Document ID: SEC-2010-1384-0001
Agency: sec
Document Type: Notice
Title: Applications: Transamerica Asset Management, Inc. et al.
Posted Date: 2010-09-10T04:00Z

[Federal Register: September 10, 2010 (Volume 75, Number 175)]
[Notices]               
[Page 55376-55381]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10se10-98]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29410; File No. 812-13661]

 
Transamerica Asset Management, Inc. et al.; Notice of Application

September 3, 2010
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 12(d)(1)(J) 
of the Investment Company Act of 1940 (the ``Act'') for an exemption 
from sections 12(d)(1)(A) and (B) of the Act, under sections 6(c) and 
17(b) of the Act for an exemption from section 17(a) of the Act, and 
under section 6(c) of the Act for an exemption from rule 12d1-2(a) 
under the Act.

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    Summary of the Application: The requested order would (a) permit 
certain series of registered open-end management investment companies 
to acquire shares of other registered open-end management investment 
companies or unit investment trusts (``UITs'') registered under the Act 
that are within or outside of the same group of investment companies as 
the acquiring investment companies, and (b) permit certain series of 
registered open-end management investment companies relying on rule 
12d1-2 under the Act to invest in certain financial instruments.
    Applicants: Transamerica Asset Management, Inc. (the ``Adviser''), 
Transamerica Funds (``TF''), Transamerica Partners Funds Group 
(``TPFG''), Transamerica Partners Funds Group II (``TPFGII''), 
Transamerica Partners Portfolios (``TPP'') and Transamerica Series 
Trust (``TST'') (collectively, TF, TPFG, TPFGII, TPP, and TST, the 
``Trusts'').
    Filing Dates: The application was filed on May 28, 2009 and amended 
on November 20, 2009 and August 17, 2010.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on September 27, 2010, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090; Applicants: Adviser, 570 
Carillon Parkway, St Petersburg, Florida 33716.

FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at 
(202) 551-6873, or Michael W. Mundt, Assistant Director, at (202) 551-
6821 (Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.
    Applicants' Representations:
    1. The Trusts are open-end management investment companies 
registered under the Act. Each Trust is comprised of separate series 
(the ``Funds'') that pursue distinctive investment objectives and 
strategies.\1\ TF and TST are statutory trusts organized under the laws 
of Delaware. TPFG and TPFGII are business trusts organized under the 
laws of Massachusetts. TPP is organized as a New York trust. TPFG and 
TPFGII include Funds that operate as feeder trusts in a master-feeder 
structure in reliance on section 12(d)(1)(E) of the Act, with TPP as 
their common corresponding master trust.\2\ TST includes Funds that are 
offered solely to insurance company separate accounts (``Separate 
Accounts'') that fund variable annuity and variable life contracts 
issued by insurance companies. The Separate Accounts may be registered 
under the Act (``Registered Separate Accounts'') or unregistered under 
the Act (``Unregistered Separate Accounts''). The Adviser, a Florida 
corporation, is

[[Page 55377]]

registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). The Adviser serves as investment adviser to each of the Funds.
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    \1\ Applicants request that the order extend to any future 
series of the Trusts and any other existing or future registered 
open-end management investment company and any series thereof that 
is part of the same ``group of investment companies,'' as defined in 
section 12(d)(1)(G)(ii) of the Act, as the Trusts and that is, or 
may in the future be advised by the Adviser or any entity 
controlling, controlled by, or under common control with the Adviser 
(included in the term ``Funds.''). All existing entities that 
currently intend to rely on the requested order are named as 
applicants. Any other entity that relies on the order in the future 
will do so only in accordance with the terms and conditions of the 
application.
    \2\ A Fund of Funds may not invest in an Underlying Fund that 
operates as a feeder fund unless the feeder fund is part of the same 
group of investment companies (as defined in section 
12(d)(1)(G)(ii)) of the Act as its corresponding master fund.
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    2. Applicants request relief to permit (a) certain Funds (each, a 
``Fund of Funds'') to acquire shares of (i) other Funds (``Affiliated 
Underlying Funds'') and (ii) registered open-end management investment 
companies (the ``Unaffiliated Funds'') and UITs (``Unaffiliated 
Trusts,'' and together with the Unaffiliated Funds, the ``Unaffiliated 
Underlying Funds'') \3\ that are not part of the same ``group of 
investment companies,'' as defined in section 12(d)(1)(G)(ii) of the 
Act, as the Fund of Funds (collectively, the Affiliated Underlying 
Funds and the Unaffiliated Underlying Funds are ``Underlying Funds''); 
(b) the Affiliated Underlying Funds, or their principal underwriters 
and any broker or dealer registered under the Securities Exchange Act 
of 1934 (``Broker'') to sell shares of the Affiliated Underlying Funds 
to the Fund of Funds; and (c) the Unaffiliated Funds, or their 
principal underwriters and any Broker to sell shares of the 
Unaffiliated Funds to the Funds of Funds. Applicants also request an 
order under sections 6(c) and 17(b) of the Act to permit Underlying 
Funds that are affiliated persons of Fund of Funds to sell their shares 
to and redeem their shares from the Fund of Funds.
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    \3\ Certain of the Unaffiliated Underlying Funds may be 
registered under the Act as either UITs or open-end management 
investment companies and have obtained exemptions from the 
Commission necessary to permit their shares to be listed and traded 
on a national securities exchange at negotiated prices (each, an 
``ETF'').
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    3. Applicants also request an exemption under section 6(c) of the 
Act to permit any Fund that may invest in Affiliated Underlying Funds 
in reliance on section 12(d)(1)(G) of the Act (``Same Group Fund of 
Funds'') and that is eligible to invest in securities (as defined in 
section 2(a)(36) of the Act) in reliance on rule 12d1-2 under the Act, 
to also invest, consistent with its investment objectives, policies, 
strategies and limitations, in financial instruments that may not be 
securities within the meaning of section 2(a)(36) of the Act (``Other 
Investments'').
    4. Consistent with its fiduciary obligations under the Act, each 
Same Group Fund of Funds' board of trustees or directors will review 
the advisory fees charged by the Same Group Fund of Funds' investment 
adviser to ensure that they are based on services provided that are in 
addition to, rather than duplicative of, services provided pursuant to 
the advisory agreement of any investment company in which the Same 
Group Fund of Funds may invest.

Applicants' Legal Analysis

Investments in Underlying Funds by Fund of Funds

A. Section 12(d)(1)
    1. Section 12(d)(1)(A) of the Act prohibits a registered investment 
company from acquiring shares of any other investment company if the 
securities represent more than 3% of the total outstanding voting stock 
of the acquired company, more than 5% of the total assets of the 
acquiring company, or, together with the securities of any other 
investment companies, more than 10% of the total assets of the 
acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter and 
any broker or dealer from selling the shares of the investment company 
to another investment company if the sale will cause the acquiring 
company to own more than 3% of the acquired company's voting stock, or 
if the sale will cause more than 10% of the acquired company's voting 
stock to be owned by investment companies generally.
    2. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security, or transaction, or any class or classes of 
persons, securities or transactions, from any provision of section 
12(d)(1) if the exemption is consistent with the public interest and 
the protection of investors. Applicants seek an exemption under section 
12(d)(1)(J) of the Act from the limitations of sections 12(d)(1)(A) and 
(B) to the extent necessary to permit the Funds of Funds to acquire 
shares of the Underlying Funds in excess of the limits set forth in 
section 12(d)(1)(A) of the Act and to permit the Affiliated Underlying 
Funds and Unaffiliated Funds, their principal underwriters and any 
Broker to sell shares to the Funds of Funds in excess of the limits set 
forth in sections 12(d)(1)(B) of the Act.
    3. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 12(d)(1)(A) and (B), 
which include concerns about undue influence by a fund of funds or its 
affiliated persons over underlying funds, excessive layering of fees, 
and overly complex fund structures. Accordingly, applicants believe 
that the requested exemption is consistent with the public interest and 
the protection of investors.
    4. Applicants state that the proposed arrangement will not result 
in undue influence by a Fund of Funds or its affiliated persons over 
the Underlying Funds. The concern about undue influence does not arise 
in connection with a Fund of Funds' investment in the Affiliated 
Underlying Funds, since they are part of the same group of investment 
companies. To limit the control that a Fund of Funds or its affiliated 
persons may have over an Unaffiliated Underlying Fund, applicants 
propose a condition prohibiting: (a) Any investment adviser within the 
meaning of section 2(a)(20)(A) of the Act to a Fund of Funds (``Fund of 
Funds' Adviser''), any person controlling, controlled by or under 
common control with the Fund of Funds' Adviser and any investment 
company or issuer that would be an investment company but for section 
3(c)(1) or section 3(c)(7) of the Act advised or sponsored by the Fund 
of Funds' Adviser or any person controlling, controlled by or under 
common control with the Fund of Funds' Adviser (collectively, the 
``Group''), and (b) any investment adviser within the meaning of 
section 2(a)(20)(B) of the Act to a Fund of Funds (``Fund of Funds' 
Subadviser''), any person controlling, controlled by or under common 
control with the Fund of Funds' Subadviser, and any investment company 
or issuer that would be an investment company but for section 3(c)(1) 
or 3(c)(7) of the Act (or portion of such investment company or issuer) 
advised or sponsored by the Fund of Funds' Subadviser or any person 
controlling, controlled by or under common control with the Fund of 
Funds' Subadviser (collectively, the ``Subadviser Group'') from 
controlling (individually or in the aggregate) an Unaffiliated 
Underlying Fund within the meaning of section 2(a)(9) of the Act.
    5. Applicants further state that condition 2 precludes a Fund of 
Funds, a Fund of Funds' Adviser, any Fund of Funds' Subadviser, 
promoter or principal underwriter of a Fund of Funds, and any person 
controlling, controlled by or under common control with any of those 
entities (each, a ``Fund of Funds Affiliate'') from taking advantage of 
an Unaffiliated Underlying Fund, with respect to transactions between 
the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated 
Underlying Fund or the Unaffiliated Underlying Fund's investment 
adviser(s), sponsor, promoter, principal underwriter or any person 
controlling, controlled by or under common control with any of these 
entities (each, an ``Unaffiliated Fund Affiliate''). Condition 5 
precludes a Fund of Funds or Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to an 
Unaffiliated Fund or

[[Page 55378]]

sponsor to an Unaffiliated Trust) from causing an Unaffiliated 
Underlying Fund to purchase a security in an offering of securities 
during the existence of any underwriting or selling syndicate of which 
a principal underwriter is an officer, director, trustee, member of an 
advisory board, Fund of Fund's Adviser, Fund of Funds' Subadviser, or 
employee of the Fund of Funds, or a person of which any such officer, 
director, trustee, investment adviser, Fund of Funds' Subadviser, 
member of an advisory board, or employee is an affiliated person (each, 
an ``Underwriting Affiliate,'' except that any person whose 
relationship to the Unaffiliated Underlying Fund is covered by section 
10(f) of the Act is not an Underwriting Affiliate). An offering of 
securities during the existence of any underwriting or selling 
syndicate of which a principal underwriter is an Underwriting Affiliate 
is an ``Affiliated Underwriting.''
    6. As an additional assurance that an Unaffiliated Fund understands 
the implications of an investment by a Fund of Funds under the 
requested order, prior to a Fund of Funds' investment in the 
Unaffiliated Fund in excess of the limit in section 12(d)(1)(A)(i), 
condition 8 requires that the Fund of Funds and Unaffiliated Fund 
execute an agreement stating, without limitation, that their boards of 
directors or trustees (``Boards'') and their investment advisers 
understand the terms and conditions of the order and agree to fulfill 
their responsibilities under the order (``Participation Agreement''). 
Applicants note that an Unaffiliated Fund (other than an ETF whose 
shares are purchased by a Fund of Funds in the secondary market) will 
retain the right to reject an investment by a Fund of Funds.\4\
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    \4\ An Unaffiliated Fund, including an ETF, would retain its 
right to reject any initial investment by a Fund of Funds in excess 
of the limit in section 12(d)(1)(A)(i) of the Act by declining to 
execute the Participation Agreement with the Funds.
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    7. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. With respect to investment advisory 
fees, applicants state that, in connection with the approval of any 
investment advisory contract under section 15 of the Act, the Board of 
each Fund of Funds, including a majority of the directors or trustees 
who are not ``interested persons,'' as defined in section 2(a)(19) of 
the Act (``Independent Board Members''), will find that the advisory 
fees charged under the advisory contract are based on services provided 
that are in addition to, rather than duplicative of, services provided 
pursuant to any Underlying Fund's advisory contract(s). Applicants 
further state that the Fund of Funds' Adviser will waive fees otherwise 
payable to it by a Fund of Funds in an amount at least equal to any 
compensation (including fees received pursuant to any plan adopted by 
an Unaffiliated Fund pursuant to rule 12b-1 under the Act) received 
from an Unaffiliated Underlying Fund by the Fund of Funds' Adviser, or 
an affiliated person of the Fund of Funds' Adviser, other than any 
advisory fees paid to the Fund of Funds' Adviser or an affiliated 
person of the Fund of Funds' Adviser by an Unaffiliated Fund, in 
connection with the investment by the Fund of Funds in the Unaffiliated 
Underlying Fund.
    8. Applicants state that with respect to Registered Separate 
Accounts that invest in a Fund of Funds, no sales load will be charged 
at the Fund of Funds level or at the Underlying Fund level. Other sales 
charges and service fees, as defined in Rule 2830 of the Conduct Rules 
of the National Association of Securities Dealers (``NASD Conduct Rule 
2830''),\5\ if any, will only be charged at the Fund of Funds level or 
at the Underlying Fund level, not both. With respect to other 
investments in a Fund of Funds, any sales charges and/or service fees 
charged with respect to shares of the Fund of Funds will not exceed the 
limits applicable to funds of funds as set forth in NASD Conduct Rule 
2830.
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    \5\ Any reference to NASD Conduct Rule 2830 includes any 
successor or replacement rule to NASD Conduct Rule 2830 that may be 
adopted by the Financial Industry Regulatory Authority.
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    9. Applicants represent that each Fund of Funds will represent in 
the Participation Agreement that no insurance company sponsoring a 
Registered Separate Account funding variable insurance contracts will 
be permitted to invest in the Fund of Funds unless the insurance 
company has certified to the Fund of Funds that the aggregate of all 
fees and charges associated with each contract that invests in the Fund 
of Funds, including fees and charges at the Separate Account, Fund of 
Funds, and Underlying Fund levels, are reasonable in relation to the 
services rendered, the expenses expected to be incurred, and the risks 
assumed by the insurance company.
    10. Applicants state that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that an Underlying 
Fund will be prohibited from acquiring securities of any investment 
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in 
excess of the limits contained in section 12(d)(1)(A), except to the 
extent that such Underlying Fund: (a) Acquires such securities in 
compliance with section 12(d)(1)(E) of the Act; (b) receives securities 
of another investment company as a dividend or as a result of a plan of 
reorganization of a company (other than a plan devised for the purpose 
of evading section 12(d)(1) of the Act); or (c) acquires (or is deemed 
to have acquired) securities of another investment company pursuant to 
exemptive relief from the Commission permitting such Underlying Fund 
to: (i) Acquire securities of one or more investment companies for 
short-term cash management purposes, or (ii) engage in interfund 
borrowing and lending transactions.
B. Section 17(a)
    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and its 
affiliated persons or affiliated persons of such persons. Section 
2(a)(3) of the Act defines an ``affiliated person'' of another person 
to include (a) any person directly or indirectly owning, controlling, 
or holding with power to vote, 5% or more of the outstanding voting 
securities of the other person; (b) any person 5% or more of whose 
outstanding voting securities are directly or indirectly owned, 
controlled, or held with power to vote by the other person; and (c) any 
person directly or indirectly controlling, controlled by, or under 
common control with the other person.
    2. Applicants state that the Funds of Funds and the Affiliated 
Funds may be deemed to be under common control of the Fund of Funds' 
Adviser and therefore affiliated persons of one another. Applicants 
also state that the Funds of Funds and the Underlying Funds may be 
deemed to be affiliated persons of one another if a Fund of Funds 
acquires 5% or more of an Underlying Fund's outstanding voting 
securities. In light of these possible affiliations, section 17(a) 
could prevent an Underlying Fund from selling shares to and redeeming 
shares from a Fund of Funds.\6\
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    \6\ Applicants acknowledge that receipt of any compensation by 
(a) an affiliated person of a Funds of Funds, or an affiliated 
person of such person, for the purchase by the Fund of Funds of 
shares of an Underlying Fund or (b) an affiliated person of an 
Underlying Fund, or an affiliated person of such person, for the 
sale by the Underlying Fund of its shares to a Fund of Funds may be 
prohibited by section 17(e)(1) of the Act. The Participation 
Agreement also will include this acknowledgement.
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    3. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise

[[Page 55379]]

prohibited by section 17(a) if it finds that (a) the terms of the 
proposed transaction are fair and reasonable and do not involve 
overreaching on the part of any person concerned; (b) the proposed 
transaction is consistent with the policies of each registered 
investment company involved; and (c) the proposed transaction is 
consistent with the general purposes of the Act. Section 6(c) of the 
Act permits the Commission to exempt any person or transactions from 
any provision of the Act if such exemption is necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act.
    4. Applicants submit that the proposed transactions satisfy the 
requirements for relief under sections 17(b) and 6(c) of the Act as the 
terms are fair and reasonable and do not involve overreaching. 
Applicants state that the terms upon which an Underlying Fund will sell 
its shares to or purchase its shares from a Fund of Funds will be based 
on the net asset value of each Underlying Fund.\7\ Applicants also 
state that the proposed transactions will be consistent with the 
policies of each Fund of Funds and Underlying Fund, and with the 
general purposes of the Act.
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    \7\ Applicants note that a Fund of Funds generally would 
purchase and sell shares of an Unaffiliated Underlying Fund that 
operates as an ETF through secondary market transactions at market 
prices rather than through principal transactions with the 
Unaffiliated Underlying Fund at net asset value. To the extent that 
a Fund of Funds purchases or redeems shares from an ETF that is an 
affiliated person, or an affiliated person of an affiliated person 
of the Fund of Funds, in exchange for a basket of specified 
securities as described in the application for the exemptive order 
upon which the ETF relies, applicants also request relief from 
section 17(a) for those transactions.
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Other Investments by Same Group Fund of Funds
    1. Section 12(d)(1)(G) of the Act provides that section 12(d)(1) 
will not apply to securities of an acquired company purchased by an 
acquiring company if: (i) The acquiring company and acquired company 
are part of the same group of investment companies; (ii) the acquiring 
company holds only securities of acquired companies that are part of 
the same group of investment companies, government securities, and 
short-term paper; (iii) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not 
excessive under rules adopted pursuant to section 22(b) or section 
22(c) of the Act by a securities association registered under section 
15A of the Exchange Act or by the Commission; and (iv) the acquired 
company has a policy that prohibits it from acquiring securities of 
registered open-end management investment companies or registered unit 
investment trusts in reliance on section 12(d)(1)(F) or (G) of the Act.
    2. Rule 12d1-2 under the Act permits a registered open-end 
investment company or a registered unit investment trust that relies on 
section 12(d)(1)(G) of the Act to acquire, in addition to securities 
issued by another registered investment company in the same group of 
investment companies, government securities, and short-term paper: (1) 
Securities issued by an investment company that is not in the same 
group of investment companies, when the acquisition is in reliance on 
section 12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) securities (other 
than securities issued by an investment company); and (3) securities 
issued by a money market fund, when the investment is in reliance on 
rule 12d1-1 under the Act. For the purposes of rule 12d1-2, 
``securities'' means any security as defined in section 2(a)(36) of the 
Act.
    3. Applicants state that the proposed arrangement would comply with 
the provisions of rule 12d1-2 under the Act, but for the fact that the 
Same Group Fund of Funds may invest a portion of their assets in Other 
Investments. Applicants request an order under section 6(c) of the Act 
for an exemption from rule 12d1-2(a) to allow the Same Group Fund of 
Funds to invest in Other Investments. Applicants assert that permitting 
the Same Group Fund of Funds to invest in Other Investments as 
described in the application would not raise any of the concerns that 
the requirements of section 12(d)(1) were designed to address.

Applicants' Conditions

A. Investments in Underlying Funds by Funds of Funds
    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The members of the Group will not control (individually or in 
the aggregate) an Unaffiliated Underlying Fund within the meaning of 
section 2(a)(9) of the Act. The members of a Subadviser Group will not 
control (individually or in the aggregate) an Unaffiliated Underlying 
Fund within the meaning of section 2(a)(9) of the Act. If, as a result 
of a decrease in the outstanding voting securities of an Unaffiliated 
Underlying Fund, the Group or the Subadviser Group, each in the 
aggregate, becomes a holder of more than 25% of the outstanding voting 
securities of the Unaffiliated Underlying Fund, then the Group or the 
Subadviser Group (except for any member of the Group or the Subadviser 
Group that is a Separate Account) will vote its shares of the 
Unaffiliated Underlying Fund in the same proportion as the vote of all 
other holders of the Unaffiliated Underlying Fund's shares. This 
condition will not apply to the Subadviser Group with respect to the 
Unaffiliated Underlying Fund for which the Fund of Funds' Subadviser or 
a person controlling, controlled by, or under common control with the 
Fund of Funds' Subadviser acts as the investment adviser within the 
meaning section 2(a)(20)(A) of the Act (in the case of an Unaffiliated 
Fund) or as the sponsor (in the case of an Unaffiliated Trust). A 
Registered Separate Account will seek voting instructions from its 
contract holders and will vote its shares of an Unaffiliated Underlying 
Fund in accordance with the instructions received and will vote those 
shares for which no instructions were received in the same proportion 
as the shares for which instructions were received. An Unregistered 
Separate Account will either (a) vote its shares of the Unaffiliated 
Underlying Fund in the same proportion as the vote of all other holders 
of the Unaffiliated Underlying Fund's shares; or (b) seek voting 
instructions from its contract holders and vote its shares in 
accordance with the instructions received and vote those shares for 
which no instructions were received in the same proportion as the 
shares for which instructions were received.
    2. No Fund of Funds or Fund of Funds Affiliate will cause any 
existing or potential investment by the Fund of Funds in shares of an 
Unaffiliated Underlying Fund to influence the terms of any services or 
transactions between the Fund of Funds or a Fund of Funds Affiliate and 
the Unaffiliated Underlying Fund or an Unaffiliated Fund Affiliate.
    3. The Board of each Fund of Funds, including a majority of the 
Independent Board Members, will adopt procedures reasonably designed to 
assure that the Funds of Funds' Adviser and any Fund of Funds' 
Subadviser are conducting the investment program of the Fund of Funds 
without taking into account any consideration received by the Fund of 
Funds or a Fund of Funds Affiliate from an Unaffiliated Underlying Fund 
or an Unaffiliated Fund Affiliate in connection with any services or 
transactions.
    4. Once an investment by a Fund of Funds in the securities of an

[[Page 55380]]

Unaffiliated Fund exceeds the limit of section 12(d)(1)(A)(i) of the 
Act, the Board of the Unaffiliated Fund, including a majority of the 
Independent Board Members, will determine that any consideration paid 
by the Unaffiliated Fund to a Fund of Funds or a Fund of Funds 
Affiliate in connection with any services or transactions: (a) Is fair 
and reasonable in relation to the nature and quality of the services 
and benefits received by the Unaffiliated Fund; (b) is within the range 
of consideration that the Unaffiliated Fund would be required to pay to 
another unaffiliated entity in connection with the same services or 
transactions; and (c) does not involve overreaching on the part of any 
person concerned. This condition does not apply with respect to any 
services or transactions between an Unaffiliated Fund and its 
investment adviser(s), or any person controlling, controlled by, or 
under common control with such investment adviser(s).
    5. No Fund of Funds or Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to an 
Unaffiliated Fund or sponsor to an Unaffiliated Trust) will cause an 
Unaffiliated Underlying Fund to purchase a security in an Affiliated 
Underwriting.
    6. The Board of an Unaffiliated Fund, including a majority of the 
Independent Board Members, will adopt procedures reasonably designed to 
monitor any purchases of securities by the Unaffiliated Fund in an 
Affiliated Underwriting, once an investment by a Fund of Funds in the 
securities of the Unaffiliated Fund exceeds the limit of section 
12(d)(1)(A)(i) of the Act, including any purchases made directly from 
an Underwriting Affiliate. The Board of the Unaffiliated Fund will 
review these purchases periodically, but no less frequently than 
annually, to determine whether the purchases were influenced by the 
investment by the Fund of Funds in shares of the Unaffiliated Fund. The 
Board of the Unaffiliated Fund will consider, among other things: (a) 
Whether the purchases were consistent with the investment objectives 
and policies of the Unaffiliated Fund; (b) how the performance of 
securities purchased in an Affiliated Underwriting compares to the 
performance of comparable securities purchased during a comparable 
period of time in underwritings other than Affiliated Underwritings or 
to a benchmark such as a comparable market index; and (c) whether the 
amount of securities purchased by the Unaffiliated Fund in Affiliated 
Underwritings and the amount purchased directly from an Underwriting 
Affiliate have changed significantly from prior years. The Board of the 
Unaffiliated Fund will take any appropriate actions based on its 
review, including, if appropriate, the institution of procedures 
designed to assure that purchases of securities in Affiliated 
Underwritings are in the best interests of shareholders.
    7. Each Unaffiliated Fund will maintain and preserve permanently in 
an easily accessible place a written copy of the procedures described 
in the preceding condition, and any modifications to such procedures, 
and will maintain and preserve for a period of not less than six years 
from the end of the fiscal year in which any purchase in an Affiliated 
Underwriting occurred, the first two years in an easily accessible 
place, a written record of each purchase of securities in an Affiliated 
Underwriting once an investment by a Fund of Funds in the securities of 
an Unaffiliated Fund exceeds the limit of section 12(d)(1)(A)(i) of the 
Act, setting forth from whom the securities were acquired, the identity 
of the underwriting syndicate's members, the terms of the purchase, and 
the information or materials upon which the determinations of the 
Unaffiliated Fund's Board were made.
    8. Prior to an investment in shares of an Unaffiliated Fund in 
excess of the limit in section 12(d)(1)(A)(i) of the Act, the Fund of 
Funds and the Unaffiliated Fund will execute a Participation Agreement 
stating, without limitation, that their boards of directors or trustees 
and their investment advisers understand the terms and conditions of 
the order and agree to fulfill their responsibilities under the order. 
At the time of its investment in shares of an Unaffiliated Fund in 
excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds will 
notify the Unaffiliated Fund of the investment. At such time, the Fund 
of Funds also will transmit to the Unaffiliated Fund a list of the 
names of each Fund of Funds Affiliate and Underwriting Affiliate. The 
Fund of Funds will notify the Unaffiliated Fund of any changes to the 
list as soon as reasonably practicable after a change occurs. The 
Unaffiliated Fund and the Fund of Funds will maintain and preserve a 
copy of the order, the Participation Agreement, and the list with any 
updated information for the duration of the investment and for a period 
of not less than six years thereafter, the first two years in an easily 
accessible place.
    9. Prior to reliance on the requested order and subsequently in 
connection with the approval of any investment advisory contract under 
section 15 of the Act, the Board of each Fund of Funds, including a 
majority of the Independent Board Members, will find that the advisory 
fees charged under the advisory contract are based on services provided 
that are in addition to, rather than duplicative of, the services 
provided under the advisory contract(s) of any Underlying Fund in which 
the Fund of Funds may invest. This finding, and the basis upon which 
the finding was made, will be recorded fully in the minute books of the 
appropriate Fund of Funds.
    10. The Funds of Funds' Adviser will waive fees otherwise payable 
to it by the Fund of Funds in an amount at least equal to any 
compensation (including fees received pursuant to a plan adopted by an 
Unaffiliated Fund pursuant to rule 12b-1 under the Act) received by the 
Fund of Funds' Adviser or an affiliated person of the Fund of Funds' 
Adviser from an Unaffiliated Underlying Fund, other than any advisory 
fees paid to the Fund of Funds' Adviser or its affiliated person by the 
Unaffiliated Fund, in connection with the investment by the Fund of 
Funds in the Unaffiliated Underlying Fund. Any Fund of Funds' 
Subadviser will waive fees otherwise payable to the Fund of Funds' 
Subadviser, directly or indirectly, by the Fund of Funds in an amount 
at least equal to any compensation received from an Unaffiliated 
Underlying Fund by the Fund of Funds' Subadviser, or an affiliated 
person of the Fund of Funds' Subadviser, other than any advisory fees 
paid to the Fund of Funds' Subadviser or its affiliated person by an 
Unaffiliated Fund, in connection with the investment by the Fund of 
Funds in the Unaffiliated Underlying Fund made at the direction of the 
Fund of Funds' Subadviser. In the event that the Fund of Funds' 
Subadviser waives fees, the benefit of the waiver will be passed 
through to the Fund of Funds.
    11. With respect to Registered Separate Accounts that invest in a 
Fund of Funds, no sales load will be charged at the Fund of Funds level 
or at the Underlying Fund level. Other sales charges and service fees, 
as defined in NASD Conduct Rule 2830, if any, will only be charged at 
the Fund of Funds level or at the Underlying Fund level, not both. With 
respect to other investments in a Fund of Funds, any sales charges and/
or service fees charged with respect to shares of a Fund of Funds will 
not exceed the limits applicable to funds of funds set forth in NASD 
Conduct Rule 2830.
    12. No Underlying Fund will acquire securities of any other 
investment company or company relying on section 3(c)(1) or 3(c)(7) of 
the Act in excess of

[[Page 55381]]

the limits contained in section 12(d)(1)(A) of the Act, except to the 
extent that such Underlying Fund: (a) Acquires such securities in 
compliance with section 12(d)(1)(E) of the Act; (b) receives securities 
of another investment company as a dividend or as a result of a plan of 
reorganization of a company (other than a plan devised for the purpose 
of evading section 12(d)(1) of the Act); or (c) acquires (or is deemed 
to have acquired) securities of another investment company pursuant to 
exemptive relief from the Commission permitting such Underlying Fund 
to: (i) acquire securities of one or more investment companies for 
short-term cash management purposes, or (ii) engage in interfund 
borrowing and lending transactions.
B. Other Investments by Same Group Fund of Funds
    Applicants agree that the relief to permit the Same Group Fund of 
Funds to invest in Other Investments shall be subject to the following 
condition:
    13. Applicants will comply with all provisions of rule 12d1-2 under 
the Act, except for paragraph (a)(2), to the extent that it restricts 
any Same Group Fund of Funds from investing in Other Investments as 
described in the application.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-22623 Filed 9-9-10; 8:45 am]
BILLING CODE 8010-01-P