[Federal Register Volume 76, Number 151 (Friday, August 5, 2011)]
[Notices]
[Pages 47617-47621]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-19852]



[[Page 47617]]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29741; 812-13916]


BofA Funds Series Trust, et al.; Notice of Application

August 1, 2011.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under sections 6(c) and 
17(b) of the Investment Company Act of 1940 (the ``Act'') for an 
exemption from section 17(a) of the Act.

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Applicants:  BofA Funds Series Trust (``BAFST'' or ``Trust''), on 
behalf of its series (the ``Funds'', BofA Advisors, LLC) (together with 
any successor, ``BAA'' or the ``Advisor'') and Merrill Lynch, Pierce, 
Fenner & Smith Incorporated (together with any successor, ``MLPF&S'') 
(Trust, Advisor and MLPF&S, the ``Applicants'').\1\

    \1\ Any succession shall be solely by way of change in 
organization, such as reincorporation or reorganization as a 
partnership or similar entity. Any entity that currently intends to 
rely on the requested order is named as an Applicant. Any entity 
that relies on the order in the future will comply with the terms 
and conditions of the application.
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SUMMARY: Summary of Application: Applicants request an order to permit 
the Funds to engage in principal transactions in certain taxable money 
market instruments including repurchase agreements with MLPF&S.

DATES:  Filing Dates: The application was filed on June 29, 2011.

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 23, 2011, and should be accompanied by proof of service 
on the 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 may request notification of a hearing by writing to 
the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants: BAFST and BAA, 100 
Federal Street, Boston, Massachusetts 02110; MLPFS, Bank of America 
Tower, One Bryant Park, New York, New York 10036.

FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Senior Counsel, 
(202) 551-6868 or Janet M. Grossnickle, Assistant Director, (202) 551-
6821 (Office of Investment Company Regulation, Division of Investment 
Management).

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 Trust, an open-end investment company registered under the 
Act, is organized as a Delaware statutory trust. The Trust is currently 
comprised of eleven Funds, each of which is a money market fund subject 
to rule 2a-7 under the Act (``Rule 2a-7'') and permitted to invest in 
taxable money market instruments, including repurchase agreements. The 
term ``Funds'' also includes all future series of the Trust and any or 
any other registered investment company or series thereof that is 
advised or sub-advised by the Advisor, and that is permitted to invest 
in taxable money market instruments, including repurchase agreements 
(``Future Funds'').
    2. The BAA serves as the primary investment adviser for the Funds 
and is a direct wholly owned subsidiary of BofA Global Capital 
Management Group, LLC, which is wholly owned subsidiary of Bank of 
America, N.A., which is an indirect wholly owned banking subsidiary of 
Bank of America Corporation (``BAC''). The Advisor is registered as an 
investment adviser under the Investment Advisers Act of 1940, as 
amended (``Advisers Act''). The term ``Advisor'' also includes any 
other existing or future investment adviser registered under the 
Advisers Act which acts as investment adviser or sub-adviser to a Fund 
and which controls, is controlled by, or is under common control (as 
defined in section 2(a)(9) of the Act) with BAA or MLPF&S.
    3. MLPF&S, a wholly owned subsidiary of ML&Co., which is a wholly 
subsidiary of BAC, is a broker-dealer registered under the Securities 
Exchange Act of 1934, as amended (the ``1934 Act'') and a full service 
investment banking firm.\2\ MLPF&S, which is a primary dealer in U.S. 
Government securities, has grown into one of the largest dealers in 
commercial paper, repurchase agreements and other taxable money market 
instruments in the United States. The Applicants believe that MLPF&S's 
extensive dealing in taxable money market instruments and repurchase 
agreements makes it a very significant source for money market 
investment opportunities as well as related market information and 
expertise.
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    \2\ MLPF&S is also registered as an investment adviser under the 
Advisers Act. For purposes of this application, the relief sought 
applies to MLPF&S as broker-dealer only. The requested relief will 
not extend to any investment company advised or sub-advised by 
MLPF&S.
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    4. On December 29, 2008, the Advisor (formerly known as Columbia 
Management Advisors, LLC), Banc of America Securities, LLC (``BAS''), a 
broker-dealer that was merged with and into MLPF&S, and predecessor 
registered investment companies or series thereof to the Funds 
(``Original Applicants'') received an order of exemption (the ``BAS 
Order'') from the Commission under Sections 6(c) and 17(b) of the Act, 
providing relief from the provisions of Section 17(a) of the Act that 
permitted the Funds to buy from, or sell to, BAS, certain taxable money 
market instruments including repurchase agreements.\3\ On November 1, 
2010, BAS was merged into MLPF&S (the ``Merger''), with MLPF&S as the 
surviving corporation. Applicants filed the application to obtain the 
same relief for MLPF&S and the Applicants as that provided to BAS and 
the Original Applicants under the BAS Order.
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    \3\ See Banc of America Funds Trust, et al., Investment Company 
Act Release Nos. 28526 (Dec. 1, 2008) (notice) and 285736 (Dec. 29, 
2008) (order).
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    5. Applicants state that MLPF&S and the Advisor are functionally 
independent of each other and operate as separate entities under the 
umbrella of BAC, the parent holding company. While MLPF&S and the 
Advisor are under common control, each company has its own separate 
directors, has separate officers and employees, is separately 
capitalized and maintains its own books and records, except for one 
dual officer as more fully discussed in the application. The Advisor 
and MLPF&S operate on different sides of appropriate information 
barriers with respect to portfolio management activities and investment 
banking activities, and maintain physically separate offices.
    6. Investment management decisions for the Funds are determined 
solely by the Advisor and other investment advisers (as defined in 
section 2(a)(20) of the Act) that serve as subadvisers to the Funds, 
that are unaffiliated with the Advisor, and that do not include MLPF&S. 
The portfolio managers and other employees that are responsible for

[[Page 47618]]

portfolio management for registered investment companies function 
exclusively on behalf of the Advisor (or its affiliates), and not 
MLPF&S. The personnel assigned to the Advisor's investment advisory 
operations that are also involved with the business of other affiliates 
have absolutely no function or responsibility with respect MLPF&S. The 
compensation of persons employed by the Advisor will not depend on the 
volume or nature of trades effected by the Advisor for the Funds with 
MLPF&S under the requested exemption, except to the limited extent that 
such trades may minimally affect the profits and losses of BAC and its 
subsidiaries as a whole or to the extent that such trades affect the 
investment performance of a Fund.
    7. The portfolio securities in which each of the Funds, consistent 
with their stated investment objectives and practices, may invest 
consist of high-credit quality short-term taxable money market 
instruments, including repurchase agreements. Future Funds may also be 
authorized to invest in taxable money market instruments, in addition 
to the other instruments permitted by their respective investment 
policies and strategies. Practically all trading in money market 
instruments takes place in over-the-counter markets consisting of 
groups of dealer firms that are primarily major securities firms or 
large banks. Money market instruments are generally traded in round 
lots of $1,000,000 on a net basis and do not normally involve either 
brokerage commissions or transfer taxes. The cost of portfolio 
transactions to the Funds consists primarily of dealer or underwriter 
spreads. Spreads vary among money market instruments but dealer spreads 
generally do not exceed 1-5 basis points (.01% to .05%). It has been 
the experience of the Funds that spreads have narrowed and there is not 
a great deal of variation in the spreads charged by the various 
dealers, except during turbulent market conditions.
    8. The money market relies upon elaborate communications networks 
among dealer firms, principal issuers of money market instruments and 
principal institutional buyers of such instruments. Because the money 
market is a dealer market rather than an auction market, there is not a 
single obtainable price for a given instrument that generally prevails 
at any given time. A dealer acts either as ``agent'' on behalf of 
issuer clients or as ``principal'' for its own account. In either 
capacity, a dealer posts rates throughout its internal, private 
distribution networks that are intended to reflect ``market clearing 
price levels,'' as determined by the dealer. Only customers of the 
dealer seeking to purchase money market instruments have access to 
these postings.
    9. Because of the variety of types of money market instruments, the 
money market is very segmented. The market for the different types of 
instruments will vary in terms of price, volatility, liquidity and 
availability. Although the rates for the different types of instruments 
tend to fluctuate closely together, there are significant differences 
in yield among the various types of instruments, and even within the 
particular type, depending upon the maturity date and the credit 
quality of the issuer. Moreover, from time to time segmenting exists 
within money market instruments with the same maturity date and rating. 
The segmenting is based on such factors as whether the issuer is an 
industrial or financial company, whether the issuer is domestic or 
foreign and whether the instruments are asset-backed or unsecured. 
Because dealers tend to specialize in certain types of money market 
instruments, the particular needs of a potential buyer or seller in 
terms of type of instrument, maturity or credit quality may limit the 
number of dealers who can provide the most beneficial terms available. 
Hence, with respect to any given type of instrument, there may be only 
a few dealers that have such instruments in inventory (or can readily 
add such instruments to inventory) and can be in a position to quote a 
competitive price.
    10. MLPF&S has become one of the world's largest dealers in taxable 
money market instruments, ranking among the top firms in each of the 
major markets and product areas, as more fully discussed in the 
application. As of May 4, 2011, MLPF&S was the largest dealer in terms 
of the number of U.S. commercial paper programs in which it 
participates as a dealer. It also has been designated as placement 
agent on 656 commercial paper programs, representing 66% of the total 
market. Applicants state that MLPF&&S plays a relatively significant 
role in the repurchase agreement market and that MLPF&S's market 
position is among the ten leading dealers. For the calendar year ended 
2010, MLPF&S' average daily repurchase agreement transaction volume was 
approximately $198 billion. As of March 1, 2011, MLPF&S was one of 
twenty primary dealers and has been active in this role since the 
1980s. MLPF&S' primary dealer desk actively participates in the U.S. 
Treasury Bill market (which consists of short-term government 
obligations that are sold on a weekly basis through public auctions). 
As of March 31, 2011, MLPF&S market share in the U.S. Treasury Bills' 
secondary market was 11.9%. Since 2000, MLPF&S has experienced growth 
in activity involving instruments issued by U.S. Government agencies 
and government sponsored enterprises. MLPF&S ranked seventh at the year 
ended 2010 in underwriting activity involving agency instruments with a 
market share of approximately 5% in 2010. In the Agency Discount Note 
market, consisting of notes maturing in one year or less, MLPF&S is a 
major dealer in all of the top-tier discount note programs. MLPF&S is 
also one of the leading participants in the market for medium-term 
notes (``MTNs''). MTNs are offered continuously in public or private 
offerings, with maturities between nine months and thirty years. MTNs 
represent a significant portion of the longer-term money market 
investment alternatives because commercial paper is not issued with 
maturities greater than nine months and bankers' acceptances cannot 
have an initial maturity of more than six months. MLPF&S is a 
significant placement agent/dealer for MTN programs, and through May 
15, 2011, ranked ninth with a 4.5% market share.
    11. Applicants state that over the past seven years, there have 
been a significant number of mergers and acquisitions involving major 
banks. From 1990 to March 31, 2011, the number of FDIC-insured 
commercial banks has declined by 48%. During this period, there has 
also been a significant decline in the number of primary dealers. As a 
result, there is a substantially smaller number of major dealers who 
are active in the money market than was the case only a few years ago. 
The reduction in the number of participants makes it even more critical 
for investors to have access to as many dealers that are actively 
engaged in the market as possible. The availability of MLPF&S to the 
Funds is important not only because the number of industry participants 
has declined but because high-credit quality participants such as 
MLPF&S are becoming more important in the money market. Applicants 
state that the Funds not having access to MLPF&S, which is one of the 
more significant remaining dealers, would place them at a distinct 
disadvantage compared to other institutional investors.
    12. Subject to the general supervision of the Trust's board of 
trustees (``Board,''), the Advisor is responsible for portfolio 
decisions and placing execution of the Funds' portfolio transactions. 
The Advisor, on behalf of the Funds, has no obligation to deal with any 
dealer or group of dealers in

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the execution of their portfolio transactions. When placing orders, an 
Advisor must attempt to obtain the best net price and the most 
favorable execution of its orders. In doing so, it takes into account 
such factors as price, the size, type and difficulty of the transaction 
involved and the firm's general execution and operational facilities. 
For repurchase agreement transactions in particular, the Advisor places 
great emphasis on the creditworthiness of the counterparty.

Applicants' Legal Analysis

    1. Applicants request an order pursuant to sections 6(c) and 17(b) 
of the Act exempting certain transactions from the provisions of 
section 17(a) of the Act to permit MLPF&S, acting as principal, to sell 
to or purchase from the Funds taxable money market instruments, and to 
engage in repurchase agreement transactions with the Funds, subject to 
the conditions set forth below.
    2. Section 17(a) of the Act generally prohibits an affiliated 
person or principal underwriter of a registered investment company, or 
any affiliated person of such a person, acting as principal, from 
selling to or purchasing from such registered company, or any company 
controlled by such registered company, any security or other property. 
Because MLPF&S and the Advisor are under common control of BAC, MLPF&S 
could be deemed to be an affiliated person of the Advisor within the 
meaning of section 2(a)(3)(C) of the Act. Accordingly, MLPF&S could be 
deemed to be an affiliated person of an affiliated person of the Funds, 
because the Advisor, as the investment adviser of the Funds, could be 
deemed to be an affiliated person of the Funds under section 2(a)(3)(E) 
of the Act. Thus, section 17(a) would prohibit the Funds from selling 
or purchasing taxable money market instruments to or from MLPF&S to the 
extent MLPF&S is deemed an affiliated person of an affiliated person of 
the Funds.
    3. Section 17(b) of the Act provides that the Commission, upon 
application, may exempt a transaction from the provisions of section 
17(a) if evidence establishes that the terms of the proposed 
transaction, including the consideration to be paid, are reasonable and 
fair, and do not involve overreaching on the part of any person 
concerned, and that the proposed transaction is consistent with the 
policy of the registered investment company concerned and with the 
general purposes of the Act. Section 6(c) of the Act provides that the 
Commission may conditionally or unconditionally exempt any person, 
security, or transaction, or any class or classes of persons, 
securities, or transactions, from any provision or provisions of the 
Act or of any rule or regulation thereunder, if and to the extent that 
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 contend that the rationale behind the proposed order 
is based upon the reduction in the number of participants in the money 
market, the growing and significant role played in the money market by 
MLPF&S and the growing investment requirements of the Funds. In 
particular Applicants note the following:
    (a) With approximately $52 billion invested in money market 
instruments (including repurchase agreements) as of April 30, 2011, the 
Funds are major buyers and sellers in the money market with a strong 
need for unrestricted access to large quantities of high credit quality 
taxable money market instruments. The Applicants believe that denial of 
access to such a major dealer as MLPF&S in these markets will hinder 
the Funds' ability to manage their respective portfolios in the most 
effective manner.
    (b) The policy of the Funds of investing in instruments with short 
maturities and repurchase agreements, combined with the active 
portfolio management techniques employed by the Advisor, results in the 
need to make ongoing purchases and sales of taxable money market 
instruments. This dynamic makes the need to obtain suitable portfolio 
instruments and repurchase agreements and the most beneficial terms 
available from the broadest possible range of major participants in the 
market especially compelling.
    (c) MLPF&S is such a major participant in the money market that 
being unable to deal directly with it may, upon occasion, deprive the 
Funds of obtaining the most beneficial terms available.
    (d) The money market, including the market for repurchase 
agreements, is highly competitive and precluding a competitor as 
important as MLPF&S from engaging in principal transactions with the 
Funds could indirectly deprive the Funds of obtaining the most 
beneficial terms available even when the Funds trade with other 
dealers.
    5. Applicants believe that the requested order will provide the 
Funds with broader and more complete access to the money market, which 
is necessary to carry out the policies and objectives of each of the 
Funds in obtaining the most beneficial terms in all portfolio 
transactions. In addition, the Applicants respectfully submit that the 
requested relief will provide the Funds with important information 
sources in the money market, to the direct benefit of shareholders in 
the Funds. Applicants believe that the transactions contemplated by 
this application are identical to those in which they are currently 
engaged pursuant to the BAS Order except for the proposed participation 
of MLPF&S, and that such transactions are consistent with the policies 
of the Funds as recited in their registration statements and reports 
filed under the Act. Applicants further believe that the procedures set 
forth with respect to transactions with MLPF&S are structured in such a 
way as to insure that the transactions will be, in all instances, 
reasonable and fair, will not involve overreaching on the part of any 
person concerned, and that the requested exemption is 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.

Applicants' Conditions

    Applicants agree that the order granting the requested relief will 
be subject to the following conditions:
    1. Transactions Subject to the Exemption--The exemption shall be 
applicable to principal transactions in the secondary market and 
primary or secondary fixed-price dealer offerings not made pursuant to 
underwriting syndicates. The principal transactions that may be 
conducted pursuant to the exemption shall be limited to transactions in 
Eligible Securities.\4\ To the extent a Fund is subject to Rule 2a-7, 
such Eligible Securities must meet the portfolio maturity and credit 
quality requirements of paragraphs (c)(2) and (c)(3) of Rule 2a-7. To 
the extent a Fund is not subject to Rule 2a-7, such Eligible Securities 
must meet the requirements of clauses (i), (iii) and (iv) of paragraph 
(c)(3) of Rule 2a-7. Additionally:
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    \4\ Italicized terms are defined as set forth in paragraph (a) 
of Rule 2a-7, unless otherwise indicated.
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    (a) No Fund shall make portfolio purchases pursuant to the 
exemption that would result directly or indirectly in a Fund investing 
pursuant to the exemption more than 2% of its Total Assets (or, in the 
case of a Fund that is not subject to Rule 2a-7, more than 2% of the 
total of its cash, cash items and Eligible Securities) in instruments 
that, when acquired by the Fund (either initially or upon any 
subsequent

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rollover) were Second Tier Securities; provided that any Fund may make 
portfolio sales of Second Tier Securities pursuant to the exemption 
without regard to this limitation.
    (b) The exemption shall not apply to an Unrated Security other than 
a Government Security.
    (c) The exemption shall not apply to any instrument, other than a 
repurchase agreement, issued by BAC or any affiliated person thereof or 
to any instrument subject to a Demand Feature or Guarantee issued by 
BAC or any affiliated person thereof.
    2. Repurchase Agreement Requirements--The Funds may engage in 
repurchase agreements with MLPF&S only if MLPF&S has: (a) Net capital, 
as defined in rule 15c3-1 under the 1934 Act, of at least $100 million 
and (b) a record (including the record of predecessors) of at least 
five years continuous operations as a dealer during which time it 
engaged in repurchase agreements relating to the kind of instrument 
subject to the repurchase agreement. MLPF&S shall furnish the Advisor 
with financial statements for its most recent fiscal year and the most 
recent semi-annual financial statements made available to their 
customers. The Advisor shall determine that MLPF&S complies with the 
above requirements and with the repurchase agreement guidelines adopted 
by the Boards. Each repurchase agreement will be Collateralized Fully.
    3. Volume Limitations on Transactions--Transactions other than 
repurchase agreements conducted pursuant to the exemption shall be 
limited to no more than 25% of (a) The direct or indirect purchases or 
sales, as the case may be, by each Fund of Eligible Securities other 
than repurchase agreements; and (b) the purchases or sales, as the case 
may be, by MLPF&S of Eligible Securities other than repurchase 
agreements. Transactions comprising repurchase agreements conducted 
pursuant to the exemption shall be limited to no more than 10% of (a) 
The repurchase agreements directly or indirectly entered into by the 
relevant Fund and (b) the repurchase agreements transacted by MLPF&S. 
These calculations shall be measured on an annual basis (the fiscal 
year of each Fund and of MLPF&S) and shall be computed with respect to 
the dollar volume thereof.
    4. Information Required to Document Compliance with Price Test--
Before any transaction may be conducted pursuant to the exemption, the 
relevant Fund or the Advisor must obtain such information as it deems 
necessary to determine that the price test (as defined in condition 5 
below) applicable to such transaction has been satisfied. In the case 
of purchase or sale transactions, the Funds or the Advisor must make 
and document a good faith determination with respect to compliance with 
the price test based upon current price information obtained through 
the contemporaneous solicitation of bona fide offers in connection with 
the type of instrument involved (comparable security falling within the 
same category of instrument, credit rating, maturity and segment, if 
any, but not necessarily the identical instrument or issuer). With 
respect to prospective purchases of instruments, these dealers must be 
those who have, in their inventories, or who otherwise have access to 
taxable money market instruments of the categories and the types 
desired and who are in a position to quote favorable prices with 
respect thereto. With respect to the prospective disposition of 
instruments, these dealers must be those who, in the experience of the 
Funds and the Advisor, are in a position to quote favorable prices. 
Before any repurchase agreements are entered into pursuant to the 
exemption, the Funds or the Advisor must obtain and document 
competitive quotations from at least two other dealers with respect to 
repurchase agreements comparable to the type of repurchase agreement 
involved, except that if quotations are unavailable from two such 
dealers, only one other competitive quotation is required.
    5. Price Test--In the case of purchase and sale transactions, a 
determination will be required in each instance, based upon the 
information available to the Funds and the Advisor, that the price 
available from MLPF&S is at least as favorable as that available from 
other sources. In the case of ``swaps'' involving trades of one 
instrument for another, the price test shall be based upon the 
transaction viewed as a whole, and not upon the two components thereof 
individually. With respect to transactions involving repurchase 
agreements, a determination will be required in each instance, based on 
the information available to the Funds and the Advisor, that the income 
to be earned from the repurchase agreement is at least equal to that 
available from other sources in connection with comparable repurchase 
agreements.
    6. Permissible Dealer Spread--MLPF&S' spreads in regard to any 
transaction with the Funds will be no greater than its customary dealer 
spreads, which will in turn be consistent with the average or standard 
spread charged by dealers in taxable money market instruments for the 
type of instrument and the size of transaction involved.
    7. Parties Must Be Factually Independent--The Advisor on the one 
hand, and MLPF&S, on the other, will operate on different sides of 
appropriate walls of separation with respect to the Funds and Eligible 
Securities. The walls of separation will include all of the following 
characteristics and such others as may from time to time be considered 
reasonable by MLPF&S and the Advisor to facilitate the factual 
independence of the Advisor from MLPF&S.
    (a) The Advisor will maintain offices physically separate from 
those of MLPF&S.
    (b) The compensation of persons assigned to the Advisor (i.e., 
executive, administrative or investment personnel) will not depend on 
the volume or nature of trades effected by the Advisor for the Funds 
with MLPF&S under this exemption, except to the extent that such trades 
may affect the profits and losses of BAC and its subsidiaries as a 
whole or to the extent that such trades affect the investment 
performance of a Fund.
    (c) MLPF&S will not share any of its respective profits or losses 
on such transactions with the Advisor, except to the extent that such 
profits and losses affect the general firmwide compensation of BAC and 
its subsidiaries as a whole.
    (d) Personnel assigned to the Advisor's investment advisory 
operations on behalf of the Funds will be exclusively devoted to the 
investment advisory business and affairs of the Advisor and the 
businesses of its affiliates (other than MLPF&S), and have lines of 
reporting solely within the Advisor or its affiliates (other than 
MLPF&S). The personnel assigned to the Advisor's investment advisory 
operations that are also involved with the business of other affiliates 
have absolutely no function or responsibility with respect to MLPF&S.
    (e) Personnel assigned to MLPF&S will not participate in the 
decision-making process for or otherwise seek to influence the Advisor 
other than in the normal course of sales and dealer activities of the 
same nature as are simultaneously being carried out with respect to 
nonaffiliated institutional clients. The Advisor, on the one hand, and 
MLPF&S, on the other, may nonetheless maintain affiliations other than 
with respect to the Funds, and in addition with respect to the Funds as 
follows:
    (i) Advisor personnel may rely on research, including credit 
analysis and

[[Page 47621]]

reports prepared internally by various subsidiaries and divisions of 
MLPF&S.
    (ii) Certain senior executives of BAC with responsibility for 
overseeing operations of various divisions, subsidiaries and affiliates 
of BAC are not precluded from exercising those functions over the 
Advisor because they oversee MLPF&S as well; provided that such persons 
shall not have any involvement with respect to proposed transactions 
pursuant to the exemption and will not in any way attempt to influence 
or control the placing by the Funds or the Advisor of orders in respect 
of Eligible Securities with MLPF&S.
    8. Record-Keeping Requirements--The Funds and the Advisor will 
maintain such records with respect to those transactions conducted 
pursuant to the exemption as may be necessary to confirm compliance 
with the conditions to the requested relief. In this regard:
    (a) Each Fund shall maintain an itemized daily record of all 
purchases and sales of instruments pursuant to the exemption, showing 
for each transaction: the name and quantity of instruments; the unit 
purchase or sale price; the time and date of the transaction; and 
whether such instrument was a First Tier Security or a Second Tier 
Security. Such records also shall, for each transaction, document two 
quotations received from other dealers for comparable instruments 
(except that, in the case of repurchase agreements and consistent with 
condition 4, if quotations are unavailable from two such dealers only 
one other competitive quotation is required), including: the names of 
the dealers; the names of the instruments; the prices quoted; the times 
and dates the quotations were received; and whether such instruments 
were First Tier Securities or Second Tier Securities.
    (b) Each Fund shall maintain a ledger or other record showing, on a 
daily basis, the percentage of the Fund's Total Assets (or, in the case 
of a Fund that is not subject to Rule 2a-7, the percentage of the total 
of its cash, cash items and Eligible Securities) represented by Second 
Tier Securities acquired from MLPF&S.
    (c) Each Fund shall maintain records sufficient to verify 
compliance with the volume limitations contained in condition 3, above. 
MLPF&S will provide the Funds with all records and information 
necessary to implement this requirement.
    (d) Each Fund shall maintain records sufficient to verify 
compliance with the requirements related to repurchase agreements 
contained in condition 2, above.
    The records required by this condition 8 will be maintained and 
preserved in the same manner as records required under rule 31a-1(b)(1) 
of the Act.
    9. Guidelines--MLPF&S and the Advisor, with the assistance of their 
compliance departments, will prepare and, as necessary, update 
guidelines for personnel of the MLPF&S or the Advisor, as the case may 
be, to make certain that transactions conducted pursuant to the 
exemption comply with the conditions set forth therein, and that the 
parties generally maintain arm's-length relationships. In training 
personnel of MLPF&S, particular emphasis will be given to the fact that 
the Funds are to receive rates as favorable as other institutional 
purchasers buying the same quantities. The compliance departments of 
MLPF&S and the Advisor will periodically monitor the activities of 
MLPF&S and the Advisor to make certain that the conditions set forth in 
the exemption are adhered to.
    10. Audit Committee Review--The audit committee or another 
committee which, in each case, consists of members of the Board who are 
not interested persons as defined in section 2(a)(19) of the Act 
(``Independent Members''), will approve, periodically review and update 
as necessary, guidelines for the Advisor and MLPF&S reasonably designed 
to ensure that transactions conducted pursuant to the exemption comply 
with the conditions set forth herein and that the procedures described 
herein are followed in all respects. The respective audit committees 
will periodically monitor the activities of the Funds, the Advisor and 
MLPF&S in this regard to ensure that these matters are being 
accomplished.
    11. Scope of Exemption--Applicants expressly acknowledge that any 
order issued on the application would grant relief from section 17(a) 
of the Act only, and would not grant relief from any other section of, 
or rule under, the Act including, without limitation, Rule 2a-7.
    12. Board Review--The Board, including a majority of the 
Independent Members, will have approved each Fund's participation in 
transactions conducted pursuant to the exemption and determined that 
such participation by the Fund is in the best interests of the Fund and 
its shareholders. The minutes of the meeting of the Board at which this 
approval is given will reflect in detail the reasons for the Board's 
determinations. The Boards will review no less frequently than annually 
a Fund's participation in transactions conducted pursuant to the 
exemption during the prior year and determine whether the Fund's 
participation in such transactions continues to be in the best 
interests of the Fund and its shareholders. Such review will include 
(but not be limited to): (a) A comparison of the volume of transactions 
in each type of instrument conducted pursuant to the exemption to the 
market presence of MLPF&S in the market for that type of instrument; 
and (b) a determination that the Funds are maintaining appropriate 
trading relationships with other sources for each type of instrument to 
ensure that there are appropriate sources for the quotations required 
by condition 4 above. The minutes of the meetings of the Boards at 
which this determination is made will reflect in detail the reasons for 
the Boards' determinations.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-19852 Filed 8-4-11; 8:45 am]
BILLING CODE 8011-01-P