
[Federal Register Volume 80, Number 120 (Tuesday, June 23, 2015)]
[Notices]
[Pages 36008-36013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15337]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31677; 812-14325]


American Funds Insurance Series, et al.; Notice of Application

June 17, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 12(d)(1)(J) 
of the Investment Company Act of 1940 (the ``Act'') for an exemption 
from sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) 
and 17(b) of the Act for an exemption from sections 17(a)(1) and (2) of 
the Act.

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Summary of the Application: The requested order would permit certain 
registered management investment companies to acquire shares of certain 
registered open-end management investment companies that are outside 
the same group of investment companies as the acquiring investment 
companies.

Applicants: American Funds Insurance Series (the ``Trust''), Capital 
Research and Management Company (``Capital Research'' or the 
``Adviser''),\1\ and American Funds Distributors, Inc. (the 
``Distributor'').
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    \1\ All references to the term ``Adviser'' herein include 
successors-in-interest to Capital Research. Successors-in-interest 
are limited to any entity resulting from a reorganization of Capital 
Research into another jurisdiction or a change in the type of 
business organization.

Filing Dates: The application was filed on June 27, 2014 and amended on 
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May 7, 2015.

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

[[Page 36009]]

should be received by the Commission by 5:30 p.m. on July 13, 2015, and 
should be accompanied by proof of service on applicants, in the form of 
an affidavit or, for lawyers, a certificate of service. Pursuant to 
rule 0-5 under the Act, hearing requests should state the nature of the 
writer's interest, any facts bearing upon the desirability of a hearing 
on the matter, the reason for the request, and the issues contested. 
Persons who wish to be notified of a hearing may request notification 
by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. Applicants: Paul F. Roye, Esq. 
and Michael J. Triessl, Esq., Capital Research and Management Company, 
333 South Hope Street, Los Angeles, CA 90071.

FOR FURTHER INFORMATION CONTACT: Kay-Mario Vobis, Senior Counsel, at 
(202) 551-6728, or Daniele Marchesani, 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 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 an open-end management investment company 
registered under the Act and organized as a Massachusetts business 
trust. The Trust is comprised of separate series, each of which may be 
an Underlying Fund (as defined below), pursuing distinct investment 
objectives and strategies. Capital Research is a Delaware corporation 
and is registered as an investment adviser under the Investment 
Advisers Act of 1940 (``Advisers Act'') and serves as investment 
adviser to each Underlying Fund. The Distributor is a California 
corporation and is registered as a broker-dealer under the Securities 
Exchange Act of 1934 (the ``Exchange Act''). The Distributor serves as 
distributor for the shares of the Underlying Funds.
    2. Applicants request an exemption to permit registered management 
investment companies that operate as a ``fund of funds'' and that are 
not part of the same ``group of investment companies,'' within the 
meaning of section 12(d)(1)(G)(ii) of the Act, as the Trust 
(``Unrelated Funds of Funds'') to acquire shares of current or future 
separate series of the Trust (``Underlying Funds'') \2\ in excess of 
the limits in section 12(d)(1)(A) of the Act, and to permit Underlying 
Funds, any principal underwriter for an Underlying Fund, and any broker 
or dealer registered under the Exchange Act (``Broker'') to sell shares 
of an Underlying Fund to an Unrelated Fund of Funds in excess of the 
limits in section 12(d)(1)(B) of the Act. Applicants are also 
requesting relief from sections 17(a)(1) and (2) to permit an 
Underlying Fund to sell its shares and to redeem its shares from 
Unrelated Funds of Funds that own 5% or more of the shares of an 
Underlying Fund. Applicants request that the relief apply to: (a) Each 
registered open-end management investment company or series thereof 
that currently or subsequently is part of the same ``group of 
investment companies,'' within the meaning of section 12(d)(1)(G)(ii) 
of the Act, as the Trust, and that is advised by Capital Research or 
any entity controlling, controlled by, or under common control with 
Capital Research (such advisers are included in the term ``Adviser'' 
and such registered open-end management investment companies or their 
series are included in the term ``Underlying Funds''); (b) each 
Unrelated Fund of Funds that enters into a Participation Agreement (as 
defined below) with an Underlying Fund to purchase shares of the 
Underlying Fund; and (c) any principal underwriter to an Underlying 
Fund or Broker selling shares of an Underlying Fund.\3\
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    \2\ As of the date of the application, the Underlying Funds 
include the following series of the Trust: Asset Allocation Fund; 
Blue Chip Income and Growth Fund; Bond Fund; Capital Income Builder; 
Cash Management Fund; Global Bond Fund; Global Growth Fund; Global 
Growth and Income Fund; Global Small Capitalization Fund; Growth 
Fund; Global Balanced Fund; Growth-Income Fund; High-Income Bond 
Fund; International Fund; International Growth and Income Fund; 
Managed Risk Asset Allocation Fund; Managed Risk Blue Chip Income 
and Growth Fund; Managed Risk Growth Fund; Managed Risk Growth-
Income Fund; Managed Risk International Fund; Mortgage Fund; New 
World Fund; and U.S. Government/AAA-Rated Securities Fund. In 
instances where an Unrelated Fund of Funds acquires shares of a 
Managed Risk Fund (as defined below), the term ``Underlying Fund'' 
includes both the Managed Risk Fund as well as its respective 
Managed Risk Acquired Fund (as defined below). The term ``Underlying 
Fund'' also includes any Managed Risk Acquired Fund to the extent 
that an Unrelated Fund of Funds invests directly in the Managed Risk 
Acquired Fund in reliance on the requested relief.
    \3\ 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. An Unrelated Fund of Funds may rely on the requested 
order only to invest in an Underlying Fund and not in any other 
registered investment company.
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    3. Certain Underlying Funds may currently or in the future operate 
pursuant to a master-feeder structure or pursuant to a Managed Risk 
Fund Structure (defined below). Each Underlying Fund operating pursuant 
to a master-feeder structure will operate in compliance with section 
12(d)(1)(E) of the Act. Each Underlying Fund operating pursuant to a 
Managed Risk Fund Structure \4\ will comply with all provisions of 
section 12(d)(1)(E), including paragraph (ii), except as is necessary 
to permit its investment in the Managed Risk Strategy Component 
(defined below) to pursue its objectives.\5\
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    \4\ Each Managed Risk Fund operates pursuant to Section 
12(d)(1)(G) and the relief provided by rule 12d1-2 as well as the 
further relief granted by the Commission to the Trust from the 
restrictions under rule 12d1-2(a), which permits series of the Trust 
to invest in hedging instruments that would not be deemed securities 
within the meaning of Section 2(a)(36) of the Act.
    \5\ An Unrelated Fund of Funds may not rely on the requested 
order to invest in an Underlying Fund that serves as a feeder fund 
unless the Underlying Fund is part of the same ``group of investment 
companies,'' within the meaning of section 12(d)(1)(G)(ii) of the 
Act, as its corresponding master fund (each, a ``Master Fund''). As 
defined in the application, a ``Master Fund'' is not an ``Underlying 
Fund.'' Similarly, an Unrelated Fund of Funds may not rely on the 
requested order to invest in an Underlying Fund that is a Managed 
Risk Fund unless the Managed Risk Fund and the fund in which it 
invests (the ``Managed Risk Acquired Fund'') have the same 
investment adviser and are part of the same ``group of investment 
companies.''
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    4. Applicants represent that the ``Managed Risk Fund Structure'' is 
an integrated two-tier fund structure that is substantially similar to 
a master-feeder structure. Like the feeder fund in a master-feeder 
structure, the top-tier fund in a Managed Risk Fund Structure (the 
Managed Risk Fund) invests its assets in only one other mutual fund 
(the Managed Risk Acquired Fund). Applicants state that the one 
difference between the master-feeder structure and the Managed Risk 
Fund Structure is that, while a feeder fund only invests in a master 
fund, a Managed Risk Fund may also invest in cash, cash equivalents, 
and certain hedging instruments in connection with a risk-management 
strategy that is specifically designed to reduce the volatility of the 
Managed Risk Acquired Fund and the risk of large net asset value 
declines (the ``Managed Risk Strategy Component'').\6\
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    \6\ The Managed Risk Strategy Component of each Managed Risk 
Fund is executed by Milliman Financial Risk Management LLC 
(``Milliman''), a Delaware LLC, as a sub-adviser to that Managed 
Risk Fund. No Unrelated Fund of Funds investing in a Managed Risk 
Fund will be advised or sub-advised by Milliman or any other sub-
adviser to that Managed Risk Fund (or by any person directly or 
indirectly controlling, controlled by, or under common control with 
Milliman or such other sub-adviser).

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[[Page 36010]]

    5. Each Unrelated Fund of Funds will be advised by an investment 
adviser, within the meaning of section 2(a)(20)(A) of the Act, that is 
registered as an investment adviser under the Advisers Act (an 
``Unrelated Fund of Funds Adviser''). An Unrelated Fund of Funds or its 
Unrelated Fund of Funds Adviser may contract with an investment adviser 
that meets the definition of section 2(a)(20)(B) of the Act (an 
``Unrelated Fund of Funds Sub-Adviser''). Applicants state that 
Unrelated Funds of Funds will be interested in using the Underlying 
Funds as part of their overall investment strategy.

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.
    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 to permit Unrelated Funds of Funds to acquire 
shares of the Underlying Funds in excess of the limits in section 
12(d)(1)(A), and an Underlying Fund, any principal underwriter for an 
Underlying Fund, and any Broker to sell shares of an Underlying Fund to 
an Unrelated Fund of Funds in excess of the limits in section 
12(d)(1)(B) of the Act.
    3. Applicants state that the terms and conditions of the proposed 
arrangement will adequately address the policy concerns underlying 
sections 12(d)(1)(A) and (B), which include concerns about undue 
influence by a fund of funds over underlying funds, excessive layering 
of fees, and overly complex fund structures. Accordingly, applicants 
believe that the requested exemption is consistent with the public 
interest and the protection of investors.
    4. Applicants believe that neither an Unrelated Fund of Funds nor 
an Unrelated Fund of Funds Affiliate \7\ would be able to exert undue 
influence over the Underlying Funds.\8\ To limit the control that an 
Unrelated Fund of Funds may have over an Underlying Fund, applicants 
propose a condition prohibiting the Unrelated Fund of Funds Adviser, 
any person controlling, controlled by or under common control with the 
Unrelated Fund of Funds Adviser, and any investment company or issuer 
that would be an investment company but for section 3(c)(1) or 3(c)(7) 
of the Act that is advised or sponsored by the Unrelated Fund of Funds 
Adviser or any person controlling, controlled by or under common 
control with the Unrelated Fund of Funds Adviser (the ``Unrelated Fund 
of Funds Advisory Group'') from controlling (individually or in the 
aggregate) an Underlying Fund within the meaning of section 2(a)(9) of 
the Act. The same prohibition would apply to the Unrelated Fund of 
Funds Sub-Adviser, any person controlling, controlled by or under 
common control with the Unrelated Fund of Funds 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 Unrelated 
Fund of Funds Sub-Adviser or any person controlling, controlled by, or 
under common control with the Unrelated Fund of Funds Sub-Adviser (the 
``Unrelated Fund of Funds Sub-Advisory Group''). Applicants propose 
other conditions to limit the potential for undue influence over the 
Underlying Funds, including that no Unrelated Fund of Funds or 
Unrelated Fund of Funds Affiliate (except to the extent it is acting in 
its capacity as an investment adviser to an Underlying Fund) will cause 
an Underlying Fund to purchase a security in an offering of securities 
during the existence of any underwriting or selling syndicate of which 
a principal underwriter is an Underwriting Affiliate (``Affiliated 
Underwriting''). An ``Underwriting Affiliate'' is a principal 
underwriter in any underwriting or selling syndicate that is an 
officer, director, member of an advisory board, investment adviser, 
sub-adviser or employee of the Unrelated Fund of Funds, or a person of 
which any such officer, director, member of an advisory board, 
investment adviser, sub-adviser or employee is an affiliated person. An 
Underwriting Affiliate does not include any person whose relationship 
to an Underlying Fund is covered by section 10(f) of the Act.
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    \7\ An ``Unrelated Fund of Funds Affiliate'' is defined as the 
Unrelated Fund of Funds Adviser, Unrelated Fund of Funds Sub-
Adviser, a promoter, or a principal underwriter of an Unrelated Fund 
of Funds, and any person controlling, controlled by, or under common 
control with any of those entities. An ``Underlying Fund Affiliate'' 
is defined as an investment adviser, sponsor, promoter or principal 
underwriter of an Underlying Fund (or its respective Master Fund), 
and any person controlling, controlled by or under common control 
with any of those entities.
    \8\ For purposes of the investment calculations required by 
Conditions 1, 4, 6, 7, and 8 in the application with respect to 
investments in an Underlying Fund, each Participation Agreement 
(defined below) will require that an Unrelated Fund of Funds (or 
with the members of the Unrelated Fund of Funds Advisory Group and 
the Unrelated Fund of Funds Sub-Advisory Group, as applicable) 
separately calculate its investments in each Managed Risk Fund and 
the respective Managed Risk Acquired Fund. In calculating its 
investments in the Managed Risk Acquired Fund, however, an Unrelated 
Fund of Funds (or with the members of the Unrelated Fund of Funds 
Advisory Group and the Unrelated Fund of Funds Sub-Advisory Group, 
as applicable) will aggregate its direct and indirect (through a 
Managed Risk Fund) investments in the Managed Risk Acquired Fund.
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    5. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. The board of directors or trustees 
(the ``Board'') of each Unrelated Fund of Funds, including a majority 
of the directors or trustees who are not ``interested persons'' (within 
the meaning of section 2(a)(19) of the Act) (the ``Independent 
Trustees''), will find that the advisory fees charged under such 
advisory contract are based on services provided that will be in 
addition to, rather than duplicative of, the services provided under 
the advisory or management agreement of any Underlying Fund in which 
the Unrelated Fund of Funds may invest. In addition, an Unrelated Fund 
of Funds Adviser will waive fees otherwise payable to it by the 
Unrelated Fund of Funds in an amount at least equal to any compensation 
(including fees received pursuant to any plan adopted by an Underlying 
Fund under rule 12b-1 under the Act) received from an Underlying Fund 
by the Unrelated Fund of Funds Adviser, or an affiliated person of the 
Unrelated Fund of Funds Adviser, other than any advisory fees paid to 
the Unrelated Fund of Funds Adviser or its affiliated person by the 
Underlying Fund, in connection with

[[Page 36011]]

the investment by the Unrelated Fund of Funds in the Underlying Fund. 
Applicants also state that with respect to registered separate accounts 
that invest in an Unrelated Fund of Funds, no sales load will be 
charged at the Unrelated Fund of Funds level or at the Underlying Fund 
level.\9\ Other sales charges and service fees, as defined in Rule 2830 
of the Conduct Rules of the NASD (``NASD Conduct Rules''), if any, will 
only be charged at the Unrelated Fund of Funds level or at the 
Underlying Fund level, not both. With respect to other investments in 
an Unrelated Fund of Funds, any sales charges and/or service fees 
charged with respect to shares of the Unrelated Fund of Funds will not 
exceed the limits applicable to a fund of funds as set forth in NASD 
Conduct Rule 2830.\10\
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    \9\ Applicants represent that each Unrelated Fund of Funds that 
enters into a Participation Agreement (as defined below) will 
represent therein that no insurance company sponsoring a registered 
separate account funding variable insurance contracts will be 
permitted to invest in the Unrelated Fund of Funds unless the 
insurance company has certified to the Unrelated Fund of Funds that 
the aggregate of all fees and charges associated with each contract 
that invests in the Unrelated Fund of Funds, including fees and 
charges at the separate account, Unrelated Fund of Funds and 
Underlying Fund levels, will be reasonable in relation to the 
services rendered, the expenses expected to be incurred and the 
risks assumed by the insurance company.
    \10\ Any references to NASD Conduct Rule 2830 include any 
successor or replacement FINRA Rule to NASD Conduct Rule 2830.
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    6. 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.
    7. With respect to Underlying Funds that operate using a Managed 
Risk Fund Structure, applicants believe that having an Unrelated Fund 
of Funds as an investor will also not raise concerns about complex 
structures, undue influence or the layering of fees. Applicants note 
that an Unrelated Fund of Funds investing in a Managed Risk Fund could 
technically result in a three-tier arrangement. However, given that the 
Managed Risk Funds effectively operate as an integrated two-tier fund 
structure that is substantially similar to a master-feeder structure, 
and given the transparency of the Managed Risk Fund Structure, 
including the fact that each Managed Risk Fund may invest in only one 
Managed Risk Acquired Fund and the Managed Risk Strategy Component, 
applicants do not believe this will result in an overly complex 
arrangement. Applicants also have agreed to certain representations to 
further ensure that investments in the Managed Risk Fund Structure do 
not raise concerns about complex structures, undue influence or the 
layering of fees.\11\
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    \11\ In particular, applicants represent that: (1) The Adviser 
will serve as the investment adviser to both the Managed Risk Fund 
and the Managed Risk Acquired Fund in which it invests; (2) the 
Managed Risk Fund will invest only in one Managed Risk Acquired Fund 
and the Managed Risk Strategy Component; (3) other than to permit 
its investment in the Managed Risk Strategy Component, the Managed 
Risk Fund will comply with all of the provisions of section 
12(d)(1)(E) of the Act; (4) the hedging instruments purchased in 
connection with the Managed Risk Strategy Component will be 
purchased solely to assist the Managed Risk Fund in achieving its 
investment strategy of stabilizing volatility and providing downside 
protection and will not be purchased for speculative purposes; (5) 
the Board of the Managed Risk Funds will not authorize the payment 
of any investment advisory fee by a Managed Risk Fund to the Adviser 
unless it is based on the provision of services that are in addition 
to, rather than duplicative of, the services that the Adviser 
provides to the Managed Risk Acquired Fund; (6) the Board of the 
Managed Risk Funds, including a majority of the Independent 
Trustees, will authorize the Adviser to manage volatility and 
provide downside protection based only on the portfolio holdings of 
the Managed Risk Acquired Fund, consistent with the applicable 
Managed Risk Fund's investment objective, and will review the 
appropriateness of this authorization at least annually; (7) the 
Board will review and approve at least annually the continuing 
appropriateness of the operations of each Managed Risk Fund, 
including with respect to (i) the Managed Risk Fund's use of 
derivatives, (ii) how the Adviser (and any relevant sub-adviser) 
assesses and manages risk with respect to the Managed Risk Fund's 
use of derivatives; and (iii) whether the Managed Risk Fund's 
disclosure of its use of derivatives in its offering documents and 
periodic reports is consistent with relevant Commission and staff 
guidance; and (8) no Unrelated Fund of Funds may invest in a feeder 
fund that is investing in a Managed Risk Fund in reliance on section 
12(d)(1)(E) of the Act.
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    8. Applicants also represent that to ensure that Unrelated Funds of 
Funds comply with the terms and conditions of the requested exemption 
from section 12(d)(1)(A) of the Act, an Unrelated Fund of Funds must 
enter into a participation agreement between the Trust, on behalf of 
the relevant Underlying Fund, and the Unrelated Funds of Funds 
(``Participation Agreement'') before investing in an Underlying Fund in 
excess of the limits in section 12(d)(1)(A). The Participation 
Agreement will require the Unrelated Fund of Funds to adhere to the 
terms and conditions of the requested order. An Unrelated Fund of Funds 
may rely on the requested order only to invest in the Underlying Funds 
and not in any other registered investment company.

B. Section 17(a)

    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and any 
affiliated person of the company. Section 2(a)(3) of the Act defines an 
``affiliated person'' of another person to include 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.
    2. Applicants seek relief from section 17(a) to permit an 
Underlying Fund that is an affiliated person of an Unrelated Fund of 
Funds because the Unrelated Fund of Funds holds 5% or more of the 
Underlying Fund's shares to sell its shares to and redeem its shares 
from an Unrelated Fund of Funds. Applicants state that any proposed 
transactions directly between an Underlying Fund and an Unrelated Fund 
of Funds will be consistent with the policies of each Underlying Fund 
and each Unrelated Fund of Funds and the general purposes of the Act. 
The Participation Agreement will require any Unrelated Fund of Funds 
that purchases shares from an Underlying Fund to represent that the 
purchase of shares from the Underlying Fund by the Unrelated Fund of 
Funds will be accomplished in compliance with the investment 
restrictions of the Unrelated Fund of Funds and will be consistent with 
the investment policies set forth in the Unrelated Fund of Funds' 
registration statement.
    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 involved; 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.\12\ 
Applicants state

[[Page 36012]]

that the terms of the transactions are reasonable and fair and do not 
involve overreaching. Applicants note that any consideration paid for 
the purchase or redemption of shares directly from an Underlying Fund 
will be based on the net asset value of the Underlying Fund. Applicants 
state that any proposed transactions directly between an Underlying 
Fund and an Unrelated Fund of Funds will be consistent with the 
policies of each Underlying Fund and each Unrelated Fund of Funds and 
the general purposes of the Act.
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    \12\ Applicants acknowledge that receipt of compensation by (a) 
an affiliated person of an Unrelated Fund of Funds, or an affiliated 
person of such person, for the purchase by the Unrelated 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 an Unrelated Fund of 
Funds may be prohibited by Section 17(e)(1) of the Act. The 
Participation Agreement will also include this acknowledgement.
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Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The members of an Unrelated Fund of Funds Advisory Group will 
not control (individually or in the aggregate) an Underlying Fund (or 
its respective Master Fund) within the meaning of section 2(a)(9) of 
the Act. The members of an Unrelated Fund of Funds Sub-Advisory Group 
will not control (individually or in the aggregate) an Underlying Fund 
(or its respective Master 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 Underlying Fund, the Unrelated Fund of Funds Advisory 
Group or the Unrelated Fund of Funds Sub-Advisory Group, each in the 
aggregate, becomes a holder of more than 25 percent of the outstanding 
voting securities of an Underlying Fund, it (except for any member of 
the Unrelated Fund of Funds Advisory Group or Unrelated Fund of Funds 
Sub-Advisory Group that is a separate account funding variable 
insurance contracts) will vote its shares of the Underlying Fund in the 
same proportion as the vote of all other holders of the Underlying 
Fund's shares. A registered separate account funding variable insurance 
contracts will seek voting instructions from its contract holders and 
will vote its shares 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 funding variable insurance contracts will 
either (i) vote its shares of the Underlying Fund in the same 
proportion as the vote of all other holders of the Underlying 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 Unrelated Fund of Funds or Unrelated Fund of Funds Affiliate 
will cause any existing or potential investment by the Unrelated Fund 
of Funds in shares of an Underlying Fund to influence the terms of any 
services or transactions between the Unrelated Fund of Funds or an 
Unrelated Fund of Funds Affiliate and the Underlying Fund (or its 
respective Master Fund) or an Underlying Fund Affiliate.
    3. The board of directors or trustees of an Unrelated Fund of 
Funds, including a majority of the Independent Trustees, will adopt 
procedures reasonably designed to ensure that the Unrelated Fund of 
Funds Adviser and any Unrelated Fund of Funds Sub-Adviser(s) are 
conducting the investment program of the Unrelated Fund of Funds 
without taking into account any consideration received by the Unrelated 
Fund of Funds or an Unrelated Fund of Funds Affiliate from an 
Underlying Fund (or its respective Master Fund) or an Underlying Fund 
Affiliate in connection with any services or transactions.
    4. Once an investment by an Unrelated Fund of Funds in the 
securities of an Underlying Fund exceeds the limit in section 
12(d)(1)(A)(i) of the Act, the Board of the Underlying Fund (or its 
respective Master Fund), including a majority of the Independent 
Trustees, will determine that any consideration paid by the Underlying 
Fund (or its respective Master Fund) to the Unrelated Fund of Funds or 
an Unrelated 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 Underlying Fund 
(or its respective Master Fund); (b) is within the range of 
consideration that the Underlying Fund (or its respective Master Fund) 
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 
Underlying Fund (or its respective Master Fund) and its investment 
adviser(s) or any person controlling, controlled by, or under common 
control with such investment adviser(s).
    5. No Unrelated Fund of Funds or Unrelated Fund of Funds Affiliate 
(except to the extent it is acting in its capacity as an investment 
adviser to an Underlying Fund (or its respective Master Fund)) will 
cause an Underlying Fund (or its respective Master Fund) to purchase a 
security in any Affiliated Underwriting.
    6. The Board of an Underlying Fund (or of its respective Master 
Fund), including a majority of the Independent Trustees, will adopt 
procedures reasonably designed to monitor any purchases of securities 
by the Underlying Fund (or its respective Master Fund) in an Affiliated 
Underwriting once an investment by an Unrelated Fund of Funds in the 
securities of the Underlying Fund 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 Underlying Fund (or its 
respective Master Fund) will review these purchases periodically, but 
no less frequently than annually, to determine whether the purchases 
were influenced by the investment by the Unrelated Fund of Funds in 
shares of the Underlying Fund. The Board of the Underlying Fund (or its 
respective Master Fund) shall consider, among other things, (i) whether 
the purchases were consistent with the investment objectives and 
policies of the Underlying Fund (or its respective Master Fund); (ii) 
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 (iii) whether the amount of securities purchased by 
the Underlying Fund (or its respective Master Fund) in Affiliated 
Underwritings and the amount purchased directly from an Underwriting 
Affiliate have changed significantly from prior years. The Board of the 
Underlying Fund shall 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 Underlying Fund (or its respective Master Fund) shall 
maintain and preserve permanently in an easily accessible place a 
written copy of the procedures described in the preceding condition, 
and any modifications to such procedures, and shall maintain and 
preserve for a period 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

[[Page 36013]]

place, a written record of each purchase of securities in Affiliated 
Underwritings once an investment by an Unrelated Fund of Funds in the 
securities of an Underlying Fund exceeds the limit in section 
12(d)(1)(A)(i) of the Act, setting forth from whom the securities were 
acquired, the identity of the underwriting syndicate's members, the 
terms of the purchase and the information or materials upon which the 
Board's determinations were made.
    8. Before investing in shares of an Underlying Fund in excess of 
the limits in section 12(d)(1)(A), each Unrelated Fund of Funds and 
Underlying Fund will execute a Participation Agreement stating, without 
limitation, that their boards of directors or trustees 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 Underlying Fund in excess of the 
limit in section 12(d)(1)(A)(i), an Unrelated Fund of Funds will notify 
the Underlying Fund of the investment. At such time, the Unrelated Fund 
of Funds will also transmit to the Underlying Fund a list of the names 
of each Unrelated Fund of Funds Affiliate and Underwriting Affiliate. 
The Unrelated Fund of Funds will notify the Underlying Fund of any 
changes to the list of the names as soon as reasonably practicable 
after a change occurs. The Underlying Fund and the Unrelated 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. Prior to approving any advisory contract under section 15 of the 
Act, the board of directors or trustees of each Unrelated Fund of 
Funds, including a majority of the Independent Trustees, will find that 
the advisory fees charged under such advisory contracts are based on 
services provided that will be in addition to, rather than duplicative 
of, the services provided under the advisory contract(s) of any 
Underlying Fund (or its respective Master Fund) in which the Unrelated 
Fund of Funds may invest. These findings and their basis will be 
recorded fully in the minute books of the appropriate Unrelated Fund of 
Funds.
    10. An Unrelated Fund of Funds Adviser will waive fees otherwise 
payable to it by the Unrelated Fund of Funds in an amount at least 
equal to any compensation (including fees received pursuant to any plan 
adopted by an Underlying Fund (or its respective Master Fund) under 
rule 12b-1 under the Act) received from an Underlying Fund (or its 
respective Master Fund) by the Unrelated Fund of Funds Adviser, or an 
affiliated person of the Unrelated Fund of Funds Adviser, other than 
any advisory fees paid to the Unrelated Fund of Funds Adviser or its 
affiliated person by the Underlying Fund (or its respective Master 
Fund), in connection with the investment by the Unrelated Fund of Funds 
in the Underlying Fund. Any Unrelated Fund of Funds Sub-Adviser will 
waive fees otherwise payable to the Unrelated Fund of Funds Sub-
Adviser, directly or indirectly, by the Unrelated Fund of Funds in an 
amount at least equal to any compensation received from any Underlying 
Fund (or its respective Master Fund) by the Unrelated Fund of Funds 
Sub-Adviser, or an affiliated person of the Unrelated Fund of Funds 
Sub-Adviser, other than any advisory fees paid to the Unrelated Fund of 
Funds Sub-Adviser or its affiliated person by the Underlying Fund (or 
its respective Master Fund), in connection with the investment by the 
Unrelated Fund of Funds in the Underlying Fund made at the direction of 
the Unrelated Fund of Funds Sub-Adviser. In the event that the 
Unrelated Fund of Funds Sub-Adviser waives fees, the benefit of the 
waiver will be passed through to the Unrelated Fund of Funds.
    11. With respect to registered separate accounts that invest in an 
Unrelated Fund of Funds, no sales load will be charged at the Unrelated 
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 Unrelated Fund of Funds level or at the 
Underlying Fund level, not both. With respect to other investments in 
an Unrelated Fund of Funds, any sales charges and/or service fees 
charged with respect to shares of the Unrelated Fund of Funds will not 
exceed the limits applicable to a fund of funds as set forth in NASD 
Conduct Rule 2830.
    12. No Underlying Fund or its respective Master 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 or its respective Master Fund: (a) Acquires such 
securities in compliance with section 12(d)(1)(E) of the Act; \13\ (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 or its respective Master 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.
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    \13\ Solely for the purposes of condition 12, the investment by 
a Managed Risk Fund in a Managed Risk Acquired Fund will be deemed 
to have been made pursuant to section 12(d)(1)(E), notwithstanding 
the fact that such arrangement does not comply with section 
12(d)(1)(E)(ii).

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015-15337 Filed 6-22-15; 8:45 am]
 BILLING CODE 8011-01-P


