
[Federal Register Volume 78, Number 79 (Wednesday, April 24, 2013)]
[Notices]
[Pages 24241-24249]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-09634]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30469; 812-13734]


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

April 18, 2013.
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, and 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.

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APPLICANTS: John Hancock Exchange-Traded Fund Trust (``Trust''); John 
Hancock Advisers, LLC and John Hancock Investment Management Services, 
LLC (each, an ``Adviser,'' and collectively the ``Advisers''); and John 
Hancock Funds, LLC (``JHF LLC'').

SUMMARY OF APPLICATION: Applicants request an order that would permit: 
(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 
after the tender of Creation Units for redemption; (d) certain 
affiliated persons of the series to buy securities from, and sell 
securities to, 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.\1\
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    \1\ Capitalized terms not otherwise defined in this notice have 
the same meaning ascribed to them in the application.

DATES: FILING DATES: The application was filed on December 23, 2009 and 
amended on June 18, 2010, August 29, 2011, August 9, 2012, January 14, 
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2013, and March 28, 2013.

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 13, 2013, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. Applicants: Thomas M. Kinzler, 
Esq., 601 Congress Street, Boston, MA 02210-2805.

FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel, 
at (202) 551-6812 or David P. Bartels, Branch Chief, at (202) 551-6821 
(Division of Investment Management,

[[Page 24242]]

Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or 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, a Massachusetts business trust, is registered under 
the Act as an open-end management company. The Trust currently is 
comprised of a single, actively-managed investment series, John Hancock 
Global Balanced ETF (the ``Initial Fund''). The investment objective of 
the Initial Fund will be to seek a balance between a high level of 
current income and growth of capital, with a greater emphasis on growth 
of capital.
    2. The Advisers, each of which is a Delaware limited liability 
company, are registered as investment advisers under the Investment 
Advisers Act of 1940 (the ``Advisers Act''). Each Adviser will be an 
investment adviser to one or more of the Funds (defined below) and may 
enter into sub-advisory agreements with one or more affiliated or 
unaffiliated investment advisers, including the other Adviser, to serve 
as sub-adviser to one or more of the Funds or to a portion of one or 
more Funds' portfolios (each, a ``Sub-Adviser''). Each Sub-Adviser will 
be registered, or not subject to registration, as an investment adviser 
under the Advisers Act.
    3. The Trust will enter into a distribution agreement with JHF LLC, 
a Delaware limited liability company, and in the future may enter into 
a distribution agreement with one or more other distributors. Each 
distributor will be a broker-dealer (``Broker'') registered under the 
Securities Exchange Act of 1934 (``Exchange Act'') and will act as 
distributor and principal underwriter for one or more of the Funds (the 
``Distributor''). Applicants represent that the Fund's Listing Exchange 
(as defined below) will not be affiliated with the Distributor. 
However, the Distributor may be an ``affiliated person,'' or an 
affiliated person of an affiliated person, of a Fund's Adviser and/or 
Sub-Adviser.
    4. Applicants are requesting relief to permit the Trust to offer 
one or more actively managed series that offer exchange-traded Shares 
with limited redeemability. Applicants request that the order apply to 
the Initial Fund as well as to additional series of the Trust and other 
open-end management investment companies, or series thereof, that may 
be created in the future (``Future Funds,'' collectively with the 
Initial Fund, ``Funds''). Each Fund will (a) be advised by an Adviser 
or an entity controlling, controlled by or under common control with 
the Adviser and (b) comply with the terms and conditions of the 
application.\2\ Each Fund will operate as an actively managed exchange-
traded fund (``ETF'').
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    \2\ All entities that currently intend to rely on the order are 
named as applicants. Any other existing or future entity, including 
any investment adviser controlling, controlled by, or under common 
control with an Adviser, that subsequently relies on the order will 
comply with the terms and conditions of the application.
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    5. The Initial Fund will operate as a single-tier fund that will 
invest in securities and other instruments, including shares of other 
investment companies, subject to the limits of section 12(d)(1)(A) of 
the Act, in accordance with its investment objectives (``Single-Tier 
Fund''). The Initial Fund and any future Single-Tier Fund may operate 
as a feeder fund in a master-feeder structure (``Feeder Fund''). No 
Single-Tier Fund will be permitted to acquire securities of any 
investment company or company relying on section 3(c)(1) or section 
3(c)(7) of the Act in excess of the limits contained in section 
12(d)(1)(A) of the Act, except to acquire securities of its Master 
Fund, if any, pursuant to the Master-Feeder Relief (defined below) and 
as otherwise described in condition B.12.
    6. Applicants also request relief (``Funds of Funds Relief'') to 
permit management investment companies (``Investing Management 
Companies'') and unit investment trusts (``Investing Trusts,'' 
collectively with such Investing Management Companies, ``Investing 
Funds'') registered under the Act that are not part of the same ``group 
of investment companies,'' within the meaning of section 
12(d)(1)(G)(ii) of the Act, as the Funds to acquire Shares of Single-
Tier Funds beyond the limitations in section 12(d)(1)(A). The requested 
order also would permit the Single-Tier Funds, any principal 
underwriter for the Single-Tier Funds, and any Broker to sell Shares of 
the Single-Tier Funds beyond the limitations in section 12(d)(1)(B) 
(``Fund of Funds Relief''). Applicants ask that the Funds of Funds 
Relief apply to: (1) Each Single-Tier Fund that is currently or 
subsequently part of the same ``group of investment companies'' as the 
Initial Fund as well as any principal underwriter for the Single-Tier 
Funds and any Brokers selling Shares of a Single-Tier Fund to Investing 
Funds; and (2) each Investing Fund that enters into a participation 
agreement (``Participation Agreement'') with a Single-Tier Fund.\3\
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    \3\ An Investing Fund (as defined below) may rely on the order 
to invest in Single-Tier Funds but not in any other registered 
investment company or any Fund that does not operate as a Single-
Tier Fund. ``Investing Funds'' do not include the Funds.
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    7. Applicants further request that the order permit a Single-Tier 
Fund to operate as a Feeder Fund (``Master-Feeder Relief''). Under the 
order, a Feeder Fund would be permitted to acquire shares of another 
registered investment company in the same group of investment companies 
having substantially the same investment objectives as the Feeder Fund 
(``Master Fund'') beyond the limitations in section 12(d)(1)(A) of the 
Act,\4\ and the Master Fund, and any principal underwriter for the 
Master Fund, would be permitted to sell shares of the Master Fund to 
the Feeder Fund beyond the limitations in section 12(d)(1)(B) of the 
Act. Applicants request that the Master-Feeder Relief apply to any 
Feeder Fund, any Master Fund and any principal underwriter for the 
Master Funds selling shares of a Master Fund to a Feeder Fund. 
Applicants state that creating an exchange-traded feeder fund is 
preferable to creating entirely new series for several reasons, 
including avoiding additional overhead costs and economies of scale for 
the Feeder Funds.\5\ Applicants assert that, while certain costs may be 
higher in a master-feeder structure and there may possibly be lower tax 
efficiencies for the Feeder Funds, the Feeder Funds' Board will 
consider any such potential disadvantages against the benefits of 
economies of scale and other benefits of operating within a master-
feeder structure.
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    \4\ A Feeder Fund managed in a master-feeder structure will not 
make direct investments in any securities other than the securities 
issued by its respective Master Fund.
    \5\ 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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    8. The Funds, or their respective Master Funds, may invest in, 
among other investments, equity securities and/or fixed income 
securities traded in the U.S. and/or non-U.S. markets, as well as 
forward contracts, shares of other ETFs and shares of U.S. or non-U.S. 
money market mutual funds, other investment companies that invest 
primarily in short-term fixed income securities or other investment 
companies, or other instruments, all in accordance with their 
investment objectives and all of which may be denominated in U.S. 
dollars or a foreign currency. Funds may also invest in

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Depositary Receipts.\6\ The securities, currencies, derivatives, other 
assets and other positions held by a Fund (or its respective Master 
Fund) are referred to herein as its ``Portfolio Securities.'' Funds, 
including the Initial Fund, that invest all or a portion of their 
assets in foreign instruments are ``Global Funds.'' If a Fund (or its 
respective Master Fund) makes use of derivatives, then (a) the Fund's 
board of directors or trustees (``Board'') will periodically review and 
approve the Fund's (or, in the case of a Feeder Fund, its Master 
Fund's) use of derivatives and how the Adviser assesses and manages 
risk with respect to the Fund's (or, in the case of a Feeder Fund, its 
Master Fund's) use of derivatives and (b) the Fund's disclosure of its 
(or, in the case of a Feeder Fund, its Master Fund's) use of 
derivatives in its offering documents and periodic reports will be 
consistent with relevant Commission and staff guidance.
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    \6\ 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 (or its respective Master Fund) will not invest in any 
Depositary Receipt that the Adviser or Sub-Adviser deems to be 
illiquid or for which pricing information is not readily available. 
No affiliated persons of applicants or any Sub-Adviser will serve as 
the Depository for any Depositary Receipts held by a Fund.
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    9. Applicants state that each Fund will issue, on a continuous 
offering basis, Creation Units of a fixed number of Shares (e.g., at 
least 25,000 Shares) and that the trading price of a Share will range 
from $20 to $100. All orders to purchase Creation Units must be placed 
with the Distributor by or through an ``Authorized Participant,'' which 
is either (a) a Broker or other participant in the Continuous Net 
Settlement System of the National Securities Clearing Corporation 
(``NSCC'') or (b) a participant in the Depository Trust Company 
(``DTC''), which, in either case, has signed a ``Participant 
Agreement'' with the Distributor. The Distributor will deliver a 
confirmation and prospectus (``Prospectus'') to the purchaser and will 
maintain a record of the instructions given to the Trust to implement 
the delivery of Shares.
    10. Shares will be purchased and redeemed in Creation Units and 
generally on an in-kind basis.\7\ 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'').\8\ On 
any given Business Day,\9\ 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 the Fund's portfolio (including cash positions),\10\ 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; 
\11\ or (c) to-be-announced transactions,\12\ short positions, 
derivatives, and other positions that cannot be transferred in kind 
\13\ will be excluded from the Creation Basket.\14\ If there is a 
difference between the net asset value (``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\ Feeder Funds will redeem shares from the appropriate Master 
Fund and then deliver to the redeeming shareholder the applicable 
redemption payment.
    \8\ 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.
    \9\ 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'').
    \10\ The portfolio used for this purpose will be the same 
portfolio used to calculate the Fund's NAV for that Business Day.
    \11\ A tradeable round lot for a security will be the standard 
unit of trading in that particular type of security in its primary 
market.
    \12\ A ``to-be-announced transaction'' is a method of trading 
mortgage-backed securities. In a to-be-announced transaction, the 
buyer and seller agree on general trade parameters such as agency, 
settlement date, par amount, and price.
    \13\ 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.
    \14\ 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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    11. 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, a 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, a Fund determines to require the purchase or 
redemption, as applicable, to be made entirely in cash; (d) if, on a 
given Business Day, a 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 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 a 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.\15\
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    \15\ 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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    12. Each Business Day, before the open of trading on the Fund's 
listing Exchange, each 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. An amount representing, on a per Share 
basis, the sum of the current value of the Fund's Portfolio Securities 
will be disseminated every 15 seconds throughout the trading

[[Page 24244]]

day through the facilities of the Consolidated Tape Association.
    13. An investor purchasing or redeeming a Creation Unit from a Fund 
may be charged a fee (``Transaction Fee'') to defray transaction 
expenses as well as to prevent possible shareholder dilution.\16\ Where 
a Fund permits a purchaser to substitute cash in lieu of depositing a 
portion of the requisite Deposit Instruments, the purchaser may be 
assessed a higher Transaction Fee to cover the costs of purchasing 
those Deposit Instruments. In all cases, the Transaction Fee will be 
limited in accordance with requirements of the Commission applicable to 
management investment companies offering redeemable securities.
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    \16\ 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.
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    14. Purchasers of Shares in Creation Units may hold such Shares or 
may sell such Shares into the secondary market. The principal secondary 
market for Shares will be the primary listing Exchange. When Arca or 
the NYSE is the primary listing Exchange, it is expected that one or 
more Exchange member firms will be designated by the Exchange to act as 
a market maker (``Market Maker'').\17\ The price of Shares trading on 
an Exchange will be based on a current bid/offer market. Transactions 
involving the sale of Shares on an Exchange will be subject to 
customary brokerage commissions and charges.
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    \17\ If Shares are listed on Nasdaq or a similar electronic 
Exchange (including NYSE Arca (``Arca'')), one or more member firms 
of that Exchange will act as Market Maker and maintain a market for 
Shares trading on the 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 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 section 2(a)(3)(A) or (C) of the 
Act due solely to ownership of Shares.
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    15. Applicants expect that purchasers of Creation Units will 
include institutional investors and arbitrageurs. Market Makers, acting 
in the role of providing a fair and orderly secondary market for 
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 investors and retail 
investors.\18\ Applicants state that, in light of the full portfolio 
transparency and efficient arbitrage mechanism inherent in each Fund's 
structure, the secondary market prices for Shares of the Funds should 
be close to NAV and should reflect the value of each Fund's Portfolio 
Securities. Applicants do not believe that the Shares will persistently 
trade in the secondary market at a material premium or discount in 
relation to the Fund's NAV.
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    \18\ Shares will be registered in book-entry form only. DTC or 
its nominee will be the 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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    16. 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.
    17. 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 Fund will be marketed as an ``actively 
managed exchange-traded fund.'' 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 
that the owners of Shares may acquire those Shares from the Fund, or 
tender those Shares for redemption to the Fund, in Creation Units 
only.\19\
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    \19\ As noted above, the Funds may operate in a master-feeder 
structure. Under such circumstances, the Feeder Funds would operate, 
and would be marketed, as ETFs. Applicants do not believe the 
master-feeder structure contemplated in the application would be 
confusing to investors because any additional feeder fund that is a 
traditional mutual fund or other pooled investment vehicle would be 
marketed separately. The prospectus for each Feeder Fund will 
clearly indicate that the Feeder Fund is an ETF, each Feeder Fund 
will have a prospectus separate and distinct from any other feeder 
funds; and as required by the conditions herein, the Feeder Funds 
will not be marketed as mutual funds.
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    18. The Trust's Web site (``Web site''), which will be publicly 
available prior to the public offering of Shares, will include the 
current Prospectus and may include the Summary Prospectus and Statement 
of Additional Information (``SAI''). The Web site will include 
additional quantitative information updated on a daily basis, 
including, for each Fund, daily trading volume, the prior Business 
Day's market closing price, NAV and Bid/Ask Price, and a calculation of 
the premium and discount of the market closing price or Bid/Ask Price 
against the NAV. On each Business Day, before commencement of trading 
in Shares on the Exchange, the Fund will disclose on the Web site the 
identities and quantities of the Portfolio Securities held by the Fund 
(or its respective Master Fund) \20\ that will form the basis for the 
Fund's calculation of NAV at the end of the Business Day.\21\
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    \20\ For Funds that are part of a master-feeder structure, the 
Fund will disclose information about the securities and other assets 
held by the Master Fund.
    \21\ Under accounting procedures followed by the Funds, 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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Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act 
granting 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; and under sections 6(c) and 
17(b) of the Act granting an exemption from sections 17(a)(1) and (2) 
of the Act, and under section 12(d)(1)(J) 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 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 provision of section 12(d)(1) if the exemption 
is consistent with the public interest and the protection of investors.

[[Page 24245]]

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. 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 to permit the Trust to register as an open-
end management investment company and issue Shares that are redeemable 
in Creation Units only.\22\ Applicants state that Creation Units will 
always be redeemable in accordance with the provisions of the Act and 
that owners of Shares may purchase the requisite number of Shares and 
tender the resulting Creation Unit for redemption. Applicants further 
state that, because of the arbitrage possibilities created by the 
redeemability of Creation Units, it is expected that market price of 
individual Shares will not vary much from NAV.
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    \22\ 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.
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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 its 
NAV. Applicants state that secondary market trading in Shares will take 
place at negotiated prices, rather than at the current offering price 
described in the Fund's Prospectus or 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 intended (a) To prevent dilution caused by 
certain riskless-trading schemes by principal underwriters and contract 
dealers, (b) to prevent unjust discrimination or preferential treatment 
among buyers, and (c) to ensure an orderly distribution system of 
shares by contract dealers by eliminating price competition from non-
contract dealers who could offer investors shares at less than the 
published sales price and who could pay investors a little 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 transactions in 
Shares would not cause dilution for owners of such Shares because such 
transactions do not directly involve Fund assets, 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. 
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 will ensure that the 
difference between NAV and the market price of Shares will not be 
material.

Section 22(e) of the Act

    7. Section 22(e) 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 the 
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 for 
underlying foreign Portfolio Instruments in which those Funds invest. 
Applicants have been advised that, under certain circumstances, the 
delivery cycles for transferring Portfolio Securities to redeeming 
investors, coupled with local market holiday schedules, will require a 
delivery process of longer than seven days. Applicants therefore 
request relief from section 22(e) in order to provide payment or 
satisfaction of redemptions within a longer number of calendar days as 
required for such payment or satisfaction in the principal local 
markets in which the Portfolio Securities of each Global Fund 
customarily clear and settle, but in all cases no later than 15 days 
\23\ following the tender of a Creation Unit.\24\
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    \23\ Applicants state that, in the past, settlements in certain 
countries, including Russia, have extended to 15 calendar days.
    \24\ Rule 15c6-1 under the Exchange Act requires that most 
securities transactions be settled within three business days of the 
trade date. 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.
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    8. Applicants submit that Congress adopted section 22(e) to prevent 
unreasonable, undisclosed or unforeseen delays in the actual payment of 
redemption proceeds. Applicants state that allowing redemption payments 
for Creation Units of a Global Fund to be made within the number of 
days indicated above would not be inconsistent with the spirit and 
intent of section 22(e).\25\ Applicants state that the SAI will 
disclose those local holidays 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 effect creations and redemptions in-kind.
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    \25\ Other feeder funds invested in any Master Fund are not 
seeking, and will not rely on, the section 22(e) relief requested 
herein.
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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 the 
securities represent more than 3% of the total outstanding voting stock 
of the acquired company, more than 5% of the total assets of the 
acquiring company, or, together with the securities of any other 
investment companies, more than 10% of the total assets of the 
acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter, or 
any other Broker 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 of Single-Tier Funds in excess of the limits in section 
12(d)(1)(A) of the Act and to permit the Single-Tier Funds, their 
principal underwriters and any Broker to sell Shares to Investing Funds 
in excess of the limits in section 12(d)(1)(B) of the Act.

[[Page 24246]]

    11. Applicants submit that the concerns underlying section 12(d)(1) 
of the Act and the potential and actual abuses identified in the 
Commission's 1966 report to Congress \26\ are not present in the 
proposed transactions and that, in any event, Applicants have proposed 
a number of conditions to address those concerns, which include 
concerns about undue influence, excessive layering of fees and overly 
complex structures.
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    \26\ Report of the Securities and Exchange Commission on the 
Public Policy Implications of Investment Company Growth, H.R. Rep. 
No. 2337, 89th Cong., 2d Sess., 311-324.
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    12. Applicants submit that their proposed conditions address any 
concerns regarding the potential for undue influence. For instance, the 
conditions would limit the ability of an Investing Fund's Advisory 
Group,\27\ and Investing Fund's Sub-Advisory Group,\28\ to control a 
Single-Tier Fund within the meaning of Section 2(a)(9) of the Act. The 
conditions also prohibit Investing Funds and Investing Fund Affiliates 
\29\ from causing an investment by an Investing Fund in a Single-Tier 
Fund to influence the terms of services or transactions between the 
Investing Fund or an Investing Fund Affiliate and the Single-Tier Fund 
or a Single-Tier Fund Affiliate.\30\ Applicants also propose a 
condition to ensure that no Investing Fund or Investing Fund Affiliate 
will cause a Single-Tier Fund to purchase a security from an Affiliated 
Underwriting.\31\
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    \27\ An ``Investing Fund's Advisory Group'' is the Investing 
Fund Adviser, 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 section 3(c)(l) or 3(c)(7) of the Act, that is advised or 
sponsored by the Investing Fund Adviser, Sponsor or any person 
controlling, controlled by or under common control with the 
Investing Fund Adviser or Sponsor. In this regard, each Investing 
Management Company's investment adviser within the meaning of 
Section 29a)(20)(A) of the Act is the ``Investing Fund Adviser.'' 
Similarly, each Investing Trust's sponsor is the ``Sponsor.'' Each 
Investing Fund Adviser will be registered or exempt from 
registration under the Advisers Act.
    \28\ An ``Investing Fund's Sub-Advisory Group'' is any 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 section 3(c)(l) 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 Fund of Funds Sub-Adviser.
    \29\ An ``Investing Fund Affiliate'' is defined as the Investing 
Fund Adviser, Investing Fund Sub-Adviser(s), any Sponsor, promoter 
or principal underwriter of an Investing Fund and any person 
controlling, controlled by or under common control with any of these 
entities.
    \30\ A ``Single-Tier Fund Affiliate'' is defined as 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.
    \31\ An ``Affiliated Underwriting'' is an offering of securities 
during the existence of an underwriting or selling syndicate of 
which a principal underwriter is an Underwriting Affiliate. 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, Sponsor, or employee 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, Sponsor, or 
employee 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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    13. Applicants propose several conditions to address the potential 
for excessive layering of fees. Applicants note that the board of 
directors or trustees of an 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 (``non-
interested directors or trustees''), will be required to find that any 
fees charged under the Investing Management Company's advisory 
contract(s) are based on services provided that will be in addition to, 
rather than duplicative of, services provided under the advisory 
contract(s) of any Fund in which the Investing Management Company may 
invest. Applicants 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 set forth in NASD Conduct Rule 
2830.\32\
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    \32\ Any references to NASD Conduct Rule 2830 include any 
successor or replacement rule that may be adopted by the Financial 
Industry Regulatory Authority.
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    14. Applicants submit that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that a Single-Tier 
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 (a) permitted by exemptive relief from the 
Commission permitting the Single-Tier Fund to acquire shares of other 
investment companies for short-term cash management purposes or (b) the 
Single-Tier Fund acquires securities of the Master Fund pursuant to the 
Master-Feeder Relief.
    15. To ensure that an Investing Fund is aware of the terms and 
conditions of the requested order, the Investing Fund must enter into a 
Participation Agreement with the respective Single-Tier Fund. The 
Participation Agreement will include an acknowledgment from the 
Investing Fund that it may rely on the order only to invest in the 
Single-Tier Fund and not in any other investment company.
    16. Applicants also are seeking relief from Sections 12(d)(1)(A) 
and 12(d)(1)(B) to the extent necessary 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 sections 
12(d)(1)(A) and (B) will 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 in the investing fund's portfolio (in this case, the 
Feeder Fund's portfolio). 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 sections 12(d)(1)(A) and (B). The Feeder Funds 
would operate in compliance with all other provisions of section 
12(d)(1)(E).

Section 17(a) of the Act

    17. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such person (``Second Tier Affiliates''), 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 
provides that a control relationship will be presumed where one person 
owns more than 25% of another person'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

[[Page 24247]]

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'').
    18. 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 from the Funds 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 more than 25%, of the Shares of the Trust 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. Applicants also request 
an exemption in order to permit a Single-Tier Fund to sell Shares to 
and redeem Shares from, and engage in the in-kind transactions that 
would accompany such sales and redemptions with, an Investing Fund of 
which a Single-Tier Fund is an affiliated person or Second-Tier 
Affiliate.\33\
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    \33\ Applicants are seeking relief for Single-Tier Funds that 
are affiliated persons or second tier affiliates of an Investing 
Fund solely by virtue of one or more of the reasons described. 
Applicants believe that an Investing Fund generally will purchase 
Shares in the secondary market and will not purchase or redeem 
Creation Units directly from a Single-Tier Fund. Nonetheless, an 
Investing Fund could transact in Creation Units directly with a 
Single-Tier Fund pursuant to the Section 17(a) relief requested. 
Applicants are not seeking relief from Section 17(a) for, and the 
requested relief will not apply to, transactions where a Single-Tier 
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.
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    19. Applicants contend that no useful purpose would be served by 
prohibiting such affiliated persons or Second Tier Affiliates from 
acquiring or redeeming Creation Units through in-kind transactions. 
Both 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. Deposit 
Instruments and Redemption Instruments will be valued in the same 
manner as the Portfolio Securities currently held by the relevant Fund. 
Accordingly, Applicants do not believe that in-kind purchases and 
redemptions will result in abusive self-dealing or overreaching of the 
Fund.
    20. Applicants also submit that the sale of Shares to and 
redemption of Shares from an Investing Fund satisfies 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 Creation Units 
directly from a Single-Tier Fund will be based on the NAV of the 
Single-Tier Fund.\34\
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    \34\ 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 or (b) an affiliated person of a Single-Tier Fund, or an 
affiliated person of such person, for the sale by the Single-Tier 
Fund of its Shares to an Investing Fund, may be prohibited by 
section 17(e)(1) of the Act. The Participation Agreement also will 
include this acknowledgment.
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    21. In addition, to the extent that a Fund operates in a master-
feeder structure, the 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 request for relief 
described above 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, 
the 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. Applicants 
represent that 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 state that, in 
effect, the Feeder Fund will serve as a conduit through which creation 
and redemption orders by Authorized Participants will be effected.
    22. Applicants believe that: (a) With respect to the relief 
requested pursuant to section 17(b), the proposed transactions are fair 
and reasonable, 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 Investing Fund, and the proposed 
transactions are consistent with the general purposes of the Act; and 
(b) with respect to the relief requested pursuant to section 6(c), the 
requested exemption for the proposed transactions is 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.

Applicants' Conditions

    Applicants agree that any order of the Commission granting the 
requested relief will be subject to the following conditions:

A. Actively Managed Exchange-Traded Relief

    1. The requested relief, except for the Fund of Funds Relief and 
Master-Feeder Relief, 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.
    2. As long as a Fund operates in reliance on the requested order, 
the 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 the Creation Units or 
refers to redeemability will prominently disclose that the Shares are 
not individually redeemable and that owners of Shares may acquire those 
Shares from the Fund and tender those Shares for redemption to the Fund 
in Creation Units only.
    4. 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 the 
Bid/Ask Price of the Shares, and a calculation of the premium or 
discount of the market closing price or Bid/Ask Price against such NAV.
    5. No Adviser or 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. On each Business Day, before the commencement of trading in 
Shares on the Fund's listing Exchange, the Fund will disclose on its 
Web site the identities and quantities of the Portfolio Securities held 
by the Fund (or its respective Master Fund) that will form the basis of 
the Fund's calculation of NAV at the end of the Business Day.

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 Single-Tier Fund (or its 
respective

[[Page 24248]]

Master 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 Single-Tier 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 Single-Tier 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 Single-Tier Fund, it will vote its voting securities of the Single-
Tier Fund in the same proportion as the vote of all other holders of 
the Single-Tier Fund's voting securities. This condition does not apply 
to the Investing Fund's Sub-Advisory Group with respect to a Single-
Tier Fund (or its respective Master Fund) for which the Investing Fund 
Sub-Adviser or a person controlling, controlled by or under common 
control with 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 Single-Tier 
Fund to influence the terms of any services or transactions between the 
Investing Fund or an Investing Fund Affiliate and the Single-Tier Fund 
(or its respective Master Fund) or a Single-Tier Fund Affiliate.
    3. The board of directors or trustees of an Investing Management 
Company, including a majority of the non-interested 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 Single-Tier 
Fund (or its respective Master Fund) or a Single-Tier Fund Affiliate in 
connection with any services or transactions.
    4. Once an investment by an Investing Fund in the securities of a 
Single-Tier Fund exceeds the limit in section 12(d)(1)(A)(i) of the 
Act, the Board of the Single-Tier Fund (or its respective Master Fund), 
including a majority of the non-interested Board members, will 
determine that any consideration paid by the Single-Tier Fund (or its 
respective Master 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 Single-Tier Fund (or its respective Master 
Fund); (ii) is within the range of consideration that the Single-Tier 
Fund (or its respective Master 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 Single-Tier 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 Investing Fund Adviser, or trustee or Sponsor of an 
Investing Trust, 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 Single-Tier 
Fund (or its respective Master Fund) under rule 12b-l under the Act) 
received from a Single-Tier Fund (or its respective Master Fund) by the 
Investing Fund Adviser, or trustee or Sponsor of the Investing Trust, 
or an affiliated person of the Investing Fund Adviser, or trustee or 
Sponsor of the Investing Trust, other than any advisory fees paid to 
the Investing Fund Adviser, or trustee or Sponsor of an Investing 
Trust, or its affiliated person by the Single-Tier Fund (or its 
respective Master Fund), in connection with the investment by the 
Investing Fund in the Single-Tier 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 Single-Tier 
Fund (or its respective Master 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 Single-Tier Fund (or its respective Master 
Fund), in connection with the investment by the Investing Management 
Company in the Single-Tier 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 
(or its respective Master Fund)) will cause a Single-Tier Fund (or its 
respective Master Fund) to purchase a security in an Affiliated 
Underwriting.
    7. The Board of each Single-Tier 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 Single-Tier Fund (or its respective Master Fund) in 
an Affiliated Underwriting, once an investment by an Investing Fund in 
the securities of the Single-Tier 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 Single-Tier Fund. The Board will consider, among 
other things: (i) Whether the purchases were consistent with the 
investment objectives and policies of the Single-Tier 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 Single-Tier 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 Single-Tier Fund.
    8. Each Single-Tier 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 an Investing Fund in the securities of the Single-Tier 
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

[[Page 24249]]

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 Single-Tier Fund in excess of the limits 
in section 12(d)(1)(A), an Investing Fund will execute a Participation 
Agreement with the Single-Tier Fund 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 Single-Tier Fund in excess of the limit in section 
12(d)(1)(A)(i), an Investing Fund will notify the Single-Tier Fund of 
the investment. At such time, the Investing Fund will also transmit to 
the Single-Tier Fund a list of the names of each Investing Fund 
Affiliate and Underwriting Affiliate. The Investing Fund will notify 
the Single-Tier Fund of any changes to the list of the names as soon as 
reasonably practicable after a change occurs. The Single-Tier Fund and 
the Investing Fund will maintain and preserve a copy of the order, the 
Participation Agreement, and the list with any updated information for 
the duration of the investment and for a period of not less than six 
years thereafter, the first two years in an easily accessible place.
    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 non-interested 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 Single-Tier Fund (or its respective Master 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 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 Single-Tier 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 Single-
Tier Fund (or its respective Master Fund) acquires securities of 
another investment company pursuant to exemptive relief from the 
Commission permitting the Single-Tier Fund (or its respective Master 
Fund) to acquire securities of one or more investment companies for 
short-term cash management purposes, or (ii) the Single-Tier 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.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-09634 Filed 4-23-13; 8:45 am]
BILLING CODE 8011-01-P


