Forum Funds II, et al.; Notice of Application, 1522-1527 [2015-00226]
Download as PDF
<![CDATA[
tkelley on DSK3SPTVN1PROD with NOTICES
1522
Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices
in the applicable Board minutes, that
such change is in the best interests of
the Fund and its shareholders, and does
not involve a conflict of interest from
which the Adviser or the Affiliated
Subadviser derives an inappropriate
advantage.
7. Independent legal counsel, as
defined in rule 0–1(a)(6) under the Act,
will be engaged to represent the
Independent Trustees. The selection of
such counsel will be within the
discretion of the then-existing
Independent Trustees.
8. The Adviser will provide the
Board, no less frequently than quarterly,
with information about the profitability
of the Adviser on a per Fund basis. The
information will reflect the impact on
profitability of the hiring or termination
of any Subadviser during the applicable
quarter.
9. Whenever a Subadviser is hired or
terminated, the Adviser will provide the
Board with information showing the
expected impact on the profitability of
the Adviser.
10. The Adviser will provide general
management services to each Fund,
including overall supervisory
responsibility for the general
management and investment of each
Fund’s assets, and, subject to review
and approval of the Board, will: (a) Set
each Fund’s overall investment
strategies; (b) evaluate, select, and
recommend Subadvisers to manage all
or a portion of the each Fund’s assets;
(c) allocate and, when appropriate,
reallocate each Fund’s assets among one
or more Subadvisers; (d) monitor and
evaluate the performance of
Subadvisers; and (e) implement
procedures reasonably designed to
ensure that Subadvisers comply with
each Fund’s investment objective,
policies and restrictions.
11. No trustee or officer of the Trust
or a Fund, or director, manager or
officer of the Adviser, will own, directly
or indirectly (other than through a
pooled investment vehicle that is not
controlled by such person), any interest
in a Subadviser, except for (a)
ownership of interests in the Adviser or
any entity that controls, is controlled by,
or is under common control with the
Adviser; or (b) ownership of less than
1% of the outstanding securities of any
class of equity or debt of any publicly
traded company that is either a
Subadviser or an entity that controls, is
controlled by or is under common
control with a Subadviser.
12. In the event the Commission
adopts a rule under the Act providing
substantially similar relief to that in the
order requested in the Application, the
VerDate Sep<11>2014
17:35 Jan 09, 2015
Jkt 235001
requested order will expire on the
effective date of that rule.
13. Each Fund will disclose the
Aggregate Fee Disclosure in its
registration statement.
14. Any new Subadvisory Agreement
or any amendment to a Fund’s existing
Advisory Agreement or Subadvisory
Agreement that directly or indirectly
results in an increase in the aggregate
advisory rate payable by the Fund will
be submitted to the Fund’s shareholders
for approval.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2015–00227 Filed 1–9–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31407; 812–14355]
Forum Funds II, et al.; Notice of
Application
January 6, 2015.
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
‘‘1940 Act’’) for exemptions from
sections 12(d)(1)(A), (B), and (C) of the
1940 Act, under sections 6(c) and 17(b)
of the 1940 Act for an exemption from
section 17(a) of the 1940 Act, and under
section 6(c) of the 1940 Act for an
exemption from rule 12d1–2(a) under
the 1940 Act.
AGENCY:
SUMMARY OF THE APPLICATION:
Applicants request an order that would
(a) 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,
registered closed-end management
investment companies, business
development companies as defined by
section 2(a)(48) of the 1940 Act
(‘‘business development companies’’),
and registered unit investment trusts
that are within or outside the same
group of investment companies as the
acquiring investment companies and (b)
permit certain registered open-end
management investment companies
relying on rule 12d1–2 under the 1940
Act to invest in certain financial
instruments.
APPLICANTS: Forum Funds II (‘‘Trust’’),
Full Circle Advisors, LLC (‘‘Initial
PO 00000
Frm 00030
Fmt 4703
Sfmt 4703
Advisor’’) and Foreside Fund Services,
LLC (the ‘‘Distributor’’).
FILING DATES: The application was filed
August 29, 2014, and amended on
November 4, 2014, November 12, 2014,
December 17, 2014, and December 24,
2014.
HEARING OR NOTIFICATION OF HEARING:
An order granting the requested relief
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 February 2, 2015, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
1940 Act, hearing requests should state
the nature of the writer’s interest, any
facts bearing upon the desirability of a
hearing on the matter, 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: Forum Funds II, Three
Canal Plaza, Suite 600, Portland, Maine
04101; Full Circle Advisors, LLC, 102
Greenwich Avenue, 2nd Floor,
Greenwich, CT 06830; Foreside Fund
Services LLC, Three Canal Plaza, Suite
300, Portland, ME 04101.
FOR FURTHER INFORMATION CONTACT: Jill
Ehrlich, Senior Counsel, at (202) 551–
6819, or David P. Bartels, Branch Chief,
at (202) 551–6821 (Division of
Investment Management, Chief
Counsel’s Office).
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. The Trust is an open-end
management company registered under
the 1940 Act and organized as a
Delaware statutory trust. The Trust may
offer multiple series.1
1 The Applicants request that the order apply not
only to the series of the Trust advised by the Initial
Adviser, The BDC Income Fund, but also to any
future series of the Trust and any other existing or
future registered open-end management investment
companies and any series thereof that are part of the
same ‘‘group of investment companies’’, as defined
E:\FR\FM\12JAN1.SGM
12JAN1
Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
2. The Initial Advisor, a Delaware
limited liability company, is a registered
investment adviser under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’). The Initial Advisor, or
an entity controlling, controlled by, or
under common control with the Initial
Advisor, serves, or will serve, as the
investment adviser to each of the
Funds.2 The Advisor may enter into
sub-advisory agreements with one or
more additional investment advisers to
act as ‘‘Sub-Advisers’’ with respect to
particular Funds (each, a ‘‘SubAdviser’’). The Distributor is a Broker
(as defined below) and serves as the
existing Fund’s principal underwriter
and distributor.
3. Applicants request relief to the
extent necessary to permit: (a) Each
Fund (each, a ‘‘Fund of Funds,’’ and
collectively, the ‘‘Funds of Funds’’) to
acquire shares of registered open-end
management investment companies
(each an ‘‘Unaffiliated Open-End
Investment Company’’), registered
closed-end management investment
companies, business development
companies (each registered closed-end
management investment company and
each business development company,
an ‘‘Unaffiliated Closed-End Investment
Company’’ and, together with the
Unaffiliated Open-End Investment
Companies, the ‘‘Unaffiliated
Investment Companies’’), and registered
unit investment trusts (‘‘UITs’’) (the
‘‘Unaffiliated Trusts,’’ collectively with
the Unaffiliated Investment Companies,
the ‘‘Unaffiliated Funds’’), in each case,
that are not part of the same ‘‘group of
investment companies’’ as the Funds of
Funds; 3 (b) the Unaffiliated Funds, their
principal underwriters and any broker
or dealer registered under the Securities
in section 12(d)(1)(G)(ii) of the 1940 Act, as The
BDC Income Fund and are, or may in the future be,
advised by the Initial Advisor or any other
investment adviser controlling, controlled by, or
under common control with the Initial Advisor
(together with The BDC Income Fund, each series
a ‘‘Fund,’’ and collectively, ‘‘Funds’’). All entities
that currently intend to rely on the requested order
are named as applicants. Any other entity that relies
on the order in the future will comply with the
terms and conditions of the application.
2 All references to the term ‘‘Full Circle Advisors,
LLC’’ include any successors in interest to Full
Circle Advisors, LLC. A successor is limited to an
entity that results from a reorganization into
another jurisdiction or a change in the type of
business organization. The term ‘‘Advisor’’ includes
(i) the Initial Advisor and (ii) any entity controlling,
controlled by, or under common control with the
Initial Advisor that serves as investment adviser to
the Funds.
3 For purposes of the request for relief, the term
‘‘group of investment companies’’ means any two
or more registered investment companies, including
closed-end investment companies and BDCs, that
hold themselves out to investors as related
companies for purposes of investment and investor
services.
VerDate Sep<11>2014
17:35 Jan 09, 2015
Jkt 235001
Exchange Act of 1934 (the ‘‘1934 Act’’)
(‘‘Broker’’) to sell shares of such
Unaffiliated Funds to the Funds of
Funds; (c) the Funds of Funds to acquire
shares of other registered investment
companies, including open-end
management investment companies and
series thereof, closed-end management
investment companies and UITs, as well
as business development companies (if
any), in the same group of investment
companies as the Funds of Funds
(collectively, the ‘‘Affiliated Funds,’’
and, together with the Unaffiliated
Funds, the ‘‘Underlying Funds’’); 4 and
(d) the Affiliated Funds, their principal
underwriters and any Broker to sell
shares of the Affiliated Funds to the
Funds of Funds.5 Applicants also
request an order under sections 6(c) and
17(b) of the 1940 Act to exempt
applicants from section 17(a) to the
extent necessary to permit Underlying
Funds organized as open-end
investment companies (‘‘Underlying
Open-End Investment Companies’’) and
UITs (‘‘Underlying UITs’’) to sell their
shares to Funds of Funds and redeem
their shares from Funds of Funds.
4. Applicants also request an
exemption under section 6(c) from rule
12d1–2 under the 1940 Act to permit
any existing or future Fund of Funds
that relies on section 12(d)(1)(G) of the
1940 Act (‘‘Section 12(d)(1)(G) Fund of
Funds’’) and that otherwise complies
with rule 12d1–2 under the 1940 Act, to
also invest, to the extent consistent with
its investment objective(s), policies,
strategies and limitations, in other
4 Certain of the Underlying Funds may be
registered under the 1940 Act as either UITs or
open-end management investment companies and
have obtained exemptions from the Commission
necessary to permit their shares to be listed and
traded on a national securities exchange at
negotiated prices and, accordingly, to operate as
exchange-traded funds (collectively, ‘‘ETFs’’ and
each, an ‘‘ETF’’). In addition, certain of the
Underlying Funds may in the future pursue their
investment objectives through a master-feeder
arrangement in reliance on section 12(d)(1)(E) of the
1940 Act. In accordance with condition 12, a Fund
of Funds may not invest in an Underlying Fund that
operates as a feeder fund unless the feeder fund is
part of the same ‘‘group of investment companies’’
as its corresponding master fund or the Fund of
Funds. If a Fund of Funds invests in an Affiliated
Fund that operates as a feeder fund and the
corresponding master fund is not within the same
‘‘group of investment companies’’ as the Fund of
Funds and Affiliated Fund, the master fund would
be an Unaffiliated Fund for purposes of the
application and its conditions.
5 Applicants state that they do not believe that
investments in business development companies
present any particular considerations or concerns
that may be different from those presented by
investments in registered closed-end investment
companies. In addition, Applicants represent that
the Funds of Funds will not invest in reliance on
the order in BDCs or closed-end investment
companies that are not listed and traded on a
national securities exchange.
PO 00000
Frm 00031
Fmt 4703
Sfmt 4703
1523
financial instruments that may not be
securities within the meaning of section
2(a)(36) of the 1940 Act (‘‘Other
Investments’’).
Applicants’ Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the 1940 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
1940 Act prohibits a registered openend investment company, its principal
underwriter, and any Broker 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. Section 12(d)(1)(C) prohibits
an investment company from acquiring
any security issued by a registered
closed-end investment company if such
acquisition would result in the
acquiring company, any other
investment companies having the same
investment adviser, and companies
controlled by such investment
companies, collectively, owning more
than 10% of the outstanding voting
stock of the registered closed-end
investment company.
2. Section 12(d)(1)(J) of the 1940 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 request an exemption under
section 12(d)(1)(J) of the 1940 Act from
the limitations of sections 12(d)(1)(A),
(B) and (C) to the extent necessary to
permit: (i) The Funds of Funds to
acquire shares of Underlying Funds in
excess of the limits set forth in section
12(d)(1)(A) and (C) of the 1940 Act; and
(ii) the Underlying Funds, their
principal underwriters and any Broker
to sell shares of the Underlying Funds
to the Funds of Funds in excess of the
limits set forth in section 12(d)(1)(B) of
the 1940 Act.
3. Applicants state that the proposed
arrangement will not give rise to the
policy concerns underlying sections
E:\FR\FM\12JAN1.SGM
12JAN1
1524
Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
12(d)(1)(A), (B), and (C), 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 submit that the
proposed structure will not result in the
exercise of undue influence by a Fund
of Funds or its affiliated persons over
the Underlying Funds. Applicants assert
that the concern about undue influence
does not arise in connection with a
Fund of Funds’ investment in the
Affiliated Funds because they are part of
the same group of investment
companies. To limit the control a Fund
of Funds or Fund of Funds Affiliate 6
may have over an Unaffiliated Fund,
applicants propose a condition
prohibiting the Advisor and any person
controlling, controlled by or under
common control with the Advisor, and
any investment company and any issuer
that would be an investment company
but for section 3(c)(1) or section 3(c)(7)
of the 1940 Act advised or sponsored by
the Advisor or any person controlling,
controlled by or under common control
with the Advisor (collectively, the
‘‘Group’’) from controlling (individually
or in the aggregate) an Unaffiliated Fund
within the meaning of section 2(a)(9) of
the 1940 Act. The same prohibition
would apply to any Sub-Adviser and
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 1940 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 Sub-Adviser (collectively, the
‘‘Sub-Adviser Group’’).
5. With respect to closed-end
Underlying Funds, applicants note that
although closed-end funds may not be
unduly influenced by a holder’s right of
redemption, closed-end Underlying
Funds may be unduly influenced by a
holder’s ability to vote a large block of
stock. To address this concern,
applicants submit that, with respect to
a Fund’s investment in an Unaffiliated
Closed-End Investment Company, (i)
6 A ‘‘Fund of Funds Affiliate’’ is the Advisor, any
Sub-Adviser, 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(s), sponsor, promoter or
principal underwriter of any Unaffiliated Fund or
any person controlling, controlled by or under
common control with any of those entities.
VerDate Sep<11>2014
17:35 Jan 09, 2015
Jkt 235001
each member of the Group or SubAdviser Group that is an investment
company or an issuer that would be an
investment company but for section
3(c)(1) or 3(c)(7) of the 1940 Act will
vote its shares of the Unaffiliated
Closed-End Investment Company in the
manner prescribed by section
12(d)(1)(E) of the 1940 Act and (ii) each
other member of the Group or SubAdviser Group will vote its shares of the
Unaffiliated Closed-End Investment
Company in the same proportion as the
vote of all other holders of the same
type of such Unaffiliated Closed-End
Investment Company’s shares.
Applicants state that, in this way, an
Unaffiliated Closed-End Investment
Company will be protected from undue
influence by a Fund of Funds through
the voting of the Unaffiliated ClosedEnd Investment Company’s shares.
6. 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 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 an offering of securities during the
existence of any underwriting or selling
syndicate of which a principal
underwriter is an Underwriting Affiliate
(‘‘Affiliated Underwriting’’).7
7. To further ensure that an
Unaffiliated Investment Company
understands the implications of a Fund
of Funds’ investment under the
requested exemptive relief, prior to its
investment in the shares of an
Unaffiliated Investment Company in
excess of the limit of section
12(d)(1)(A)(i) of the 1940 Act, a Fund of
Funds and the Unaffiliated Investment
Company will execute an agreement
stating, without limitation, that each of
their boards of directors or trustees (for
any entity, the ‘‘Board’’) and their
investment advisers understand the
terms and conditions of the order and
agree to fulfill their responsibilities
under the order (the ‘‘Participation
Agreement’’). Applicants note that an
Unaffiliated Investment Company
(including an ETF or an Unaffiliated
Closed-End Investment Company)
7 An ‘‘Underwriting Affiliate’’ is a principal
underwriter in any underwriting or selling
syndicate that 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, sub-adviser, member of an
advisory board or employee is an affiliated person.
An Underwriting Affiliate does not include any
person whose relationship to an Unaffiliated Fund
is covered by section 10(f) of the 1940 Act.
PO 00000
Frm 00032
Fmt 4703
Sfmt 4703
would also retain its right to reject any
initial investment by a Fund of Funds
in excess of the limits in section
12(d)(1)(A)(i) of the 1940 Act by
declining to execute the Participation
Agreement with the Fund of Funds. In
addition, an Unaffiliated Investment
Company (other than an ETF or closedend fund 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. Finally, subject solely to the
giving of notice to a Fund of Funds and
the passage of a reasonable notice
period, an Unaffiliated Fund (including
an ETF or an Unaffiliated Closed-End
Investment Company) could terminate a
Participation Agreement with the Fund
of Funds.
8. Applicants state that they do not
believe that the proposed arrangement
will result in 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 1940
Act (the ‘‘Independent Trustees’’), will
find that the management or advisory
fees charged under a Fund of Funds’
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. In addition, the
Advisor 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 1940 Act) received
from an Unaffiliated Fund by the
Advisor, or an affiliated person of the
Advisor, other than any advisory fees
paid to the Advisor or an affiliated
person of the Advisor by the
Unaffiliated Investment Company, in
connection with the investment by the
Fund of Funds in the Unaffiliated Fund.
9. Applicants further state that 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
in rule 2830 of the Conduct Rules of the
NASD (‘‘NASD Conduct Rule 2830’’).8
10. 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 other
investment company or company
relying on section 3(c)(1) or 3(c)(7) of
8 Any references to NASD Conduct Rule 2830
include any successor or replacement FINRA rule
to NASD Conduct Rule 2830.
E:\FR\FM\12JAN1.SGM
12JAN1
Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices
the 1940 Act in excess of the limits
contained in section 12(d)(1)(A) of the
1940 Act, except in certain
circumstances identified in condition 12
below.
tkelley on DSK3SPTVN1PROD with NOTICES
B. Section 17(a)
1. Section 17(a) of the 1940 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 1940 Act defines an ‘‘affiliated
person’’ of another person to include (a)
any person directly or indirectly
owning, controlling, or holding with
power to vote, 5% or more of the
outstanding voting securities of the
other person; (b) any person 5% or more
of whose outstanding voting securities
are directly or indirectly owned,
controlled, or held with power to vote
by the other person; and (c) any person
directly or indirectly controlling,
controlled by, or under common control
with the other person.
2. Applicants state that the Funds of
Funds and the Affiliated Funds may be
deemed to be under the common control
of the Advisor and, therefore, affiliated
persons of one another. Applicants also
state that the Funds of Funds and the
Underlying Funds may also be deemed
to be affiliated persons of one another if
a Fund of Funds owns 5% or more of
the outstanding voting securities of one
or more of such Underlying Funds.
Applicants state that the sale of shares
by the Underlying Open-End Investment
Companies or Underlying UITs to the
Funds of Funds and the purchase of
those shares from the Funds of Funds by
the Underlying Open-End Investment
Companies or Underlying UITs (through
redemptions) could be deemed to
violate section 17(a).9
3. Section 17(b) of the 1940 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 concerned; and
(iii) the proposed transaction is
consistent with the general purposes of
the 1940 Act. Section 6(c) of the 1940
9 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 the Fund of Funds of shares of an
Underlying Fund or (b) an affiliated person of an
Underlying Fund, or an affiliated person of such
person, for the sale by the Underlying Fund of its
shares to a Fund of Funds may be prohibited by
section 17(e) (1) of the 1940 Act. The Participation
Agreement also will include this acknowledgement.
VerDate Sep<11>2014
17:35 Jan 09, 2015
Jkt 235001
Act permits the Commission to exempt
any person or transactions from any
provision of the 1940 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 1940 Act.
4. Applicants submit that the
proposed transactions satisfy the
standards for relief under sections 17(b)
and 6(c) of the 1940 Act. Applicants
state 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 in accordance with the
rules and regulations under the 1940
Act.10 Applicants also state that the
proposed transactions will be consistent
with the policies of each Fund of Funds
and any Underlying Fund, and with the
general purposes of the 1940 Act.
C. Other Investments by Section
12(d)(1)(G) Funds of Funds
1. Section 12(d)(1)(G) of the 1940 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,’’
as defined in section 12(d)(1)(G)(ii) of
the 1940 Act; (ii) the acquiring company
holds only securities of acquired
companies that are part of the same
‘‘group of investment companies,’’ as
defined in section 12(d)(1)(G)(ii) of the
1940 Act, 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 1940 Act by a
securities association registered under
section 15A of the 1934 Act or by the
Commission; and (iv) the acquired
10 Applicants note that a Fund of Funds generally
would purchase and sell shares of an Underlying
Fund that operates as an ETF or a closed-end fund
through secondary market transactions rather than
through principal transactions with the Underlying
Fund. Applicants nevertheless request relief from
sections 17(a)(1) and (2) to permit each Fund of
Funds that is an affiliated person, or an affiliated
person of an affiliated person, as defined in section
2(a)(3) of the 1940 Act, of an ETF or a closed-end
fund to purchase or redeem shares from the ETF or
closed-end fund. Applicants are not seeking relief
from section 17(a) for, and the requested relief will
not apply to, transactions where an ETF or a closedend fund could be deemed an affiliated person, or
an affiliated person of an affiliated person, of a
Fund of Funds because an investment adviser to the
ETF or an entity controlling, controlled by or under
common control with the investment adviser to the
ETF or closed-end fund is also an investment
adviser to the Fund of Funds.
PO 00000
Frm 00033
Fmt 4703
Sfmt 4703
1525
company has a policy that prohibits it
from acquiring securities of registered
open-end management investment
companies or registered UITs in reliance
on section 12(d)(1)(F) or (G) of the 1940
Act.
2. Rule 12d1–2 under the 1940 Act
permits a registered open-end
investment company or a registered UIT
that relies on section 12(d)(1)(G) of the
1940 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 1940
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 1940 Act. For
the purposes of rule 12d1–2,
‘‘securities’’ means any security as
defined in section 2(a)(36) of the 1940
Act.
3. Applicants state that the proposed
arrangement would comply with rule
12d1–2 under the 1940 Act, but for the
fact that the Section 12(d)(1)(G) Funds
of Funds may invest a portion of their
assets in Other Investments. Applicants
request an order under section 6(c) of
the 1940 Act for an exemption from rule
12d1–2(a) to allow the Section
12(d)(1)(G) Funds of Funds to invest in
Other Investments. Applicants assert
that permitting a Section 12(d)(1)(G)
Fund of Funds to invest in Other
Investments as described in the
application would not raise any of the
concerns that section 12(d)(1) of the
1940 Act was intended to address.
4. Consistent with its fiduciary
obligations under the 1940 Act, a
Section 12(d)(1)(G) Fund of Funds’
Board will review the advisory fees
charged by the Section 12(d)(1)(G) Fund
of Funds’ investment adviser(s) to
ensure that the fees 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 Section 12(d)(1)(G) Fund
of Funds may invest.
Applicants’ Conditions
Investments by Funds of Funds in
Underlying Funds
Applicants agree that the order
granting the requested relief to permit
Funds of Funds to invest in Underlying
Funds shall be subject to the following
conditions:
E:\FR\FM\12JAN1.SGM
12JAN1
tkelley on DSK3SPTVN1PROD with NOTICES
1526
Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices
1. The members of the Group will not
control (individually or in the aggregate)
an Unaffiliated Fund within the
meaning of section 2(a)(9) of the 1940
Act. The members of a Sub-Adviser
Group will not control (individually or
in the aggregate) an Unaffiliated Fund
within the meaning of section 2(a)(9) of
the 1940 Act. With respect to a Fund’s
investment in an Unaffiliated ClosedEnd Investment Company, (i) each
member of the Group or Sub-Adviser
Group that is an investment company or
an issuer that would be an investment
company but for section 3(c)(1) or
3(c)(7) of the 1940 Act will vote its
shares of the Unaffiliated Closed-End
Investment Company in the manner
prescribed by section 12(d)(1)(E) of the
1940 Act and (ii) each other member of
the Group or Sub-Adviser Group will
vote its shares of the Unaffiliated
Closed-End Investment Company in the
same proportion as the vote of all other
holders of the same type of such
Unaffiliated Closed-End Investment
Company’s shares. If, as a result of a
decrease in the outstanding voting
securities of any other Unaffiliated
Fund, the Group or a Sub-Adviser
Group, each in the aggregate, becomes a
holder of more than 25 percent of the
outstanding voting securities of such
Unaffiliated Fund, then the Group or the
Sub-Adviser 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 Sub-Adviser Group with respect to an
Unaffiliated Fund for which the SubAdviser or a person controlling,
controlled by, or under common control
with the Sub-Adviser acts as the
investment adviser within the meaning
of section 2(a)(20)(A) of the 1940 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 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 ensure that the
Advisor and any Sub-Adviser to the
Fund of Funds is 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
VerDate Sep<11>2014
17:35 Jan 09, 2015
Jkt 235001
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 1940 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 1940 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
PO 00000
Frm 00034
Fmt 4703
Sfmt 4703
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 ensure that
purchases of securities in Affiliated
Underwritings are in the best interest of
shareholders.
7. Each Unaffiliated Investment
Company will maintain and preserve
permanently, in an easily accessible
place, a written copy of the procedures
described in the preceding condition,
and any modifications to such
procedures, and will maintain and
preserve for a period of not less than six
years from the end of the fiscal year in
which any purchase in an Affiliated
Underwriting occurred, the first two
years in an easily accessible place, a
written record of each purchase of
securities in an Affiliated Underwriting
once an investment by a Fund of Funds
in the securities of an Unaffiliated
Investment Company exceeds the limit
of section 12(d)(1)(A)(i) of the 1940 Act,
setting forth (1) the party from whom
the securities were acquired, (2) the
identity of the underwriting syndicate’s
members, (3) the terms of the purchase,
and (4) the information or materials
upon which the determinations of the
Board of the Unaffiliated Investment
Company were made.
8. Prior to its investment in shares of
an Unaffiliated Investment Company in
excess of the limit set forth in section
12(d)(1)(A)(i) of the 1940 Act, the Fund
of Funds and the Unaffiliated
Investment Company will execute a
Participation Agreement stating,
without limitation, that their Boards and
their investment advisers understand
the terms and conditions of the order
and agree to fulfill their responsibilities
under the order. At the time of its
investment in shares of an Unaffiliated
Investment Company in excess of the
limit set forth in section 12(d)(1)(A)(i),
a Fund of Funds will notify the
Unaffiliated Investment Company of the
investment. At such time, the Fund of
Funds will also transmit to the
Unaffiliated Investment Company a list
of the names of each Fund of Funds
Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the
E:\FR\FM\12JAN1.SGM
12JAN1
tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices
Unaffiliated Investment Company of any
changes to the list as soon as reasonably
practicable after a change occurs. The
Unaffiliated Investment Company and
the Fund of Funds will maintain and
preserve a copy of the order, the
Participation Agreement, and the list
with any updated information for the
duration of the investment and for a
period of not less than six years
thereafter, the first two years in an
easily accessible place.
9. Before approving any advisory
contract under section 15 of the 1940
Act, the Board of each Fund of Funds,
including a majority of the Independent
Trustees, shall find that the advisory
fees charged under the advisory contract
are based on services provided that are
in addition to, rather than duplicative
of, services provided under the advisory
contract(s) of any Underlying Fund in
which the Fund of Funds may invest.
Such finding, and the basis upon which
the finding was made, will be recorded
fully in the minute books of the
appropriate Fund of Funds.
10. The Advisor will waive fees
otherwise payable to it by a Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Unaffiliated Investment Company
pursuant to rule 12b–1 under the 1940
Act) received from an Unaffiliated Fund
by the Advisor, or an affiliated person
of the Advisor, other than any advisory
fees paid to the Advisor or its affiliated
person by the Unaffiliated Investment
Company, in connection with the
investment by the Fund of Funds in the
Unaffiliated Fund. Any Sub-Adviser
will waive fees otherwise payable to the
Sub-Adviser, directly or indirectly, by
the Fund of Funds in an amount at least
equal to any compensation received by
the Sub-Adviser, or an affiliated person
of the Sub-Adviser, from an Unaffiliated
Fund, other than any advisory fees paid
to the Sub-Adviser or its affiliated
person by the Unaffiliated Investment
Company in connection with the
investment by the Fund of Funds in the
Unaffiliated Fund made at the direction
of the Sub-Adviser. In the event that the
Sub-Adviser waives fees, the benefit of
the waiver will be passed through to the
Fund of Funds.
11. Any sales charges and/or service
fees charged with respect to shares of a
Fund of Funds will not exceed the
limits applicable to funds of funds set
forth in NASD Conduct Rule 2830.
12. No Underlying Fund will acquire
securities of any other investment
company or company relying on section
3(c)(1) or 3(c)(7) of the 1940 Act, in
excess of the limits contained in section
12(d)(1)(A) of the 1940 Act, except to
VerDate Sep<11>2014
17:35 Jan 09, 2015
Jkt 235001
the extent that such Underlying Fund:
(a) Acquires such securities in
compliance with section 12(d)(1)(E) of
the 1940 Act and is either an Affiliated
Fund or is in the same ‘‘group of
investment companies’’ as its
corresponding master fund; (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 1940 Act); or (c) acquires (or is
deemed to have acquired) securities of
another investment company pursuant
to exemptive relief from the
Commission permitting such
Underlying Fund to: (i) Acquire
securities of one or more investment
companies for short-term cash
management purposes or (ii) engage in
inter-fund borrowing and lending
transactions.
Other Investments by Section
12(d)(1)(G) Funds of Funds
In addition, Applicants agree that the
order granting the requested relief to
permit Section 12(d)(1)(G) Funds of
Funds to invest in Other Investments
shall be subject to the following
condition:
13. Applicants will comply with all
provisions of rule 12d1–2 under the
1940 Act, except for paragraph (a)(2) to
the extent that it restricts any Section
12(d)(1)(G) 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.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2015–00226 Filed 1–9–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73993; File No. SR–
NYSEArca–2014–147]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the Fees for
NYSE Arca Integrated Feed To
Establish Eligibility Requirements for
Redistribution
January 6, 2015.
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 December
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00035
Fmt 4703
1527
24, 2014, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or the ‘‘Exchange’’) 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
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 the
fees for NYSE Arca Integrated Feed to
establish eligibility requirements for
redistribution on a managed nondisplay basis and to establish an access
fee for managed non-display data
recipients, operative on January 1, 2015.
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.
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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
fees for NYSE Arca Integrated Feed, as
set forth on the NYSE Arca Equities
Proprietary Market Data Fees Schedule
(‘‘Fee Schedule’’), to establish eligibility
requirements for redistribution of
market data on a Managed Non-Display
basis and establish an access fee for
Managed Non-Display data recipients,
operative on January 1, 2015.
Non-Display Use of NYSE Arca
market data means accessing,
processing, or consuming NYSE Arca
market data delivered via direct and/or
Redistributor 3 data feeds for a purpose
3 ‘‘Redistributor’’ means a vendor or any other
person that provides an NYSE Arca data product to
a data recipient or to any system that a data
Continued
Sfmt 4703
E:\FR\FM\12JAN1.SGM
12JAN1
]]>Agencies
[Federal Register Volume 80, Number 7 (Monday, January 12, 2015)]
[Notices]
[Pages 1522-1527]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00226]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31407; 812-14355]
Forum Funds II, et al.; Notice of Application
January 6, 2015.
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 ``1940 Act'') for exemptions
from sections 12(d)(1)(A), (B), and (C) of the 1940 Act, under sections
6(c) and 17(b) of the 1940 Act for an exemption from section 17(a) of
the 1940 Act, and under section 6(c) of the 1940 Act for an exemption
from rule 12d1-2(a) under the 1940 Act.
-----------------------------------------------------------------------
Summary of the Application: Applicants request an order that would (a)
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, registered closed-end
management investment companies, business development companies as
defined by section 2(a)(48) of the 1940 Act (``business development
companies''), and registered unit investment trusts that are within or
outside the same group of investment companies as the acquiring
investment companies and (b) permit certain registered open-end
management investment companies relying on rule 12d1-2 under the 1940
Act to invest in certain financial instruments.
Applicants: Forum Funds II (``Trust''), Full Circle Advisors, LLC
(``Initial Advisor'') and Foreside Fund Services, LLC (the
``Distributor'').
Filing Dates: The application was filed August 29, 2014, and amended
on November 4, 2014, November 12, 2014, December 17, 2014, and December
24, 2014.
Hearing or Notification of Hearing: An order granting the requested
relief 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 February 2, 2015, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to rule 0-5 under the 1940 Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, 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: Forum Funds II,
Three Canal Plaza, Suite 600, Portland, Maine 04101; Full Circle
Advisors, LLC, 102 Greenwich Avenue, 2nd Floor, Greenwich, CT 06830;
Foreside Fund Services LLC, Three Canal Plaza, Suite 300, Portland, ME
04101.
FOR FURTHER INFORMATION CONTACT: Jill Ehrlich, Senior Counsel, at (202)
551-6819, or David P. Bartels, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
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. The Trust is an open-end management company registered under the
1940 Act and organized as a Delaware statutory trust. The Trust may
offer multiple series.\1\
---------------------------------------------------------------------------
\1\ The Applicants request that the order apply not only to the
series of the Trust advised by the Initial Adviser, The BDC Income
Fund, but also to any future series of the Trust and any other
existing or future registered open-end management investment
companies and any series thereof that are part of the same ``group
of investment companies'', as defined in section 12(d)(1)(G)(ii) of
the 1940 Act, as The BDC Income Fund and are, or may in the future
be, advised by the Initial Advisor or any other investment adviser
controlling, controlled by, or under common control with the Initial
Advisor (together with The BDC Income Fund, each series a ``Fund,''
and collectively, ``Funds''). All entities that currently intend to
rely on the requested order are named as applicants. Any other
entity that relies on the order in the future will comply with the
terms and conditions of the application.
---------------------------------------------------------------------------
[[Page 1523]]
2. The Initial Advisor, a Delaware limited liability company, is a
registered investment adviser under the Investment Advisers Act of 1940
(the ``Advisers Act''). The Initial Advisor, or an entity controlling,
controlled by, or under common control with the Initial Advisor,
serves, or will serve, as the investment adviser to each of the
Funds.\2\ The Advisor may enter into sub-advisory agreements with one
or more additional investment advisers to act as ``Sub-Advisers'' with
respect to particular Funds (each, a ``Sub-Adviser''). The Distributor
is a Broker (as defined below) and serves as the existing Fund's
principal underwriter and distributor.
---------------------------------------------------------------------------
\2\ All references to the term ``Full Circle Advisors, LLC''
include any successors in interest to Full Circle Advisors, LLC. A
successor is limited to an entity that results from a reorganization
into another jurisdiction or a change in the type of business
organization. The term ``Advisor'' includes (i) the Initial Advisor
and (ii) any entity controlling, controlled by, or under common
control with the Initial Advisor that serves as investment adviser
to the Funds.
---------------------------------------------------------------------------
3. Applicants request relief to the extent necessary to permit: (a)
Each Fund (each, a ``Fund of Funds,'' and collectively, the ``Funds of
Funds'') to acquire shares of registered open-end management investment
companies (each an ``Unaffiliated Open-End Investment Company''),
registered closed-end management investment companies, business
development companies (each registered closed-end management investment
company and each business development company, an ``Unaffiliated
Closed-End Investment Company'' and, together with the Unaffiliated
Open-End Investment Companies, the ``Unaffiliated Investment
Companies''), and registered unit investment trusts (``UITs'') (the
``Unaffiliated Trusts,'' collectively with the Unaffiliated Investment
Companies, the ``Unaffiliated Funds''), in each case, that are not part
of the same ``group of investment companies'' as the Funds of Funds;
\3\ (b) the Unaffiliated Funds, their principal underwriters and any
broker or dealer registered under the Securities Exchange Act of 1934
(the ``1934 Act'') (``Broker'') to sell shares of such Unaffiliated
Funds to the Funds of Funds; (c) the Funds of Funds to acquire shares
of other registered investment companies, including open-end management
investment companies and series thereof, closed-end management
investment companies and UITs, as well as business development
companies (if any), in the same group of investment companies as the
Funds of Funds (collectively, the ``Affiliated Funds,'' and, together
with the Unaffiliated Funds, the ``Underlying Funds''); \4\ and (d) the
Affiliated Funds, their principal underwriters and any Broker to sell
shares of the Affiliated Funds to the Funds of Funds.\5\ Applicants
also request an order under sections 6(c) and 17(b) of the 1940 Act to
exempt applicants from section 17(a) to the extent necessary to permit
Underlying Funds organized as open-end investment companies
(``Underlying Open-End Investment Companies'') and UITs (``Underlying
UITs'') to sell their shares to Funds of Funds and redeem their shares
from Funds of Funds.
---------------------------------------------------------------------------
\3\ For purposes of the request for relief, the term ``group of
investment companies'' means any two or more registered investment
companies, including closed-end investment companies and BDCs, that
hold themselves out to investors as related companies for purposes
of investment and investor services.
\4\ Certain of the Underlying Funds may be registered under the
1940 Act as either UITs or open-end management investment companies
and have obtained exemptions from the Commission necessary to permit
their shares to be listed and traded on a national securities
exchange at negotiated prices and, accordingly, to operate as
exchange-traded funds (collectively, ``ETFs'' and each, an ``ETF'').
In addition, certain of the Underlying Funds may in the future
pursue their investment objectives through a master-feeder
arrangement in reliance on section 12(d)(1)(E) of the 1940 Act. In
accordance with condition 12, a Fund of Funds may not invest in an
Underlying Fund that operates as a feeder fund unless the feeder
fund is part of the same ``group of investment companies'' as its
corresponding master fund or the Fund of Funds. If a Fund of Funds
invests in an Affiliated Fund that operates as a feeder fund and the
corresponding master fund is not within the same ``group of
investment companies'' as the Fund of Funds and Affiliated Fund, the
master fund would be an Unaffiliated Fund for purposes of the
application and its conditions.
\5\ Applicants state that they do not believe that investments
in business development companies present any particular
considerations or concerns that may be different from those
presented by investments in registered closed-end investment
companies. In addition, Applicants represent that the Funds of Funds
will not invest in reliance on the order in BDCs or closed-end
investment companies that are not listed and traded on a national
securities exchange.
---------------------------------------------------------------------------
4. Applicants also request an exemption under section 6(c) from
rule 12d1-2 under the 1940 Act to permit any existing or future Fund of
Funds that relies on section 12(d)(1)(G) of the 1940 Act (``Section
12(d)(1)(G) Fund of Funds'') and that otherwise complies with rule
12d1-2 under the 1940 Act, to also invest, to the extent consistent
with its investment objective(s), policies, strategies and limitations,
in other financial instruments that may not be securities within the
meaning of section 2(a)(36) of the 1940 Act (``Other Investments'').
Applicants' Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the 1940 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 1940 Act prohibits a
registered open-end investment company, its principal underwriter, and
any Broker 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. Section 12(d)(1)(C) prohibits
an investment company from acquiring any security issued by a
registered closed-end investment company if such acquisition would
result in the acquiring company, any other investment companies having
the same investment adviser, and companies controlled by such
investment companies, collectively, owning more than 10% of the
outstanding voting stock of the registered closed-end investment
company.
2. Section 12(d)(1)(J) of the 1940 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 request an
exemption under section 12(d)(1)(J) of the 1940 Act from the
limitations of sections 12(d)(1)(A), (B) and (C) to the extent
necessary to permit: (i) The Funds of Funds to acquire shares of
Underlying Funds in excess of the limits set forth in section
12(d)(1)(A) and (C) of the 1940 Act; and (ii) the Underlying Funds,
their principal underwriters and any Broker to sell shares of the
Underlying Funds to the Funds of Funds in excess of the limits set
forth in section 12(d)(1)(B) of the 1940 Act.
3. Applicants state that the proposed arrangement will not give
rise to the policy concerns underlying sections
[[Page 1524]]
12(d)(1)(A), (B), and (C), 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 submit that the proposed structure will not result in
the exercise of undue influence by a Fund of Funds or its affiliated
persons over the Underlying Funds. Applicants assert that the concern
about undue influence does not arise in connection with a Fund of
Funds' investment in the Affiliated Funds because they are part of the
same group of investment companies. To limit the control a Fund of
Funds or Fund of Funds Affiliate \6\ may have over an Unaffiliated
Fund, applicants propose a condition prohibiting the Advisor and any
person controlling, controlled by or under common control with the
Advisor, and any investment company and any issuer that would be an
investment company but for section 3(c)(1) or section 3(c)(7) of the
1940 Act advised or sponsored by the Advisor or any person controlling,
controlled by or under common control with the Advisor (collectively,
the ``Group'') from controlling (individually or in the aggregate) an
Unaffiliated Fund within the meaning of section 2(a)(9) of the 1940
Act. The same prohibition would apply to any Sub-Adviser and any person
controlling, controlled by or under common control with the Sub-
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 1940 Act
(or portion of such investment company or issuer) advised or sponsored
by the Sub-Adviser or any person controlling, controlled by or under
common control with the Sub-Adviser (collectively, the ``Sub-Adviser
Group'').
---------------------------------------------------------------------------
\6\ A ``Fund of Funds Affiliate'' is the Advisor, any Sub-
Adviser, 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(s), sponsor, promoter or
principal underwriter of any Unaffiliated Fund or any person
controlling, controlled by or under common control with any of those
entities.
---------------------------------------------------------------------------
5. With respect to closed-end Underlying Funds, applicants note
that although closed-end funds may not be unduly influenced by a
holder's right of redemption, closed-end Underlying Funds may be unduly
influenced by a holder's ability to vote a large block of stock. To
address this concern, applicants submit that, with respect to a Fund's
investment in an Unaffiliated Closed-End Investment Company, (i) each
member of the Group or Sub-Adviser Group that is an investment company
or an issuer that would be an investment company but for section
3(c)(1) or 3(c)(7) of the 1940 Act will vote its shares of the
Unaffiliated Closed-End Investment Company in the manner prescribed by
section 12(d)(1)(E) of the 1940 Act and (ii) each other member of the
Group or Sub-Adviser Group will vote its shares of the Unaffiliated
Closed-End Investment Company in the same proportion as the vote of all
other holders of the same type of such Unaffiliated Closed-End
Investment Company's shares. Applicants state that, in this way, an
Unaffiliated Closed-End Investment Company will be protected from undue
influence by a Fund of Funds through the voting of the Unaffiliated
Closed-End Investment Company's shares.
6. 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 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 an offering of securities during the
existence of any underwriting or selling syndicate of which a principal
underwriter is an Underwriting Affiliate (``Affiliated
Underwriting'').\7\
---------------------------------------------------------------------------
\7\ An ``Underwriting Affiliate'' is a principal underwriter in
any underwriting or selling syndicate that is an officer, director,
trustee, advisory board member, investment adviser, sub-adviser or
employee of the Fund of Funds, or a person of which any such
officer, director, trustee, investment adviser, sub-adviser, member
of an advisory board or employee is an affiliated person. An
Underwriting Affiliate does not include any person whose
relationship to an Unaffiliated Fund is covered by section 10(f) of
the 1940 Act.
---------------------------------------------------------------------------
7. To further ensure that an Unaffiliated Investment Company
understands the implications of a Fund of Funds' investment under the
requested exemptive relief, prior to its investment in the shares of an
Unaffiliated Investment Company in excess of the limit of section
12(d)(1)(A)(i) of the 1940 Act, a Fund of Funds and the Unaffiliated
Investment Company will execute an agreement stating, without
limitation, that each of their boards of directors or trustees (for any
entity, the ``Board'') and their investment advisers understand the
terms and conditions of the order and agree to fulfill their
responsibilities under the order (the ``Participation Agreement'').
Applicants note that an Unaffiliated Investment Company (including an
ETF or an Unaffiliated Closed-End Investment Company) would also retain
its right to reject any initial investment by a Fund of Funds in excess
of the limits in section 12(d)(1)(A)(i) of the 1940 Act by declining to
execute the Participation Agreement with the Fund of Funds. In
addition, an Unaffiliated Investment Company (other than an ETF or
closed-end fund 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. Finally, subject solely to the giving of
notice to a Fund of Funds and the passage of a reasonable notice
period, an Unaffiliated Fund (including an ETF or an Unaffiliated
Closed-End Investment Company) could terminate a Participation
Agreement with the Fund of Funds.
8. Applicants state that they do not believe that the proposed
arrangement will result in 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
1940 Act (the ``Independent Trustees''), will find that the management
or advisory fees charged under a Fund of Funds' 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. In addition, the
Advisor 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 1940 Act) received from an Unaffiliated Fund
by the Advisor, or an affiliated person of the Advisor, other than any
advisory fees paid to the Advisor or an affiliated person of the
Advisor by the Unaffiliated Investment Company, in connection with the
investment by the Fund of Funds in the Unaffiliated Fund.
9. Applicants further state that 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 in rule 2830 of
the Conduct Rules of the NASD (``NASD Conduct Rule 2830'').\8\
---------------------------------------------------------------------------
\8\ Any references to NASD Conduct Rule 2830 include any
successor or replacement FINRA rule to NASD Conduct Rule 2830.
---------------------------------------------------------------------------
10. 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 other investment company or company
relying on section 3(c)(1) or 3(c)(7) of
[[Page 1525]]
the 1940 Act in excess of the limits contained in section 12(d)(1)(A)
of the 1940 Act, except in certain circumstances identified in
condition 12 below.
B. Section 17(a)
1. Section 17(a) of the 1940 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 1940 Act
defines an ``affiliated person'' of another person to include (a) any
person directly or indirectly owning, controlling, or holding with
power to vote, 5% or more of the outstanding voting securities of the
other person; (b) any person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held with
power to vote by the other person; and (c) any person directly or
indirectly controlling, controlled by, or under common control with the
other person.
2. Applicants state that the Funds of Funds and the Affiliated
Funds may be deemed to be under the common control of the Advisor and,
therefore, affiliated persons of one another. Applicants also state
that the Funds of Funds and the Underlying Funds may also be deemed to
be affiliated persons of one another if a Fund of Funds owns 5% or more
of the outstanding voting securities of one or more of such Underlying
Funds. Applicants state that the sale of shares by the Underlying Open-
End Investment Companies or Underlying UITs to the Funds of Funds and
the purchase of those shares from the Funds of Funds by the Underlying
Open-End Investment Companies or Underlying UITs (through redemptions)
could be deemed to violate section 17(a).\9\
---------------------------------------------------------------------------
\9\ 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 the Fund of Funds of shares of
an Underlying Fund or (b) an affiliated person of an Underlying
Fund, or an affiliated person of such person, for the sale by the
Underlying Fund of its shares to a Fund of Funds may be prohibited
by section 17(e) (1) of the 1940 Act. The Participation Agreement
also will include this acknowledgement.
---------------------------------------------------------------------------
3. Section 17(b) of the 1940 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 concerned; and (iii) the
proposed transaction is consistent with the general purposes of the
1940 Act. Section 6(c) of the 1940 Act permits the Commission to exempt
any person or transactions from any provision of the 1940 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 1940 Act.
4. Applicants submit that the proposed transactions satisfy the
standards for relief under sections 17(b) and 6(c) of the 1940 Act.
Applicants state 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 in accordance with the rules and
regulations under the 1940 Act.\10\ Applicants also state that the
proposed transactions will be consistent with the policies of each Fund
of Funds and any Underlying Fund, and with the general purposes of the
1940 Act.
---------------------------------------------------------------------------
\10\ Applicants note that a Fund of Funds generally would
purchase and sell shares of an Underlying Fund that operates as an
ETF or a closed-end fund through secondary market transactions
rather than through principal transactions with the Underlying Fund.
Applicants nevertheless request relief from sections 17(a)(1) and
(2) to permit each Fund of Funds that is an affiliated person, or an
affiliated person of an affiliated person, as defined in section
2(a)(3) of the 1940 Act, of an ETF or a closed-end fund to purchase
or redeem shares from the ETF or closed-end fund. Applicants are not
seeking relief from section 17(a) for, and the requested relief will
not apply to, transactions where an ETF or a closed-end fund could
be deemed an affiliated person, or an affiliated person of an
affiliated person, of a Fund of Funds because an investment adviser
to the ETF or an entity controlling, controlled by or under common
control with the investment adviser to the ETF or closed-end fund is
also an investment adviser to the Fund of Funds.
---------------------------------------------------------------------------
C. Other Investments by Section 12(d)(1)(G) Funds of Funds
1. Section 12(d)(1)(G) of the 1940 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,'' as
defined in section 12(d)(1)(G)(ii) of the 1940 Act; (ii) the acquiring
company holds only securities of acquired companies that are part of
the same ``group of investment companies,'' as defined in section
12(d)(1)(G)(ii) of the 1940 Act, 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 1940
Act by a securities association registered under section 15A of the
1934 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 UITs in reliance on
section 12(d)(1)(F) or (G) of the 1940 Act.
2. Rule 12d1-2 under the 1940 Act permits a registered open-end
investment company or a registered UIT that relies on section
12(d)(1)(G) of the 1940 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 1940 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 1940 Act. For the purposes of rule
12d1-2, ``securities'' means any security as defined in section
2(a)(36) of the 1940 Act.
3. Applicants state that the proposed arrangement would comply with
rule 12d1-2 under the 1940 Act, but for the fact that the Section
12(d)(1)(G) Funds of Funds may invest a portion of their assets in
Other Investments. Applicants request an order under section 6(c) of
the 1940 Act for an exemption from rule 12d1-2(a) to allow the Section
12(d)(1)(G) Funds of Funds to invest in Other Investments. Applicants
assert that permitting a Section 12(d)(1)(G) Fund of Funds to invest in
Other Investments as described in the application would not raise any
of the concerns that section 12(d)(1) of the 1940 Act was intended to
address.
4. Consistent with its fiduciary obligations under the 1940 Act, a
Section 12(d)(1)(G) Fund of Funds' Board will review the advisory fees
charged by the Section 12(d)(1)(G) Fund of Funds' investment adviser(s)
to ensure that the fees 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 Section
12(d)(1)(G) Fund of Funds may invest.
Applicants' Conditions
Investments by Funds of Funds in Underlying Funds
Applicants agree that the order granting the requested relief to
permit Funds of Funds to invest in Underlying Funds shall be subject to
the following conditions:
[[Page 1526]]
1. The members of the Group will not control (individually or in
the aggregate) an Unaffiliated Fund within the meaning of section
2(a)(9) of the 1940 Act. The members of a Sub-Adviser Group will not
control (individually or in the aggregate) an Unaffiliated Fund within
the meaning of section 2(a)(9) of the 1940 Act. With respect to a
Fund's investment in an Unaffiliated Closed-End Investment Company, (i)
each member of the Group or Sub-Adviser Group that is an investment
company or an issuer that would be an investment company but for
section 3(c)(1) or 3(c)(7) of the 1940 Act will vote its shares of the
Unaffiliated Closed-End Investment Company in the manner prescribed by
section 12(d)(1)(E) of the 1940 Act and (ii) each other member of the
Group or Sub-Adviser Group will vote its shares of the Unaffiliated
Closed-End Investment Company in the same proportion as the vote of all
other holders of the same type of such Unaffiliated Closed-End
Investment Company's shares. If, as a result of a decrease in the
outstanding voting securities of any other Unaffiliated Fund, the Group
or a Sub-Adviser Group, each in the aggregate, becomes a holder of more
than 25 percent of the outstanding voting securities of such
Unaffiliated Fund, then the Group or the Sub-Adviser 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 Sub-Adviser Group with respect to an Unaffiliated
Fund for which the Sub-Adviser or a person controlling, controlled by,
or under common control with the Sub-Adviser acts as the investment
adviser within the meaning of section 2(a)(20)(A) of the 1940 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 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
ensure that the Advisor and any Sub-Adviser to the Fund of Funds is
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 1940 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 1940 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 ensure that purchases of
securities in Affiliated Underwritings are in the best interest of
shareholders.
7. Each Unaffiliated Investment Company will maintain and preserve
permanently, in an easily accessible place, a written copy of the
procedures described in the preceding condition, and any modifications
to such procedures, and will maintain and preserve for a period of not
less than six years from the end of the fiscal year in which any
purchase in an Affiliated Underwriting occurred, the first two years in
an easily accessible place, a written record of each purchase of
securities in an Affiliated Underwriting once an investment by a Fund
of Funds in the securities of an Unaffiliated Investment Company
exceeds the limit of section 12(d)(1)(A)(i) of the 1940 Act, setting
forth (1) the party from whom the securities were acquired, (2) the
identity of the underwriting syndicate's members, (3) the terms of the
purchase, and (4) the information or materials upon which the
determinations of the Board of the Unaffiliated Investment Company were
made.
8. Prior to its investment in shares of an Unaffiliated Investment
Company in excess of the limit set forth in section 12(d)(1)(A)(i) of
the 1940 Act, the Fund of Funds and the Unaffiliated Investment Company
will execute a Participation Agreement stating, without limitation,
that their Boards and their investment advisers understand the terms
and conditions of the order and agree to fulfill their responsibilities
under the order. At the time of its investment in shares of an
Unaffiliated Investment Company in excess of the limit set forth in
section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated
Investment Company of the investment. At such time, the Fund of Funds
will also transmit to the Unaffiliated Investment Company a list of the
names of each Fund of Funds Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the
[[Page 1527]]
Unaffiliated Investment Company of any changes to the list as soon as
reasonably practicable after a change occurs. The Unaffiliated
Investment Company and the Fund of Funds will maintain and preserve a
copy of the order, the Participation Agreement, and the list with any
updated information for the duration of the investment and for a period
of not less than six years thereafter, the first two years in an easily
accessible place.
9. Before approving any advisory contract under section 15 of the
1940 Act, the Board of each Fund of Funds, including a majority of the
Independent Trustees, shall find that the advisory fees charged under
the advisory contract are based on services provided that are in
addition to, rather than duplicative of, services provided under the
advisory contract(s) of any Underlying Fund in which the Fund of Funds
may invest. Such finding, and the basis upon which the finding was
made, will be recorded fully in the minute books of the appropriate
Fund of Funds.
10. The Advisor will waive fees otherwise payable to it by a Fund
of Funds in an amount at least equal to any compensation (including
fees received pursuant to any plan adopted by an Unaffiliated
Investment Company pursuant to rule 12b-1 under the 1940 Act) received
from an Unaffiliated Fund by the Advisor, or an affiliated person of
the Advisor, other than any advisory fees paid to the Advisor or its
affiliated person by the Unaffiliated Investment Company, in connection
with the investment by the Fund of Funds in the Unaffiliated Fund. Any
Sub-Adviser will waive fees otherwise payable to the Sub-Adviser,
directly or indirectly, by the Fund of Funds in an amount at least
equal to any compensation received by the Sub-Adviser, or an affiliated
person of the Sub-Adviser, from an Unaffiliated Fund, other than any
advisory fees paid to the Sub-Adviser or its affiliated person by the
Unaffiliated Investment Company in connection with the investment by
the Fund of Funds in the Unaffiliated Fund made at the direction of the
Sub-Adviser. In the event that the Sub-Adviser waives fees, the benefit
of the waiver will be passed through to the Fund of Funds.
11. Any sales charges and/or service fees charged with respect to
shares of a Fund of Funds will not exceed the limits applicable to
funds of funds set forth in NASD Conduct Rule 2830.
12. No Underlying Fund will acquire securities of any other
investment company or company relying on section 3(c)(1) or 3(c)(7) of
the 1940 Act, in excess of the limits contained in section 12(d)(1)(A)
of the 1940 Act, except to the extent that such Underlying Fund: (a)
Acquires such securities in compliance with section 12(d)(1)(E) of the
1940 Act and is either an Affiliated Fund or is in the same ``group of
investment companies'' as its corresponding master fund; (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 1940 Act); or (c)
acquires (or is deemed to have acquired) securities of another
investment company pursuant to exemptive relief from the Commission
permitting such Underlying Fund to: (i) Acquire securities of one or
more investment companies for short-term cash management purposes or
(ii) engage in inter-fund borrowing and lending transactions.
Other Investments by Section 12(d)(1)(G) Funds of Funds
In addition, Applicants agree that the order granting the requested
relief to permit Section 12(d)(1)(G) Funds of Funds to invest in Other
Investments shall be subject to the following condition:
13. Applicants will comply with all provisions of rule 12d1-2 under
the 1940 Act, except for paragraph (a)(2) to the extent that it
restricts any Section 12(d)(1)(G) 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.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2015-00226 Filed 1-9-15; 8:45 am]
BILLING CODE 8011-01-P
