80_FR_25073 80 FR 24989 - Highland Funds I, et al.; Notice of Application

80 FR 24989 - Highland Funds I, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 84 (May 1, 2015)

Page Range24989-24998
FR Document2015-10176

Federal Register, Volume 80 Issue 84 (Friday, May 1, 2015)
[Federal Register Volume 80, Number 84 (Friday, May 1, 2015)]
[Notices]
[Pages 24989-24998]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-10176]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31579; File No. 812-14443]


Highland Funds I, et al.; Notice of Application

April 27, 2015.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') for an exemption from 
sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c-1 
under the Act, under sections 6(c) and 17(b) of the Act for an 
exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under 
section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and 
12(d)(1)(B) of the Act.

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Summary of Application:  Applicants request an order that would permit 
(a) series of certain open-end management investment companies to issue 
shares (``Shares'') redeemable in large aggregations only (``Creation 
Units''); (b) secondary market transactions in Shares to occur at 
negotiated market prices rather than at net asset value (``NAV''); (c) 
certain series to pay redemption proceeds, under certain circumstances, 
more than seven days after the tender of Shares for redemption; (d) 
certain affiliated persons of the series to deposit securities into, 
and receive securities from, the series in connection with the purchase 
and redemption of Creation Units; (e) certain registered management 
investment companies and unit investment trusts outside of the same 
group of investment companies as the series to acquire Shares; and (f) 
certain series to perform creations and redemptions of Creation Units 
in-kind in a master-feeder structure.

Applicants: Highland Funds I (the ``Trust''), Highland Capital 
Management Fund Advisors, L.P. (the ``Initial Adviser''), and SEI 
Investments Distribution Co. (the ``Distributor'').

Filing Dates: The application was filed on April 17, 2015, and amended 
on April 23, 2015 and April 27, 2015.

Hearing or Notification of Hearing:  An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on May 22, 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:  The Commission: Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants: 
The Trust and the Initial Adviser, 200 Crescent Court, Suite 700, 
Dallas, TX 75201; the Distributor, One Freedom Valley Drive, Oaks, PA 
19456.

FOR FURTHER INFORMATION CONTACT:  Mark N. Zaruba, Senior Counsel at 
(202) 551-6878, 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 organized as a Delaware statutory trust and is 
registered under the Act as an open-end management investment company 
with multiple series.
    2. The Initial Adviser is registered as investment adviser under 
the Investment Advisers Act of 1940 (the ``Advisers Act'') and will be 
the investment adviser to the Funds (defined below). Any other Adviser 
(defined below) will also be registered as an investment adviser under 
the Advisers Act. The Adviser may enter into sub-advisory agreements 
with one or more investment advisers to act as sub-advisers to 
particular Funds (each, a ``Sub-Adviser''). Any Sub-Adviser will either 
be registered under the Advisers Act or will not be required to 
register thereunder.
    3. Each Trust will enter into a distribution agreement with the 
Distributor. The distributor for the Initial Funds (defined below) will 
be SEI Investments Distribution Co. The Distributor is a broker-dealer 
(``Broker'') registered under the Securities Exchange Act of 1934 (the 
``Exchange Act'') and will act as distributor and principal underwriter 
of one or more of the Funds. The distributor of any Fund may be an 
affiliated person, as defined in section 2(a)(3) of the Act 
(``Affiliated Person''), or an affiliated person of an Affiliated 
Person (``Second-Tier Affiliate''), of that Fund's Adviser and/or Sub-
Advisers. No distributor will be affiliated with any Exchange (defined 
below).
    4. Applicants request that the order apply to the initial series of 
the Trust described in the application that will rely on the requested 
order (``Initial Funds''), as well as any additional series of the 
Trust and other open-end management investment companies, or series 
thereof, that may be created in the future (``Future Funds''), each of 
which will operate as an exchanged-traded fund (``ETF'') and will track 
a specified index that includes both long and short positions or uses a 
130/30 investment strategy and is comprised of domestic or foreign 
equity and/or fixed income securities (each, an ``Underlying 
Index'').\1\ Any Future Fund will (a) be advised by the Initial 
Advisers or an entity controlling, controlled by, or under common 
control with the Initial Advisers (each, an ``Adviser'') and (b) comply 
with the terms and conditions of the application. The Initial Funds and 
Future Funds, together, are the ``Funds.'' \2\
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    \1\ Certain of the applicants received a prior order with 
respect to the offering of index-based exchange-traded funds. In the 
Matter of Highland Capital Management, L.P., et al., Investment 
Company Act Release Nos. 29890 (Dec. 19, 2011) (notice) and 29918 
(Jan. 17, 2012) (order) (the ``Prior Order''). The Prior Order does 
not apply to Long/Short Funds and 130/30 Funds (each as defined 
herein), and the order requested herein by applicants will only 
cover Long/Short Funds and 130/30 Funds.
    \2\ All existing entities that intend to rely on the requested 
order have been named as applicants. Any other existing or future 
entity that subsequently relies on the order will comply with the 
terms and conditions of the order. A Fund of Funds (as defined 
below) may rely on the order only to invest in Funds and not in any 
other registered investment company.
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    5. Applicants state that a Fund may operate as a feeder fund in a 
master-feeder structure (``Feeder Fund''). Applicants request that the 
order permit a Feeder Fund to acquire shares of another registered 
investment company in the same group of investment companies having 
substantially the

[[Page 24990]]

same investment objectives as the Feeder Fund (``Master Fund'') beyond 
the limitations in section 12(d)(1)(A) of the Act and permit the Master 
Fund, and any principal underwriter for the Master Fund, to sell shares 
of the Master Fund to the Feeder Fund beyond the limitations in section 
12(d)(1)(B) of the Act (``Master-Feeder Relief''). Applicants may 
structure certain Feeder Funds to generate economies of scale and incur 
lower overhead costs.\3\ There would be no ability by Fund shareholders 
to exchange Shares of Feeder Funds for shares of another feeder series 
of the Master Fund.
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    \3\ Operating in a master-feeder structure could also impose 
costs on a Feeder Fund and reduce its tax efficiency. The Feeder 
Fund's Board will consider any such potential disadvantages against 
the benefits of economies of scale and other benefits of operating 
within a master-feeder structure. In a master-feeder structure, the 
Master Fund--rather than the Feeder Fund--would generally invest its 
portfolio in compliance with the requested order.
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    6. Each Fund, or its respective Master Fund, will hold certain 
securities, currencies, other assets and other investment positions 
(``Portfolio Holdings'') selected to correspond generally to the 
performance of its Underlying Index. Certain of the Funds will be based 
on Underlying Indexes that will be comprised solely of equity and/or 
fixed income securities issued by one or more of the following 
categories of issuers: (i) Domestic issuers and (ii) non-domestic 
issuers meeting the requirements for trading in U.S. markets. Other 
Funds will be based on Underlying Indexes that will be comprised solely 
of foreign and domestic, or solely foreign, equity and/or fixed income 
securities (``Foreign Funds'').
    7. Applicants represent that each Fund, or its respective Master 
Fund, will invest at least 80% of its assets (excluding securities 
lending collateral) in the component securities of its respective 
Underlying Index (``Component Securities'') and TBA Transactions,\4\ 
and in the case of Foreign Funds, Component Securities and Depositary 
Receipts \5\ representing Component Securities. Each Fund, or its 
respective Master Fund, may also invest up to 20% of its assets in 
certain index futures, options, options on index futures, swap 
contracts or other derivatives, as related to its respective Underlying 
Index and its Component Securities, cash and cash equivalents, other 
investment companies, as well as in securities and other instruments 
not included in its Underlying Index but which the Adviser believes 
will help the Fund track its Underlying Index. A Fund may also engage 
in short sales in accordance with its investment objective.
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    \4\ A ``to-be-announced transaction'' or ``TBA Transaction'' is 
a method of trading mortgage-backed securities. In a TBA 
Transaction, the buyer and seller agree upon general trade 
parameters such as agency, settlement date, par amount and price. 
The actual pools delivered generally are determined two days prior 
to settlement date.
    \5\ Depositary receipts representing foreign securities 
(``Depositary Receipts'') include American Depositary Receipts and 
Global Depositary Receipts. The Funds, or their respective Master 
Funds, may invest in Depositary Receipts representing foreign 
securities in which they seek to invest. Depositary Receipts are 
typically issued by a financial institution (a ``depositary bank'') 
and evidence ownership interests in a security or a pool of 
securities that have been deposited with the depositary bank. A 
Fund, or its respective Master Fund, will not invest in any 
Depositary Receipts that the Adviser or any Sub-Adviser deems to be 
illiquid or for which pricing information is not readily available. 
No affiliated person of a Fund, the Adviser or any Sub-Adviser will 
serve as the depositary bank for any Depositary Receipts held by a 
Fund, or its respective Master Fund.
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    8. Funds will seek to track Underlying Indexes constructed using 
130/30 investment strategies (``130/30 Funds'') or other long/short 
investment strategies (``Long/Short Funds''). Each Long/Short Fund will 
establish (i) exposures equal to approximately 100% of the long 
positions specified by the Long/Short Index \6\ and (ii) exposures 
equal to approximately 100% of the short positions specified by the 
Long/Short Index. Each 130/30 Fund will include strategies that: (i) 
Establish long positions in securities so that total long exposure 
represents approximately 130% of a Fund's net assets; and (ii) 
simultaneously establish short positions in other securities so that 
total short exposure represents approximately 30% of such Fund's net 
assets. Each Business Day, the Adviser for each Fund will provide full 
portfolio transparency on the Fund's publicly available Web site (``Web 
site'') by making available the Fund's, or its respective Master 
Fund's, Portfolio Holdings before the commencement of trading of Shares 
on the Listing Exchange (defined below).\7\ The information provided on 
the Web site will be formatted to be reader-friendly.
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    \6\ Underlying Indexes that include both long and short 
positions in securities are referred to as ``Long/Short Indexes.''
    \7\ Under accounting procedures followed by each Fund, trades 
made on the prior Business Day (``T'') will be booked and reflected 
in NAV on the current Business Day (T+1). Accordingly, the Funds 
will be able to disclose at the beginning of the Business Day the 
portfolio that will form the basis for the NAV calculation at the 
end of the Business Day.
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    9. A Fund, or its respective Master Fund, will utilize either a 
replication or representative sampling strategy to track its Underlying 
Index. A Fund, or its respective Master Fund, using a replication 
strategy will invest in the Component Securities of its Underlying 
Index in the same approximate proportions as in such Underlying Index. 
A Fund, or its respective Master Fund, using a representative sampling 
strategy will hold some, but not necessarily all of the Component 
Securities of its Underlying Index. Applicants state that a Fund, or 
its respective Master Fund, using a representative sampling strategy 
will not be expected to track the performance of its Underlying Index 
with the same degree of accuracy as would an investment vehicle that 
invested in every Component Security of the Underlying Index with the 
same weighting as the Underlying Index. Applicants expect that each 
Fund will have an annual tracking error relative to the performance of 
its Underlying Index of less than 5%.
    10. Each Fund will be entitled to use its Underlying Index pursuant 
to either a licensing agreement with the entity that compiles, creates, 
sponsors or maintains the Underlying Index (each, an ``Index 
Provider'') or a sub-licensing arrangement with the applicable Adviser, 
which will have a licensing agreement with such Index Provider.\8\ A 
``Self-Indexing Fund'' is a Fund for which an Affiliated Person, or a 
Second-Tier Affiliate, of the Trust or a Fund, of the Adviser, of any 
Sub-Adviser to or promoter of a Fund, or of the Distributor (each, an 
``Affiliated Index Provider'') will serve as the Index Provider. In the 
case of Self-Indexing Funds, an Affiliated Index Provider will create a 
proprietary, rules-based methodology to create Underlying Indexes (each 
an ``Affiliated Index'').\9\ Except with respect to the Self-Indexing 
Funds, no Index Provider is or will be an Affiliated Person, or a 
Second-Tier Affiliate, of the Trust or a Fund, of the Adviser, of any

[[Page 24991]]

Sub-Adviser to or promoter of a Fund, or of the Distributor.
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    \8\ The licenses for the Self-Indexing Funds will specifically 
state that the Affiliated Index Provider (or in case of a sub-
licensing agreement, the Adviser) must provide the use of the 
Underlying Indexes and related intellectual property at no cost to 
the Trust and the Self-Indexing Funds.
    \9\ The Affiliated Indexes may be made available to registered 
investment companies, as well as separately managed accounts of 
institutional investors and privately offered funds that are not 
deemed to be ``investment companies'' in reliance on section 3(c)(1) 
or 3(c)(7) of the Act for which the Adviser acts as adviser or 
subadviser (``Affiliated Accounts'') as well as other such 
registered investment companies, separately managed accounts and 
privately offered funds for which it does not act either as adviser 
or subadviser (``Unaffiliated Accounts''). The Affiliated Accounts 
and the Unaffiliated Accounts, like the Funds, would seek to track 
the performance of one or more Underlying Index(es) by investing in 
the constituents of such Underlying Indexes or a representative 
sample of such constituents of the Underlying Index. Consistent with 
the relief requested from section 17(a), the Affiliated Accounts 
will not engage in Creation Union transactions with a Fund.
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    11. Applicants recognize that Self-Indexing Funds could raise 
concerns regarding the ability of the Affiliated Index Provider to 
manipulate the Underlying Index to the benefit or detriment of the 
Self-Indexing Fund. Applicants further recognize the potential for 
conflicts that may arise with respect to the personal trading activity 
of personnel of the Affiliated Index Provider who have knowledge of 
changes to an Underlying Index prior to the time that information is 
publicly disseminated. Prior orders granted to self-indexing ETFs 
(``Prior Self-Indexing Orders'') addressed these concerns by creating a 
framework that required: (i) Transparency of the Underlying Indexes; 
(ii) the adoption of policies and procedures not otherwise required by 
the Act designed to mitigate such conflicts of interest; (iii) 
limitations on the ability to change the rules for index compilation 
and the component securities of the index; (iv) that the index provider 
enter into an agreement with an unaffiliated third party to act as 
``Calculation Agent''; and (v) certain limitations designed to separate 
employees of the index provider, adviser and Calculation Agent (clauses 
(ii) through (v) are hereinafter referred to as ``Policies and 
Procedures'').\10\
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    \10\ See, e.g., In the Matter of WisdomTree Investments Inc., et 
al., Investment Company Act Release Nos. 27324 (May 18, 2006) 
(notice) and 27391 (June 12, 2006) (order); In the Matter of IndexIQ 
ETF Trust, et al., Investment Company Act Release Nos. 28638 (Feb. 
27, 2009) (notice) and 28653 (March 20, 2009) (order); Van Eck 
Associates Corporation, et al., et al., Investment Company Act 
Release Nos. 29455 (Oct. 1, 2010) (notice) and 29490 (Oct. 26, 2010) 
(order); and In the Matter of Guggenheim Funds Investment Advisors, 
LLC, et al., Investment Company Act Release Nos. 30560 (June 14, 
2013) (notice) and 30598 (July 10, 2013) (order).
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    12. Instead of adopting the same or similar Policies and 
Procedures, Applicants propose that each day that a Fund, the NYSE and 
the national securities exchange (as defined in section 2(a)(26) of the 
Act) (an ``Exchange'') on which the Fund's Shares are primarily listed 
(``Listing Exchange'') are open for business, including any day that a 
Fund is required to be open under section 22(e) of the Act (a 
``Business Day''), each Self-Indexing Fund will post on its Web site, 
before commencement of trading of Shares on the Listing Exchange, the 
identities and quantities of the Portfolio Holdings that will form the 
basis for the Fund's calculation of its NAV at the end of the Business 
Day. Applicants believe that requiring Self-Indexing Funds, and their 
respective Master Funds, to maintain full portfolio transparency will 
provide an effective alternative mechanism for addressing any such 
potential conflicts of interest.
    13. Applicants represent that each Self-Indexing Fund's Portfolio 
Holdings will be as transparent as the portfolio holdings of existing 
actively managed ETFs. Applicants observe that the framework set forth 
in the Prior Self-Indexing Orders was established before the Commission 
began issuing exemptive relief to allow the offering of actively 
managed ETFs.\11\ Unlike passively managed ETFs, actively managed ETFs 
do not seek to replicate the performance of a specified index but 
rather seek to achieve their investment objectives by using an 
``active'' management strategy. Applicants contend that the structure 
of actively managed ETFs presents potential conflicts of interest that 
are the same as those presented by Self-Indexing Funds because the 
portfolio managers of an actively managed ETF by definition have 
advance knowledge of pending portfolio changes. However, rather than 
requiring Policies and Procedures similar to those required under the 
Prior Self-Indexing Orders, Applicants believe that actively managed 
ETFs address these potential conflicts of interest appropriately 
through full portfolio transparency, as the conditions to their 
relevant exemptive relief require.
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    \11\ See, e.g., In the Matter of Huntington Asset Advisors, 
Inc., et al., Investment Company Act Release Nos. 30032 (April 10, 
2012) (notice) and 30061 (May 8, 2012) (order); In the Matter of 
Russell Investment Management Co., et al., Investment Company Act 
Release Nos. 29655 (April 20, 2011) (notice) and 29671 (May 16, 
2011) (order); In the Matter of Eaton Vance Management, et al., 
Investment Company Act Release Nos. 29591 (March 11, 2011) (notice) 
and 29620 (March 30, 2011) (order); and In the Matter of iShares 
Trust, et al., Investment Company Act Release Nos. 29543 (Dec. 27, 
2010) (notice) and 29571 (Jan. 24, 2011) (order).
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    14. In addition, Applicants do not believe the potential for 
conflicts of interest raised by the Adviser's use of the Underlying 
Indexes in connection with the management of the Self Indexing Funds, 
their respective Master Funds, and the Affiliated Accounts will be 
substantially different from the potential conflicts presented by an 
adviser managing two or more registered funds. Both the Act and the 
Advisers Act contain various protections to address conflicts of 
interest where an adviser is managing two or more registered funds and 
these protections will also help address these conflicts with respect 
to the Self-Indexing Funds.\12\
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    \12\ See, e.g., Rule 17j-1 under the Act and Section 204A under 
the Advisers Act and Rules 204A-1 and 206(4)-7 under the Advisers 
Act.
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    15. The Adviser and any Sub-Adviser has adopted or will adopt, 
pursuant to Rule 206(4)-7 under the Advisers Act, written policies and 
procedures designed to prevent violations of the Advisers Act and the 
rules thereunder. These include policies and procedures designed to 
minimize potential conflicts of interest among the Self-Indexing Funds, 
their respective Master Funds, and the Affiliated Accounts, such as 
cross trading policies, as well as those designed to ensure the 
equitable allocation of portfolio transactions and brokerage 
commissions. In addition, the Adviser has adopted policies and 
procedures as required under section 204A of the Advisers Act, which 
are reasonably designed in light of the nature of its business to 
prevent the misuse, in violation of the Advisers Act or the Exchange 
Act or the rules thereunder, of material non-public information by the 
Adviser or an associated person (``Inside Information Policy''). Any 
Sub-Adviser will be required to adopt and maintain a similar Inside 
Information Policy. In accordance with the Code of Ethics \13\ and 
Inside Information Policy of the Adviser and Sub-Advisers, personnel of 
those entities with knowledge about the composition of the Portfolio 
Deposit \14\ will be prohibited from disclosing such information to any 
other person, except as authorized in the course of their employment, 
until such information is made public. In addition, an Index Provider 
will not provide any information relating to changes to an Underlying 
Index's methodology for the inclusion of component securities, the 
inclusion or exclusion of specific component securities, or methodology 
for the calculation or the return of component securities, in advance 
of a public announcement of such changes by the Index Provider. The 
Adviser will also include under Item 10.C. of Part 2 of its Form ADV a 
discussion of its relationship to any Affiliated Index Provider and any 
material conflicts of interest resulting therefrom, regardless

[[Page 24992]]

of whether the Affiliated Index Provider is a type of affiliate 
specified in Item 10.
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    \13\ The Adviser has also adopted or will adopt a code of ethics 
pursuant to Rule 17j-1 under the Act and Rule 204A-1 under the 
Advisers Act, which contains provisions reasonably necessary to 
prevent Access Persons (as defined in Rule 17j-1) from engaging in 
any conduct prohibited in Rule 17j-1 (``Code of Ethics'').
    \14\ The instruments and cash that the purchaser is required to 
deliver in exchange for the Creation Units it is purchasing is 
referred to as the ``Portfolio Deposit.''
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    16. To the extent the Self-Indexing Funds or their respective 
Master Funds transact with an Affiliated Person of the Adviser or Sub-
Adviser, such transactions will comply with the Act, the rules 
thereunder and the terms and conditions of the requested order. In this 
regard, each Self-Indexing Fund's board of directors or trustees 
(``Board'') will periodically review the Self-Indexing Fund's use of an 
Affiliated Index Provider. Subject to the approval of the Self-Indexing 
Fund's Board, the Adviser, Affiliated Persons of the Adviser (``Adviser 
Affiliates'') and Affiliated Persons of any Sub-Adviser (``Sub-Adviser 
Affiliates'') may be authorized to provide custody, fund accounting and 
administration and transfer agency services to the Self-Indexing Funds. 
Any services provided by the Adviser, Adviser Affiliates, Sub-Adviser 
and Sub-Adviser Affiliates will be performed in accordance with the 
provisions of the Act, the rules under the Act and any relevant 
guidelines from the staff of the Commission.
    17. In light of the foregoing, Applicants believe it is appropriate 
to allow the Self-Indexing Funds and their respective Master Funds to 
be fully transparent in lieu of Policies and Procedures from the Prior 
Self-Indexing Orders discussed above.
    18. The Shares of each Fund will be purchased and redeemed in 
Creation Units and generally on an in-kind basis. Except where the 
purchase or redemption will include cash under the limited 
circumstances specified below, purchasers will be required to purchase 
Creation Units by making an in-kind deposit of specified instruments 
(``Deposit Instruments''), and shareholders redeeming their Shares will 
receive an in-kind transfer of specified instruments (``Redemption 
Instruments'').\15\ On any given Business Day, the names and quantities 
of the instruments that constitute the Deposit Instruments and the 
names and quantities of the instruments that constitute the Redemption 
Instruments will be identical, unless the Fund is Rebalancing (as 
defined below). In addition, the Deposit Instruments and the Redemption 
Instruments will each correspond pro rata to the positions in the 
Fund's portfolio (including cash positions) \16\ except: (a) In the 
case of bonds, for minor differences when it is impossible to break up 
bonds beyond certain minimum sizes needed for transfer and settlement; 
(b) for minor differences when rounding is necessary to eliminate 
fractional shares or lots that are not tradeable round lots; \17\ (c) 
TBA Transactions, short positions, derivatives and other positions that 
cannot be transferred in kind \18\ will be excluded from the Deposit 
Instruments and the Redemption Instruments; \19\ (d) to the extent the 
Fund determines, on a given Business Day, to use a representative 
sampling of the Fund's portfolio; \20\ or (e) for temporary periods, to 
effect changes in the Fund's portfolio as a result of the rebalancing 
of its Underlying Index (any such change, a ``Rebalancing''). If there 
is a difference between the NAV attributable to a Creation Unit and the 
aggregate market value of the Deposit Instruments or Redemption 
Instruments exchanged for the Creation Unit, the party conveying 
instruments with the lower value will also pay to the other an amount 
in cash equal to that difference (the ``Cash Amount'').
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    \15\ The Funds must comply with the federal securities laws in 
accepting Deposit Instruments and satisfying redemptions with 
Redemption Instruments, including that the Deposit Instruments and 
Redemption Instruments are sold in transactions that would be exempt 
from registration under the Securities Act of 1933 (``Securities 
Act''). In accepting Deposit Instruments and satisfying redemptions 
with Redemption Instruments that are restricted securities eligible 
for resale pursuant to rule 144A under the Securities Act, the Funds 
will comply with the conditions of rule 144A.
    \16\ The portfolio used for this purpose will be the same 
portfolio used to calculate the Fund's NAV for the Business Day.
    \17\ A tradeable round lot for a security will be the standard 
unit of trading in that particular type of security in its primary 
market.
    \18\ This includes instruments that can be transferred in kind 
only with the consent of the original counterparty to the extent the 
Fund does not intend to seek such consents.
    \19\ Because these instruments will be excluded from the Deposit 
Instruments and the Redemption Instruments, their value will be 
reflected in the determination of the Cash Amount (as defined 
below).
    \20\ A Fund may only use sampling for this purpose if the 
sample: (i) Is designed to generate performance that is highly 
correlated to the performance of the Fund's portfolio; (ii) consists 
entirely of instruments that are already included in the Fund's 
portfolio; and (iii) is the same for all Authorized Participants (as 
defined below) on a given Business Day.
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    19. Purchases and redemptions of Creation Units may be made in 
whole or in part on a cash basis, rather than in kind, solely under the 
following circumstances: (a) To the extent there is a Cash Amount; (b) 
if, on a given Business Day, the Fund announces before the open of 
trading that all purchases, all redemptions or all purchases and 
redemptions on that day will be made entirely in cash; (c) if, upon 
receiving a purchase or redemption order from an Authorized 
Participant, the Fund determines to require the purchase or redemption, 
as applicable, to be made entirely in cash; \21\ (d) if, on a given 
Business Day, the Fund requires all Authorized Participants purchasing 
or redeeming Shares on that day to deposit or receive (as applicable) 
cash in lieu of some or all of the Deposit Instruments or Redemption 
Instruments, respectively, solely because: (i) Such instruments are not 
eligible for transfer through either the NSCC or DTC (defined below); 
or (ii) in the case of Foreign Funds holding non-U.S. investments, such 
instruments are not eligible for trading due to local trading 
restrictions, local restrictions on securities transfers or other 
similar circumstances; or (e) if the Fund permits an Authorized 
Participant to deposit or receive (as applicable) cash in lieu of some 
or all of the Deposit Instruments or Redemption Instruments, 
respectively, solely because: (i) Such instruments are, in the case of 
the purchase of a Creation Unit, not available in sufficient quantity; 
(ii) such instruments are not eligible for trading by an Authorized 
Participant or the investor on whose behalf the Authorized Participant 
is acting; or (iii) a holder of Shares of a Foreign Fund holding non-
U.S. investments would be subject to unfavorable income tax treatment 
if the holder receives redemption proceeds in kind.\22\
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    \21\ In determining whether a particular Fund will sell or 
redeem Creation Units entirely on a cash or in-kind basis (whether 
for a given day or a given order), the key consideration will be the 
benefit that would accrue to the Fund and its investors. For 
instance, in bond transactions, the Adviser may be able to obtain 
better execution than Share purchasers because of the Adviser's 
size, experience and potentially stronger relationships in the fixed 
income markets. Purchases of Creation Units either on an all cash 
basis or in-kind are expected to be neutral to the Funds from a tax 
perspective. In contrast, cash redemptions typically require selling 
portfolio holdings, which may result in adverse tax consequences for 
the remaining Fund shareholders that would not occur with an in-kind 
redemption. As a result, tax consideration may warrant in-kind 
redemptions.
    \22\ A ``custom order'' is any purchase or redemption of Shares 
made in whole or in part on a cash basis in reliance on clause 
(e)(i) or (e)(ii).
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    20. Creation Units will consist of specified large aggregations of 
Shares, e.g., at least 25,000 Shares, and it is expected that the 
initial price of a Creation Unit will range from $1 million to $10 
million. All orders to purchase Creation Units must be placed with the 
Distributor by or through an ``Authorized Participant'' which is either 
(1) a ``Participating Party,'' i.e., a broker-dealer or other 
participant in the Continuous Net Settlement System of the NSCC, a 
clearing agency registered with the Commission, or (2) a participant in 
The Depository Trust Company (``DTC'') (``DTC Participant''), which, in 
either case, has signed a participant agreement with the

[[Page 24993]]

Distributor. The Distributor will be responsible for transmitting the 
orders to the Funds and will furnish to those placing such orders 
confirmation that the orders have been accepted, but applicants state 
that the Distributor may reject any order which is not submitted in 
proper form.
    21. Each Business Day, before the open of trading on the Listing 
Exchange, each Fund will cause to be published through the NSCC the 
names and quantities of the instruments comprising the Deposit 
Instruments and the Redemption Instruments, as well as the estimated 
Cash Amount (if any), for that day. The list of Deposit Instruments and 
Redemption Instruments will apply until a new list is announced on the 
following Business Day, and there will be no intra-day changes to the 
list except to correct errors in the published list. Each Listing 
Exchange will disseminate, every 15 seconds during regular Exchange 
trading hours, through the facilities of the Consolidated Tape 
Association, an amount for each Fund stated on a per individual Share 
basis representing the sum of (i) the estimated Cash Amount and (ii) 
the current value of the Deposit Instruments.
    22. Transaction expenses, including operational processing and 
brokerage costs, will be incurred by a Fund when investors purchase or 
redeem Creation Units in-kind and such costs have the potential to 
dilute the interests of the Fund's existing shareholders. Each Fund 
will impose purchase or redemption transaction fees (``Transaction 
Fees'') in connection with effecting such purchases or redemptions of 
Creation Units. With respect to Feeder Funds, the Transaction Fee would 
be paid indirectly to the Master Fund.\23\ In all cases, such 
Transaction Fees will be limited in accordance with requirements of the 
Commission applicable to management investment companies offering 
redeemable securities. Since the Transaction Fees are intended to 
defray the transaction expenses as well as to prevent possible 
shareholder dilution resulting from the purchase or redemption of 
Creation Units, the Transaction Fees will be borne only by such 
purchasers or redeemers.\24\ The Distributor will be responsible for 
delivering the Fund's prospectus to those persons acquiring Shares in 
Creation Units and for maintaining records of both the orders placed 
with it and the confirmations of acceptance furnished by it. In 
addition, the Distributor will maintain a record of the instructions 
given to the applicable Fund to implement the delivery of its Shares.
---------------------------------------------------------------------------

    \23\ Applicants are not requesting relief from section 18 of the 
Act. Accordingly, a Master Fund may require a Transaction Fee 
payment to cover expenses related to purchases or redemptions of the 
Master Fund's shares by a Feeder Fund only if it requires the same 
payment for equivalent purchases or redemptions by any other feeder 
fund. Thus, for example, a Master Fund may require payment of a 
Transaction Fee by a Feeder Fund for transactions for 20,000 or more 
shares so long as it requires payment of the same Transaction Fee by 
all feeder funds for transactions involving 20,000 or more shares.
    \24\ Where a Fund permits an in-kind purchaser to substitute 
cash-in-lieu of depositing one or more of the requisite Deposit 
Instruments, the purchaser may be assessed a higher Transaction Fee 
to cover the cost of purchasing such Deposit Instruments.
---------------------------------------------------------------------------

    23. Shares of each Fund will be listed and traded individually on 
an Exchange. It is expected that one or more member firms of an 
Exchange will be designated to act as a market maker (each, a ``Market 
Maker'') and maintain a market for Shares trading on the Exchange. 
Prices of Shares trading on an Exchange will be based on the current 
bid/offer market. Transactions involving the sale of Shares on an 
Exchange will be subject to customary brokerage commissions and 
charges.
    24. Applicants expect that purchasers of Creation Units will 
include institutional investors and arbitrageurs. Market Makers, acting 
in their roles to provide a fair and orderly secondary market for the 
Shares, may from time to time find it appropriate to purchase or redeem 
Creation Units. Applicants expect that secondary market purchasers of 
Shares will include both institutional and retail investors.\25\ The 
price at which Shares trade will be disciplined by arbitrage 
opportunities created by the option continually to purchase or redeem 
Shares in Creation Units, which should help prevent Shares from trading 
at a material discount or premium in relation to their NAV.
---------------------------------------------------------------------------

    \25\ Shares will be registered in book-entry form only. DTC or 
its nominee will be the record or registered owner of all 
outstanding Shares. Beneficial ownership of Shares will be shown on 
the records of DTC or the DTC Participants.
---------------------------------------------------------------------------

    25. Shares will not be individually redeemable, and owners of 
Shares may acquire those Shares from the Fund, or tender such Shares 
for redemption to the Fund, in Creation Units only. To redeem, an 
investor must accumulate enough Shares to constitute a Creation Unit. 
Redemption requests must be placed through an Authorized Participant. A 
redeeming investor may pay a Transaction Fee, calculated in the same 
manner as a Transaction Fee payable in connection with purchases of 
Creation Units.
    26. Neither the Trust nor any Fund will be advertised or marketed 
or otherwise held out as a traditional open-end investment company or a 
``mutual fund.'' Instead, each such Fund will be marketed as an 
``ETF.'' All marketing materials that describe the features or method 
of obtaining, buying or selling Creation Units, or Shares traded on an 
Exchange, or refer to redeemability, will prominently disclose that 
Shares are not individually redeemable and will disclose that the 
owners of Shares may acquire those Shares from the Fund or tender such 
Shares for redemption to the Fund in Creation Units only. The Funds 
will provide copies of their annual and semi-annual shareholder reports 
to DTC Participants for distribution to beneficial owners of Shares.
Applicants' Legal Analysis
    1. Applicants request an order under section 6(c) of the Act for an 
exemption from sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act 
and rule 22c-1 under the Act, under section 12(d)(1)(J) of 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 17(a)(2) of the Act.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction, or any class of persons, 
securities or transactions, from any provision of the Act, if and to 
the extent that 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. 
Section 17(b) of the Act authorizes the Commission to exempt a proposed 
transaction from section 17(a) of the Act if evidence establishes that 
the terms of the transaction, including the consideration to be paid or 
received, are reasonable and fair and do not involve overreaching on 
the part of any person concerned, and the proposed transaction is 
consistent with the policies of the registered investment company and 
the general provisions of the Act. 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 provisions of section 12(d)(1) if the exemption 
is consistent with the public interest and the protection of investors.

Sections 5(a)(1) and 2(a)(32) of the Act

    3. Section 5(a)(1) of the Act defines an ``open-end company'' as a 
management investment company that is offering for sale or has 
outstanding any redeemable security of which it is the issuer.

[[Page 24994]]

Section 2(a)(32) of the Act defines a redeemable security as any 
security, other than short-term paper, under the terms of which the 
owner, upon its presentation to the issuer, is entitled to receive 
approximately a proportionate share of the issuer's current net assets, 
or the cash equivalent. Because Shares will not be individually 
redeemable, applicants request an order that would permit the Funds to 
register as open-end management investment companies and issue Shares 
that are redeemable in Creation Units only.\26\ Applicants state that 
investors may purchase Shares in Creation Units and redeem Creation 
Units from each Fund. Applicants further state that because Creation 
Units may always be purchased and redeemed at NAV, the price of Shares 
on the secondary market should not vary materially from NAV.
---------------------------------------------------------------------------

    \26\ The Master Funds will not require relief from sections 
2(a)(32) and 5(a)(1) because the Master Funds will issue 
individually redeemable securities.
---------------------------------------------------------------------------

Section 22(d) of the Act and Rule 22c-1 under the Act

    4. Section 22(d) of the Act, among other things, prohibits a dealer 
from selling a redeemable security that is currently being offered to 
the public by or through an underwriter, except at a current public 
offering price described in the prospectus. Rule 22c-1 under the Act 
generally requires that a dealer selling, redeeming or repurchasing a 
redeemable security do so only at a price based on its NAV. Applicants 
state that secondary market trading in Shares will take place at 
negotiated prices, not at a current offering price described in a 
Fund's prospectus, and not at a price based on NAV. Thus, purchases and 
sales of Shares in the secondary market will not comply with section 
22(d) of the Act and rule 22c-1 under the Act. Applicants request an 
exemption under section 6(c) from these provisions.
    5. Applicants assert that the concerns sought to be addressed by 
section 22(d) of the Act and rule 22c-1 under the Act with respect to 
pricing are equally satisfied by the proposed method of pricing Shares. 
Applicants maintain that while there is little legislative history 
regarding section 22(d), its provisions, as well as those of rule 22c-
1, appear to have been designed to (a) prevent dilution caused by 
certain riskless-trading schemes by principal underwriters and contract 
dealers, (b) prevent unjust discrimination or preferential treatment 
among buyers, and (c) ensure an orderly distribution of investment 
company shares by eliminating price competition from dealers offering 
shares at less than the published sales price and repurchasing shares 
at more than the published redemption price.
    6. Applicants believe that none of these purposes will be thwarted 
by permitting Shares to trade in the secondary market at negotiated 
prices. Applicants state that (a) secondary market trading in Shares 
does not involve a Fund as a party and will not result in dilution of 
an investment in Shares, and (b) to the extent different prices exist 
during a given trading day, or from day to day, such variances occur as 
a result of third-party market forces, such as supply and demand. 
Therefore, applicants assert that secondary market transactions in 
Shares will not lead to discrimination or preferential treatment among 
purchasers. Finally, applicants contend that the price at which Shares 
trade will be disciplined by arbitrage opportunities created by the 
option continually to purchase or redeem Shares in Creation Units, 
which should help prevent Shares from trading at a material discount or 
premium in relation to their NAV.

Section 22(e)

    7. Section 22(e) of the Act generally prohibits a registered 
investment company from suspending the right of redemption or 
postponing the date of payment of redemption proceeds for more than 
seven days after the tender of a security for redemption. Applicants 
state that settlement of redemptions for Foreign Funds will be 
contingent not only on the settlement cycle of the United States 
market, but also on current delivery cycles in local markets for the 
underlying foreign securities held by a Foreign Fund. Applicants state 
that the delivery cycles currently practicable for transferring 
Redemption Instruments to redeeming investors, coupled with local 
market holiday schedules, may require a delivery process of up to 
fifteen (15) calendar days.\27\ Accordingly, with respect to Foreign 
Funds only, applicants hereby request relief under section 6(c) from 
the requirement imposed by section 22(e) to allow Foreign Funds to pay 
redemption proceeds within fifteen (15) calendar days following the 
tender of Creation Units for redemption.\28\
---------------------------------------------------------------------------

    \27\ Certain countries in which a Fund may invest have 
historically had settlement periods of up to fifteen (15) calendar 
days.
    \28\ Applicants acknowledge that no relief obtained from the 
requirements of section 22(e) will affect any obligations applicants 
may otherwise have under rule 15c6-1 under the Exchange Act 
requiring that most securities transactions be settled within three 
business days of the trade date.
---------------------------------------------------------------------------

    8. Applicants believe that Congress adopted section 22(e) to 
prevent unreasonable, undisclosed or unforeseen delays in the actual 
payment of redemption proceeds. Applicants propose that allowing 
redemption payments for Creation Units of a Foreign Fund to be made 
within fifteen calendar days would not be inconsistent with the spirit 
and intent of section 22(e). Applicants suggest that a redemption 
payment occurring within fifteen calendar days following a redemption 
request would adequately afford investor protection.
    9. Applicants are not seeking relief from section 22(e) with 
respect to Foreign Funds that do not effect creations and redemptions 
of Creation Units in-kind.\29\
---------------------------------------------------------------------------

    \29\ In addition, the requested exemption from section 22(e) 
would only apply to in-kind redemptions by the Feeder Funds and 
would not apply to in-kind redemptions by other feeder funds.
---------------------------------------------------------------------------

Section 12(d)(1)

    10. Section 12(d)(1)(A) of the Act prohibits a registered 
investment company from acquiring securities of an investment company 
if such 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 other broker-dealer from knowingly 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.
    11. Applicants request an exemption to permit registered management 
investment companies and unit investment trusts (``UITs'') that are not 
advised or sponsored by the Advisers and 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 (such management investment 
companies are referred to as ``Investing Management Companies,'' such 
UITs are referred to as ``Investing Trusts,'' and Investing Management 
Companies and Investing Trusts are collectively referred to as ``Funds 
of Funds''), to acquire Shares beyond the limits of section 12(d)(1)(A) 
of the Act; and the Funds, and any principal underwriter

[[Page 24995]]

for the Funds, and/or any Broker registered under the Exchange Act, to 
sell Shares to Funds of Funds beyond the limits of section 12(d)(1)(B) 
of the Act.
    12. Each Investing Management Company will be advised by an 
investment adviser within the meaning of section 2(a)(20)(A) of the Act 
(the ``Fund of Funds Adviser'') and may be sub-advised by investment 
advisers within the meaning of section 2(a)(20)(B) of the Act (each a 
``Fund of Funds Sub-Adviser''). Any investment adviser to an Investing 
Management Company will be registered under the Advisers Act. Each 
Investing Trust will be sponsored by a sponsor (``Sponsor'').
    13. Applicants submit that the proposed conditions to the requested 
relief adequately address the concerns underlying the limits in 
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. Applicants believe that the 
requested exemption is consistent with the public interest and the 
protection of investors.
    14. Applicants believe that neither a Fund of Funds nor a Fund of 
Funds Affiliate would be able to exert undue influence over a Fund.\30\ 
To limit the control that a Fund of Funds may have over a Fund, 
applicants propose a condition prohibiting a Fund of Funds Adviser or 
Sponsor, any person controlling, controlled by, or under common control 
with a Fund of Funds Adviser or Sponsor, and any investment company and 
any issuer that would be an investment company but for sections 3(c)(1) 
or 3(c)(7) of the Act that is advised or sponsored by a Fund of Funds 
Adviser or Sponsor, or any person controlling, controlled by, or under 
common control with a Fund of Funds Adviser or Sponsor (``Fund of Funds 
Advisory Group'') from controlling (individually or in the aggregate) a 
Fund within the meaning of section 2(a)(9) of the Act. The same 
prohibition would apply to any Fund of Funds Sub-Adviser, any person 
controlling, controlled by or under common control with the Fund of 
Funds Sub-Adviser, and any investment company or issuer that would be 
an investment company but for sections 3(c)(1) or 3(c)(7) of the Act 
(or portion of such investment company or issuer) advised or sponsored 
by the Fund of Funds Sub-Adviser or any person controlling, controlled 
by or under common control with the Fund of Funds Sub-Adviser (``Fund 
of Funds Sub-Advisory Group'').
---------------------------------------------------------------------------

    \30\ A ``Fund of Funds Affiliate'' is a Fund of Funds Adviser, 
Fund of Funds Sub-Adviser, Sponsor, promoter, and principal 
underwriter of a Fund of Funds, and any person controlling, 
controlled by, or under common control with any of those entities. A 
``Fund Affiliate'' is an investment adviser, promoter, or principal 
underwriter of a Fund and any person controlling, controlled by or 
under common control with any of these entities.
---------------------------------------------------------------------------

    15. Applicants propose other conditions to limit the potential for 
undue influence over the 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 a Fund) will cause a Fund to purchase a 
security in an offering of securities during the existence of an 
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, Fund of Funds Adviser, Fund of Funds Sub-Adviser, 
employee or Sponsor of the Fund of Funds, or a person of which any such 
officer, director, member of an advisory board, Fund of Funds Adviser 
or Fund of Funds Sub-Adviser, employee or Sponsor is an affiliated 
person (except that any person whose relationship to the Fund is 
covered by section 10(f) of the Act is not an Underwriting Affiliate).
    16. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. The board of directors or trustees 
of any Investing Management Company, including a majority of the 
directors or trustees who are not ``interested persons'' within the 
meaning of section 2(a)(19) of the Act (``disinterested directors or 
trustees''), will find that the advisory fees charged under the 
contract are based on services provided that will be in addition to, 
rather than duplicative of, services provided under the advisory 
contract of any Fund, or its respective Master Fund, in which the 
Investing Management Company may invest. In addition, under condition 
B.5., a Fund of Funds Adviser, or a Fund of Funds' trustee or Sponsor, 
as applicable, will waive fees otherwise payable to it by the Fund of 
Funds in an amount at least equal to any compensation (including fees 
received pursuant to any plan adopted by a Fund, or its respective 
Master Fund, under rule 12b-1 under the Act) received from a Fund by 
the Fund of Funds Adviser, trustee or Sponsor or an affiliated person 
of the Fund of Funds Adviser, trustee or Sponsor, other than any 
advisory fees paid to the Fund of Funds Adviser, trustee or Sponsor or 
its affiliated person by a Fund, in connection with the investment by 
the Fund of Funds in the Fund. Applicants 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 a fund of funds as set forth 
in NASD Conduct Rule 2830.\31\
---------------------------------------------------------------------------

    \31\ Any references to NASD Conduct Rule 2830 include any 
successor or replacement FINRA rule to NASD Conduct Rule 2830.
---------------------------------------------------------------------------

    17. Applicants submit that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that no Fund, nor its 
respective Master Fund, will acquire 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 permitted by exemptive relief from the Commission 
permitting the Fund, or its respective Master Fund, to purchase shares 
of other investment companies for short-term cash management purposes 
or pursuant to the Master-Feeder Relief. To ensure a Fund of Funds is 
aware of the terms and conditions of the requested order, the Fund of 
Funds will enter into an agreement with the Fund (``FOF Participation 
Agreement''). The FOF Participation Agreement will include an 
acknowledgement from the Fund of Funds that it may rely on the order 
only to invest in the Funds and not in any other investment company.
    18. Applicants also note that a Fund may choose to reject a direct 
purchase of Shares in Creation Units by a Fund of Funds. To the extent 
that a Fund of Funds purchases Shares in the secondary market, a Fund 
would still retain its ability to reject any initial investment by a 
Fund of Funds in excess of the limits of section 12(d)(1)(A) by 
declining to enter into a FOF Participation Agreement with the Fund of 
Funds.
    19. Applicants also are seeking the Master-Feeder Relief to permit 
the Feeder Funds to perform creations and redemptions of Shares in-kind 
in a master-feeder structure. Applicants assert that this structure is 
substantially identical to traditional master-feeder structures 
permitted pursuant to the exception provided in section 12(d)(1)(E) of 
the Act. Section 12(d)(1)(E) provides that the percentage limitations 
of section 12(d)(1)(A) and (B) shall not apply to a security issued by 
an investment company (in this case, the shares of the applicable 
Master Fund) if, among other things, that security is the only 
investment security held by the investing investment company (in this 
case, the Feeder

[[Page 24996]]

Fund). Applicants believe the proposed master-feeder structure complies 
with section 12(d)(1)(E) because each Feeder Fund will hold only 
investment securities issued by its corresponding Master Fund; however, 
the Feeder Funds may receive securities other than securities of its 
corresponding Master Fund if a Feeder Fund accepts an in-kind creation. 
To the extent that a Feeder Fund may be deemed to be holding both 
shares of the Master Fund and other securities, applicants request 
relief from section 12(d)(1)(A) and (B). The Feeder Funds would operate 
in compliance with all other provisions of section 12(d)(1)(E).

Sections 17(a)(1) and (2) of the Act

    20. Sections 17(a)(1) and (2) of the Act generally prohibit an 
affiliated person of a registered investment company, or an affiliated 
person of such a person, from selling any security to or purchasing any 
security from the company. Section 2(a)(3) of the Act defines 
``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 
the 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. Section 2(a)(9) of the Act defines ``control'' as the 
power to exercise a controlling influence over the management or 
policies of a company, and provides that a control relationship will be 
presumed where one person owns more than 25% of a company's voting 
securities. The Funds may be deemed to be controlled by the Adviser or 
an entity controlling, controlled by or under common control with the 
Adviser and hence affiliated persons of each other. In addition, the 
Funds may be deemed to be under common control with any other 
registered investment company (or series thereof) advised by the 
Adviser or an entity controlling, controlled by or under common control 
with the Adviser (an ``Affiliated Fund''). Any investor, including 
Market Makers, owning 5% or holding in excess of 25% of the Trust or 
such Funds, may be deemed affiliated persons of the Trust or such 
Funds. In addition, an investor could own 5% or more, or in excess of 
25% of the outstanding shares of one or more Affiliated Funds making 
that investor a Second-Tier Affiliate of the Funds.
    21. Applicants request an exemption from sections 17(a)(1) and 
17(a)(2) of the Act pursuant to sections 6(c) and 17(b) of the Act to 
permit persons that are Affiliated Persons of the Funds, or Second-Tier 
Affiliates of the Funds, solely by virtue of one or more of the 
following: (a) Holding 5% or more, or in excess of 25%, of the 
outstanding Shares of one or more Funds; (b) an affiliation with a 
person with an ownership interest described in (a); or (c) holding 5% 
or more, or more than 25%, of the shares of one or more Affiliated 
Funds, to effectuate purchases and redemptions ``in-kind.''
    22. Applicants assert that no useful purpose would be served by 
prohibiting such affiliated persons from making ``in-kind'' purchases 
or ``in-kind'' redemptions of Shares of a Fund in Creation Units. Both 
the deposit procedures for ``in-kind'' purchases of Creation Units and 
the redemption procedures for ``in-kind'' redemptions of Creation Units 
will be effected in exactly the same manner for all purchases and 
redemptions, regardless of size or number. There will be no 
discrimination between purchasers or redeemers. Deposit Instruments and 
Redemption Instruments for each Fund will be valued in the identical 
manner as those Portfolio Holdings currently held by such Fund and the 
valuation of the Deposit Instruments and Redemption Instruments will be 
made in an identical manner regardless of the identity of the purchaser 
or redeemer. Applicants do not believe that ``in-kind'' purchases and 
redemptions will result in abusive self-dealing or overreaching, but 
rather assert that such procedures will be implemented consistently 
with each Fund's objectives and with the general purposes of the Act. 
Applicants believe that ``in-kind'' purchases and redemptions will be 
made on terms reasonable to applicants and any affiliated persons 
because they will be valued pursuant to verifiable objective standards. 
The method of valuing Portfolio Holdings held by a Fund is identical to 
that used for calculating ``in-kind'' purchase or redemption values and 
therefore creates no opportunity for affiliated persons or Second-Tier 
Affiliates of applicants to effect a transaction detrimental to the 
other holders of Shares of that Fund. Similarly, applicants submit 
that, by using the same standards for valuing Portfolio Holdings held 
by a Fund as are used for calculating ``in-kind'' redemptions or 
purchases, the Fund will ensure that its NAV will not be adversely 
affected by such securities transactions. Applicants also note that the 
ability to take deposits and make redemptions ``in-kind'' will help 
each Fund to track closely its Underlying Index and therefore aid in 
achieving the Fund's objectives.
    23. Applicants also seek relief under sections 6(c) and 17(b) from 
section 17(a) to permit a Fund that is an affiliated person, or an 
affiliated person of an affiliated person, of a Fund of Funds to sell 
its Shares to and redeem its Shares from a Fund of Funds, and to engage 
in the accompanying in-kind transactions with the Fund of Funds.\32\ 
Applicants state that the terms of the transactions are fair and 
reasonable and do not involve overreaching. Applicants note that any 
consideration paid by a Fund of Funds for the purchase or redemption of 
Shares directly from a Fund will be based on the NAV of the Fund.\33\ 
Applicants believe that any proposed transactions directly between the 
Funds and Funds of Funds will be consistent with the policies of each 
Fund of Funds. The purchase of Creation Units by a Fund of Funds 
directly from a Fund will be accomplished in accordance with the 
investment restrictions of any such Fund of Funds and will be 
consistent with the investment policies set forth in the Fund of Funds' 
registration statement. Applicants also state that the proposed 
transactions are consistent with the general purposes of the Act and 
are appropriate in the public interest.
---------------------------------------------------------------------------

    \32\ Although applicants believe that most Funds of Funds will 
purchase Shares in the secondary market and will not purchase 
Creation Units directly from a Fund, a Fund of Funds might seek to 
transact in Creation Units directly with a Fund that is an 
affiliated person of a Fund of Funds. To the extent that purchases 
and sales of Shares occur in the secondary market and not through 
principal transactions directly between a Fund of Funds and a Fund, 
relief from section 17(a) would not be necessary. However, the 
requested relief would apply to direct sales of Shares in Creation 
Units by a Fund to a Fund of Funds and redemptions of those Shares. 
Applicants are not seeking relief from section 17(a) for, and the 
requested relief will not apply to, transactions where a Fund could 
be deemed an affiliated person, or an affiliated person of an 
affiliated person of a Fund of Funds because the Adviser or an 
entity controlling, controlled by or under common control with the 
Adviser provides investment advisory services to that Fund of Funds.
    \33\ Applicants acknowledge that the receipt of 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 a 
Fund or (b) an affiliated person of a Fund, or an affiliated person 
of such person, for the sale by the Fund of its Shares to a Fund of 
Funds, may be prohibited by section 17(e)(1) of the Act. The FOF 
Participation Agreement also will include this acknowledgment.
---------------------------------------------------------------------------

    24. To the extent that a Fund operates in a master-feeder 
structure, applicants also request relief permitting the Feeder Funds 
to engage in in-kind creations and redemptions with the applicable 
Master Fund. Applicants state that the customary section 17(a)(1) and 
17(a)(2)

[[Page 24997]]

relief would not be sufficient to permit such transactions because the 
Feeder Funds and the applicable Master Fund could also be affiliated by 
virtue of having the same investment adviser. However, applicants 
believe that in-kind creations and redemptions between a Feeder Fund 
and a Master Fund advised by the same investment adviser do not involve 
``overreaching'' by an affiliated person. Such transactions will occur 
only at the Feeder Fund's proportionate share of the Master Fund's net 
assets, and the distributed securities will be valued in the same 
manner as they are valued for the purposes of calculating the 
applicable Master Fund's NAV. Further, all such transactions will be 
effected with respect to pre-determined securities and on the same 
terms with respect to all investors. Finally, such transaction would 
only occur as a result of, and to effectuate, a creation or redemption 
transaction between the Feeder Fund and a third-party investor. 
Applicants believe that the terms of the proposed transactions are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, the proposed transactions are consistent with the 
policy of each Fund and will be consistent with the investment 
objectives and policies of each Fund of Funds, and the proposed 
transactions are consistent with the general purposes of the Act.
Applicants' Conditions
    Applicants agree that any order of the Commission granting the 
requested relief will be subject to the following conditions:

A. ETF Relief

    1. The requested relief, other than the section 12(d)(1) Relief and 
the section 17 relief related to a master-feeder structure, will expire 
on the effective date of any Commission rule under the Act that 
provides relief permitting the operation of index-based ETFs.
    2. As long as a Fund operates in reliance on the requested order, 
Shares of such Fund will be listed on an Exchange.
    3. Neither the Trust nor any Fund will be advertised or marketed as 
an open-end investment company or a mutual fund. Any advertising 
material that describes the purchase or sale of Creation Units or 
refers to redeemability will prominently disclose that Shares are not 
individually redeemable and that owners of Shares may acquire those 
Shares from the Fund and tender those Shares for redemption to a Fund 
in Creation Units only.
    4. The Web site, which is and will be publicly accessible at no 
charge, will contain, on a per Share basis for each Fund, the prior 
Business Day's NAV and the market closing price or the midpoint of the 
bid/ask spread at the time of the calculation of such NAV (``Bid/Ask 
Price''), and a calculation of the premium or discount of the market 
closing price or Bid/Ask Price against such NAV.
    5. Each Fund will post on the Web site on each Business Day, before 
commencement of trading of Shares on the Exchange, the Fund's, or its 
respective Master Fund's, Portfolio Holdings.
    6. Neither the Adviser nor any Sub-Adviser to a Self-Indexing Fund, 
directly or indirectly, will cause any Authorized Participant (or any 
investor on whose behalf an Authorized Participant may transact with 
the Self-Indexing Fund) to acquire any Deposit Instrument for a Self-
Indexing Fund, or its respective Master Fund, through a transaction in 
which the Self-Indexing Fund, or its respective Master Fund, could not 
engage directly.

B. Section 12(d)(1) Relief

    1. The members of a Fund of Funds' Advisory Group will not control 
(individually or in the aggregate) a Fund, or its respective Master 
Fund, within the meaning of section 2(a)(9) of the Act. The members of 
a Fund of Funds' Sub-Advisory Group will not control (individually or 
in the aggregate) a 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 a Fund, the Fund of Funds' 
Advisory Group or the Fund of Funds' Sub-Advisory Group, each in the 
aggregate, becomes a holder of more than 25 percent of the outstanding 
voting securities of a Fund, it will vote its Shares of the Fund in the 
same proportion as the vote of all other holders of the Fund's Shares. 
This condition does not apply to the Fund of Funds' Sub-Advisory Group 
with respect to a Fund, or its respective Master Fund, for which the 
Fund of Funds' Sub-Adviser or a person controlling, controlled by or 
under common control with the Fund of Funds' Sub-Adviser acts as the 
investment adviser within the meaning of section 2(a)(20)(A) of the 
Act.
    2. No Fund of Funds or Fund of Funds Affiliate will cause any 
existing or potential investment by the Fund of Funds in a Fund to 
influence the terms of any services or transactions between the Fund of 
Funds or Fund of Funds Affiliate and the Fund, or its respective Master 
Fund, or a Fund Affiliate.
    3. The board of directors or trustees of an Investing Management 
Company, including a majority of the disinterested directors or 
trustees, will adopt procedures reasonably designed to ensure that the 
Fund of Funds Adviser and Fund of Funds Sub-Adviser are conducting the 
investment program of the Investing Management Company without taking 
into account any consideration received by the Investing Management 
Company or a Fund of Funds Affiliate from a Fund, or its respective 
Master Fund, or Fund Affiliate in connection with any services or 
transactions.
    4. Once an investment by a Fund of Funds in the securities of a 
Fund exceeds the limits in section 12(d)(1)(A)(i) of the Act, the Board 
of the Fund, or its respective Master Fund, including a majority of the 
directors or trustees who are not ``interested persons'' within the 
meaning of section 2(a)(19) of the Act (``non-interested Board 
members''), will determine that any consideration paid by the Fund, or 
its respective Master Fund, to the Fund of Funds or a Fund of Funds 
Affiliate in connection with any services or transactions: (i) Is fair 
and reasonable in relation to the nature and quality of the services 
and benefits received by the Fund, or its respective Master Fund; (ii) 
is within the range of consideration that the Fund would be required to 
pay to another unaffiliated entity in connection with the same services 
or transactions; and (iii) does not involve overreaching on the part of 
any person concerned. This condition does not apply with respect to any 
services or transactions between a 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. The Fund of Funds Adviser, or trustee or Sponsor of an Investing 
Trust, as applicable, will waive fees otherwise payable to it by the 
Fund of Funds in an amount at least equal to any compensation 
(including fees received pursuant to any plan adopted by a Fund, or its 
respective Master Fund, under rule 12b-l under the Act) received from a 
Fund, or its respective Master Fund, by the Fund of Funds Adviser, or 
trustee or Sponsor of the Investing Trust, or an affiliated person of 
the Fund of Funds Adviser, or trustee or Sponsor of the Investing 
Trust, other than any advisory fees paid to the Fund of Funds Adviser, 
trustee or Sponsor of an Investing Trust, or its affiliated person by 
the Fund, or its respective Master Fund, in connection with the

[[Page 24998]]

investment by the Fund of Funds in the Fund. Any Fund of Funds Sub-
Adviser will waive fees otherwise payable to the Fund of Funds Sub-
Adviser, directly or indirectly, by the Investing Management Company in 
an amount at least equal to any compensation received from a Fund, or 
its respective Master Fund, by the Fund of Funds Sub-Adviser, or an 
affiliated person of the Fund of Funds Sub-Adviser, other than any 
advisory fees paid to the Fund of Funds Sub-Adviser or its affiliated 
person by the Fund, or its respective Master Fund, in connection with 
the investment by the Investing Management Company in the Fund made at 
the direction of the Fund of Funds Sub-Adviser. In the event that the 
Fund of Funds Sub-Adviser waives fees, the benefit of the waiver will 
be passed through to the Investing Management Company.
    6. No Fund of Funds or Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to a Fund) 
will cause a Fund, or its respective Master Fund, to purchase a 
security in any Affiliated Underwriting.
    7. The Board of a Fund, or its respective Master Fund, including a 
majority of the non-interested Board members, will adopt procedures 
reasonably designed to monitor any purchases of securities by the Fund, 
or its respective Master Fund, in an Affiliated Underwriting, once an 
investment by a Fund of Funds in the securities of the 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 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 Fund. The Board will consider, among other 
things: (i) Whether the purchases were consistent with the investment 
objectives and policies of the 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 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 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 of the Fund.
    8. Each Fund, or its respective Master Fund, 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 Affiliated Underwritings once an investment 
by a Fund of Funds in the securities of the Fund exceeds the limit of 
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.
    9. Before investing in a Fund in excess of the limit in section 
12(d)(1)(A), a Fund of Funds and the applicable Trust will execute a 
FOF Participation Agreement stating without limitation that their 
respective boards of directors or trustees and their investment 
advisers, or trustee and Sponsor, as applicable, 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 a Fund in excess of the limit in section 12(d)(1)(A)(i), a 
Fund of Funds will notify the Fund of the investment. At such time, the 
Fund of Funds will also transmit to the Fund a list of the names of 
each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of 
Funds will notify the Fund of any changes to the list of the names as 
soon as reasonably practicable after a change occurs. The Fund and the 
Fund of Funds will maintain and preserve a copy of the order, the FOF 
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.
    10. Before approving any advisory contract under section 15 of the 
Act, the board of directors or trustees of each Investing Management 
Company including a majority of the disinterested directors or 
trustees, will find that the advisory fees charged under such contract 
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 Fund, or its respective Master Fund, in which the Investing 
Management Company may invest. These findings and their basis will be 
fully recorded in the minute books of the appropriate Investing 
Management Company.
    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 a 
fund of funds as set forth in NASD Conduct Rule 2830.
    12. No Fund, or its respective Master Fund, will acquire securities 
of an 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 (i) the Fund, or its 
respective Master Fund, acquires securities of another investment 
company pursuant to exemptive relief from the Commission permitting the 
Fund, or its respective Master Fund, to acquire securities of one or 
more investment companies for short-term cash management purposes or 
(ii) the Fund acquires securities of the Master Fund pursuant to the 
Master-Feeder Relief.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015-10176 Filed 4-30-15; 8:45 am]
BILLING CODE 8011-01-P



                                                                                      Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Notices                                                       24989

                                                    For the Commission, by the Division of                  HEARING OR NOTIFICATION OF HEARING:                      3. Each Trust will enter into a
                                                  Trading and Markets, pursuant to delegated                An order granting the requested relief                distribution agreement with the
                                                  authority.27                                              will be issued unless the Commission                  Distributor. The distributor for the
                                                  Brent J. Fields,                                          orders a hearing. Interested persons may              Initial Funds (defined below) will be
                                                  Secretary.                                                request a hearing by writing to the                   SEI Investments Distribution Co. The
                                                  [FR Doc. 2015–10160 Filed 4–30–15; 8:45 am]               Commission’s Secretary and serving                    Distributor is a broker-dealer (‘‘Broker’’)
                                                  BILLING CODE 8011–01–P                                    applicants with a copy of the request,                registered under the Securities
                                                                                                            personally or by mail. Hearing requests               Exchange Act of 1934 (the ‘‘Exchange
                                                                                                            should be received by the Commission                  Act’’) and will act as distributor and
                                                  SECURITIES AND EXCHANGE                                   by 5:30 p.m. on May 22, 2015, and                     principal underwriter of one or more of
                                                  COMMISSION                                                should be accompanied by proof of                     the Funds. The distributor of any Fund
                                                                                                            service on applicants, in the form of an              may be an affiliated person, as defined
                                                  [Investment Company Act Release No.
                                                  31579; File No. 812–14443]                                affidavit, or for lawyers, a certificate of           in section 2(a)(3) of the Act (‘‘Affiliated
                                                                                                            service. Pursuant to Rule 0–5 under the               Person’’), or an affiliated person of an
                                                  Highland Funds I, et al.; Notice of                       Act, hearing requests should state the                Affiliated Person (‘‘Second-Tier
                                                  Application                                               nature of the writer’s interest, any facts            Affiliate’’), of that Fund’s Adviser
                                                                                                            bearing upon the desirability of a                    and/or Sub-Advisers. No distributor will
                                                  April 27, 2015.                                           hearing on the matter, the reason for the             be affiliated with any Exchange (defined
                                                  AGENCY:    Securities and Exchange                        request, and the issues contested.                    below).
                                                  Commission (‘‘Commission’’).                              Persons who wish to be notified of a                     4. Applicants request that the order
                                                  ACTION: Notice of an application for an                   hearing may request notification by                   apply to the initial series of the Trust
                                                  order under section 6(c) of the                           writing to the Commission’s Secretary.                described in the application that will
                                                  Investment Company Act of 1940 (the                       ADDRESSES: The Commission: Secretary,                 rely on the requested order (‘‘Initial
                                                  ‘‘Act’’) for an exemption from sections                   U.S. Securities and Exchange                          Funds’’), as well as any additional series
                                                  2(a)(32), 5(a)(1), 22(d), and 22(e) of the                Commission, 100 F Street NE.,                         of the Trust and other open-end
                                                  Act and rule 22c–1 under the Act, under                   Washington, DC 20549–1090;                            management investment companies, or
                                                  sections 6(c) and 17(b) of the Act for an                 Applicants: The Trust and the Initial                 series thereof, that may be created in the
                                                  exemption from sections 17(a)(1) and                      Adviser, 200 Crescent Court, Suite 700,               future (‘‘Future Funds’’), each of which
                                                  17(a)(2) of the Act, and under section                    Dallas, TX 75201; the Distributor, One                will operate as an exchanged-traded
                                                  12(d)(1)(J) for an exemption from                         Freedom Valley Drive, Oaks, PA 19456.                 fund (‘‘ETF’’) and will track a specified
                                                  sections 12(d)(1)(A) and 12(d)(1)(B) of                                                                         index that includes both long and short
                                                                                                            FOR FURTHER INFORMATION CONTACT:
                                                  the Act.                                                                                                        positions or uses a 130/30 investment
                                                                                                            Mark N. Zaruba, Senior Counsel at (202)
                                                                                                                                                                  strategy and is comprised of domestic or
                                                                                                            551–6878, or David P. Bartels, Branch
                                                  SUMMARY OF APPLICATION:     Applicants                                                                          foreign equity and/or fixed income
                                                                                                            Chief, at (202) 551–6821 (Division of
                                                  request an order that would permit (a)                                                                          securities (each, an ‘‘Underlying
                                                                                                            Investment Management, Chief
                                                  series of certain open-end management                                                                           Index’’).1 Any Future Fund will (a) be
                                                                                                            Counsel’s Office).
                                                  investment companies to issue shares                                                                            advised by the Initial Advisers or an
                                                                                                            SUPPLEMENTARY INFORMATION: The
                                                  (‘‘Shares’’) redeemable in large                                                                                entity controlling, controlled by, or
                                                  aggregations only (‘‘Creation Units’’); (b)               following is a summary of the                         under common control with the Initial
                                                  secondary market transactions in Shares                   application. The complete application                 Advisers (each, an ‘‘Adviser’’) and (b)
                                                  to occur at negotiated market prices                      may be obtained via the Commission’s                  comply with the terms and conditions
                                                  rather than at net asset value (‘‘NAV’’);                 Web site by searching for the file                    of the application. The Initial Funds and
                                                  (c) certain series to pay redemption                      number, or for an applicant using the                 Future Funds, together, are the
                                                  proceeds, under certain circumstances,                    Company name box, at http://                          ‘‘Funds.’’ 2
                                                  more than seven days after the tender of                  www.sec.gov/search/search.htm or by                      5. Applicants state that a Fund may
                                                  Shares for redemption; (d) certain                        calling (202) 551–8090.                               operate as a feeder fund in a master-
                                                  affiliated persons of the series to deposit               Applicants’ Representations                           feeder structure (‘‘Feeder Fund’’).
                                                  securities into, and receive securities                                                                         Applicants request that the order permit
                                                                                                               1. The Trust is organized as a
                                                  from, the series in connection with the                                                                         a Feeder Fund to acquire shares of
                                                                                                            Delaware statutory trust and is
                                                  purchase and redemption of Creation                                                                             another registered investment company
                                                                                                            registered under the Act as an open-end
                                                  Units; (e) certain registered management                                                                        in the same group of investment
                                                                                                            management investment company with
                                                  investment companies and unit                                                                                   companies having substantially the
                                                                                                            multiple series.
                                                  investment trusts outside of the same                        2. The Initial Adviser is registered as              1 Certain of the applicants received a prior order
                                                  group of investment companies as the                      investment adviser under the                          with respect to the offering of index-based
                                                  series to acquire Shares; and (f) certain                 Investment Advisers Act of 1940 (the                  exchange-traded funds. In the Matter of Highland
                                                  series to perform creations and                           ‘‘Advisers Act’’) and will be the                     Capital Management, L.P., et al., Investment
                                                  redemptions of Creation Units in-kind                     investment adviser to the Funds                       Company Act Release Nos. 29890 (Dec. 19, 2011)
                                                  in a master-feeder structure.                                                                                   (notice) and 29918 (Jan. 17, 2012) (order) (the ‘‘Prior
                                                                                                            (defined below). Any other Adviser                    Order’’). The Prior Order does not apply to Long/
                                                  APPLICANTS: Highland Funds I (the                         (defined below) will also be registered               Short Funds and 130/30 Funds (each as defined
                                                  ‘‘Trust’’), Highland Capital Management                   as an investment adviser under the                    herein), and the order requested herein by
                                                  Fund Advisors, L.P. (the ‘‘Initial                                                                              applicants will only cover Long/Short Funds and
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                                                                                                            Advisers Act. The Adviser may enter
                                                                                                                                                                  130/30 Funds.
                                                  Adviser’’), and SEI Investments                           into sub-advisory agreements with one                   2 All existing entities that intend to rely on the
                                                  Distribution Co. (the ‘‘Distributor’’).                   or more investment advisers to act as                 requested order have been named as applicants.
                                                  FILING DATES: The application was filed                   sub-advisers to particular Funds (each,               Any other existing or future entity that
                                                  on April 17, 2015, and amended on                         a ‘‘Sub-Adviser’’). Any Sub-Adviser will              subsequently relies on the order will comply with
                                                                                                                                                                  the terms and conditions of the order. A Fund of
                                                  April 23, 2015 and April 27, 2015.                        either be registered under the Advisers               Funds (as defined below) may rely on the order
                                                                                                            Act or will not be required to register               only to invest in Funds and not in any other
                                                    27 17   CFR 200.30–3(a)(12).                            thereunder.                                           registered investment company.



                                             VerDate Sep<11>2014     18:14 Apr 30, 2015   Jkt 235001   PO 00000   Frm 00098   Fmt 4703   Sfmt 4703   E:\FR\FM\01MYN1.SGM   01MYN1


                                                  24990                              Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Notices

                                                  same investment objectives as the                        Component Securities. Each Fund, or its                  Index in the same approximate
                                                  Feeder Fund (‘‘Master Fund’’) beyond                     respective Master Fund, may also invest                  proportions as in such Underlying
                                                  the limitations in section 12(d)(1)(A) of                up to 20% of its assets in certain index                 Index. A Fund, or its respective Master
                                                  the Act and permit the Master Fund,                      futures, options, options on index                       Fund, using a representative sampling
                                                  and any principal underwriter for the                    futures, swap contracts or other                         strategy will hold some, but not
                                                  Master Fund, to sell shares of the Master                derivatives, as related to its respective                necessarily all of the Component
                                                  Fund to the Feeder Fund beyond the                       Underlying Index and its Component                       Securities of its Underlying Index.
                                                  limitations in section 12(d)(1)(B) of the                Securities, cash and cash equivalents,                   Applicants state that a Fund, or its
                                                  Act (‘‘Master-Feeder Relief’’).                          other investment companies, as well as                   respective Master Fund, using a
                                                  Applicants may structure certain Feeder                  in securities and other instruments not                  representative sampling strategy will
                                                  Funds to generate economies of scale                     included in its Underlying Index but                     not be expected to track the
                                                  and incur lower overhead costs.3 There                   which the Adviser believes will help the                 performance of its Underlying Index
                                                  would be no ability by Fund                              Fund track its Underlying Index. A                       with the same degree of accuracy as
                                                  shareholders to exchange Shares of                       Fund may also engage in short sales in                   would an investment vehicle that
                                                  Feeder Funds for shares of another                       accordance with its investment                           invested in every Component Security
                                                  feeder series of the Master Fund.                        objective.                                               of the Underlying Index with the same
                                                     6. Each Fund, or its respective Master                   8. Funds will seek to track Underlying                weighting as the Underlying Index.
                                                  Fund, will hold certain securities,                      Indexes constructed using 130/30                         Applicants expect that each Fund will
                                                  currencies, other assets and other                       investment strategies (‘‘130/30 Funds’’)                 have an annual tracking error relative to
                                                  investment positions (‘‘Portfolio                        or other long/short investment strategies                the performance of its Underlying Index
                                                  Holdings’’) selected to correspond                       (‘‘Long/Short Funds’’). Each Long/Short                  of less than 5%.
                                                  generally to the performance of its                      Fund will establish (i) exposures equal                     10. Each Fund will be entitled to use
                                                  Underlying Index. Certain of the Funds                   to approximately 100% of the long                        its Underlying Index pursuant to either
                                                  will be based on Underlying Indexes                      positions specified by the Long/Short                    a licensing agreement with the entity
                                                  that will be comprised solely of equity                  Index 6 and (ii) exposures equal to                      that compiles, creates, sponsors or
                                                  and/or fixed income securities issued by                 approximately 100% of the short                          maintains the Underlying Index (each,
                                                  one or more of the following categories                  positions specified by the Long/Short                    an ‘‘Index Provider’’) or a sub-licensing
                                                  of issuers: (i) Domestic issuers and (ii)                Index. Each 130/30 Fund will include                     arrangement with the applicable
                                                  non-domestic issuers meeting the                         strategies that: (i) Establish long                      Adviser, which will have a licensing
                                                  requirements for trading in U.S.                         positions in securities so that total long               agreement with such Index Provider.8 A
                                                  markets. Other Funds will be based on                    exposure represents approximately                        ‘‘Self-Indexing Fund’’ is a Fund for
                                                  Underlying Indexes that will be                          130% of a Fund’s net assets; and (ii)                    which an Affiliated Person, or a Second-
                                                  comprised solely of foreign and                          simultaneously establish short positions                 Tier Affiliate, of the Trust or a Fund, of
                                                  domestic, or solely foreign, equity and/                 in other securities so that total short                  the Adviser, of any Sub-Adviser to or
                                                  or fixed income securities (‘‘Foreign                    exposure represents approximately 30%                    promoter of a Fund, or of the Distributor
                                                  Funds’’).                                                of such Fund’s net assets. Each Business                 (each, an ‘‘Affiliated Index Provider’’)
                                                     7. Applicants represent that each                     Day, the Adviser for each Fund will                      will serve as the Index Provider. In the
                                                  Fund, or its respective Master Fund,                     provide full portfolio transparency on                   case of Self-Indexing Funds, an
                                                  will invest at least 80% of its assets                   the Fund’s publicly available Web site                   Affiliated Index Provider will create a
                                                  (excluding securities lending collateral)                (‘‘Web site’’) by making available the                   proprietary, rules-based methodology to
                                                  in the component securities of its                       Fund’s, or its respective Master Fund’s,                 create Underlying Indexes (each an
                                                  respective Underlying Index                              Portfolio Holdings before the                            ‘‘Affiliated Index’’).9 Except with
                                                  (‘‘Component Securities’’) and TBA                       commencement of trading of Shares on                     respect to the Self-Indexing Funds, no
                                                  Transactions,4 and in the case of                        the Listing Exchange (defined below).7                   Index Provider is or will be an Affiliated
                                                  Foreign Funds, Component Securities                      The information provided on the Web                      Person, or a Second-Tier Affiliate, of the
                                                  and Depositary Receipts 5 representing                   site will be formatted to be reader-                     Trust or a Fund, of the Adviser, of any
                                                                                                           friendly.
                                                    3 Operating in a master-feeder structure could            9. A Fund, or its respective Master                      8 The licenses for the Self-Indexing Funds will
                                                  also impose costs on a Feeder Fund and reduce its        Fund, will utilize either a replication or               specifically state that the Affiliated Index Provider
                                                  tax efficiency. The Feeder Fund’s Board will                                                                      (or in case of a sub-licensing agreement, the
                                                  consider any such potential disadvantages against
                                                                                                           representative sampling strategy to track                Adviser) must provide the use of the Underlying
                                                  the benefits of economies of scale and other benefits    its Underlying Index. A Fund, or its                     Indexes and related intellectual property at no cost
                                                  of operating within a master-feeder structure. In a      respective Master Fund, using a                          to the Trust and the Self-Indexing Funds.
                                                  master-feeder structure, the Master Fund—rather          replication strategy will invest in the                     9 The Affiliated Indexes may be made available to
                                                  than the Feeder Fund—would generally invest its                                                                   registered investment companies, as well as
                                                  portfolio in compliance with the requested order.        Component Securities of its Underlying
                                                                                                                                                                    separately managed accounts of institutional
                                                    4 A ‘‘to-be-announced transaction’’ or ‘‘TBA
                                                                                                                                                                    investors and privately offered funds that are not
                                                  Transaction’’ is a method of trading mortgage-           Fund, will not invest in any Depositary Receipts         deemed to be ‘‘investment companies’’ in reliance
                                                  backed securities. In a TBA Transaction, the buyer       that the Adviser or any Sub-Adviser deems to be          on section 3(c)(1) or 3(c)(7) of the Act for which the
                                                  and seller agree upon general trade parameters such      illiquid or for which pricing information is not         Adviser acts as adviser or subadviser (‘‘Affiliated
                                                  as agency, settlement date, par amount and price.        readily available. No affiliated person of a Fund, the   Accounts’’) as well as other such registered
                                                  The actual pools delivered generally are determined      Adviser or any Sub-Adviser will serve as the             investment companies, separately managed
                                                  two days prior to settlement date.                       depositary bank for any Depositary Receipts held by      accounts and privately offered funds for which it
                                                    5 Depositary receipts representing foreign             a Fund, or its respective Master Fund.                   does not act either as adviser or subadviser
                                                                                                              6 Underlying Indexes that include both long and
                                                  securities (‘‘Depositary Receipts’’) include                                                                      (‘‘Unaffiliated Accounts’’). The Affiliated Accounts
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                                                  American Depositary Receipts and Global                  short positions in securities are referred to as         and the Unaffiliated Accounts, like the Funds,
                                                  Depositary Receipts. The Funds, or their respective      ‘‘Long/Short Indexes.’’                                  would seek to track the performance of one or more
                                                  Master Funds, may invest in Depositary Receipts             7 Under accounting procedures followed by each        Underlying Index(es) by investing in the
                                                  representing foreign securities in which they seek       Fund, trades made on the prior Business Day (‘‘T’’)      constituents of such Underlying Indexes or a
                                                  to invest. Depositary Receipts are typically issued      will be booked and reflected in NAV on the current       representative sample of such constituents of the
                                                  by a financial institution (a ‘‘depositary bank’’) and   Business Day (T+1). Accordingly, the Funds will be       Underlying Index. Consistent with the relief
                                                  evidence ownership interests in a security or a pool     able to disclose at the beginning of the Business Day    requested from section 17(a), the Affiliated
                                                  of securities that have been deposited with the          the portfolio that will form the basis for the NAV       Accounts will not engage in Creation Union
                                                  depositary bank. A Fund, or its respective Master        calculation at the end of the Business Day.              transactions with a Fund.



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                                                                                    Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Notices                                                          24991

                                                  Sub-Adviser to or promoter of a Fund,                   maintain full portfolio transparency will               with respect to the Self-Indexing
                                                  or of the Distributor.                                  provide an effective alternative                        Funds.12
                                                     11. Applicants recognize that Self-                  mechanism for addressing any such                          15. The Adviser and any Sub-Adviser
                                                  Indexing Funds could raise concerns                     potential conflicts of interest.                        has adopted or will adopt, pursuant to
                                                  regarding the ability of the Affiliated                                                                         Rule 206(4)–7 under the Advisers Act,
                                                                                                             13. Applicants represent that each
                                                  Index Provider to manipulate the                                                                                written policies and procedures
                                                  Underlying Index to the benefit or                      Self-Indexing Fund’s Portfolio Holdings
                                                                                                          will be as transparent as the portfolio                 designed to prevent violations of the
                                                  detriment of the Self-Indexing Fund.
                                                                                                          holdings of existing actively managed                   Advisers Act and the rules thereunder.
                                                  Applicants further recognize the
                                                                                                          ETFs. Applicants observe that the                       These include policies and procedures
                                                  potential for conflicts that may arise
                                                                                                          framework set forth in the Prior Self-                  designed to minimize potential conflicts
                                                  with respect to the personal trading
                                                                                                          Indexing Orders was established before                  of interest among the Self-Indexing
                                                  activity of personnel of the Affiliated
                                                                                                          the Commission began issuing                            Funds, their respective Master Funds,
                                                  Index Provider who have knowledge of
                                                                                                          exemptive relief to allow the offering of               and the Affiliated Accounts, such as
                                                  changes to an Underlying Index prior to
                                                                                                          actively managed ETFs.11 Unlike                         cross trading policies, as well as those
                                                  the time that information is publicly
                                                                                                          passively managed ETFs, actively                        designed to ensure the equitable
                                                  disseminated. Prior orders granted to
                                                                                                          managed ETFs do not seek to replicate                   allocation of portfolio transactions and
                                                  self-indexing ETFs (‘‘Prior Self-Indexing
                                                                                                                                                                  brokerage commissions. In addition, the
                                                  Orders’’) addressed these concerns by                   the performance of a specified index but
                                                  creating a framework that required: (i)                                                                         Adviser has adopted policies and
                                                                                                          rather seek to achieve their investment
                                                  Transparency of the Underlying                                                                                  procedures as required under section
                                                                                                          objectives by using an ‘‘active’’
                                                  Indexes; (ii) the adoption of policies and                                                                      204A of the Advisers Act, which are
                                                                                                          management strategy. Applicants
                                                  procedures not otherwise required by                                                                            reasonably designed in light of the
                                                                                                          contend that the structure of actively                  nature of its business to prevent the
                                                  the Act designed to mitigate such                       managed ETFs presents potential
                                                  conflicts of interest; (iii) limitations on                                                                     misuse, in violation of the Advisers Act
                                                                                                          conflicts of interest that are the same as              or the Exchange Act or the rules
                                                  the ability to change the rules for index               those presented by Self-Indexing Funds
                                                  compilation and the component                                                                                   thereunder, of material non-public
                                                                                                          because the portfolio managers of an                    information by the Adviser or an
                                                  securities of the index; (iv) that the                  actively managed ETF by definition
                                                  index provider enter into an agreement                                                                          associated person (‘‘Inside Information
                                                                                                          have advance knowledge of pending                       Policy’’). Any Sub-Adviser will be
                                                  with an unaffiliated third party to act as              portfolio changes. However, rather than
                                                  ‘‘Calculation Agent’’; and (v) certain                                                                          required to adopt and maintain a similar
                                                                                                          requiring Policies and Procedures                       Inside Information Policy. In accordance
                                                  limitations designed to separate
                                                                                                          similar to those required under the Prior               with the Code of Ethics 13 and Inside
                                                  employees of the index provider,
                                                  adviser and Calculation Agent (clauses                  Self-Indexing Orders, Applicants                        Information Policy of the Adviser and
                                                  (ii) through (v) are hereinafter referred               believe that actively managed ETFs                      Sub-Advisers, personnel of those
                                                  to as ‘‘Policies and Procedures’’).10                   address these potential conflicts of                    entities with knowledge about the
                                                     12. Instead of adopting the same or                  interest appropriately through full                     composition of the Portfolio Deposit 14
                                                  similar Policies and Procedures,                        portfolio transparency, as the conditions               will be prohibited from disclosing such
                                                  Applicants propose that each day that a                 to their relevant exemptive relief                      information to any other person, except
                                                  Fund, the NYSE and the national                         require.                                                as authorized in the course of their
                                                  securities exchange (as defined in                                                                              employment, until such information is
                                                                                                             14. In addition, Applicants do not                   made public. In addition, an Index
                                                  section 2(a)(26) of the Act) (an                        believe the potential for conflicts of
                                                  ‘‘Exchange’’) on which the Fund’s                                                                               Provider will not provide any
                                                                                                          interest raised by the Adviser’s use of                 information relating to changes to an
                                                  Shares are primarily listed (‘‘Listing                  the Underlying Indexes in connection
                                                  Exchange’’) are open for business,                                                                              Underlying Index’s methodology for the
                                                                                                          with the management of the Self                         inclusion of component securities, the
                                                  including any day that a Fund is                        Indexing Funds, their respective Master
                                                  required to be open under section 22(e)                                                                         inclusion or exclusion of specific
                                                                                                          Funds, and the Affiliated Accounts will                 component securities, or methodology
                                                  of the Act (a ‘‘Business Day’’), each Self-
                                                                                                          be substantially different from the                     for the calculation or the return of
                                                  Indexing Fund will post on its Web site,
                                                                                                          potential conflicts presented by an                     component securities, in advance of a
                                                  before commencement of trading of
                                                  Shares on the Listing Exchange, the                     adviser managing two or more registered                 public announcement of such changes
                                                  identities and quantities of the Portfolio              funds. Both the Act and the Advisers                    by the Index Provider. The Adviser will
                                                  Holdings that will form the basis for the               Act contain various protections to                      also include under Item 10.C. of Part 2
                                                  Fund’s calculation of its NAV at the end                address conflicts of interest where an                  of its Form ADV a discussion of its
                                                  of the Business Day. Applicants believe                 adviser is managing two or more                         relationship to any Affiliated Index
                                                  that requiring Self-Indexing Funds, and                 registered funds and these protections                  Provider and any material conflicts of
                                                  their respective Master Funds, to                       will also help address these conflicts                  interest resulting therefrom, regardless

                                                     10 See, e.g., In the Matter of WisdomTree               11 See, e.g., In the Matter of Huntington Asset         12 See, e.g., Rule 17j–1 under the Act and Section

                                                  Investments Inc., et al., Investment Company Act        Advisors, Inc., et al., Investment Company Act          204A under the Advisers Act and Rules 204A–1
                                                  Release Nos. 27324 (May 18, 2006) (notice) and          Release Nos. 30032 (April 10, 2012) (notice) and        and 206(4)–7 under the Advisers Act.
                                                                                                                                                                     13 The Adviser has also adopted or will adopt a
                                                  27391 (June 12, 2006) (order); In the Matter of         30061 (May 8, 2012) (order); In the Matter of Russell
                                                  IndexIQ ETF Trust, et al., Investment Company Act       Investment Management Co., et al., Investment           code of ethics pursuant to Rule 17j–1 under the Act
mstockstill on DSK4VPTVN1PROD with NOTICES




                                                  Release Nos. 28638 (Feb. 27, 2009) (notice) and         Company Act Release Nos. 29655 (April 20, 2011)         and Rule 204A–1 under the Advisers Act, which
                                                  28653 (March 20, 2009) (order); Van Eck Associates      (notice) and 29671 (May 16, 2011) (order); In the       contains provisions reasonably necessary to prevent
                                                  Corporation, et al., et al., Investment Company Act     Matter of Eaton Vance Management, et al.,               Access Persons (as defined in Rule 17j–1) from
                                                  Release Nos. 29455 (Oct. 1, 2010) (notice) and          Investment Company Act Release Nos. 29591               engaging in any conduct prohibited in Rule 17j–1
                                                  29490 (Oct. 26, 2010) (order); and In the Matter of     (March 11, 2011) (notice) and 29620 (March 30,          (‘‘Code of Ethics’’).
                                                  Guggenheim Funds Investment Advisors, LLC, et           2011) (order); and In the Matter of iShares Trust, et      14 The instruments and cash that the purchaser is

                                                  al., Investment Company Act Release Nos. 30560          al., Investment Company Act Release Nos. 29543          required to deliver in exchange for the Creation
                                                  (June 14, 2013) (notice) and 30598 (July 10, 2013)      (Dec. 27, 2010) (notice) and 29571 (Jan. 24, 2011)      Units it is purchasing is referred to as the ‘‘Portfolio
                                                  (order).                                                (order).                                                Deposit.’’



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                                                  24992                              Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Notices

                                                  of whether the Affiliated Index Provider                 the Redemption Instruments will each                     cash; 21 (d) if, on a given Business Day,
                                                  is a type of affiliate specified in Item 10.             correspond pro rata to the positions in                  the Fund requires all Authorized
                                                     16. To the extent the Self-Indexing                   the Fund’s portfolio (including cash                     Participants purchasing or redeeming
                                                  Funds or their respective Master Funds                   positions) 16 except: (a) In the case of                 Shares on that day to deposit or receive
                                                  transact with an Affiliated Person of the                bonds, for minor differences when it is                  (as applicable) cash in lieu of some or
                                                  Adviser or Sub-Adviser, such                             impossible to break up bonds beyond                      all of the Deposit Instruments or
                                                  transactions will comply with the Act,                   certain minimum sizes needed for                         Redemption Instruments, respectively,
                                                  the rules thereunder and the terms and                   transfer and settlement; (b) for minor                   solely because: (i) Such instruments are
                                                  conditions of the requested order. In                    differences when rounding is necessary                   not eligible for transfer through either
                                                  this regard, each Self-Indexing Fund’s                   to eliminate fractional shares or lots that              the NSCC or DTC (defined below); or (ii)
                                                  board of directors or trustees (‘‘Board’’)               are not tradeable round lots; 17 (c) TBA                 in the case of Foreign Funds holding
                                                  will periodically review the Self-                       Transactions, short positions,                           non-U.S. investments, such instruments
                                                  Indexing Fund’s use of an Affiliated                     derivatives and other positions that                     are not eligible for trading due to local
                                                  Index Provider. Subject to the approval                  cannot be transferred in kind 18 will be                 trading restrictions, local restrictions on
                                                  of the Self-Indexing Fund’s Board, the                   excluded from the Deposit Instruments                    securities transfers or other similar
                                                  Adviser, Affiliated Persons of the                       and the Redemption Instruments; 19 (d)                   circumstances; or (e) if the Fund permits
                                                  Adviser (‘‘Adviser Affiliates’’) and                     to the extent the Fund determines, on a                  an Authorized Participant to deposit or
                                                  Affiliated Persons of any Sub-Adviser                    given Business Day, to use a                             receive (as applicable) cash in lieu of
                                                  (‘‘Sub-Adviser Affiliates’’) may be                      representative sampling of the Fund’s                    some or all of the Deposit Instruments
                                                  authorized to provide custody, fund                      portfolio; 20 or (e) for temporary periods,              or Redemption Instruments,
                                                  accounting and administration and                        to effect changes in the Fund’s portfolio                respectively, solely because: (i) Such
                                                  transfer agency services to the Self-                    as a result of the rebalancing of its                    instruments are, in the case of the
                                                  Indexing Funds. Any services provided                    Underlying Index (any such change, a                     purchase of a Creation Unit, not
                                                  by the Adviser, Adviser Affiliates, Sub-                 ‘‘Rebalancing’’). If there is a difference               available in sufficient quantity; (ii) such
                                                  Adviser and Sub-Adviser Affiliates will                  between the NAV attributable to a                        instruments are not eligible for trading
                                                  be performed in accordance with the                      Creation Unit and the aggregate market                   by an Authorized Participant or the
                                                  provisions of the Act, the rules under                   value of the Deposit Instruments or                      investor on whose behalf the
                                                  the Act and any relevant guidelines                      Redemption Instruments exchanged for                     Authorized Participant is acting; or (iii)
                                                  from the staff of the Commission.                        the Creation Unit, the party conveying                   a holder of Shares of a Foreign Fund
                                                     17. In light of the foregoing,                        instruments with the lower value will                    holding non-U.S. investments would be
                                                  Applicants believe it is appropriate to                  also pay to the other an amount in cash                  subject to unfavorable income tax
                                                  allow the Self-Indexing Funds and their                  equal to that difference (the ‘‘Cash                     treatment if the holder receives
                                                  respective Master Funds to be fully                      Amount’’).                                               redemption proceeds in kind.22
                                                  transparent in lieu of Policies and                         19. Purchases and redemptions of                         20. Creation Units will consist of
                                                  Procedures from the Prior Self-Indexing                  Creation Units may be made in whole or                   specified large aggregations of Shares,
                                                  Orders discussed above.                                  in part on a cash basis, rather than in                  e.g., at least 25,000 Shares, and it is
                                                     18. The Shares of each Fund will be                   kind, solely under the following                         expected that the initial price of a
                                                  purchased and redeemed in Creation                       circumstances: (a) To the extent there is                Creation Unit will range from $1 million
                                                  Units and generally on an in-kind basis.                 a Cash Amount; (b) if, on a given                        to $10 million. All orders to purchase
                                                  Except where the purchase or                             Business Day, the Fund announces                         Creation Units must be placed with the
                                                  redemption will include cash under the                   before the open of trading that all                      Distributor by or through an
                                                  limited circumstances specified below,                   purchases, all redemptions or all                        ‘‘Authorized Participant’’ which is
                                                  purchasers will be required to purchase                  purchases and redemptions on that day                    either (1) a ‘‘Participating Party,’’ i.e., a
                                                  Creation Units by making an in-kind                      will be made entirely in cash; (c) if,                   broker-dealer or other participant in the
                                                  deposit of specified instruments                         upon receiving a purchase or                             Continuous Net Settlement System of
                                                  (‘‘Deposit Instruments’’), and                           redemption order from an Authorized                      the NSCC, a clearing agency registered
                                                  shareholders redeeming their Shares                      Participant, the Fund determines to                      with the Commission, or (2) a
                                                  will receive an in-kind transfer of                      require the purchase or redemption, as                   participant in The Depository Trust
                                                  specified instruments (‘‘Redemption                      applicable, to be made entirely in                       Company (‘‘DTC’’) (‘‘DTC Participant’’),
                                                  Instruments’’).15 On any given Business                                                                           which, in either case, has signed a
                                                  Day, the names and quantities of the                        16 The portfolio used for this purpose will be the    participant agreement with the
                                                  instruments that constitute the Deposit                  same portfolio used to calculate the Fund’s NAV for
                                                                                                           the Business Day.
                                                  Instruments and the names and                               17 A tradeable round lot for a security will be the
                                                                                                                                                                      21 In determining whether a particular Fund will

                                                  quantities of the instruments that                                                                                sell or redeem Creation Units entirely on a cash or
                                                                                                           standard unit of trading in that particular type of      in-kind basis (whether for a given day or a given
                                                  constitute the Redemption Instruments                    security in its primary market.                          order), the key consideration will be the benefit that
                                                  will be identical, unless the Fund is                       18 This includes instruments that can be
                                                                                                                                                                    would accrue to the Fund and its investors. For
                                                  Rebalancing (as defined below). In                       transferred in kind only with the consent of the         instance, in bond transactions, the Adviser may be
                                                                                                           original counterparty to the extent the Fund does        able to obtain better execution than Share
                                                  addition, the Deposit Instruments and                    not intend to seek such consents.                        purchasers because of the Adviser’s size, experience
                                                                                                              19 Because these instruments will be excluded         and potentially stronger relationships in the fixed
                                                     15 The Funds must comply with the federal             from the Deposit Instruments and the Redemption          income markets. Purchases of Creation Units either
                                                  securities laws in accepting Deposit Instruments         Instruments, their value will be reflected in the        on an all cash basis or in-kind are expected to be
                                                  and satisfying redemptions with Redemption               determination of the Cash Amount (as defined             neutral to the Funds from a tax perspective. In
mstockstill on DSK4VPTVN1PROD with NOTICES




                                                  Instruments, including that the Deposit Instruments      below).                                                  contrast, cash redemptions typically require selling
                                                  and Redemption Instruments are sold in                      20 A Fund may only use sampling for this purpose      portfolio holdings, which may result in adverse tax
                                                  transactions that would be exempt from registration      if the sample: (i) Is designed to generate               consequences for the remaining Fund shareholders
                                                  under the Securities Act of 1933 (‘‘Securities Act’’).   performance that is highly correlated to the             that would not occur with an in-kind redemption.
                                                  In accepting Deposit Instruments and satisfying          performance of the Fund’s portfolio; (ii) consists       As a result, tax consideration may warrant in-kind
                                                  redemptions with Redemption Instruments that are         entirely of instruments that are already included in     redemptions.
                                                  restricted securities eligible for resale pursuant to    the Fund’s portfolio; and (iii) is the same for all        22 A ‘‘custom order’’ is any purchase or

                                                  rule 144A under the Securities Act, the Funds will       Authorized Participants (as defined below) on a          redemption of Shares made in whole or in part on
                                                  comply with the conditions of rule 144A.                 given Business Day.                                      a cash basis in reliance on clause (e)(i) or (e)(ii).



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                                                                                    Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Notices                                              24993

                                                  Distributor. The Distributor will be                    redeemers.24 The Distributor will be                   otherwise held out as a traditional open-
                                                  responsible for transmitting the orders                 responsible for delivering the Fund’s                  end investment company or a ‘‘mutual
                                                  to the Funds and will furnish to those                  prospectus to those persons acquiring                  fund.’’ Instead, each such Fund will be
                                                  placing such orders confirmation that                   Shares in Creation Units and for                       marketed as an ‘‘ETF.’’ All marketing
                                                  the orders have been accepted, but                      maintaining records of both the orders                 materials that describe the features or
                                                  applicants state that the Distributor may               placed with it and the confirmations of                method of obtaining, buying or selling
                                                  reject any order which is not submitted                 acceptance furnished by it. In addition,               Creation Units, or Shares traded on an
                                                  in proper form.                                         the Distributor will maintain a record of              Exchange, or refer to redeemability, will
                                                     21. Each Business Day, before the                    the instructions given to the applicable               prominently disclose that Shares are not
                                                  open of trading on the Listing Exchange,                Fund to implement the delivery of its                  individually redeemable and will
                                                  each Fund will cause to be published                    Shares.                                                disclose that the owners of Shares may
                                                  through the NSCC the names and                            23. Shares of each Fund will be listed               acquire those Shares from the Fund or
                                                  quantities of the instruments comprising                and traded individually on an                          tender such Shares for redemption to
                                                  the Deposit Instruments and the                         Exchange. It is expected that one or                   the Fund in Creation Units only. The
                                                  Redemption Instruments, as well as the                  more member firms of an Exchange will                  Funds will provide copies of their
                                                  estimated Cash Amount (if any), for that                be designated to act as a market maker                 annual and semi-annual shareholder
                                                  day. The list of Deposit Instruments and                (each, a ‘‘Market Maker’’) and maintain                reports to DTC Participants for
                                                  Redemption Instruments will apply                       a market for Shares trading on the                     distribution to beneficial owners of
                                                  until a new list is announced on the                    Exchange. Prices of Shares trading on an               Shares.
                                                  following Business Day, and there will                  Exchange will be based on the current
                                                  be no intra-day changes to the list                                                                            Applicants’ Legal Analysis
                                                                                                          bid/offer market. Transactions involving
                                                  except to correct errors in the published               the sale of Shares on an Exchange will                    1. Applicants request an order under
                                                  list. Each Listing Exchange will                        be subject to customary brokerage                      section 6(c) of the Act for an exemption
                                                  disseminate, every 15 seconds during                    commissions and charges.                               from sections 2(a)(32), 5(a)(1), 22(d), and
                                                  regular Exchange trading hours, through                   24. Applicants expect that purchasers                22(e) of the Act and rule 22c–1 under
                                                  the facilities of the Consolidated Tape                 of Creation Units will include                         the Act, under section 12(d)(1)(J) of the
                                                  Association, an amount for each Fund                    institutional investors and arbitrageurs.              Act for an exemption from sections
                                                  stated on a per individual Share basis                  Market Makers, acting in their roles to                12(d)(1)(A) and (B) of the Act, and
                                                  representing the sum of (i) the estimated               provide a fair and orderly secondary                   under sections 6(c) and 17(b) of the Act
                                                  Cash Amount and (ii) the current value                                                                         for an exemption from sections 17(a)(1)
                                                                                                          market for the Shares, may from time to
                                                  of the Deposit Instruments.                                                                                    and 17(a)(2) of the Act.
                                                                                                          time find it appropriate to purchase or
                                                     22. Transaction expenses, including                                                                            2. Section 6(c) of the Act provides that
                                                                                                          redeem Creation Units. Applicants                      the Commission may exempt any
                                                  operational processing and brokerage                    expect that secondary market
                                                  costs, will be incurred by a Fund when                                                                         person, security or transaction, or any
                                                                                                          purchasers of Shares will include both                 class of persons, securities or
                                                  investors purchase or redeem Creation                   institutional and retail investors.25 The
                                                  Units in-kind and such costs have the                                                                          transactions, from any provision of the
                                                                                                          price at which Shares trade will be                    Act, if and to the extent that such
                                                  potential to dilute the interests of the                disciplined by arbitrage opportunities
                                                  Fund’s existing shareholders. Each                                                                             exemption is necessary or appropriate
                                                                                                          created by the option continually to                   in the public interest and consistent
                                                  Fund will impose purchase or                            purchase or redeem Shares in Creation
                                                  redemption transaction fees                                                                                    with the protection of investors and the
                                                                                                          Units, which should help prevent                       purposes fairly intended by the policy
                                                  (‘‘Transaction Fees’’) in connection with               Shares from trading at a material
                                                  effecting such purchases or redemptions                                                                        and provisions of the Act. Section 17(b)
                                                                                                          discount or premium in relation to their               of the Act authorizes the Commission to
                                                  of Creation Units. With respect to                      NAV.
                                                  Feeder Funds, the Transaction Fee                                                                              exempt a proposed transaction from
                                                                                                            25. Shares will not be individually                  section 17(a) of the Act if evidence
                                                  would be paid indirectly to the Master                  redeemable, and owners of Shares may
                                                  Fund.23 In all cases, such Transaction                                                                         establishes that the terms of the
                                                                                                          acquire those Shares from the Fund, or                 transaction, including the consideration
                                                  Fees will be limited in accordance with                 tender such Shares for redemption to
                                                  requirements of the Commission                                                                                 to be paid or received, are reasonable
                                                                                                          the Fund, in Creation Units only. To                   and fair and do not involve
                                                  applicable to management investment                     redeem, an investor must accumulate
                                                  companies offering redeemable                                                                                  overreaching on the part of any person
                                                                                                          enough Shares to constitute a Creation                 concerned, and the proposed
                                                  securities. Since the Transaction Fees                  Unit. Redemption requests must be
                                                  are intended to defray the transaction                                                                         transaction is consistent with the
                                                                                                          placed through an Authorized                           policies of the registered investment
                                                  expenses as well as to prevent possible                 Participant. A redeeming investor may
                                                  shareholder dilution resulting from the                                                                        company and the general provisions of
                                                                                                          pay a Transaction Fee, calculated in the               the Act. Section 12(d)(1)(J) of the Act
                                                  purchase or redemption of Creation                      same manner as a Transaction Fee
                                                  Units, the Transaction Fees will be                                                                            provides that the Commission may
                                                                                                          payable in connection with purchases of                exempt any person, security, or
                                                  borne only by such purchasers or                        Creation Units.                                        transaction, or any class or classes of
                                                    23 Applicants are not requesting relief from
                                                                                                            26. Neither the Trust nor any Fund                   persons, securities or transactions, from
                                                  section 18 of the Act. Accordingly, a Master Fund
                                                                                                          will be advertised or marketed or                      any provisions of section 12(d)(1) if the
                                                  may require a Transaction Fee payment to cover                                                                 exemption is consistent with the public
                                                                                                            24 Where a Fund permits an in-kind purchaser to
                                                  expenses related to purchases or redemptions of the
mstockstill on DSK4VPTVN1PROD with NOTICES




                                                  Master Fund’s shares by a Feeder Fund only if it        substitute cash-in-lieu of depositing one or more of   interest and the protection of investors.
                                                  requires the same payment for equivalent purchases      the requisite Deposit Instruments, the purchaser
                                                                                                          may be assessed a higher Transaction Fee to cover
                                                                                                                                                                 Sections 5(a)(1) and 2(a)(32) of the Act
                                                  or redemptions by any other feeder fund. Thus, for
                                                  example, a Master Fund may require payment of a         the cost of purchasing such Deposit Instruments.          3. Section 5(a)(1) of the Act defines an
                                                  Transaction Fee by a Feeder Fund for transactions         25 Shares will be registered in book-entry form
                                                                                                                                                                 ‘‘open-end company’’ as a management
                                                  for 20,000 or more shares so long as it requires        only. DTC or its nominee will be the record or
                                                  payment of the same Transaction Fee by all feeder       registered owner of all outstanding Shares.
                                                                                                                                                                 investment company that is offering for
                                                  funds for transactions involving 20,000 or more         Beneficial ownership of Shares will be shown on        sale or has outstanding any redeemable
                                                  shares.                                                 the records of DTC or the DTC Participants.            security of which it is the issuer.


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                                                  24994                             Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Notices

                                                  Section 2(a)(32) of the Act defines a                   dealers offering shares at less than the                    8. Applicants believe that Congress
                                                  redeemable security as any security,                    published sales price and repurchasing                   adopted section 22(e) to prevent
                                                  other than short-term paper, under the                  shares at more than the published                        unreasonable, undisclosed or
                                                  terms of which the owner, upon its                      redemption price.                                        unforeseen delays in the actual payment
                                                  presentation to the issuer, is entitled to                 6. Applicants believe that none of                    of redemption proceeds. Applicants
                                                  receive approximately a proportionate                   these purposes will be thwarted by                       propose that allowing redemption
                                                  share of the issuer’s current net assets,               permitting Shares to trade in the                        payments for Creation Units of a Foreign
                                                  or the cash equivalent. Because Shares                  secondary market at negotiated prices.                   Fund to be made within fifteen calendar
                                                  will not be individually redeemable,                    Applicants state that (a) secondary                      days would not be inconsistent with the
                                                  applicants request an order that would                  market trading in Shares does not                        spirit and intent of section 22(e).
                                                  permit the Funds to register as open-end                involve a Fund as a party and will not                   Applicants suggest that a redemption
                                                  management investment companies and                     result in dilution of an investment in                   payment occurring within fifteen
                                                  issue Shares that are redeemable in                     Shares, and (b) to the extent different                  calendar days following a redemption
                                                  Creation Units only.26 Applicants state                 prices exist during a given trading day,                 request would adequately afford
                                                  that investors may purchase Shares in                   or from day to day, such variances occur                 investor protection.
                                                  Creation Units and redeem Creation                      as a result of third-party market forces,                   9. Applicants are not seeking relief
                                                  Units from each Fund. Applicants                        such as supply and demand. Therefore,                    from section 22(e) with respect to
                                                  further state that because Creation Units               applicants assert that secondary market                  Foreign Funds that do not effect
                                                  may always be purchased and redeemed                    transactions in Shares will not lead to                  creations and redemptions of Creation
                                                  at NAV, the price of Shares on the                      discrimination or preferential treatment                 Units in-kind.29
                                                  secondary market should not vary                        among purchasers. Finally, applicants                    Section 12(d)(1)
                                                  materially from NAV.                                    contend that the price at which Shares
                                                                                                          trade will be disciplined by arbitrage                      10. Section 12(d)(1)(A) of the Act
                                                  Section 22(d) of the Act and Rule 22c–                                                                           prohibits a registered investment
                                                  1 under the Act                                         opportunities created by the option
                                                                                                          continually to purchase or redeem                        company from acquiring securities of an
                                                     4. Section 22(d) of the Act, among                   Shares in Creation Units, which should                   investment company if such securities
                                                  other things, prohibits a dealer from                   help prevent Shares from trading at a                    represent more than 3% of the total
                                                  selling a redeemable security that is                   material discount or premium in                          outstanding voting stock of the acquired
                                                  currently being offered to the public by                relation to their NAV.                                   company, more than 5% of the total
                                                  or through an underwriter, except at a                                                                           assets of the acquiring company, or,
                                                  current public offering price described                 Section 22(e)                                            together with the securities of any other
                                                  in the prospectus. Rule 22c–1 under the                                                                          investment companies, more than 10%
                                                  Act generally requires that a dealer                       7. Section 22(e) of the Act generally                 of the total assets of the acquiring
                                                  selling, redeeming or repurchasing a                    prohibits a registered investment                        company. Section 12(d)(1)(B) of the Act
                                                  redeemable security do so only at a                     company from suspending the right of                     prohibits a registered open-end
                                                  price based on its NAV. Applicants state                redemption or postponing the date of                     investment company, its principal
                                                  that secondary market trading in Shares                 payment of redemption proceeds for                       underwriter and any other broker-dealer
                                                  will take place at negotiated prices, not               more than seven days after the tender of                 from knowingly selling the investment
                                                  at a current offering price described in                a security for redemption. Applicants                    company’s shares to another investment
                                                  a Fund’s prospectus, and not at a price                 state that settlement of redemptions for                 company if the sale will cause the
                                                  based on NAV. Thus, purchases and                       Foreign Funds will be contingent not                     acquiring company to own more than
                                                  sales of Shares in the secondary market                 only on the settlement cycle of the                      3% of the acquired company’s voting
                                                  will not comply with section 22(d) of                   United States market, but also on                        stock, or if the sale will cause more than
                                                  the Act and rule 22c–1 under the Act.                   current delivery cycles in local markets                 10% of the acquired company’s voting
                                                  Applicants request an exemption under                   for the underlying foreign securities                    stock to be owned by investment
                                                  section 6(c) from these provisions.                     held by a Foreign Fund. Applicants                       companies generally.
                                                     5. Applicants assert that the concerns               state that the delivery cycles currently                    11. Applicants request an exemption
                                                  sought to be addressed by section 22(d)                 practicable for transferring Redemption                  to permit registered management
                                                  of the Act and rule 22c–1 under the Act                 Instruments to redeeming investors,                      investment companies and unit
                                                  with respect to pricing are equally                     coupled with local market holiday                        investment trusts (‘‘UITs’’) that are not
                                                  satisfied by the proposed method of                     schedules, may require a delivery                        advised or sponsored by the Advisers
                                                  pricing Shares. Applicants maintain that                process of up to fifteen (15) calendar                   and are not part of the same ‘‘group of
                                                  while there is little legislative history               days.27 Accordingly, with respect to                     investment companies,’’ as defined in
                                                  regarding section 22(d), its provisions,                Foreign Funds only, applicants hereby                    section 12(d)(1)(G)(ii) of the Act as the
                                                  as well as those of rule 22c–1, appear to               request relief under section 6(c) from                   Funds (such management investment
                                                  have been designed to (a) prevent                       the requirement imposed by section                       companies are referred to as ‘‘Investing
                                                  dilution caused by certain riskless-                    22(e) to allow Foreign Funds to pay                      Management Companies,’’ such UITs
                                                  trading schemes by principal                            redemption proceeds within fifteen (15)                  are referred to as ‘‘Investing Trusts,’’
                                                  underwriters and contract dealers, (b)                  calendar days following the tender of                    and Investing Management Companies
                                                  prevent unjust discrimination or                        Creation Units for redemption.28                         and Investing Trusts are collectively
                                                  preferential treatment among buyers,                                                                             referred to as ‘‘Funds of Funds’’), to
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                                                                                                             27 Certain countries in which a Fund may invest
                                                  and (c) ensure an orderly distribution of                                                                        acquire Shares beyond the limits of
                                                                                                          have historically had settlement periods of up to
                                                  investment company shares by                            fifteen (15) calendar days.
                                                                                                                                                                   section 12(d)(1)(A) of the Act; and the
                                                  eliminating price competition from                         28 Applicants acknowledge that no relief obtained     Funds, and any principal underwriter
                                                                                                          from the requirements of section 22(e) will affect
                                                    26 The Master Funds will not require relief from      any obligations applicants may otherwise have              29 In addition, the requested exemption from

                                                  sections 2(a)(32) and 5(a)(1) because the Master        under rule 15c6–1 under the Exchange Act                 section 22(e) would only apply to in-kind
                                                  Funds will issue individually redeemable                requiring that most securities transactions be settled   redemptions by the Feeder Funds and would not
                                                  securities.                                             within three business days of the trade date.            apply to in-kind redemptions by other feeder funds.



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                                                                                    Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Notices                                                  24995

                                                  for the Funds, and/or any Broker                        3(c)(1) or 3(c)(7) of the Act (or portion             connection with the investment by the
                                                  registered under the Exchange Act, to                   of such investment company or issuer)                 Fund of Funds in the Fund. Applicants
                                                  sell Shares to Funds of Funds beyond                    advised or sponsored by the Fund of                   state that any sales charges and/or
                                                  the limits of section 12(d)(1)(B) of the                Funds Sub-Adviser or any person                       service fees charged with respect to
                                                  Act.                                                    controlling, controlled by or under                   shares of a Fund of Funds will not
                                                     12. Each Investing Management                        common control with the Fund of                       exceed the limits applicable to a fund of
                                                  Company will be advised by an                           Funds Sub-Adviser (‘‘Fund of Funds                    funds as set forth in NASD Conduct
                                                  investment adviser within the meaning                   Sub-Advisory Group’’).                                Rule 2830.31
                                                  of section 2(a)(20)(A) of the Act (the                     15. Applicants propose other                          17. Applicants submit that the
                                                  ‘‘Fund of Funds Adviser’’) and may be                   conditions to limit the potential for                 proposed arrangement will not create an
                                                  sub-advised by investment advisers                      undue influence over the Funds,                       overly complex fund structure.
                                                  within the meaning of section                           including that no Fund of Funds or                    Applicants note that no Fund, nor its
                                                  2(a)(20)(B) of the Act (each a ‘‘Fund of                Fund of Funds Affiliate (except to the                respective Master Fund, will acquire
                                                  Funds Sub-Adviser’’). Any investment                    extent it is acting in its capacity as an             securities of any investment company or
                                                  adviser to an Investing Management                      investment adviser to a Fund) will cause              company relying on section 3(c)(1) or
                                                  Company will be registered under the                    a Fund to purchase a security in an                   3(c)(7) of the Act in excess of the limits
                                                  Advisers Act. Each Investing Trust will                 offering of securities during the                     contained in section 12(d)(1)(A) of the
                                                  be sponsored by a sponsor (‘‘Sponsor’’).                existence of an underwriting or selling               Act, except to the extent permitted by
                                                     13. Applicants submit that the                       syndicate of which a principal                        exemptive relief from the Commission
                                                  proposed conditions to the requested                    underwriter is an Underwriting Affiliate              permitting the Fund, or its respective
                                                  relief adequately address the concerns                  (‘‘Affiliated Underwriting’’). An                     Master Fund, to purchase shares of
                                                  underlying the limits in sections                       ‘‘Underwriting Affiliate’’ is a principal             other investment companies for short-
                                                  12(d)(1)(A) and (B), which include                      underwriter in any underwriting or                    term cash management purposes or
                                                  concerns about undue influence by a                     selling syndicate that is an officer,                 pursuant to the Master-Feeder Relief. To
                                                  fund of funds over underlying funds,                    director, member of an advisory board,                ensure a Fund of Funds is aware of the
                                                  excessive layering of fees and overly                   Fund of Funds Adviser, Fund of Funds                  terms and conditions of the requested
                                                  complex fund structures. Applicants                     Sub-Adviser, employee or Sponsor of                   order, the Fund of Funds will enter into
                                                  believe that the requested exemption is                 the Fund of Funds, or a person of which               an agreement with the Fund (‘‘FOF
                                                  consistent with the public interest and                 any such officer, director, member of an              Participation Agreement’’). The FOF
                                                  the protection of investors.                            advisory board, Fund of Funds Adviser                 Participation Agreement will include an
                                                     14. Applicants believe that neither a                or Fund of Funds Sub-Adviser,                         acknowledgement from the Fund of
                                                  Fund of Funds nor a Fund of Funds                       employee or Sponsor is an affiliated                  Funds that it may rely on the order only
                                                  Affiliate would be able to exert undue                  person (except that any person whose                  to invest in the Funds and not in any
                                                  influence over a Fund.30 To limit the                   relationship to the Fund is covered by                other investment company.
                                                  control that a Fund of Funds may have                   section 10(f) of the Act is not an                       18. Applicants also note that a Fund
                                                  over a Fund, applicants propose a                       Underwriting Affiliate).                              may choose to reject a direct purchase
                                                  condition prohibiting a Fund of Funds                      16. Applicants do not believe that the             of Shares in Creation Units by a Fund
                                                  Adviser or Sponsor, any person                          proposed arrangement will involve                     of Funds. To the extent that a Fund of
                                                  controlling, controlled by, or under                    excessive layering of fees. The board of              Funds purchases Shares in the
                                                  common control with a Fund of Funds                     directors or trustees of any Investing                secondary market, a Fund would still
                                                  Adviser or Sponsor, and any investment                  Management Company, including a                       retain its ability to reject any initial
                                                  company and any issuer that would be                    majority of the directors or trustees who             investment by a Fund of Funds in
                                                  an investment company but for sections                  are not ‘‘interested persons’’ within the             excess of the limits of section
                                                  3(c)(1) or 3(c)(7) of the Act that is                   meaning of section 2(a)(19) of the Act                12(d)(1)(A) by declining to enter into a
                                                  advised or sponsored by a Fund of                       (‘‘disinterested directors or trustees’’),            FOF Participation Agreement with the
                                                  Funds Adviser or Sponsor, or any                        will find that the advisory fees charged              Fund of Funds.
                                                                                                          under the contract are based on services                 19. Applicants also are seeking the
                                                  person controlling, controlled by, or
                                                                                                          provided that will be in addition to,                 Master-Feeder Relief to permit the
                                                  under common control with a Fund of
                                                                                                          rather than duplicative of, services                  Feeder Funds to perform creations and
                                                  Funds Adviser or Sponsor (‘‘Fund of
                                                                                                          provided under the advisory contract of               redemptions of Shares in-kind in a
                                                  Funds Advisory Group’’) from
                                                                                                          any Fund, or its respective Master Fund,              master-feeder structure. Applicants
                                                  controlling (individually or in the
                                                                                                          in which the Investing Management                     assert that this structure is substantially
                                                  aggregate) a Fund within the meaning of
                                                                                                          Company may invest. In addition, under                identical to traditional master-feeder
                                                  section 2(a)(9) of the Act. The same
                                                                                                          condition B.5., a Fund of Funds                       structures permitted pursuant to the
                                                  prohibition would apply to any Fund of
                                                                                                          Adviser, or a Fund of Funds’ trustee or               exception provided in section
                                                  Funds Sub-Adviser, any person
                                                                                                          Sponsor, as applicable, will waive fees               12(d)(1)(E) of the Act. Section
                                                  controlling, controlled by or under                     otherwise payable to it by the Fund of
                                                  common control with the Fund of                                                                               12(d)(1)(E) provides that the percentage
                                                                                                          Funds in an amount at least equal to any              limitations of section 12(d)(1)(A) and (B)
                                                  Funds Sub-Adviser, and any investment                   compensation (including fees received
                                                  company or issuer that would be an                                                                            shall not apply to a security issued by
                                                                                                          pursuant to any plan adopted by a                     an investment company (in this case,
                                                  investment company but for sections                     Fund, or its respective Master Fund,                  the shares of the applicable Master
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                                                    30 A ‘‘Fund of Funds Affiliate’’ is a Fund of Funds
                                                                                                          under rule 12b–1 under the Act)                       Fund) if, among other things, that
                                                  Adviser, Fund of Funds Sub-Adviser, Sponsor,
                                                                                                          received from a Fund by the Fund of                   security is the only investment security
                                                  promoter, and principal underwriter of a Fund of        Funds Adviser, trustee or Sponsor or an               held by the investing investment
                                                  Funds, and any person controlling, controlled by,       affiliated person of the Fund of Funds                company (in this case, the Feeder
                                                  or under common control with any of those entities.     Adviser, trustee or Sponsor, other than
                                                  A ‘‘Fund Affiliate’’ is an investment adviser,
                                                  promoter, or principal underwriter of a Fund and
                                                                                                          any advisory fees paid to the Fund of                   31 Any references to NASD Conduct Rule 2830

                                                  any person controlling, controlled by or under          Funds Adviser, trustee or Sponsor or its              include any successor or replacement FINRA rule
                                                  common control with any of these entities.              affiliated person by a Fund, in                       to NASD Conduct Rule 2830.



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                                                  24996                             Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Notices

                                                  Fund). Applicants believe the proposed                  Act pursuant to sections 6(c) and 17(b)               Fund to track closely its Underlying
                                                  master-feeder structure complies with                   of the Act to permit persons that are                 Index and therefore aid in achieving the
                                                  section 12(d)(1)(E) because each Feeder                 Affiliated Persons of the Funds, or                   Fund’s objectives.
                                                  Fund will hold only investment                          Second-Tier Affiliates of the Funds,                     23. Applicants also seek relief under
                                                  securities issued by its corresponding                  solely by virtue of one or more of the                sections 6(c) and 17(b) from section
                                                  Master Fund; however, the Feeder                        following: (a) Holding 5% or more, or in              17(a) to permit a Fund that is an
                                                  Funds may receive securities other than                 excess of 25%, of the outstanding                     affiliated person, or an affiliated person
                                                  securities of its corresponding Master                  Shares of one or more Funds; (b) an                   of an affiliated person, of a Fund of
                                                  Fund if a Feeder Fund accepts an in-                    affiliation with a person with an                     Funds to sell its Shares to and redeem
                                                  kind creation. To the extent that a                     ownership interest described in (a); or               its Shares from a Fund of Funds, and to
                                                  Feeder Fund may be deemed to be                         (c) holding 5% or more, or more than                  engage in the accompanying in-kind
                                                  holding both shares of the Master Fund                  25%, of the shares of one or more                     transactions with the Fund of Funds.32
                                                  and other securities, applicants request                Affiliated Funds, to effectuate purchases             Applicants state that the terms of the
                                                  relief from section 12(d)(1)(A) and (B).                and redemptions ‘‘in-kind.’’                          transactions are fair and reasonable and
                                                  The Feeder Funds would operate in                          22. Applicants assert that no useful               do not involve overreaching. Applicants
                                                  compliance with all other provisions of                 purpose would be served by prohibiting                note that any consideration paid by a
                                                  section 12(d)(1)(E).                                    such affiliated persons from making ‘‘in-             Fund of Funds for the purchase or
                                                                                                          kind’’ purchases or ‘‘in-kind’’                       redemption of Shares directly from a
                                                  Sections 17(a)(1) and (2) of the Act                                                                          Fund will be based on the NAV of the
                                                     20. Sections 17(a)(1) and (2) of the Act             redemptions of Shares of a Fund in
                                                                                                                                                                Fund.33 Applicants believe that any
                                                  generally prohibit an affiliated person of              Creation Units. Both the deposit
                                                                                                                                                                proposed transactions directly between
                                                  a registered investment company, or an                  procedures for ‘‘in-kind’’ purchases of
                                                                                                                                                                the Funds and Funds of Funds will be
                                                  affiliated person of such a person, from                Creation Units and the redemption
                                                                                                                                                                consistent with the policies of each
                                                  selling any security to or purchasing any               procedures for ‘‘in-kind’’ redemptions of
                                                                                                                                                                Fund of Funds. The purchase of
                                                  security from the company. Section                      Creation Units will be effected in
                                                                                                                                                                Creation Units by a Fund of Funds
                                                  2(a)(3) of the Act defines ‘‘affiliated                 exactly the same manner for all
                                                                                                                                                                directly from a Fund will be
                                                  person’’ of another person to include (a)               purchases and redemptions, regardless
                                                                                                                                                                accomplished in accordance with the
                                                  any person directly or indirectly                       of size or number. There will be no
                                                                                                                                                                investment restrictions of any such
                                                  owning, controlling or holding with                     discrimination between purchasers or
                                                                                                                                                                Fund of Funds and will be consistent
                                                  power to vote 5% or more of the                         redeemers. Deposit Instruments and                    with the investment policies set forth in
                                                  outstanding voting securities of the                    Redemption Instruments for each Fund                  the Fund of Funds’ registration
                                                  other person, (b) any person 5% or more                 will be valued in the identical manner                statement. Applicants also state that the
                                                  of whose outstanding voting securities                  as those Portfolio Holdings currently                 proposed transactions are consistent
                                                  are directly or indirectly owned,                       held by such Fund and the valuation of                with the general purposes of the Act and
                                                  controlled or held with the power to                    the Deposit Instruments and                           are appropriate in the public interest.
                                                  vote by the other person, and (c) any                   Redemption Instruments will be made                      24. To the extent that a Fund operates
                                                  person directly or indirectly controlling,              in an identical manner regardless of the              in a master-feeder structure, applicants
                                                  controlled by or under common control                   identity of the purchaser or redeemer.                also request relief permitting the Feeder
                                                  with the other person. Section 2(a)(9) of               Applicants do not believe that ‘‘in-kind’’            Funds to engage in in-kind creations
                                                  the Act defines ‘‘control’’ as the power                purchases and redemptions will result                 and redemptions with the applicable
                                                  to exercise a controlling influence over                in abusive self-dealing or overreaching,              Master Fund. Applicants state that the
                                                  the management or policies of a                         but rather assert that such procedures                customary section 17(a)(1) and 17(a)(2)
                                                  company, and provides that a control                    will be implemented consistently with
                                                  relationship will be presumed where                     each Fund’s objectives and with the                      32 Although applicants believe that most Funds of

                                                  one person owns more than 25% of a                      general purposes of the Act. Applicants               Funds will purchase Shares in the secondary
                                                                                                          believe that ‘‘in-kind’’ purchases and                market and will not purchase Creation Units
                                                  company’s voting securities. The Funds                                                                        directly from a Fund, a Fund of Funds might seek
                                                  may be deemed to be controlled by the                   redemptions will be made on terms                     to transact in Creation Units directly with a Fund
                                                  Adviser or an entity controlling,                       reasonable to applicants and any                      that is an affiliated person of a Fund of Funds. To
                                                  controlled by or under common control                   affiliated persons because they will be               the extent that purchases and sales of Shares occur
                                                                                                          valued pursuant to verifiable objective               in the secondary market and not through principal
                                                  with the Adviser and hence affiliated                                                                         transactions directly between a Fund of Funds and
                                                  persons of each other. In addition, the                 standards. The method of valuing                      a Fund, relief from section 17(a) would not be
                                                  Funds may be deemed to be under                         Portfolio Holdings held by a Fund is                  necessary. However, the requested relief would
                                                  common control with any other                           identical to that used for calculating                apply to direct sales of Shares in Creation Units by
                                                                                                          ‘‘in-kind’’ purchase or redemption                    a Fund to a Fund of Funds and redemptions of
                                                  registered investment company (or                                                                             those Shares. Applicants are not seeking relief from
                                                  series thereof) advised by the Adviser or               values and therefore creates no                       section 17(a) for, and the requested relief will not
                                                  an entity controlling, controlled by or                 opportunity for affiliated persons or                 apply to, transactions where a Fund could be
                                                  under common control with the Adviser                   Second-Tier Affiliates of applicants to               deemed an affiliated person, or an affiliated person
                                                                                                          effect a transaction detrimental to the               of an affiliated person of a Fund of Funds because
                                                  (an ‘‘Affiliated Fund’’). Any investor,                                                                       the Adviser or an entity controlling, controlled by
                                                  including Market Makers, owning 5% or                   other holders of Shares of that Fund.                 or under common control with the Adviser
                                                  holding in excess of 25% of the Trust or                Similarly, applicants submit that, by                 provides investment advisory services to that Fund
                                                  such Funds, may be deemed affiliated                    using the same standards for valuing                  of Funds.
                                                                                                                                                                   33 Applicants acknowledge that the receipt of
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                                                  persons of the Trust or such Funds. In                  Portfolio Holdings held by a Fund as are
                                                                                                                                                                compensation by (a) an affiliated person of a Fund
                                                  addition, an investor could own 5% or                   used for calculating ‘‘in-kind’’                      of Funds, or an affiliated person of such person, for
                                                  more, or in excess of 25% of the                        redemptions or purchases, the Fund                    the purchase by the Fund of Funds of Shares of a
                                                  outstanding shares of one or more                       will ensure that its NAV will not be                  Fund or (b) an affiliated person of a Fund, or an
                                                  Affiliated Funds making that investor a                 adversely affected by such securities                 affiliated person of such person, for the sale by the
                                                                                                                                                                Fund of its Shares to a Fund of Funds, may be
                                                  Second-Tier Affiliate of the Funds.                     transactions. Applicants also note that               prohibited by section 17(e)(1) of the Act. The FOF
                                                     21. Applicants request an exemption                  the ability to take deposits and make                 Participation Agreement also will include this
                                                  from sections 17(a)(1) and 17(a)(2) of the              redemptions ‘‘in-kind’’ will help each                acknowledgment.



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                                                                                    Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Notices                                             24997

                                                  relief would not be sufficient to permit                   4. The Web site, which is and will be              Affiliate and the Fund, or its respective
                                                  such transactions because the Feeder                    publicly accessible at no charge, will                Master Fund, or a Fund Affiliate.
                                                  Funds and the applicable Master Fund                    contain, on a per Share basis for each                   3. The board of directors or trustees of
                                                  could also be affiliated by virtue of                   Fund, the prior Business Day’s NAV and                an Investing Management Company,
                                                  having the same investment adviser.                     the market closing price or the midpoint              including a majority of the disinterested
                                                  However, applicants believe that in-                    of the bid/ask spread at the time of the              directors or trustees, will adopt
                                                  kind creations and redemptions                          calculation of such NAV (‘‘Bid/Ask                    procedures reasonably designed to
                                                  between a Feeder Fund and a Master                      Price’’), and a calculation of the                    ensure that the Fund of Funds Adviser
                                                  Fund advised by the same investment                     premium or discount of the market                     and Fund of Funds Sub-Adviser are
                                                  adviser do not involve ‘‘overreaching’’                 closing price or Bid/Ask Price against                conducting the investment program of
                                                  by an affiliated person. Such                           such NAV.                                             the Investing Management Company
                                                  transactions will occur only at the                        5. Each Fund will post on the Web                  without taking into account any
                                                  Feeder Fund’s proportionate share of                    site on each Business Day, before                     consideration received by the Investing
                                                  the Master Fund’s net assets, and the                   commencement of trading of Shares on                  Management Company or a Fund of
                                                  distributed securities will be valued in                the Exchange, the Fund’s, or its                      Funds Affiliate from a Fund, or its
                                                  the same manner as they are valued for                  respective Master Fund’s, Portfolio                   respective Master Fund, or Fund
                                                  the purposes of calculating the                         Holdings.                                             Affiliate in connection with any services
                                                  applicable Master Fund’s NAV. Further,                     6. Neither the Adviser nor any Sub-                or transactions.
                                                  all such transactions will be effected                                                                           4. Once an investment by a Fund of
                                                                                                          Adviser to a Self-Indexing Fund,
                                                  with respect to pre-determined                                                                                Funds in the securities of a Fund
                                                                                                          directly or indirectly, will cause any
                                                  securities and on the same terms with                                                                         exceeds the limits in section
                                                                                                          Authorized Participant (or any investor
                                                  respect to all investors. Finally, such                                                                       12(d)(1)(A)(i) of the Act, the Board of
                                                                                                          on whose behalf an Authorized
                                                  transaction would only occur as a result                                                                      the Fund, or its respective Master Fund,
                                                                                                          Participant may transact with the Self-
                                                  of, and to effectuate, a creation or                                                                          including a majority of the directors or
                                                                                                          Indexing Fund) to acquire any Deposit
                                                  redemption transaction between the                                                                            trustees who are not ‘‘interested
                                                                                                          Instrument for a Self-Indexing Fund, or               persons’’ within the meaning of section
                                                  Feeder Fund and a third-party investor.                 its respective Master Fund, through a
                                                  Applicants believe that the terms of the                                                                      2(a)(19) of the Act (‘‘non-interested
                                                                                                          transaction in which the Self-Indexing                Board members’’), will determine that
                                                  proposed transactions are reasonable                    Fund, or its respective Master Fund,
                                                  and fair and do not involve                                                                                   any consideration paid by the Fund, or
                                                                                                          could not engage directly.                            its respective Master Fund, to the Fund
                                                  overreaching on the part of any person
                                                  concerned, the proposed transactions                    B. Section 12(d)(1) Relief                            of Funds or a Fund of Funds Affiliate
                                                                                                                                                                in connection with any services or
                                                  are consistent with the policy of each                     1. The members of a Fund of Funds’                 transactions: (i) Is fair and reasonable in
                                                  Fund and will be consistent with the                    Advisory Group will not control                       relation to the nature and quality of the
                                                  investment objectives and policies of                   (individually or in the aggregate) a                  services and benefits received by the
                                                  each Fund of Funds, and the proposed                    Fund, or its respective Master Fund,                  Fund, or its respective Master Fund; (ii)
                                                  transactions are consistent with the                    within the meaning of section 2(a)(9) of              is within the range of consideration that
                                                  general purposes of the Act.                            the Act. The members of a Fund of                     the Fund would be required to pay to
                                                  Applicants’ Conditions                                  Funds’ Sub-Advisory Group will not                    another unaffiliated entity in connection
                                                                                                          control (individually or in the aggregate)            with the same services or transactions;
                                                    Applicants agree that any order of the                a Fund, or its respective Master Fund,                and (iii) does not involve overreaching
                                                  Commission granting the requested                       within the meaning of section 2(a)(9) of              on the part of any person concerned.
                                                  relief will be subject to the following                 the Act. If, as a result of a decrease in             This condition does not apply with
                                                  conditions:                                             the outstanding voting securities of a                respect to any services or transactions
                                                  A. ETF Relief                                           Fund, the Fund of Funds’ Advisory                     between a Fund, or its respective Master
                                                                                                          Group or the Fund of Funds’ Sub-                      Fund, and its investment adviser(s), or
                                                     1. The requested relief, other than the              Advisory Group, each in the aggregate,                any person controlling, controlled by or
                                                  section 12(d)(1) Relief and the section                 becomes a holder of more than 25                      under common control with such
                                                  17 relief related to a master-feeder                    percent of the outstanding voting                     investment adviser(s).
                                                  structure, will expire on the effective                 securities of a Fund, it will vote its                   5. The Fund of Funds Adviser, or
                                                  date of any Commission rule under the                   Shares of the Fund in the same                        trustee or Sponsor of an Investing Trust,
                                                  Act that provides relief permitting the                 proportion as the vote of all other                   as applicable, will waive fees otherwise
                                                  operation of index-based ETFs.                          holders of the Fund’s Shares. This                    payable to it by the Fund of Funds in
                                                     2. As long as a Fund operates in                     condition does not apply to the Fund of               an amount at least equal to any
                                                  reliance on the requested order, Shares                 Funds’ Sub-Advisory Group with                        compensation (including fees received
                                                  of such Fund will be listed on an                       respect to a Fund, or its respective                  pursuant to any plan adopted by a
                                                  Exchange.                                               Master Fund, for which the Fund of                    Fund, or its respective Master Fund,
                                                     3. Neither the Trust nor any Fund will               Funds’ Sub-Adviser or a person                        under rule 12b-l under the Act) received
                                                  be advertised or marketed as an open-                   controlling, controlled by or under                   from a Fund, or its respective Master
                                                  end investment company or a mutual                      common control with the Fund of                       Fund, by the Fund of Funds Adviser, or
                                                  fund. Any advertising material that                     Funds’ Sub-Adviser acts as the                        trustee or Sponsor of the Investing
                                                                                                          investment adviser within the meaning
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                                                  describes the purchase or sale of                                                                             Trust, or an affiliated person of the
                                                  Creation Units or refers to redeemability               of section 2(a)(20)(A) of the Act.                    Fund of Funds Adviser, or trustee or
                                                  will prominently disclose that Shares                      2. No Fund of Funds or Fund of                     Sponsor of the Investing Trust, other
                                                  are not individually redeemable and                     Funds Affiliate will cause any existing               than any advisory fees paid to the Fund
                                                  that owners of Shares may acquire those                 or potential investment by the Fund of                of Funds Adviser, trustee or Sponsor of
                                                  Shares from the Fund and tender those                   Funds in a Fund to influence the terms                an Investing Trust, or its affiliated
                                                  Shares for redemption to a Fund in                      of any services or transactions between               person by the Fund, or its respective
                                                  Creation Units only.                                    the Fund of Funds or Fund of Funds                    Master Fund, in connection with the


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                                                  24998                             Federal Register / Vol. 80, No. 84 / Friday, May 1, 2015 / Notices

                                                  investment by the Fund of Funds in the                  appropriate, the institution of                       under the advisory contract(s) of any
                                                  Fund. Any Fund of Funds Sub-Adviser                     procedures designed to ensure that                    Fund, or its respective Master Fund, in
                                                  will waive fees otherwise payable to the                purchases of securities in Affiliated                 which the Investing Management
                                                  Fund of Funds Sub-Adviser, directly or                  Underwritings are in the best interest of             Company may invest. These findings
                                                  indirectly, by the Investing Management                 shareholders of the Fund.                             and their basis will be fully recorded in
                                                  Company in an amount at least equal to                     8. Each Fund, or its respective Master             the minute books of the appropriate
                                                  any compensation received from a                        Fund, will maintain and preserve                      Investing Management Company.
                                                  Fund, or its respective Master Fund, by                 permanently in an easily accessible                      11. Any sales charges and/or service
                                                  the Fund of Funds Sub-Adviser, or an                    place a written copy of the procedures                fees charged with respect to shares of a
                                                  affiliated person of the Fund of Funds                  described in the preceding condition,                 Fund of Funds will not exceed the
                                                  Sub-Adviser, other than any advisory                    and any modifications to such                         limits applicable to a fund of funds as
                                                  fees paid to the Fund of Funds Sub-                     procedures, and will maintain and                     set forth in NASD Conduct Rule 2830.
                                                  Adviser or its affiliated person by the                 preserve for a period of not less than six               12. No Fund, or its respective Master
                                                  Fund, or its respective Master Fund, in                 years from the end of the fiscal year in              Fund, will acquire securities of an
                                                  connection with the investment by the                   which any purchase in an Affiliated                   investment company or company
                                                  Investing Management Company in the                     Underwriting occurred, the first two                  relying on section 3(c)(1) or 3(c)(7) of
                                                  Fund made at the direction of the Fund                  years in an easily accessible place, a                the Act in excess of the limits contained
                                                  of Funds Sub-Adviser. In the event that                 written record of each purchase of                    in section 12(d)(1)(A) of the Act, except
                                                  the Fund of Funds Sub-Adviser waives                    securities in Affiliated Underwritings                to the extent (i) the Fund, or its
                                                  fees, the benefit of the waiver will be                 once an investment by a Fund of Funds                 respective Master Fund, acquires
                                                  passed through to the Investing                         in the securities of the Fund exceeds the             securities of another investment
                                                  Management Company.                                     limit of section 12(d)(1)(A)(i) of the Act,           company pursuant to exemptive relief
                                                     6. No Fund of Funds or Fund of                       setting forth from whom the securities                from the Commission permitting the
                                                  Funds Affiliate (except to the extent it                were acquired, the identity of the                    Fund, or its respective Master Fund, to
                                                  is acting in its capacity as an investment              underwriting syndicate’s members, the                 acquire securities of one or more
                                                  adviser to a Fund) will cause a Fund, or                terms of the purchase, and the                        investment companies for short-term
                                                  its respective Master Fund, to purchase                 information or materials upon which                   cash management purposes or (ii) the
                                                  a security in any Affiliated                            the Board’s determinations were made.                 Fund acquires securities of the Master
                                                  Underwriting.                                              9. Before investing in a Fund in                   Fund pursuant to the Master-Feeder
                                                     7. The Board of a Fund, or its                       excess of the limit in section                        Relief.
                                                  respective Master Fund, including a                     12(d)(1)(A), a Fund of Funds and the
                                                  majority of the non-interested Board                    applicable Trust will execute a FOF                     For the Commission, by the Division of
                                                  members, will adopt procedures                          Participation Agreement stating without               Investment Management, under delegated
                                                                                                                                                                authority.
                                                  reasonably designed to monitor any                      limitation that their respective boards of
                                                  purchases of securities by the Fund, or                 directors or trustees and their                       Brent J. Fields,
                                                  its respective Master Fund, in an                       investment advisers, or trustee and                   Secretary.
                                                  Affiliated Underwriting, once an                        Sponsor, as applicable, understand the                [FR Doc. 2015–10176 Filed 4–30–15; 8:45 am]
                                                  investment by a Fund of Funds in the                    terms and conditions of the order, and                BILLING CODE 8011–01–P
                                                  securities of the Fund exceeds the limit                agree to fulfill their responsibilities
                                                  of section 12(d)(1)(A)(i) of the Act,                   under the order. At the time of its
                                                  including any purchases made directly                   investment in Shares of a Fund in                     SMALL BUSINESS ADMINISTRATION
                                                  from an Underwriting Affiliate. The                     excess of the limit in section
                                                  Board will review these purchases                       12(d)(1)(A)(i), a Fund of Funds will                  Data Collection Available for Public
                                                  periodically, but no less frequently than               notify the Fund of the investment. At                 Comments
                                                  annually, to determine whether the                      such time, the Fund of Funds will also
                                                  purchases were influenced by the                        transmit to the Fund a list of the names                    60-day notice and request for
                                                                                                                                                                ACTION:
                                                  investment by the Fund of Funds in the                  of each Fund of Funds Affiliate and                   comments.
                                                  Fund. The Board will consider, among                    Underwriting Affiliate. The Fund of
                                                                                                                                                                SUMMARY:   The Small Business
                                                  other things: (i) Whether the purchases                 Funds will notify the Fund of any
                                                                                                                                                                Administration (SBA) intends to request
                                                  were consistent with the investment                     changes to the list of the names as soon
                                                                                                                                                                approval from the Office of Management
                                                  objectives and policies of the Fund, or                 as reasonably practicable after a change
                                                                                                                                                                and Budget (OMB) for the collection of
                                                  its respective Master Fund; (ii) how the                occurs. The Fund and the Fund of
                                                                                                                                                                information described below. The
                                                  performance of securities purchased in                  Funds will maintain and preserve a
                                                                                                                                                                Paperwork Reduction Act (PRA) of 1995
                                                  an Affiliated Underwriting compares to                  copy of the order, the FOF Participation
                                                                                                                                                                44 U.S.C Chapter 35 requires federal
                                                  the performance of comparable                           Agreement, and the list with any
                                                                                                                                                                agencies to publish a notice in the
                                                  securities purchased during a                           updated information for the duration of
                                                                                                                                                                Federal Register concerning each
                                                  comparable period of time in                            the investment and for a period of not
                                                                                                                                                                proposed collection of information
                                                  underwritings other than Affiliated                     less than six years thereafter, the first
                                                  Underwritings or to a benchmark such                    two years in an easily accessible place.              before submission to OMB, and to allow
                                                  as a comparable market index; and (iii)                    10. Before approving any advisory                  60 days for public comment in response
                                                  whether the amount of securities                        contract under section 15 of the Act, the             to the notice. This notice complies with
                                                                                                                                                                that requirement.
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                                                  purchased by the Fund, or its respective                board of directors or trustees of each
                                                  Master Fund, in Affiliated                              Investing Management Company                          DATES: Submit comments on or before
                                                  Underwritings and the amount                            including a majority of the disinterested             June 30, 2015.
                                                  purchased directly from an                              directors or trustees, will find that the             ADDRESSES: Send all comments to
                                                  Underwriting Affiliate have changed                     advisory fees charged under such                      Brittany Borg, Contracting Officer
                                                  significantly from prior years. The                     contract are based on services provided               Representative, Office of
                                                  Board will take any appropriate actions                 that will be in addition to, rather than              Entrepreneurial Development, U.S.
                                                  based on its review, including, if                      duplicative of, the services provided                 Small Business Administration, 409 3rd


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Document Created: 2018-02-21 10:20:59
Document Modified: 2018-02-21 10:20:59
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
ActionNotice of an application for an order under section 6(c) of the Investment Company Act of 1940 (the ``Act'') for an exemption from sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c-1 under the Act, under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act.
DatesThe application was filed on April 17, 2015, and amended on April 23, 2015 and April 27, 2015.
ContactMark N. Zaruba, Senior Counsel at (202) 551-6878, or David P. Bartels, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation80 FR 24989 

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