80 FR 34939 - New York Alaska ETF Management LLC, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 117 (June 18, 2015)

Summary of Application: Applicants request an order that permits: (a) Actively-managed 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; (c) certain series to pay redemption proceeds, under certain circumstances, more than seven days from 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; and (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the series to acquire Shares.

[Federal Register Volume 80, Number 117 (Thursday, June 18, 2015)]
[Notices]
[Pages 34939-34946]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-14969]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31667; 812-14419]


New York Alaska ETF Management LLC, et al.; Notice of Application

June 12, 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 (``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 (a)(2) of the Act, and under section 12(d)(1)(J) 
of the Act for an exemption from sections 12(d)(1)(A) and (B) of the 
Act.

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APPLICANTS: Plus Trust (``Trust''), New York Alaska ETF Management LLC 
(``New York Alaska Management''), and Foreside Fund Services, LLC.
SUMMARY: Summary of Application: Applicants request an order that 
permits: (a) Actively-managed 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; (c) 
certain series to pay redemption proceeds, under certain circumstances, 
more than seven days from 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; and (e) certain registered management 
investment companies and unit investment trusts outside of the same 
group of investment companies as the series to acquire Shares.

[[Page 34940]]


DATES: Filing Dates: The application was filed on January 23, 2015, and 
amended on April 29, 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 July 7, 2015, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Pursuant to rule 0-5 under the Act, hearing 
requests should state the nature of the writer's interest, any facts 
bearing upon the desirability of a hearing on the matter, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. Applicants: Ofer Abarbanel, New 
York Alaska ETF Management LLC, 535 Fifth Avenue, 4th Floor, New York, 
NY 10017.

FOR FURTHER INFORMATION CONTACT: Robert H. Shapiro, Senior Counsel, at 
(202) 551-7758 or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicants' Representations

    1. The Trust is a Delaware statutory trust and is registered with 
the Commission as an open-end management investment company. The Trust 
is organized as a series fund with multiple series, but will initially 
be comprised of a single series, the 1-3 Month Enhanced Short Duration 
ETF, (the ``Initial Fund''). The Trust will be overseen by a board of 
trustees (for any entity, ``Board''). Subject to market conditions, 
applicants expect that the investment objective of the Initial Fund 
will be to seek current income consistent with preservation of capital 
and daily liquidity.
    2. New York Alaska Management, a Nevada limited liability company 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (``Advisers Act''), will be the investment adviser to the 
Initial Fund. The Adviser (as defined below), subject to the oversight 
and authority of the Board, will develop the overall investment program 
for each Fund (as defined below). The Adviser may enter into sub-
advisory agreements with one or more investment advisers, each of which 
will act as sub-adviser to a Fund (each a ``Sub-Adviser''). Applicants 
state that each Sub-Adviser will be registered, or not subject to 
registration, under the Advisers Act.
    3. The Board will select and approve Foreside Fund Services, LLC, a 
Delaware limited liability company, to act as the distributor and 
principal underwriter of the Funds (the ``Initial Distributor'') 
pursuant to a distribution agreement between the Initial Distributor 
and the Trust. The Trust may also enter into additional distribution 
agreements with one or more other broker or dealer registered under the 
Securities Exchange Act of 1934 (the ``Exchange Act'' and such persons 
registered under the Exchange Act, ``Brokers'') (each, a ``Future 
Distributor'' and, together with the Initial Distributor, each, a 
``Distributor''). The Distributors will act as distributor and 
principal underwriter of one or more of the Funds and will distribute 
Shares on an agency basis. The Distributor of any Fund may be an 
affiliated person or an affiliated person of an affiliated person of 
that Fund's Adviser and/or Sub-Advisers. No Distributor, Adviser, Sub-
Adviser, Trust, or Fund is, or will be, affiliated with any national 
securities exchange, as defined in section 2(a)(26) of the Act (``Stock 
Exchange'').
    4. Applicants request that the order apply not only to the Initial 
Fund but also to any future series of the Trust as well as other future 
open-end management companies offering Shares that may utilize active 
management investment strategies (collectively, ``Future Funds''). Any 
Future Fund will (a) be advised by New York Alaska Management or an 
entity controlling, controlled by, or under common control with New 
York Alaska Management (New York Alaska Management and each such other 
entity and any successor thereto included in the term ``Adviser''),\1\ 
and (b) comply with the terms and conditions of the application.\2\ The 
Initial Fund and Future Funds together are the ``Funds.'' \3\ Each Fund 
will consist of a portfolio of securities (including fixed income 
securities and/or equity securities) and/or currencies traded in the 
U.S. and/or non-U.S. markets, and derivatives, other assets, and other 
investment positions (``Portfolio Instruments'').\4\ Funds may invest 
in ``Depositary Receipts.'' \5\ Each Fund will operate as an actively 
managed exchange-traded fund (``ETF'').
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    \1\ For the purposes of the requested order, a ``successor'' is 
limited to an entity that results from a reorganization into another 
jurisdiction or a change in the type of business organization.
    \2\ Any Adviser to a Future Fund will be registered as an 
investment adviser under the Advisers Act. All entities that 
currently intend to rely on the order are named as applicants. Any 
entity that relies on the order in the future will comply with the 
terms and conditions of the application.
    \3\ Applicants further request that the order apply to any 
Future Distributor of the Funds, which would be a Broker and would 
comply with the terms and conditions of the application.
    \4\ If a Fund invests in derivatives, then (a) the Fund's Board 
will periodically review and approve the Fund's use of derivatives 
and how the Adviser assesses and manages risk with respect to the 
Fund's use of derivatives and (b) the Fund's disclosure of its use 
of derivatives in its offering documents and periodic reports will 
be consistent with relevant Commission and staff guidance.
    \5\ Depositary Receipts are typically issued by a financial 
institution, a ``depository,'' and evidence ownership in a security 
or pool of securities that have been deposited with the depository. 
A Fund will not invest in any Depositary Receipts that the Adviser 
or Sub-Adviser deems to be illiquid or for which pricing information 
is not readily available. No affiliated persons of applicants, any 
Future Fund, any Adviser or any Sub-Adviser will serve as the 
depositary bank for any Depositary Receipts held by a Fund.
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    5. Applicants request that any exemption under section 12(d)(1)(J) 
apply to: (1) With respect to section 12(d)(1)(B), any Fund that is 
currently or subsequently part of the same ``group of investment 
companies'' as the Initial Fund within the meaning of section 
12(d)(1)(G)(ii) of the Act as well as any principal underwriter for the 
Funds and any Brokers selling Shares of a Fund to an Investing Fund (as 
defined below); and (2) with respect to section 12(d)(1)(A), each 
management investment company or unit investment trust registered under 
the Act that is not part of the same ``group of investment companies'' 
as the Funds, and that enters into a FOF Participation Agreement (as 
defined below) to acquire Shares of a Fund (such management investment 
companies, ``Investing Management Companies,'' such unit investment 
trusts, ``Investing Trusts,'' and Investing Management Companies and 
Investing Trusts together, ``Investing Funds''). Investing Funds do not 
include the Funds.\6\
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    \6\ An Investing Fund may rely on the order only to invest in 
Funds and not in any other registered investment company.
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    6. Applicants anticipate that a Creation Unit will consist of a 
fixed number of Shares (e.g., at least 25,000). Applicants anticipate 
that the trading

[[Page 34941]]

price of a Share will range from $10 to $100. All orders to purchase 
Creation Units must be placed with a Distributor by or through a party 
that has entered into a participant agreement with the Distributor and 
the transfer agent of the Fund (``Authorized Participant'') with 
respect to the creation and redemption of Creation Units. An Authorized 
Participant is either: (a) A Broker or other participant, in the 
Continuous Net Settlement System of the National Securities Clearing 
Corporation (``NSCC''), a clearing agency registered with the 
Commission and affiliated with the Depository Trust Company (``DTC''), 
or (b) a participant in the DTC (``DTC Participant''). An investor does 
not have to be an Authorized Participant, but must place an order 
through, and make appropriate arrangements with, an Authorized 
Participant.
    7. In order to keep costs low and permit each Fund to be as fully 
invested as possible, Shares 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'').\7\ On 
any given Business Day,\8\ 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, and these instruments may be referred to, in the case of 
either a purchase or redemption, as the ``Creation Basket.'' In 
addition, the Creation Basket will correspond pro rata to the positions 
in a Fund's portfolio (including cash positions),\9\ 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; \10\ or 
(c) TBA Transactions,\11\ short positions and other positions that 
cannot be transferred in kind \12\ will be excluded from the Creation 
Basket.\13\ If there is a difference between NAV attributable to a 
Creation Unit and the aggregate market value of the Creation Basket 
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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    \7\ 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.
    \8\ Each Fund will sell and redeem Creation Units on any day the 
Fund is open, including as required by section 22(e) of the Act 
(each, a ``Business Day'').
    \9\ The portfolio used for this purpose will be the same 
portfolio used to calculate the Fund's net asset value (``NAV'') for 
that Business Day.
    \10\ A tradeable round lot for a security will be the standard 
unit of trading in that particular type of security in its primary 
market.
    \11\ A TBA Transaction is a method of trading mortgage-backed 
securities. In a TBA Transaction, the buyer and seller agree on 
general trade parameters such as agency, settlement date, par amount 
and price.
    \12\ 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.
    \13\ Because these instruments will be excluded from the 
Creation Basket, their value will be reflected in the determination 
of the Cash Amount (defined below).
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    8. 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, as 
described above; (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; (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; or (ii) in the case of Funds holding non-U.S. investments 
(``Global Funds''), 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 
Global Fund would be subject to unfavorable income tax treatment if the 
holder receives redemption proceeds in kind.\14\
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    \14\ 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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    9. Each Business Day, before the open of trading on a Stock 
Exchange on which a Fund's Shares are listed, such Fund will cause to 
be published through the NSCC the names and quantities of the 
instruments comprising the Creation Basket, as well as the estimated 
Cash Amount (if any), for that day. The published Creation Basket will 
apply until a new Creation Basket is announced on the following 
Business Day, and there will be no intra-day changes to the Creation 
Basket except to correct errors in the published Creation Basket. The 
Stock Exchange will disseminate every 15 seconds throughout the trading 
day through the facilities of the Consolidated Tape Association an 
amount representing, on a per Share basis, the sum of the current value 
of the Portfolio Instruments that were publicly disclosed prior to the 
commencement of trading in Shares on the Stock Exchange.
    10. A Fund may recoup the settlement costs charged by NSCC and DTC 
by imposing a transaction fee on investors purchasing or redeeming 
Creation Units (``Transaction Fee''). The Transaction Fee will be borne 
only by purchasers and redeemers of Creation Units and will be limited 
to amounts that have been determined appropriate by the Adviser to 
defray the transaction expenses that will be incurred by a Fund when an 
investor purchases or redeems Creation Units.\15\
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    \15\ In all cases, the Transaction Fee will be limited in 
accordance with the requirements of the Commission applicable to 
open-end management investment companies offering redeemable 
securities.
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    11. All orders to purchase Creation Units will be placed with a 
Distributor by or through an Authorized Participant and the Distributor 
will transmit all purchase orders to the relevant Fund. The Distributor 
will be responsible for delivering a prospectus (``Prospectus'') to 
those persons purchasing Creation Units and for maintaining records of 
both the orders placed with it and the confirmations of acceptance 
furnished by it.
    12. Shares will be listed on a Stock Exchange and traded in the 
secondary

[[Page 34942]]

market in the same manner as other equity securities and ETFs. 
Applicants expect that the Stock Exchange where each Fund is listed 
will select, designate or appoint one or more specialists or market 
makers (collectively, ``Market Makers'') for the Shares of each 
Fund.\16\ The price of Shares trading on the Stock Exchange will be 
based on a current bid/offer in the secondary market. Transactions 
involving the purchases and sales of Shares on the Stock Exchange will 
be subject to customary brokerage commissions and charges.
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    \16\ If Shares are listed on The NASDAQ Stock Market LLC 
(``Nasdaq'') or a similar electronic Stock Exchange (including NYSE 
Arca), one or more member firms of that Stock Exchange will act as 
Market Makers and maintain a market for Shares trading on that Stock 
Exchange. On Nasdaq, no particular Market Maker would be 
contractually obligated to make a market in Shares. However, the 
listing requirements on Nasdaq, for example, stipulate that at least 
two Market Makers must be registered in Shares to maintain a 
listing. In addition, on Nasdaq and NYSE Arca, registered Market 
Makers are required to make a continuous two-sided market or subject 
themselves to regulatory sanctions. No Market Maker will be an 
affiliated person or an affiliated person of an affiliated person, 
of the Funds, except within the meaning of section 2(a)(3)(A) or (C) 
of the Act due solely to ownership of Shares, as discussed below.
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    13. Applicants expect that purchasers of Creation Units will 
include institutional investors and arbitrageurs. Market Makers, acting 
in their unique role to provide a fair and orderly secondary market for 
Shares, also may purchase Creation Units for use in their own market 
making activities. Applicants expect that secondary market purchasers 
of Shares will include both institutional and retail investors.\17\ 
Applicants expect that arbitrage opportunities created by the ability 
to continually purchase or redeem Creation Units at NAV should ensure 
that the Shares will not trade at a material discount or premium in 
relation to their NAV.
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    \17\ Shares will be registered in book-entry form only and the 
Funds will not issue Share certificates. 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 DTC 
Participants.
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    14. Shares will not be individually redeemable and owners of Shares 
may acquire those Shares from a 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 by or through an Authorized Participant.
    15. Neither the Trust nor any Fund will be marketed or otherwise 
held out as a ``mutual fund.'' Instead, each Fund will be marketed as 
an ``actively managed exchange-traded fund.'' No Fund marketing 
materials (other than as required in the Prospectus) will reference an 
``open-end fund'' or ``mutual fund,'' except to compare and contrast a 
Fund with conventional mutual funds. In all marketing materials where 
the features or method of obtaining, buying or selling Shares traded on 
the Stock Exchange are described, there will be an appropriate 
statement to the effect that Shares are not individually redeemable.
    16. The Funds' Web site, which will be publicly available prior to 
the public offering of Shares, will include a Prospectus for each Fund 
that may be downloaded and additional quantitative information updated 
on a daily basis, including, on a per Share basis for each Fund, the 
prior Business Day's NAV and the market closing price or mid-point of 
the bid/ask spread at the time of the calculation of such NAV (``Bid/
Ask Price''),\18\ and a calculation of the premium or discount of the 
market closing price or Bid/Ask Price against such NAV. On each 
Business Day, before commencement of trading in Shares on the Stock 
Exchange, the Fund will disclose on its Web site the identities and 
quantities of the Portfolio Instruments held by the Fund (including any 
short positions held in securities) that will form the basis for the 
Fund's calculation of NAV at the end of the Business Day.\19\ The Web 
site and information will be publicly available at no charge.
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    \18\ Applicants state that the Bid/Ask Price of a Fund will be 
determined using the highest bid and the lowest offer on the Stock 
Exchange as of the time of calculation of such Fund's NAV. The 
records relating to Bid/Ask Prices will be retained by the Funds or 
their service providers.
    \19\ Applicants note that under accounting procedures followed 
by the Funds, trades made on the prior Business Day will be booked 
and reflected in NAV on the current Business Day. Accordingly, each 
Fund will be able to disclose at the beginning of the Business Day 
the portfolio that will form the basis for its NAV calculation at 
the end of such Business Day.
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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 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) of the Act for an exemption from sections 
12(d)(1)(A) and (B) 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 provisions 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 provision of section 12(d)(1) if the exemption 
is consistent with the public interest and the protection of investors.

Sections 2(a)(32) and 5(a)(1) 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. 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 holder, 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 Trust to register as 
an open-end management investment company and redeem Shares in Creation 
Units only. Applicants state that investors may purchase Shares in 
Creation Units from each Fund and redeem Creation Units from each Fund. 
Applicants further state that because the market price of Creation 
Units will be disciplined by arbitrage opportunities, investors should 
be able to sell Shares in the secondary market at prices that do not 
vary materially from their NAV.

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 a principal 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 the 
NAV

[[Page 34943]]

next computed after receipt of a tender of such security for redemption 
or of an order to purchase or sell such security. Applicants state that 
secondary market trading in Shares will take place at negotiated 
prices, not at a current offering price described in the 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 to permit the Shares to trade at negotiated 
prices.
    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 resulting from sales at different prices, and (c) assure 
an orderly distribution system of investment company shares by 
eliminating price competition from brokers 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 the Funds as parties and cannot 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, not 
as a result of unjust or discriminatory manipulation. Therefore, 
applicants assert that secondary market transactions in Shares will not 
lead to discrimination or preferential treatment among purchasers. 
Finally, applicants contend that the proposed distribution system will 
be orderly because arbitrage activity should ensure that the difference 
between the market price of Shares and their NAV remains narrow.

Section 22(e) of the Act

    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 
observe that settlement of redemptions of Creation Units of Global 
Funds is contingent not only on the settlement cycle of the U.S. 
securities markets but also on the delivery cycles present in foreign 
markets in which those Funds invest. Applicants have been advised that, 
under certain circumstances, the delivery cycles for transferring 
Portfolio Instruments to redeeming investors, coupled with local market 
holiday schedules, will require a delivery process of up to 14 calendar 
days. Applicants therefore request relief from section 22(e) in order 
to provide payment or satisfaction of redemptions within the maximum 
number of calendar days required for such payment or satisfaction in 
the principal local markets where transactions in the Portfolio 
Instruments of each Global Fund customarily clear and settle, but in 
all cases no later than 14 calendar days following the tender of a 
Creation Unit.\20\
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    \20\ Applicants acknowledge that no relief obtained from the 
requirements of section 22(e) will affect any obligations that it 
may otherwise have under rule 15c6-1 under the Exchange Act. Rule 
15c6-1 requires that most securities transactions be settled within 
three business days of the trade date.
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    8. Applicants submit that section 22(e) was designed to prevent 
unreasonable, undisclosed and unforeseen delays in the actual payment 
of redemption proceeds. Applicants state that allowing redemption 
payments for Creation Units of a Fund to be made within a maximum of 14 
calendar days would not be inconsistent with the spirit and intent of 
section 22(e). Applicants state each Global Fund's statement of 
additional information (``SAI'') will disclose those local holidays 
(over the period of at least one year following the date of the SAI), 
if any, that are expected to prevent the delivery of redemption 
proceeds in seven calendar days and the maximum number of days needed 
to deliver the proceeds for each affected Global Fund. Applicants are 
not seeking relief from section 22(e) with respect to Global Funds that 
do not affect redemptions in-kind.

Section 12(d)(1) of the Act

    9. Section 12(d)(1)(A) of the Act prohibits a registered investment 
company from acquiring shares 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, or 
any other broker or dealer from selling its 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.
    10. Applicants request relief to permit Investing Funds to acquire 
Shares in excess of the limits in section 12(d)(1)(A) of the Act and to 
permit the Funds, their principal underwriters and any Brokers to sell 
Shares to Investing Funds in excess of the limits in section 
12(d)(l)(B) of the Act. Applicants submit that the proposed conditions 
to the requested relief address the concerns underlying the limits in 
section 12(d)(1), which include concerns about undue influence, 
excessive layering of fees and overly complex structures.
    11. Applicants submit that their proposed conditions address any 
concerns regarding the potential for undue influence. To limit the 
control that an Investing Fund may have over a Fund, applicants propose 
a condition prohibiting the adviser of an Investing Management Company 
(``Investing Fund Adviser''), sponsor of an Investing Trust 
(``Sponsor''), any person controlling, controlled by, or under common 
control with the Investing Fund Adviser or Sponsor, 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 that is advised or sponsored by the 
Investing Fund Adviser, the Sponsor, or any person controlling, 
controlled by, or under common control with the Investing Fund Adviser 
or Sponsor (``Investing Fund's 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 sub-adviser 
to an Investing Management Company (``Investing Fund Sub-Adviser''), 
any person controlling, controlled by or under common control with the 
Investing Fund 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 Investing Fund Sub-Adviser or any person controlling, 
controlled by or under common control with the Investing Fund Sub-
Adviser

[[Page 34944]]

(``Investing Fund's Sub-Advisory Group'').
    12. Applicants propose a condition to ensure that no Investing Fund 
or Investing Fund Affiliate \21\ (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, Investing Fund Adviser, Investing Fund Sub-
Adviser, employee or Sponsor of the Investing Fund, or a person of 
which any such officer, director, member of an advisory board, 
Investing Fund Adviser, Investing Fund Sub-Adviser, employee or Sponsor 
is an affiliated person (except any person whose relationship to the 
Fund is covered by section 10(f) of the Act is not an Underwriting 
Affiliate).
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    \21\ An ``Investing Fund Affiliate'' is any Investing Fund 
Adviser, Investing Fund Sub-Adviser, Sponsor, promoter and principal 
underwriter of an Investing Fund, and any person controlling, 
controlled by or under common control with any of these entities. 
``Fund Affiliate'' is an investment adviser, promoter, or principal 
underwriter of a Fund or any person controlling, controlled by or 
under common control with any of these entities.
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    13. Applicants propose several conditions to address the potential 
for layering of fees. Applicants note that the Board 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 (``independent directors or trustees''), will be 
required to 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 in which the Investing Management Company may invest. Applicants 
also state that any sales charges and/or service fees charged with 
respect to shares of an Investing Fund will not exceed the limits 
applicable to a fund of funds as set forth in NASD Conduct Rule 
2830.\22\
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    \22\ Any reference to NASD Conduct Rule 2830 includes any 
successor or replacement rule that may be adopted by the Financial 
Industry Regulatory Authority (``FINRA'').
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    14. Applicants submit that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that a Fund will be 
prohibited from acquiring securities of any investment company or 
company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of 
the limits contained in section 12(d)(1)(A) of the Act, except to the 
extent permitted by exemptive relief from the Commission permitting the 
Fund to purchase shares of other investment companies for short-term 
cash management purposes.
    15. To ensure that an Investing Fund is aware of the terms and 
conditions of the requested order, the Investing Funds must enter into 
an agreement with the respective Funds (``FOF Participation 
Agreement''). The FOF Participation Agreement will include an 
acknowledgement from the Investing Fund that it may rely on the order 
only to invest in a Fund and not in any other investment company.

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

    16. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such a person (``second tier affiliate''), from selling any security to 
or purchasing any security from the company. Section 2(a)(3) of the Act 
defines ``affiliated person'' to include 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 and 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 another person's voting securities. Each Fund may be deemed to 
be controlled by an 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 
an Adviser (an ``Affiliated Fund'').
    17. Applicants request an exemption under sections 6(c) and 17(b) 
of the Act from sections 17(a)(1) and 17(a)(2) of the Act to permit in-
kind purchases and redemptions of Creation Units by persons that are 
affiliated persons 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) 
having 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.\23\ Applicants also request an 
exemption in order to permit a Fund to sell its Shares to and redeem 
its Shares from, and engage in the in-kind transactions that would 
accompany such sales and redemptions with, certain Investing Funds of 
which the Funds are affiliated persons or second-tier affiliates.\24\
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    \23\ 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 an Investing Fund because an investment 
adviser to the Funds is also an investment adviser to an Investing 
Fund.
    \24\ Applicants expect most Investing Funds will purchase Shares 
in the secondary market and will not purchase Creation Units 
directly from a Fund. To the extent that purchases and sales of 
Shares occur in the secondary market and not through principal 
transactions directly between an Investing Fund 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 an Investing Fund and redemptions of those Shares. The 
requested relief is intended to also cover the in-kind transactions 
that may accompany such sales and redemptions.
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    18. 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. Absent the 
unusual circumstances discussed in the application, the Deposit 
Instruments and Redemption Instruments available for a Fund will be the 
same for all purchases and redemptions, respectively, and will 
correspond pro rata to the Fund's Portfolio Instruments. The deposit 
procedures for in-kind purchases of Creation Units and the redemption 
procedures for in-kind redemptions will be effected in exactly the same 
manner for all purchases and redemptions, regardless of size or number. 
Deposit Instruments and Redemption Instruments will be valued in the 
same manner as those Portfolio Instruments currently held by the 
relevant Funds, and the valuation of the Deposit Instruments and 
Redemption Instruments will be made in the same manner and on the same 
terms, 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 of the Fund.
    19. Applicants also submit that the sale of Shares to and 
redemption of Shares from an Investing Fund meets the standards for 
relief under sections 17(b) and 6(c) of the Act. Applicants note that 
any consideration paid for the purchase or redemption of Shares 
directly from a Fund will be based on the NAV of the Fund in accordance 
with policies and procedures set forth in the Fund's registration 
statement.\25\ The

[[Page 34945]]

FOF Participation Agreement will require any Investing Fund that 
purchases Creation Units directly from a Fund to represent that the 
purchase of Creation Units from a Fund by an Investing Fund will be 
accomplished in compliance with the investment restrictions of the 
Investing Fund and will be consistent with the investment policies set 
forth in the Investing Fund's registration statement. Applicants also 
state that the proposed transactions are consistent with the general 
purposes of the Act and appropriate in the public interest.
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    \25\ Applicants acknowledge that the receipt of compensation by 
(a) an affiliated person of an Investing Fund, or an affiliated 
person of such person, for the purchase by the Investing Fund of 
Shares of the 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 an Investing Fund, may be prohibited by section 17(e)(1) 
of the Act. The FOF Participation Agreement also will include this 
acknowledgment.
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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. As long as a Fund operates in reliance on the requested order, 
the Shares of the Fund will be listed on a Stock Exchange.
    2. 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 the Shares are 
not individually redeemable and that owners of the Shares may acquire 
those Shares from the Fund and tender those Shares for redemption to 
the Fund in Creation Units only.
    3. The Web site for the Funds, 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 Bid/
Ask Price, and a calculation of the premium or discount of the market 
closing price or Bid/Ask Price against such NAV.
    4. On each Business Day, before commencement of trading in Shares 
on the Stock Exchange, the Fund will disclose on its Web site the 
identities and quantities of the Portfolio Instruments held by the Fund 
that will form the basis for the Fund's calculation of NAV at the end 
of the Business Day.
    5. Neither the Adviser nor any Sub-Adviser, directly or indirectly, 
will cause any Authorized Participant (or any investor on whose behalf 
an Authorized Participant may transact with the Fund) to acquire any 
Deposit Instrument for the Fund through a transaction in which the Fund 
could not engage directly.
    6. The requested relief to permit ETF operations will expire on the 
effective date of any Commission rule under the Act that provides 
relief permitting the operation of actively-managed exchange-traded 
funds.

B. Section 12(d)(1) Relief

    1. The members of the Investing Fund's Advisory Group will not 
control (individually or in the aggregate) a Fund within the meaning of 
section 2(a)(9) of the Act. The members of the Investing Fund's Sub-
Advisory Group will not control (individually or in the aggregate) a 
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 
Investing Fund's Advisory Group or the Investing Fund's 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 Investing 
Fund's Sub-Advisory Group with respect to a Fund for which the 
Investing Fund Sub-Adviser or a person controlling, controlled by or 
under common control with the Investing Fund Sub-Adviser acts as the 
investment adviser within the meaning of section 2(a)(20)(A) of the 
Act.
    2. No Investing Fund or Investing Fund Affiliate will cause any 
existing or potential investment by the Investing Fund in a Fund to 
influence the terms of any services or transactions between the 
Investing Fund or an Investing Fund Affiliate and the Fund or a Fund 
Affiliate.
    3. The board of directors or trustees of an Investing Management 
Company, including a majority of the independent directors or trustees, 
will adopt procedures reasonably designed to ensure that the Investing 
Fund Adviser and any Investing Fund 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 an Investing Fund Affiliate from a Fund or a Fund Affiliate 
in connection with any services or transactions.
    4. Once an investment by an Investing Fund in the Shares of a Fund 
exceeds the limit in section 12(d)(1)(A)(i) of the Act, the Board of a 
Fund, including a majority of the independent directors or trustees, 
will determine that any consideration paid by the Fund to the Investing 
Fund or an Investing Fund 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; (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 and its investment adviser(s), 
or any person controlling, controlled by or under common control with 
such investment adviser(s).
    5. The Investing Fund Adviser, or Trustee or Sponsor, as 
applicable, will waive fees otherwise payable to it by the Investing 
Fund in an amount at least equal to any compensation (including fees 
received pursuant to any plan adopted by a Fund under rule 12b-1 under 
the Act) received from a Fund by the Investing Fund Adviser, or Trustee 
or Sponsor, or an affiliated person of the Investing Fund Adviser, or 
Trustee or Sponsor, other than any advisory fees paid to the Investing 
Fund Adviser, or Trustee or Sponsor, or its affiliated person by the 
Fund, in connection with the investment by the Investing Fund in the 
Fund. Any Investing Fund Sub-Adviser will waive fees otherwise payable 
to the Investing Fund Sub-Adviser, directly or indirectly, by the 
Investing Management Company in an amount at least equal to any 
compensation received from a Fund by the Investing Fund Sub-Adviser, or 
an affiliated person of the Investing Fund Sub-Adviser, other than any 
advisory fees paid to the Investing Fund Sub-Adviser or its affiliated 
person by the Fund, in connection with the investment by the Investing 
Management Company in the Fund made at the direction of the Investing 
Fund Sub-Adviser. In the event that the Investing Fund Sub-Adviser 
waives fees, the benefit of the waiver will be passed through to the 
Investing Management Company.
    6. No Investing Fund or Investing Fund 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 Affiliated Underwriting.
    7. The Board of a Fund, including a majority of the independent 
directors or trustees, will adopt procedures reasonably designed to 
monitor any purchases of securities by the Fund in an Affiliated 
Underwriting, once an investment by an Investing Fund in the

[[Page 34946]]

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 Investing Fund 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; 
(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 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 
assure that purchases of securities in Affiliated Underwritings are in 
the best interest of shareholders of the Fund.
    8. Each 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 an Investing Fund 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 limits in section 
12(d)(1)(A)(i), an Investing Fund will execute a FOF Participation 
Agreement with the Fund stating 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), an Investing Fund will notify the Fund of 
the investment. At such time, the Investing Fund will also transmit to 
the Fund a list of the names of each Investing Fund Affiliate and 
Underwriting Affiliate. The Investing Fund will notify the Fund of any 
changes to the list as soon as reasonably practicable after a change 
occurs. The Fund and the Investing Fund 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 independent 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 in which the Investing Management Company may invest. These 
findings and their basis will be recorded fully in the minute books of 
the appropriate Investing Management Company.
    11. Any sales charges and/or service fees charged with respect to 
shares of an Investing Fund will not exceed the limits applicable to a 
fund of funds as set forth in NASD Conduct Rule 2830.
    12. No Fund relying on the section 12(d)(1) relief 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 to purchase 
shares of other investment companies for short-term cash management 
purposes.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-14969 Filed 6-17-15; 8:45 am]
BILLING CODE 8011-01-P