[Federal Register Volume 77, Number 83 (Monday, April 30, 2012)]
[Notices]
[Pages 25514-25521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-10299]


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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.

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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

[[Page 25515]]

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\
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    \1\ 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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    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.
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    \2\ Each 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 sub-advised 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'').
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    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.
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    \3\ Fixed income securities may include ``to-be-announced 
transactions'' (``TBA Transactions''). A TBA Transaction is a method 
of trading mortgage-backed 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.
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    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.
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    \4\ With 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.
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    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.
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    \5\ While 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.
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    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

[[Page 25516]]

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'').
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    \6\ In the case of a Fund that is part of a master-feeder 
structure, the Fund will redeem shares from 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.
    \7\ The portfolio used for this purpose will be the same 
portfolio used to calculate the Fund's NAV for that Business Day.
    \8\ A tradeable round lot for a security will be the standard 
unit of trading in that particular type of security in its primary 
market.
    \9\ 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.
    \10\ Because these instruments will be excluded from the 
Creation Basket, their value will be reflected in the determination 
of the Cash Amount (as defined below).
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    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\
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    \11\ 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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    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.
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    \12\ 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 (``DTC Participants'').
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    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.
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    \13\ Where a Fund permits a purchaser to substitute cash in lieu 
of depositing a portion of the requisite Deposit Instruments, the 
purchaser may be assessed a higher Transaction Fee to 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.
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    17. Neither the Trust nor any Fund will be advertised or marketed 
or otherwise held out as a traditional open-end investment company or a 
mutual fund. Instead, each Fund will be marketed as an ``actively-
managed exchange-traded fund.'' \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

[[Page 25517]]

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.
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    \14\ As 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.
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    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\
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    \15\ For Funds that are part of a master-feeder structure, the 
Fund will disclose information about the securities and other assets 
held by the Master Fund.
    \16\ Under accounting procedures followed by the Funds, trades 
made on the prior Business Day (``T'') will be booked and reflected 
in NAV on the current Business Day (``T+1''). Accordingly, the Funds 
will be able to disclose at the beginning of the Business Day the 
portfolio that will form the basis for the NAV calculation at the 
end of the Business Day.
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Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act 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.
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    \17\ 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, 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 riskless-trading schemes by principal underwriters and contract 
dealers, (b) prevent unjust discrimination or preferential treatment 
among buyers resulting from sales at different prices, and (c) assure 
an orderly distribution of investment company shares by eliminating 
price competition from Brokers offering shares at less than the 
published sales price and repurchasing shares at more than the 
published redemption price.
    6. Applicants believe that none of these purposes will be thwarted 
by permitting Shares to trade in the secondary market at negotiated 
prices. Applicants state that (a) secondary market trading in Shares 
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 third-party market forces, such as 
supply and demand. Therefore, applicants assert that secondary market 
transactions in Shares will not lead to discrimination or preferential 
treatment among purchasers. Finally, applicants contend that the 
proposed distribution system will be orderly because arbitrage activity 
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

[[Page 25518]]

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.
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    \18\ Applicants 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.
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    8. Applicants submit that Congress adopted section 22(e) to prevent 
unreasonable, undisclosed or unforeseen delays in the actual payment of 
redemption proceeds. Applicants state that allowing 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.
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    \19\ 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)

    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\
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    \20\ A ``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.
    \21\ A ``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.
    \22\ A ``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.
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    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

[[Page 25519]]

funds set forth in NASD Conduct Rule 2830.\23\
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    \23\ Any references to NASD Conduct Rule 2830 include any 
successor or replacement rule that may be adopted by FINRA.
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    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 master-feeder 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 in-kind 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\
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    \24\ Applicants 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.
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    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.
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    \25\ Applicants 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.
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    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 in-

[[Page 25520]]

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 open-end investment company or a mutual fund. Any advertising 
material that describes the purchase or sale of Creation Units or 
refers to redeemability will prominently disclose that the Shares are 
not individually redeemable and that owners of the Shares may acquire 
those Shares from the Fund and tender those Shares for redemption to 
the Fund in Creation Units only.
    3. The Web site for the Funds, which is and will be publicly 
accessible at no charge, will contain, on a per Share basis, for each 
Fund the prior Business Day's NAV and the market closing price or Bid/
Ask Price 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

[[Page 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