Prudential Investment Portfolios 3, et al.; Notice of Application, 57162-57166 [2012-22792]
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Federal Register / Vol. 77, No. 180 / Monday, September 17, 2012 / Notices
personal information concerning
individuals associated with the MRSEC.
These matters are exempt under 5
U.S.C. 552 b(c), (4) and (6) of the
Government in the Sunshine Act.
Dated: September 11, 2012.
Susanne Bolton,
Committee Management Officer.
NATIONAL SCIENCE FOUNDATION
Proposal Review Panel for Materials
Research; Notice of Meeting
In accordance with the Federal
Advisory Committee Act (Pub. L. 92–
463 as amended), the National Science
Foundation announces the following
meeting:
Name: Site visit review of the
Materials Research Science and
Engineering Center (MRSEC) at The
Ohio State University (OSU) by the
Division of Materials Research (DMR)
#1203.
Dates & Times: Oct 22, 2012, 7:15
a.m.–6:45 p.m., Oct 23, 2012, 8:00 a.m.–
3:15 p.m.
Place: The Ohio State University,
Columbus, Ohio.
Type Of Meeting: Part open.
Contact Person: Dr. Charles Ying,
Program Director, Materials Research
Science and Engineering Centers
Program, Division of Materials Research,
Room 1065, National Science
Foundation, 4201 Wilson Boulevard,
Arlington, VA 22230, Telephone (703)
292–8428.
Purpose Of Meeting: To provide
advice and recommendations
concerning further support of the
MRSEC at The Ohio State University.
Agenda
Monday, October 22, 2012
7:15 a.m.–8:15 a.m. Closed—Executive
Session
8:15 a.m.–5:00 p.m. Open—Review of
the OSU MRSEC
5:00 p.m.–6:45 p.m. Closed—
Executive Session
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BILLING CODE 7555–01–P
Tuesday, October 23, 2012
8:00 a.m.–3:15 p.m. Closed—Executive
session & Report Writing
Reason For Closing: The work being
reviewed may include information of a
proprietary or confidential nature,
including technical information;
financial data, such as salaries and
personal information concerning
individuals associated with the MRSEC.
These matters are exempt under 5
U.S.C. 552 b(c), (4) and (6) of the
Government in the Sunshine Act.
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In accordance with the Federal
Advisory Committee Act (Pub. L. 92–
463, as amended), the National Science
Foundation announces the following
meeting:
Name: Advisory Committee for
Geosciences (1755).
Dates: October 10, 2012 (8:30 a.m.–
5:00 p.m.)–October 11, 2012; 8:30 a.m.–
2:00 p.m.
Place: Stafford I, Room 1235, National
Science Foundation, 4201Wilson Blvd.,
Arlington, Virginia 22230.
Type of Meeting: Open.
Contact Person: Melissa Lane,
National Science Foundation, Suite 705,
4201 Wilson Blvd., Arlington, Virginia
22230. Phone 703–292–8500.
Minutes: May be obtained from the
contact person listed above.
Purpose Of Meeting: To provide
advice, recommendations, and oversight
concerning support for geosciences.
Agenda
Wednesday, October 10, 2012
• Update on Directorate Activities and
Plans
• Updates on NSF-wide Programmatic
Efforts such as Science, Engineering
and Education for Sustainability
• Meeting with the Director and Deputy
Director
• Division Subcommittee Meetings
Thursday, October 11, 2012
• Division Subcommittee Reports
• Review and Approval of FY 2012
Committee of Visitor Reports
• Action Items/Planning for Fall
Meeting
Dated: September 11, 2012.
Susanne Bolton,
Committee Management Officer.
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[Investment Company Act Release No.
30200; File No. 812–13993]
Prudential Investment Portfolios 3, et
al.; Notice of Application
Advisory Committee For Geosciences;
Notice of Meeting
BILLING CODE 7555–01–P
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SECURITIES AND EXCHANGE
COMMISSION
NATIONAL SCIENCE FOUNDATION
[FR Doc. 2012–22748 Filed 9–14–12; 8:45 am]
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Dated: September 11, 2012.
Susanne Bolton,
Committee Management Officer.
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September 11, 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.
AGENCY:
Summary of the Application:
The requested order would permit
certain registered open-end management
investment companies that operate as
‘‘funds of funds’’ to acquire shares of
certain registered open-end management
investment companies and unit
investment trusts (‘‘UITs’’) that are
within and outside the same group of
investment companies as the acquiring
investment companies.
APPLICANTS: Prudential Investment
Portfolios 3 (‘‘PIP 3’’), The Prudential
Investment Portfolios, Inc. (‘‘PIP Inc.’’,
together with PIP 3, the ‘‘Trusts’’) and
Prudential Investments LLC (‘‘PI’’ or the
‘‘Adviser’’).
DATES: Filing Dates: The application
was filed on December 21, 2011, and
amended on May 9, 2012, and
September 10, 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 October 5, 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: Elizabeth M. Murphy,
Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
Applicants: Gateway Center Three, 100
Mulberry Street, 4th Floor, Newark,
New Jersey 07102–4061.
SUMMARY:
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Federal Register / Vol. 77, No. 180 / Monday, September 17, 2012 / Notices
FOR FURTHER INFORMATION CONTACT:
Lewis B. Reich, Senior Counsel, at (202)
551–6919, or Jennifer L. Sawin, 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 for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm, or by
calling (202) 551–8090.
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Applicants’ Representations
1. PIP 3 is an open-end management
investment company registered under
the Act and organized as a Delaware
statutory trust. PIP 3 is a series trust and
currently offers four series, each with its
own investment objectives and policies.
PIP Inc. is an open-end management
investment company registered under
the Act and organized as a Maryland
corporation. PIP Inc. is a series trust and
currently offers six series, each with its
own investment objectives and
policies.1 One series of PIP 3 and three
series of PIP Inc. currently operate as
Funds of Funds and intend to rely on
the requested order.
2. PI, a New York limited liability
company that is a wholly-owned direct
subsidiary of Prudential Financial, Inc.,
is registered as an investment adviser
under the Investment Advisers Act of
1940 and serves as investment adviser
to the Trusts. PI currently employs
certain entities either controlling,
controlled by or under common control
with PI as subadvisers to the Funds.
3. Applicants request an order under
section 12(d)(1)(J) of the Act exempting
them from sections 12(d)(1)(A) and (B)
of the Act to permit (1) a Fund of Funds
to acquire shares in excess of the limits
set forth in section 12(d)(1)(A) of the Act
of (a) registered open-end management
investment companies 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
Fund of Funds (‘‘Unaffiliated
Investment Companies’’) and UITs that
are not part of the same group of
investment companies as the Fund of
Funds (‘‘Unaffiliated Trusts,’’ together
1 Applicants request that the relief apply to the
Trusts and to any existing or future registered openend management investment company or series
thereof that (i) is advised by PI or by an entity
controlling, controlled by or under common control
with PI and (ii) invests in other registered open-end
management investment companies in reliance on
section 12(d)(1)(G) of the Act (any such investment
companies or series thereof, together with any
series of either Trust, a ‘‘Fund’’, and any Fund that
operates as a fund of funds, a ‘‘Fund of Funds’’).
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with the Unaffiliated Investment
Companies, ‘‘Unaffiliated Funds’’)2 and
(b) registered open-end management
investment companies and UITs that are
part of the same group of investment
companies as the Fund of Funds
(collectively, ‘‘Affiliated Funds,’’
together with the Unaffiliated Funds,
‘‘Underlying Funds’’) and (2) each
Underlying Fund, any principal
underwriter for the Underlying Fund,
and any broker or dealer registered
under the Securities Exchange Act of
1934 (‘‘Broker’’) to sell shares of the
Underlying Fund to the Fund of Funds
in excess of the limits set forth in
section 12(d)(1)(B) of the Act.3
Applicants also request an order under
sections 6(c) and 17(b) of the Act to
exempt applicants from section 17(a) to
the extent necessary to permit
Underlying Funds to sell their shares to
Funds of Funds and redeem their shares
from Funds of Funds.
Applicants’ Legal Analysis
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
2 Certain of the Unaffiliated Funds may be
registered under the Act as either UITs or open-end
investment companies and have received exemptive
relief to permit their shares to be listed and traded
on a national securities exchange at negotiated
prices (‘‘ETFs’’).
3 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 set forth in
the application.
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interest and the protection of investors.
Applicants seek an exemption under
section 12(d)(1)(J) of the Act to permit
(a) the Funds of Funds to acquire shares
of the Underlying Funds in excess of the
limits in section 12(d)(1)(A), and (b) the
Underlying Funds, their principal
underwriters, and any Broker to sell
shares of an Underlying Fund to a Fund
of Funds in excess of the limits in
section 12(d)(1)(B) of the Act.
3. Applicants state that the proposed
arrangement will not give rise to the
policy concerns underlying sections
12(d)(1)(A) and (B), which include
concerns about undue influence by a
fund of funds 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 the
exercise of undue influence by a Fund
of Funds or its affiliated persons over
the Underlying Funds. The concern
about undue influence does not arise in
connection with a Fund of Funds’
investment in the Affiliated Funds,
since they are part of the same group of
investment companies. To limit the
control that a Fund of Funds or its
affiliated persons may have over an
Unaffiliated Fund, applicants propose a
condition prohibiting the Adviser, any
person controlling, controlled by, or
under common control with the
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 Adviser or any person
controlling, controlled by, or under
common control with the Adviser
(collectively, the ‘‘Group’’) from
controlling (individually or in the
aggregate) an Unaffiliated Fund within
the meaning of section 2(a)(9) of the Act.
The same prohibition would apply
(individually and in the aggregate) to
any other investment adviser within the
meaning of section 2(a)(20)(B) of the Act
to a Fund of Funds (‘‘Subadviser’’), any
person controlling, controlled by or
under common control with the
Subadviser, and any investment
company or issuer that would be an
investment company but for section
3(c)(1) or 3(c)(7) of the Act (or portion
of such investment company or issuer)
advised or sponsored by the Subadviser
or any person controlling, controlled by
or under common control with the
Subadviser (the ‘‘Subadviser Group’’).
Applicants propose other conditions to
limit the potential for undue influence
over the Unaffiliated Funds, including
that no Fund of Funds or Fund of Funds
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Affiliate4 (except to the extent it is
acting in its capacity as an investment
adviser to an Unaffiliated Investment
Company or sponsor to an Unaffiliated
Trust) will cause an Unaffiliated Fund
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, advisory board
member, investment adviser, Subadviser
or employee of the Fund of Funds, or a
person of which any such officer,
director, trustee, investment adviser,
Subadviser, member of an advisory
board or employee is an affiliated
person (each, an ‘‘Underwriting
Affiliate’’; however any person whose
relationship to the Unaffiliated Fund is
covered by section 10(f) of the Act is not
an Underwriting Affiliate). An offering
of securities during the existence of an
underwriting or selling syndicate of
which a principal underwriter is an
Underwriting Affiliate is referred to as
an ‘‘Affiliated Underwriting.’’
5. To further ensure that an
Unaffiliated Investment Company
understands the implications of an
investment by a Fund of Funds under
the requested order, prior to a Fund of
Funds’ investment in the shares of an
Unaffiliated Investment Company in
excess of the limit in section
12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Investment
Company will execute an agreement
stating, without limitation, that their
Boards and their investment advisers
understand the terms and conditions of
the order and agree to fulfill their
responsibilities under the order
(‘‘Participation Agreement’’). Applicants
note that an Unaffiliated Investment
Company other than an ETF whose
shares are purchased by a Fund of
Funds in the secondary market will
retain its right at all times to reject any
investment by a Fund of Funds.5
6. Applicants state that they do not
believe that the proposed arrangement
will involve excessive layering of fees.
The Board of each Fund of Funds,
including a majority of the 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 any
Fund of Funds investment advisory or
management contract are based on
services provided that will be in
addition to, rather than duplicative of,
the services provided under any
Underlying Fund’s advisory contract. In
addition, the 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 Investment Company under
rule 12b–1 under the Act) received from
an Unaffiliated Fund by the Adviser or
an affiliated person of the Adviser, other
than any advisory fees paid to the
Adviser or its affiliated person by an
Unaffiliated Investment Company, in
connection with the investment by the
Fund of Funds in the Unaffiliated Fund.
Any Subadviser for a Fund of Funds
will waive fees otherwise payable to the
Subadviser, directly or indirectly, by the
Fund of Funds in an amount at least
equal to any compensation received by
the Subadviser or an affiliated person of
the Subadviser from an Unaffiliated
Fund, other than any advisory fees paid
to the Subadviser or an affiliated person
by the Unaffiliated Fund, in connection
with the investment by the Fund of
Funds in the Unaffiliated Fund made at
the direction of the Subadviser. In the
event that the Subadviser waives fees,
the benefit of the waiver will be passed
through to the Fund of Funds. Any sales
charges and/or service fees charged with
respect to shares of a Fund of Funds
will not exceed the limits applicable to
a fund of funds as set forth in Rule 2830
of the Conduct Rules of the NASD
(‘‘NASD Conduct Rule 2830’’).6
7. 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 11 below.
4 A ‘‘Fund of Funds Affiliate’’ is the Adviser, any
Subadviser, promoter or principal underwriter of a
Fund of Funds, as well as any person controlling,
controlled by, or under common control with any
of those entities. An ‘‘Unaffiliated Fund Affiliate’’
is an investment adviser, sponsor, promoter, or
principal underwriter of an Unaffiliated Fund, as
well as any person controlling, controlled by, or
under common control with any of those entities.
5 An Unaffiliated Investment Company, including
an ETF would retain its right to reject any initial
investment by a Fund of Funds in excess of the
limit in section 12(d)(1)(A)(i) of the Act by
declining to execute the Participation Agreement
with the Fund of Funds.
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 (a) any person directly
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6 Any references to NASD Conduct Rule 2830
include any successor or replacement FINRA rule
to NASD Conduct Rule 2830.
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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 a Fund of
Funds and the Affiliated Funds might
be deemed to be under common control
of the Adviser and therefore affiliated
persons of one another. Applicants also
state that a Fund of Funds and the
Unaffiliated Funds might be deemed to
be affiliated persons of one another if
the Fund of Funds acquires 5% or more
of an Unaffiliated Fund’s outstanding
voting securities. In light of these and
other possible affiliations, section 17(a)
could prevent an Underlying Fund from
selling shares to and redeeming shares
from a Fund of Funds.7
3. Section 17(b) of the Act authorizes
the Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction, including the consideration
to be paid or received, are fair and
reasonable and do not involve
overreaching on the part of any person
concerned; (b) the proposed transaction
is consistent with the policies of each
registered investment company
involved; and (c) the proposed
transaction is consistent with the
general purposes of the Act. Section 6(c)
of the Act permits the Commission to
exempt any person or transactions from
any provision of the Act if such
exemption is necessary or appropriate
in the public interest and consistent
with the protection of investors and the
purposes fairly intended by the policy
and provisions of the Act.
4. Applicants submit that the
proposed transactions satisfy the
standards for relief under sections 17(b)
and 6(c) of the Act.8 Applicants state
7 Applicants state that to the extent purchases and
sales of shares of an ETF occur in the secondary
market (and not through principal transactions
directly between a Fund of Funds and an ETF),
relief from section 17(a) would not be necessary.
The requested relief is intended to cover, however,
transactions directly between ETFs and a Fund of
Funds. Applicants are not seeking relief from
section 17(a) for, and the requested relief will not
apply to, transactions where an ETF could be
deemed an affiliated person, or an affiliated person
of an affiliated person, of a Fund of Funds because
the investment adviser to the ETF or an entity
controlling, controlled by or under common control
with the investment adviser to an ETF also is an
investment adviser to the Fund of Funds.
8 Applicants acknowledge that receipt of any
compensation by (a) an affiliated person of a Fund
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that the terms of the transactions are
reasonable and fair 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 the
Underlying Fund. Applicants state that
the proposed transactions will be
consistent with the policies of each
Fund of Funds and each Underlying
Fund and with the general purposes of
the Act.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief shall be
subject to the following conditions:
1. The members of a Group will not
control (individually or in the aggregate)
an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act.
The members of a Subadviser Group
will not control (individually or in the
aggregate) an Unaffiliated Fund within
the meaning of section 2(a)(9) of the Act.
If, as a result of a decrease in the
outstanding voting securities of an
Unaffiliated Fund, the Group or a
Subadviser Group, each in the aggregate,
becomes a holder of more than 25
percent of the outstanding voting
securities of the Unaffiliated Fund, then
the Group or the Subadviser Group will
vote its shares of the Unaffiliated Fund
in the same proportion as the vote of all
other holders of the Unaffiliated Fund’s
shares. This condition will not apply to
a Subadviser Group with respect to an
Unaffiliated Fund for which the
Subadviser or a person controlling,
controlled by, or under common control
with the Subadviser acts as the
investment adviser within the meaning
of section 2(a)(20)(A) of the Act (in the
case of an Unaffiliated Investment
Company) or as the sponsor (in the case
of an Unaffiliated Trust).
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 Fund
to influence the terms of any services or
transactions between the Fund of Funds
or a Fund of Funds Affiliate and the
Unaffiliated Fund or an Unaffiliated
Fund Affiliate.
3. The Board of each Fund of Funds,
including a majority of the Independent
Trustees, will adopt procedures
reasonably designed to assure that its
of Funds, or an affiliated person of such person, for
the purchase by a 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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Adviser and any Subadviser(s) to the
Fund of Funds are conducting the
investment program of the Fund of
Funds without taking into account any
consideration received by the Fund of
Funds or Fund of Funds Affiliate from
an Unaffiliated Fund or an Unaffiliated
Fund Affiliate in connection with any
services or transactions.
4. Once an investment by a Fund of
Funds in the securities of an
Unaffiliated Investment Company
exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of
the Unaffiliated Investment Company,
including a majority of the Independent
Trustees, will determine that any
consideration paid by the Unaffiliated
Investment Company to a Fund of
Funds or a Fund of Funds Affiliate in
connection with any services or
transactions: (a) Is fair and reasonable in
relation to the nature and quality of the
services and benefits received by the
Unaffiliated Investment Company; (b) is
within the range of consideration that
the Unaffiliated Investment Company
would be required to pay to another
unaffiliated entity in connection with
the same services or transactions; and
(c) does not involve overreaching on the
part of any person concerned. This
condition does not apply with respect to
any services or transactions between an
Unaffiliated Investment Company and
its investment adviser(s) or any person
controlling, controlled by, or under
common control with such investment
adviser(s).
5. No Fund of Funds or Fund of
Funds Affiliate (except to the extent it
is acting in its capacity as an investment
adviser to an Unaffiliated Investment
Company or sponsor to an Unaffiliated
Trust) will cause an Unaffiliated Fund
to purchase a security in any Affiliated
Underwriting.
6. The Board of an Unaffiliated
Investment Company, including a
majority of the Independent Trustees,
will adopt procedures reasonably
designed to monitor any purchases of
securities by the Unaffiliated Investment
Company in an Affiliated Underwriting
once an investment by a Fund of Funds
in the securities of the Unaffiliated
Investment Company exceeds the limit
of section 12(d)(1)(A)(i) of the Act,
including any purchases made directly
from an Underwriting Affiliate. The
Board of the Unaffiliated Investment
Company will review these purchases
periodically, but no less frequently than
annually, to determine whether the
purchases were influenced by the
investment by the Fund of Funds in the
Unaffiliated Investment Company. The
Board of the Unaffiliated Investment
Company will consider, among other
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things, (a) whether the purchases were
consistent with the investment
objectives and policies of the
Unaffiliated Investment Company; (b)
how the performance of securities
purchased in an Affiliated Underwriting
compares to the performance of
comparable securities purchased during
a comparable period of time in
underwritings other than Affiliated
Underwritings or to a benchmark such
as a comparable market index; and (c)
whether the amount of securities
purchased by the Unaffiliated
Investment Company in Affiliated
Underwritings and the amount
purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board of the Unaffiliated Investment
Company will take any appropriate
actions based on its review, including,
if appropriate, the institution of
procedures designed to assure that
purchases of securities in Affiliated
Underwritings are in the best interests
of shareholders.
7. Each Unaffiliated Investment
Company 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 not less than six
years from the end of the fiscal year in
which any purchase in an Affiliated
Underwriting occurred, the first two
years in an easily accessible place, a
written record of each purchase of
securities in an Affiliated Underwriting
once an investment by a Fund of Funds
in the securities of an Unaffiliated
Investment Company exceeds the limit
of section 12(d)(1)(A)(i) of the Act,
setting forth the: (a) Party from whom
the securities were acquired, (b) identity
of the underwriting syndicate’s
members, (c) terms of the purchase, and
(d) information or materials upon which
the determinations of the Board of the
Unaffiliated Investment Company were
made.
8. Prior to its investment in shares of
an Unaffiliated Investment Company in
excess of the limit in section
12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Investment
Company will execute a Participation
Agreement stating, without limitation,
that their Boards and their investment
advisers understand the terms and
conditions of the order and agree to
fulfill their responsibilities under the
order. At the time of its investment in
shares of an Unaffiliated Investment
Company in excess of the limit in
section 12(d)(1)(A)(i), a Fund of Funds
will notify the Unaffiliated Investment
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Federal Register / Vol. 77, No. 180 / Monday, September 17, 2012 / Notices
Company of the investment. At such
time, the Fund of Funds will also
transmit to the Unaffiliated Investment
Company a list of the names of each
Fund of Funds Affiliate and
Underwriting Affiliate. The Fund of
Funds will notify the Unaffiliated
Investment Company of any changes to
the list of the names as soon as
reasonably practicable after a change
occurs. The Unaffiliated Investment
Company and the Fund of Funds will
maintain and preserve a copy of the
order, the Participation Agreement, and
the list with any updated information
for the duration of the investment and
for a period of not less than six years
thereafter, the first two years in an
easily accessible place.
9. Before approving any advisory
contract under section 15 of the Act, the
Board of each Fund of Funds, including
a majority of the Independent Trustees,
shall find that the advisory fees charged
under such advisory contract are based
on services provided that are in addition
to, rather than duplicative of, services
provided under the advisory contract(s)
of any Underlying Fund in which the
Fund of Funds may invest. Such finding
and the basis upon which the finding
was made will be recorded fully in the
minute books of the appropriate Fund of
Funds.
10. The 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 Investment Company under
rule 12b-1 under the Act) received from
an Unaffiliated Fund by the Adviser, or
an affiliated person of the Adviser, other
than any advisory fees paid to the
Adviser or its affiliated person by an
Unaffiliated Investment Company, in
connection with the investment by the
Fund of Funds in the Unaffiliated Fund.
Any Subadviser will waive fees
otherwise payable to the Subadviser,
directly or indirectly, by the Fund of
Funds in an amount at least equal to any
compensation received by the
Subadviser, or an affiliated person of the
Subadviser, from an Unaffiliated Fund,
other than any advisory fees paid to the
Subadviser or its affiliated person by an
Unaffiliated Investment Company, in
connection with the investment by the
Fund of Funds in the Unaffiliated Fund
made at the direction of the Subadviser.
In the event that the Subadviser waives
fees, the benefit of the waiver will be
passed through to the Fund of Funds.
11. No Underlying Fund will acquire
securities of any other investment
company or company relying on section
3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section
VerDate Mar<15>2010
19:43 Sep 14, 2012
Jkt 226001
12(d)(1)(A) of the Act, except to the
extent that such Underlying Fund: (a)
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 (b) 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.
12. 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.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin M. O’Neill,
Deputy Secretary.
adjudicatory matter; and other matters
relating to enforcement proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact:
The Office of the Secretary at (202)
551–5400.
Dated: September 13, 2012.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–22968 Filed 9–13–12; 4:15 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67797; File No. SR–
NYSEArca–2012–85]
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending Certain NYSE
Arca Equities Rules To Replace
References to ‘‘NYSE Amex’’ With
‘‘NYSE MKT’’ Reflecting the Recent
Name Change of NYSE Amex LLC to
NYSE MKT LLC
Sunshine Act Meeting.
September 7, 2012.
[FR Doc. 2012–22792 Filed 9–14–12; 8:45 am]
BILLING CODE 8011–01–P
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold a Closed Meeting
on Thursday, September 20, 2012 at
2:00 p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10)
and 17 CFR 200.402(a)(3), (5), (7), 9(ii)
and (10), permit consideration of the
scheduled matters at the Closed
Meeting.
Commissioner Paredes, as duty
officer, voted to consider the items
listed for the Closed Meeting in closed
session, and determined that no earlier
notice thereof was possible.
The subject matter of the Closed
Meeting scheduled for Thursday,
September 20, 2012 will be:
and settlement of injunctive actions;
institution and settlement of
administrative proceedings; an
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b-4 thereunder,3
notice is hereby given that, on August
28, 2012, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments 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
certain NYSE Arca Equities rules to
replace references to ‘‘NYSE Amex’’
with ‘‘NYSE MKT’’ to reflect the recent
name change of NYSE Amex LLC to
NYSE MKT LLC. The text of the
proposed rule change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
1 15
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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]]>Agencies
[Federal Register Volume 77, Number 180 (Monday, September 17, 2012)]
[Notices]
[Pages 57162-57166]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-22792]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30200; File No. 812-13993]
Prudential Investment Portfolios 3, et al.; Notice of Application
September 11, 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.
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SUMMARY: Summary of the Application: The requested order would permit
certain registered open-end management investment companies that
operate as ``funds of funds'' to acquire shares of certain registered
open-end management investment companies and unit investment trusts
(``UITs'') that are within and outside the same group of investment
companies as the acquiring investment companies.
Applicants: Prudential Investment Portfolios 3 (``PIP 3''), The
Prudential Investment Portfolios, Inc. (``PIP Inc.'', together with PIP
3, the ``Trusts'') and Prudential Investments LLC (``PI'' or the
``Adviser'').
DATES: Filing Dates: The application was filed on December 21, 2011,
and amended on May 9, 2012, and September 10, 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 October 5, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants:
Gateway Center Three, 100 Mulberry Street, 4th Floor, Newark, New
Jersey 07102-4061.
[[Page 57163]]
FOR FURTHER INFORMATION CONTACT: Lewis B. Reich, Senior Counsel, at
(202) 551-6919, or Jennifer L. Sawin, 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 for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1. PIP 3 is an open-end management investment company registered
under the Act and organized as a Delaware statutory trust. PIP 3 is a
series trust and currently offers four series, each with its own
investment objectives and policies. PIP Inc. is an open-end management
investment company registered under the Act and organized as a Maryland
corporation. PIP Inc. is a series trust and currently offers six
series, each with its own investment objectives and policies.\1\ One
series of PIP 3 and three series of PIP Inc. currently operate as Funds
of Funds and intend to rely on the requested order.
---------------------------------------------------------------------------
\1\ Applicants request that the relief apply to the Trusts and
to any existing or future registered open-end management investment
company or series thereof that (i) is advised by PI or by an entity
controlling, controlled by or under common control with PI and (ii)
invests in other registered open-end management investment companies
in reliance on section 12(d)(1)(G) of the Act (any such investment
companies or series thereof, together with any series of either
Trust, a ``Fund'', and any Fund that operates as a fund of funds, a
``Fund of Funds'').
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2. PI, a New York limited liability company that is a wholly-owned
direct subsidiary of Prudential Financial, Inc., is registered as an
investment adviser under the Investment Advisers Act of 1940 and serves
as investment adviser to the Trusts. PI currently employs certain
entities either controlling, controlled by or under common control with
PI as subadvisers to the Funds.
3. Applicants request an order under section 12(d)(1)(J) of the Act
exempting them from sections 12(d)(1)(A) and (B) of the Act to permit
(1) a Fund of Funds to acquire shares in excess of the limits set forth
in section 12(d)(1)(A) of the Act of (a) registered open-end management
investment companies 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 Fund of Funds (``Unaffiliated Investment
Companies'') and UITs that are not part of the same group of investment
companies as the Fund of Funds (``Unaffiliated Trusts,'' together with
the Unaffiliated Investment Companies, ``Unaffiliated Funds'')\2\ and
(b) registered open-end management investment companies and UITs that
are part of the same group of investment companies as the Fund of Funds
(collectively, ``Affiliated Funds,'' together with the Unaffiliated
Funds, ``Underlying Funds'') and (2) each Underlying Fund, any
principal underwriter for the Underlying Fund, and any broker or dealer
registered under the Securities Exchange Act of 1934 (``Broker'') to
sell shares of the Underlying Fund to the Fund of Funds in excess of
the limits set forth in section 12(d)(1)(B) of the Act.\3\ Applicants
also request an order under sections 6(c) and 17(b) of the Act to
exempt applicants from section 17(a) to the extent necessary to permit
Underlying Funds to sell their shares to Funds of Funds and redeem
their shares from Funds of Funds.
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\2\ Certain of the Unaffiliated Funds may be registered under
the Act as either UITs or open-end investment companies and have
received exemptive relief to permit their shares to be listed and
traded on a national securities exchange at negotiated prices
(``ETFs'').
\3\ 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 set
forth in the application.
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Applicants' Legal Analysis
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 (a) the Funds of Funds to acquire
shares of the Underlying Funds in excess of the limits in section
12(d)(1)(A), and (b) the Underlying Funds, their principal
underwriters, and any Broker to sell shares of an Underlying Fund to a
Fund of Funds in excess of the limits in section 12(d)(1)(B) of the
Act.
3. Applicants state that the proposed arrangement will not give
rise to the policy concerns underlying sections 12(d)(1)(A) and (B),
which include concerns about undue influence by a fund of funds 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 the exercise of undue influence by a Fund of Funds or its affiliated
persons over the Underlying Funds. The concern about undue influence
does not arise in connection with a Fund of Funds' investment in the
Affiliated Funds, since they are part of the same group of investment
companies. To limit the control that a Fund of Funds or its affiliated
persons may have over an Unaffiliated Fund, applicants propose a
condition prohibiting the Adviser, any person controlling, controlled
by, or under common control with the 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
Adviser or any person controlling, controlled by, or under common
control with the Adviser (collectively, the ``Group'') from controlling
(individually or in the aggregate) an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act. The same prohibition would apply
(individually and in the aggregate) to any other investment adviser
within the meaning of section 2(a)(20)(B) of the Act to a Fund of Funds
(``Subadviser''), any person controlling, controlled by or under common
control with the Subadviser, and any investment company or issuer that
would be an investment company but for section 3(c)(1) or 3(c)(7) of
the Act (or portion of such investment company or issuer) advised or
sponsored by the Subadviser or any person controlling, controlled by or
under common control with the Subadviser (the ``Subadviser Group'').
Applicants propose other conditions to limit the potential for undue
influence over the Unaffiliated Funds, including that no Fund of Funds
or Fund of Funds
[[Page 57164]]
Affiliate\4\ (except to the extent it is acting in its capacity as an
investment adviser to an Unaffiliated Investment Company or sponsor to
an Unaffiliated Trust) will cause an Unaffiliated Fund 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, advisory board member, investment
adviser, Subadviser or employee of the Fund of Funds, or a person of
which any such officer, director, trustee, investment adviser,
Subadviser, member of an advisory board or employee is an affiliated
person (each, an ``Underwriting Affiliate''; however any person whose
relationship to the Unaffiliated Fund is covered by section 10(f) of
the Act is not an Underwriting Affiliate). An offering of securities
during the existence of an underwriting or selling syndicate of which a
principal underwriter is an Underwriting Affiliate is referred to as an
``Affiliated Underwriting.''
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\4\ A ``Fund of Funds Affiliate'' is the Adviser, any
Subadviser, promoter or principal underwriter of a Fund of Funds, as
well as any person controlling, controlled by, or under common
control with any of those entities. An ``Unaffiliated Fund
Affiliate'' is an investment adviser, sponsor, promoter, or
principal underwriter of an Unaffiliated Fund, as well as any person
controlling, controlled by, or under common control with any of
those entities.
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5. To further ensure that an Unaffiliated Investment Company
understands the implications of an investment by a Fund of Funds under
the requested order, prior to a Fund of Funds' investment in the shares
of an Unaffiliated Investment Company in excess of the limit in section
12(d)(1)(A)(i) of the Act, the Fund of Funds and the Unaffiliated
Investment Company will execute an agreement stating, without
limitation, that their Boards and their investment advisers understand
the terms and conditions of the order and agree to fulfill their
responsibilities under the order (``Participation Agreement'').
Applicants note that an Unaffiliated Investment Company other than an
ETF whose shares are purchased by a Fund of Funds in the secondary
market will retain its right at all times to reject any investment by a
Fund of Funds.\5\
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\5\ An Unaffiliated Investment Company, including an ETF would
retain its right to reject any initial investment by a Fund of Funds
in excess of the limit in section 12(d)(1)(A)(i) of the Act by
declining to execute the Participation Agreement with the Fund of
Funds.
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6. Applicants state that they do not believe that the proposed
arrangement will involve excessive layering of fees. The Board of each
Fund of Funds, including a majority of the 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 any Fund of Funds investment advisory or management
contract are based on services provided that will be in addition to,
rather than duplicative of, the services provided under any Underlying
Fund's advisory contract. In addition, the 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 Investment Company under rule 12b-1 under
the Act) received from an Unaffiliated Fund by the Adviser or an
affiliated person of the Adviser, other than any advisory fees paid to
the Adviser or its affiliated person by an Unaffiliated Investment
Company, in connection with the investment by the Fund of Funds in the
Unaffiliated Fund. Any Subadviser for a Fund of Funds will waive fees
otherwise payable to the Subadviser, directly or indirectly, by the
Fund of Funds in an amount at least equal to any compensation received
by the Subadviser or an affiliated person of the Subadviser from an
Unaffiliated Fund, other than any advisory fees paid to the Subadviser
or an affiliated person by the Unaffiliated Fund, in connection with
the investment by the Fund of Funds in the Unaffiliated Fund made at
the direction of the Subadviser. In the event that the Subadviser
waives fees, the benefit of the waiver will be passed through to the
Fund of Funds. Any sales charges and/or service fees charged with
respect to shares of a Fund of Funds will not exceed the limits
applicable to a fund of funds as set forth in Rule 2830 of the Conduct
Rules of the NASD (``NASD Conduct Rule 2830'').\6\
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\6\ Any references to NASD Conduct Rule 2830 include any
successor or replacement FINRA rule to NASD Conduct Rule 2830.
---------------------------------------------------------------------------
7. 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 11 below.
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 (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 a Fund of Funds and the Affiliated Funds
might be deemed to be under common control of the Adviser and therefore
affiliated persons of one another. Applicants also state that a Fund of
Funds and the Unaffiliated Funds might be deemed to be affiliated
persons of one another if the Fund of Funds acquires 5% or more of an
Unaffiliated Fund's outstanding voting securities. In light of these
and other possible affiliations, section 17(a) could prevent an
Underlying Fund from selling shares to and redeeming shares from a Fund
of Funds.\7\
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\7\ Applicants state that to the extent purchases and sales of
shares of an ETF occur in the secondary market (and not through
principal transactions directly between a Fund of Funds and an ETF),
relief from section 17(a) would not be necessary. The requested
relief is intended to cover, however, transactions directly between
ETFs and a Fund of Funds. Applicants are not seeking relief from
section 17(a) for, and the requested relief will not apply to,
transactions where an ETF could be deemed an affiliated person, or
an affiliated person of an affiliated person, of a Fund of Funds
because the investment adviser to the ETF or an entity controlling,
controlled by or under common control with the investment adviser to
an ETF also is an investment adviser to the Fund of Funds.
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3. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
it finds that (a) the terms of the proposed transaction, including the
consideration to be paid or received, are fair and reasonable and do
not involve overreaching on the part of any person concerned; (b) the
proposed transaction is consistent with the policies of each registered
investment company involved; and (c) the proposed transaction is
consistent with the general purposes of the Act. Section 6(c) of the
Act permits the Commission to exempt any person or transactions from
any provision of the Act if such exemption is necessary or appropriate
in the public interest and consistent with the protection of investors
and the purposes fairly intended by the policy and provisions of the
Act.
4. Applicants submit that the proposed transactions satisfy the
standards for relief under sections 17(b) and 6(c) of the Act.\8\
Applicants state
[[Page 57165]]
that the terms of the transactions are reasonable and fair 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 the Underlying
Fund. Applicants state that the proposed transactions will be
consistent with the policies of each Fund of Funds and each Underlying
Fund and with the general purposes of the Act.
---------------------------------------------------------------------------
\8\ Applicants acknowledge that receipt of any compensation by
(a) an affiliated person of a Fund of Funds, or an affiliated person
of such person, for the purchase by a 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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Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. The members of a Group will not control (individually or in the
aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9)
of the Act. The members of a Subadviser Group will not control
(individually or in the aggregate) an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act. If, as a result of a decrease in
the outstanding voting securities of an Unaffiliated Fund, the Group or
a Subadviser Group, each in the aggregate, becomes a holder of more
than 25 percent of the outstanding voting securities of the
Unaffiliated Fund, then the Group or the Subadviser Group will vote its
shares of the Unaffiliated Fund in the same proportion as the vote of
all other holders of the Unaffiliated Fund's shares. This condition
will not apply to a Subadviser Group with respect to an Unaffiliated
Fund for which the Subadviser or a person controlling, controlled by,
or under common control with the Subadviser acts as the investment
adviser within the meaning of section 2(a)(20)(A) of the Act (in the
case of an Unaffiliated Investment Company) or as the sponsor (in the
case of an Unaffiliated Trust).
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 Fund to influence the terms of any services or
transactions between the Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
3. The Board of each Fund of Funds, including a majority of the
Independent Trustees, will adopt procedures reasonably designed to
assure that its Adviser and any Subadviser(s) to the Fund of Funds are
conducting the investment program of the Fund of Funds without taking
into account any consideration received by the Fund of Funds or Fund of
Funds Affiliate from an Unaffiliated Fund or an Unaffiliated Fund
Affiliate in connection with any services or transactions.
4. Once an investment by a Fund of Funds in the securities of an
Unaffiliated Investment Company exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment
Company, including a majority of the Independent Trustees, will
determine that any consideration paid by the Unaffiliated Investment
Company to a Fund of Funds or a Fund of Funds Affiliate in connection
with any services or transactions: (a) Is fair and reasonable in
relation to the nature and quality of the services and benefits
received by the Unaffiliated Investment Company; (b) is within the
range of consideration that the Unaffiliated Investment Company would
be required to pay to another unaffiliated entity in connection with
the same services or transactions; and (c) does not involve
overreaching on the part of any person concerned. This condition does
not apply with respect to any services or transactions between an
Unaffiliated Investment Company and its investment adviser(s) or any
person controlling, controlled by, or under common control with such
investment adviser(s).
5. No Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Unaffiliated Investment Company or sponsor to an Unaffiliated Trust)
will cause an Unaffiliated Fund to purchase a security in any
Affiliated Underwriting.
6. The Board of an Unaffiliated Investment Company, including a
majority of the Independent Trustees, will adopt procedures reasonably
designed to monitor any purchases of securities by the Unaffiliated
Investment Company in an Affiliated Underwriting once an investment by
a Fund of Funds in the securities of the Unaffiliated Investment
Company exceeds the limit of section 12(d)(1)(A)(i) of the Act,
including any purchases made directly from an Underwriting Affiliate.
The Board of the Unaffiliated Investment Company will review these
purchases periodically, but no less frequently than annually, to
determine whether the purchases were influenced by the investment by
the Fund of Funds in the Unaffiliated Investment Company. The Board of
the Unaffiliated Investment Company will consider, among other things,
(a) whether the purchases were consistent with the investment
objectives and policies of the Unaffiliated Investment Company; (b) how
the performance of securities purchased in an Affiliated Underwriting
compares to the performance of comparable securities purchased during a
comparable period of time in underwritings other than Affiliated
Underwritings or to a benchmark such as a comparable market index; and
(c) whether the amount of securities purchased by the Unaffiliated
Investment Company in Affiliated Underwritings and the amount purchased
directly from an Underwriting Affiliate have changed significantly from
prior years. The Board of the Unaffiliated Investment Company will take
any appropriate actions based on its review, including, if appropriate,
the institution of procedures designed to assure that purchases of
securities in Affiliated Underwritings are in the best interests of
shareholders.
7. Each Unaffiliated Investment Company 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 not
less than six years from the end of the fiscal year in which any
purchase in an Affiliated Underwriting occurred, the first two years in
an easily accessible place, a written record of each purchase of
securities in an Affiliated Underwriting once an investment by a Fund
of Funds in the securities of an Unaffiliated Investment Company
exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth
the: (a) Party from whom the securities were acquired, (b) identity of
the underwriting syndicate's members, (c) terms of the purchase, and
(d) information or materials upon which the determinations of the Board
of the Unaffiliated Investment Company were made.
8. Prior to its investment in shares of an Unaffiliated Investment
Company in excess of the limit in section 12(d)(1)(A)(i) of the Act,
the Fund of Funds and the Unaffiliated Investment Company will execute
a Participation Agreement stating, without limitation, that their
Boards and their investment advisers understand the terms and
conditions of the order and agree to fulfill their responsibilities
under the order. At the time of its investment in shares of an
Unaffiliated Investment Company in excess of the limit in section
12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Investment
[[Page 57166]]
Company of the investment. At such time, the Fund of Funds will also
transmit to the Unaffiliated Investment Company a list of the names of
each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of
Funds will notify the Unaffiliated Investment Company of any changes to
the list of the names as soon as reasonably practicable after a change
occurs. The Unaffiliated Investment Company and the Fund of Funds will
maintain and preserve a copy of the order, the Participation Agreement,
and the list with any updated information for the duration of the
investment and for a period of not less than six years thereafter, the
first two years in an easily accessible place.
9. Before approving any advisory contract under section 15 of the
Act, the Board of each Fund of Funds, including a majority of the
Independent Trustees, shall find that the advisory fees charged under
such advisory contract are based on services provided that are in
addition to, rather than duplicative of, services provided under the
advisory contract(s) of any Underlying Fund in which the Fund of Funds
may invest. Such finding and the basis upon which the finding was made
will be recorded fully in the minute books of the appropriate Fund of
Funds.
10. The 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
Investment Company under rule 12b-1 under the Act) received from an
Unaffiliated Fund by the Adviser, or an affiliated person of the
Adviser, other than any advisory fees paid to the Adviser or its
affiliated person by an Unaffiliated Investment Company, in connection
with the investment by the Fund of Funds in the Unaffiliated Fund. Any
Subadviser will waive fees otherwise payable to the Subadviser,
directly or indirectly, by the Fund of Funds in an amount at least
equal to any compensation received by the Subadviser, or an affiliated
person of the Subadviser, from an Unaffiliated Fund, other than any
advisory fees paid to the Subadviser or its affiliated person by an
Unaffiliated Investment Company, in connection with the investment by
the Fund of Funds in the Unaffiliated Fund made at the direction of the
Subadviser. In the event that the Subadviser waives fees, the benefit
of the waiver will be passed through to the Fund of Funds.
11. No Underlying Fund will acquire securities of any other
investment company or company relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained in section 12(d)(1)(A) of the
Act, except to the extent that such Underlying Fund: (a) 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 (b) 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.
12. 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.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-22792 Filed 9-14-12; 8:45 am]
BILLING CODE 8011-01-P
