the Unrelated Funds of Funds
(‘‘Participation Agreement’’) before
investing in an Underlying Fund in
excess of the limits in section
12(d)(1)(A). The Participation
Agreement will require the Unrelated
Fund of Funds to adhere to the terms
and conditions of the requested order.
The Participation Agreement will
include an acknowledgment from the
Unrelated Fund of Funds that it may
rely on the requested order only to
invest in the Underlying Funds and not
in any other registered investment
company.
7. Applicants state that investments
by an Underlying Fund in a Cayman
Sub also do not raise concerns about
undue influence, layering of fees and
complex structures. Applicants
represent that: (a) the Underlying Fund
will be the sole and legal beneficial
owner of its Cayman Sub, which
addresses concerns regarding
pyramiding of voting control as a means
of undue influence; (b) the Adviser and/
or the Sub-Adviser will manage the
investments of both the Underlying
Fund and its Cayman Sub, which
addresses concerns over undue
influence by the Adviser; and (c) there
will be no inappropriate layering of fees
and expenses as a result of an
Underlying Fund investing in a Cayman
Sub. Applicants, further represent that
the financial statements of the Cayman
Sub will be consolidated with those of
the Underlying Fund, if permitted by
the applicable accounting standards. In
addition, in assessing compliance with
the asset coverage requirements under
section 18(f) of the Act, an Underlying
Fund (or its respective Master Fund)
will deem the assets, liabilities and
8 Any references to NASD Conduct Rule 2830
include any successor or replacement FINRA Rule
to NASD Conduct Rule 2830.
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indebtedness of a Cayman Sub in which
the Underlying Fund (or its respective
Master Fund) invests as its own. Finally,
the expenses of the Cayman Sub will be
included in the total annual fund
operating expenses in the prospectus of
the Underlying Fund.
B. Section 17(a)
1. Section 17(a) of the Act generally
prohibits sales or purchases of securities
between a registered investment
company and any affiliated person of
the company. Section 2(a)(3) of the Act
defines an ‘‘affiliated person’’ of another
person to include 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.
2. Applicants seek relief from section
17(a) to permit an Underlying Fund that
is an affiliated person of an Unrelated
Fund of Funds because the Unrelated
Fund of Funds holds 5% or more of the
Underlying Fund’s shares to sell its
shares to and redeem its shares from an
Unrelated Fund of Funds. Applicants
state that any proposed transactions
directly between an Underlying Fund
and an Unrelated Fund of Funds will be
consistent with the policies of each
Underlying Fund and Unrelated Fund of
Funds. The Participation Agreement
will require any Unrelated Fund of
Funds that purchases shares from an
Underlying Fund to represent that the
purchase of shares from the Underlying
Fund by an Unrelated Fund of Funds
will be accomplished in compliance
with the investment restrictions of the
Unrelated Fund of Funds and will be
consistent with the investment policies
set forth in the Unrelated Fund of
Funds’ registration statement.
3. Section 17(b) of the Act authorizes
the Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (i) The terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (ii) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (iii)
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
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standards for relief under sections 17(b)
and 6(c) of the Act.9 Applicants state
that the terms of the transactions are
reasonable and fair and do not involve
overreaching. Applicants note that any
consideration paid for the purchase or
redemption of shares directly from an
Underlying Fund will be based on the
net asset value of the Underlying Fund.
Applicants state that the proposed
transactions will be consistent with the
policies of each Underlying Fund and
each Unrelated Fund of Funds and with
the general purposes of the Act.
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Other Investments by Related Funds of
Funds
1. Section 12(d)(1)(G) of the Act
provides that section 12(d)(1) will not
apply to securities of an acquired
company purchased by an acquiring
company if: (i) The acquiring company
and acquired company are part of the
same group of investment companies;
(ii) the acquiring company holds only
securities of acquired companies that
are part of the same group of investment
companies, government securities, and
short-term paper; (iii) the aggregate sales
loads and distribution-related fees of the
acquiring company and the acquired
company are not excessive under rules
adopted pursuant to section 22(b) or
section 22(c) of the Act by a securities
association registered under section 15A
of the Exchange Act or by the
Commission; and (iv) the acquired
company has a policy that prohibits it
from acquiring securities of registered
open-end management investment
companies or registered unit investment
trusts in reliance on section 12(d)(1)(F)
or (G) of the Act.
2. Rule 12d1–2 under the Act permits
a registered open-end investment
company or a registered unit investment
trust that relies on section 12(d)(1)(G) of
the Act to acquire, in addition to
securities issued by another registered
investment company in the same group
of investment companies, government
securities, and short-term paper: (1)
Securities issued by an investment
company that is not in the same group
of investment companies, when the
acquisition is in reliance on section
12(d)(1)(A) or 12(d)(1)(F) of the Act; (2)
securities (other than securities issued
by an investment company); and (3)
9 Applicants acknowledge that receipt of
compensation by (a) an affiliated person of an
Unrelated Fund of Funds, or an affiliated person of
such person, for the purchase by the Unrelated
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 an Unrelated
Fund of Funds may be prohibited by section
17(e)(1) of the Act. The Participation Agreement
also will include this acknowledgment.
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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 Related Funds
of Funds may invest a portion of their
assets in Other Investments. Applicants
request an order under section 6(c) of
the Act for an exemption from rule
12d1–2(a) to allow the Related Funds of
Funds to invest in Other Investments.
Applicants assert that permitting the
Related Funds of Funds to invest in
Other Investments as described in the
application would not raise any of the
concerns that the requirements of
section 12(d)(1) were designed to
address.
Applicants’ Conditions
Investments in Underlying Funds by
Unrelated Funds of Funds
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. The members of an Unrelated Fund
of Funds Advisory Group will not
control (individually or in the aggregate)
an Underlying Fund (or its respective
Master Fund) within the meaning of
section 2(a)(9) of the Act. The members
of an Unrelated Fund of Funds
Subadvisory Group will not control
(individually or in the aggregate) an
Underlying Fund (or its respective
Master 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 Underlying Fund, the
Unrelated Fund of Funds Advisory
Group or the Unrelated Fund of Funds
Subadvisory Group, each in the
aggregate, becomes a holder of more
than 25 percent of the outstanding
voting securities of an Underlying Fund,
it (except for any member of the
Unrelated Fund of Funds Advisory
Group or Unrelated Fund of Funds
Subadvisory Group that is a separate
account funding variable insurance
contracts) will vote its shares of the
Underlying Fund in the same
proportion as the vote of all other
holders of the Underlying Fund’s
shares. This condition does not apply to
the Unrelated Fund of Funds
Subadvisory Group with respect to an
Underlying Fund (or its respective
Master Fund) for which the Unrelated
Fund of Funds Subadviser or a person
controlling, controlled by, or under
common control with the Unrelated
Fund of Funds Subadviser acts as the
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
investment adviser within the meaning
of section 2(a)(20)(A) of the Act. A
registered separate account funding
variable insurance contracts will seek
voting instructions from its contract
holders and will vote its shares 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 funding
variable insurance contracts will either
(a) vote its shares of the Underlying
Fund in the same proportion as the vote
of all other holders of the 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 Unrelated Fund of Funds or
Unrelated Fund of Funds Affiliate will
cause any existing or potential
investment by the Unrelated Fund of
Funds in shares of an Underlying Fund
to influence the terms of any services or
transactions between the Unrelated
Fund of Funds or an Unrelated Fund of
Funds Affiliate and the Underlying
Fund (or its respective Master Fund or
Cayman Sub) or an Underlying Fund
Affiliate.
3. The board of directors or trustees of
an Unrelated Fund of Funds, including
a majority of the Independent Trustees,
will adopt procedures reasonably
designed to ensure that the Unrelated
Fund of Funds Adviser and any
Unrelated Fund of Funds Subadviser(s)
are conducting the investment program
of the Unrelated Fund of Funds without
taking into account any consideration
received by the Unrelated Fund of
Funds or an Unrelated Fund of Funds
Affiliate from an Underlying Fund (or
its respective Master Fund or Cayman
Sub) or an Underlying Fund Affiliate in
connection with any services or
transactions.
4. Once an investment by an
Unrelated Fund of Funds in the
securities of an Underlying Fund
exceeds the limit in section
12(d)(1)(A)(i) of the Act, the Board of
Trustees (the ‘‘Board’’) of the
Underlying Fund (or its respective
Master Fund), including a majority of
the Independent Trustees, will
determine that any consideration paid
by the Underlying Fund (or its
respective Master Fund or Cayman Sub)
to the Unrelated Fund of Funds or an
Unrelated Fund of Funds Affiliate in
connection with any services or
transactions: (a) Is fair and reasonable in
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10JYN1
mstockstill on DSK4VPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 132 / Tuesday, July 10, 2012 / Notices
relation to the nature and quality of the
services and benefits received by the
Underlying Fund (or its respective
Master Fund or Cayman Sub); (b) is
within the range of consideration that
the Underlying Fund (or its respective
Master Fund or Cayman Sub) 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 Underlying
Fund (or its respective Master Fund or
Cayman Sub) and its investment
adviser(s) or any person controlling,
controlled by, or under common control
with such investment adviser(s).
5. No Unrelated Fund of Funds or
Unrelated Fund of Funds Affiliate
(except to the extent it is acting in its
capacity as an investment adviser to an
Underlying Fund (or its respective
Master Fund or Cayman Sub)) will
cause an Underlying Fund (or its
respective Master Fund or Cayman Sub)
to purchase a security in any Affiliated
Underwriting.
6. The Board of an Underlying Fund
(or of its respective Master Fund),
including a majority of the Independent
Trustees, will adopt procedures
reasonably designed to monitor any
purchases of securities by the
Underlying Fund (or its respective
Master Fund or Cayman Sub) in an
Affiliated Underwriting once an
investment by an Unrelated Fund of
Funds in the securities of the
Underlying 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 Underlying Fund (or its
respective Master Fund) will review
these purchases periodically, but no less
frequently than annually, to determine
whether the purchases were influenced
by the investment by the Unrelated
Fund of Funds in shares of the
Underlying Fund. The Board of the
Underlying Fund (or its respective
Master Fund) shall consider, among
other things, (a) Whether the purchases
were consistent with the investment
objectives and policies of the
Underlying Fund (or its respective
Master Fund or Cayman Sub); (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 Underlying Fund (or
VerDate Mar<15>2010
16:28 Jul 09, 2012
Jkt 226001
its respective Master Fund or Cayman
Sub) in Affiliated Underwritings and the
amount purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board of the Underlying Fund shall take
any appropriate actions based on its
review, including, if appropriate, the
institution of procedures designed to
ensure that purchases of securities in
Affiliated Underwritings are in the best
interest of shareholders.
7. Each Underlying Fund (or its
respective Master Fund) shall 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 shall 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 Affiliated Underwritings
once an investment by an Unrelated
Fund of Funds in the securities of an
Underlying Fund exceeds the limit in
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 Board’s determinations were made.
8. Before investing in shares of an
Underlying Fund in excess of the limits
in section 12(d)(1)(A), each Unrelated
Fund of Funds and Underlying 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 Underlying
Fund in excess of the limit in section
12(d)(1)(A)(i), an Unrelated Fund of
Funds will notify the Underlying Fund
of the investment. At such time, the
Unrelated Fund of Funds will also
transmit to the Underlying Fund a list
of the names of each Unrelated Fund of
Funds Affiliate and Underwriting
Affiliate. The Unrelated Fund of Funds
will notify the Underlying Fund of any
changes to the list of the names as soon
as reasonably practicable after a change
occurs. The Underlying Fund and the
Unrelated 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.
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
40663
9. Prior to approving any advisory
contract under section 15 of the Act, the
board of directors or trustees of each
Unrelated Fund of Funds, including a
majority of the Independent Trustees,
will find that the advisory fees charged
under such advisory contracts are based
on services provided that will be in
addition to, rather than duplicative of,
the services provided under the
advisory contract(s) of any Underlying
Fund (or its respective Master Fund) in
which the Unrelated Fund of Funds
may invest. These findings and their
basis will be recorded fully in the
minute books of the appropriate
Unrelated Fund of Funds.
10. An Unrelated Fund of Funds
Adviser will waive fees otherwise
payable to it by the Unrelated Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Underlying Fund (or its respective
Master Fund) under rule 12b–1 under
the Act) received from an Underlying
Fund (or its respective Master Fund or
Cayman Sub) by the Unrelated Fund of
Funds Adviser, or an affiliated person of
the Unrelated Fund of Funds Adviser,
other than any advisory fees paid to the
Unrelated Fund of Funds Adviser or its
affiliated person by the Underlying
Fund (or its respective Master Fund or
Cayman Sub), in connection with the
investment by the Unrelated Fund of
Funds in the Underlying Fund. Any
Unrelated Fund of Funds Subadviser
will waive fees otherwise payable to the
Unrelated Fund of Funds Subadviser,
directly or indirectly, by the Unrelated
Fund of Funds in an amount at least
equal to any compensation received
from any Underlying Fund (or its
respective Master Fund or Cayman Sub)
by the Unrelated Fund of Funds
Subadviser, or an affiliated person of the
Unrelated Fund of Funds Subadviser,
other than any advisory fees paid to the
Unrelated Fund of Funds Subadviser or
its affiliated person by the Underlying
Fund (or its respective Master Fund or
Cayman Sub), in connection with the
investment by the Unrelated Fund of
Funds in the Underlying Fund made at
the direction of the Unrelated Fund of
Funds Subadviser. In the event that the
Unrelated Fund of Funds Subadviser
waives fees, the benefit of the waiver
will be passed through to the Unrelated
Fund of Funds.
11. With respect to registered separate
accounts that invest in an Unrelated
Fund of Funds, no sales load will be
charged at the Unrelated 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
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Federal Register / Vol. 77, No. 132 / Tuesday, July 10, 2012 / Notices
Unrelated Fund of Funds level or at the
Underlying Fund level, not both. With
respect to other investments in an
Unrelated Fund of Funds, any sales
charges and/or service fees charged with
respect to shares of the Unrelated Fund
of Funds will not exceed the limits
applicable to a fund of funds as set forth
in NASD Conduct Rule 2830.
12. No Underlying Fund (or its
respective Master Fund) will acquire
securities of any other investment
company or company relying on section
3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section
12(d)(1)(A) of the Act, except to the
extent that such Underlying Fund (or its
respective Master 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); (c) acquires (or is deemed to
have acquired) securities of another
investment company pursuant to
exemptive relief from the Commission
permitting such Underlying Fund (or its
respective Master 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; or (d) invests in a Cayman
Sub that is a wholly-owned and
controlled subsidiary of the Underlying
Fund (or its respective Master Fund) as
described in the Application. Further,
no Cayman Sub will acquire securities
of any other investment company or
company relying on section 3(c)(1) or
3(c)(7) of the Act other than money
market funds that comply with Rule
2a–7 for short-term cash management
purposes.
Other Investments by Related Funds of
Funds
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
mstockstill on DSK4VPTVN1PROD with NOTICES
Maker
Maker
Maker
Maker
(adds
(adds
(adds
(adds
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–16770 Filed 7–9–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67340; File No. SR–CBOE–
2012–060]
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the CBOE
Stock Exchange Fees Schedule
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
July 3, 2012.
CBSX proposes to amend its Fees
Schedule. First, the Exchange proposes
to eliminate the Maker fee tier for
Makers that add 2,500,000–4,999,999
shares of liquidity in one day (for which
such Makers were assessed a $0.0016
per share rate) and make the lowest
Maker tier (and corresponding $0.0018
per share fee) apply to any Maker that
adds 4,999,999 shares or less of
liquidity in one day (all Maker and
Taker fees discussed in this filing relate
to transactions in securities priced $1 or
greater). CBSX also proposes increasing
the per share rates for the remaining
Maker tiers (aside from the lowest
Maker tier) by $0.0002. These changes
are proposed for economic and
competitive reasons as CBSX attempts
to create a continuum of incentives that
will allow CBSX to compete for
liquidity provision and order flow. As
such, the proposed Maker fees for
transactions in securities priced $1 or
greater would be as follows:
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 2,
2012, the Chicago Board Options
Exchange, Incorporated (‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change, as described
in Items I and II below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comment on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Fees Schedule for its CBOE Stock
Exchange (‘‘CBSX’’). The text of the
proposed rule change is available on the
Exchange’s Web site (https://
determined in the chart above for each
tier. Market participants who share a
trading acronym or MPID may aggregate
their trading activity for purposes of
these rates. Qualification for these rates
will require that a market participant
U.S.C. 78s(b)(1).
VerDate Mar<15>2010
www.cboe.com/AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission.
1. Purpose
4,999,999 shares or less of liquidity in one day) ..................................................................................................
5,000,000–9,999,999 shares of liquidity in one day) ............................................................................................
10,000,000–14,999,999 shares of liquidity in one day) ........................................................................................
15 million shares or more of liquidity in one day) .................................................................................................
As before, these rates apply to all
transactions in securities priced $1 or
greater made by the same market
participant in any day in which such
participant adds the established amount
of shares or more of liquidity that is
1 15
13. The Applicants will comply with
all provisions of rule 12d1–2 under the
Act, except for paragraph (a)(2) to the
extent that it restricts any Related Fund
of Funds from investing in Other
Investments as described in the
application.
16:28 Jul 09, 2012
2 17
Jkt 226001
PO 00000
Fmt 4703
Sfmt 4703
per
per
per
per
share.
share.
share.
share.
appropriately indicate his trading
acronym and/or MPID in the
appropriate field on the order.
CBSX also proposes amending its
Taker rebate structure for transactions in
securities priced $1 or greater.
CFR 240.19b–4.
Frm 00101
$0.0018
$0.0017
$0.0016
$0.0015
E:\FR\FM\10JYN1.SGM
10JYN1
]]>Agencies
[Federal Register Volume 77, Number 132 (Tuesday, July 10, 2012)]
[Notices]
[Pages 40659-40664]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16770]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30128; 812-13833]
AQR Capital Management, LLC, et al.; Notice of Application
July 3, 2012.
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 sections 17(a)(1) and (2) of the
Act, and under section 6(c) of the Act for an exemption from rule 12d1-
2(a) under the Act.
-----------------------------------------------------------------------
Summary of the Application: The requested order would (a) permit
certain registered management investment companies to acquire shares of
certain registered open-end management investment companies that are
outside the same group of investment companies as the acquiring
investment companies, and (b) permit funds of funds relying on rule
12d1-2 under the Act to invest in certain financial instruments.
Applicants: AQR Capital Management, LLC (the ``Adviser''), CNH
Partners, LLC (the ``Sub-Adviser''), AQR Funds (the ``Trust'') and ALPS
Distributors, Inc. (the ``Distributor'').
Dates: Filing Dates: The application was filed on October 14, 2010, and
amended on January 6, 2011, September 30, 2011, and June 13, 2012.
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 July 25, 2012, 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, Sub-Adviser
and the Trust, Two Greenwich Plaza, Greenwich CT 06830; Distributor:
1290 Broadway, Suite 1100, Denver, CO 80203.
FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at
(202) 551-6879, or Daniele Marchesani, Branch Chief, 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 Trust is an open-end management investment company
registered under the Act and organized as a Delaware statutory trust.
The Trust is comprised of separate series that pursue distinct
investment objectives and strategies. The Adviser, a Delaware limited
liability company, is registered as an investment adviser under the
Investment Advisers Act of 1940 (``Advisers Act'') and serves as
investment adviser to each series of the Trust. The Sub-Adviser, an
affiliate of the Adviser, is a Delaware limited liability company and
is registered as an investment adviser under the Advisers Act. The Sub-
Adviser serves as investment sub-adviser to two series of the Trust.\1\
The Distributor is a Colorado corporation and is registered as a
broker-dealer under the Securities Exchange Act of 1934 (the ``Exchange
Act''). The Distributor serves as principal underwriter and distributor
for the shares of the Underlying Funds (as defined below).
---------------------------------------------------------------------------
\1\ All references to the term ``Adviser'' or ``Sub-Adviser''
include successors-in-interest to the Adviser or Sub-Adviser,
respectively. Successors-in-interest are limited to any entity
resulting from a name change, a reorganization of the Adviser or
Sub-Adviser, respectively, into another jurisdiction or a change in
the type of business organization.
---------------------------------------------------------------------------
2. Applicants request an exemption to permit registered management
investment companies that operate as a ``fund of funds'' and that are
not part of the same ``group of investment companies,'' within the
meaning of section 12(d)(1)(G)(ii) of the Act, as the Trust
(``Unrelated Funds of Funds'') to acquire shares of separate series of
the Trust that do not operate as ``funds of funds'' (``Underlying
Funds'') \2\ in excess of the limits in section 12(d)(1)(A) of the Act,
and to permit Underlying Funds, any principal underwriter for an
Underlying Fund, and any broker or dealer registered under the Exchange
Act (``Broker'') to sell shares of an Underlying Fund to an Unrelated
Fund of Funds in excess of the limits in section 12(d)(1)(B) of the
Act.\3\ Applicants request that the relief apply to: (a) Each
registered open-end management investment company or series thereof
that currently or subsequently is part of the same ``group of
investment companies,'' within the meaning of section 12(d)(1)(G)(ii)
of the Act, as the Trust, and that is advised by the Adviser or Sub-
Adviser or any entity controlling, controlled by, or under common
control with the Adviser or Sub-Adviser (such registered open-end
management investment companies or their series are included in the
term ``Underlying Funds''); (b) each Unrelated Fund of Funds that
enters into a Participation Agreement (as defined below) with an
Underlying Fund to purchase shares of the Underlying Fund; and (c) any
principal underwriter to an Underlying Fund or Broker selling shares of
an Underlying Fund.\4\
---------------------------------------------------------------------------
\2\ As of the date of the Application, the Underlying Funds
include the following series of the Trust: AQR Global Equity Fund,
AQR International Equity Fund, AQR International Small Cap Fund, AQR
Emerging Markets Fund, AQR Equity Plus Fund, AQR Small Cap Core
Fund, AQR Small Cap Growth Fund, AQR Diversified Arbitrage Fund, AQR
Momentum Fund, AQR Small Cap Momentum Fund, AQR International
Momentum Fund, AQR Managed Futures Strategy Fund, AQR Risk Parity
Fund, AQR Multi-Strategy Alternative Fund, AQR Tax-Managed Momentum
Fund, AQR Tax-Managed Small Cap Momentum Fund, AQR Tax-Managed
International Momentum Fund, AQR U.S. Defensive Equity Fund, AQR
International Defensive Equity Fund, AQR Emerging Defensive Equity
Fund, AQR Risk-Balanced Commodities Strategy Fund, AQR Risk-Balanced
Commodities Strategy LV Fund, AQR Moderate Risk-Balanced Fund and
AQR Aggressive Risk-Balanced Fund.
\3\ Certain of the Underlying Funds may in the future pursue
their investment objective through a master-feeder arrangement in
reliance on section 12(d)(1)(E) of the Act. An Unrelated Fund of
Funds may not invest in an Underlying Fund that operates as a feeder
fund unless the Underlying 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 (each a ``Master Fund'').
\4\ All entities that currently intend to rely on the requested
order are named as applicants. Any other entity that relies on the
order in the future will comply with the terms and conditions of the
application. An Unrelated Fund of Funds may rely on the requested
order only to invest in an Underlying Fund and not in any other
registered investment company.
---------------------------------------------------------------------------
[[Page 40660]]
3. An Underlying Fund may invest up to 25% of its assets in a
wholly-owned and controlled subsidiary of the Underlying Fund,
organized under the laws of the Cayman Islands or another non-U.S.
jurisdiction (a ``Cayman Sub'') in order to invest in commodity-related
instruments and certain other instruments. The Adviser and/or the Sub-
Adviser will serve as the investment adviser to both such Underlying
Fund and Cayman Sub. The Cayman Sub is created for the purpose of
assuring that the Underlying Fund continues to qualify as a regulated
investment company for U.S. federal income tax purposes.
4. Each Unrelated Fund of Funds will be advised by an investment
adviser, within the meaning of section 2(a)(20)(A) of the Act, that is
registered as an investment adviser under the Advisers Act (an
``Unrelated Fund of Funds Adviser''). An Unrelated Fund of Funds or its
Unrelated Fund of Funds Adviser may contract with an investment adviser
that meets the definition of section 2(a)(20)(B) of the Act (an
``Unrelated Fund of Funds Subadviser''). Applicants state that
Unrelated Funds of Funds will be interested in using the Underlying
Funds as part of their overall investment strategy.
5. Applicants also request an exemption to the extent necessary to
permit any existing or future funds that operate as ``funds of funds''
and that are part of the same ``group of investment companies,'' within
the meaning of section 12(d)(1)(G)(ii) of the Act, as the Trusts
(``Related Funds of Funds'') and which invest in other Underlying Funds
in reliance on section 12(d)(1)(G) of the Act, and which are also
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 objective, policies, strategies and
limitations, in financial instruments that may not be securities within
the meaning of section 2(a)(36) of the Act (``Other Investments'').\5\
---------------------------------------------------------------------------
\5\ Applicants request that the relief apply to each registered
open-end management investment company or series thereof that
operates as a ``fund of funds'' and that currently or subsequently
is part of the same ``group of investment companies,'' within the
meaning of section 12(d)(1)(G)(ii) of the Act, as the Trust, and is
advised by the Adviser or Sub-Adviser or any entity controlling,
controlled by or under common control with the Adviser or Sub-
Adviser.
---------------------------------------------------------------------------
6. Consistent with its fiduciary obligations under the Act, each
Related Fund of Fund's board of trustees will review the advisory fees
charged by the Related Fund of Fund's investment adviser to ensure that
they are based on services provided that are in addition to, rather
than duplicative of, services provided pursuant to the advisory
agreement of any investment company in which the Related Fund of Funds
may invest.
Applicants' Legal Analysis
Investments in Underlying Funds by Unrelated Funds of Funds
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act, in relevant part, prohibits a
registered investment company from acquiring shares of an investment
company if the securities represent more than 3% of the total
outstanding voting stock of the acquired company, more than 5% of the
total assets of the acquiring company, or, together with the securities
of any other investment companies, more than 10% of the total assets of
the acquiring company. Section 12(d)(1)(B) of the Act prohibits a
registered open-end investment company, its principal underwriter, and
any broker or dealer from selling the investment company's shares 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 to permit Unrelated Funds of Funds to acquire
shares of the Underlying Funds in excess of the limits in section
12(d)(1)(A), and an Underlying Fund, any principal underwriter for an
Underlying Fund, and any Broker to sell shares of an Underlying Fund to
an Unrelated Fund of Funds in excess of the limits in section
12(d)(1)(B) of the Act.
3. Applicants state that the terms and conditions of the proposed
arrangement will adequately address the policy concerns underlying
sections 12(d)(1)(A) and (B), which include concerns about undue
influence by a fund of funds 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 believe that neither an Unrelated Fund of Funds nor
an Unrelated Fund of Funds Affiliate would be able to exert undue
influence over the Underlying Funds.\6\ To limit the control that an
Unrelated Fund of Funds may have over an Underlying Fund, applicants
propose a condition prohibiting the Unrelated Fund of Funds Adviser,
any person controlling, controlled by, or under common control with the
Unrelated Fund of Funds Adviser, 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 that is advised or sponsored by the Unrelated Fund of Funds
Adviser or any person controlling, controlled by, or under common
control with the Unrelated Fund of Funds Adviser (the ``Unrelated Fund
of Funds Advisory Group'') from controlling (individually or in the
aggregate) an Underlying Fund within the meaning of section 2(a)(9) of
the Act. The same prohibition would apply to the Unrelated Fund of
Funds Subadviser, any person controlling, controlled by or under common
control with the Unrelated 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 Unrelated Fund of Funds Subadviser
or any person controlling, controlled by or under common control with
the Unrelated Fund of Funds Subadviser (the ``Unrelated Fund of Funds
Subadvisory Group''). Applicants propose other conditions to limit the
potential for undue influence over the Underlying Funds, including that
no Unrelated Fund of Funds or Unrelated Fund of Funds Affiliate (except
to the extent it is acting in its capacity as an investment adviser to
an open-end fund) will cause an 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
[[Page 40661]]
Underwriting Affiliate (``Affiliated Underwriting'').
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\6\ An ``Unrelated Fund of Funds Affiliate'' is an Unrelated
Fund of Funds Adviser, Unrelated Fund of Funds Subadviser, a
promoter, or a principal underwriter of an Unrelated Fund of Funds,
and any person controlling, controlled by, or under common control
with any of those entities. An ``Underlying Fund Affiliate'' is an
investment adviser, sponsor, promoter, or principal underwriter of
an Underlying Fund (or its respective Master Fund or Cayman Sub),
and any person controlling, controlled by, or under common control
with any of those entities.
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5. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. The board of directors or trustees
of each Unrelated Fund of Funds, including a majority of the directors
or trustees who are not ``interested persons'' (within the meaning of
section 2(a)(19) of the Act) (``Independent Trustees''), will find that
the advisory fees charged under such advisory contract are based on
services provided that will be in addition to, rather than duplicative
of, the services provided under the advisory contract(s) of any
Underlying Fund in which the Unrelated Fund of Funds may invest. In
addition, an Unrelated Fund of Funds Adviser will waive fees otherwise
payable to it by the Unrelated Fund of Funds in an amount at least
equal to any compensation (including fees received pursuant to any plan
adopted by an Underlying Fund under rule 12b-1 under the Act) received
from an Underlying Fund by the Unrelated Fund of Funds Adviser or an
affiliated person of the Unrelated Fund of Funds Adviser, other than
any advisory fees paid to the Unrelated Fund of Funds Adviser or its
affiliated person, by an Underlying Fund, in connection with the
investment by the Unrelated Fund of Funds in the Underlying Fund.
Applicants also state that with respect to registered separate accounts
that invest in an Unrelated Fund of Funds, no sales load will be
charged at the Unrelated Fund of Funds level or at the Underlying Fund
level.\7\ Other sales charges and service fees, as defined in Rule 2830
of the Conduct Rules of the NASD (``NASD Conduct Rules''), if any, will
only be charged at the Unrelated Fund of Funds level or at the
Underlying Fund level, not both. With respect to other investments in
an Unrelated Fund of Funds, any sales charges and/or service fees
charged with respect to shares of the Unrelated Fund of Funds will not
exceed the limits applicable to a fund of funds as set forth in Rule
2830 of the NASD Conduct Rules.\8\
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\7\ Applicants represent that each Unrelated Fund of Funds will
represent in the Participation Agreement (as defined below) that no
insurance company sponsoring a registered separate account funding
variable insurance contracts will be permitted to invest in the
Unrelated Fund of Funds unless the insurance company has certified
to the Unrelated Fund of Funds that the aggregate of all fees and
charges associated with each contract that invests in the Unrelated
Fund of Funds, including fees and charges at the separate account,
Unrelated Fund of Funds, and Underlying Fund levels, will be
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the insurance
company.
\8\ Any references to NASD Conduct Rule 2830 include any
successor or replacement FINRA Rule to NASD Conduct Rule 2830.
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6. Applicants submit that the proposed arrangement will not create
an overly complex fund structure. Applicants note that no Underlying
Fund will acquire 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) of the Act, except in certain
circumstances identified in condition 12 below. Applicants also
represent that to ensure that Unrelated Funds of Funds comply with the
terms and conditions of the requested exemption from section
12(d)(1)(A) of the Act, an Unrelated Fund of Funds must enter into a
participation agreement between the Trust, on behalf of the relevant
Underlying Fund, and the Unrelated Funds of Funds (``Participation
Agreement'') before investing in an Underlying Fund in excess of the
limits in section 12(d)(1)(A). The Participation Agreement will require
the Unrelated Fund of Funds to adhere to the terms and conditions of
the requested order. The Participation Agreement will include an
acknowledgment from the Unrelated Fund of Funds that it may rely on the
requested order only to invest in the Underlying Funds and not in any
other registered investment company.
7. Applicants state that investments by an Underlying Fund in a
Cayman Sub also do not raise concerns about undue influence, layering
of fees and complex structures. Applicants represent that: (a) the
Underlying Fund will be the sole and legal beneficial owner of its
Cayman Sub, which addresses concerns regarding pyramiding of voting
control as a means of undue influence; (b) the Adviser and/or the Sub-
Adviser will manage the investments of both the Underlying Fund and its
Cayman Sub, which addresses concerns over undue influence by the
Adviser; and (c) there will be no inappropriate layering of fees and
expenses as a result of an Underlying Fund investing in a Cayman Sub.
Applicants, further represent that the financial statements of the
Cayman Sub will be consolidated with those of the Underlying Fund, if
permitted by the applicable accounting standards. In addition, in
assessing compliance with the asset coverage requirements under section
18(f) of the Act, an Underlying Fund (or its respective Master Fund)
will deem the assets, liabilities and indebtedness of a Cayman Sub in
which the Underlying Fund (or its respective Master Fund) invests as
its own. Finally, the expenses of the Cayman Sub will be included in
the total annual fund operating expenses in the prospectus of the
Underlying Fund.
B. Section 17(a)
1. Section 17(a) of the Act generally prohibits sales or purchases
of securities between a registered investment company and any
affiliated person of the company. Section 2(a)(3) of the Act defines an
``affiliated person'' of another person to include 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.
2. Applicants seek relief from section 17(a) to permit an
Underlying Fund that is an affiliated person of an Unrelated Fund of
Funds because the Unrelated Fund of Funds holds 5% or more of the
Underlying Fund's shares to sell its shares to and redeem its shares
from an Unrelated Fund of Funds. Applicants state that any proposed
transactions directly between an Underlying Fund and an Unrelated Fund
of Funds will be consistent with the policies of each Underlying Fund
and Unrelated Fund of Funds. The Participation Agreement will require
any Unrelated Fund of Funds that purchases shares from an Underlying
Fund to represent that the purchase of shares from the Underlying Fund
by an Unrelated Fund of Funds will be accomplished in compliance with
the investment restrictions of the Unrelated Fund of Funds and will be
consistent with the investment policies set forth in the Unrelated Fund
of Funds' registration statement.
3. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
it finds that (i) The terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (ii) the proposed transaction is consistent with the
policies of each registered investment company involved; and (iii) 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
[[Page 40662]]
standards for relief under sections 17(b) and 6(c) of the Act.\9\
Applicants state that the terms of the transactions are reasonable and
fair and do not involve overreaching. Applicants note that any
consideration paid for the purchase or redemption of shares directly
from an Underlying Fund will be based on the net asset value of the
Underlying Fund. Applicants state that the proposed transactions will
be consistent with the policies of each Underlying Fund and each
Unrelated Fund of Funds and with the general purposes of the Act.
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\9\ Applicants acknowledge that receipt of compensation by (a)
an affiliated person of an Unrelated Fund of Funds, or an affiliated
person of such person, for the purchase by the Unrelated 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 an Unrelated Fund of
Funds may be prohibited by section 17(e)(1) of the Act. The
Participation Agreement also will include this acknowledgment.
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Other Investments by Related Funds of Funds
1. Section 12(d)(1)(G) of the Act provides that section 12(d)(1)
will not apply to securities of an acquired company purchased by an
acquiring company if: (i) The acquiring company and acquired company
are part of the same group of investment companies; (ii) the acquiring
company holds only securities of acquired companies that are part of
the same group of investment companies, government securities, and
short-term paper; (iii) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not
excessive under rules adopted pursuant to section 22(b) or section
22(c) of the Act by a securities association registered under section
15A of the Exchange Act or by the Commission; and (iv) the acquired
company has a policy that prohibits it from acquiring securities of
registered open-end management investment companies or registered unit
investment trusts in reliance on section 12(d)(1)(F) or (G) of the Act.
2. Rule 12d1-2 under the Act permits a registered open-end
investment company or a registered unit investment trust that relies on
section 12(d)(1)(G) of the Act to acquire, in addition to securities
issued by another registered investment company in the same group of
investment companies, government securities, and short-term paper: (1)
Securities issued by an investment company that is not in the same
group of investment companies, when the acquisition is in reliance on
section 12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) securities (other
than securities issued by an investment company); and (3) securities
issued by a money market fund, when the investment is in reliance on
rule 12d1-1 under the Act. For the purposes of rule 12d1-2,
``securities'' means any security as defined in section 2(a)(36) of the
Act.
3. Applicants state that the proposed arrangement would comply with
the provisions of rule 12d1-2 under the Act, but for the fact that the
Related Funds of Funds may invest a portion of their assets in Other
Investments. Applicants request an order under section 6(c) of the Act
for an exemption from rule 12d1-2(a) to allow the Related Funds of
Funds to invest in Other Investments. Applicants assert that permitting
the Related Funds of Funds to invest in Other Investments as described
in the application would not raise any of the concerns that the
requirements of section 12(d)(1) were designed to address.
Applicants' Conditions
Investments in Underlying Funds by Unrelated Funds of Funds
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The members of an Unrelated Fund of Funds Advisory Group will
not control (individually or in the aggregate) an Underlying Fund (or
its respective Master Fund) within the meaning of section 2(a)(9) of
the Act. The members of an Unrelated Fund of Funds Subadvisory Group
will not control (individually or in the aggregate) an Underlying Fund
(or its respective Master 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 Underlying Fund, the Unrelated Fund of Funds Advisory
Group or the Unrelated Fund of Funds Subadvisory Group, each in the
aggregate, becomes a holder of more than 25 percent of the outstanding
voting securities of an Underlying Fund, it (except for any member of
the Unrelated Fund of Funds Advisory Group or Unrelated Fund of Funds
Subadvisory Group that is a separate account funding variable insurance
contracts) will vote its shares of the Underlying Fund in the same
proportion as the vote of all other holders of the Underlying Fund's
shares. This condition does not apply to the Unrelated Fund of Funds
Subadvisory Group with respect to an Underlying Fund (or its respective
Master Fund) for which the Unrelated Fund of Funds Subadviser or a
person controlling, controlled by, or under common control with the
Unrelated Fund of Funds Subadviser acts as the investment adviser
within the meaning of section 2(a)(20)(A) of the Act. A registered
separate account funding variable insurance contracts will seek voting
instructions from its contract holders and will vote its shares 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 funding variable insurance contracts will either (a) vote its
shares of the Underlying Fund in the same proportion as the vote of all
other holders of the 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 Unrelated Fund of Funds or Unrelated Fund of Funds Affiliate
will cause any existing or potential investment by the Unrelated Fund
of Funds in shares of an Underlying Fund to influence the terms of any
services or transactions between the Unrelated Fund of Funds or an
Unrelated Fund of Funds Affiliate and the Underlying Fund (or its
respective Master Fund or Cayman Sub) or an Underlying Fund Affiliate.
3. The board of directors or trustees of an Unrelated Fund of
Funds, including a majority of the Independent Trustees, will adopt
procedures reasonably designed to ensure that the Unrelated Fund of
Funds Adviser and any Unrelated Fund of Funds Subadviser(s) are
conducting the investment program of the Unrelated Fund of Funds
without taking into account any consideration received by the Unrelated
Fund of Funds or an Unrelated Fund of Funds Affiliate from an
Underlying Fund (or its respective Master Fund or Cayman Sub) or an
Underlying Fund Affiliate in connection with any services or
transactions.
4. Once an investment by an Unrelated Fund of Funds in the
securities of an Underlying Fund exceeds the limit in section
12(d)(1)(A)(i) of the Act, the Board of Trustees (the ``Board'') of the
Underlying Fund (or its respective Master Fund), including a majority
of the Independent Trustees, will determine that any consideration paid
by the Underlying Fund (or its respective Master Fund or Cayman Sub) to
the Unrelated Fund of Funds or an Unrelated Fund of Funds Affiliate in
connection with any services or transactions: (a) Is fair and
reasonable in
[[Page 40663]]
relation to the nature and quality of the services and benefits
received by the Underlying Fund (or its respective Master Fund or
Cayman Sub); (b) is within the range of consideration that the
Underlying Fund (or its respective Master Fund or Cayman Sub) 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 Underlying Fund (or
its respective Master Fund or Cayman Sub) and its investment adviser(s)
or any person controlling, controlled by, or under common control with
such investment adviser(s).
5. No Unrelated Fund of Funds or Unrelated Fund of Funds Affiliate
(except to the extent it is acting in its capacity as an investment
adviser to an Underlying Fund (or its respective Master Fund or Cayman
Sub)) will cause an Underlying Fund (or its respective Master Fund or
Cayman Sub) to purchase a security in any Affiliated Underwriting.
6. The Board of an Underlying Fund (or of its respective Master
Fund), including a majority of the Independent Trustees, will adopt
procedures reasonably designed to monitor any purchases of securities
by the Underlying Fund (or its respective Master Fund or Cayman Sub) in
an Affiliated Underwriting once an investment by an Unrelated Fund of
Funds in the securities of the Underlying 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 Underlying
Fund (or its respective Master Fund) will review these purchases
periodically, but no less frequently than annually, to determine
whether the purchases were influenced by the investment by the
Unrelated Fund of Funds in shares of the Underlying Fund. The Board of
the Underlying Fund (or its respective Master Fund) shall consider,
among other things, (a) Whether the purchases were consistent with the
investment objectives and policies of the Underlying Fund (or its
respective Master Fund or Cayman Sub); (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 Underlying Fund (or its
respective Master Fund or Cayman Sub) in Affiliated Underwritings and
the amount purchased directly from an Underwriting Affiliate have
changed significantly from prior years. The Board of the Underlying
Fund shall take any appropriate actions based on its review, including,
if appropriate, the institution of procedures designed to ensure that
purchases of securities in Affiliated Underwritings are in the best
interest of shareholders.
7. Each Underlying Fund (or its respective Master Fund) shall
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 shall 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 Affiliated Underwritings once
an investment by an Unrelated Fund of Funds in the securities of an
Underlying Fund exceeds the limit in 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 Board's determinations were
made.
8. Before investing in shares of an Underlying Fund in excess of
the limits in section 12(d)(1)(A), each Unrelated Fund of Funds and
Underlying 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 Underlying Fund in excess of the
limit in section 12(d)(1)(A)(i), an Unrelated Fund of Funds will notify
the Underlying Fund of the investment. At such time, the Unrelated Fund
of Funds will also transmit to the Underlying Fund a list of the names
of each Unrelated Fund of Funds Affiliate and Underwriting Affiliate.
The Unrelated Fund of Funds will notify the Underlying Fund of any
changes to the list of the names as soon as reasonably practicable
after a change occurs. The Underlying Fund and the Unrelated 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 approving any advisory contract under section 15 of the
Act, the board of directors or trustees of each Unrelated Fund of
Funds, including a majority of the Independent Trustees, will find that
the advisory fees charged under such advisory contracts are based on
services provided that will be in addition to, rather than duplicative
of, the services provided under the advisory contract(s) of any
Underlying Fund (or its respective Master Fund) in which the Unrelated
Fund of Funds may invest. These findings and their basis will be
recorded fully in the minute books of the appropriate Unrelated Fund of
Funds.
10. An Unrelated Fund of Funds Adviser will waive fees otherwise
payable to it by the Unrelated Fund of Funds in an amount at least
equal to any compensation (including fees received pursuant to any plan
adopted by an Underlying Fund (or its respective Master Fund) under
rule 12b-1 under the Act) received from an Underlying Fund (or its
respective Master Fund or Cayman Sub) by the Unrelated Fund of Funds
Adviser, or an affiliated person of the Unrelated Fund of Funds
Adviser, other than any advisory fees paid to the Unrelated Fund of
Funds Adviser or its affiliated person by the Underlying Fund (or its
respective Master Fund or Cayman Sub), in connection with the
investment by the Unrelated Fund of Funds in the Underlying Fund. Any
Unrelated Fund of Funds Subadviser will waive fees otherwise payable to
the Unrelated Fund of Funds Subadviser, directly or indirectly, by the
Unrelated Fund of Funds in an amount at least equal to any compensation
received from any Underlying Fund (or its respective Master Fund or
Cayman Sub) by the Unrelated Fund of Funds Subadviser, or an affiliated
person of the Unrelated Fund of Funds Subadviser, other than any
advisory fees paid to the Unrelated Fund of Funds Subadviser or its
affiliated person by the Underlying Fund (or its respective Master Fund
or Cayman Sub), in connection with the investment by the Unrelated Fund
of Funds in the Underlying Fund made at the direction of the Unrelated
Fund of Funds Subadviser. In the event that the Unrelated Fund of Funds
Subadviser waives fees, the benefit of the waiver will be passed
through to the Unrelated Fund of Funds.
11. With respect to registered separate accounts that invest in an
Unrelated Fund of Funds, no sales load will be charged at the Unrelated
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
[[Page 40664]]
Unrelated Fund of Funds level or at the Underlying Fund level, not
both. With respect to other investments in an Unrelated Fund of Funds,
any sales charges and/or service fees charged with respect to shares of
the Unrelated Fund of Funds will not exceed the limits applicable to a
fund of funds as set forth in NASD Conduct Rule 2830.
12. No Underlying Fund (or its respective Master Fund) will acquire
securities of any other investment company or company relying on
section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except to the extent that such
Underlying Fund (or its respective Master 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); (c)
acquires (or is deemed to have acquired) securities of another
investment company pursuant to exemptive relief from the Commission
permitting such Underlying Fund (or its respective Master 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; or (d) invests in a Cayman Sub that is a wholly-
owned and controlled subsidiary of the Underlying Fund (or its
respective Master Fund) as described in the Application. Further, no
Cayman Sub will acquire securities of any other investment company or
company relying on section 3(c)(1) or 3(c)(7) of the Act other than
money market funds that comply with Rule 2a-7 for short-term cash
management purposes.
Other Investments by Related Funds of Funds
Applicants agree that any order granting the requested relief will
be subject to the following condition:
13. The Applicants will comply with all provisions of rule 12d1-2
under the Act, except for paragraph (a)(2) to the extent that it
restricts any Related 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.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-16770 Filed 7-9-12; 8:45 am]
BILLING CODE 8011-01-P
