Document ID: SEC-2012-1181-0001
Agency: sec
Document Type: Notice
Title: Applications: The Dreyfus Corporation, et al.
Posted Date: 2012-07-19T04:00Z

[Federal Register Volume 77, Number 139 (Thursday, July 19, 2012)]
[Notices]
[Pages 42516-42522]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17575]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30137; 812-13906]

The Dreyfus Corporation, et al.; Notice of Application

July 12, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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Summary of the Application:  The requested order would (a) permit 
certain registered management investment companies and unit investment 
trusts to acquire shares of certain registered open-end management 
investment companies that are outside the same group of investment 
companies as the acquiring investment companies, and (b) permit funds 
of funds relying on rule 12d1-2 under the Act to invest in certain 
financial instruments.

Applicants:  Advantage Funds, Inc., BNY Mellon Funds Trust, Dreyfus 
Appreciation Fund, Inc., Dreyfus BASIC U.S. Mortgage Securities Fund, 
Dreyfus Bond Funds, Inc., Dreyfus Funds, Inc., Dreyfus Growth and 
Income Fund, Inc., Dreyfus Intermediate Municipal Bond Fund, Inc., 
Dreyfus Index Funds, Inc., Dreyfus International Funds, Inc., Dreyfus 
Investment Funds, Dreyfus Investment Grade Funds, Inc., Dreyfus 
LifeTime Portfolios, Inc., Dreyfus Manager Funds I, Dreyfus Manager 
Funds II, Dreyfus Midcap Index Fund,

[[Page 42517]]

Inc., Dreyfus Municipal Bond Opportunity Fund, Dreyfus Municipal Funds, 
Inc., Dreyfus New Jersey Municipal Bond Fund, Inc., Dreyfus New York 
AMT-Free Municipal Bond Fund, Dreyfus New York Tax Exempt Bond Fund, 
Inc., Dreyfus Opportunity Funds, Dreyfus Premier California AMT-Free 
Municipal Bond Fund, Inc., Dreyfus Premier GNMA Fund, Inc., Dreyfus 
Premier Investment Funds, Inc., Dreyfus Premier Short-Intermediate 
Municipal Bond Fund, Dreyfus Premier Worldwide Growth Fund, Inc., 
Dreyfus Research Growth Fund, Inc., Dreyfus Short-Intermediate 
Government Fund, Dreyfus State Municipal Bond Funds, Dreyfus Stock 
Funds, Dreyfus U.S. Treasury Intermediate Term Fund, Dreyfus U.S. 
Treasury Long Term Fund, Strategic Funds, Inc., The Dreyfus Fund 
Incorporated, The Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Funds 
Trust, and The Dreyfus Third Century Fund, Inc. (each, a ``Company,'' 
and collectively, the ``Companies''), The Dreyfus Corporation (the 
``Adviser'') and MBSC Securities Corporation (the ``Distributor'').

DATES: Filing Dates: The application was filed on May 23, 2011, and 
amended on August 18, 2011, and May 11, 2012.

Hearing or Notification of Hearing:  An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on August 6, 2012, and should be accompanied by proof of service 
on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. Applicants, c/o The Dreyfus 
Corporation, 200 Park Avenue, New York, New York 10166.

FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Senior Counsel, at 
(202) 551-6868, or Daniele Marchesani, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Companies are open-end management investment companies 
registered under the Act and organized as either a Massachusetts 
business trust or a Maryland corporation. Each Company or Company's 
separate series pursues distinct investment objectives and strategies. 
The Adviser, a New York corporation, is registered as an investment 
adviser under the Investment Advisers Act of 1940 (``Advisers Act'') 
and serves as investment adviser to the Companies.\1\ The Distributor 
is a New York corporation and is registered as a broker-dealer under 
the Securities Exchange Act of 1934 (the ``Exchange Act''). The 
Distributor serves as the distributor for the Companies.
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    \1\ All references to the term ``Adviser'' include successors-
in-interest to the Adviser. Successors-in-interest are limited to 
any entity resulting from a name change, a reorganization of the 
Adviser into another jurisdiction or a change in the type of 
business organization.
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    2. Applicants request an exemption to permit registered management 
investment companies and unit investments trusts that operate as a 
``fund of funds'' and that are not part of the same ``group of 
investment companies,'' within the meaning of section 12(d)(1)(G)(ii) 
of the Act, as the Companies (``Unrelated Funds of Funds'') to acquire 
shares of the Companies or separate series of the Companies that do not 
operate as ``funds of funds'' (``Underlying Funds'') \2\ in excess of 
the limits in

[[Page 42518]]

section 12(d)(1)(A) of the Act, and to permit the Underlying Funds, the 
Distributor (or any principal underwriter for an Underlying Fund), and 
any broker or dealer registered under the Exchange Act (``Broker'') to 
sell shares of an Underlying Fund to an Unrelated Fund of Funds in 
excess of the limits in section 12(d)(1)(B) of the Act. Applicants 
request that the relief apply to: (1) Each registered open-end 
management investment company or series thereof that currently or 
subsequently is part of the same ``group of investment companies,'' 
within the meaning of section 12(d)(1)(G)(ii) of the Act, as the 
Companies, and that is advised or sponsored by the Adviser or any 
entity controlling, controlled by, or under common control with the 
Adviser (such registered open-end management investment companies or 
their series are included in the term ``Underlying Funds''); (2) each 
Unrelated Fund of Funds that enters into a Participation Agreement (as 
defined below) with an Underlying Fund to purchase shares of the 
Underlying Fund; and (3) any principal underwriter to an Underlying 
Fund or Broker selling shares of an Underlying Fund.\3\
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    \2\ The Underlying Funds currently include the following 
Companies or series thereof: Advantage Funds, Inc., on behalf of its 
series Dreyfus Global Absolute Return Fund, Dreyfus Global Dynamic 
Bond Fund, Dreyfus Global Real Return Fund, Dreyfus International 
Value Fund, Dreyfus Opportunistic Midcap Value Fund, Dreyfus 
Opportunistic Small Cap Fund, Dreyfus Opportunistic U.S. Stock Fund, 
Dreyfus Strategic Value Fund, Dreyfus Structured Midcap Fund, 
Dreyfus Technology Growth Fund, Dreyfus Total Emerging Markets Fund, 
Dreyfus Total Return Advantage Fund and Global Alpha Fund; BNY 
Mellon Funds Trust, on behalf of its series BNY Mellon Bond Fund, 
BNY Mellon Corporate Bond Fund, BNY Mellon Emerging Markets Fund, 
BNY Mellon Focused Equity Opportunities Fund, BNY Mellon Income 
Stock Fund, BNY Mellon Intermediate Bond Fund, BNY Mellon 
Intermediate U.S. Government Fund, BNY Mellon International 
Appreciation Fund, BNY Mellon International Equity Income Fund, BNY 
Mellon International Fund, BNY Mellon Large Cap Stock Fund, BNY 
Mellon Massachusetts Intermediate Municipal Bond Fund, BNY Mellon 
Mid Cap Stock Fund, BNY Mellon Municipal Opportunities Fund, BNY 
Mellon National Intermediate Municipal Bond Fund, BNY Mellon 
National Short-Term Municipal Bond Fund, BNY Mellon New York 
Intermediate Tax-Exempt Bond Fund, BNY Mellon Pennsylvania 
Intermediate Municipal Bond Fund, BNY Mellon Short-Term U.S. 
Government Securities Fund, BNY Mellon Small Cap Stock Fund, BNY 
Mellon Small/Mid Cap Fund and BNY Mellon U.S. Core Equity 130/30 
Fund; Dreyfus Appreciation Fund, Inc.; Dreyfus BASIC U.S. Mortgage 
Securities Fund; Dreyfus Bond Funds, Inc., on behalf of its series 
Dreyfus Municipal Bond Fund; Dreyfus Funds, Inc., on behalf of its 
series Dreyfus Mid-Cap Growth Fund; Dreyfus Growth and Income Fund, 
Inc.; Dreyfus Index Funds, Inc., on behalf of its series Dreyfus 
International Stock Index Fund, Dreyfus S&P 500 Index Fund and 
Dreyfus Smallcap Stock Index Fund; Dreyfus Intermediate Municipal 
Bond Fund, Inc.; Dreyfus International Funds, Inc., on behalf of its 
series Dreyfus Brazil Equity Fund and Dreyfus Emerging Markets Fund; 
Dreyfus Investment Funds, on behalf of its series Dreyfus/The Boston 
Company Large Cap Core Fund, Dreyfus/The Boston Company Small Cap 
Value Fund, Dreyfus/The Boston Company Small Cap Growth Fund, 
Dreyfus/The Boston Company Small/Mid Cap Growth Fund, Dreyfus/The 
Boston Company Small Cap Tax-Sensitive Equity Fund, Dreyfus/The 
Boston Company Emerging Markets Core Equity Fund, Dreyfus/Standish 
Fixed Income Fund, Dreyfus/Standish Global Fixed Income Fund, 
Dreyfus/Standish International Fixed Income Fund, Dreyfus/Standish 
Intermediate Tax Exempt Bond Fund and Dreyfus/Newton International 
Equity Fund; Dreyfus Investment Grade Funds, Inc., on behalf of its 
series Dreyfus Intermediate Term Income Fund, Dreyfus Short Term 
Income Fund and Dreyfus Inflation Adjusted Securities Fund; Dreyfus 
LifeTime Portfolios, Inc., on behalf of its series Growth and Income 
Portfolio; Dreyfus Manager Funds I, on behalf of its series Dreyfus 
MidCap Core Fund; Dreyfus Manager Funds II, on behalf of its series 
Dreyfus Balanced Opportunity Fund; Dreyfus Midcap Index Fund, Inc.; 
Dreyfus Municipal Bond Opportunity Fund; Dreyfus Municipal Funds, 
Inc., on behalf of its series Dreyfus AMT-Free Municipal Bond Fund 
and Dreyfus High Yield Municipal Bond Fund; Dreyfus New Jersey 
Municipal Bond Fund, Inc.; Dreyfus New York AMT-Free Municipal Bond 
Fund; Dreyfus New York Tax Exempt Bond Fund, Inc.; Dreyfus 
Opportunity Funds, on behalf of its series Dreyfus Natural Resources 
Fund; Dreyfus Premier California AMT-Free Municipal Bond Fund, Inc., 
on behalf of its series Dreyfus California AMT-Free Municipal Bond 
Fund; Dreyfus Premier GNMA Fund, Inc., on behalf of its series 
Dreyfus GNMA Fund; Dreyfus Premier Investment Funds, Inc., on behalf 
of its series Dreyfus Emerging Asia Fund, Dreyfus Global Real Estate 
Securities Fund, Dreyfus Greater China Fund, Dreyfus India Fund, 
Dreyfus Large Cap Equity Fund and Dreyfus Large Cap Growth Fund; 
Dreyfus Premier Short-Intermediate Municipal Bond Fund, on behalf of 
its series Dreyfus Short-Intermediate Municipal Bond Fund; Dreyfus 
Premier Worldwide Growth Fund, Inc., on behalf of its series Dreyfus 
Worldwide Growth Fund; Dreyfus Research Growth Fund, Inc.; Dreyfus 
Short-Intermediate Government Fund; Dreyfus State Municipal Bond 
Funds, on behalf of its series Dreyfus Connecticut Fund, Dreyfus 
Maryland Fund, Dreyfus Massachusetts Fund, Dreyfus Minnesota Fund, 
Dreyfus Ohio Fund and Dreyfus Pennsylvania Fund; Dreyfus Stock 
Funds, on behalf of its series Dreyfus Small Cap Equity Fund and 
Dreyfus International Equity Fund; Dreyfus U.S. Treasury 
Intermediate Term Fund; Dreyfus U.S. Treasury Long Term Fund; 
Strategic Funds, Inc., on behalf of its series Dreyfus Active MidCap 
Fund, Global Stock Fund, International Stock Fund, Dreyfus U.S. 
Equity Fund, Dreyfus Select Managers Small Cap Value Fund and 
Dreyfus Select Managers Small Cap Growth Fund; The Dreyfus Fund 
Incorporated; The Dreyfus/Laurel Funds, Inc., on behalf of its 
series Dreyfus BASIC S&P 500 Stock Index Fund, Dreyfus Bond Market 
Index Fund, Dreyfus Core Equity Fund, Dreyfus Disciplined Stock 
Fund, Dreyfus Opportunistic Fixed Income Fund, Dreyfus Small Cap 
Fund and Dreyfus Tax Managed Growth Fund; The Dreyfus/Laurel Funds 
Trust, on behalf of its series Dreyfus Emerging Markets Debt Local 
Currency Fund, Dreyfus Equity Income Fund, Dreyfus Global Equity 
Income Fund, Dreyfus High Yield Fund and Dreyfus International Bond 
Fund; and The Dreyfus Third Century Fund, Inc. The Related Funds of 
Funds (as defined below) currently include: BNY Mellon Funds Trust, 
on behalf of its series BNY Mellon Asset Allocation Fund, BNY Mellon 
Large Cap Market Opportunities Fund and BNY Mellon Tax-Sensitive 
Large Cap Multi-Strategy Fund; Strategic Funds, Inc., on behalf of 
its series Dreyfus Conservative Allocation Fund, Dreyfus Moderate 
Allocation Fund and Dreyfus Growth Allocation Fund; and Dreyfus 
Premier Investment Funds, Inc., on behalf of its series Dreyfus 
Diversified International Fund and Dreyfus Satellite Alpha Fund.
    \3\ All entities that currently intend to rely on the requested 
order are named as applicants. Any other entity that relies on the 
order in the future will comply with the terms and conditions of the 
application. An Unrelated Fund of Funds may rely on the requested 
order only to invest in an Underlying Fund and not in any other 
registered investment company.
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    3. Each Unrelated Fund of Funds will be advised by or, in the case 
of a unit investment company, sponsored by, an investment adviser, 
within the meaning of section 2(a)(20)(A) of the Act, that is 
registered as an investment adviser under the Advisers Act (an 
``Unrelated Fund of Funds Adviser or Unrelated Fund of Funds Sponsor, 
respectively''). An Unrelated Fund of Funds or its Unrelated Fund of 
Funds Adviser or Unrelated Fund of Funds Sponsor may contract with an 
investment adviser, including the Adviser or its affiliates, that meets 
the definition of section 2(a)(20)(B) of the Act (an ``Unrelated Fund 
of Funds Subadviser''). Applicants state that Unrelated Funds of Funds 
will be interested in using the Underlying Funds as part of their 
overall investment strategy.
    4. Applicants also request an exemption to the extent necessary to 
permit any existing or future funds that operate as ``funds of funds'' 
and that are part of the same ``group of investment companies,'' within 
the meaning of section 12(d)(1)(G)(ii) of the Act, as the Companies 
(``Related Funds of Funds'') and which invest in other Underlying Funds 
in reliance on section 12(d)(1)(G) of the Act, and which are also 
eligible to invest in securities (as defined in section 2(a)(36) of the 
Act) in reliance on rule 12d1-2 under the Act, also to invest, 
consistent with their investment objective, policies, strategies and 
limitations, in financial instruments that may not be securities within 
the meaning of section 2(a)(36) of the Act (``Other Investments'').\4\
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    \4\ Applicants request that the relief apply to each registered 
open-end management investment company or series thereof that 
operates as a ``fund of funds'' and that currently or subsequently 
is part of the same ``group of investment companies,'' within the 
meaning of section 12(d)(1)(G)(ii) of the Act, as the Companies, and 
is advised or sponsored by the Adviser or any entity controlling, 
controlled by or under common control with the Adviser (such 
registered open-end management investment companies or their series 
are included in the term ``Related Fund of Funds'').
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    5. Consistent with its fiduciary obligations under the Act, each 
Related Fund of Fund's board of trustees will review the advisory fees 
charged by the Related Fund of Fund's investment adviser to ensure that 
they are based on services provided that are in addition to, rather 
than duplicative of, services provided pursuant to the advisory 
agreement of any investment company in which the Related Fund of Funds 
may invest.

Applicants' Legal Analysis

Investments in Underlying Funds by Unrelated Funds of Funds

A. Section 12(d)(1)
    1. Section 12(d)(1)(A) of the Act, in relevant part, prohibits a 
registered investment company from acquiring shares of an investment 
company if the securities represent more than 3% of the total 
outstanding voting stock of the acquired company, more than 5% of the 
total assets of the acquiring company, or, together with the securities 
of any other investment companies, more than 10% of the total assets of 
the acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter, and 
any broker or dealer from selling the investment company's shares to 
another investment company if the sale will cause the acquiring company 
to own more than 3% of the acquired company's voting stock, or if the 
sale will cause more than 10% of the acquired company's voting stock to 
be owned by investment companies generally.
    2. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security, or transaction, or any class or classes of 
persons, securities or transactions, from any provision of section 
12(d)(1) if the exemption is consistent with the public interest and 
the protection of investors. Applicants is seeking an exemption under 
section 12(d)(1)(J) of the Act to permit Unrelated Funds of Funds to 
acquire shares of the Underlying Funds in excess of the limits in 
section 12(d)(1)(A), and an Underlying Fund, any principal underwriter 
for an Underlying Fund, and any Broker to sell shares of an Underlying 
Fund to an Unrelated Fund of Funds in excess of the limits in section 
12(d)(1)(B) of the Act.
    3. Applicants state that the terms and conditions of the 
application appropriately address the concerns underlying sections 
12(d)(1)(A) and (B), which include concerns about undue influence by a 
fund of funds over underlying funds, excessive layering of fees, and 
overly complex fund structures. Accordingly, applicants believe that 
the requested exemption is consistent with the public interest and the 
protection of investors.
    4. Applicants believe that neither an Unrelated Fund of Funds nor 
an Unrelated Fund of Funds Affiliate would be able to exert undue 
influence over the Underlying Funds.\5\ To limit the control that a 
Unrelated Fund of Funds may have over an Underlying Fund, applicants 
propose a condition prohibiting the Unrelated Fund of Funds Adviser or 
Unrelated Fund of Funds Sponsor, any person controlling, controlled by, 
or under common control

[[Page 42519]]

with the Unrelated Fund of Funds Adviser or Unrelated Fund of Funds 
Sponsor, and any investment company or issuer that would be an 
investment company but for section 3(c)(1) or 3(c)(7) of the Act that 
is advised by the Unrelated Fund of Funds Adviser or sponsored by the 
Unrelated Fund of Funds Sponsor or any person controlling, controlled 
by, or under common control with the Unrelated Fund of Funds Adviser or 
Unrelated Fund for Funds Sponsor (the ``Unrelated Fund of Funds 
Advisory Group'') from controlling (individually or in the aggregate) 
an Underlying Fund within the meaning of section 2(a)(9) of the Act. 
The same prohibition would apply to the Unrelated Fund of Funds 
Subadviser, any person controlling, controlled by or under common 
control with the Unrelated Fund of Funds Subadviser, and any investment 
company or issuer that would be an investment company but for section 
3(c)(1) or 3(c)(7) of the Act (or portion of such investment company or 
issuer) advised or sponsored by the Unrelated Fund of Funds Subadviser 
or any person controlling, controlled by or under common control with 
the Unrelated Fund of Funds Subadviser (the ``Unrelated Fund of Funds 
Subadvisory Group''). Applicants propose other conditions to limit the 
potential for undue influence over the Underlying Funds, including that 
no Unrelated Fund of Funds or Unrelated Fund of Funds Affiliate (except 
to the extent it is acting in its capacity as an investment adviser to 
an open-end fund) will cause an Underlying Fund to purchase a security 
in an offering of securities during the existence of any underwriting 
or selling syndicate of which a principal underwriter is an 
Underwriting Affiliate (``Affiliated Underwriting''). An ``Underwriting 
Affiliate'' is a principal underwriter in any underwriting or selling 
syndicate that is an officer, director, member of an advisory board, 
investment adviser, subadviser, sponsor, or employee of the Unrelated 
Fund of Funds, or a person of which any such officer, director, member 
of an advisory board, investment adviser, subadviser, sponsor, or 
employee is an affiliated person. An Underwriting Affiliate does not 
include any person whose relationship to an Underlying Fund is covered 
by section 10(f) of the Act.
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    \5\ An ``Unrelated Fund of Funds Affiliate'' is an Unrelated 
Fund of Funds Adviser, Unrelated Fund of Funds Sponsor, Unrelated 
Fund of Funds Subadviser, promoter, or principal underwriter of an 
Unrelated Fund of Funds, and any person controlling, controlled by, 
or under common control with any of those entities. An ``Underlying 
Fund Affiliate'' is an investment adviser, sponsor, promoter, or 
principal underwriter of an Underlying Fund, and any person 
controlling, controlled by, or under common control with any of 
those entities.
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    5. Applicants do not believe that the proposed fund of funds 
arrangement will involve excessive layering of fees. The board of 
directors or trustees of each Unrelated Fund of Funds, including a 
majority of the directors or trustees who are not ``interested 
persons'' (within the meaning of section 2(a)(19) of the Act) 
(``Independent Board Members''), will find that the advisory fees 
charged under such advisory contract are based on services provided 
that will be in addition to, rather than duplicative of, the services 
provided under the advisory contract(s) of any Underlying Fund in which 
the Unrelated Fund of Funds may invest. In addition, an Unrelated Fund 
of Funds Adviser or Unrelated Fund of Funds Sponsor will waive fees 
otherwise payable to it by the Unrelated Fund of Funds in an amount at 
least equal to any compensation (including fees received pursuant to 
any plan adopted by an Underlying Fund under rule 12b-1 under the Act) 
received from an Underlying Fund by the Unrelated Fund of Funds Adviser 
or Unrelated Fund of Funds Sponsor or an affiliated person of the 
Unrelated Fund of Funds Adviser or Unrelated Fund of Funds Sponsor, 
other than any advisory fees paid to the Unrelated Fund of Funds 
Adviser or Unrelated Fund of Funds Sponsor or affiliated person of the 
Unrelated Fund of Funds Adviser or Unrelated Fund of Funds Sponsor, by 
an Underlying Fund, in connection with the investment by the Unrelated 
Fund of Funds in the Underlying Fund. Applicants also state that with 
respect to registered separate accounts that invest in an Unrelated 
Fund of Funds, no sales load will be charged at the Unrelated Fund of 
Funds level or at the Underlying Fund level.\6\ Other sales charges and 
service fees, as defined in Rule 2830 of the Conduct Rules of the NASD 
(``NASD Conduct Rules''), if any, will only be charged at the Unrelated 
Fund of Funds level or at the Underlying Fund level, not both. With 
respect to other investments in an Unrelated Fund of Funds, any sales 
charges and/or service fees charged with respect to shares of the 
Unrelated Fund of Funds will not exceed the limits applicable to a fund 
of funds as set forth in Rule 2830 of the NASD Conduct Rules.
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    \6\ Applicants represent that each Unrelated Fund of Funds will 
represent in the Participation Agreement (as defined below) that no 
insurance company sponsoring a registered separate account will be 
permitted to invest in the Unrelated Fund of Funds unless the 
insurance company has certified to the Unrelated Fund of Funds that 
the aggregate of all fees and charges associated with each contract 
that invests in the Unrelated Fund of Funds, including fees and 
charges at the separate account, Unrelated Fund of Funds, and 
Underlying Fund levels, will be reasonable in relation to the 
services rendered, the expenses expected to be incurred, and the 
risks assumed by the insurance company.
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    6. Applicants submit that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that no Underlying 
Fund will acquire securities of any investment company or company 
relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the 
limits contained in section 12(d)(1)(A) of the Act, except in certain 
circumstances identified in condition 12 below. Applicants also 
represent that to ensure that Unrelated Funds of Funds comply with the 
terms and conditions of the requested exemption from section 
12(d)(1)(A) of the Act, an Unrelated Fund of Funds must enter into a 
participation agreement between a Company, on behalf of the relevant 
Underlying Fund, and the Unrelated Funds of Funds (``Participation 
Agreement'') before investing in an Underlying Fund in excess of the 
limits in section 12(d)(1)(A). The Participation Agreement will require 
the Unrelated Fund of Funds to adhere to the terms and conditions of 
the requested order. The Participation Agreement will include an 
acknowledgment from the Unrelated Fund of Funds that it may rely on the 
requested order only to invest in the Underlying Funds and not in any 
other registered investment company or series thereof.
B. Section 17(a)
    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and any 
affiliated person of the company. Section 2(a)(3) of the Act defines an 
``affiliated person'' of another person to include any person 5% or 
more of whose outstanding voting securities are directly or indirectly 
owned, controlled, or held with power to vote by the other person.
    2. Applicants seek relief from section 17(a) to permit an 
Underlying Fund that is an affiliated person of an Unrelated Fund of 
Funds because the Unrelated Fund of Funds holds 5% or more of the 
Underlying Fund's shares to sell its shares to and redeem its shares 
from an Unrelated Fund of Funds. Applicants state that any proposed 
transactions directly between an Underlying Fund and an Unrelated Fund 
of Funds will be consistent with the policies of each Underlying Fund 
and Unrelated Fund of Funds. The Participation Agreement will require 
any Unrelated Fund of Funds that purchases shares from an Underlying 
Fund to represent that the purchase of shares from the Underlying Fund 
by a Unrelated Fund of Funds will be accomplished in compliance with 
the investment restrictions of the Unrelated Fund of Funds and will be 
consistent with the investment policies set forth in the Unrelated Fund 
of Funds' registration statement.

[[Page 42520]]

    3. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise prohibited by section 17(a) if 
it finds that (i) the terms of the proposed transaction are fair and 
reasonable and do not involve overreaching on the part of any person 
concerned; (ii) the proposed transaction is consistent with the 
policies of each registered investment company involved; and (iii) the 
proposed transaction is consistent with the general purposes of the 
Act. Section 6(c) of the Act permits the Commission to exempt any 
person or transactions from any provision of the Act if such exemption 
is necessary or appropriate in the public interest and consistent with 
the protection of investors and the purposes fairly intended by the 
policy and provisions of the Act.
    4. Applicants submit that the proposed transactions satisfy the 
standards for relief under sections 17(b) and 6(c) of the Act.\7\ 
Applicants state that the terms of the transactions are reasonable and 
fair and do not involve overreaching. Applicants note that any 
consideration paid for the purchase or redemption of shares directly 
from an Underlying Fund will be based on the net asset value of the 
Underlying Fund. Applicants state that the proposed transactions will 
be consistent with the policies of each Underlying Fund and Unrelated 
Fund of Funds and with the general purposes of the Act.
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    \7\ Applicants acknowledge that receipt of compensation by (a) 
an affiliated person of an Unrelated Fund of Funds, or an affiliated 
person of such person, for the purchase by the Unrelated Fund of 
Funds of shares of an Underlying Fund or (b) an affiliated person of 
an Underlying Fund, or an affiliated person of such person, for the 
sale by the Underlying Fund of its shares to an Unrelated Fund of 
Funds may be prohibited by section 17(e)(1) of the Act. The 
Participation Agreement also will include this acknowledgment.
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Other Investments by Related Funds of Funds

    1. Section 12(d)(1)(G) of the Act provides that section 12(d)(1) 
will not apply to securities of an acquired company purchased by an 
acquiring company if: (i) The acquiring company and acquired company 
are part of the same group of investment companies; (ii) the acquiring 
company holds only securities of acquired companies that are part of 
the same group of investment companies, government securities, and 
short-term paper; (iii) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not 
excessive under rules adopted pursuant to section 22(b) or section 
22(c) of the Act by a securities association registered under section 
15A of the Exchange Act or by the Commission; and (iv) the acquired 
company has a policy that prohibits it from acquiring securities of 
registered open-end management investment companies or registered unit 
investment trusts in reliance on section 12(d)(1)(F) or (G) of the Act.
    2. Rule 12d1-2 under the Act permits a registered open-end 
investment company or a registered unit investment trust that relies on 
section 12(d)(1)(G) of the Act to acquire, in addition to securities 
issued by another registered investment company in the same group of 
investment companies, government securities, and short-term paper: (1) 
Securities issued by an investment company that is not in the same 
group of investment companies, when the acquisition is in reliance on 
section 12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) securities (other 
than securities issued by an investment company); and (3) securities 
issued by a money market fund, when the investment is in reliance on 
rule 12d1-1 under the Act. For the purposes of rule 12d1-2, 
``securities'' means any security as defined in section 2(a)(36) of the 
Act.
    3. Applicants state that the proposed arrangement would comply with 
the provisions of rule 12d1-2 under the Act, but for the fact that the 
Related Funds of Funds may invest a portion of their assets in Other 
Investments. Applicants request an order under section 6(c) of the Act 
for an exemption from rule 12d1-2(a) to allow the Related Funds of 
Funds to invest in Other Investments. Applicants assert that permitting 
the Related Funds of Funds to invest in Other Investments as described 
in the application would not raise any of the concerns that the 
requirements of section 12(d)(1) were designed to address.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:

Investments in Underlying Funds by Unrelated Funds of Funds

    1. The members of an Unrelated Fund of Funds Advisory Group will 
not control (individually or in the aggregate) an Underlying Fund 
within the meaning of section 2(a)(9) of the Act. The members of an 
Unrelated Fund of Funds Subadvisory Group will not control 
(individually or in the aggregate) an Underlying Fund within the 
meaning of section 2(a)(9) of the Act. If, as a result of a decrease in 
the outstanding voting securities of an Underlying Fund, the Unrelated 
Fund of Funds Advisory Group or the Unrelated Fund of Funds Subadvisory 
Group, each in the aggregate, becomes a holder of more than 25 percent 
of the outstanding voting securities of an Underlying Fund, it (except 
for any member of the Unrelated Fund of Funds Advisory Group or 
Unrelated Fund of Funds Subadvisory Group that is a separate account 
funding variable insurance contract) will vote its shares of the 
Underlying Fund in the same proportion as the vote of all other holders 
of the Underlying Fund's shares. This condition does not apply to the 
Unrelated Fund of Funds Subadvisory Group with respect to an Underlying 
Fund for which the Unrelated Fund of Funds Subadvisers or a person 
controlling, controlled by, or under common control with the Unrelated 
Fund of Funds Subadvisers acts as the investment adviser within the 
meaning of section 2(a)(20)(A) of the Act. A registered separate 
account funding variable insurance contracts will seek voting 
instructions from its contract holders and will vote its shares in 
accordance with the instructions received and will vote those shares 
for which no instructions were received in the same proportion as the 
shares for which instructions were received. An unregistered separate 
account funding variable insurance contracts will either (i) vote its 
shares of the Underlying Fund in the same proportion as the vote of all 
other holders of the Underlying Fund's shares; or (ii) seek voting 
instructions from its contract holders and vote its shares in 
accordance with the instructions received and vote those shares for 
which no instructions were received in the same proportion as the 
shares for which instructions were received.
    2. No Unrelated Fund of Funds or Unrelated Fund of Funds Affiliate 
will cause any existing or potential investment by the Unrelated Fund 
of Funds in shares of an Underlying Fund to influence the terms of any 
services or transactions between the Unrelated Fund of Funds or an 
Unrelated Fund of Funds Affiliate and the Underlying Fund or an 
Underlying Fund Affiliate.
    3. The board of directors or trustees of an Unrelated Fund of 
Funds, including a majority of the Independent Board Members, will 
adopt procedures reasonably designed to assure that the Unrelated Fund 
of Funds Adviser or Unrelated Fund Funds Sponsor and any Unrelated Fund 
of Funds Subadviser(s) are conducting the investment program of the 
Unrelated Fund of Funds without taking into account any consideration 
received by the Unrelated Fund of Funds or an Unrelated Fund of Funds 
Affiliate from an Underlying Fund or an

[[Page 42521]]

Underlying Fund Affiliate in connection with any services or 
transactions.
    4. Once an investment by an Unrelated Fund of Funds in the 
securities of an Underlying Fund exceeds the limit in section 
12(d)(1)(A)(i) of the Act, the board of directors or trustees of the 
Underlying Fund (the ``Board''), including a majority of the 
Independent Board Members, will determine that any consideration paid 
by the Underlying Fund to an Unrelated Fund of Funds or an Unrelated 
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 Underlying Fund; 
(b) is within the range of consideration that the Underlying 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 
Underlying Fund and its investment adviser(s) or any person 
controlling, controlled by, or under common control with such 
investment adviser(s).
    5. No Unrelated Fund of Funds or Unrelated Fund of Funds Affiliate 
(except to the extent it is acting in its capacity as an investment 
adviser to an Underlying Fund) will cause an Underlying Fund to 
purchase a security in any Affiliated Underwriting.
    6. The Board, including a majority of the Independent Board 
Members, will adopt procedures reasonably designed to monitor any 
purchases of securities by the Underlying Fund in an Affiliated 
Underwriting once an investment by an Unrelated Fund of Funds in the 
securities of the Underlying Fund exceeds the limit of section 
12(d)(1)(A)(i) of the Act, including any purchases made directly from 
an Underwriting Affiliate. The Board will review these purchases 
periodically, but no less frequently than annually, to determine 
whether the purchases were influenced by the investment by the 
Unrelated Fund of Funds in the Underlying Fund. The Board shall 
consider, among other things, (i) whether the purchases were consistent 
with the investment objectives and policies of the Underlying Fund; 
(ii) 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 (iii) whether the amount of securities purchased by 
the Underlying Fund in Affiliated Underwritings and the amount 
purchased directly from an Underwriting Affiliate have changed 
significantly from prior years. The Board shall 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 Underlying 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 Affiliated 
Underwritings once an investment by an Unrelated Fund of Funds in the 
securities of an Underlying Fund exceeds the limit in section 
12(d)(1)(A)(i) of the Act, setting forth from whom the securities were 
acquired, the identity of the underwriting syndicate's members, the 
terms of the purchase, and the information or materials upon which the 
Board's determinations were made.
    8. Before investing in shares of an Underlying Fund in excess of 
the limits in section 12(d)(1)(A), the Unrelated Fund of Funds and 
Underlying Fund will execute a Participation Agreement stating, without 
limitation, that their boards of directors or trustees and their 
investment advisers and/or sponsors understand the terms and conditions 
of the order and agree to fulfill their responsibilities under the 
order. At the time of its investment in shares of an Underlying Fund in 
excess of the limit in section 12(d)(1)(A)(i), an Unrelated Fund of 
Funds will notify the Underlying Fund of the investment. At such time, 
the Unrelated Fund of Funds will also transmit to the Underlying Fund a 
list of the names of each Unrelated Fund of Funds Affiliate and 
Underwriting Affiliate. The Unrelated Fund of Funds will notify the 
Underlying Fund of any changes to the list of the names as soon as 
reasonably practicable after a change occurs. The Underlying Fund and 
the Unrelated Fund of Funds will maintain and preserve a copy of the 
order, the Participation Agreement, and the list with any updated 
information for the duration of the investment and for a period of not 
less than six years thereafter, the first two years in an easily 
accessible place.
    9. Before approving any advisory contract under section 15 of the 
Act, the board of directors or trustees of each Unrelated Fund of 
Funds, including a majority of the Independent Board Members, will find 
that the advisory fees charged under such advisory contract are based 
on services provided that will be in addition to, rather than 
duplicative of, the services provided under the advisory contract(s) of 
any Underlying Fund in which the Unrelated Fund of Funds may invest. 
These findings and their basis will be recorded fully in the minute 
books of the appropriate Unrelated Fund of Funds.
    10. An Unrelated Fund of Funds Adviser or Unrelated Fund of Funds 
Sponsor will waive fees otherwise payable to it by the Unrelated Fund 
of Funds in an amount at least equal to any compensation (including 
fees received pursuant to any plan adopted by an Underlying Fund under 
rule 12b-1 under the Act) received from an Underlying Fund by the 
Unrelated Fund of Funds Adviser or Unrelated Fund of Funds Sponsor, or 
an affiliated person of the Unrelated Fund of Funds Adviser or 
Unrelated Fund of Funds Sponsor, other than any advisory fees paid to 
the Unrelated Fund of Funds Adviser or Unrelated Fund of Funds Sponsor 
or affiliated persons of the Unrelated Fund of Funds Adviser or 
Unrelated Fund of Funds Sponsor by the Underlying Fund, in connection 
with the investment by the Unrelated Fund of Funds in the Underlying 
Fund. Any Unrelated Fund of Funds Subadvisers will waive fees otherwise 
payable to the Unrelated Fund of Funds Subadvisers, directly or 
indirectly, by the Unrelated Fund of Funds in an amount at least equal 
to any compensation received from any Underlying Fund by the Unrelated 
Fund of Funds Subadvisers, or an affiliated person of the Unrelated 
Fund of Funds Subadvisers, other than any advisory fees paid to the 
Unrelated Fund of Funds Subadvisers or its affiliated person by the 
Underlying Fund, in connection with the investment by the Unrelated 
Fund of Funds in the Underlying Fund made at the direction of the 
Unrelated Fund of Funds Subadvisers. In the event that the Unrelated 
Fund of Funds Subadvisers waives fees, the benefit of the waiver will 
be passed through to the Unrelated Fund of Funds.
    11. With respect to registered separate accounts that invest in an 
Unrelated Fund of Funds, no sales load will be charged at the Unrelated 
Fund of Funds level or at the Underlying Fund level.

[[Page 42522]]

Other sales charges and service fees, as defined in Rule 2830 of the 
NASD Conduct Rules, if any, will only be charged at the Unrelated Fund 
of Funds level or at the Underlying Fund level, not both. With respect 
to other investments in an Unrelated Fund of Funds, any sales charges 
and/or service fees charged with respect to shares of the Unrelated 
Fund of Funds will not exceed the limits applicable to a fund of funds 
as set forth in Rule 2830 of the NASD Conduct Rules.
    12. No Underlying Fund will acquire securities of any investment 
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in 
excess of the limits contained in section 12(d)(1)(A) of the Act, 
except to the extent that the 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 engage in interfund borrowing and 
lending transactions; or (d) acquires securities of one or more 
investment companies for short-term cash management purposes.

Other Investments by Related Funds of Funds

    13. The Applicants will comply with all provisions of rule 12d1-2 
under the Act, except for paragraph (a)(2), to the extent that it 
restricts any Related Fund of Funds from investing in Other Investments 
as described in the application.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-17575 Filed 7-18-12; 8:45 am]
BILLING CODE 8011-01-P