[Federal Register Volume 79, Number 14 (Wednesday, January 22, 2014)]
[Notices]
[Pages 3633-3637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-01135]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30858; File No. 812-14218]


ALPS Series Trust, et al.; Notice of Application

January 15, 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: 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: ALPS Series Trust (``Trust''), Brinker Capital, Inc. 
(``Fund of Funds Adviser''), and ALPS Distributors, Inc. (the 
``Distributor'').

DATES: Filing Dates: The application was filed on September 27, 2013 
and was amended on January 3, 2014.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on February 10, 2014, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street, NE., Washington, DC 20549-1090. Applicants: 
ALPS Series Trust, 1290 Broadway, Suite 1100, Denver, CO 80203; Brinker 
Capital, Inc., 1055 Westlakes Drive, Suite 250, Berwyn, PA; ALPS 
Distributors, Inc., 1290 Broadway, Suite 1100, Denver, CO 80203.

FOR FURTHER INFORMATION CONTACT: Jason M. Williams, Senior Counsel, at 
(202) 551-6817, or Daniele Marchesani, Branch Chief, at (202) 551-6817 
(Division of Investment Management, Chief Counsel's Office).

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

Applicants' Representations

    1. The Trust, a Delaware statutory trust, is registered under the 
Act as an open-end management investment company and offers shares of 
multiple series, 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 Trust and to each existing and future 
registered open-end management investment company or series thereof 
that is advised by the Fund of Funds Adviser or any entity 
controlling, controlled by or under common control with the Fund of 
Funds Adviser (any such entity is included in the term ``Fund of 
Funds 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 Trust (each, a ``Fund'' and collectively, ``Funds.''). All 
entities that currently intend to rely on the requested order are 
named as applicants. Any other entity that relies on the order in 
the future will comply with the terms and conditions of the 
application.
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    2. Brinker Capital, Inc., a Delaware corporation, is registered as 
an investment adviser under the Investment Advisers Act of 1940, as 
amended (the ``Advisers Act''). A Fund of Funds Adviser will serve as 
investment adviser to the Funds. Any other Fund of Funds Adviser will 
also be registered as an investment adviser under the Advisers Act.
    3. The Distributor, a Colorado corporation, is registered as a 
broker-dealer under the Securities Exchange Act of 1934 (the ``Exchange 
Act''). The Distributor, or another distributor, will serve 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 UITs that are not part of 
the same group of investment companies as the Fund of Funds 
(``Unaffiliated Trusts,'' and together with the Unaffiliated Investment 
Companies, ``Unaffiliated Funds'') \2\ or (ii) registered open-end 
management 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,'' 
and together with the Unaffiliated Funds, ``Underlying Funds'') \3\ and 
(b) each Underlying Fund, the Distributor or any principal underwriter 
for the Underlying Fund, and any broker or dealer registered

[[Page 3634]]

under the Exchange Act (``Broker'') to sell shares of the Underlying 
Fund to the Fund of Funds. Applicants also request an order under 
sections 6(c) and 17(b) of the Act to exempt applicants from section 
17(a) of the Act 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'').
    \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 11, a Fund of Funds may not invest in an 
Underlying Fund that operates as a feeder fund unless the feeder 
fund is part of the same ``group of investment companies,'' as 
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.
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    5. Applicants also request an exemption under section 6(c) of the 
Act from rule 12d1-2 under the Act to permit any existing or future 
Fund that relies on section 12(d)(1)(G) of the Act (``Same Group 
Investing Fund'') and that otherwise complies with 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'').

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 company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter, and 
any Broker from knowingly 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) 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 to permit a Fund of Funds to 
acquire shares of the Underlying Funds in excess of the limits in 
section 12(d)(1)(A) of the Act, and an Underlying Fund, the Distributor 
or 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) of the Act, 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.\4\ To limit the control 
that the Fund of Funds may have over an Unaffiliated Fund, applicants 
propose a condition prohibiting the Fund of Funds Adviser, any person 
controlling, controlled by, or under common control with the Fund of 
Funds 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 Fund of Funds Adviser or any person 
controlling, controlled by, or under common control with the Fund of 
Funds 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 sections 
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, member of an advisory board, 
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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    \4\ A ``Fund of Funds Affiliate'' is the Fund of Funds 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.\5\
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    \5\ 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 trustees who are not 
``interested persons'' (within the meaning of section 2(a)(19) of the 
Act) (``Independent Trustees''), 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

[[Page 3635]]

contract(s) of any Underlying Fund in which the Fund of Funds may 
invest. In addition, the Fund of Funds 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 Fund of Funds 
Adviser or an affiliated person of the Fund of Funds 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 the 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'').\6\
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    \6\ 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 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 Fund of Funds 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) of the Act 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) 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 
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.\7\ 
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.\8\ 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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    \7\ 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.
    \8\ 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, also is an investment adviser to the Fund of Funds.
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C. Other Investments by Same Group Investing Funds

    1. Section 12(d)(1)(G) of the Act provides that section 12(d)(1) of 
the Act 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 sections 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 
sections 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 under the 
Act, ``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 Investing Fund 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) under the Act to allow the Same 
Group Investing Funds to invest in Other Investments. Applicants assert 
that permitting Same Group Investing Funds to invest in Other 
Investments as described in the application would not raise any of the

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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, the 
Board of each Same Group Investing Fund will review the advisory fees 
charged by the Same Group Investing Fund's investment adviser to ensure 
that they are based on services provided that are in addition to, 
rather than duplicative of, services provided pursuant to the advisory 
agreement of any investment company in which the Same Group Investing 
Fund 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, an Advisory 
Group or a Subadvisory Group, each in the aggregate, becomes a holder 
of more than 25 percent of the outstanding voting securities of the 
Unaffiliated Fund, then the Advisory Group or the Subadvisory Group 
will vote its shares of the Unaffiliated Fund in the same proportion as 
the vote of all other holders of the Unaffiliated Fund's shares. This 
condition will not apply to a Subadvisory Group with respect to an 
Unaffiliated Fund for which the Subadviser or a person controlling, 
controlled by, or under common control with the Subadviser acts as the 
investment adviser within the meaning of section 2(a)(20)(A) of the Act 
(in the case of an Unaffiliated Investment Company) or as the sponsor 
(in the case of an Unaffiliated Trust).
    2. No Fund of Funds or Fund of Funds Affiliate will cause any 
existing or potential investment by the Fund of Funds in 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 Trustees, will adopt procedures reasonably designed to 
ensure that its Fund of Funds Adviser and any Subadviser(s) to the Fund 
of Funds are conducting the investment program of the Fund of Funds 
without taking into account any consideration received by the Fund of 
Funds or Fund of Funds Affiliate from an Unaffiliated Fund or an 
Unaffiliated Fund Affiliate in connection with any services or 
transactions.
    4. Once an investment by a Fund of Funds in the securities of an 
Unaffiliated Investment Company exceeds the limit of section 
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment 
Company, including a majority of the Independent Trustees, will 
determine that any consideration paid by the Unaffiliated Investment 
Company to a Fund of Funds or a Fund of Funds Affiliate in connection 
with any services or transactions: (a) Is fair and reasonable in 
relation to the nature and quality of the services and benefits 
received by the Unaffiliated Investment Company; (b) is within the 
range of consideration that the Unaffiliated Investment Company would 
be required to pay to another unaffiliated entity in connection with 
the same services or transactions; and (c) does not involve 
overreaching on the part of any person concerned. This condition does 
not apply with respect to any services or transactions between an 
Unaffiliated Investment Company and its investment adviser(s) or any 
person controlling, controlled by, or under common control with such 
investment adviser(s).
    5. No Fund of Funds or Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to an 
Unaffiliated Investment Company or sponsor to an Unaffiliated Trust) 
will cause an Unaffiliated Fund to purchase a security in any 
Affiliated Underwriting.
    6. The Board of an Unaffiliated Investment Company, including a 
majority of the Independent Trustees, will adopt procedures reasonably 
designed to monitor any purchases of securities by the Unaffiliated 
Investment Company in an Affiliated Underwriting once an investment by 
a Fund of Funds in the securities of the Unaffiliated Investment 
Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, 
including any purchases made directly from an Underwriting Affiliate. 
The Board of the Unaffiliated Investment Company will review these 
purchases periodically, but no less frequently than annually, to 
determine whether the purchases were influenced by the investment by 
the Fund of Funds in the Unaffiliated Investment Company. The Board of 
the Unaffiliated Investment Company will consider, among other things: 
(a) Whether the purchases were consistent with the investment 
objectives and policies of the Unaffiliated Investment Company; (b) how 
the performance of securities purchased in an Affiliated Underwriting 
compares to the performance of comparable securities purchased during a 
comparable period of time in underwritings other than Affiliated 
Underwritings or to a benchmark such as a comparable market index; and 
(c) whether the amount of securities purchased by the Unaffiliated 
Investment Company in Affiliated Underwritings and the amount purchased 
directly from an Underwriting Affiliate have changed significantly from 
prior years. The Board of the Unaffiliated Investment Company will take 
any appropriate actions based on its review, including, if appropriate, 
the institution of procedures designed to ensure that purchases of 
securities in Affiliated Underwritings are in the best interests of 
shareholders.
    7. Each Unaffiliated Investment Company shall maintain and preserve 
permanently in an easily accessible place a written copy of the 
procedures described in the preceding condition, and any modifications 
to such procedures, and 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)(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 in section 12(d)(1)(A)(i) of the Act, 
the Fund of Funds and the Unaffiliated Investment Company will execute 
a Participation Agreement stating, without limitation, that their 
Boards and their investment advisers understand the terms and 
conditions of the order and agree to fulfill their responsibilities 
under the order. At the time of its investment in shares of an 
Unaffiliated Investment Company in excess of the limit in section 
12(d)(1)(A)(i) of the Act, a Fund of Funds will notify the Unaffiliated

[[Page 3637]]

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 Trustees, 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. A Fund of Funds 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 Fund of Funds Adviser, or an 
affiliated person of the Fund of Funds Adviser, other than any advisory 
fees paid to the Fund of Funds 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 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 a 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 sections 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.
    12. Any sales charges and/or service fees charged with respect to 
shares of a Fund of Funds will not exceed the limits applicable to 
funds of funds set forth in NASD Conduct Rule 2830.

Other Investments by Same Group Investing Funds

    Applicants agree that the relief to permit Same Group Investing 
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 Investing Fund 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. 2014-01135 Filed 1-21-14; 8:45 am]
BILLING CODE 8011-01-P