[Federal Register Volume 79, Number 22 (Monday, February 3, 2014)]
[Notices]
[Pages 6238-6243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-02142]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30895; File No. 812-14182]
The Ohio National Life Insurance Company, et al.; Notice of
Application
January 28, 2014.
AGENCY: Securities and Exchange Commission (the ``Commission'').
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: 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. Summary of the Application: Applicants request an
order that would (a) permit certain series of registered open-end
management investment companies to acquire shares of other registered
open-end management investment companies and unit investment trusts
(``UITs'') that are within or outside the same ``group of
[[Page 6239]]
investment companies,'' as defined in section 12(d)(1)(G)(ii) of the
Act, as the acquiring company 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: The Ohio National Life Insurance Company (``ONLIC''),
Ohio National Life Assurance Corporation (``ONLAC''), National Security
Life and Annuity Company (``National Security,'' and collectively with
ONLIC and ONLAC, the ``Insurance Companies'') (including any insurance
company controlling, controlled by or under common control with the
Insurance Companies), Ohio National Investments, Inc. (the
``Adviser''), and Ohio National Fund, Inc. (the ``Fund'')
(collectively, ``Applicants'').
DATES: Filing Dates: The application was filed on July 23, 2013 and
amended on December 13, 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 24, 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: The Commission: Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants:
Kimberly A. Plante, Esq., Ohio National Fund, Inc., One Financial Way,
Montgomery, OH 45242.
FOR FURTHER INFORMATION CONTACT: Kay-Mario Vobis, Senior Counsel, at
(202) 551-6728, 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 Fund is a Maryland corporation registered under the Act as
an open-end management investment company and is comprised of multiple
portfolios, each of which has its own investment objective, policies
and restrictions.\1\ Shares of the Portfolios are not offered directly
to the public. Shares of the Portfolios are offered through separate
accounts that are registered as UITs under the Act (``Registered
Separate Accounts'') or accounts that are exempt from registration
under the Act (``Unregistered Separate Accounts,'' and together with
the Registered Separate Accounts, ``Separate Accounts'') of the
Insurance Companies and serve as the underlying funding vehicles for
the variable life insurance contracts and variable annuity contracts
(the ``Contracts'') issued by the Insurance Companies. Shares of the
Portfolios may also be offered to certain of the general accounts of
the Insurance Companies or to other Portfolios.
---------------------------------------------------------------------------
\1\ Applicants request that the order extend to any existing or
future portfolio of the Fund and any existing or future registered
open-end management investment company or portfolio thereof that
currently or subsequently is part of the same ``group of investment
companies,'' as defined in section 12(d)(1)(G)(ii) of the Act, as
the Fund and is, or will be, advised by the Adviser or any other
investment adviser controlling, controlled by, or under common
control with the Adviser (together with the existing portfolios of
the Fund, the ``Portfolios''). All entities that currently intend to
rely on the requested order are named as Applicants and any other
entity that relies on the order in the future will comply with the
terms and conditions of the application.
---------------------------------------------------------------------------
2. The Adviser is an Ohio corporation registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the
``Advisers Act'') and serves as investment adviser to the Fund and each
Portfolio. The Adviser is a wholly-owned subsidiary of Ohio National
Life.
3. ONLIC is organized as a stock life insurance company under the
laws of Ohio and is a wholly-owned subsidiary of Ohio National
Financial Services, Inc. ONLAC is organized as a stock life insurance
company under the laws of Ohio and is a wholly-owned stock subsidiary
of ONLIC. National Security is incorporated under the laws of the State
of New York and is also a wholly-owned stock subsidiary of ONLIC.
4. Applicants request relief to permit: (a) Certain Portfolios
(each, a ``Fund of Funds,'' and collectively, the ``Funds of Funds'')
to acquire shares of registered open-end management investment
companies and UITs 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
Funds of Funds (the ``Unaffiliated Investment Companies'' and
``Unaffiliated Trusts,'' respectively, and together, the ``Unaffiliated
Funds''); \2\ (b) the Unaffiliated Investment Companies, their
principal underwriters and any broker or dealer registered under the
Securities Exchange Act of 1934, as amended (the ``Exchange Act'', and
any such broker or dealer, a ``Broker''), to sell shares of the
Unaffiliated Investment Companies to the Funds of Funds in excess of
the limitations in section 12(d)(1)(B) of the Act; (c) the Funds of
Funds to acquire shares of certain other Portfolios in the same ``group
of investment companies,'' as defined in section 12(d)(1)(G)(ii) of the
Act, as the Funds of Funds (the ``Affiliated Funds,'' and together with
the Unaffiliated Funds, the ``Underlying Funds''); \3\ and (d) the
Affiliated Funds, their principal underwriters and any Broker to sell
shares of the Affiliated Funds to the Funds of Funds in excess of the
limitations in section 12(d)(1)(B) of the Act. Applicants also request
an order under sections 6(c) and 17(b) of the Act exempting the
transactions described in (a) through (d) above from section 17(a) of
the Act to the extent necessary to permit an Underlying Fund that is an
affiliated person of a Fund of Funds to sell its shares to, and redeem
its shares from, the Fund of Funds.
---------------------------------------------------------------------------
\2\ Certain of the Unaffiliated Funds may have received
exemptive relief or are otherwise permitted to list and trade their
shares on a national securities exchange at negotiated prices
(``ETFs'').
\3\ 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 12, a Fund of Funds may not invest in an
Underlying Fund that operates as a feeder fund unless the feeder
fund is part of the same ``group of investment companies,'' as
defined in section 12(d)(1)(G)(ii) of the Act, 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 defined in section 12(d)(1)(G)(ii) of the Act, 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 also request an exemption to the extent necessary to
permit a Fund of Funds that invests in Underlying Funds in reliance on
section 12(d)(1)(G) of the Act (a ``Section 12(d)(1)(G) 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, to the extent consistent with its 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'').
[[Page 6240]]
Applicants' Legal Analysis
A. Investments in Underlying Funds--Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act prohibits a registered investment
company (an ``acquiring company'') from acquiring shares of another
investment company (an ``acquired 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 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) of the Act 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) of the Act 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 Unaffiliated Investment Companies and Affiliated Funds, their
principal underwriters and any Broker to sell shares of the
Unaffiliated Investment Companies and Affiliated 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) and (B) of
the Act, which include concerns about undue influence by a Fund of
Funds or its affiliated persons over the 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 structure will not result in
the exercise of undue influence by a Fund of Funds or its affiliated
persons over the Underlying Funds. Applicants note that the concerns
about undue influence do not arise in connection with a Fund of Funds'
investment in the Affiliated Funds, since the Affiliated Funds are part
of the same ``group of investment companies,'' as defined in section
12(d)(1)(G)(ii) of the Act, as the Funds of Funds. To limit the control
that a Fund of Funds or its affiliated persons may have over an
Unaffiliated Fund, Applicants submit that condition 1 prohibits the
Group \4\ and the Sub-Adviser Group \5\ from controlling (individually
or in the aggregate) an Unaffiliated Fund within the meaning of section
2(a)(9) of the Act.
---------------------------------------------------------------------------
\4\ The Adviser and any person controlling, controlled by or
under common control with the Adviser, 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 are, collectively, the ``Group.''
\5\ Any investment adviser within the meaning of section
2(a)(20)(B) of the Act to a Fund of Funds (each, a ``Sub-Adviser''),
any person controlling, controlled by or under common control with a
Sub-Adviser, and any investment company or issuer that would be an
investment company but for section 3(c)(1) or 3(c)(7) of the Act (or
portion of such investment company or issuer) advised or sponsored
by a Sub-Adviser or any person controlling, controlled by or under
common control with the Sub-Adviser are, collectively, the ``Sub-
Adviser Group.''
---------------------------------------------------------------------------
5. Applicants further state that condition 2 precludes a Fund of
Funds, the Adviser, any Sub-Adviser, 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 Fund, with
respect to transactions between the Fund of Funds or a Fund of Funds
Affiliate and the Unaffiliated Fund or the Unaffiliated Fund's
investment adviser(s), sponsor, promoter, principal underwriter and any
person controlling, controlled by or under common control with any of
those entities (each, an ``Unaffiliated Fund Affiliate'').
6. 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 Investment Company or sponsor to an
Unaffiliated Trust) from causing an Unaffiliated Fund to purchase a
security in an offering of securities during the existence of any
underwriting or selling syndicate of which a principal underwriter is
an Underwriting Affiliate (an ``Affiliated Underwriting'').\6\
---------------------------------------------------------------------------
\6\ An ``Underwriting Affiliate'' is an officer, director,
member of an advisory board, Adviser, Sub-Adviser, or employee of
the Fund of Funds, or a person of which any such officer, director,
Adviser, Sub-Adviser, member of an advisory board, or employee is an
affiliated person. However, any person whose relationship to the
Unaffiliated Fund is covered by section 10(f) of the Act is not an
Underwriting Affiliate.
---------------------------------------------------------------------------
7. As an additional assurance that an Unaffiliated Investment
Company understands the implications of an investment by a Fund of
Funds under the requested order, prior to an investment in the shares
of the Unaffiliated Investment Company in excess of the limit in
section 12(d)(1)(A)(i) of the Act, the Fund of Funds and the
Unaffiliated Investment Company will execute an agreement (the
``Participation Agreement'') stating, without limitation, that their
respective boards of directors or trustees (for any entity, the
``Board'') and their investment advisers understand the terms and
conditions of the order and agree to fulfill their respective
responsibilities under the order. Applicants note that an Unaffiliated
Investment Company (other than an ETF whose shares are purchased by a
Fund of Funds in the secondary market) will retain its right at all
times to reject any investment by a Fund of Funds.\7\
---------------------------------------------------------------------------
\7\ An Unaffiliated Investment Company, including an ETF, would
retain its right to reject any initial investment by a Fund of Funds
in excess of the limit in section 12(d)(1)(A)(i) of the Act by
declining to execute the Participation Agreement with the Fund of
Funds.
---------------------------------------------------------------------------
8. Applicants do not believe that the proposed arrangement will
result in 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 trustees who
are not ``interested persons,'' as defined in section 2(a)(19) of the
Act (for any Board, the ``Disinterested Trustees''), will find that the
advisory or management fees charged to a Fund of Funds 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 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 an
affiliated person of the Adviser by an Unaffiliated Investment Company,
in connection with the
[[Page 6241]]
investment by the Fund of Funds in the Unaffiliated Fund.
9. 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 NASD Conduct
Rules (``NASD Conduct Rule 2830''),\8\ 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.
---------------------------------------------------------------------------
\8\ Any references to NASD Conduct Rule 2830 include any
successor or replacement rule to NASD Conduct Rule 2830 that may be
adopted by FINRA.
---------------------------------------------------------------------------
10. Applicants represent that each Fund of Funds will represent in
the Participation Agreement that no Insurance Company sponsoring a
Registered Separate Account funding 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.
11. 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 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 defined in section 12(d)(1)(G)(ii) of the Act, 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 interfund
borrowing and lending transactions.
B. Investments in Underlying Funds--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 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 and other possible
affiliations, section 17(a) of the Act could prevent an Underlying Fund
from selling shares to, and redeeming shares from, a Fund of Funds.\9\
---------------------------------------------------------------------------
\9\ 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.
---------------------------------------------------------------------------
3. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) of
the Act 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
standards 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.\10\ 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.
---------------------------------------------------------------------------
\10\ To the extent purchases and sales of shares of an ETF occur
in the secondary market (and not through principal transactions
directly between a Fund of Funds and an ETF), relief from section
17(a) of the Act would not be necessary. The requested relief is
intended to cover, however, transactions directly between ETFs and a
Fund of Funds. Applicants are not seeking relief from section 17(a)
for, and the requested relief will not apply to, transactions where
an ETF could be deemed an affiliated person, or an affiliated person
of an affiliated person, of a Fund of Funds because the investment
adviser to the ETF or an entity controlling, controlled by or under
common control with the investment adviser to the ETF is an
investment adviser to the Fund of Funds.
---------------------------------------------------------------------------
C. Other Investments by Section 12(d)(1)(G) Funds of Funds
1. Section 12(d)(1)(G) of the 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 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 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
[[Page 6242]]
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
Section 12(d)(1)(G) Funds of Funds may invest a portion of their assets
in Other Investments. Applicants request an order under section 6(c) of
the Act for an exemption from rule 12d1-2(a) to allow the Section
12(d)(1)(G) Funds of Funds to invest in Other Investments. Applicants
assert that permitting the Section 12(d)(1)(G) 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) of the
Act were designed to address.
4. Consistent with its fiduciary obligations under the Act, each
Section 12(d)(1)(G) Fund of Funds' Board will review the advisory fees
charged by the Section 12(d)(1)(G) Fund of Funds' investment adviser(s)
to ensure that the fees are based on services provided that are in
addition to, rather than duplicative of, services provided pursuant to
the advisory agreement of any investment company in which the Section
12(d)(1)(G) Fund of Funds may invest.
Applicants' Conditions
Applicants agree that the order granting the requested relief shall
be subject to the following conditions:
Investments in Underlying Funds by Funds of Funds
1. The members of the Group will not control (individually or in
the aggregate) an Unaffiliated Fund within the meaning of section
2(a)(9) of the Act. The members of a Sub-Adviser Group will not control
(individually or in the aggregate) an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act. If, as a result of a decrease in
the outstanding voting securities of an Unaffiliated Fund, the Group or
a Sub-Adviser Group, each in the aggregate, becomes a holder of more
than 25% of the outstanding voting securities of the Unaffiliated Fund,
then the Group or the Sub-Adviser Group (except for any member of the
Group or the Sub-Adviser Group that is a Separate Account) 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. A Registered
Separate Account will seek voting instructions from its Contract owners
and will vote its shares of an Unaffiliated 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: (i) Vote its shares of the Unaffiliated Fund in the same
proportion as the vote of all other holders of the Unaffiliated Fund's
shares; or (ii) seek voting instructions from its Contract owners 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. This
condition will not apply to a Sub-Adviser Group with respect to an
Unaffiliated Fund for which the Sub-Adviser or a person controlling,
controlled by, or under common control with the Sub-Adviser acts as the
investment adviser within the meaning of section 2(a)(20)(A) of the 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
Disinterested Trustees, will adopt procedures reasonably designed to
assure that the Adviser and any Sub-Adviser 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 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 Disinterested Trustees, will
determine that any consideration paid by the Unaffiliated Investment
Company to a Fund of Funds or a Fund of Funds Affiliate in connection
with any services or transactions: (a) Is fair and reasonable in
relation to the nature and quality of the services and benefits
received by the Unaffiliated Investment Company; (b) is within the
range of consideration that the Unaffiliated Investment Company would
be required to pay to another unaffiliated entity in connection with
the same services or transactions; and (c) does not involve
overreaching on the part of any person concerned. This condition does
not apply with respect to any services or transactions between an
Unaffiliated Investment Company and its investment adviser(s), or any
person controlling, controlled by or under common control with such
investment adviser(s).
5. No Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Unaffiliated Investment Company or sponsor to an Unaffiliated Trust)
will cause an Unaffiliated Fund to purchase a security in any
Affiliated Underwriting.
6. The Board of an Unaffiliated Investment Company, including a
majority of the Disinterested 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
[[Page 6243]]
Investment Company in Affiliated Underwritings and the amount purchased
directly from an Underwriting Affiliate have changed significantly from
prior years. The Board of the Unaffiliated Investment Company will take
any appropriate actions based on its review, including, if appropriate,
the institution of procedures designed to assure that purchases of
securities in Affiliated Underwritings are in the best interest of
shareholders.
7. Each Unaffiliated Investment Company will maintain and preserve
permanently in an easily accessible place a written copy of the
procedures described in the preceding condition, and any modifications
to such procedures, and will maintain and preserve for a period of not
less than six years from the end of the fiscal year in which any
purchase in an Affiliated Underwriting occurred, the first two years in
an easily accessible place, a written record of each purchase of
securities in an Affiliated Underwriting once an investment by a Fund
of Funds in the securities of an Unaffiliated Investment Company
exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth
(a) the party from whom the securities were acquired, (b) the identity
of the underwriting syndicate's members, (c) the terms of the purchase,
and (d) the information or materials upon which the determinations of
the Board of the Unaffiliated Investment Company were made.
8. Prior to its investment in shares of an Unaffiliated Investment
Company in excess of the limit of 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
respective Boards and investment advisers understand the terms and
conditions of the order and agree to fulfill their respective
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
Disinterested Trustees, shall find that the advisory fees charged to
the Fund of Funds 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 under rule 12b-1 under the Act) received from an
Unaffiliated Fund by the Adviser, or an affiliated person of the
Adviser, other than any advisory fees paid to the Adviser or its
affiliated person by an Unaffiliated Investment Company, in connection
with the investment by the Fund of Funds in the Unaffiliated Fund. Any
Sub-Adviser will waive fees otherwise payable to the Sub-Adviser,
directly or indirectly, by the Fund of Funds in an amount at least
equal to any compensation received by the Sub-Adviser, or an affiliated
person of the Sub-Adviser, from an Unaffiliated Fund, other than any
advisory fees paid to the Sub-Adviser or an affiliated person of the
Sub-Adviser by the Unaffiliated Investment Company, in connection with
the investment by the Fund of Funds in the Unaffiliated Fund made at
the direction of the Sub-Adviser. In the event that the Sub-Adviser
waives fees, the benefit of the waiver will be passed through to the
Fund of Funds.
11. 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 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 defined in section 12(d)(1)(G)(ii) of the Act, 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 interfund borrowing
and lending transactions.
Other Investments by Section 12(d)(1)(G) 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 Section 12(d)(1)(G) Fund of Funds from investing in Other
Investments as described in the application.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-02142 Filed 1-31-14; 8:45 am]
BILLING CODE 8011-01-P