
[Federal Register: April 1, 2010 (Volume 75, Number 62)]
[Notices]               
[Page 16529-16533]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01ap10-128]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29192; File No. 812-13681]

 
Legg Mason Partners Equity Trust, et al.; Notice of Application

March 26, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 12(d)(1)(J) of 
the Investment Company Act of 1940 (``Act'') for an exemption from 
sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) and 
17(b) of the Act for an exemption from section 17(a) of the Act.

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SUMMARY OF THE APPLICATION: Applicants request an order that would 
permit certain series of registered open-end management investment 
companies to acquire shares of other registered open-end management 
investment companies and unit investment trusts (``UITs'') that are 
within or outside the same group of investment companies.

APPLICANTS:  Legg Mason Partners Equity Trust (``LMP Equity Trust''), 
Legg Mason Partners Variable Equity Trust (``LMP Variable Equity 
Trust,'' and together with LMP Equity Trust, the ``Trusts'') and Legg 
Mason Partners Fund Advisor, LLC (``LMPFA'' or the ``Adviser'').

FILING DATES: The application was filed on August 7, 2009 and amended 
on December 30, 2009.

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 April 20, 2010, 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: Secretary, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090; Applicants: Legg Mason Partners Equity 
Trust and Legg Mason Partners Variable Equity Trust, 55 Water Street, 
New York, NY 10041; Legg Mason Partners Fund Advisor, LLC, 620 Eighth 
Avenue, New York, NY 10018.

FOR FURTHER INFORMATION CONTACT: Lewis B. Reich, Senior Counsel, at 
(202) 551-6919, or Jennifer L. Sawin, Branch Chief, at (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. Each Trust is a Maryland business trust registered as an open-
end management investment company under the Act. Each Trust is a series 
trust whose shares are registered under the Securities Act of 1933, as 
amended.\1\ The series of LMP Variable Equity Trust are offered to 
registered separate accounts (``Registered Separate Accounts'') and 
unregistered separate accounts (``Unregistered Separate Accounts'') of 
insurance companies that are not affiliates of the Adviser; those 
separate accounts fund certain variable annuity and variable life 
insurance contracts and qualified retirement and pension plans 
(together with Registered Separate Accounts and the Unregistered 
Separate Accounts, the ``Variable Accounts'').\2\
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    \1\ Applicants request that the order also extend to any future 
series of the Trusts, 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) of the Act as the Trusts and that are, or in the 
future are, advised by the Adviser or any other investment adviser 
controlling, controlled by, or under common control with the Adviser 
(together with the existing series of the Trusts, 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.
    \2\ Each Fund that operates as a Fund of Funds as defined below, 
relies on the requested order and offers its shares to Variable 
Accounts, a ``Variable Fund of Funds''.
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    2. LMPFA is registered with the Commission as an investment adviser 
under the Investment Advisers Act of 1940 (``Advisers Act'') and serves 
as the investment adviser to each Trust. LMPFA provides administrative 
and certain oversight services to the Funds, manages the Funds' cash 
and short-term instruments and is responsible for the overall 
management of the Funds' investment programs. All investment advisers 
and subadvisers to any Fund

[[Page 16530]]

will be registered as investment advisers under the Advisers Act.
    3. Applicants request relief to the extent necessary to permit (a) 
Any Fund (each, a ``Fund of Funds'') to acquire shares of registered 
open-end management investment companies (the ``Unaffiliated Investment 
Companies'') and UITs (the ``Unaffiliated Trusts'', and together with 
the Unaffiliated Investment Companies, the ``Unaffiliated Funds'') that 
are not part of the same ``group of investment companies'' as defined 
in section 12(d)(1)(G)(ii) of the Act as the Fund of Funds; (b) the 
Unaffiliated Funds or their principal underwriters and any broker or 
dealer registered under the Securities Exchange Act of 1934 (``1934 
Act'') (``Broker'') to sell shares of the Unaffiliated Funds to the 
Fund of Funds, (c) the Funds of Funds to acquire shares of certain 
other Funds in the same ``group of investment companies'' as the Fund 
of Funds (the ``Affiliated Funds,'' and together with the Unaffiliated 
Funds, the ``Underlying Funds''), and (d) the Affiliated Funds, or 
their principal underwriters and any Broker to sell shares of the 
Affiliated Funds to the Funds of Funds. Certain of the Unaffiliated 
Funds may be registered under the Act as either UITs or open-end 
management investment companies that have received exemptive relief to 
permit their shares be listed and traded on a national securities 
exchange at negotiated prices (``ETFs''). Each Fund of Funds also may 
invest in securities and investments that are not issued by registered 
investment companies and that are consistent with its investment 
objective.

Applicants' Legal Analysis

A. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act 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 shares of the investment company 
to another investment company if the sale will cause the acquiring 
company to own more than 3% of the acquired company's voting stock, or 
if the sale will cause more than 10% of the acquired company's voting 
stock to be owned by investment companies generally.
    2. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security, or transaction, or any class or classes of 
persons, securities or transactions, from any provision of section 
12(d)(1) if the exemption is consistent with the public interest and 
the protection of investors. Applicants seek an exemption under section 
12(d)(1)(J) of the Act from the limitations of sections 12(d)(1)(A) and 
(B) to the extent necessary to permit (a) the Funds of Funds to acquire 
shares of the Underlying Funds in excess of the limits set forth in 
section 12(d)(1)(A) of the Act and (b) 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) and (B), 
which include concerns about undue influence 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 state that the proposed arrangement will not result 
in undue influence by a Fund of Funds or its affiliated persons over 
the Underlying Funds. The concern about undue influence does not arise 
in connection with a Fund of Funds' investment in the Affiliated Funds, 
since they are part of the same group of investment companies. To limit 
the control that a Fund of Funds or its affiliated persons may have 
over an Unaffiliated Fund, applicants will comply with condition 1 
below, which prohibits: (a) The Adviser, any person controlling, 
controlled by or under common control with the Adviser, any investment 
company and any issuer that would be an investment company but for 
section 3(c)(1) or section 3(c)(7) of the Act advised or sponsored by 
the Adviser or any person controlling, controlled by or under common 
control with the Adviser (collectively, the ``Group''), and (b) any 
other investment adviser within the meaning of section 2(a)(20)(B) of 
the Act to a Fund of Funds (``Sub-Adviser''), 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'') from 
controlling (individually or in the aggregate) an Unaffiliated Fund 
within the meaning of section 2(a)(9) of the Act.
    5. Applicants further state that they propose to prevent a Fund of 
Funds, 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 (each, a ``Fund of 
Funds Affiliate'') from taking advantage of an Unaffiliated Fund, with 
respect to transactions between the Fund of Funds or a Fund of Funds 
Affiliate and the Unaffiliated Fund or the Unaffiliated Fund's 
investment adviser(s), sponsor, promoter, principal underwriter or any 
person controlling, controlled by or under common control with any of 
these entities (each, an ``Unaffiliated Fund Affiliate''). 
Additionally, condition 5 precludes a Fund of Funds or Fund of Funds 
Affiliate (except to the extent it is acting in its capacity as an 
investment adviser to an Unaffiliated Investment Company or sponsor to 
an Unaffiliated Trust) from causing an Unaffiliated Fund to purchase a 
security in an offering of securities during the existence of any 
underwriting or selling syndicate of which a principal underwriter is 
an 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 (each, an ``Underwriting Affiliate,'' except any person whose 
relationship to the Unaffiliated Fund is covered by section 10(f) of 
the Act is not an Underwriting Affiliate). An offering of securities 
during the existence of any underwriting or selling syndicate of which 
a principal underwriter is an Underwriting Affiliate is an ``Affiliated 
Underwriting.''
    6. As an additional assurance that an Unaffiliated Investment 
Company understands and appreciates the implications of an investment 
by a Fund of Funds under the requested order, condition 8 requires that 
prior to a Fund of Funds' investment in the Unaffiliated Investment 
Company in excess of the limit of section 12(d)(1)(A)(i), a Fund of 
Funds and the Unaffiliated Investment Company will execute an agreement 
stating, without limitation, that their boards of directors or trustees 
(``Boards'') and their investment advisers understand the terms and 
conditions of

[[Page 16531]]

the order and agree to fulfill their responsibilities under the order 
(``Participation Agreement''). Applicants note that an Unaffiliated 
Fund (other than an ETF whose shares are purchased by a Fund of Funds 
in the secondary market) will retain the right to reject an investment 
by a Fund of Funds.\3\
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    \3\ An Unaffiliated Underlying Fund (including an ETF) would 
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.
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    7. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. With respect to investment advisory 
fees, applicants state that, in connection with the approval of any 
investment advisory contract under section 15 of the Act, the Board of 
each Fund of Funds, including a majority of the trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act 
(``Independent Trustees''), will find that the management or advisory 
fees charged under a Fund of Funds' advisory contract(s) are based on 
services provided that are in addition to, rather than duplicative of, 
services provided pursuant to any Underlying Fund's advisory 
contract(s). Applicants further state that the Adviser will waive fees 
otherwise payable to it by a Fund of Funds in an amount at least equal 
to any compensation (including fees received pursuant to any plan 
adopted by an Unaffiliated Investment Company pursuant to rule 12b-1 
under the Act) received from an Unaffiliated Fund by the Adviser, or an 
affiliated person of the Adviser, other than any advisory fees paid to 
the Adviser or an affiliated person of the Adviser by the Unaffiliated 
Fund, in connection with the investment by the Fund of Funds in the 
Unaffiliated Fund.
    8. Applicants state that with respect to Registered Separate 
Accounts that invest in a Variable Fund of Funds, no sales load will be 
charged at the Fund of Funds level or at the Underlying Fund level, and 
other sales charges and service fees, as defined in Rule 2830 of the 
Conduct Rules of the National Association of Securities Dealers (``NASD 
Conduct Rule 2830''),\4\ 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 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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    \4\ Any references to NASD Conduct Rule 2830 include any 
successor or replacement rule to Conduct Rule 2830 that may be 
adopted by the Financial Industry Regulatory Authority, Inc.
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    9. Applicants represent that each Variable Fund of Funds will 
represent in the Participation Agreement that no insurance company 
sponsoring a Registered Separate Account funding variable insurance 
contracts will be permitted to invest in the Variable Fund of Funds 
unless the insurance company has certified to such Fund of Funds that 
the aggregate of all fees and charges associated with each contract 
that invests in the Fund of Funds, including fees and charges at the 
separate account, Fund of Funds, and Underlying Fund levels, are 
reasonable in relation to the services rendered, the expenses expected 
to be incurred, and the risks assumed by the insurance company.
    10. Applicants state that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that an Underlying 
Fund will be prohibited from acquiring securities of any 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), except in 
certain circumstances identified in condition 12 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 its 
affiliated persons or affiliated persons of such persons. Section 
2(a)(3) of the Act defines an ``affiliated person'' of another person 
to include (a) Any person directly or indirectly owning, controlling, 
or holding with power to vote, 5% or more of the outstanding voting 
securities of the other person; (b) any person 5% or more of whose 
outstanding voting securities are directly or indirectly owned, 
controlled, or held with power to vote by the other person; and (c) any 
person directly or indirectly controlling, controlled by, or under 
common control with the other person.
    2. Applicants state that the Funds of Funds and the Affiliated 
Funds may be deemed to be under common control and therefore affiliated 
persons of one another. Applicants also state that the Funds of Funds 
and the Underlying Funds may be deemed to be affiliated persons of one 
another if a Fund of Funds acquires 5% or more of an Underlying Fund's 
outstanding voting securities. In light of these possible affiliations, 
section 17(a) could prevent an Underlying Fund from selling shares to 
and redeeming shares from a Fund of Funds.\5\
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    \5\ 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 
the Commission finds that (a) the terms of the proposed transaction are 
fair and reasonable and do not involve overreaching on the part of any 
person concerned; (b) the proposed transaction is consistent with the 
policies of each registered investment company involved; and (c) the 
proposed transaction is consistent with the general purposes of the 
Act. Section 6(c) of the Act permits the Commission to exempt any 
person or transactions from any provision of the Act if such exemption 
is necessary or appropriate in the public interest and consistent with 
the protection of investors and the purposes fairly intended by the 
policy and provisions of the Act.
    4. Applicants submit that the proposed transactions satisfy the 
standards for relief under sections 17(b) and 6(c) of the Act, as the 
terms are fair and reasonable and do not involve overreaching. 
Applicants state that the terms upon which an Underlying Fund will sell 
its shares to or purchase its shares from a Fund of Funds will be based 
on the net asset value of each Underlying Fund.\6\ Applicants also 
state that the proposed transactions will be consistent with the 
policies of each Fund of Funds and Underlying Fund, and with the 
general purposes of the Act.
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    \6\ Applicants note that a Fund of Funds generally would 
purchase and sell shares of an Unaffiliated Fund that operates as an 
ETF through secondary market transactions at market prices rather 
than through principal transactions with the Unaffiliated Fund at 
net asset value. Applicants would not rely on the requested relief 
from Section 17(a) for such secondary market transactions. A Fund of 
Funds could seek to transact in ``Creation Units'' directly with an 
ETF that is an Unaffiliated Fund pursuant to the requested section 
17(a) relief. Certain of the Affiliated Funds also may operate as 
ETFs; however, no Fund of Funds will be an ETF. Applicants are not 
requesting, and the Commission is not granting, any relief from 
section 17(a) to purchase and redeem Creation Units of any ETF that 
is an Affiliated Fund.
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Applicants' Conditions

    Applicants agree that the order granting the requested relief shall 
be subject to the following conditions:

[[Page 16532]]

    1. The members of the Group will not control (individually or in 
the aggregate) an Unaffiliated Fund within the meaning of section 
2(a)(9) of the Act. The members of a Sub-Adviser Group will not control 
(individually or in the aggregate) an Unaffiliated Fund within the 
meaning of section 2(a)(9) of the Act. If, as a result of a decrease in 
the outstanding voting securities of an Unaffiliated Fund, the Group or 
a Sub-Adviser Group, each in the aggregate, becomes a holder of more 
than 25% of the outstanding voting securities of the Unaffiliated Fund, 
then the Group or the Sub-Adviser Group 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 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 section 2(a)(20)(A) of the Act (in the case of an 
Unaffiliated Investment Company) or the sponsor (in the case of an 
Unaffiliated Trust). With respect to each Variable Fund of Funds, a 
Registered Separate Account will seek voting instructions from its 
contract holders 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 (a) 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 (b) seek voting instructions from its contract holders 
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.
    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 
assure that its 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 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 or not 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 assure that purchases of securities in 
Affiliated Underwritings are in the best interests 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 from 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, (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 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

[[Page 16533]]

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 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 Fund, in connection with the 
investment by the Fund of Funds in the Unaffiliated Fund. Any Sub-
Adviser will waive fees otherwise payable to the Sub-Adviser, directly 
or indirectly, by the Fund of Funds in an amount at least equal to any 
compensation received by the Sub-Adviser, or an affiliated person of 
the Sub-Adviser, from an Unaffiliated Fund, other than any advisory 
fees paid to the Sub-Adviser or its affiliated person by the 
Unaffiliated Investment Company, in connection with the investment by 
the Fund of Funds in the Unaffiliated Investment Company made at the 
direction of the Sub-Adviser. In the event that the Sub-Adviser waives 
fees, the benefit of the waiver will be passed through to the Fund of 
Funds.
    11. With respect to Registered Separate Accounts that invest in a 
Variable Fund of Funds, no sales load will be charged at the Fund of 
Funds level or at the Underlying Fund level, and other sales charges 
and service fees, as defined in NASD Conduct Rule 2830, if any, will 
only be charged at the Fund of Funds level or at the Underlying Fund 
level, not both. With respect to other investments in a Fund of Funds, 
any sales charges and/or service fees charged with respect to shares of 
a Fund of Funds will not exceed the limits applicable to funds of funds 
set forth in NASD Conduct Rule 2830.
    12. No Underlying Fund will acquire securities of any other 
investment company or company relying on section 3(c)(1) or 3(c)(7) of 
the Act in excess of the limits contained in section 12(d)(1)(A) of the 
Act, except to the extent that such Underlying Fund: (a) 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 (b) acquires 
(or is deemed to have acquired) securities of another investment 
company pursuant to exemptive relief from the Commission permitting 
such Underlying Fund to: (i) acquire securities of one or more 
affiliated investment companies for short-term cash management 
purposes, or (ii) engage in interfund borrowing and lending 
transactions.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7290 Filed 3-31-10; 8:45 am]
BILLING CODE 8011-01-P

