80 FR 50341 - Janus Investment Fund, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 160 (August 19, 2015)

[Federal Register Volume 80, Number 160 (Wednesday, August 19, 2015)]
[Notices]
[Pages 50341-50347]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-20413]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31753; File No. 812-14412]


Janus Investment Fund, et al.; Notice of Application

August 13, 2015.
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), 12(d)(1)(B) and 12(d)(1)(C) of the Act, 
under sections 6(c) and 17(b) of the Act for an exemption from section 
17(a) of the Act, and under section 6(c) of the Act for an exemption 
from rule 12d1-2(a) under the Act.

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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, registered closed-end 
management companies, business development companies as defined by 
section 2(a)(48) of the Act (``business development companies''), and 
registered 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: Janus Investment Fund, Janus Aspen Series (together with 
Janus Investment Fund, the ``Trusts''), Janus Capital Management LLC 
(``Initial Adviser'') and Janus Distributors LLC (``Distributor'').

Filing Dates: The application was filed on January 6, 2015 and amended 
on April 14, 2015 and on July 31, 2015.

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 September 8, 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, 151 Detroit Street, 
Denver CO 80206.

FOR FURTHER INFORMATION CONTACT: Robert Shapiro, Senior Counsel, at 
(202) 551-7758 or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

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

Applicants' Representations

    1. Janus Investment Fund is organized as a Massachusetts business 
trust and Janus Aspen Series is registered as a Delaware statutory 
trust. Each Trust is registered with the Commission as an open-end 
management investment company under the Act with multiple series.\1\ 
Each Fund will pursue distinct investment objectives and strategies, 
will hold securities and may hold other instruments as well. A Fund may 
serve as a funding vehicle for variable annuity and variable life 
contracts (``Contracts,'' and owners of such Contracts, ``Contract 
Owners'') offered through separate accounts that are registered under 
the Act (``Registered Separate Accounts'') or exempt from registration 
under the Act (``Unregistered Separate Accounts,'' and together with 
Registered Separate Accounts, ``Separate Accounts'').\2\
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    \1\ Applicants request that the order apply not only to any 
existing series of the Trusts, but that the order also extend to any 
future series of a Trust and any other existing or future registered 
open-end management investment companies and any series thereof that 
are part of the same ``group of investment companies,'' as defined 
in section 12(d)(1)(G)(ii) of the Act, as a Trust and are, or may in 
the future be, advised by the Initial Adviser or any other 
investment adviser controlling, controlled by, or under common 
control with the Initial Adviser (together with the existing series 
of the Trusts, each series a ``Fund,'' and collectively, the 
``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 and the requested order.
    \2\ Applicants state that series of the Janus Aspen Series 
currently serve as funding vehicles for Separate Accounts, and that 
future Funds may also serve as funding vehicles for Separate 
Accounts.
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    2. The Initial Adviser is organized as a Delaware limited liability 
company and is registered as an ``investment adviser'' under the 
Investment Advisers Act of 1940 (the ``Advisers Act''). The Initial 
Adviser, or an entity controlling, controlled by, or under common 
control with the Initial Adviser, serves, or will serve, as the 
investment adviser for each of the Funds.\3\ The Adviser may enter into 
sub-advisory agreements with one or more additional investment advisers 
to act as ``Sub-Advisers'' with respect to particular Funds (each, a 
``Sub-Adviser''). Any Sub-Adviser to a Fund will be registered with the 
Commission as an investment adviser under the Advisers Act or not 
subject to such registration. The Distributor is a Broker (as defined 
below) and serves as the existing Funds' principal underwriter and 
distributor.
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    \3\ All references to the ``Initial Adviser'' include any 
successors in interest to Janus Capital Management LLC. A 
``successor'' is limited to an entity that results from a 
reorganization into another jurisdiction or a change in the type of 
business organization. The term ``Adviser'' includes (i) the Initial 
Adviser and (ii) any entity controlling, controlled by, or under 
common control with the Initial Adviser that serves as an investment 
adviser to the Funds.
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    3. Applicants request relief to the extent necessary to permit: (a) 
Each Fund (each, a ``Fund of Funds,'' and collectively, the ``Funds of 
Funds'') to acquire shares of registered open-end management investment 
companies (each an ``Unaffiliated Open-End Investment Company''), 
registered closed-end management investment

[[Page 50342]]

companies, business development companies (each registered closed-end 
management investment company and each business development company, an 
``Unaffiliated Closed-End Investment Company'' and, together with the 
Unaffiliated Open-End Investment Companies, the ``Unaffiliated 
Investment Companies''), and UITs (the ``Unaffiliated UITs,'' and, 
collectively with the Unaffiliated Investment Companies, the 
``Unaffiliated Funds''), in each case, that are not part of the same 
``group of investment companies'' as the Funds of Funds; \4\ (b) the 
Unaffiliated Funds, their principal underwriters and any broker or 
dealer registered under the Securities Exchange Act of 1934 (the ``1934 
Act'') (``Broker'') to sell shares of such Unaffiliated Funds to the 
Funds of Funds; (c) the Funds of Funds to acquire shares of other 
registered investment companies, including open-end management 
investment companies and series thereof, registered closed-end 
management investment companies and business development companies, and 
UITs (if any), in the same group of investment companies as the Funds 
of Funds (collectively, the ``Affiliated Funds,'' and, together with 
the Unaffiliated Funds, the ``Underlying Funds''); \5\ and (d) the 
Affiliated Funds, their principal underwriters and any Broker to sell 
shares of the Affiliated Funds to the Funds of Funds.\6\ 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 to redeem 
their shares from Funds of Funds.
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    \4\ For purposes of the request for relief, the term ``group of 
investment companies'' means any two or more registered investment 
companies, including closed-end investment companies and business 
development companies, that hold themselves out to investors as 
related companies for purposes of investment and investor services.
    \5\ Certain of the Underlying Funds may be registered under the 
Act as either UITs or open-end management investment companies and 
have obtained exemptions from the Commission necessary to permit 
their shares to be listed and traded on a national securities 
exchange at negotiated prices and, accordingly, to operate as 
exchange-traded funds (collectively, ``ETFs'' and each, an ``ETF''). 
In addition, certain of the Underlying Funds may in the future 
pursue their investment objectives through a master-feeder 
arrangement in reliance on section 12(d)(1)(E) of the Act. In 
accordance with condition 12, a Fund of Funds may not invest in an 
Underlying Fund that operates as a feeder fund unless the feeder 
fund is part of the same ``group of investment companies'' as 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 the Fund of Funds and Affiliated Fund, the 
master fund would be an Unaffiliated Fund for purposes of the 
application and its conditions.
    \6\ Applicants state that they do not believe that investments 
in business development companies present any particular 
considerations or concerns that may be different from those 
presented by investments in registered closed-end investment 
companies. In addition, applicants represent that the Funds of Funds 
will not invest in reliance on the order in business development 
companies or closed-end investment companies that are not listed and 
traded on a national securities exchange.
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    4. Certain Underlying Investment Companies may invest up to 25% of 
their assets in a wholly-owned and controlled subsidiary of the 
Underlying Investment Company, organized under the laws of the Cayman 
Islands as an exempted company or under the laws of another non-U.S. 
jurisdiction (each, a ``Wholly-Owned Subsidiary''), in order to invest 
in commodity-related instruments and certain other instruments. For an 
Underlying Investment Company that invests in a Wholly-Owned 
Subsidiary, an investment adviser to the Underlying Investment Company 
would serve as investment adviser to the Wholly-Owned Subsidiary.
    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 (``Section 12(d)(1)(G) Fund of 
Funds'') and that otherwise complies with rule 12d1-2(a) under the Act 
to also invest, to the extent consistent with its investment 
objective(s), 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. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act, in relevant part, prohibits a 
registered investment company from acquiring shares of an investment 
company if the securities represent more than 3% of the total 
outstanding voting stock of the acquired company, more than 5% of the 
total assets of the acquiring company, or, together with the securities 
of any other investment companies, more than 10% of the total assets of 
the acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter, and 
any broker or dealer from selling the investment company's shares to 
another investment company if the sale will cause the acquiring company 
to own more than 3% of the acquired company's 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. Section 12(d)(1)(C) prohibits an investment 
company from acquiring any security issued by a registered closed-end 
investment company if such acquisition would result in the acquiring 
company, any other investment companies having the same investment 
adviser, and companies controlled by such investment companies, 
collectively, owning more than 10% of the outstanding voting stock of 
the registered closed-end investment company.
    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 from the limitations of sections 12(d)(1)(A), 
(B) and (C) to the extent necessary to permit: (i) The Funds of Funds 
to acquire shares of Underlying Funds in excess of the limits set forth 
in section 12(d)(1)(A) and (C) of the Act; and (ii) the Underlying 
Funds, their principal underwriters and any Broker to sell shares of 
the Underlying Funds to the Funds of Funds in excess of the limits set 
forth in section 12(d)(1)(B) of the Act.
    3. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 12(d)(1)(A), (B) and 
(C), 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 submit that the proposed structure will not result in 
the exercise of undue influence by the Fund of Funds or its affiliated 
persons over the Underlying Funds. Applicants assert that the concern 
about undue influence does not arise in connection with a Fund of 
Funds' investment in the Affiliated Funds because they are part of the 
same group of investment companies. To limit the control a Fund of 
Funds or Fund of Funds Affiliate \7\

[[Page 50343]]

may have over an Unaffiliated Fund, applicants propose a condition 
prohibiting the Adviser and any person controlling, controlled by or 
under common control with the Adviser, and any investment company and 
any issuer that would be an investment company but for section 3(c)(1) 
or section 3(c)(7) of the Act advised or sponsored by the Adviser or 
any person controlling, controlled by or under common control with the 
Adviser (collectively, the ``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 Sub-Adviser 
to a Fund of Funds and any person controlling, controlled by or under 
common control with the Sub-Adviser, and any investment company or 
issuer that would be an investment company but for section 3(c)(1) or 
3(c)(7) of the Act (or portion of such investment company or issuer) 
advised or sponsored by the Sub-Adviser or any person controlling, 
controlled by or under common control with the Sub-Adviser 
(collectively, the ``Sub-Adviser Group'').
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    \7\ A ``Fund of Funds Affiliate'' is the Adviser, any Sub-
Adviser, 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(s), sponsor, promoter or 
principal underwriter of any Unaffiliated Fund or any person 
controlling, controlled by or under common control with any of those 
entities.
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    5. With respect to closed-end Underlying Funds, applicants note 
that although closed-end funds may not be unduly influenced by a 
holder's right of redemption, closed-end Underlying Funds may be unduly 
influenced by a holder's ability to vote a large block of stock. To 
address this concern, applicants submit that, with respect to a Fund's 
investment in an Unaffiliated Closed-End Investment Company, (i) each 
member of the Group or Sub-Adviser Group that is an investment company 
or an issuer that would be an investment company but for section 
3(c)(1) or 3(c)(7) of the Act will vote its shares of the Unaffiliated 
Closed-End Investment Company in the manner prescribed by section 
12(d)(1)(E) of the Act and (ii) each other member of the Group or Sub-
Adviser Group will vote its shares of the Unaffiliated Closed-End 
Investment Company in the same proportion as the vote of all other 
holders of the same type of such Unaffiliated Closed-End Investment 
Company's shares. Applicants state that, in this way, an Unaffiliated 
Closed-End Investment Company will be protected from undue influence by 
a Fund of Funds through the voting of the Unaffiliated Closed-End 
Investment Company's shares.
    6. With respect to Separate Accounts, applicants state that a 
Registered Separate Account will seek voting instructions from its 
Contract Owners and will vote its shares of an Unaffiliated Fund in 
accordance with the instructions received and will vote those shares 
for which no instructions were received in the same proportion as the 
shares for which instructions were received. An Unregistered Separate 
Account will either: (i) Vote its shares of the Unaffiliated Fund in 
the same proportion as the vote of all other holders of the 
Unaffiliated Fund's shares; or (ii) seek voting instructions from its 
Contract Owners and vote its shares of the Unaffiliated Fund in 
accordance with the instructions received and vote those shares for 
which no instructions were received in the same proportion as the 
shares for which instructions were received.
    7. 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'').\8\
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    \8\ An ``Underwriting Affiliate'' is a principal underwriter in 
any underwriting or selling syndicate that is an officer, director, 
trustee, advisory board member, investment adviser, sub-adviser or 
employee of the Fund of Funds, or a person of which any such 
officer, director, trustee, investment adviser, sub-adviser, member 
of an advisory board 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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    8. To further ensure that an Unaffiliated Investment Company 
understands the implications of a Fund of Funds' investment under the 
requested exemptive relief, prior to its investment in the shares of an 
Unaffiliated Investment Company in excess of the limit of section 
12(d)(1)(A)(i) of the Act, a Fund of Funds and the Unaffiliated 
Investment Company will execute an agreement stating, without 
limitation, that each of their boards of directors or trustees (for any 
entity, the ``Board'') and their investment advisers understand the 
terms and conditions of the order and agree to fulfill their 
responsibilities under the order (the ``Participation Agreement''). 
Applicants note that an Unaffiliated Investment Company (including an 
ETF or an Unaffiliated Closed-End Investment Company) would also retain 
its right to reject any initial investment by a Fund of Funds in excess 
of the limits in section 12(d)(1)(A)(i) of the Act by declining to 
execute the Participation Agreement with the Fund of Funds. In 
addition, an Unaffiliated Investment Company (other than an ETF or 
closed-end fund 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. Finally, subject solely to the giving of 
notice to a Fund of Funds and the passage of a reasonable notice 
period, an Unaffiliated Fund (including an ETF or an Unaffiliated 
Closed-End Investment Company) could terminate a Participation 
Agreement with the Fund of Funds.
    9. Applicants state that they do not believe that the proposed 
arrangement will result in 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 (the ``Independent Trustees''), will find that the management or 
advisory fees charged under a Fund of Funds' 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. 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 an affiliated person of the 
Adviser by the Unaffiliated Investment Company, in connection with the 
investment by the Fund of Funds in the Unaffiliated Fund.
    10. Applicants state that, with respect to Registered Separate 
Accounts that invest in a Fund of Funds, no sales load will be charged 
at the Fund of Funds level or at the Underlying Fund level. Other sales 
charges and services fees, as defined in Rule 2830 of the NASD Conduct 
Rules (``NASD Conduct Rule 2830''), if any, will only be charged at the 
Fund of Funds level or at the Underlying Fund level, not both.\9\ With 
respect to other investments in a Fund of Funds, any sales charges and/
or service fees charged with respect to shares of a Fund of Funds will 
not exceed the limits applicable to funds of funds as set forth in NASD 
Conduct Rule 2830.
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    \9\ Any references to NASD Conduct Rule 2830 include any 
successor or replacement FINRA rule to NASD Conduct Rule 2830.
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    11. Applicants represent that each Fund of Funds will represent in 
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Participation Agreement that no insurance company sponsoring a 
Registered Separate Account funding Contracts will be permitted to 
invest in the Fund of Funds unless the insurance company has certified 
to the Fund of Funds that the aggregate of all fees and charges 
associated with each contract that invests in the Fund of Funds, 
including fees and charges at the Separate Account, Fund of Funds, and 
the Underlying Fund levels, are reasonable in relation to the services 
rendered, the expenses expected to be incurred, and the risks assumed 
by the insurance company.
    12. 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 other investment company or company 
relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the 
limits contained in section 12(d)(1)(A) of the Act, except in certain 
circumstances identified in condition 12 below.
    13. Applicants state that investments by an Underlying Investment 
Company in a Wholly-Owned Subsidiary also do not raise concerns about 
undue influence, layering of fees and complex structures. Applicants 
represent that, with respect to each Underlying Investment Company in 
which a Fund of Funds will invest that has a Wholly-Owned Subsidiary: 
(1) Such Underlying Investment Company will be the sole and legal 
beneficial owner of its Wholly-Owned Subsidiary; (2) an investment 
adviser to such Underlying Investment Company will manage the 
investments of both the Underlying Investment Company and its Wholly-
Owned Subsidiary; (3) such Underlying Investment Company's investment 
in the Wholly-Owned Subsidiary enables the Underlying Investment 
Company to continue to qualify as a regulated investment company under 
subchapter M of the Internal Revenue Code of 1986; and (4) there will 
be no inappropriate layering of fees and expenses as a result of such 
Underlying Investment Company investing in a Wholly-Owned Subsidiary. 
Applicants further represent that an Underlying Investment Company that 
invests in a Wholly-Owned Subsidiary will consolidate its financial 
statements with the Wholly-Owned Subsidiary's financial statements, 
provided that the applicable accounting standards permit consolidation. 
In addition, in assessing compliance with the asset coverage 
requirements under section 18(f) of the Act, an Underlying Investment 
Company will deem the assets, liabilities and indebtedness of a Wholly-
Owned Subsidiary in which the Underlying Investment Company invests as 
its own. In addition, the expenses of the Wholly-Owned Subsidiary are 
included in the total annual fund operating expenses in the prospectus 
of the relevant Underlying Investment Company.

B. Section 17(a)

    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and its 
affiliated persons or affiliated persons of such persons. Section 
2(a)(3) of the Act defines an ``affiliated person'' of another person 
to include (a) any person directly or indirectly owning, controlling, 
or holding with power to vote, 5% or more of the outstanding voting 
securities of the other person; (b) any person 5% or more of whose 
outstanding voting securities are directly or indirectly owned, 
controlled, or held with power to vote by the other person; and (c) any 
person directly or indirectly controlling, controlled by, or under 
common control with the other person.
    2. Applicants state that the Funds of Funds and the Affiliated 
Funds may be deemed to be under the common control of the Adviser and, 
therefore, affiliated persons of one another. Applicants also state 
that a Fund of Funds and an Unaffiliated Fund also may be deemed to be 
affiliated persons of one another if the Fund of Funds owns 5% or more 
of the outstanding voting securities of such Unaffiliated Fund. 
Applicants state that the sale of shares by the Unaffiliated Open-End 
Investment Companies or Unaffiliated UITs to the Funds of Funds and the 
redemption of those shares by the Funds of Funds could be deemed to 
violate section 17(a) of the Act.\10\
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    \10\ 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 the Fund of Funds of shares of 
an Underlying Fund or (b) an affiliated person of an Underlying 
Fund, or an affiliated person of such person, for the sale by the 
Underlying Fund of its shares to a Fund of Funds may be prohibited 
by section 17(e) (1) of the Act. The Participation Agreement also 
will include this acknowledgement.
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    3. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise prohibited by section 17(a) if 
it finds that (i) The terms of the proposed transaction are fair and 
reasonable and do not involve overreaching on the part of any person 
concerned; (ii) the proposed transaction is consistent with the 
policies of each registered investment company concerned; and (iii) the 
proposed transaction is consistent with the general purposes of the 
Act. Section 6(c) of the Act permits the Commission to exempt any 
person or transactions from any provision of the Act if such exemption 
is necessary or appropriate in the public interest and consistent with 
the protection of investors and the purposes fairly intended by the 
policy and provisions of the Act.
    4. Applicants submit that the proposed transactions satisfy the 
standards for relief under sections 17(b) and 6(c) of the Act. 
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 in accordance with the rules and 
regulations under the Act.\11\ Applicants also 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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    \11\ Applicants note that a Fund of Funds generally would 
purchase and sell shares of an Underlying Fund that operates as an 
ETF or a closed-end fund through secondary market transactions 
rather than through principal transactions with the Underlying Fund. 
Applicants nevertheless request relief from sections 17(a)(1) and 
(2) to permit each ETF or closed-end fund that is an affiliated 
person, or an affiliated person of an affiliated person, as defined 
in section 2(a)(3) of the Act, of a Fund of Funds to sell shares to 
or redeem shares from the Fund of Funds. This includes, in the case 
of sales and redemptions of shares of ETFs, in-kind transactions 
that accompany such sales and redemptions. Applicants are not 
seeking relief from section 17(a) for, and the requested relief will 
not apply to, transactions where an ETF or closed-end fund could be 
deemed an affiliated person, or an affiliated person of an 
affiliated person, of a Fund of Funds because an investment adviser 
to the ETF or closed-end fund or an entity controlling, controlled 
by or under common control with the investment adviser to the ETF or 
closed-end fund, is also an investment adviser to the Fund of Funds.
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C. Other Investments by Section 12(d)(1)(G) Funds of Funds

    1. Section 12(d)(1)(G) of the Act provides that section 12(d)(1) 
will not apply to securities of an acquired company purchased by an 
acquiring company if: (i) The acquiring company and acquired company 
are part of the same ``group of investment companies,'' as defined in 
section 12(d)(1)(G)(ii) of the Act; (ii) the acquiring company holds 
only securities of acquired companies that are part of the same ``group 
of investment companies,'' as defined in section 12(d)(1)(G)(ii) of the 
Act, government securities, and short-term paper; (iii) the aggregate 
sales loads and distribution-related fees of the acquiring company and 
the acquired company are not excessive under rules adopted pursuant to 
section 22(b) or section 22(c) of the Act by a securities

[[Page 50345]]

association registered under section 15A of the 1934 Act or by the 
Commission; and (iv) the acquired company has a policy that prohibits 
it from acquiring securities of registered open-end management 
investment companies or registered UITs in reliance on section 
12(d)(1)(F) or (G) of the Act.
    2. Rule 12d1-2 under the Act permits a registered open-end 
investment company or a registered UIT that relies on section 
12(d)(1)(G) of the Act to acquire, in addition to securities issued by 
another registered investment company in the same group of investment 
companies, government securities, and short-term paper: (1) Securities 
issued by an investment company that is not in the same group of 
investment companies, when the acquisition is in reliance on section 
12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) securities (other than 
securities issued by an investment company); and (3) securities issued 
by a money market fund, when the investment is in reliance on rule 
12d1-1 under the Act. For the purposes of rule 12d1-2, ``securities'' 
means any security as defined in section 2(a)(36) of the Act.
    3. Applicants state that the proposed arrangement would comply with 
rule 12d1-2 under the Act, but for the fact that the Section 
12(d)(1)(G) Funds of Funds may invest a portion of their assets in 
Other Investments. Applicants request an order under section 6(c) of 
the Act for an exemption from rule 12d1-2(a) to allow the Section 
12(d)(1)(G) Funds of Funds to invest in Other Investments. Applicants 
assert that permitting a Section 12(d)(1)(G) Fund of Funds to invest in 
Other Investments as described in the application would not raise any 
of the concerns that section 12(d)(1) of the Act was intended to 
address.
    4. Consistent with its fiduciary obligations under the Act, a 
Section 12(d)(1)(G) Fund of Funds' Board will review the advisory fees 
charged by the Section 12(d)(1)(G) Fund of Funds' investment adviser(s) 
to ensure that the fees are based on services provided that are in 
addition to, rather than duplicative of, services provided pursuant to 
the advisory agreement of any investment company in which the Section 
12(d)(1)(G) Fund of Funds may invest.

Applicants' Conditions

A. Investments by Funds of Funds in Underlying Funds

    Applicants agree that the order granting the requested relief to 
permit Funds of Funds to invest in Underlying Funds shall be subject to 
the following conditions:
    1. The members of the Group will not control (individually or in 
the aggregate) an Unaffiliated Fund within the meaning of section 
2(a)(9) of the Act. The members of a Sub-Adviser Group will not control 
(individually or in the aggregate) an Unaffiliated Fund within the 
meaning of section 2(a)(9) of the Act. With respect to a Fund's 
investment in an Unaffiliated Closed-End Investment Company, (i) each 
member of the Group or Sub-Adviser Group that is an investment company 
or an issuer that would be an investment company but for section 
3(c)(1) or 3(c)(7) of the Act will vote its shares of the Unaffiliated 
Closed-End Investment Company in the manner prescribed by section 
12(d)(1)(E) of the Act and (ii) each other member of the Group or Sub-
Adviser Group will vote its shares of the Unaffiliated Closed-End 
Investment Company in the same proportion as the vote of all other 
holders of the same type of such Unaffiliated Closed-End Investment 
Company's shares. If, as a result of a decrease in the outstanding 
voting securities of any other Unaffiliated Fund, the Group or a Sub-
Adviser Group, each in the aggregate, becomes a holder of more than 25% 
of the outstanding voting securities of such Unaffiliated Fund, then 
the Group or the Sub-Adviser Group (except for any member of the Group 
or Sub-Adviser Group that is a Separate Account) will vote its shares 
of the Unaffiliated Fund in the same proportion as the vote of all 
other holders of the Unaffiliated Fund's shares. A Registered Separate 
Account will seek voting instructions from its Contract Owners and will 
vote its shares of an Unaffiliated Fund in accordance with the 
instructions received and will vote those shares for which no 
instructions were received in the same proportion as the shares for 
which instructions were received. An Unregistered Separate Account will 
either: (i) Vote its shares of the Unaffiliated Fund in the same 
proportion as the vote of all other holders of the Unaffiliated Fund's 
shares; or (ii) seek voting instructions from its Contract Owners and 
vote its shares in accordance with the instructions received and vote 
those shares for which no instructions were received in the same 
proportion as the shares for which instructions were received. This 
condition will not apply to a Sub-Adviser Group with respect to an 
Unaffiliated Fund for which the Sub-Adviser or a person controlling, 
controlled by, or under common control with the Sub-Adviser acts as the 
investment adviser within the meaning of section 2(a)(20)(A) of the Act 
(in the case of an Unaffiliated Investment Company) or as the sponsor 
(in the case of an Unaffiliated UIT).
    2. No Fund of Funds or Fund of Funds Affiliate will cause any 
existing or potential investment by the Fund of Funds in an 
Unaffiliated Fund to influence the terms of any services or 
transactions between the Fund of Funds or a Fund of Funds Affiliate and 
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
    3. The Board of each Fund of Funds, including a majority of the 
Independent Trustees, will adopt procedures reasonably designed to 
ensure that the Adviser and any Sub-Adviser 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 UIT) 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

[[Page 50346]]

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 interest of 
shareholders.
    7. Each Unaffiliated Investment Company will maintain and preserve 
permanently, in an easily accessible place, a written copy of the 
procedures described in the preceding condition, and any modifications 
to such procedures, and will maintain and preserve for a period of not 
less than six years from the end of the fiscal year in which any 
purchase in an Affiliated Underwriting occurred, the first two years in 
an easily accessible place, a written record of each purchase of 
securities in an Affiliated Underwriting once an investment by a Fund 
of Funds in the securities of an Unaffiliated Investment Company 
exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth 
(1) the party from whom the securities were acquired, (2) the identity 
of the underwriting syndicate's members, (3) the terms of the purchase, 
and (4) 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 set forth 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 set forth in 
section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated 
Investment Company of the investment. At such time, the Fund of Funds 
will also transmit to the Unaffiliated Investment Company a list of the 
names of each Fund of Funds Affiliate and Underwriting Affiliate. The 
Fund of Funds will notify the Unaffiliated Investment Company of any 
changes to the list as soon as reasonably practicable after a change 
occurs. The Unaffiliated Investment Company and the Fund of Funds will 
maintain and preserve a copy of the order, the Participation Agreement, 
and the list with any updated information for the duration of the 
investment and for a period of not less than six years thereafter, the 
first two years in an easily accessible place.
    9. Before approving any advisory contract under section 15 of the 
Act, the Board of each Fund of Funds, including a majority of the 
Independent Trustees, shall find that the advisory fees charged under 
the advisory contract are based on services provided that are in 
addition to, rather than duplicative of, services provided under the 
advisory contract(s) of any Underlying Fund in which the Fund of Funds 
may invest. Such finding, and the basis upon which the finding was 
made, will be recorded fully in the minute books of the appropriate 
Fund of Funds.
    10. The Adviser will waive fees otherwise payable to it by a Fund 
of Funds in an amount at least equal to any compensation (including 
fees received pursuant to any plan adopted by an Unaffiliated 
Investment Company pursuant to rule 12b-1 under the Act) received from 
an Unaffiliated Fund (or its Wholly-Owned Subsidiary) by the Adviser, 
or an affiliated person of the Adviser, other than any advisory fees 
paid to the Adviser or its affiliated person by the Unaffiliated 
Investment Company (or its Wholly-Owned-Subsidiary), in connection with 
the investment by the Fund of Funds in the Unaffiliated Fund. Any Sub-
Adviser will waive fees otherwise payable to the Sub-Adviser, directly 
or indirectly, by the Fund of Funds in an amount at least equal to any 
compensation received by the Sub-Adviser, or an affiliated person of 
the Sub-Adviser, from an Unaffiliated Fund (or its Wholly-Owned 
Subsidiary), other than any advisory fees paid to the Sub-Adviser or 
its affiliated person by the Unaffiliated Investment Company (or its 
Wholly-Owned Subsidiary), in connection with the investment by the Fund 
of Funds in the Unaffiliated Fund made at the direction of the Sub-
Adviser. In the event that the Sub-Adviser waives fees, the benefit of 
the waiver will be passed through to the applicable Fund of Funds.
    11. With respect to Registered Separate Accounts that invest in a 
Fund of Funds, no sales load will be charged at the Fund of Funds level 
or at the Underlying Fund level. Other sales charges and service fees, 
as defined in NASD Conduct Rule 2830, if any, will only be charged at 
the Fund of Funds level or at the Underlying Fund level, not both. With 
respect to other investments in a Fund of Funds, any sales charges and/
or service fees charged with respect to shares of a Fund of Funds will 
not exceed the limits applicable to funds of funds set forth in NASD 
Conduct Rule 2830.
    12. No Underlying Fund will acquire securities of any other 
investment company or company relying on section 3(c)(1) or 3(c)(7) of 
the Act, in excess of the limits contained in section 12(d)(1)(A) of 
the Act, other than any Wholly-Owned Subsidiary as described in the 
application, and except to the extent that such Underlying Fund: (a) 
Acquires such securities in compliance with section 12(d)(1)(E) of the 
Act and is either an Affiliated Fund or is in the same ``group of 
investment companies'' 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 inter-fund borrowing and lending transactions. Further, no 
Wholly-Owned Subsidiary will acquire securities of any other investment 
company or company relying on section 3(c)(1) or 3(c)(7) of the Act 
other than money market funds that comply with

[[Page 50347]]

rule 2a-7 for short-term cash management purposes.

B. Other Investments by Section 12(d)(1)(G) Funds of Funds

    In addition, applicants agree that the order granting the requested 
relief to permit Section 12(d)(1)(G) Funds of Funds to invest in Other 
Investments shall be subject to the following condition:
    1. Applicants will comply with all provisions of rule 12d1-2 under 
the Act, except for paragraph (a)(2) to the extent that it restricts 
any Section 12(d)(1)(G) Fund of Funds from investing in Other 
Investments as described in the application.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015-20413 Filed 8-18-15; 8:45 am]
BILLING CODE 8011-01-P