
[Federal Register Volume 77, Number 192 (Wednesday, October 3, 2012)]
[Notices]
[Pages 60484-60488]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-24293]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30222; 812-13820]


PowerShares Exchange-Traded Fund Trust, et al.; Notice of 
Application

September 26, 2012.
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 exemptions from 
sections 12(d)(1)(A), (B), and (C) 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 registered open-end management investment companies that 
operate as ``funds of funds'' to acquire shares of certain registered 
open-end and closed-end management investment companies and unit 
investment trusts that are within and outside the same group of 
investment companies as the acquiring investment companies.

Applicants: PowerShares Exchange-Traded Fund Trust, PowerShares 
Exchange-Traded Fund Trust II, PowerShares Actively Managed Exchange-
Traded Fund Trust (each, a ``Trust'') and Invesco PowerShares Capital 
Management LLC (the ``Adviser'').

Filing Dates: The application was filed on September 3, 2010, and 
amended on December 22, 2010, October 13, 2011, April 23, 2012, 
September 5, 2012, and September 20, 2012.

Hearing or Notification of Hearing:  An order granting the application 
will be issued unless the Commission orders

[[Page 60485]]

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 October 22, 2012, 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, 
301 West Roosevelt Road, Wheaton, Illinois 60187.

FOR FURTHER INFORMATION CONTACT: Jill Ehrlich, Senior Counsel, at (202) 
551-6819, or David P. Bartels, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

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. Each Trust is organized as a Massachusetts business trust or 
Delaware statutory trust and is registered as an open-end management 
investment company under the Act.\1\ Each series of a Trust will pursue 
distinct investment objectives and strategies. The Adviser is a 
Delaware limited liability company registered under the Investment 
Advisers Act of 1940. The Adviser or an entity controlling, controlled 
by or under common control with the Adviser serves as the investment 
adviser for each of the Funds.\2\
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    \1\ Applicants request that the order 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 the Trust and are, or may in 
the future be, 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 Trust, 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 set forth in the application.
    \2\ All references to the term ``Adviser'' include any entity 
that results from reorganization into another jurisdiction or a 
change in the type of business organization.
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    2. Applicants request relief to the extent necessary to permit: (a) 
A Fund (each, a ``Fund of Funds,'' and collectively, the ``Funds of 
Funds'') to acquire shares of registered management investment 
companies, including open-end investment companies and closed-end 
investment companies (``Unaffiliated OEFs'' and ``Unaffiliated CEFs,'' 
respectively, and, together, the ``Unaffiliated Investment 
Companies''), and unit investment trusts (``UITs'') (the ``Unaffiliated 
Trusts,'' and together 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; \3\ (b) the 
Unaffiliated Funds, their principal underwriters and any broker or 
dealer registered under the Securities Exchange Act of 1934 
(``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 investment companies, closed-
end investment companies and UITs in the same group of investment 
companies (the ``Affiliated Funds,'' together with the Unaffiliated 
Funds, the ``Underlying Funds''); \4\ and (d) the Affiliated Funds, 
their principal underwriters and any Broker to sell shares of such 
Affiliated Funds to the Funds of Funds. Applicants also request an 
order under sections 6(c) and 17(b) of the Act to exempt applicants 
from section 17(a) to the extent necessary to permit Underlying Funds 
to sell their shares to Funds of Funds and redeem their shares from 
Funds of Funds.
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    \3\ For purposes of the application, the same ``group of 
investment companies'' means any two or more registered investment 
companies, including closed-end investment companies, that hold 
themselves out to investors as related companies for purposes of 
investment and investor services.
    \4\ Certain of the Unaffiliated 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 (``ETFs''). Underlying Funds that are 
registered closed-end management investment companies are referred 
to herein as ``Underlying CEFs,'' and Underlying Funds that are ETFs 
are ``Underlying ETFs.'' Underlying Funds that are registered open-
end management investment companies and not ETFs are ``Underlying 
OEFs.''
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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 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 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. 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 request 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 a Fund

[[Page 60486]]

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 \5\ 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 other 
investment adviser within the meaning of section 2(a)(20)(B) of the Act 
to a Fund of Funds (``Sub-Adviser'') 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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    \5\ 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, sponsor, promoter or principal 
underwriter of an 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 Underlying CEFs, applicants submit that one 
significant difference from Underlying OEFs is that, whereas Underlying 
OEFs may be unduly influenced by the threat of large-scale redemptions, 
Underlying CEFs cannot be so influenced because they do not issue 
redeemable securities and, therefore, are not subject to large-scale 
redemptions. On the other hand, applicants state that Unaffiliated CEFs 
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 of Fund's investment in an Unaffiliated CEF, (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 CEF 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 CEF in the same proportion as the vote of all other 
holders of the same type of such Unaffiliated CEF's shares. Applicants 
state that, in this way, an Unaffiliated CEF will be protected from 
undue influence by a Fund of Funds through the voting of the 
Unaffiliated CEF's shares.
    6. Applicants propose other conditions to limit the potential for 
undue influence over the Unaffiliated Underlying 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'').\6\
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    \6\ 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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    7. To further ensure that an Unaffiliated Investment Company 
understands the implications of a Fund of Funds' investment under the 
requested 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 their boards of directors or trustees (each, a 
``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 Fund (including an Unaffiliated ETF or an Unaffiliated 
CEF) 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 Fund (other than an Unaffiliated 
ETF or an Unaffiliated CEF 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 Unaffiliated CEF) 
could terminate a Participation Agreement with the Fund of Funds.
    8. 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(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. 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.
    9. Applicants further state that 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 Rule 2830 of the 
Conduct Rules of the NASD.\7\
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    \7\ Any references to NASD Conduct Rule 2830 include any 
successor or replacement FINRA rule to NASD Conduct Rule 2830.
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    10. 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.

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

[[Page 60487]]

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 an Affiliated Fund may 
be deemed to be under common control and therefore affiliated persons 
of one another. Applicants also state that a Fund of Funds and an 
Underlying Fund may also be deemed to be affiliated persons of one 
another if a Fund of Funds owned 5% or more of one or more of such 
Underlying Funds' outstanding voting securities. Applicants state that, 
for example, the sale by an Underlying OEF to the Fund of Funds and the 
redemption by the Underlying OEF of the Fund of Funds may be deemed to 
violate section 17(a).\8\ Similarly, applicants state that, the 
participation by the Fund of Funds in a follow-on offering of an 
Underlying CEF may be deemed to violate section 17(a).\9\
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    \8\ 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.
    \9\ Applicants assert that they would not require relief from 
section 17(a) for secondary market transactions in the shares of any 
Underlying ETF or Underlying CEF, regardless of whether the Fund of 
Funds and Underlying Fund may be deemed to be affiliated persons.
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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.\10\ 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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    \10\ Applicants note that a Fund of Funds generally would 
purchase and sell shares of an Underlying ETF or an Underlying CEF 
through secondary market transactions rather than through principal 
transactions with such Underlying Fund. Applicants nevertheless 
request relief from sections 17(a)(1) and (2) to permit each Fund of 
Funds that is an affiliated person, or an affiliated person of an 
affiliated person, as defined in section 2(a)(3) of the Act, of an 
Underlying ETF or Underlying CEF to purchase and redeem shares from 
such Underlying ETF and to purchase shares from such Underlying CEF. 
Applicants are not seeking relief from section 17(a) for, and the 
requested relief will not apply to, transactions where an Underlying 
ETF or Underlying CEF could be deemed to be an affiliated person, or 
an affiliated person of an affiliated person, of a Fund of Funds 
because an investment adviser to the Underlying Fund is also an 
investment adviser to the Fund of Funds.
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Applicants' Conditions

    Applicants agree that the order granting the requested relief 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 CEF, (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 CEF 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 CEF 
in the same proportion as the vote of all other holders of the same 
type of Unaffiliated CEF'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 percent of the outstanding voting securities of such 
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 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 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 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).

[[Page 60488]]

    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 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 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, (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 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, 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 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 Fund of Funds.
    11. 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 
investment companies, for short-term cash management purposes or (ii) 
engage in inter-fund borrowing and lending transactions.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-24293 Filed 10-2-12; 8:45 am]
BILLING CODE 8011-01-P


