Document ID: SEC-2014-0129-0001
Agency: sec
Document Type: Notice
Title: Applications: American Pension Investors Trust, et al.
Posted Date: 2014-01-23T05:00Z

[Federal Register Volume 79, Number 15 (Thursday, January 23, 2014)]
[Notices]
[Pages 3890-3895]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01256]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30885; 812-14181]

American Pension Investors Trust, et al.; Notice of Application

January 16, 2014.
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 exemptions from 
sections 12(d)(1)(A), (B), and (C) 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:  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 Act, 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 Act to invest in certain financial instruments.

Applicants:  American Pension Investors Trust (``Trust''') and Yorktown 
Management & Research Company, Inc. (``Adviser'').

DATES: Filing Dates: The application was filed on July 19, 2013 and 
amended on November 21, 2013.

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 February 10, 2014, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Adviser and 
Trust, 2303 Yorktown Avenue, Lynchburg, VA 24501.

FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, (202) 
551-6870, or Mary Kay Frech, 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 http://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 
Act and organized as a Massachusetts business trust. The Trust has 
multiple series which pursue distinct investment objectives and 
strategies.\1\
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    \1\ Applicants request that the order apply to each existing and 
each future series of the Trust, and to each existing and future 
registered open-end management investment company or series thereof 
which is advised by the Adviser or any entity controlling, 
controlled by or under common control with the Adviser and which is 
part of the ``same group of investment companies'' (as defined in 
section 12(d)(1)(G)(ii) of the Act) as the Trust (each 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.
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    2. The Adviser, a Delaware limited liability company, is a 
registered investment adviser under the Investment Advisers Act of 1940 
and serves as the investment adviser to each of the Funds of Funds (as 
defined below).\2\
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    \2\ All references to the term ``Adviser'' include successors-
in-interest to the Adviser. A successor-in-interest is limited to an 
entity that results from a reorganization into another jurisdiction 
or a change in the type of business organization.
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    3. Applicants request relief to the extent necessary to permit: (a) 
A Fund that operates as a ``fund of funds'' (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'' as 
defined by section 2(a)(48) of the Act (``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,'' and together 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

[[Page 3891]]

Funds of Funds.\5\ Applicants also request an order under sections 6(c) 
and 17(b) of the Act to exempt applicants from section 17(a) to the 
extent necessary to permit Underlying Funds to sell their shares to 
Funds of Funds and redeem their shares from Funds of Funds.\6\
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    \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, 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 
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 currently pursue, or 
may in the future pursue, their investment objectives through a 
master-feeder arrangement in reliance on section 12(d)(1)(E) of the 
Act. In accordance with condition 11, 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.
    \6\ Applicants note that a Fund of Funds will purchase and sell 
shares of an Underlying Fund that is a closed-end fund through 
secondary market transactions at market prices rather than through 
principal transactions with the closed-end fund. Accordingly, 
applicants are not requesting section 17(a) relief with respect to 
principal transactions with closed-end funds.
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    4. Applicants also request an exemption under section 6(c) from 
rule 12d1-2 under the Act to permit any existing or future Fund that 
relies on section 12(d)(1)(G) of the Act (``Same Group Investing 
Funds'') and that otherwise complies with rule 12d1-2 under the 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 Act (``Other Investments'').

Applicants' Legal Analysis

A. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act, in relevant part, prohibits a 
registered investment company from acquiring shares of an investment 
company if the securities represent more than 3% of the total 
outstanding voting stock of the acquired company, more than 5% of the 
total assets of the acquiring company, or, together with the securities 
of any other investment companies, more than 10% of the total assets of 
the acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter, and 
any Broker 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 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 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 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 Act.
    3. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 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 or its affiliated persons 
over the Underlying Funds. To limit the control a Fund of Funds or Fund 
of Funds Affiliate \7\ may have over an Unaffiliated Fund, applicants 
propose a condition prohibiting the Adviser and any person controlling, 
controlled by or under common control with the Adviser, 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 Act advised or 
sponsored by the Adviser or any person controlling, controlled by or 
under common control with the Adviser (collectively, the ``Advisory 
Group'') from controlling (individually or in the aggregate) an 
Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. The 
same prohibition would apply to any other investment adviser within the 
meaning of section 2(a)(20)(B) of the Act to a Fund of Funds 
(``Subadviser'') 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 Act (or portion of such investment company or issuer) 
advised or sponsored by the Subadviser or any person controlling, 
controlled by or under common control with the Subadviser 
(collectively, the ``Subadvisory Group'').
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    \7\ A ``Fund of Funds Affiliate'' is the Adviser, any 
Subadviser, promoter or principal underwriter of a Fund of Funds, as 
well as any person controlling, controlled by or under common 
control with any of those entities. An ``Unaffiliated Fund 
Affiliate'' is an investment adviser(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.
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    5. With respect to closed-end underlying funds, applicants submit 
that one significant difference from open-end underlying funds is that, 
whereas open-end underlying funds may be unduly influenced by the 
threat of large-scale redemptions, closed-end underlying funds cannot 
be so influenced because they do not issue redeemable securities and, 
therefore, are not subject to large-scale redemptions. On the other 
hand, applicants state that 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 Advisory Group or Subadvisory 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 Act will vote its shares of the 
Unaffiliated Closed-End Investment Company in the manner prescribed by 
section 12(d)(1)(E) of the Act and (ii) each other member of the 
Advisory Group or Subadvisory 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

[[Page 3892]]

syndicate of which a principal underwriter is an Underwriting Affiliate 
(``Affiliated Underwriting'').\8\
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    \8\ 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, subadviser, 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 Act.
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    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 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 (each, a 
``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 Act by declining to execute the 
Participation Agreement with the Fund of Funds. In addition, an 
Unaffiliated Investment Company (other than an ETF or an Unaffiliated 
Closed-End Investment Company 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 Investment Company (including a closed-
end fund) 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 
Act (the ``Independent Trustees''), will find that the 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 Adviser will waive fees 
otherwise payable to it by a Fund of Funds in an amount at least equal 
to any compensation (including fees received pursuant to any plan 
adopted by an Unaffiliated Investment Company under rule 12b-1 under 
the Act) received from an Unaffiliated Fund by the Adviser, or an 
affiliated person of the Adviser, other than any advisory fees paid to 
the Adviser or an affiliated person of the Adviser 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'').\9\
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    \9\ Any references to NASD Conduct Rule 2830 include any 
successor or replacement Financial Industry Regulatory Authority 
rule to NASD Conduct Rule 2830.
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    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 the Act in excess of the 
limits contained in section 12(d)(1)(A) of the Act, except in certain 
circumstances identified in condition 11 below.

B. Section 17(a)

    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and any 
affiliated person of the company. Section 2(a)(3) of the Act defines an 
``affiliated person'' of another person to include (a) any person 
directly or indirectly owning, controlling, or holding with power to 
vote, 5% or more of the outstanding voting securities of the other 
person; (b) any person 5% or more of whose outstanding voting 
securities are directly or indirectly owned, controlled, or held with 
power to vote by the other person; and (c) any person directly or 
indirectly controlling, controlled by, or under common control with the 
other person.
    2. Applicants state that the Funds of Funds and the Affiliated 
Funds may be deemed to be under the common control of the Adviser and, 
therefore, affiliated persons of one another. Applicants also state 
that the Funds of Funds and the Unaffiliated Funds may also be deemed 
to be affiliated persons of one another if a Fund of Funds acquires 5% 
or more of an Unaffiliated Fund's outstanding voting securities. 
Applicants state that the sale of shares by the Underlying Funds to the 
Funds of Funds and the purchase of those shares from the Funds of Funds 
by the Underlying Funds (through redemptions) could be deemed to 
violate section 17(a).\10\
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    \10\ 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 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 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 
Act. Section 6(c) of the Act permits the Commission to exempt any 
person or transactions from any provision of the Act if such exemption 
is necessary or appropriate in the public interest and consistent with 
the protection of investors and the purposes fairly intended by the 
policy and provisions of the Act.
    4. Applicants submit that the proposed transactions satisfy the 
standards for relief under sections 17(b) and 6(c) of the Act. 
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 Open-End 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 Open-End Fund.\11\ Applicants also state that 
the

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proposed transactions will be consistent with the policies of each Fund 
of Funds and Underlying Open-End Fund, and with the general purposes of 
the Act.
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    \11\ Applicants note that a Fund of Funds generally would 
purchase and sell shares of an Underlying Fund that operates as an 
ETF 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 
Act, of an ETF to purchase or redeem shares from the ETF. Applicants 
are not seeking relief from section 17(a) for, and the requested 
relief will not apply to, transactions where an ETF could be deemed 
an affiliated person, or an affiliated person of an affiliated 
person, of a Fund of Funds because an investment adviser to the ETF 
or an entity controlling, controlled by or under common control with 
the investment adviser to the ETF is also an investment adviser to 
the Fund of Funds. Applicants note that a Fund of Funds will 
purchase and sell shares of an Underlying Fund that is a closed-end 
fund (including a business development company) through secondary 
market transactions at market prices rather than through principal 
transactions with the closed-end fund. Accordingly, applicants are 
not requesting section 17(a) relief with respect to principal 
transactions with closed-end funds (including business development 
companies).
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C. Other Investments by Same Group Investing 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,'' as defined in 
section 12(d)(1)(G)(ii) of the 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 
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 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 Act.
    2. Rule 12d1-2 under the Act permits a registered open-end 
investment company or a registered UIT 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: (a) 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; (b) securities (other than 
securities issued by an investment company); and (c) 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 
rule 12d1-2 under the Act, but for the fact that the Same Group 
Investing 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 Investing 
Funds to invest in Other Investments. Applicants assert that permitting 
Same Group Investing 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 Act was intended to address.
    4. Consistent with its fiduciary obligations under the Act, the 
Board of each Same Group Investing Fund will review the advisory fees 
charged by the Same Group Investing 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 Same 
Group Investing Funds may invest.

Applicants' Conditions

A. 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:
    1. The members of an Advisory Group will not control (individually 
or in the aggregate) an Unaffiliated Fund within the meaning of section 
2(a)(9) of the Act. The members of a Subadvisory Group will not control 
(individually or in the aggregate) an Unaffiliated Fund within the 
meaning of section 2(a)(9) of the Act. With respect to a Fund's 
investment in an Unaffiliated Closed-End Investment Company, (i) each 
member of the Advisory Group or Subadvisory 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 Act will vote its shares of the 
Unaffiliated Closed-End Investment Company in the manner prescribed by 
section 12(d)(1)(E) of the Act and (ii) each other member of the 
Advisory Group or Subadvisory 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 Unaffiliated Fund, the 
Advisory Group or a Subadvisory Group, each in the aggregate, becomes a 
holder of more than 25 percent of the outstanding voting securities of 
the Unaffiliated Fund, then the Advisory Group or the Subadvisory 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 Subadvisory Group with respect to an 
Unaffiliated Fund for which the Subadviser or a person controlling, 
controlled by or under common control with the Subadviser acts as the 
investment adviser within the meaning of section 2(a)(20)(A) of the Act 
(in the case of an Unaffiliated Investment Company) or as the sponsor 
(in the case of an Unaffiliated Trust).
    2. No Fund of Funds or Fund of Funds Affiliate will cause any 
existing or potential investment by the Fund of Funds in 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 its Adviser and any Subadviser(s) to the Fund of Funds are 
conducting the investment program of the Fund of Funds without taking 
into account any consideration received by the Fund of Funds or Fund of 
Funds Affiliate from an Unaffiliated Fund or an Unaffiliated Fund 
Affiliate in connection with any services or transactions.
    4. Once an investment by a Fund of Funds in the securities of an 
Unaffiliated Investment Company exceeds the limit of section 
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment 
Company, including a majority of the Independent Trustees, will 
determine that any consideration paid by the Unaffiliated Investment 
Company to a Fund of Funds or a Fund of Funds Affiliate in connection 
with any services or transactions: (a) Is fair and reasonable in 
relation to the nature and quality of the services and benefits 
received by the Unaffiliated Investment Company; (b) is within the 
range of consideration that the Unaffiliated Investment Company would 
be required to pay to another unaffiliated entity in connection with 
the same services or transactions; and (c) does not involve 
overreaching on the part of any person concerned. This condition does 
not apply with respect to any services or transactions between an 
Unaffiliated Investment Company and its investment adviser(s), or any 
person controlling, controlled by, or under common control with such 
investment adviser(s).
    5. No Fund of Funds or Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to an 
Unaffiliated Investment

[[Page 3894]]

Company or sponsor to an Unaffiliated Trust) will cause an Unaffiliated 
Fund to purchase a security in any Affiliated Underwriting.
    6. The Board of an Unaffiliated Investment Company, including a 
majority of the Independent Trustees, will adopt procedures reasonably 
designed to monitor any purchases of securities by the Unaffiliated 
Investment Company in an Affiliated Underwriting once an investment by 
a Fund of Funds in the securities of the Unaffiliated Investment 
Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, 
including any purchases made directly from an Underwriting Affiliate. 
The Board of the Unaffiliated Investment Company will review these 
purchases periodically, but no less frequently than annually, to 
determine whether the purchases were influenced by the investment by 
the Fund of Funds in the Unaffiliated Investment Company. The Board of 
the Unaffiliated Investment Company will consider, among other things: 
(a) Whether the purchases were consistent with the investment 
objectives and policies of the Unaffiliated Investment Company; (b) how 
the performance of securities purchased in an Affiliated Underwriting 
compares to the performance of comparable securities purchased during a 
comparable period of time in underwritings other than Affiliated 
Underwritings or to a benchmark such as a comparable market index; and 
(c) whether the amount of securities purchased by the Unaffiliated 
Investment Company in Affiliated Underwritings and the amount purchased 
directly from an Underwriting Affiliate have changed significantly from 
prior years. The Board of the Unaffiliated Investment Company will take 
any appropriate actions based on its review, including, if appropriate, 
the institution of procedures designed to ensure that purchases of 
securities in Affiliated Underwritings are in the best interests of 
shareholders.
    7. Each Unaffiliated Investment Company shall maintain and preserve 
permanently, in an easily accessible place, a written copy of the 
procedures described in the preceding condition, and any modifications 
to such procedures, and 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 Act, setting forth 
the: (a) party from whom the securities were acquired, (b) identity of 
the underwriting syndicate's members, (c) terms of the purchase, and 
(d) information or materials upon which the determinations of the Board 
of the Unaffiliated Investment Company were made.
    8. Prior to its investment in shares of an Unaffiliated Investment 
Company in excess of the limit set forth in section 12(d)(1)(A)(i) of 
the Act, the Fund of Funds and the Unaffiliated Investment Company will 
execute a Participation Agreement stating, without limitation, that 
their Boards and their investment advisers understand the terms and 
conditions of the order and agree to fulfill their responsibilities 
under the order. At the time of its investment in shares of an 
Unaffiliated Investment Company in excess of the limit 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 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 
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 Adviser will waive fees otherwise payable to it by a Fund 
of Funds in an amount at least equal to any compensation (including 
fees received pursuant to any plan adopted by an Unaffiliated 
Investment Company pursuant to rule 12b-1 under the Act) received from 
an Unaffiliated Fund by the Adviser, or an affiliated person of the 
Adviser, other than any advisory fees paid to the Adviser or its 
affiliated person by the Unaffiliated Investment Company, in connection 
with the investment by the Fund of Funds in the Unaffiliated Fund. Any 
Subadviser will waive fees otherwise payable to the Subadviser, 
directly or indirectly, by the Fund of Funds in an amount at least 
equal to any compensation received by the Subadviser, or an affiliated 
person of the Subadviser, from an Unaffiliated Fund, other than any 
advisory fees paid to the Subadviser or its affiliated person by the 
Unaffiliated Investment Company, in connection with the investment by 
the Fund of Funds in the Unaffiliated Fund made at the direction of the 
Subadviser. In the event that the Subadviser waives fees, the benefit 
of the waiver will be passed through to the Fund of Funds.
    11. No Underlying Fund will acquire securities of any other 
investment company or company relying on section 3(c)(1) or 3(c)(7) of 
the Act, in excess of the limits contained in section 12(d)(1)(A) of 
the Act, except to the extent that such Underlying Fund: (a) acquires 
such securities in compliance with section 12(d)(1)(E) of the Act and 
either is 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 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.
    12. Any sales charges and/or service fees charged with respect to 
shares of a Fund of Funds will not exceed the limits applicable to 
funds of funds set forth in NASD Conduct Rule 2830.

B. Other Investments by Same Group Investing Funds

    Applicants agree that the order granting the requested relief to 
permit Same Group Investing Funds to invest in Other Investments shall 
be subject to the following condition:
    1. 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 Investing Fund from investing in Other Investments as 
described in the application.

[[Page 3895]]

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01256 Filed 1-22-14; 8:45 am]
BILLING CODE 8011-01-P