Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 71753 

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 

Continued 

an amount at least equal to any 

compensation received from a Fund by 

the Acquiring Fund SubAdviser, or an 

affiliated person of the Acquiring Fund 

Sub-Adviser, other than any advisory 

fees paid to the Acquiring Fund SubAdviser or its affiliated person by the 

Fund, in connection with any 

investment by the Acquiring 

Management Company in the Fund 

made at the direction of the Acquiring 

Fund SubAdviser. In the event that the 

Acquiring Fund SubAdviser waives 

fees, the benefit of the waiver will be 

passed through to the Acquiring 

Management Company. 

14. Any sales charges and/or service 

fees charged with respect to shares of an 

Acquiring Fund will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

15. No Fund will acquire securities of 

any other investment company or 

company relying on section 3(c)(1) or 

3(c)(7) of the Act in excess of the limits 

contained in section 12(d)(1)(A) of the 

Act, except to the extent permitted by 

exemptive relief from the Commission 

permitting the Fund to purchase shares 

of other investment companies for shortterm cash management purposes. 

16. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Acquiring Management Company, 

including a majority of the disinterested 

directors or trustees, will find that the 

advisory fees charged under such 

advisory 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 in which the Acquiring 

Management Company may invest. 

These findings and their basis will be 

recorded fully in the minute books of 

the appropriate Acquiring Management 

Company. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29589 Filed 11–23–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

29499; 812–13487] 

SSgA Funds Management, Inc., et al.; 

Notice of Application 

November 17, 2010. 

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: SSgA Funds Management, 

Inc. (the ‘‘Adviser’’), State Street Global 

Markets, LLC (the ‘‘Distributor’’), SPDR 

Series Trust and SPDR Index Shares 

Funds (each a ‘‘Trust’’ and together the 

‘‘Trusts’’). 

SUMMARY OF APPLICATION: Applicants 

request an order that permits: (a) Series 

of certain open-end management 

investment companies to issue shares 

(‘‘Shares’’) redeemable in large 

aggregations only (‘‘Creation Units’’); (b) 

secondary market transactions in Shares 

to occur at negotiated market prices; (c) 

certain series to pay redemption 

proceeds, under certain circumstances, 

more than seven days 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. 

FILING DATES: The application was filed 

on January 31, 2008, and amended on 

May 21, 2008, December 2, 2008, 

September 3, 2009, July 16, 2010, and 

November 17, 2010. 

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 December 10, 2010, 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, State Street Financial 

Center, One Lincoln Street, Boston, MA 

02111. 

FOR FURTHER INFORMATION CONTACT: 

Christine Y. Greenlees, Senior Counsel, 

at (202) 551–6879 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. Each Trust is a business trust 

organized under the laws of the 

Commonwealth of Massachusetts and 

registered under the Act as an open-end 

management investment company. Each 

Trust is organized as a series fund with 

multiple series. 

2. The Adviser, a Massachusetts 

corporation, is registered as an 

investment adviser under the 

Investment Advisers Act of 1940 (the 

‘‘Advisers Act’’) and will be the 

investment adviser to the Funds. The 

Adviser may retain sub-advisers (‘‘SubAdvisers’’). Any Sub-Adviser will be 

registered under the Advisers Act. The 

Distributor, a broker-dealer registered 

under the Securities Exchange Act of 

1934 (the ‘‘Exchange Act’’), will serve as 

the principal underwriter and 

distributor of each of the Funds. 

3. Applicants are requesting relief to 

permit the Trusts to create and operate 

certain actively managed investment 

portfolios of the Trusts (‘‘New Funds’’) 

that offer Shares with limited 

redeemability (‘‘ETF Relief’’) and to 

operate in a master-feeder structure. 

Applicants request that the ETF Relief 

apply to future series of the Trusts or of 

other open-end management companies 

that (a) Utilize active management 

investment strategies, (b) are advised by 

the Adviser or an entity controlling, 

controlled by, or under common control 

with the Adviser, and (c) comply with 

the terms and condition of the order 

(‘‘Future Funds’’). The New Funds and 

Future Funds together are the ‘‘Funds.’’ 

Each Fund will operate as an 

exchanged-traded fund (‘‘ETF’’).1

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

71754 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

the terms and conditions of the application. A 

Purchasing Fund (as defined below) may rely on the 

requested order only to invest in the Funds and not 

in any other registered investment company. 

2Applicants expect that the New Funds may rely 

on section 12(d)(1)(F) or (G) of the Act and, thus, 

would not be able to rely on the Fund of Funds 

Relief. Nonetheless, it is anticipated that certain 

Future Funds would rely on the requested Fund of 

Funds Relief. 

3Each Underlying ETP will trade on a Stock 

Exchange (as defined below) and will calculate its 

net asset value per share (‘‘NAV’’) each day. 

4There would be no ability to exchange Shares 

of the New Funds for shares of any other feeder 

fund. 

5With respect to ADRs, the Depository 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 (as defined below) 

or off-exchange. FINRA Rule 6620 requires all offexchange 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 Depository 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 Sub-Adviser will serve as the 

depositary bank for any Depositary Receipts held by 

a Fund. 

4. 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 principal 

underwriter for the Funds, and any 

broker or dealer registered under the 

Exchange Act (‘‘Brokers’’) 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: (i) Any registered 

investment company or unit investment 

trust that is currently or subsequently 

part of the same ‘‘group of investment 

companies’’ as the Funds within the 

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

Act as well as any principal underwriter 

for the Funds and any Brokers selling 

Shares of a Fund to a Purchasing Fund 

(as defined below); and (ii) 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 a 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’’). 

Purchasing Funds do not include the 

Funds. This 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.2

5. 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 Fund, to sell 

shares of the Master Funds to the Funds 

beyond the limitations in section 

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

6. Each New Fund will attempt to 

achieve a specified investment objective 

utilizing an active management strategy, 

rather than attempting to replicate the 

performance of an index. It is currently 

anticipated that the investment 

strategies of the New Funds will be 

similar to existing ‘‘target date’’ mutual 

funds, and the New Funds will seek to 

achieve their investment objectives by 

investing in ETFs and other exchange 

traded products that are not registered 

under the Act, which may or may not 

be sponsored or advised by the Adviser 

or one of its affiliates (‘‘Underlying 

ETPs’’). The New Funds may invest in 

Underlying ETPs either directly or 

through investment in a Master Fund.3

Each Fund, or its respective Master 

Fund, may invest in foreign and 

domestic equity securities, including 

depositary receipts (‘‘Depositary 

Receipts’’) and shares of other 

investment companies, and in foreign 

and domestic fixed income securities, 

including TBA transactions, as 

described herein. Neither the New 

Funds nor any Future Fund (or its 

respective Master Fund, if any) will 

invest in options contracts, futures 

contracts or swap agreements. 

7. It is currently anticipated that each 

New Fund will invest in a Master Fund 

with a portfolio of Underlying ETPs 

instead of directly holding Underlying 

ETP shares. Applicants have designed 

this master-feeder structure because it is 

anticipated that, in addition to the New 

Funds, other feeder funds will be 

created in the future and hold shares of 

each respective Master Fund. Such 

other feeder funds could be traditional 

mutual funds, the shares of which 

would be individually redeemable, 

other exchange-traded funds, or other 

pooled investment vehicles. Any 

traditional mutual fund feeder funds 

would also be series of a separate and 

distinct registered investment 

company.4

8. The Future Funds may invest, 

either directly or through a Master 

Fund, in equity securities (‘‘Equity 

Funds’’) or fixed income securities 

(‘‘Fixed Income Funds’’) traded in the 

U.S. or non-U.S. markets. 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 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. 

9. Applicants anticipate that many, if 

not all of the Foreign Funds will invest 

a significant portion of their assets in 

Depositary Receipts representing foreign 

securities in which they seek to invest, 

including American Depositary Receipts 

(‘‘ADRs’’) and Global Depositary 

Receipts (‘‘GDRs’’). Depositary Receipts 

are typically issued by a financial 

institution (‘‘Depository’’) and evidence 

ownership interests in a security or a 

pool or securities (‘‘Underlying 

Securities’’) that have been deposited 

with the Depository.5 A Fund will not 

invest in any Depositary Receipts that 

the Adviser or Sub-Adviser deems to be 

illiquid or for which pricing information 

is not readily available. 

10. Shares of each Fund will be 

purchased from the Trusts only in 

Creation Units. Creation Units will be 

separable upon issue into individual 

Shares, which will be listed and traded 

at negotiated prices on a national 

securities exchange as defined in 

section 2(a)(26) of the Act (‘‘Stock 

Exchange’’). The Funds will issue Shares 

in Creation Units of at least 50,000 

Shares. Orders to purchase Creation 

Units may be placed by or through an 

‘‘Authorized Participant,’’ which is 

either (i) a broker-dealer or other 

participant in the continuous net 

settlement system of the National 

Securities Clearing Corporation, 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 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 71755 

6On each day that a Fund is open, including as 

required by section 22(e) of the Act (‘‘Business 

Day’’), the Adviser will make available prior to the 

opening of trading on the Stock Exchange a list of 

the names and the required number of shares of 

each Deposit Security to be included in the Fund 

Deposit for each Fund, along with the prior day’s 

Cash Component. The Stock Exchange will 

disseminate, every 15 seconds during its regular 

trading hours, through the facilities of the 

Consolidated Tape Association, the estimated NAV 

of the Funds, which is an amount per Share 

representing the sum of the estimated Cash 

Component effective through and including the 

previous Business Day, plus the current value of the 

Deposit Securities, on a per Share basis. 

7Where a Fund permits a purchaser to substitute 

cash in lieu of depositing a portion of the requisite 

Deposit Securities, the purchaser may be assessed 

a higher Transaction Fee to offset the cost to the 

Fund of purchasing such Deposit Securities. 

8Shares 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’’). 

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

the appropriate master portfolio and then deliver to 

the redeeming shareholder a portfolio of 

Redemption Securities and specified cash amount 

as published in the redemption basket. 

10The Funds may substitute a cash-in-lieu 

amount to replace any Deposit Security or 

Redemption Security that is a to-be-announced 

transaction (‘‘TBA Transaction’’). 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. The amount of 

substituted cash in the case of TBA Transactions 

will be equivalent to the value of the TBA 

Transaction listed as a Deposit Security or 

Redemption Security. 

11 In accepting Deposit Securities and satisfying 

redemptions with Redemption Securities that are 

restricted securities eligible for resale pursuant to 

rule 144A under the Securities Act, each Fund will 

comply with the conditions of rule 144A, including 

in satisfying redemptions with such rule 144A 

eligible restricted Redemption Securities. 

12As noted above, the Funds may operate 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. 

13For 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. 

redemptions of Creation Units 

(‘‘Participant Agreement’’). Shares of 

each New Fund will be purchased in 

Creation Units in exchange for an inkind deposit by the purchaser of a 

particular portfolio of securities 

(‘‘Deposit Securities’’) designated by the 

Adviser, together with the deposit of a 

specified cash payment (‘‘Cash 

Component,’’ collectively with the 

Deposit Securities, ‘‘Fund Deposit’’). The 

Cash Component is an amount equal to 

the difference between the NAV of a 

Creation Unit and the total aggregate 

market value per Creation Unit of the 

Deposit Securities.6 A Fund may also 

permit, under certain circumstances, an 

in-kind purchaser to substitute cash in 

lieu of depositing some or all of the 

Deposit Securities. 

11. 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.7 The 

Distributor will deliver a confirmation 

and prospectus (‘‘Prospectus’’) to the 

purchaser. 

12. Purchasers of Shares in Creation 

Units may hold such Shares or may sell 

such Shares into the secondary market. 

Shares will be listed on the Stock 

Exchange and traded in the secondary 

market in the same manner as other 

equity securities. One or more Market 

Makers (as defined below) will be 

assigned to make continuous markets in 

Shares. 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. 

13. Applicants expect that purchasers 

of Creation Units will include 

arbitrageurs and the lead market makers 

(‘‘LMMs’’) and/or designated liquidity 

providers (together with LMMs, ‘‘Market 

Makers’’). Applicants expect that 

secondary market purchasers of Shares 

will include both institutional and retail 

investors.8 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. 

14. 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. 

Creation Units will be redeemed in 

exchange for a portfolio of securities 

(‘‘Redemption Securities’’) and specified 

cash amount 9 as published in the 

redemption basket. While Shares 

generally will be redeemed in Creation 

Units in exchange for Redemption 

Securities, each Fund will have the right 

to make redemption payments in cash, 

in kind or a combination of each, 

provided the value of its redemption 

payments equals the NAV.10 To the 

extent that the Redemption Securities 

have a value greater than the NAV of the 

Shares being redeemed, a cash payment 

equal to the differential will be paid by 

the redeeming shareholder to the Trust. 

Redemption of Shares in Creation Units 

will be subject to a Transaction Fee. 

15. Applicants state that each Fund 

must comply with the federal securities 

laws in accepting Deposit Securities and 

satisfying redemptions with 

Redemption Securities, including that 

the Redemption Securities are sold in 

transactions that would be exempt from 

registration under the Securities Act.11

The Deposit Securities and Redemption 

Securities will consist of a pro rata 

basket of the portfolio securities held by 

a Fund (‘‘Fund Securities’’), except for 

certain minor differences that may exist 

for certain Fixed Income Funds because 

it is impossible to break up bonds 

beyond certain minimum sizes needed 

for transfer and settlement. 

16. 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.’’ 12 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 

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. The Funds will provide copies 

of its semi-annual and annual 

shareholder reports to DTC Participants 

for distribution to beneficial owners of 

Shares. 

17. The Trust will maintain a Web site 

that 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, 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 such price 

against such NAV. Prior to the opening 

of the Stock Exchange on each Business 

Day, a Trust will disclose on its Web 

site the identities and quantities of the 

securities and other assets held by each 

Fund, or its respective Master Fund,13

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

71756 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

14Under 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. 

15The Master Funds will not require relief from 

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

Funds will issue individually redeemable 

securities. 

16Applicants 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. 

that will form the basis of each Fund’s 

NAV at the end of such Business Day.14

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 

redeem Shares in Creation Units only.15

Applicants state that investors may 

purchase Shares in Creation Units and 

redeem Creation Units from each Fund. 

Applicants further state that because the 

market price of Creation Units will be 

disciplined by arbitrage opportunities, 

investors should be able to sell Shares 

in the secondary market at prices that 

do vary substantially 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 low. 

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 

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 Funds, or 

their respective Master Funds, may 

invest. Applicants have been advised 

that, under certain circumstances, the 

delivery cycles for transferring 

Redemption Securities to redeeming 

investors, coupled with local market 

holiday schedules, will require a 

delivery process of up to 14 calendar 

days. Applicants therefore request relief 

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 Fund, 

and any respective Master Fund, 

customarily clear and settle, but in all 

cases no later than 14 days following the 

tender of a Creation Unit.16

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 

Fund, and any respective Master Fund, 

to be made within the number of days 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 71757 

17A ‘‘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. 

18A ‘‘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. 

19Any references to NASD Conduct Rule 2830 

include any successor or replacement rule that may 

be adopted by the Financial Industry Regulatory 

Authority. 

indicated above would not be 

inconsistent with the spirit and intent of 

section 22(e). Applicants state that each 

Foreign Fund’s SAI will disclose those 

local holidays (over the period of at 

least one year following the date of the 

SAI), if any, that are expected to prevent 

the delivery of in-kind redemption 

proceeds in seven calendar days and the 

maximum number of days needed to 

deliver the proceeds for each affected 

Foreign Fund. Applicants are not 

seeking relief from section 22(e) with 

respect to Foreign Funds effecting 

redemptions on a cash basis. 

9. If using a master-feeder structure, 

applicants will operate in substantially 

the same manner. In the case of an inkind redemption from a Fund, the Fund 

would make a corresponding 

redemption from the Master Fund. 

Applicants do not believe the masterfeeder structure would have any impact 

on the delivery cycle. 

Section 12(d)(1) 

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

prohibits a registered investment 

company from acquiring shares of an 

investment company if the securities 

represent more than 3% of the total 

outstanding voting stock of the acquired 

company, more than 5% of the total 

assets of the acquiring company, or, 

together with the securities of any other 

investment companies, more than 10% 

of the total assets of the acquiring 

company. Section 12(d)(1)(B) of the Act 

prohibits a registered open-end 

investment company, its principal 

underwriter, or any other broker or 

dealer from selling its shares to another 

investment company if the sale will 

cause the acquiring company to own 

more than 3% of the acquired 

company’s voting stock, or if the sale 

will cause more than 10% of the 

acquired company’s voting stock to be 

owned by investment companies 

generally. 

11. Applicants request relief to permit 

Purchasing Management Companies and 

Purchasing Trusts registered under the 

Act that are not sponsored or advised by 

the Adviser or any entity controlling, 

controlled by, or under common control 

with the Adviser and are not part of the 

same ‘‘group of investment companies,’’ 

as defined in section 12(d)(1)(G)(ii) of 

the Act, as the Trusts, 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). Pursuant to the 

terms and conditions of the requested 

order, each Purchasing Fund will enter 

into a FOF Participation Agreement (as 

defined below) with the relevant Fund. 

12. 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 

Sub-Adviser’’). 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’’). 

13. 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. 

14. Applicants submit that their 

proposed conditions address any 

concerns regarding the potential for 

undue influence. A Purchasing Fund or 

Purchasing Fund Affiliate 17 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.18 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. 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 Sub-Adviser, 

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 Sub-Adviser. 

15. 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 Sub-Adviser, 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 Sub-Adviser, employee or 

Sponsor is an affiliated person, except 

any person whose relationship to the 

Fund is covered by section 10(f) of the 

Act is not an Underwriting Affiliate. 

16. 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 

funds set forth in NASD Conduct Rule 

2830.19

17. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that a Fund (and its 

respective Master Fund) will be 

prohibited from acquiring securities of 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

71758 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

20Applicants state that although they believe that 

a Purchasing Fund generally will purchase Shares 

in the secondary market, a Purchasing Fund might 

seek to transact in Creation Units directly with a 

Fund. 

21Applicants 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. 

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. 

18. 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 (or other series of 

the Trusts) and not in any other 

investment company. 

19. Applicants also are seeking relief 

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

Act to permit the Funds to perform 

creations and redemptions of Shares inkind in a master-feeder structure. 

Applicants assert that this structure is 

substantially identical to traditional 

master-feeder structures permitted 

pursuant to the exception provided in 

section 12(d)(1)(E) of the Act. Section 

12(d)(1)(E) provides that the percentage 

limitations of sections 12(d)(1)(A) and 

(B) will not apply to a security issued 

by an investment company (in this case, 

the shares of the applicable master 

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 

20. 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’’). 

21. 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 in-kind 

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.20

22. Applicants contend that no useful 

purpose would be served by prohibiting 

the affiliated persons described above 

from making in-kind purchases or inkind redemptions of Shares of a Fund in 

Creation Units. The value of a Fund 

Deposit made by a purchaser or 

Redemption Securities and 

corresponding Cash Component 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 inkind purchases and redemptions will 

afford no opportunity for the specified 

affiliated persons 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. 

23. 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.21 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. 

24. 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 inkind 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: 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 71759 

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 each Fund that will form the 

basis for each Fund’s calculation of 

NAV at the end of such Business Day. 

5. The Adviser or Sub-Adviser, 

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 Security 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 Sub-Adviser or a person 

controlling, controlled by or under 

common control with the Purchasing 

Fund Sub-Adviser 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 Sub-Adviser 

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 

trustees of a Fund (‘‘Board’’) (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 Sub-Adviser will waive fees 

otherwise payable to the Purchasing 

Fund Sub-Adviser, 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 

Sub-Adviser, or an affiliated person of 

the Purchasing Fund Sub-Adviser, other 

than any advisory fees paid to the 

Purchasing Fund Sub-Adviser 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 Purchasing 

Fund Sub-Adviser. In the event that the 

Purchasing Fund Sub-Adviser 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 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

71760 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 63041 

(October 5, 2010), 75 FR 62905 (‘‘Notice’’). 

4A Managed Fund Share is a security that, among 

other things, represents an interest in an investment 

company registered under the Investment Company 

Act of 1940 (‘‘1940 Act’’) organized as an open-end 

investment company or similar entity that invests 

in a portfolio of securities selected by its investment 

advisor consistent with its investment objectives 

and policies. See NYSE Arca Equities Rule 

8.600(c)(1). 

5The Trust is registered under the 1940 Act. On 

May 11, 2010, the Trust filed with the Commission 

Post-Effective Amendment No. 6 to Form N–1A 

relating to the Fund (File Nos. 333–157876 and 

811–22110) (‘‘Registration Statement’’). 

6The Exchange represents that the Advisor and 

Sub-Advisor are not affiliated with a broker-dealer. 

See Commentary .06 to NYSE Arca Equities Rule 

8.600 (requiring that, if the investment adviser is 

affiliated with a broker-dealer, the investment 

adviser erect a ‘‘fire wall’’ between the investment 

adviser and the broker-dealer with respect to access 

to information concerning the composition and/or 

changes to the portfolio). 

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. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29588 Filed 11–23–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63329; File No. SR– 

NYSEArca–2010–86] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Granting Approval of 

Proposed Rule Change Relating to the 

Listing and Trading of Shares of the 

Peritus High Yield ETF 

November 17, 2010. 

I. Introduction 

On September 23, 2010, NYSE Arca, 

Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to list and trade shares (‘‘Shares’’) 

of the Peritus High Yield ETF (‘‘Fund’’). 

The proposed rule change was 

published for comment in the Federal 

Register on October 13, 2010.3 The 

Commission received no comments on 

the proposal. This order grants approval 

of the proposed rule change. 

II. Description of the Proposal 

The Exchange proposes to list and 

trade the Shares pursuant to NYSE Arca 

Equities Rule 8.600, which governs the 

listing and trading of Managed Fund 

Shares.4 The Shares will be offered by 

AdvisorShares Trust (‘‘Trust’’), a 

statutory trust organized under the laws 

of the State of Delaware and registered 

with the Commission as an open-end 

management investment company.5 The 

investment advisor to the Fund is 

AdvisorShares Investments, LLC 

(‘‘Advisor’’), and Peritus I Asset 

Management, LLC is the Fund’s subadvisor (‘‘Peritus’’ or ‘‘Sub-Advisor’’).6

WReier-Aviles on DSKGBLS3C1PROD with NOTICES