
[Federal Register Volume 81, Number 13 (Thursday, January 21, 2016)]
[Notices]
[Pages 3520-3527]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01147]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31956; 812-13761]


J.P. Morgan Exchange-Traded Fund Trust, et al.; Notice of 
Application

January 14, 2016.
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, under sections 6(c) and 17(b) of the Act for an 
exemption from sections 17(a)(1) and (a)(2) of the Act, and under 
section 12(d)(1)(J) of the Act for an exemption from sections 
12(d)(1)(A) and (B) of the Act.

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    Applicants: J.P. Morgan Exchange-Traded Fund Trust (the ``Trust''), 
J.P. Morgan Investment Management Inc. (``JPMIM''), and SEI Investments 
Distribution Co. (the ``Distributor'').
SUMMARY: Summary of Application: Applicants request an order that 
permits: (a) actively-managed series of certain open-end management 
investment companies to issue shares (``Shares'') redeemable in large 
aggregations only (``Creation Units''); (b) secondary market 
transactions in Shares to occur at negotiated market prices; (c) 
certain series to pay redemption proceeds, under certain circumstances, 
more than seven days after the tender of Creation Units for redemption; 
(d) certain affiliated persons of the series to deposit securities 
into, and receive securities from, the series in connection with the 
purchase and redemption of Creation Units; (e) certain registered 
management investment companies and unit investment trusts outside of 
the same group of investment companies as the series to acquire Shares; 
and (f) certain series to perform creations and redemptions of Creation 
Units in-kind in a master-feeder structure.

DATES: Filing Dates: The application was filed on March 10, 2010 and 
amended on November 8, 2010, October 3, 2011, May 24, 2013, January 24, 
2014, September 24, 2014, May 15, 2015, October 10, 2015, and December 
23, 2015.
    Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on February 8, 2016, and should be accompanied by proof of 
service on applicants, in the form of an affidavit, or for lawyers, a 
certificate of service. Pursuant to rule 0-5 under the Act, hearing 
requests should state the nature of the writer's interest, any facts 
bearing upon the desirability of a hearing on the matter, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Brent J. Fields, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants: 
J.P. Morgan Investment Management, Inc., 270 Park Avenue, New York, New 
York 10017.

FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at 
(202) 551-6873 or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

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

Applicants' Representations

    1. The Trust is organized as a Delaware statutory trust and is 
registered as an open-end management investment company under the Act. 
The Trust is organized as a series fund with multiple series. The Trust 
will offer a new series (the ``New Fund''), whose investment objective 
will be to seek total return by investing pursuant to a systematic 
rules-based investment process. The New Fund will invest its assets 
globally (including in emerging markets) to gain exposure to equity 
securities (across market capitalizations), debt securities (including 
below investment grade and unrated debt securities), commodities 
(through a Wholly-Owned Subsidiary (as defined below) of the New Fund) 
and currencies.
    2. JPMIM, a Delaware corporation, is registered as an investment 
adviser under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). JPMIM will serve as the investment adviser to the New Fund. The 
Adviser (as defined below) may enter into sub-advisory agreements with 
one or more investment advisers, each of which will act as sub-adviser 
(``Sub-Adviser'') to a Fund (as defined below) or its respective Master 
Fund (as defined below). Each Sub-Adviser will be registered or not 
subject to registration under the Advisers Act. The Distributor, a 
Pennsylvania corporation, is registered as a broker-dealer (``Broker'') 
under the Securities Exchange Act of 1934 (the ``Exchange Act''). The 
Distributor will serve as the principal underwriter and distributor for 
the New Fund.\1\
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    \1\ Applicants request that the order apply to any other Broker 
hired by a Fund (including an affiliate of the Adviser) to act as 
distributor and principal underwriter of the Fund that complies with 
the terms and conditions of the application. Applicants state that 
neither the Distributor nor any future Distributor is or will be 
affiliated with any Listing Market (as defined below).
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    3. Applicants request that the order apply to the New Fund, as well 
as to additional series of the Trust and any other open-end management 
investment companies or series thereof that may be created in the 
future (``Future Funds''). Any Future Fund will: (a) Be advised by 
JPMIM or an entity controlling, controlled by, or under common control 
with JPMIM (each such entity is referred to as an ``Adviser'') and (b) 
comply with the terms and conditions of the application. The New Fund 
and Future Funds together are the ``Funds.'' \2\ Each Fund relying on 
the order will operate as an actively-managed exchanged traded fund 
(``ETF''), and a Fund may operate as a feeder fund in a master-feeder 
structure (``Feeder Fund'').
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    \2\ All entities that currently intend to rely on the order are 
named as applicants. Any other entity that relies on the order in 
the future will comply with the terms and conditions of the 
application.
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    4. The Funds, or their respective Master Funds (as defined below), 
may invest in equity securities or fixed income securities traded in 
the U.S. or non-U.S. markets. Funds, or their respective Master Funds, 
that invest in equity securities or fixed income securities traded in 
the U.S. or non-U.S. markets are ``Global Funds.'' Funds, or their 
respective Master Funds, that invest solely in foreign equity 
securities or foreign fixed income securities are ``Foreign Funds.'' 
The Funds may also invest in a in a broad variety of other

[[Page 3521]]

instruments.\3\ Applicants anticipate that the Funds, or their 
respective Master Funds, may invest a significant portion or their 
assets in depositary receipts representing foreign securities in which 
they seek to invest (Depositary Receipts'').\4\ Applicants further 
state that, in order to implement each Fund's investment strategy, the 
Adviser and/or Sub-Advisers of a Fund may review and change the 
securities, or instruments, or other assets or positions held by the 
Fund, or its respective Master Fund (``Portfolio Instruments'') daily.
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    \3\ 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, in the case of a Feeder Fund, its Master Fund's) use of 
derivatives and how the Fund's investment 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 use of derivatives in its offering documents and 
periodic reports will be consistent with relevant Commission and 
staff guidance.
    \4\ 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 (or its respective Master Fund) will not invest in any 
Depositary Receipts that the Adviser or any Sub-Adviser deems to be 
illiquid or for which pricing information is not readily available. 
No affiliated persons of applicants, and Future Fund, any Adviser, 
or any Sub-Adviser will serve as the depositary bank for any 
Depositary Receipts held by a Fund (or its respective Master Fund), 
except a depositary bank that is deemed to be affiliated solely 
because a Fund owns greater than 5% of the outstanding voting 
securities of such depositary bank.
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    5. With respect to section 12(d)(1), applicants are requesting 
relief (``Fund of Funds Relief'') to permit management investment 
companies and unit investment trusts (``UITs'') 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 
(such registered management investment companies are referred to as 
``Investing Management Companies,'' such UITs are referred to as 
``Investing Trusts,'' and Investing Management Companies and Investing 
Trusts are collectively referred to as ``Funds of Funds''), to acquire 
Shares beyond the limitations in section 12(d)(1)(A) and to permit the 
Funds, and any principal underwriter for the Funds, and any Broker, to 
sell Shares beyond the limitations in section 12(d)(l)(B) to Funds of 
Funds. Applicants request that any exemption under section 12(d)(1)(J) 
from sections 12(d)(1)(A) and (B) apply to: (1) Each Fund that is 
currently or subsequently part of the same ``group of investment 
companies'' as the New Fund within the meaning of section 
12(d)(1)(G)(ii) of the Act, as well as any principal underwriter for 
the Funds and any Brokers selling Shares of a Fund to Funds of Funds; 
and (2) each Fund of Funds that enters into a participation agreement 
(``FOF Participation Agreement'') with a Fund. ``Funds of Funds'' do 
not include the Funds.\5\
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    \5\ A Fund of Funds may rely on the order only to invest in 
Funds and not in any other registered investment company.
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    6. Applicants further request that the order permit a 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,\6\ 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 may be 
preferable to creating entirely new series for several reasons, 
including avoiding additional overhead costs and economies of scale for 
the Feeder Funds.\7\ 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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    \6\ A Feeder Fund managed in a master-feeder structure will not 
make direct investments in any security or other instrument other 
than the securities issued by its respective Master Fund.
    \7\ In a master-feeder structure, the Master Fund, rather than 
the Feeder Fund, would invest its portfolio in compliance with the 
order. 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. A Creation Unit will consist of at least 25,000 Shares and 
applicants expect that the trading price of a Share will range from $10 
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'', and such process the ``NSCC Process''), or (b) a participant 
in the Depository Trust Company (``DTC,'' such participant ``DTC 
Participant'' and such process the ``DTC Process''), which, in either 
case, has executed an agreement with the Distributor with respect to 
the purchase and redemption of Creation Units.
    8. In order to keep costs low and permit each Fund to be as fully 
invested as possible, Shares will be purchased and redeemed in Creation 
Units and generally on an in-kind basis. Except where the purchase or 
redemption will include cash under the limited circumstances specified 
below, purchasers will be required to purchase Creation Units by making 
an in-kind deposit of specified instruments (``Deposit Instruments''), 
and shareholders redeeming their Shares will receive an in-kind 
transfer of specified instruments (``Redemption Instruments'').\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 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 and other positions 
that cannot be

[[Page 3522]]

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 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 Trust 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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    9. 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 
Process or DTC Process; or (ii) in the case of Global Funds and 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 Global Fund or 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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    10. 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 Market''), 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. The Listing Market will disseminate, every 15 seconds 
throughout the regular trading hours, through the facilities of the 
Consolidated Tape Association, an estimated NAV, which is an amount per 
Share representing the current value of the Portfolio Instruments that 
were publicly disclosed prior to the commencement of trading in Shares 
on the Listing Market.
    11. A Fund may recoup the settlement costs charged by NSCC and DTC 
by imposing a transaction fee on investors purchasing or redeeming 
Creation Units (the ``Transaction Fee'').\16\ The Transaction Fee will 
be borne only by purchasers and redeemers of Creation Units and will be 
limited to amounts that have been determined appropriate by the Adviser 
to defray the transaction expenses that will be incurred by a Fund when 
an investor purchases or redeems Creation Units.\17\ All orders to 
purchase Creation Units will be placed with the Distributor by or 
through an Authorized Participant and the Distributor will transmit 
such orders to the Fund. 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\ 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.
    \17\ Where a Fund permits an in-kind purchaser to deposit cash 
in lieu of depositing one or more Deposit Instruments, the purchaser 
may be assessed a higher Transaction Fee to offset the cost to the 
Fund of buying those particular Deposit Instruments. In all cases, 
the Transaction Fee will be limited in accordance with the 
requirements of the Commission applicable to open-end management 
investment companies offering redeemable securities.
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    12. 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 Market and it is expected 
that the relevant Listing Market will designate one or more member 
firms to maintain a market for the Shares.\18\ The price of Shares 
trading on a Listing Market 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 Market (including NYSE 
Arca, Inc.), one or more member firms of that Listing Market will 
act as market maker (a ``Market Maker'') and maintain a market for 
Shares trading on that Listing Market. 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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    13. 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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    14. Shares will not be individually redeemable and owners of Shares 
may acquire those Shares from a Fund, or tender such shares for 
redemption to the Fund, in Creation Units only. To redeem, an investor 
must accumulate enough Shares to constitute a Creation Unit. Redemption 
requests must be placed by or through an Authorized Participant.
    15. Neither the Trust nor any Fund will be 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 ``actively-
managed exchange-traded fund.'' All marketing materials that describe 
the features or

[[Page 3523]]

method of obtaining, buying, or selling Creation Units, or Shares 
traded on a Listing Market, 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.
    16. 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 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 a Listing Market, each Fund shall post on the 
Web site the identities and quantities of the Portfolio Instruments 
held by the Fund, or its respective Master Fund, that will form the 
basis for the calculation of the NAV at the end of that Business 
Day.\20\ This disclosure will look through any Wholly-Owned Subsidiary 
and identify the specific Portfolio Instruments held by that entity.
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    \20\ Under accounting procedures followed by the 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 ale 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 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.
    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 to issue Shares 
that are redeemable in Creation Units only.\21\ 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 materially from their NAV.
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    \21\ 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, 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.\22\
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    \22\ The Master Funds will not require relief from section 22(d) 
or rule 22c-1 because shares of the Master Funds will not trade at 
negotiated prices in the secondary market.
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    5. Applicants state 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 (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 assert that the protections intended to be afforded 
by section 22(d) and rule 22c-1 are adequately addressed by the 
proposed methods for creating, redeeming and pricing Creation Units and 
pricing and trading Shares. 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 but do 
not occur as a result of unjust or discriminatory manipulation. 
Finally, applicants assert that competitive forces in the marketplace 
should ensure that the margin between NAV and the price for the Shares 
in the secondary market remains narrow.

Section 22(e) of the Act

    7. Section 22(e) of the Act generally prohibits a registered 
investment company from suspending the right of redemption or 
postponing the date of payment of redemption proceeds for more than 
seven days after the tender of a security for redemption. Applicants 
observe that the settlement of redemptions of Creation Units of the 
Foreign and 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

[[Page 3524]]

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 fifteen 
(15) 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 and Global Fund customarily clear 
and settle, but in all cases no later than fifteen (15) days following 
the tender of a Creation Unit.\23\
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    \23\ Applicants acknowledge that no relief obtained from the 
requirements of section 22(e) of the Act will affect any obligations 
that it may otherwise have under Rule 15c6-1 under the Exchange Act. 
Rule 15c6-1 requires that most securities transactions be settled 
within three business days of the trade date.
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    8. Applicants 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 protections intended to 
be afforded by section 22(e) are adequately addressed by the proposed 
method and securities delivery cycles for redeeming Creation Units. 
Applicants state that allowing redemption payments for Creation Units 
of a Fund to be made within a maximum of fifteen (15) calendar days 
\24\ would not be inconsistent with the spirit and intent of section 
22(e).\25\ Applicants represent the SAI will disclose those local 
holidays (over the period of at least one year following the date of 
the SAI), if any, that are expected to prevent the delivery of 
redemption proceeds in seven calendar days and the maximum number of 
days, up to 15 calendar days, needed to deliver the proceeds for each 
affected Foreign Fund or Global Fund. Applicants are not seeking relief 
from section 22(e) with respect to Foreign and Global Funds that do not 
effect redemptions in-kind.
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    \24\ Certain countries in which a Fund may invest have 
historically had settlement periods of up to 15 calendar days.
    \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 or dealer from selling its shares to another 
investment company if the sale will cause the acquiring company to own 
more than 3% of the acquired company's voting stock, or if the sale 
will cause more than 10% of the acquired company's voting stock to be 
owned by investment companies generally.
    10. Applicants request relief to permit 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. Applicants submit that the proposed conditions to the 
requested relief address the concerns underlying the limits in section 
12(d)(1), which include concerns about undue influence, excessive 
layering of fees and overly complex structures.
    11. Applicants submit that certain of their proposed conditions 
address 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 Fund of Funds Adviser, Sponsor, any 
person controlling, controlled by, or under common control with the 
Fund of Funds Adviser, sponsor of an Investing Trust (``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 an Investing Management Company (``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'').
    12. Applicants propose a condition to ensure that no Fund of Funds 
or Fund of Funds Affiliate \26\ (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'').\27\
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    \26\ ``Fund of Funds Affiliate'' is any Fund of Funds Adviser, 
Fund of Funds Sub-Adviser, Sponsor, promoter or principal 
underwriter of a Fund of Funds, and any person controlling, 
controlled by or under common control with any of these entities. A 
``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.
    \27\ 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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    13. Applicants propose several conditions to address the potential 
for layering of fees. Applicants note that the board of directors or 
trustees of any Investing Management Company, including a majority of 
the directors or trustees who are not ``interested persons'' within the 
meaning of section 2(a)(19) of the Act (``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 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.\28\
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    \28\ 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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    14. In order to address concerns about complexity, applicants 
propose condition B.12, which will prohibit Funds 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, other

[[Page 3525]]

than a Wholly-Owned Subsidiary,\29\ except to the extent permitted by 
exemptive relief from the Commission permitting a Fund, or its 
respective Master Fund, to purchase shares of other investment 
companies for short-term cash management purposes.
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    \29\ A Fund, or its respective Master Fund, may invest in a 
wholly-owned subsidiary, organized under the laws of the Cayman 
Islands or under the laws of another non-U.S. jurisdiction (each, a 
``Wholly-Owned Subsidiary''), in order to pursue its investment 
objectives and/or ensure that the Fund remains qualified as a 
registered investment company for U.S. federal income tax purposes. 
A Wholly-Owned Subsidiary may rely on section 3(c)(1) or 3(c)(7) of 
the Act to be excluded from the definition of investment company. 
For a Fund (or its respective Master Fund) that invests in a Wholly-
Owned Subsidiary, the Adviser will serve as investment adviser to 
both the Fund (or its respective Master Fund) and the Wholly-Owned 
Subsidiary. A Feeder Fund will not invest in a Wholly-Owned 
Subsidiary.
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    15. Finally, each Fund of Funds must enter into an FOF 
Participation Agreement with the respective Funds, which will include 
an acknowledgement from the Fund of Funds that it may rely on the order 
only to invest in a 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).

Sections 17(a)(1) and (2) 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 a person (``second tier affiliate''), from selling any security to 
or purchasing any security from the company. Section 2(a)(3) of the Act 
defines ``affiliated person'' to include any person directly or 
indirectly owning, controlling, or holding with power to vote, 5% or 
more of the outstanding voting securities of the other person and any 
person directly or indirectly controlling, controlled by, or under 
common control with, the other person. Section 2(a)(9) of the Act 
defines ``control'' as the power to exercise a controlling influence 
over the management or policies of a company and provides that a 
control relationship will be presumed where one person owns more than 
25% of another person's voting securities. Each Fund may be deemed to 
be controlled by 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 (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 by persons that are 
affiliated persons or second tier affiliates of the Funds solely by 
virtue of one or more of the following: (a) Holding 5% or more, or in 
excess of 25% of the outstanding Shares of one or more Funds; (b) 
having an affiliation with a person with an ownership interest 
described in (a); or (c) holding 5% or more, or more than 25% of the 
Shares of one or more Affiliated Funds.\30\ Applicants also request an 
exemption in order to permit a Fund to sell its Shares to and redeem 
its Shares from, and engage in the in-kind transactions that would 
accompany such sales and redemptions with, certain Funds of Funds of 
which the Funds are affiliated persons or second-tier affiliates.\31\
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    \30\ 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 a second-tier 
affiliate of a Fund of Funds because the Adviser, or an entity 
controlling, controlled by or under common control with the Adviser 
is also an investment adviser to the Fund of Funds.
    \31\ 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. The requested relief is intended to 
cover, however, transactions directly between Funds and Funds of 
Funds.
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    19. Applicants assert that no useful purpose would be served by 
prohibiting such affiliated persons from making in-kind purchases or 
in-kind redemptions of Shares of a Fund in Creation Units. 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 Redemption Instruments will be 
valued in the same manner as those Portfolio Instruments currently held 
by the relevant Funds, and the valuation of the Deposit Instruments and 
Redemption Instruments will be made in the same manner and on the same 
terms for all, regardless of the identity of the purchaser or redeemer. 
Applicants do not believe that in-kind purchases and redemptions will 
result in abusive self-dealing or overreaching of the Fund.
    20. Applicants also submit that the sale of Shares to and 
redemption of Shares from a Fund of Funds meets the standards for 
relief under sections 17(b) and 6(c) of the Act. Applicants note that 
any consideration paid for the purchase or redemption of Shares 
directly from a Fund will be based on the NAV of the Fund in accordance 
with policies and procedures set forth in the Fund's registration 
statement.\32\ The FOF Participation Agreement will require any Fund of 
Funds that purchases Creation Units directly from a Fund to represent 
that the purchase of Creation Units from a Fund by a Fund of Funds will 
be accomplished in compliance with the investment restrictions of the 
Fund of Funds and will be consistent with the investment policies set 
forth in the Fund of Fund's registration statement.
---------------------------------------------------------------------------

    \32\ Applicants acknowledge that the receipt of compensation by 
(a) an affiliated person of a Fund of Funds, or a second-tier 
affiliate for the purchase by the Fund of Funds of Shares of the 
Fund or (b) an affiliated person of a Fund, or an affiliated person 
of such person, for the sale by the Fund of its Shares to 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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    21. In addition, 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 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, 
applicants believe that in-kind creations and redemptions between a 
Feeder

[[Page 3526]]

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 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 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, other than 
the Master-Feeder Relief.
    2. As long as a Fund operates in reliance on the requested order, 
the Shares of the Fund will be listed on a Listing Market.
    3. Neither the Trust nor any Fund will be advertised or marketed as 
open-end investment company or a mutual fund. Any advertising material 
that describes the purchase or sale of Creation Units or refers to 
redeemability will prominently disclose that the Shares are not 
individually redeemable and that owners of the Shares may acquire 
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, or its respective Master 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 Market, the Fund will disclose on the Web 
site the identities and quantities of the Portfolio Instruments 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 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 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 directors or trustees of an Investing Management 
Company, including a majority of the independent directors or trustees, 
will adopt procedures reasonably designed to ensure that the 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, 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-1 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

[[Page 3527]]

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 purchases were influenced by the investment by 
the Fund of Funds in the Fund. The Board will consider, among other 
things: (i) Whether the purchases were consistent with the investment 
objectives and policies of the Fund (or its respective Master Fund); 
(ii) how the performance of securities purchased in an Affiliated 
Underwriting compares to the performance of comparable securities 
purchased during a comparable period of time in underwritings other 
than Affiliated Underwritings or to a benchmark such as a comparable 
market index; and (iii) whether the amount of securities purchased by 
the Fund (or its respective Master Fund) in Affiliated Underwritings 
and the amount purchased directly from an Underwriting Affiliate have 
changed significantly from prior years. The Board will take any 
appropriate actions based on its review, including, if appropriate, the 
institution of procedures designed to ensure that purchases of 
securities in Affiliated Underwritings are in the best interest of 
shareholders of the Fund.
    8. Each Fund (or its respective Master Fund) will maintain and 
preserve permanently in an easily accessible place a written copy of 
the procedures described in the preceding condition, and any 
modifications to such procedures, and will maintain and preserve for a 
period of not less than six years from the end of the fiscal year in 
which any purchase in an Affiliated Underwriting occurred, the first 
two years in an easily accessible place, a written record of each 
purchase of securities in Affiliated Underwritings once an investment 
by a Fund of Funds in the securities of the Fund exceeds the limit of 
section 12(d)(1)(A)(i) of the Act, setting forth from whom the 
securities were acquired, the identity of the underwriting syndicate's 
members, the terms of the purchase, and the information or materials 
upon which the Board's determinations were made.
    9. Before investing in a Fund in excess of the 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 order, and agree 
to fulfill their responsibilities under the order. At the time of its 
investment in Shares of a Fund in excess of the limit in section 
12(d)(1)(A)(i), a Fund of Funds will notify the Fund of the investment. 
At such time, the Fund of Funds will also transmit to the Fund a list 
of the names of each Fund of Funds Affiliate and Underwriting 
Affiliate. The Fund of Funds will notify the Fund of any changes to the 
list as soon as reasonably practicable after a change occurs. The Fund 
and the Fund of Funds will maintain and preserve a copy of the order, 
the FOF Participation Agreement, and the list with any updated 
information for the duration of the investment and for a period of not 
less than six years thereafter, the first two years in an easily 
accessible place.
    10. Before approving any advisory contract under section 15 of the 
Act, the board of directors or trustees of each Investing Management 
Company, including a majority of the independent directors or trustees, 
will find that the advisory fees charged under such contract are based 
on services provided that will be in addition to, rather than 
duplicative of, the services provided under the advisory contract(s) of 
any Fund (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, (ii) 
the Fund acquires securities of the Master Fund pursuant to the Master-
Feeder Relief, or (iii) the Fund invests in a Wholly-Owned Subsidiary 
that is a wholly-owned and controlled subsidiary of the Fund (or its 
respective Master Fund) as described in the application. Further, no 
Wholly-Owned Subsidiary will acquire securities of any other investment 
company or company relying on section 3(c)(1) or 3(c)(7) of the Act 
other than money market funds that comply with rule 2a-7 for short-term 
cash management purposes.
    For the Commission, by the Division of Investment Management, under 
delegated authority.

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01147 Filed 1-20-16; 8:45 am]
 BILLING CODE 8011-01-P


