
[Federal Register Volume 78, Number 128 (Wednesday, July 3, 2013)]
[Notices]
[Pages 40213-40220]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-16025]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30584; 812-14009]


Charles Schwab Investment Management, Inc., et al.; Notice of 
Application

June 27, 2013.
AGENCY: Securities and Exchange Commission (the ``Commission'').

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

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    Applicants: Charles Schwab Investment Management, Inc. (``CSIM''), 
the Schwab Strategic Trust (the ``Trust''), and SEI Investments 
Distribution Co. (the ``Distributor'').
    Summary of Application: Applicants request an order that permits: 
(a) Actively-managed series of the Trusts 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 Shares for 
redemption; (d) certain affiliated persons of the series to deposit 
securities into, and receive securities from, the series in connection 
with the purchase and redemption of Creation Units; (e) certain 
registered management investment companies and unit investment trusts 
outside of the same group of investment companies as the series to 
acquire Shares; and (f) certain series to perform creations and 
redemptions of Shares in-kind in a master-feeder structure.

DATES: Filing Dates: The application was filed on February 27, 2012, 
and amended on August 8, 2012, January 25, 2013, and June 21, 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 July 22, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549. Applicants, David 
J. Lekich, Esq., Charles Schwab Investment Management, Inc., 211 Main 
Street, SF211-05-491, San Francisco, CA 94105.

FOR FURTHER INFORMATION CONTACT: Mark N. Zaruba, Senior Counsel, at 
(202) 551-6878 or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Exemptive Applications Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.
    Applicants' Representations:
    1. The Trust is registered as an open-end management investment 
company under the Act and is organized as a Delaware statutory trust. 
The Trust will offer Funds (as defined below), each of which will have 
distinct investment strategies and will attempt to achieve its 
investment objective by utilizing an active management strategy based 
on investments in equity and debt securities, including shares of other 
investment companies. Initially, the requested order will apply to a 
new series of the Trust (the ``New Fund'') that will seek a high level 
of current income consistent with preservation of capital and daily 
liquidity by investing at least 90% of its assets in a portfolio of 
investment grade short-term fixed income securities issued by U.S. and 
foreign issuers and other short-term investments.
    2. CSIM, a Delaware corporation, is, and any other Adviser (as 
defined below) will be, registered as an investment adviser under the 
Investment Advisers Act of 1940 (the ``Advisers Act''). Subject to 
approval of the Trust's Board (as defined below), an Adviser will be 
the investment adviser to each Fund. The Adviser may enter into sub-
advisory agreements with one or more investment advisers to serve as a 
subadviser to a Fund (each a ``Sub-Adviser''). Any Sub-Adviser will be 
registered, or not subject to registration, under the Advisers Act. SEI 
Investments Distribution Co., a Pennsylvania corporation, is registered 
as a broker-dealer (``Broker'') under the Securities Exchange Act of 
1934 (the ``Exchange Act''). A Distributor will serve as the principal 
underwriter and distributor for each of the Funds.\1\
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    \1\ For purposes of the requested order, the term 
``Distributor'' shall include any other entity that acts as the 
distributor and principal underwriter of the Creation Units of 
Shares of the Funds in the future and complies with the terms and 
conditions of the application. Any future Distributor will be a 
Broker registered under the Exchange Act.
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    3. Applicants request that the order apply to the New Fund as well 
as to additional series of the Trust or to any other open-end 
investment company or

[[Page 40214]]

series thereof that may be created in the future that, in each case, 
(a) is an actively managed exchange-traded fund (``ETF''), (b) is 
advised by CSIM or an entity controlling, controlled by, or under 
common control with CSIM (each such entity, an ``Adviser'') and (c) 
complies with the terms and conditions of the application (individually 
a ``Fund,'' and collectively, the ``Funds'').\2\ The Funds, or their 
respective Master Funds, may invest in equity securities or fixed 
income securities traded in the U.S. or non-U.S. markets. Funds that 
invest in foreign equity securities or foreign fixed income securities, 
either directly or through a Master Fund, are ``Foreign Funds.'' The 
Funds, either directly or through a Master Fund, may also invest in 
``Depositary Receipts'' \3\ and may engage in TBA Transactions (defined 
below). To implement each Fund's investment strategy, the Adviser and/
or Subadvisers of a Fund may review and change the portfolio 
securities, other assets, and other positions held by the Fund (the 
``Portfolio Instruments'') daily.\4\
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    \2\ 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\ Depositary Receipts are typically issued by a financial 
institution (a ``Depositary'') and evidence ownership in a security 
or pool of securities that have been deposited with the Depositary. 
A Fund will not invest in any Depositary Receipts that the Adviser 
or any Sub-Adviser deems to be illiquid or for which pricing 
information is not readily available. No affiliated persons of 
applicants or any Sub-Adviser will serve as the Depositary for any 
Depositary Receipts held by a Fund (or its respective Master Fund).
    \4\ If a Fund (or its respective Master Fund) invests in 
derivatives, then (a) the Fund's board of trustees or directors (for 
any entity, the ``Board'') will periodically review and approve the 
Fund's (or its respective Master Fund's) use of derivatives and how 
the Fund's investment adviser assesses and manages risk with respect 
to the Fund's (or its respective Master 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.
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    4. Applicants also request that any exemption under section 
12(d)(1)(J) of the Act from sections 12(d)(1)(A) and (B) apply to: (i) 
Any Fund; (ii) any Fund of Funds (as defined below); and (iii) any 
Brokers selling Shares of a Fund to a Fund of Funds or any principal 
underwriter of a Fund.\5\ A 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 within the meaning of 
section 12(d)(1)(G)(ii) of the Act and that acquires Shares of a Fund 
in excess of the limits of section 12(d)(1)(A) of the Act is referred 
to as an ``Investing Management Company'' or an ``Investing Trust,'' 
respectively, and the Investing Management Companies and Investing 
Trusts are referred to collectively as ``Funds of Funds.'' \6\
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    \5\ Any future principal underwriter of a Fund will be a Broker 
registered under the Exchange Act and will comply with the terms and 
conditions of the application.
    \6\ A Fund of Funds may rely on the order only to invest in the 
Funds and not in any other registered investment company. In no case 
will a Fund that invests in other investment companies and/or ETFs 
rely on the exemption from section 12(d)(1) being requested in the 
application.
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    5. A Fund may operate as a feeder fund in a master-feeder structure 
(``Feeder Fund''). Applicants request that the order permit a Feeder 
Fund to acquire shares of another registered investment company in the 
same group of investment companies having substantially the same 
investment objectives as the Feeder Fund (``Master Fund'') beyond the 
limitations in section 12(d)(1)(A) of the Act and permit the Master 
Fund, and any principal underwriter for the Master Fund, to sell shares 
of the Master Fund to the Feeder Fund beyond the limitations in section 
12(d)(1)(B) of the Act (``Master-Feeder Relief''). Applicants may 
structure certain Feeder Funds to generate economies of scale and incur 
lower overhead costs.\7\ 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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    \7\ Operating in a master-feeder structure could also impose 
costs on a Feeder Fund and reduce its tax efficiency. The Feeder 
Fund's Board will consider any such potential disadvantages against 
the benefits of economies of scale and other benefits of operating 
within a master-feeder structure. In a master-feeder structure, the 
Master Fund--rather than the Feeder Fund--would generally invest its 
portfolio in compliance with the requested order.
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    6. A Creation Unit will consist of at least 25,000 Shares and 
applicants expect 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''), a clearing agency registered with the Commission, or (b) a 
participant in the Depository Trust Company (``DTC,'' and such 
participant a ``DTC Participant''), which, in either case, has executed 
an agreement with the Distributor with respect to the purchase and 
redemption of Creation Units.
    7. 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'').\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 a redemption, as the ``Creation Basket.'' In 
addition, the Creation Basket will correspond pro rata to the positions 
in a Fund's (or its respective Master 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) TBA Transactions,\12\ short 
positions or other positions that cannot be transferred in kind \13\ 
will be excluded from the Creation Basket.\14\ If there is a difference 
between the NAV attributable to a Creation Unit and the aggregate 
market value of the Creation Basket exchanged for the Creation Unit, 
the party

[[Page 40215]]

conveying instruments with the lower value will also pay to the other 
an amount in cash equal to that difference (the ``Balancing Amount'').
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    \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 
that 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 net asset value (``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 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.
    \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 Balancing 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 Balancing 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 Foreign 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 Foreign 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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    9. Each Business Day, before the open of trading on a national 
securities exchange, as defined in section 2(a)(26) of the Act (a 
``Listing Exchange''), on which Shares are listed and traded, 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 Balancing 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. For each Fund, the relevant Listing Exchange will disseminate 
every 15 seconds throughout the trading day an amount representing, on 
a per Share basis, the current value of the Portfolio Instruments held 
by the Fund.
    10. An investor purchasing or redeeming a Creation Unit from a Fund 
may be charged a fee (the ``Transaction Fee'') to defray transaction 
expenses as well as prevent possible shareholder dilution.\16\ With 
respect to Feeder Funds, the Transaction Fee would be paid indirectly 
to the Master Fund.\17\ All orders to purchase Creation Units must be 
placed with the Distributor by or through an Authorized Participant and 
the Distributor will transmit such orders to the Funds. The Distributor 
will be responsible for maintaining records of both the orders placed 
with it and the confirmations of acceptance furnished by it.
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    \16\ Where a Fund permits a purchaser to substitute cash in lieu 
of depositing one or more of the requisite Deposit Instruments, the 
purchaser may be assessed a higher Transaction Fee to cover the 
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.
    \17\ 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 of 200,000 or more 
shares so long as it requires payment of the same Transaction Fee by 
all feeder funds for transactions involving 200,000 or more shares.
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    11. Purchasers of Shares in Creation Units may hold such Shares or 
may sell such Shares into the secondary market. Shares will be listed 
and traded at negotiated prices on a Listing Exchange and it is 
expected that the relevant Listing Exchange will designate one or more 
member firms to maintain a market for the Shares.\18\ The price of 
Shares trading on a Listing Exchange will be based on a current bid-
offer in the secondary market. Purchases and sales of Shares in the 
secondary market will not involve a Fund and will be subject to 
customary brokerage commissions and charges.
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    \18\ If Shares are listed on The NASDAQ Stock Market LLC 
(``Nasdaq'') or a similar electronic Listing Exchange (including 
NYSE Arca, Inc.), one or more member firms of that Listing Exchange 
will act as market maker (a ``Market Maker'') and maintain a market 
for Shares trading on that Listing Exchange. On Nasdaq, no 
particular Market Maker would be contractually obligated to make a 
market in Shares. However, the listing requirements on Nasdaq 
stipulate that at least two Market Makers must be registered in 
Shares to maintain a listing. 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.
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    12. Applicants expect that purchasers of Creation Units will 
include institutional investors and arbitrageurs. Applicants expect 
that secondary market purchasers of Shares will include both 
institutional and retail investors.\19\ Applicants believe that the 
structure and operation of the Funds will be designed to enable 
efficient arbitrage and, thereby, minimize the probability that Shares 
will trade at a material premium or discount to a Fund's NAV.
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    \19\ 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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    13. 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. As 
discussed above, redemptions of Creation Units will generally be made 
on an in-kind basis, subject to certain specified exceptions under 
which redemptions may be made in whole or in part on a cash basis, and 
may be subject to a Transaction Fee.
    14. Neither the Trust nor any Fund will be advertised or marketed 
or otherwise held out as a traditional open-end investment company or 
mutual fund. Instead, each Fund will be marketed as an ``exchange-
traded fund.'' All marketing materials that describe the features or 
method of obtaining, buying, or selling Creation Units, or Shares 
traded on a Listing 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 a Fund or 
tender those Shares for redemption to the Fund in Creation Units only.
    15. The Trust's Web site (``Web site''), which will be publicly 
available prior to the offering of Shares, will include each Fund's 
prospectus (``Prospectus''), statement of additional information 
(``SAI''), and summary prospectus, if used. The Web site will contain, 
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 calculation of such NAV (``Bid/Ask Price''), and a

[[Page 40216]]

calculation of the premium or discount of the market closing price or 
the Bid/Ask Price against such NAV. On each Business Day, prior to the 
commencement of trading in Shares on the Listing Exchange, each Fund 
shall post on the Web site the identities and quantities of the 
Portfolio Instruments held by the Fund \20\ that will form the basis 
for the calculation of the NAV at the end of that Business Day.\21\
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    \20\ Feeder Funds will disclose information about the securities 
and other assets held by the Master Fund.
    \21\ Under accounting procedures followed by each Fund, trades 
made on the prior Business Day (``T'') will be booked and reflected 
in NAV on the current Business Day (T+1). Accordingly, the Funds 
will be able to disclose at the beginning of the Business Day the 
portfolio that will form the basis for the NAV calculation at the 
end of the Business Day.
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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.

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 that would permit the Trust and each Fund 
to redeem Shares in Creation Units only.\22\ Applicants state that 
investors may purchase Shares in Creation Units from each Fund and that 
Creation Units will always be redeemable in accordance with the 
provisions of the Act. Applicants further state that because the market 
price of Shares will be disciplined by arbitrage opportunities, 
investors should be able to sell Shares in the secondary market at 
prices that do not vary substantially from their 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 operate as 
traditional mutual funds and 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, 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.
    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 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. 
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 the market price of Shares and their NAV remains 
narrow.

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 the Foreign 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 Instruments to redeeming 
investors, coupled with local market holiday schedules, will require a 
delivery process of up to fourteen (14) calendar 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 where transactions in the Portfolio Instruments of each Foreign 
Fund customarily clear and settle, but in all cases no later than 
fourteen (14) days

[[Page 40217]]

following the tender of a Creation Unit.\23\
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    \23\ Rule 15c6-1 under the Exchange Act requires that most 
securities transactions be settled within three business days of the 
trade. Applicants acknowledge that no relief obtained from the 
requirements of section 22(e) will affect any obligations applicants 
may have under rule 15c6-1.
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    8. Applicants state that section 22(e) was designed to prevent 
unreasonable, undisclosed or unforeseen delays in the actual payment of 
redemption proceeds. Applicants assert that the requested relief will 
not lead to the problems that section 22(e) was designed to prevent. 
Applicants state that the SAI will identify those instances in a given 
year where, due to local holidays, more than seven calendar days, up to 
a maximum of fourteen calendar days, will be needed to deliver 
redemption proceeds and will list such holidays. Applicants are not 
seeking relief from section 22(e) for Foreign Funds that do not effect 
redemptions of Creation Units in-kind.
    9. With respect to Feeder Funds, only in-kind redemptions may 
proceed on a delayed basis pursuant to the relief requested from 
section 22(e). In the event of such an in-kind redemption, the Feeder 
Fund would make a corresponding redemption from the Master Fund. 
Applicants do not believe the master-feeder structure would have any 
impact on the delivery cycle.\24\
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    \24\ The requested exemption from section 22(e) would only apply 
to in-kind redemptions by the Feeder Funds and would not apply to 
in-kind redemptions by other feeder funds.
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Section 12(d)(1) of the Act

    10. 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 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.
    11. Applicants request relief to permit Funds of 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 Broker to sell 
Shares to Funds of Funds in excess of the limits in section 12(d)(1)(B) 
of the Act.
    12. Applicants assert that the proposed transactions will not lead 
to any of the abuses that section 12(d)(1) was designed to prevent. 
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.
    13. Applicants submit that their proposed conditions address any 
concerns regarding the potential for undue influence. To limit the 
control that a Fund of Funds may have over a Fund, applicants propose a 
condition prohibiting the adviser of an Investing Management Company 
(``Fund of Funds' Adviser''), sponsor of an Investing Trust 
(``Sponsor''), any person controlling, controlled by, or under common 
control with the Fund of Funds' 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 Fund 
of Funds' Adviser, the Sponsor, or any person controlling, controlled 
by, or under common control with the Fund of Funds' Adviser or Sponsor 
(``Fund of Funds' Advisory Group'') from controlling (individually or 
in the aggregate) a Fund within the meaning of section 2(a)(9) of the 
Act. The same prohibition would apply to any sub-adviser to a Fund of 
Funds (``Fund of Funds' Sub-Adviser''), any person controlling, 
controlled by or under common control with the Fund of Funds' Sub-
Adviser, and any investment company or issuer that would be an 
investment company but for sections 3(c)(1) or 3(c)(7) of the Act (or 
portion of such investment company or issuer) advised or sponsored by 
the Fund of Funds' Sub-Adviser or any person controlling, controlled by 
or under common control with the Fund of Funds' Sub-Adviser (``Fund of 
Funds' Sub-Advisory Group'').
    14. Applicants propose a condition to ensure that no Fund of Funds 
or Fund of Funds' Affiliate \25\ (except to the extent it is acting in 
its capacity as an investment adviser to a Fund) will cause a Fund to 
purchase a security in an offering of securities during the existence 
of an underwriting or selling syndicate of which a principal 
underwriter is an Underwriting Affiliate (``Affiliated Underwriting''). 
An ``Underwriting Affiliate'' is a principal underwriter in any 
underwriting or selling syndicate that is an officer, director, member 
of an advisory board, Fund of Funds' Adviser, Fund of Funds' Sub-
Adviser, employee or Sponsor of the Fund of Funds, or a person of which 
any such officer, director, member of an advisory board, Fund of Funds' 
Adviser, Fund of Funds' 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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    \25\ A ``Fund of Funds' Affiliate'' is any Fund of Funds' 
Adviser, Fund of Funds' Sub-Adviser, Sponsor, promoter and principal 
underwriter of a Fund of Funds, and any person controlling, 
controlled by or under common control with any of these entities. 
``Fund Affiliate'' is the Adviser, Sub-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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    15. 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 (for any Board, the ``Independent Board Members''), 
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 (or its respective Master 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 a 
Fund of Funds will not exceed the limits applicable to a fund of funds 
as set forth in NASD Conduct Rule 2830.\26\
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    \26\ Any reference to NASD Conduct Rule 2830 includes any 
successor or replacement rule that may be adopted by the Financial 
Industry Regulatory Authority.
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    16. Applicants submit that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that a Fund (or its 
respective Master 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 or pursuant to the 
Master-Feeder Relief.
    17. To ensure that a Fund of Funds is aware of the terms and 
conditions of the requested order, the Funds of Funds

[[Page 40218]]

must enter into an agreement with the respective Funds (``FOF 
Participation Agreement''). The FOF Participation Agreement will 
include an acknowledgement from the Fund of Funds that it may rely on 
the order only to invest in the Funds and not in any other investment 
company.
    18. Applicants also are seeking the Master-Feeder Relief to permit 
the Feeder Funds to perform creations and redemptions of Shares in-kind 
in a master-feeder structure. Applicants assert that this structure is 
substantially identical to traditional master-feeder structures 
permitted pursuant to the exception provided in section 12(d)(1)(E) of 
the Act. Section 12(d)(1)(E) provides that the percentage limitations 
of section 12(d)(1)(A) and (B) shall not apply to a security issued by 
an investment company (in this case, the shares of the applicable 
Master Fund) if, among other things, that security is the only 
investment security held by the investing investment company (in this 
case, the Feeder Fund). Applicants believe the proposed master-feeder 
structure complies with section 12(d)(1)(E) because each Feeder Fund 
will hold only investment securities issued by its corresponding Master 
Fund; however, the Feeder Funds may receive securities other than 
securities of its corresponding Master Fund if a Feeder Fund accepts an 
in-kind creation. To the extent that a Feeder Fund may be deemed to be 
holding both shares of the Master Fund and, for a hypothetical moment 
in the course of a creation or redemption, other securities, applicants 
request relief from section 12(d)(1)(A) and (B). The Feeder Funds would 
operate in compliance with all other provisions of section 12(d)(1)(E).

Section 17(a) of the Act

    19. 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 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'').
    20. 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 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 each Fund to sell Shares to and redeem 
Shares from, and engage in the transactions that would accompany such 
sales and redemptions with, any Fund of Funds of which the Fund is an 
affiliated person or Second Tier Affiliate.\27\
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    \27\ Applicants anticipate that most Fund of Funds will purchase 
Shares in the secondary market and will not purchase or redeem 
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 a Fund of Funds and a Fund, 
relief from section 17(a) would not be necessary. However, the 
requested relief would apply to direct sales of Shares in Creation 
Units by a Fund to a Fund of Funds and redemptions of those Shares 
in Creation Units. The requested relief is intended to cover 
transactions that would accompany such sales and redemptions. 
Applicants are not seeking relief from section 17(a) for, and the 
requested relief will not apply to, transactions where a Fund could 
be deemed an affiliated person, or an affiliated person of an 
affiliated person of a Fund of Funds because an investment adviser 
to the Funds is also an investment adviser to the Fund of Funds.
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    21. 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 the same for 
all purchases and redemptions. Deposit Instruments and Redemptions 
Instruments will be valued in the same manner as the Portfolio 
Instruments held by the relevant Fund. Applicants thus believe that in-
kind purchases and redemptions will not result in self-dealing or 
overreaching of the Fund.
    22. Applicants also submit that the sale of Shares to and 
redemption of Shares from a Fund of Funds 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 Fund will be based on the NAV of the Fund.\28\ The FOF 
Participation Agreement will require any Fund of Funds that purchases 
Creation Units directly from a Fund to represent that the purchase will 
be in compliance with its investment restrictions and consistent with 
the investment policies set forth in its 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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    \28\ Applicants acknowledge that the receipt of compensation by 
(a) an affiliated person of a Fund of Funds, or an affiliated person 
of such person, for the purchase by the Fund of Funds of Shares of a 
Fund or (b) an affiliated person of a Fund, or an affiliated person 
of such person, for the sale by the Fund of its Shares to a Fund of 
Funds, may be prohibited by section 17(e)(1) of the Act. The FOF 
Participation Agreement also will include this acknowledgment.
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    23. To the extent that a Fund operates in a master-feeder 
structure, applicants also request relief permitting the Feeder Funds 
to engage in in-kind creations and redemptions with the applicable 
Master Fund. Applicants state that the customary section 17(a)(1) and 
17(a)(2) relief would not be sufficient to permit such transactions 
because the Feeder Funds and the applicable Master Fund could also be 
affiliated by virtue of having the same investment adviser. However, 
applicants believe that in-kind creations and redemptions between a 
Feeder Fund and a Master Fund advised by the same investment adviser do 
not involve ``overreaching'' by an affiliated person. Such transactions 
will occur only at the Feeder Fund's proportionate share of the Master 
Fund's net assets, and the distributed securities will be valued in the 
same manner as they are valued for the purposes of calculating the 
applicable Master Fund's NAV. Further, all such transactions will be 
effected with respect to pre-determined securities and on the same 
terms with respect to all investors. Finally, such transaction would 
only occur as a result of, and to effectuate, a creation or redemption 
transaction between the Feeder Fund and a third-party investor. 
Applicants believe that the terms of the proposed transactions are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned and that the transactions are

[[Page 40219]]

consistent with the general purposes of the Act.

Applicants' Conditions

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

A. Actively Managed Exchange-Traded Fund Relief

    1. 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 ETFs.
    2. As long as a Fund operates in reliance on the requested order, 
the Shares of such Fund will be listed on a Listing Exchange.
    3. Neither the Trust nor any Fund will be advertised or marketed as 
an open-end investment company or a mutual fund. Any advertising 
material that describes the purchase or sale of Creation Units or 
refers to redeemability will prominently disclose that Shares are not 
individually redeemable and that owners of Shares may acquire Shares 
from the Fund and tender Shares for redemption to the Fund in Creation 
Units only.
    4. The Web site, which is and will be publicly accessible at no 
charge, will contain, on a per Share basis for the Fund, the prior 
Business Day's NAV and the market closing price or 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 (or its respective 
Master Fund) will disclose on the Web site the identities and 
quantities of the Portfolio Instruments held by the 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 Fund of Funds' Advisory Group will not 
control (individually or in the aggregate) a Fund (or its respective 
Master Fund) within the meaning of section 2(a)(9) of the Act. The 
members of the Fund of Funds' Sub-Advisory Group will not control 
(individually or in the aggregate) a Fund (or its respective Master 
Fund) within the meaning of section 2(a)(9) of the Act. If, as a result 
of a decrease in the outstanding voting securities of a Fund, the Fund 
of Funds' Advisory Group or the Fund of Funds' Sub-Advisory Group, each 
in the aggregate, becomes a holder of more than 25 percent of the 
outstanding voting securities of a Fund, it will vote its voting 
securities of the Fund in the same proportion as the vote of all other 
holders of the Fund's voting securities. This condition does not apply 
to the Fund of Funds' Sub-Advisory Group with respect to a Fund (or its 
respective Master Fund) for which the Fund of Funds' Sub-Adviser or a 
person controlling, controlled by or under common control with the Fund 
of Funds' Sub-Adviser acts as the investment adviser within the meaning 
of section 2(a)(20)(A) of the Act.
    2. No Fund of Funds or a Fund of Funds' Affiliate will cause any 
existing or potential investment by the Fund of Funds in a Fund to 
influence the terms of any services or transactions between the Fund of 
Funds or a Fund of Funds' Affiliate and the Fund (or its respective 
Master Fund) or a Fund Affiliate.
    3. The Board of an Investing Management Company, including a 
majority of the Independent Board Members, will adopt procedures 
reasonably designed to ensure that the Fund of Funds' Adviser and any 
Fund of Funds' Sub-Adviser are conducting the investment program of the 
Investing Management Company without taking into account any 
consideration received by the Investing Management Company or a Fund of 
Funds' Affiliate from a Fund (or its respective Master Fund) or a Fund 
Affiliate in connection with any services or transactions.
    4. Once an investment by a Fund of Funds in the Shares of a Fund 
exceeds the limit in section 12(d)(1)(A)(i) of the Act, the Board of 
the Fund (or its respective Master Fund), including a majority of the 
Independent Board Members, will determine that any consideration paid 
by the Fund (or its respective Master Fund) to the Fund of Funds or a 
Fund of Funds' Affiliate in connection with any services or 
transactions: (i) Is fair and reasonable in relation to the nature and 
quality of the services and benefits received by the Fund (or its 
respective Master Fund); (ii) is within the range of consideration that 
the Fund (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 Fund (or its respective Master Fund) 
and its investment adviser(s), or any person controlling, controlled by 
or under common control with such investment adviser(s).
    5. The Fund of Funds' Adviser, or trustee or Sponsor of an 
Investing Trust, as applicable, will waive fees otherwise payable to it 
by the Fund of Funds in an amount at least equal to any compensation 
(including fees received pursuant to any plan adopted by a Fund (or its 
respective Master Fund) pursuant to rule 12b-l under the Act) received 
from a Fund (or its respective Master Fund) by the Fund of Funds' 
Adviser, or trustee or Sponsor of the Investing Trust, or an affiliated 
person of the Fund of Funds' Adviser, or trustee or Sponsor of the 
Investing Trust, other than any advisory fees paid to the Fund of 
Funds' Adviser, or trustee or Sponsor of an Investing Trust, or its 
affiliated person by the Fund (or its respective Master Fund), in 
connection with the investment by the Fund of Funds in the Fund. Any 
Fund of Funds' Sub-Adviser will waive fees otherwise payable to the 
Fund of Funds' Sub-Adviser, directly or indirectly, by the Investing 
Management Company in an amount at least equal to any compensation 
received from a Fund (or its respective Master Fund) by the Fund of 
Funds' Sub-Adviser, or an affiliated person of the Fund of Funds' Sub-
Adviser, other than any advisory fees paid to the Fund of Funds' Sub-
Adviser or its affiliated person by the Fund (or its respective Master 
Fund), in connection with the investment by the Investing Management 
Company in the Fund made at the direction of the Fund of Funds' Sub-
Adviser. In the event that the Fund of Funds' Sub-Adviser waives fees, 
the benefit of the waiver will be passed through to the Investing 
Management Company.
    6. No Fund of Funds or Fund of Funds' Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to a Fund 
(or its respective Master Fund)) will cause a Fund (or its respective 
Master Fund) to purchase a security in an Affiliated Underwriting.
    7. The Board of the Fund (or its respective Master Fund), including 
a majority of the Independent Board Members, will adopt procedures 
reasonably designed to monitor any purchases of securities by the Fund 
(or its respective Master Fund) in an Affiliated Underwriting, once an 
investment by a Fund of Funds in the securities of the Fund exceeds the 
limit of section 12(d)(1)(A)(i) of the Act, including any purchases 
made directly from an Underwriting Affiliate. The Board will review 
these purchases periodically, but no less frequently than annually, to 
determine whether the

[[Page 40220]]

purchases were influenced by the investment by the Fund of Funds in the 
Fund. The Board will consider, among other things: (i) whether the 
purchases were consistent with the investment objectives and policies 
of the Fund (or its respective Master Fund); (ii) how the performance 
of securities purchased in an Affiliated Underwriting compares to the 
performance of comparable securities purchased during a comparable 
period of time in underwritings other than Affiliated Underwritings or 
to a benchmark such as a comparable market index; and (iii) whether the 
amount of securities purchased by the Fund (or its respective Master 
Fund) in Affiliated Underwritings and the amount purchased directly 
from an Underwriting Affiliate have changed significantly from prior 
years. The Board will take any appropriate actions based on its review, 
including, if appropriate, the institution of procedures designed to 
ensure that purchases of securities in Affiliated Underwritings are in 
the best interest of the owners of beneficial interests in Shares of 
the Fund.
    8. Each Fund (or its respective Master Fund) will maintain and 
preserve permanently in an easily accessible place a written copy of 
the procedures described in the preceding condition, and any 
modifications to such procedures, and will maintain and preserve for a 
period of not less than six years from the end of the fiscal year in 
which any purchase in an Affiliated Underwriting occurred, the first 
two years in an easily accessible place, a written record of each 
purchase of securities in Affiliated Underwritings once an investment 
by a Fund of Funds in the securities of the Fund exceeds the limit of 
section 12(d)(1)(A)(i) of the Act, setting forth from whom the 
securities were acquired, the identity of the underwriting syndicate's 
members, the terms of the purchase, and the information or materials 
upon which the Board's determinations were made.
    9. Before investing in the Shares of a Fund in excess of the limits 
in section 12(d)(1)(A), a Fund of Funds 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 requested order, and agree to fulfill their responsibilities 
under the requested order. At the time of its investment in Shares of a 
Fund in excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds 
will notify the Fund of the investment. At such time, the Fund of Funds 
will also transmit to the Fund a list of the names of each Fund of 
Funds' Affiliate and Underwriting Affiliate. The Fund of Funds will 
notify the Fund of any changes to the list as soon as reasonably 
practicable after a change occurs. The Fund and the Fund of Funds will 
maintain and preserve a copy of the order, the FOF Participation 
Agreement, and the list with any updated information for the duration 
of the investment and for a period of not less than six years 
thereafter, the first two years in an easily accessible place.
    10. Before approving any advisory contract under section 15 of the 
Act, the Board of each Investing Management Company including a 
majority of the Independent Board Members, will find that the advisory 
fees charged under such contract are based on services provided that 
will be in addition to, rather than duplicative of, the services 
provided under the advisory contract(s) of any Fund (or its respective 
Master Fund) in which the Investing Management Company may invest. 
These findings and their basis will be 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 a Fund of Funds will not exceed the limits applicable to a 
fund of funds as set forth in NASD Conduct Rule 2830.
    12. No Fund (or its respective Master Fund) will acquire securities 
of an investment company or company relying on section 3(c)(1) or 
3(c)(7) of the Act in excess of the limits contained in section 
12(d)(1)(A) of the Act, except to the extent that (i) the Fund (or its 
respective Master Fund) acquires securities of another investment 
company pursuant to exemptive relief from the Commission permitting the 
Fund (or its respective Master Fund) to acquire securities of one or 
more investment companies for short-term cash management purposes, or 
(ii) the Fund acquires securities of the Master Fund pursuant to the 
Master-Feeder Relief.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-16025 Filed 7-2-13; 8:45 am]
BILLING CODE 8011-01-P


