25514 Federal Register / Vol. 77, No. 83 / Monday, April 30, 2012 / Notices 

the limits contained in section 

12(d)(1)(A) of the Act, except to the 

extent that such Underlying Fund: (a) 

Receives securities of another 

investment company as a dividend or as 

a result of a plan of reorganization of a 

company (other than a plan devised for 

the purpose of evading section 12(d)(1) 

of the Act); or (b) acquires (or is deemed 

to have acquired) securities of another 

investment company pursuant to 

exemptive relief from the Commission 

permitting such Underlying Fund to (i) 

acquire securities of one or more 

investment companies for short-term 

cash management purposes, or (ii) 

engage in interfund borrowing and 

lending transactions. 

12. Any sales charges and/or service 

fees charged with respect to shares of a 

Fund of Funds will not exceed the 

limits applicable to fund of funds set 

forth in NASD Conduct Rule 2830. 

Other Investments by Same Group 

Investing Funds 

Applicants agree that the relief to 

permit Same Group Investing Funds to 

invest in Other Investments shall be 

subject to the following condition: 

13. Applicants will comply with all 

provisions of rule 12d1–2 under the Act, 

except for paragraph (a)(2) to the extent 

that it restricts any Same Group 

Investing Fund from investing in Other 

Investments as described in the 

application. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–10290 Filed 4–27–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

30045; 812–13868] 

Northern Trust Investments, Inc., et al.; 

Notice of Application 

April 24, 2012. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 6(c) of the 

Investment Company Act of 1940 

(‘‘Act’’) for an exemption from sections 

2(a)(32), 5(a)(1), 22(d) and 22(e) of the 

Act and rule 22c–1 under the Act, under 

sections 6(c) and 17(b) of the Act for an 

exemption from sections 17(a)(1) and 

(a)(2) of the Act, and under section 

12(d)(1)(J) of the Act for an exemption 

from sections 12(d)(1)(A) and (B) of the 

Act. 

APPLICANTS: Northern Trust 

Investments, Inc. (‘‘Northern Trust’’), 

FlexShares Trust (‘‘Trust’’), and 

Foreside Fund Services, LLC 

(‘‘Foreside’’). 

SUMMARY OF APPLICATION: Applicants 

request an order that permits: (a) An 

actively managed series of the Trust to 

issue shares (‘‘Shares’’) redeemable in 

large aggregations only (‘‘Creation 

Units’’); (b) secondary market 

transactions in Shares to occur at 

negotiated market prices; (c) certain 

series to pay redemption proceeds, 

under certain circumstances, more than 

seven days from the tender of Shares for 

redemption; (d) certain affiliated 

persons of the series to deposit 

securities into, and receive securities 

from, the series in connection with the 

purchase and redemption of Creation 

Units; (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 11, 2011, and 

amended on August 8, 2011, January 11, 

2012, March 9, 2012, and April 23, 

2012. 

HEARING OR NOTIFICATION OF HEARING: 

An order granting the requested relief 

will be issued unless the Commission 

orders a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on May 21, 2012, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

Applicants, c/o Northern Trust 

Investments, Inc., 50 S. LaSalle Street, 

Chicago, IL 60603. 

FOR FURTHER INFORMATION CONTACT: 

Courtney S. Thornton, Senior Counsel, 

at (202) 551–6812 or Mary Kay Frech, 

Branch Chief, at (202) 551–6821 

(Division of Investment Management, 

Office of Investment Company 

Regulation). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

Web site by searching for the file 

number, or an applicant using the 

Company name box, at http:// 

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Applicants’ Representations 

1. The Trust is a statutory trust 

organized under the laws of the state of 

Maryland and is registered under the 

Act as an open-end management 

investment company. Subject to market 

conditions, the initial series of the Trust 

(‘‘Initial Fund’’) will be FlexShares 

Liquid Access Fund, which seeks to 

achieve its investment objective by 

investing in a non-diversified portfolio 

of fixed income instruments, including 

bonds, debt securities and other similar 

instruments issued by U.S. and non-U.S. 

public and private sector entities. 

2. Northern Trust is an Illinois state 

bank registered as an investment adviser 

under the Investment Advisers Act of 

1940 (the ‘‘Advisers Act’’) and will be 

the investment adviser to the Initial 

Fund. Subject to approval by the board 

of trustees (‘‘Board’’) of the Trust, 

Northern Trust, or any entity 

controlling, controlled by, or under 

common control with Northern Trust 

(collectively with Northern Trust, the 

‘‘Adviser’’) will advise the Funds (as 

defined below). The Adviser may enter 

into subadvisory agreements with one or 

more investment advisers to serve as 

subadvisers to a Fund (each, a 

‘‘Subadviser’’). Any Subadviser will be 

registered under the Advisers Act. 

3. The Trust may enter into a 

distribution agreement with one or more 

distributors (each a ‘‘Distributor’’). 

Foreside, a Delaware limited liability 

company, is expected to serve as 

Distributor of the Initial Fund. Foreside 

is, and each Distributor will be, a 

broker-dealer (‘‘Broker’’) registered 

under the Securities Exchange Act of 

1934 (‘‘Exchange Act’’). No Distributor 

is or will be affiliated with any national 

securities exchange as defined in 

section 2(a)(26) of the Act (‘‘Stock 

Exchange’’). A Distributor may be an 

‘‘affiliated person,’’ within the meaning 

of section 2(a)(3) of the Act, of the 

Adviser or any Subadviser. 

4. Applicants are requesting relief to 

permit the Trust to create and operate 

certain actively managed series of the 

Trust that offer Shares with limited 

redeemability (‘‘ETF Relief’’) and to 

operate certain series in a master-feeder 

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Federal Register / Vol. 77, No. 83 / Monday, April 30, 2012 / Notices 25515 

1All 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. 

2Each Purchasing Management Company will be 

advised by an investment adviser within the 

meaning of section 2(a)(20)(A) of the Act 

(‘‘Purchasing Fund Adviser’’) and may be subadvised by investment adviser(s) within the 

meaning of section 2(a)(20)(B) of the Act 

(‘‘Purchasing Fund Subadviser’’). Any investment 

adviser to a Purchasing Management Company will 

be registered as an investment adviser or exempt 

from registration under the Advisers Act. Each 

Purchasing Trust will have a sponsor (‘‘Sponsor’’). 

3Fixed income securities may include ‘‘to-beannounced transactions’’ (‘‘TBA Transactions’’). A 

TBA Transaction is a method of trading mortgagebacked securities. In a TBA Transaction the buyer 

and seller agree upon general trade parameters such 

as agency, settlement date, par amount, and price. 

The actual pools delivered generally are determined 

two days prior to the settlement date. 

4With respect to ADRs, the Depositary is 

typically a U.S. financial institution and the 

Underlying Securities are issued by a foreign issuer. 

The ADR is registered under the Securities Act of 

1933 (‘‘Securities Act’’) on Form F–6. ADR trades 

occur either on a Stock Exchange or off-exchange. 

Financial Industry Regulatory Authority (‘‘FINRA’’) 

Rule 6620 requires all off-exchange transactions in 

ADRs to be reported within 90 seconds and ADR 

trade reports to be disseminated on a real-time 

basis. With respect to GDRs, the Depositary may be 

a foreign or a U.S. entity, and the Underlying 

Securities may have a foreign or a U.S. issuer. All 

GDRs are sponsored and trade on a foreign 

exchange. No affiliated persons of applicants or any 

Subadviser will serve as the depositary bank for any 

Depositary Receipts held by a Fund. 

5While the NAV of each Fund will normally be 

determined as of the close of the regular trading 

session on the New York Stock Exchange on each 

day that a Fund is open, including as required by 

section 22(e) of the Act (‘‘Business Day’’), the NAV 

of each Fixed Income Fund and Foreign Fund may 

be determined prior to 4:00 p.m. Eastern Time on 

each Business Day. 

6 In the case of a Fund that is part of a masterfeeder structure, the Fund will redeem shares from 

Continued 

structure. Applicants request that the 

ETF Relief also apply to future series of 

the Trust and to other open-end 

management companies that (a) utilize 

active management investment 

strategies, (b) are advised by the 

Adviser, and (c) comply with the terms 

and conditions of the order (‘‘Future 

Funds,’’ together with the Initial Fund, 

‘‘Funds’’). Each Fund will operate as an 

exchanged-traded fund (‘‘ETF’’).1

5. Applicants also request that the 

order permit certain investment 

companies registered under the Act to 

acquire Shares of Funds beyond the 

limitations in section 12(d)(1)(A) and 

permit certain Funds, and any 

Distributor for the Funds, and any 

Broker to sell Shares beyond the 

limitations in section 12(d)(1)(B) (‘‘Fund 

of Funds Relief’’). Applicants request 

that any exemption under section 

12(d)(1)(J) from sections 12(d)(1)(A) and 

(B) for Fund of Funds Relief apply to 

any Fund and each management 

investment company or unit investment 

trust registered under the Act that is not 

part of the same ‘‘group of investment 

companies’’ as the Funds within the 

meaning of section 12(d)(1)(G)(ii) of the 

Act and that enters into an FOF 

Participation Agreement (as defined 

below) with a Fund (such management 

investment companies are referred to as 

‘‘Purchasing Management Companies,’’ 

such unit investment trusts are referred 

to as ‘‘Purchasing Trusts,’’ and 

Purchasing Management Companies and 

Purchasing Trusts are collectively 

referred to as ‘‘Purchasing Funds’’).2

Purchasing Funds do not include the 

Funds. The Fund of Funds Relief would 

not apply to any Fund that is, either 

directly or through a master-feeder 

structure, 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 in section 

12(d)(1)(A) of the Act. 

6. Applicants further request that the 

order permit the Funds to acquire shares 

of other registered investment 

companies managed by the Adviser 

having substantially the same 

investment objectives as the Fund 

(‘‘Master Funds’’) beyond the limitation 

in section 12(d)(1)(A) and permit the 

Master Funds, and any principal 

underwriter for the Master Funds, to sell 

shares of the Master Funds to the Funds 

beyond the limitations in section 

12(d)(1)(B) (‘‘Master-Feeder Relief’’). A 

Future Fund may invest in a Master 

Fund instead of directly holding 

underlying securities. Applicants may 

structure certain Funds as feeder funds 

in a master-feeder structure (‘‘Feeder 

Funds’’) to generate economies of scale 

and tax efficiencies for shareholders of 

all series of the Master Fund that could 

not otherwise be realized. There would 

be no ability by Fund shareholders to 

exchange Shares of Feeder Funds for 

shares of another feeder series of the 

Master Fund. 

7. Future Funds may invest, either 

directly or through a Master Fund, in 

equity securities (‘‘Equity Funds’’) or 

fixed income securities 3 (‘‘Fixed 

Income Funds’’) traded in the U.S. or 

non-U.S. markets and also may hold 

short positions in securities (‘‘Short 

Positions’’). Funds that invest, either 

directly or through a Master Fund, in 

foreign equity and/or fixed income 

securities are ‘‘Foreign Funds.’’ Funds 

that invest, either directly or through a 

Master Fund, in foreign and domestic 

equity securities are ‘‘Global Equity 

Funds.’’ Funds that invest directly in 

foreign and domestic fixed income 

securities, either directly or through a 

Master Fund, are ‘‘Global Fixed Income 

Funds’’ (and together with the ‘‘Global 

Equity Funds, ‘‘Global Funds’’). The 

term ‘‘Domestic Funds’’ includes any 

Equity Fund or Fixed Income Fund that 

invests, either directly or through a 

Master Fund, in domestic equity and/or 

fixed income securities. 

8. Each Fund may invest in depositary 

receipts representing foreign securities 

in which they seek to invest 

(‘‘Depositary Receipts’’), including 

American Depositary Receipts (‘‘ADRs’’) 

and Global Depositary Receipts 

(‘‘GDRs’’). Depositary Receipts are 

typically issued by a financial 

institution (‘‘Depositary’’) and evidence 

ownership interests in a security or a 

pool or securities (‘‘Underlying 

Securities’’) that have been deposited 

with the Depositary.4 A Fund will not 

invest in any Depositary Receipts that 

the Adviser or Subadviser deems to be 

illiquid or for which pricing information 

is not readily available. No Fund (or its 

respective Master Fund, if any) will 

invest in options contracts, futures 

contracts or swap agreements. 

9. Shares of each Fund will be 

purchased from the Trust only in 

Creation Units through the Distributor 

on a continuous basis at net asset value 

(‘‘NAV’’) next determined after an order 

in proper form is received.5 Creation 

Units will be separable upon issue into 

individual Shares, which will be listed 

and traded at negotiated prices on a 

Stock Exchange. The Funds will issue 

Shares in Creation Units of at least 

25,000 Shares. 

10. Orders to purchase or redeem 

Creation Units may be placed by or 

through an ‘‘Authorized Participant,’’ 

which is either (i) 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 (ii) a 

participant in the Depository Trust 

Company (‘‘DTC’’), which in either case 

has executed an agreement with the 

Trust and the Distributor with respect to 

creations and redemptions of Creation 

Units. 

11. Shares will be purchased and 

redeemed in Creation Units and 

generally on an in-kind basis. 

Accordingly, except where the purchase 

or redemptions 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’’).6 On any given Business 

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25516 Federal Register / Vol. 77, No. 83 / Monday, April 30, 2012 / Notices 

the appropriate master portfolio and then deliver to 

the redeeming shareholder the Redemption 

Instruments and Cash Amount (as defined below). 

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. 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. 

7The portfolio used for this purpose will be the 

same portfolio used to calculate the Fund’s NAV for 

that Business Day. 

8A tradeable round lot for a security will be the 

standard unit of trading in that particular type of 

security in its primary market. 

9This 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. 

10Because these instruments will be excluded 

from the Creation Basket, their value will be 

reflected in the determination of the Cash Amount 

(as defined below). 

11A ‘‘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). 

12Shares 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 (‘‘DTC Participants’’). 

13Where a Fund permits a purchaser to substitute 

cash in lieu of depositing a portion of the requisite 

Deposit Instruments, the purchaser may be assessed 

a higher Transaction Fee to offset the cost to the 

Fund of purchasing such Deposit Instruments. In all 

cases, such Transaction Fees will be limited in 

accordance with requirements of the Commission 

applicable to management investment companies 

offering redeemable securities. 

14As noted above, certain Funds may operate as 

Feeder Funds in a master-feeder structure. Under 

such circumstances, the Funds would operate, and 

would be marketed, as ETFs. The respective Master 

Funds would operate as mutual funds, but would 

not be publicly offered or marketed. Applicants do 

not believe the master-feeder structure would be 

confusing to investors because any additional 

feeder fund that is a traditional mutual fund or 

other pooled investment vehicle would be marketed 

separately. Applicants state that they will take steps 

to ensure that investors will understand the 

differences between the Funds and any feeder 

funds. 

Day, the names and quantities of the 

instruments that constitute the Deposit 

Instruments and the names and 

quantities of the instruments that 

constitute the Redemption Instruments 

will be identical, 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 the Fund’s portfolio 

(including cash positions),7 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; 8 or (c) TBA 

Transactions, Short Positions or other 

positions that cannot be transferred in 

kind 9 will be excluded from the 

Creation Basket.10 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 

(‘‘Cash Amount’’). 

12. Purchases and redemptions of 

Creation Units may be made in whole or 

in part on a cash basis, rather than in 

kind, solely under the following 

circumstances: (a) To the extent there is 

a Cash Amount, as described above; (b) 

if, on a given Business Day, the Fund 

announces before the open of trading 

that all purchases, all redemptions, or 

all purchases and redemptions on that 

day will be made entirely in cash; (c) if, 

upon receiving a purchase or 

redemption order from an Authorized 

Participant (as defined below), the Fund 

determines to require the purchase or 

redemption, as applicable, to be made 

entirely in cash; (d) if, on a given 

Business Day, the Fund requires all 

Authorized Participants purchasing or 

redeeming Shares on that day to deposit 

or receive (as applicable) cash in lieu of 

some or all of the Deposit Instruments 

or Redemption Instruments, 

respectively, solely because: (i) Such 

instruments are not eligible for transfer 

through either the NSCC or the DTC; or 

(ii) in the case of Foreign or Global 

Funds, such instruments are not eligible 

for trading due to local trading 

restrictions, local restrictions on 

securities transfers or other similar 

circumstances; or (e) if the Fund permits 

an Authorized Participant to deposit or 

receive (as applicable) cash in lieu of 

some or all of the Deposit Instruments 

or Redemption Instruments, 

respectively, solely because: (i) Such 

instruments are, in the case of the 

purchase of a Creation Unit, not 

available in sufficient quantity; (ii) such 

instruments are not eligible for trading 

by an Authorized Participant or the 

investor on whose behalf the 

Authorized Participant is acting; or (iii) 

a holder of Shares of a Foreign or Global 

Fund would be subject to unfavorable 

income tax treatment if the holder 

receives redemption proceeds in kind.11

13. Each Business Day, before the 

open of trading on the Stock Exchange, 

the Fund will cause to be published 

through the NSCC the names and 

quantities of the instruments comprising 

the Creation Basket, as well as the 

estimated Cash Amount (if any), for that 

day. The published Creation Basket will 

apply until a new Creation Basket is 

announced on the following Business 

Day, and there will be no intra-day 

changes to the Creation Basket except to 

correct errors in the published Creation 

Basket. The Stock Exchange will 

disseminate every 15 seconds during its 

regular trading hours an amount 

representing the sum of the estimated 

Cash Amount plus the current value of 

the Deposit Instruments, on a per Share 

basis. 

14. 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 on a 

Stock Exchange. The price of Shares 

trading on a Stock Exchange will be 

based on a current bid/offer market. 

Transactions involving the sale of 

Shares on a Stock Exchange will be 

subject to customary brokerage 

commissions and charges. 

15. Applicants expect that purchasers 

of Creation Units will include 

arbitrageurs and the lead market makers 

and/or designated liquidity providers. 

Applicants expect that secondary 

market purchasers of Shares will 

include both institutional and retail 

investors.12 Applicants state that 

arbitrage opportunities created by the 

ability to continually purchase or 

redeem Creation Units at their NAV 

should ensure that the Shares will not 

trade at a material discount or premium 

in relation to their NAV. Beneficial 

owners of Shares may sell their Shares 

in the secondary market, but must 

accumulate enough Shares to constitute 

a Creation Unit in order to redeem 

through a Fund. 

16. Each Fund may impose a purchase 

or redemption transaction fee 

(‘‘Transaction Fee’’) to protect existing 

shareholders from the dilutive costs 

associated with the purchase or 

redemption of Creation Units.13 The 

Distributor will be responsible for 

maintaining records of both the orders 

placed with it and the confirmations of 

acceptance furnished by it. The 

Distributor will deliver a confirmation 

and prospectus (‘‘Prospectus’’) to the 

purchaser. 

17. Neither the Trust nor any Fund 

will be advertised or marketed or 

otherwise held out as a traditional openend investment company or a mutual 

fund. Instead, each Fund will be 

marketed as an ‘‘actively-managed 

exchange-traded fund.’’ 14 All marketing 

materials that describe the features or 

method of obtaining, buying or selling 

Creation Units, or Shares traded on the 

Stock Exchange, or refer to 

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Federal Register / Vol. 77, No. 83 / Monday, April 30, 2012 / Notices 25517 

15For Funds that are part of a master-feeder 

structure, the Fund will disclose information about 

the securities and other assets held by the Master 

Fund. 

16Under accounting procedures followed by the 

Funds, trades made on the prior Business Day (‘‘T’’) 

will be booked and reflected in NAV on the current 

Business Day (‘‘T+1’’). Accordingly, the Funds will 

be able to disclose at the beginning of the Business 

Day the portfolio that will form the basis for the 

NAV calculation at the end of the Business Day. 

17The Master Funds will not require relief from 

sections 2(a)(32) and 5(a)(1) because the Master 

Funds will issue individually redeemable 

securities. 

redeemability, will prominently 

disclose that Shares are not individually 

redeemable shares and will disclose that 

the owners of Shares may acquire those 

Shares from the Fund, or tender those 

Shares for redemption to the Fund in 

Creation Units only. The same approach 

will be followed in connection with 

shareholder reports and investor 

educational materials issued or 

circulated in connection with the 

Shares. Each Fund will provide copies 

of its semi-annual and annual 

shareholder reports to DTC Participants 

for distribution to beneficial owners of 

Shares. 

18. The Trust will maintain a Web site 

that will be publicly available and free 

of charge. The Web site will include 

each Fund’s Prospectus and other 

information about each Fund that is 

updated on a daily basis, including the 

prior Business Day’s NAV, closing 

market price or reported midpoint of 

‘‘bid and ask’’ 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 Bid/Ask 

Price against such NAV. Prior to the 

opening of the Stock Exchange on each 

Business Day, the Trust will disclose on 

its Web site the identities and quantities 

of the securities (‘‘Fund Securities’’) and 

other assets held by each Fund, or its 

respective Master Fund,15 that will form 

the basis of each Fund’s NAV at the end 

of the Business Day.16

Applicants’ Legal Analysis 

1. Applicants request an order under 

section 6(c) of the Act for an exemption 

from sections 2(a)(32), 5(a)(1), 22(d) and 

22(e) of the Act and rule 22c–1 under 

the Act, under sections 6(c) and 17(b) of 

the Act for an exemption from sections 

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

under section 12(d)(1)(J) of the Act for 

an exemption from sections 12(d)(1)(A) 

and 12(d)(1)(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 to permit 

the Trust to register as an open-end 

management investment company and 

each Fund to issue and redeem Shares 

in Creation Units only.17 Applicants 

state that investors may purchase Shares 

in Creation Units and redeem Creation 

Units from each Fund and that Creation 

Units are always 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. 

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, which is 

currently being offered to the public by 

or through a principal underwriter, 

except at a current public offering price 

described in the prospectus. Rule 22c– 

1 under the Act generally requires that 

a dealer selling, redeeming, or 

repurchasing a redeemable security do 

so only at a price based on its NAV. 

Applicants state that secondary market 

trading in Shares will take place at 

negotiated prices, rather than at the 

current offering price described in the 

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 risklesstrading 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 would not 

cause dilution of an investment in 

Shares because such transactions do not 

involve the Funds as parties, 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 thirdparty 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 

should ensure that the difference 

between NAV and the market price of 

Shares remains narrow. 

Section 22(e) 

7. Section 22(e) of the Act generally 

prohibits a registered investment 

company from suspending the right of 

redemption or postponing the date of 

payment of redemption proceeds for 

more than seven days after the tender of 

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25518 Federal Register / Vol. 77, No. 83 / Monday, April 30, 2012 / Notices 

18Applicants acknowledge that no relief obtained 

from the requirements of section 22(e) will affect 

any obligations that applicants 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. 

19Other feeder funds invested in any Master 

Fund are not seeking, and will not rely on, the 

section 22(e) relief requested herein. 

20A ‘‘Purchasing Fund Affiliate’’ is defined as the 

Purchasing Fund Adviser, Purchasing Fund 

Subadviser, Sponsor, promoter and principal 

underwriter of a Purchasing Fund and any person 

controlling, controlled by or under common control 

with any of these entities. 

21A ‘‘Fund Affiliate’’ is defined as an investment 

adviser, promoter or principal underwriter of a 

Fund, or its respective Master Fund, and any person 

controlling, controlled by or under common control 

with any of these entities. 

22A ‘‘Purchasing Fund’s Advisory Group’’ is the 

Purchasing Fund Adviser, or Sponsor, any person 

controlling, controlled by or under common control 

with the Purchasing Fund Adviser or Sponsor, and 

any investment company or issuer that would be an 

investment company but for section 3(c)(1) or 

3(c)(7) of the Act, that is advised or sponsored by 

the Purchasing Fund Adviser, the Sponsor, or any 

person controlling, controlled by or under common 

control with the Purchasing Fund Adviser or 

Sponsor. A ‘‘Purchasing Fund’s Sub-Advisory 

Group’’ is any Purchasing Fund Subadviser, any 

person controlling, controlled by, or under common 

control with the Purchasing Fund Subadviser, and 

any investment company or issuer that would be an 

investment company but for section 3(c)(1) or 

3(c)(7) of the Act (or portion of such investment 

company or issuer) advised or sponsored by the 

Purchasing Fund Subadviser or any person 

controlling, controlled by or under common control 

with the Purchasing Fund Subadviser. 

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 in which Foreign or Global 

Funds may invest. Applicants have been 

advised that, under certain 

circumstances, the delivery cycles for 

transferring Redemption Instruments to 

redeeming investors, coupled with local 

market holiday schedules, will require a 

delivery process of up to 14 calendar 

days. Applicants therefore request relief 

under section 6(c) of the Act from 

section 22(e) in order to provide 

payment or satisfaction of redemptions 

within the maximum number of 

calendar days required for such 

payment or satisfaction in the principal 

local markets where transactions in the 

Fund Securities of each Foreign or 

Global Fund customarily clear and 

settle, but in all cases no later than 14 

days following the tender of a Creation 

Unit.18 At all other times and except as 

disclosed in the relevant Statement of 

Information (‘‘SAI’’), applicants expect 

that each Foreign or Global Fund will be 

able to deliver redemption proceeds 

within seven days. Applicants do not 

believe the master-feeder structure 

would have any impact on the delivery 

cycle. 

8. Applicants submit that Congress 

adopted section 22(e) to prevent 

unreasonable, undisclosed or 

unforeseen delays in the actual payment 

of redemption proceeds. Applicants 

state that allowing in-kind redemption 

payments for Creation Units of a Foreign 

or Global Fund, and any respective 

Master Fund, to be made within the 

number of days indicated above would 

not be inconsistent with the spirit and 

intent of section 22(e).19 Applicants 

state that the SAI for each Foreign or 

Global Fund 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 in-kind redemption proceeds 

in seven calendar days and the 

maximum number of days, up to 14 

calendar days, needed to deliver the 

proceeds for each affected Foreign or 

Global Fund. Applicants are not seeking 

relief from section 22(e) with respect to 

Foreign Funds or Global Funds effecting 

redemptions on a cash basis. 

Section 12(d)(1) 

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 

Purchasing Funds to acquire Shares of 

a Fund beyond the limits of section 

12(d)(1)(A) of the Act. Applicants also 

seek an exemption to permit the Funds 

and/or a Broker to sell Shares to 

Purchasing Funds beyond the limits of 

section 12(d)(1)(B). 

11. 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. 

12. Applicants submit that their 

proposed conditions address any 

concerns regarding the potential for 

undue influence. A Purchasing Fund or 

Purchasing Fund Affiliate 20 will not 

cause an investment in a Fund to 

influence the terms of services or 

transactions between a Purchasing Fund 

or a Purchasing Fund Affiliate and the 

Fund or Fund Affiliate.21 A Purchasing 

Fund’s Advisory Group or a Purchasing 

Fund’s Sub-Advisory Group will not 

control a Fund within the meaning of 

section 2(a)(9) of the Act.22

13. Applicants also propose a 

condition to ensure that no Purchasing 

Fund or Purchasing Fund Affiliate will 

cause a Fund to purchase a security 

from an Affiliated Underwriting. An 

‘‘Affiliated Underwriting’’ is an offering 

of securities during the existence of an 

underwriting or selling syndicate of 

which a principal underwriter is an 

Underwriting Affiliate. An 

‘‘Underwriting Affiliate’’ is a principal 

underwriter in any underwriting or 

selling syndicate that is an officer, 

director, member of an advisory board, 

Purchasing Fund Adviser, Purchasing 

Fund Subadviser, employee or Sponsor 

of the Purchasing Fund, or a person of 

which any such officer, director, 

member of an advisory board, 

Purchasing Fund Adviser, Purchasing 

Fund Subadviser, 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. 

14. Applicants propose several 

conditions to address the potential for 

layering of fees. Applicants note that the 

board of directors or trustees of a 

Purchasing Management Company, 

including a majority of the directors or 

trustees who are not ‘‘interested 

persons’’ within the meaning of section 

2(a)(19) of the Act (‘‘disinterested 

directors or trustees’’), will 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 Purchasing 

Management Company may invest. 

Applicants state that any sales charges 

and/or service fees charged with respect 

to shares of a Purchasing Fund will not 

exceed the limits applicable to a fund of 

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23Any references to NASD Conduct Rule 2830 

include any successor or replacement rule that may 

be adopted by FINRA. 

24Applicants believe that a Purchasing Fund 

generally will purchase Shares in the secondary 

market, which would not require relief from section 

17(a), and will not purchase or redeem Creation 

Units directly from a Fund. Nonetheless a 

Purchasing Fund could seek to transact in Creation 

Units directly with a Fund, and the relief requested 

pursuant to section 17(a) is intended to cover the 

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 Purchasing Fund 

because the Adviser or an entity controlling, 

controlled by, or under common control with the 

Adviser is also an investment adviser to the 

Purchasing Fund. 

25Applicants acknowledge that the receipt of 

compensation by (a) an affiliated person of a 

Purchasing Fund, or an affiliated person of such 

person, for the purchase by the Purchasing Fund of 

Shares 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 Purchasing Fund, may be 

prohibited by section 17(e)(1) of the Act. The FOF 

Participation Agreement also will include this 

acknowledgment. 

funds set forth in NASD Conduct Rule 

2830.23

15. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that a Fund (and its 

respective Master Fund, if any) 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 that (i) the Fund (or its 

respective Master Fund) acquires 

securities of another investment 

company pursuant to certain exemptive 

relief from the Commission, or (ii) the 

Fund acquires shares of its respective 

Master Fund. 

16. To ensure that a Purchasing Fund 

is aware of the terms and conditions of 

the requested order, the Purchasing 

Fund must enter into an agreement with 

the respective Fund (‘‘FOF Participation 

Agreement’’). The FOF Participation 

Agreement will include an 

acknowledgment from the Purchasing 

Fund that it may rely on the order only 

to invest in the Funds and not in any 

other investment company. 

17. Applicants also are seeking relief 

from sections 12(d)(1)(A) and (B) of the 

Act to permit the Funds in a masterfeeder structure to perform creations 

and redemptions of Shares in-kind. 

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 

portfolio) if, among other things, that 

security is the only investment security 

held by the Fund. Applicants believe 

the proposed master-feeder structure 

complies with section 12(d)(1)(E) 

because each Fund will hold only 

investment securities issued by its 

corresponding Master Fund; however, 

the Funds may receive securities other 

than securities of its corresponding 

Master Fund if a Fund accepts an inkind creation. To the extent that a Fund 

may be deemed to be holding both 

shares of the master portfolio and other 

securities, applicants request relief from 

sections 12(d)(1)(A) and (B). The Funds 

would operate in compliance with all 

other provisions of section 12(d)(1)(E). 

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

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

generally prohibit an affiliated person of 

a registered investment company, or an 

affiliated person of such a person 

(‘‘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 

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’’). 

19. Applicants request an exemption 

from section 17(a) under sections 6(c) 

and 17(b) to permit in-kind purchases 

and redemptions by persons that are 

affiliated persons or second tier 

affiliates of the Funds solely by virtue 

of one or more of the following: (i) 

Holding 5% or more, or more than 25%, 

of the Shares of the Trust or one or more 

Funds; (ii) an affiliation with a person 

with an ownership interest described in 

(i); or (iii) 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 

Purchasing Fund of which the Fund is 

an affiliated person or a second tier 

affiliate.24

20. Applicants contend that no useful 

purpose would be served by prohibiting 

these affiliated persons or second tier 

affiliates of a Fund from making in-kind 

purchases or in-kind redemptions of 

Shares of a Fund in Creation Units. The 

value of the Deposit Instruments and 

corresponding Cash Amount delivered 

by a purchaser or Redemption 

Instruments and corresponding Cash 

Amount given to a redeeming investor 

will be the same regardless of the 

investor’s identity, and will be valued 

under the same objective standards 

applied to valuing the Fund Securities. 

The method of valuing Fund Securities 

held by a Fund is the same as that used 

for calculating in-kind purchase or 

redemption values. Therefore, 

applicants state that the in-kind 

purchases and redemptions will afford 

no opportunity for the specified 

affiliated persons and second tier 

affiliates of a Fund to effect a 

transaction detrimental to other holders 

of Shares. Applicants do not believe that 

in-kind purchases and redemptions will 

result in abusive self-dealing or 

overreaching of the Fund. 

21. Applicants also submit that the 

sale of Shares to and redemption of 

Shares from a Purchasing Fund satisfies 

the standards for relief under sections 

17(b) and 6(c) of the Act. Any 

consideration paid for the purchase or 

redemption of Shares directly from a 

Fund will be based on the NAV of the 

Fund.25 The FOF Participation 

Agreement will require any Purchasing 

Fund that purchases Shares directly 

from a Fund to represent that its 

purchases are permitted under its 

investment restrictions and consistent 

with the investment policies described 

in its registration statement. 

22. To the extent that a Fund operates 

in a master-feeder structure, applicants 

also request relief permitting the Funds 

to engage in in-kind creations and 

redemptions with the applicable master 

portfolio. Applicants state that the 

customary section 17(a)(1) and 17(a)(2) 

relief would not be sufficient to permit 

such transactions because the Funds 

and the applicable master portfolio 

could also be affiliated by virtue of 

having the same investment adviser. 

However, applicants believe that inmstockstill on DSK4VPTVN1PROD with NOTICES

25520 Federal Register / Vol. 77, No. 83 / Monday, April 30, 2012 / Notices 

kind creations and redemptions 

between a Fund and a master portfolio 

advised by the same investment adviser 

do not involve ‘‘overreaching’’ by an 

affiliated person. Such transactions will 

occur only at the Fund’s proportionate 

share of the master portfolio’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 portfolio’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 

transactions would only occur as a 

result of, and to effectuate, a creation or 

redemption transaction between the 

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 

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: 

ETF Relief 

1. As long as the Funds operate in 

reliance on the requested order, the 

Shares of the Funds will be listed on a 

Stock Exchange. 

2. Neither the Trust nor any Fund will 

be advertised or marketed as an openend investment company or a mutual 

fund. Any advertising material that 

describes the purchase or sale of 

Creation Units or refers to redeemability 

will prominently disclose that the 

Shares are not individually redeemable 

and that owners of the Shares may 

acquire those Shares from the Fund and 

tender those Shares for redemption to 

the Fund in Creation Units only. 

3. The Web site for the Funds, which 

is and will be publicly accessible at no 

charge, will contain, on a per Share 

basis, for each Fund the prior Business 

Day’s NAV and the market closing price 

or Bid/Ask Price of the Shares, and a 

calculation of the premium or discount 

of the market closing price or Bid/Ask 

Price of the Shares against such NAV. 

4. On each Business Day, before 

commencement of trading in Shares on 

the Stock Exchange, the Fund (or its 

respective Master Fund) will disclose on 

its Web site the identities and quantities 

of the Fund Securities and other assets 

held by the Fund that will form the 

basis for the Fund’s calculation of NAV 

at the end of such Business Day. 

5. The Adviser or Subadviser, directly 

or indirectly, will not cause any 

Authorized Participant (or any investor 

on whose behalf an Authorized 

Participant may transact with the Fund) 

to acquire any Deposit Instrument for 

the Fund through a transaction in which 

the Fund could not engage directly. 

6. The requested relief, other than the 

section 12(d)(1) relief and the section 17 

relief related to a master-feeder 

structure, will expire on the effective 

date of any Commission rule under the 

Act that provides relief permitting the 

operation of actively-managed 

exchange-traded funds. 

Fund of Funds Relief 

7. The members of the Purchasing 

Fund’s 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 Purchasing Fund’s 

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 Purchasing Fund’s Advisory Group 

or the Purchasing Fund’s Sub-Advisory 

Group, each in the aggregate, becomes a 

holder of more than 25 percent of the 

outstanding voting securities of a Fund, 

it will vote its Shares of the Fund in the 

same proportion as the vote of all other 

holders of the Fund’s Shares. This 

condition does not apply to the 

Purchasing Fund’s Sub-Advisory Group 

with respect to a Fund (or its respective 

Master Fund) for which the Purchasing 

Fund Subadviser or a person 

controlling, controlled by or under 

common control with the Purchasing 

Fund Subadviser acts as the investment 

adviser within the meaning of section 

2(a)(20)(A) of the Act. 

8. No Purchasing Fund or Purchasing 

Fund Affiliate will cause any existing or 

potential investment by the Purchasing 

Fund in a Fund to influence the terms 

of any services or transactions between 

the Purchasing Fund or a Purchasing 

Fund Affiliate and the Fund (or its 

respective Master Fund) or a Fund 

Affiliate. 

9. The board of directors or trustees of 

a Purchasing Management Company, 

including a majority of the disinterested 

directors or trustees, will adopt 

procedures reasonably designed to 

assure that the Purchasing Fund Adviser 

and any Purchasing Fund Subadviser 

are conducting the investment program 

of the Purchasing Management 

Company without taking into account 

any consideration received by the 

Purchasing Management Company or a 

Purchasing Fund Affiliate from a Fund 

(or its respective Master Fund) or a 

Fund Affiliate in connection with any 

services or transactions. 

10. Once an investment by a 

Purchasing Fund in the securities of a 

Fund exceeds the limit in section 

12(d)(1)(A)(i) of the Act, the Board of a 

Fund (or of its respective Master Fund), 

including a majority of the disinterested 

Board members, will determine that any 

consideration paid by the Fund (or its 

respective Master Fund) to the 

Purchasing Fund or a Purchasing Fund 

Affiliate in connection with any services 

or transactions: (i) Is fair and reasonable 

in relation to the nature and quality of 

the services and benefits received by the 

Fund (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). 

11. The Purchasing Fund Adviser, or 

trustee (‘‘Trustee’’) or Sponsor, as 

applicable, will waive fees otherwise 

payable to it by the Purchasing Fund in 

an amount at least equal to any 

compensation (including fees received 

pursuant to any plan adopted by a Fund 

(or its respective Master Fund) under 

rule 12b–1 under the Act) received from 

a Fund (or its respective Master Fund) 

by the Purchasing Fund Adviser, or 

Trustee or Sponsor, or an affiliated 

person of the Purchasing Fund Adviser, 

or Trustee or Sponsor, other than any 

advisory fees paid to the Purchasing 

Fund Adviser, or Trustee, or Sponsor, or 

its affiliated person by the Fund (or its 

respective Master Fund), in connection 

with the investment by the Purchasing 

Fund in the Fund. Any Purchasing 

Fund Subadviser will waive fees 

otherwise payable to the Purchasing 

Fund Subadviser, directly or indirectly, 

by the Purchasing Management 

Company in an amount at least equal to 

any compensation received from a Fund 

(or its respective Master Fund) by the 

Purchasing Fund Subadviser, or an 

affiliated person of the Purchasing Fund 

Subadviser, other than any advisory fees 

paid to the Purchasing Fund Subadviser 

or its affiliated person by the Fund (or 

its respective Master Fund), in 

connection with any investment by the 

Purchasing Management Company in 

the Fund made at the direction of the 

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Federal Register / Vol. 77, No. 83 / Monday, April 30, 2012 / Notices 25521 

Purchasing Fund Subadviser. In the 

event that the Purchasing Fund 

Subadviser waives fees, the benefit of 

the waiver will be passed through to the 

Purchasing Management Company. 

12. No Purchasing Fund or 

Purchasing Fund Affiliate (except to the 

extent it is acting in its capacity as an 

investment adviser to a Fund (or its 

respective Master Fund)) will cause a 

Fund (or its respective Master Fund) to 

purchase a security in an Affiliated 

Underwriting. 

13. The Board of the Fund (or of its 

respective Master Fund), including a 

majority of the disinterested 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 Purchasing Fund 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 Purchasing Fund in 

the Fund. The Board will consider, 

among other things: (i) Whether the 

purchases were consistent with the 

investment objectives and policies of 

the Fund (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 assure that 

purchases of securities in Affiliated 

Underwritings are in the best interest of 

shareholders. 

14. 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 Purchasing 

Fund in the securities of the Fund 

exceeds the limit of section 

12(d)(1)(A)(i) of the Act, setting forth 

from whom the securities were 

acquired, the identity of the 

underwriting syndicate’s members, the 

terms of the purchase, and the 

information or materials upon which 

the Board’s determinations were made. 

15. Before investing in a Fund in 

excess of the limit in section 

12(d)(1)(A), a Purchasing Fund will 

execute a FOF Participation Agreement 

with the Fund stating that their 

respective boards of directors or trustees 

and their investment advisers, or 

Trustee and Sponsor, as applicable, 

understand the terms and conditions of 

the order, and agree to fulfill their 

responsibilities under the order. At the 

time of its investment in shares of a 

Fund in excess of the limit in section 

12(d)(1)(A)(i), a Purchasing Fund will 

notify the Fund of the investment. At 

such time, the Purchasing Fund will 

also transmit to the Fund a list of the 

names of each Purchasing Fund Affiliate 

and Underwriting Affiliate. The 

Purchasing Fund will notify the Fund of 

any changes to the list of the names as 

soon as reasonably practicable after a 

change occurs. The Fund and the 

Purchasing Fund will maintain and 

preserve a copy of the order, the FOF 

Participation Agreement, and the list 

with any updated information for the 

duration of the investment and for a 

period of not less than six years 

thereafter, the first two years in an 

easily accessible place. 

16. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Purchasing Management Company, 

including a majority of the disinterested 

directors or trustees, will find that the 

advisory fees charged under such 

contract are based on services provided 

that will be in addition to, rather than 

duplicative of, the services provided 

under the advisory contract(s) of any 

Fund (or its respective Master Fund) in 

which the Purchasing Management 

Company may invest. These findings 

and their basis will be recorded fully in 

the minute books of the appropriate 

Purchasing Management Company. 

17. Any sales charges and/or service 

fees charged with respect to shares of a 

Purchasing Fund will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

18. No Fund (or its respective Master 

Fund) will acquire securities of any 

investment company or company 

relying on section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act, except 

to the extent 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. 2012–10299 Filed 4–27–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Thursday, May 3, 2012 at 2:00 p.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) 

and 17 CFR 200.402(a)(3), (5), (7), 9(ii) 

and (10), permit consideration of the 

scheduled matters at the Closed 

Meeting. 

Commissioner Paredes, as duty 

officer, voted to consider the items 

listed for the Closed Meeting in a closed 

session. 

The subject matter of the Closed 

Meeting scheduled for Thursday, May 3, 

2012 will be: 

Institution and settlement of injunctive 

actions; 

Institution and settlement of 

administrative proceedings; and 

Other matters relating to enforcement 

proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

mstockstill on DSK4VPTVN1PROD with NOTICES