
[Federal Register Volume 78, Number 248 (Thursday, December 26, 2013)]
[Notices]
[Pages 78417-78422]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30771]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30840; File No. 812-14198]


Forethought Variable Insurance Trust, et al.; Notice of 
Application

December 19, 2013.
AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of an application for an order under section 12(d)(1)(J) 
of the Investment Company Act of 1940 (the ``Act'') for an exemption 
from sections 12(d)(1)(A) and (B) of the Act, under sections 6(c) and 
17(b) of the Act for an exemption from 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: Applicants request an order that would (a) 
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,'' as 
defined in section 12(d)(1)(G)(ii) of the Act, as the acquiring 
investment companies, and (b) permit certain series of registered open-
end management investment companies relying on rule 12d1-2 under the 
Act to invest in certain financial instruments.

Applicants: Forethought Variable Insurance Trust (the ``Trust''), 
Forethought Investment Advisors, LLC (the ``Manager''), and Northern 
Lights Distributors, LLC (the ``Distributor'').

DATES: Filing Dates: The application was filed on August 8, 2013, and 
amended on November 20, 2013.

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 January 13, 2014, and should be accompanied by proof of service 
on applicants in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: The Commission: Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants: 
the Trust and the Manager, 300 North Meridian Street, Suite 1800, 
Indianapolis, IN 46204; the Distributor, 17605 Wright Street, Omaha, NE 
68130.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 551-6879, or David P Bartels, 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. The Trust is a Delaware statutory trust, registered under the 
Act as an open-end management investment company, and is comprised of 
multiple series, each of which has its own investment objective, 
policies and restrictions.\1\ Shares of the Series are not offered 
directly to the public. Shares of the Series are offered through 
separate accounts that are registered as UITs under the Act 
(``Registered Separate Accounts'') or accounts that are exempt from 
registration under the Act (``Unregistered Separate Accounts,'' and 
together with the Registered Separate Accounts, ``Separate Accounts'') 
of Forethought Insurance Company (the ``Participating Insurance 
Company'') and serve as the underlying funding

[[Page 78418]]

vehicles for variable annuity contracts (the ``Contracts'') issued by 
the Participating Insurance Company. Shares of the Series may also be 
offered to qualified pension and retirement plans, certain of the 
general accounts of the insurance companies that are permitted to hold 
shares of Series that are designed to fund insurance products, or to 
other Series.
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    \1\ Applicants request that the order extend to any future 
series of the Trust, and any other existing or future registered 
open-end management investment company and 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 Manager or any other investment 
adviser controlling, controlled by, or under common control with the 
Manager (each, a ``Series''). All entities that currently intend to 
rely on the requested order are named as applicants. Any other 
entity that relies on the order in the future will comply with the 
terms and conditions of the application.
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    2. The Manager is an Indiana Limited Liability Company registered 
as an investment adviser under the Investment Advisers Act of 1940, as 
amended (the ``Advisers Act''), and serves as investment adviser to the 
Series.
    3. The Distributor is a Nebraska limited liability company and 
serves as the Trust's principal underwriter and distributor. The 
Distributor is registered as a broker-dealer with the Commission and 
the Financial Industry Regulatory Authority, Inc. (``FINRA'').
    4. Applicants request relief to permit: (a) Certain Series (each, a 
``Fund of Funds,'' and collectively, the ``Funds of Funds'') to acquire 
shares of registered open-end management investment companies and UITs 
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 Funds of Funds 
(the ``Unaffiliated Investment Companies'' and ``Unaffiliated Trusts,'' 
respectively, and together, the ``Unaffiliated Funds''); \2\ (b) the 
Unaffiliated Investment Companies, their principal underwriters and any 
broker or dealer registered under the Securities Exchange Act of 1934, 
as amended (the ``Exchange Act'', and any such broker or dealer, a 
``Broker''), to sell shares of the Unaffiliated Investment Companies to 
the Funds of Funds in excess of the limitations in section 12(d)(1)(B) 
of the Act; (c) the Funds of Funds to acquire shares of certain other 
Series in the same ``group of investment companies,'' as defined in 
section 12(d)(1)(G)(ii) of the Act, as the Fund of Funds (the 
``Affiliated Funds,'' and together with the Unaffiliated Funds, the 
``Underlying Funds''); \3\ and (d) the Affiliated Funds, their 
principal underwriters and any Broker to sell shares of the Affiliated 
Funds to the Fund of Funds in excess of the limitations in section 
12(d)(1)(B) of the Act. Applicants also request an order under sections 
6(c) and 17(b) of the Act exempting the transactions described in (a) 
through (d) above from section 17(a) of the Act to the extent necessary 
to permit an Underlying Fund that is an affiliated person of a Fund of 
Funds to sell its shares to, and redeem its shares from, the Fund of 
Funds.
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    \2\ Certain of the Unaffiliated Funds may 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'').
    \3\ Certain of the Underlying Funds currently pursue, or may in 
the future pursue, their investment objectives through a master-
feeder arrangement in reliance on section 12(d)(1)(E) of the Act. In 
accordance with condition 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 
defined in section 12(d)(1)(G)(ii) of the Act, as its corresponding 
master fund or the Fund of Funds. If a Fund of Funds invests in an 
Affiliated Fund that operates as a feeder fund and the corresponding 
master fund is not within the same ``group of investment 
companies,'' as defined in section 12(d)(1)(G)(ii) of the Act, as 
the Fund of Funds and Affiliated Fund, the master fund would be an 
Unaffiliated Fund for purposes of the application and its 
conditions.
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    5. Applicants also request an exemption to the extent necessary to 
permit a Fund of Funds that invests in Underlying Funds in reliance on 
section 12(d)(1)(G) of the Act (a ``Section 12(d)(1)(G) Fund of 
Funds''), and that is eligible to invest in securities (as defined in 
section 2(a)(36) of the Act) in reliance on rule 12d1-2 under the Act, 
to also invest, to the extent consistent with its investment 
objectives, policies, strategies and limitations, in financial 
instruments that may not be securities within the meaning of section 
2(a)(36) of the Act (``Other Investments'').

Applicants' Legal Analysis

A. Investments in Underlying Funds--Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act prohibits a registered investment 
company (an ``acquiring company'') from acquiring shares of another 
investment company (an ``acquired 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 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) of the Act if the exemption is consistent with the public 
interest and the protection of investors. Applicants seek an exemption 
under section 12(d)(1)(J) of the Act from the limitations of sections 
12(d)(1)(A) and (B) of the Act to the extent necessary to permit 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 to permit 
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) of 
the Act, which include concerns about undue influence by a Fund of 
Funds or its affiliated persons over the 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 will not arise 
in connection with a Fund of Funds' investment in the Affiliated Funds, 
since the Affiliated Funds will be part of the same ``group of 
investment companies,'' as defined in section 12(d)(1)(G)(ii) of the 
Act, as the Funds of Funds. To limit the control that a Fund of Funds 
or its affiliated persons may have over an Unaffiliated Fund, 
applicants state that condition 1 prohibits: (a) The Manager and any 
person controlling, controlled by or under common control with the 
Manager, 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 Manager or any person controlling, 
controlled by or under common control with the Manager (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 (each, a 
``Subadviser''), any person controlling, controlled by or under common 
control with a Subadviser, 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 a Subadviser or any person controlling, controlled by or

[[Page 78419]]

under common control with the Subadviser (collectively, the 
``Subadviser 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 condition 2 precludes a Fund of 
Funds, the Manager, any Subadviser, promoter or principal underwriter 
of a Fund of Funds, and 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 and any 
person controlling, controlled by or under common control with any of 
those entities (each, an ``Unaffiliated Fund Affiliate'').
    6. 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, member of an advisory board, Manager, Subadviser, 
or employee of the Fund of Funds, or a person of which any such 
officer, director, Manager, Subadviser, 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.''
    7. As an additional assurance that an Unaffiliated Investment 
Company understands the implications of an investment by a Fund of 
Funds under the requested order, prior to an investment in the shares 
of the Unaffiliated Investment Company in excess of the limit in 
section 12(d)(1)(A)(i) of the Act, the Fund of Funds and the 
Unaffiliated Investment Company will execute an agreement (the 
``Participation Agreement'') stating, without limitation, that their 
respective 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 respective 
responsibilities under the order. Applicants note that an Unaffiliated 
Investment Company (other than an ETF whose shares are purchased by a 
Fund of Funds in the secondary market) will retain the right at all 
times to reject any investment by a Fund of Funds.\4\
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    \4\ An Unaffiliated Investment Company, including an ETF, would 
retain its right to reject any initial investment by a Fund of Funds 
in excess of the limit in section 12(d)(1)(A)(i) of the Act by 
declining to execute the Participation Agreement with the Fund of 
Funds.
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    8. 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 
the Trust, including a majority of the trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act (for 
any Board, the ``Independent Trustees''), will find that the advisory 
fees charged to a Fund of Funds under the advisory contract 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 Manager 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 Manager, or an 
affiliated person of the Manager, other than any advisory fees paid to 
the Manager or an affiliated person of the Manager by an Unaffiliated 
Investment Company, in connection with the investment by the Fund of 
Funds in the Unaffiliated Fund.
    9. 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 service fees, as defined in Rule 2830 of the Conduct Rules 
of the NASD (``NASD Conduct Rule 2830''),\5\ 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 the 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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    \5\ Any references to NASD Conduct Rule 2830 include any 
successor or replacement rule to NASD Conduct Rule 2830 that may be 
adopted by FINRA.
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    10. Applicants represent that each Fund of Funds will represent in 
the Participation Agreement that no Participating Insurance Company 
sponsoring a Registered Separate Account funding Contracts will be 
permitted to invest in the Fund of Funds unless the Participating 
Insurance Company has certified to the Fund of Funds that the aggregate 
amount 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, is 
reasonable in relation to the services rendered, the expenses expected 
to be incurred, and the risks assumed by the Participating Insurance 
Company.
    11. 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) of the Act, 
except to the extent that such Underlying Fund: (a) Acquires such 
securities in compliance with section 12(d)(1)(E) of the Act and either 
is an Affiliated Fund or is in the same ``group of investment 
companies,'' as defined in Section 12(d)(G)(ii) of the Act, as its 
corresponding master fund; (b) receives securities of another 
investment company as a dividend or as a result of a plan of 
reorganization of a company (other than a plan devised for the purpose 
of evading section 12(d)(1) of the Act); or (c) acquires (or is deemed 
to have acquired) securities of another investment company pursuant to 
exemptive relief from the Commission permitting such Underlying Fund 
to: (i) Acquire securities of one or more investment companies for 
short-term cash management purposes, or (ii) engage in interfund 
borrowing and lending transactions.

B. Investments in Underlying Funds--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

[[Page 78420]]

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) of the Act could prevent an Underlying Fund from selling 
shares to, and redeeming shares from, a Fund of Funds.\6\
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    \6\ Applicants acknowledge that receipt of any compensation by 
(a) an affiliated person of a Funds 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) of 
the Act if it finds that (a) the terms of the proposed transaction are 
fair and reasonable and do not involve overreaching on the part of any 
person concerned; (b) the proposed transaction is consistent with the 
policies of each registered investment company involved; and (c) the 
proposed transaction is consistent with the general purposes of the 
Act. Section 6(c) of the Act permits the Commission to exempt any 
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.\7\ 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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    \7\ To the extent purchases and sales of shares of an ETF occur 
in the secondary market (and not through principal transactions 
directly between a Fund of Funds and an ETF), relief from section 
17(a) of the Act would not be necessary. The requested relief is 
intended to cover, however, transactions directly between ETFs and a 
Fund of Funds. Applicants are not seeking relief from section 17(a) 
for, and the requested relief will not apply to, transactions where 
an ETF could be deemed an affiliated person, or an affiliated person 
of an affiliated person, of a Fund of Funds because the investment 
adviser to the ETF or an entity controlling, controlled by or under 
common control with the investment adviser to the ETF also is a 
Manager 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 association 
registered under section 15A of the Exchange Act or by the Commission; 
and (iv) the acquired company has a policy that prohibits it from 
acquiring securities of registered open-end management investment 
companies or registered 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 
the provisions of 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 the Section 12(d)(1)(G) Funds of Funds to invest 
in Other Investments as described in the application would not raise 
any of the concerns that the requirements of section 12(d)(1) of the 
Act were designed to address.
    4. Consistent with its fiduciary obligations under the Act, each 
Section 12(d)(1)(G) Fund of Funds' board of trustees 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

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

A. Investments in Underlying Funds by Funds of Funds

    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 Subadviser 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 Subadviser 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 Subadviser Group (except for any member of the 
Group or the Subadviser 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. This condition 
will not apply to a Subadviser Group with respect to an Unaffiliated 
Fund for which the Subadviser or a person controlling, controlled by, 
or under common control with the Subadviser acts as the investment 
adviser within the meaning section 2(a)(20)(A) of the Act (in the case 
of an Unaffiliated Investment

[[Page 78421]]

Company) or the sponsor (in the case of an Unaffiliated Trust). 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 (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 
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 the Trust, including a majority of the Independent 
Trustees, will adopt procedures reasonably designed to ensure that the 
Manager and any Subadviser are conducting the investment program of the 
Fund of Funds without taking into account any consideration received by 
the Fund of Funds or a Fund of Funds Affiliate from an Unaffiliated 
Fund or an Unaffiliated Fund Affiliate in connection with any services 
or transactions.
    4. Once an investment by a Fund of Funds in the securities of an 
Unaffiliated Investment Company exceeds the limit of section 
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment 
Company, including a majority of the Independent Trustees, will 
determine that any consideration paid by the Unaffiliated Investment 
Company to a Fund of Funds or a Fund of Funds Affiliate in connection 
with any services or transactions: (a) Is fair and reasonable in 
relation to the nature and quality of the services and benefits 
received by the Unaffiliated Investment Company; (b) is within the 
range of consideration that the Unaffiliated Investment Company would 
be required to pay to another unaffiliated entity in connection with 
the same services or transactions; and (c) does not involve 
overreaching on the part of any person concerned. This condition does 
not apply with respect to any services or transactions between an 
Unaffiliated Investment Company and its investment adviser(s), or any 
person controlling, controlled by, or under common control with such 
investment adviser(s).
    5. No Fund of Funds or Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to an 
Unaffiliated Investment Company or sponsor to an Unaffiliated Trust) 
will cause an Unaffiliated Fund to purchase a security in any 
Affiliated Underwriting.
    6. The Board of an Unaffiliated Investment Company, including a 
majority of the Independent Trustees, will adopt procedures reasonably 
designed to monitor any purchases of securities by the Unaffiliated 
Investment Company in an Affiliated Underwriting once an investment by 
a Fund of Funds in the securities of the Unaffiliated Investment 
Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, 
including any purchases made directly from an Underwriting Affiliate. 
The Board of the Unaffiliated Investment Company will review these 
purchases periodically, but no less frequently than annually, to 
determine whether the purchases were influenced by the investment by 
the Fund of Funds in the Unaffiliated Investment Company. The Board of 
the Unaffiliated Investment Company will consider, among other things: 
(a) Whether the purchases were consistent with the investment 
objectives and policies of the Unaffiliated Investment Company; (b) how 
the performance of securities purchased in an Affiliated Underwriting 
compares to the performance of comparable securities purchased during a 
comparable period of time in underwritings other than Affiliated 
Underwritings or to a benchmark such as a comparable market index; and 
(c) whether the amount of securities purchased by the Unaffiliated 
Investment Company in Affiliated Underwritings and the amount purchased 
directly from an Underwriting Affiliate have changed significantly from 
prior years. The Board of an Unaffiliated Investment Company will take 
any appropriate actions based on its review, including, if appropriate, 
the institution of procedures designed to ensure that purchases of 
securities in Affiliated Underwritings are in the best interests of 
shareholders.
    7. Each Unaffiliated Investment Company 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 
(a) the party from whom the securities were acquired, (b) the identity 
of the underwriting syndicate's members, (c) the terms of the purchase, 
and (d) the information or materials upon which the determinations of 
the Board of the Unaffiliated Investment Company were made.
    8. Prior to its investment in shares of an Unaffiliated Investment 
Company in excess of the limit of 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 the Trust, including a majority of the Independent 
Trustees, shall find that the advisory fees charged to the Fund of 
Funds under the advisory contract(s) 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 Trust.

[[Page 78422]]

    10. The Manager 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 Manager, or an affiliated person of the 
Manager, other than any advisory fees paid to the Manager or its 
affiliated person by an Unaffiliated Investment Company, in connection 
with the investment by the Fund of Funds in the Unaffiliated Fund. Any 
Subadviser will waive fees otherwise payable to the Subadviser, 
directly or indirectly, by the Fund of Funds in an amount at least 
equal to any compensation received by the Subadviser, or an affiliated 
person of the Subadviser, from an Unaffiliated Fund, other than any 
advisory fees paid to the Subadviser or an affiliated person of the 
Subadviser 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 Subadviser. In the event that the Subadviser 
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 
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, except to the extent that such Underlying Fund (a) acquires such 
securities in compliance with section 12(d)(1)(E) of the Act and either 
is an Affiliated Fund or is in the same ``group of investment 
companies,'' as defined in section 12(d)(1)(G)(ii) of the Act, as its 
corresponding master fund; (b) receives securities of another 
investment company as a dividend or as a result of a plan of 
reorganization of a company (other than a plan devised for the purpose 
of evading section 12(d)(1) of the Act); or (c) acquires (or is deemed 
to have acquired) securities of another investment company pursuant to 
exemptive relief from the Commission permitting such Underlying Fund 
to: (i) Acquire securities of one or more investment companies for 
short-term cash management purposes, or (ii) engage in interfund 
borrowing and lending transactions.

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

    13. Applicants will comply with all provisions of rule 12d1-2 under 
the Act, except for paragraph (a)(2) to the extent that it restricts 
any 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.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30771 Filed 12-24-13; 8:45 am]
BILLING CODE 8011-01-P


