[Federal Register Volume 79, Number 245 (Monday, December 22, 2014)]
[Notices]
[Pages 76411-76415]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-29809]
[[Page 76411]]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31381; File No. 812-14350]
Wilshire Mutual Funds, Inc., et al.; Notice of Application
December 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 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 open-end management investment companies that
operate as ``funds of funds'' to acquire shares of certain registered
open-end management investment companies and unit investment trusts
(``UITs'') that are within and 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: Wilshire Mutual Funds, Inc. (``Wilshire Mutual Funds''),
Wilshire Variable Insurance Trust (``Wilshire VIT'', and with Wilshire
Mutual Funds, the ``Wilshire Funds''), Wilshire Associates Incorporated
(``Adviser''), and SEI Investments Distribution Co. (the
``Distributor'').
DATES: Filing Dates: The application was filed on August 19, 2014 and
amended on November 10, 2014.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on January 9, 2015 and should be accompanied by proof of
service on the applicants, in the form of an affidavit, or, for
lawyers, a certificate of service. Pursuant to rule 0-5 under the Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request notification by writing to the
Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090. Applicants, 1299 Ocean Avenue,
Suite 700, Santa Monica, CA 90401.
FOR FURTHER INFORMATION CONTACT: Kaitlin C. Bottock, Attorney Adviser,
at (202) 551-8658, or Daniele Marchesani, 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. Wilshire Mutual Funds, a Maryland corporation, and Wilshire VIT,
a Delaware statutory trust, are each registered under the Act as an
open-end management investment company. Wilshire Mutual Funds and
Wilshire VIT currently offer shares of 6 series and 9 series,
respectively, each of which pursues different investment objectives and
principal investment strategies.\1\
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\1\ Applicants request that the order apply to each existing and
future series of the Wilshire Funds and to each existing and future
registered open-end management investment company or series thereof
that is advised by the Adviser or any entity controlling, controlled
by or under common control with the Adviser and is part of the same
``group of investment companies'' (as defined in section
12(d)(1)(G)(ii) of the Act), as the Wilshire Funds (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 California corporation, is registered as an
investment adviser under the Investment Advisers Act of 1940, as
amended (``Advisers Act'') and serves as investment adviser to the
Funds.
3. The Distributor, a Pennsylvania corporation, is registered as a
broker-dealer under the Securities Exchange Act of 1934 (the ``Exchange
Act''). The Distributor serves as principal underwriter and distributor
for the shares of the Funds.
4. Applicants request an order to permit (a) a Fund that operates
as a ``fund of funds'' (each a ``Fund of Funds'') to acquire shares of
(i) registered open-end management investment companies 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 Fund of Funds
(``Unaffiliated Investment Companies'') and unit investment trusts
(``UITs'') that are not part of the same ``group of investment
companies'' as the Fund of Funds (``Unaffiliated Trusts,'' together
with the Unaffiliated Investment Companies, ``Unaffiliated Funds'') \2\
or (ii) registered open-end management investment companies or UITs
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 Fund of Funds
(collectively, ``Affiliated Funds,'' together with the Unaffiliated
Funds, ``Underlying Funds'') and (b) each Underlying Fund that is a
registered open-end management investment company or series thereof,
the Distributor or any principal underwriter for the Underlying Fund,
and any broker or dealer registered under the Exchange Act (``Broker'')
to sell shares of the Underlying Fund to the Fund of Funds in amounts
in excess of limits set forth in section 12(d)(1)(B). 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.
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\2\ Certain of the Unaffiliated Funds may be registered under
the Act as either UITs or open-end management investment companies
and have received exemptive relief to permit their shares to be
listed and traded on a national securities exchange at negotiated
prices (``ETFs'').
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5. 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 Fund of Funds'')
and that otherwise complies with rule 12d1-2 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'').
Applicants' Legal Analysis
A. Investments in Underlying Funds--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
[[Page 76412]]
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 total outstanding voting stock, or if the sale will
cause more than 10% of the acquired company's total outstanding voting
stock to be owned by investment companies generally.
2. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt any person, security, or transaction, or any class or classes of
persons, securities, or transactions, from any provision of section
12(d)(1) if the exemption is consistent with the public interest and
the protection of investors. Applicants seek an exemption under section
12(d)(1)(J) of the Act to permit a Fund 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 a 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 proposed
arrangement will not give rise to the policy concerns underlying
sections 12(d)(1)(A) and (B), which include concerns about undue
influence by a fund of funds 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 the proposed arrangement will not result
in the exercise of undue influence by the Fund of Funds or a Fund of
Funds Affiliate over the Unaffiliated Funds.\3\ To limit the control
that the Fund of Funds may have over an Unaffiliated Fund, applicants
propose a condition prohibiting the Adviser, any person controlling,
controlled by, or under common control with the 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 that is advised or sponsored
by the Adviser or any person controlling, controlled by, or under
common control with the Adviser (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''), 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 (the ``Subadvisory Group'').
Applicants propose other conditions to limit the potential for undue
influence over the Unaffiliated Funds, including that no Fund of Funds
or Fund of Funds Affiliate (except to the extent it is acting in its
capacity as an investment adviser to an Unaffiliated Investment Company
or sponsor to an Unaffiliated Trust) will cause an Unaffiliated Fund to
purchase a security in an offering of securities during the existence
of any underwriting or selling syndicate of which a principal
underwriter is an Underwriting Affiliate (``Affiliated Underwriting'').
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, advisory board member, investment adviser,
Subadviser, 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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\3\ A ``Fund of Funds Affiliate'' is the Adviser, any Subadviser
(as defined below), 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, sponsor, promoter, or
principal underwriter of an Unaffiliated Fund, as well as any person
controlling, controlled by, or under common control with any of
those entities.
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5. To further ensure that an Unaffiliated Investment Company
understands the implications of an investment by a Fund of Funds under
the requested order, prior to a Fund of Funds' investment in the shares
of an 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 stating, without
limitation, that their respective board of directors or trustees (for
any entity, the ``Board'') and their investment advisers understand the
terms and conditions of the order and agree to fulfill their
responsibilities under the order (``Participation Agreement'').
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.\4\
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\4\ 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.
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6. Applicants state that they do not believe that the proposed
arrangement will involve excessive layering of fees. The Board of each
Fund of Funds, including a majority of the directors who are not
``interested persons'' (within the meaning of section 2(a)(19) of the
Act) (``Independent Directors''), will find that the advisory fees
charged under investment advisory or management contract(s) are based
on services provided that will be in addition to, rather than
duplicative of, the services provided under such 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 its
affiliated person by an Unaffiliated Investment Company, in connection
with the investment by the Fund of Funds in the Unaffiliated Fund. Any
sales charges and/or service fees charged with respect to shares of a
Fund of Funds will not exceed the limits applicable to a fund of funds
as set forth in rule 2830 of the Conduct Rules of the NASD (``NASD
Conduct Rule 2830'').\5\
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\5\ Any references to NASD Conduct Rule 2830 include any
successor or replacement rule of FINRA to NASD Conduct Rule 2830.
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7. 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 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
[[Page 76413]]
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 a Fund of Funds and the Affiliated Funds
managed by the same Adviser might be deemed to be under common control
of the Adviser and therefore affiliated persons of one another.
Applicants also state that the Fund of Funds and the Unaffiliated Funds
might be deemed to be affiliated persons of one another if the Fund of
Funds acquires 5% or more of an Unaffiliated Fund's outstanding voting
securities. In light of these and other possible affiliations, section
17(a) could prevent an Underlying Fund from selling shares to and
redeeming shares from a Fund of Funds.
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 (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 persons 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.\6\
Applicants state that the terms of the transactions are reasonable and
fair and do not involve overreaching. Applicants state that the terms
upon which an Underlying Fund will sell its shares to or purchase its
shares from a Fund of Funds will be based on the net asset value of the
Underlying Fund.\7\ Applicants state that the proposed transactions
will be consistent with the policies of each Fund of Funds and each
Underlying Fund and with the general purposes of the Act.
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\6\ 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 a 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.
\7\ 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)
of the Act 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.
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C. Other Investments by Same Group Fund of Funds
1. Section 12(d)(1)(G) of the Act provides that section 12(d)(1)
will not apply to securities of an acquired company purchased by an
acquiring company if: (i) The acquiring company and acquired company
are part of the same group of investment companies; (ii) the acquiring
company holds only securities of acquired companies that are part of
the same group of investment companies, government securities, and
short-term paper; (iii) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not
excessive under rules adopted pursuant to section 22(b) or section
22(c) of the Act by a securities association registered under section
15A of the Exchange Act or by the Commission; and (iv) the acquired
company has a policy that prohibits it from acquiring securities of
registered open-end management investment companies or registered unit
investment trusts in reliance on section 12(d)(1)(F) or (G) of the Act.
2. Rule 12d1-2 under the Act permits a registered open-end
investment company or a registered unit investment trust that relies on
section 12(d)(1)(G) of the Act to acquire, in addition to securities
issued by another registered investment company in the same group of
investment companies, government securities, and short-term paper: (1)
securities issued by an investment company that is not in the same
group of investment companies, when the acquisition is in reliance on
section 12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) securities (other
than securities issued by an investment company); and (3) securities
issued by a money market fund, when the acquisition 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 a
Same Group Fund of Funds may invest a portion of its assets in Other
Investments. Applicants request an order under section 6(c) of the Act
for an exemption from rule 12d1-2(a) to allow the Same Group Fund of
Funds to invest in Other Investments. Applicants assert that permitting
Same Group Fund of Funds to invest in Other Investments as described in
the application would not raise any of the concerns that the
requirements of section 12(d)(1) were designed to address.
4. Consistent with its fiduciary obligations under the Act, the
Board of each Same Group Fund of Funds will review the advisory fees
charged by the Same Group Fund of Funds' investment adviser to ensure
that they are based on services provided that are in addition to,
rather than duplicative of, services provided pursuant to the advisory
agreement of any investment company in which the Same Group Fund of
Funds may invest.
Applicants' Conditions
Investments by Funds of Funds in Underlying Funds
Applicants agree that the 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. If, as a result of a decrease in
the outstanding voting securities of an 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
[[Page 76414]]
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 shares of 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 Directors, 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)(l)(A)(i) of the Act, the Board of the Unaffiliated Investment
Company, including a majority of the Independent Directors, will
determine that any consideration paid by the Unaffiliated Investment
Company to a Fund of Funds or a Fund of Funds Affiliate in connection
with any services or transactions: (a) is fair and reasonable in
relation to the nature and quality of the services and benefits
received by the Unaffiliated Investment Company; (b) is within the
range of consideration that the Unaffiliated Investment Company would
be required to pay to another unaffiliated entity in connection with
the same services or transactions; and (c) does not involve
overreaching on the part of any person concerned. This condition does
not apply with respect to any services or transactions between an
Unaffiliated Investment Company and its investment adviser(s) or any
person controlling, controlled by, or under common control with such
investment adviser(s).
5. No Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Unaffiliated Investment Company or sponsor to an Unaffiliated Trust)
will cause an Unaffiliated Fund to purchase a security in any
Affiliated Underwriting.
6. The Board of an Unaffiliated Investment Company, including a
majority of the Independent Directors, 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)(l)(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 shall maintain and preserve for a period 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)(l)(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 in section 12(d)(l)(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 in section
12(d)(l)(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 of the names 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 Directors, shall find that the advisory fees charged under
such 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
Subadviser will waive fees otherwise payable to the Subadviser,
directly or indirectly, by the Fund of
[[Page 76415]]
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 an 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 applicable Fund of Funds.
11. No Underlying Fund will acquire securities of any other
investment company or company relying on section 3(c)(l) 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) 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)(l) of the Act); or (b) 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.
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 fund
of funds set forth in NASD Conduct Rule 2830.
Other Investments by Same Group Fund of Funds
Applicants agree that the relief to permit Same Group Fund of Funds
to invest in Other Investments shall be subject to the following
condition:
13. Applicants will comply with all provisions of rule 12d1-2 under
the Act, except for paragraph (a)(2) to the extent that it restricts
any Same Group Fund of Funds from investing in Other Investments as
described in the application.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29809 Filed 12-19-14; 8:45 am]
BILLING CODE 8011-01-P