71746 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

2. Section 6(c) of the Act, in relevant 

part, permits the Commission to exempt 

any transaction or class of 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. Applicants 

request an order pursuant to section 6(c) 

to allow Fifth Street to deem the assets 

of its current and future Subsidiaries as 

its own assets for purposes of 

determining its compliance with section 

55(a). 

3. Applicants state that each 

Subsidiary will be formed as a limited 

liability company (‘‘LLC’’), a corporation 

(‘‘Corporation’’) or a partnership 

(‘‘Partnership’’). Fifth Street and/or one 

or more other Subsidiaries at all times 

will be the only members of each 

Subsidiary that is an LLC and will 

collectively hold all of the ownership 

interests in the LLC Subsidiary. No LLC 

Subsidiary will admit any person other 

than Fifth Street or another Subsidiary 

as a member, and no LLC Subsidiary 

will issue interests other than to Fifth 

Street or another Subsidiary. Fifth Street 

and/or one or more other Subsidiaries at 

all times will own and hold all of the 

outstanding equity interests in each 

Subsidiary that is formed as a 

Corporation. Fifth Street and/or one or 

more other Subsidiaries will at all times 

be the sole limited partner of any 

Subsidiary that is formed as a 

Partnership and the sole owner of such 

Subsidiary’s general partner. Applicants 

also state that since Fifth Street, directly 

or indirectly through another 

Subsidiary, owns or would own the 

entire equity interest in any current and 

future Subsidiaries, any activity carried 

on by them will, in all material respects, 

have the same economic effect on Fifth 

Street’s stockholders as if carried on 

directly by Fifth Street. 

B. Relief for the Company To Adhere to 

a Modified Asset Coverage Requirement 

1. Applicants request an exemption 

pursuant to section 6(c) of the Act from 

the provisions of sections 18(a) and 

61(a) of the Act to permit Fifth Street to 

adhere to a modified asset coverage 

requirement. 

2. Section 18(a) of the Act prohibits a 

registered closed-end investment 

company from issuing any class of 

senior security or selling any such 

security of which it is the issuer unless 

the company complies with the asset 

coverage requirements set forth in that 

section. Section 61(a) of the Act makes 

section 18 applicable to BDCs, with 

certain modifications. Section 18(k) 

exempts an investment company 

operating as an SBIC from the asset 

coverage requirements for senior 

securities representing indebtedness 

that are contained in section 18(a)(1)(A) 

and (B). 

3. Applicants state that a question 

exists as to whether Fifth Street must 

comply with the asset coverage 

requirements of section 18(a) (as 

modified by section 61(a)) solely on an 

individual basis or whether Fifth Street 

must also comply with the asset 

coverage requirements on a 

consolidated basis because Fifth Street 

may be deemed to be an indirect issuer 

of any class of senior security issued by 

the SBIC Subsidiary. Applicants state 

that they wish to treat the SBIC 

Subsidiary as if it were a BDC subject to 

sections 18 and 61 of the Act. 

Applicants state that companies 

operating under the SBIA, such as the 

SBIC Subsidiary, will be subject to the 

SBA’s substantial regulation of 

permissible leverage in its capital 

structure. 

4. Section 6(c) of the Act, in relevant 

part, permits the Commission to exempt 

any transaction or class of 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. Applicants state 

that the requested relief satisfies the 

section 6(c) standard. Applicants 

contend that, since the SBIC Subsidiary 

would be entitled to rely on section 

18(k) if it was a BDC itself, there is no 

policy reason to deny the benefit of that 

exemption to Fifth Street. 

Applicants’ Conditions 

Applicants agree that the order 

granting the requested relief will be 

subject to the following conditions: 

Relief From Section 55(a) 

1. Each Subsidiary will be formed as 

a LLC, a Corporation or a Partnership. 

Fifth Street and/or one or more other 

Subsidiaries at all times will be the only 

members of each Subsidiary that is an 

LLC and will collectively hold all of the 

ownership interests in the LLC 

Subsidiary. No LLC Subsidiary will 

admit any person other than Fifth Street 

or another Subsidiary as a member, and 

no LLC Subsidiary will issue interests 

other than to Fifth Street or another 

Subsidiary. Fifth Street and/or one or 

more other Subsidiaries at all times will 

own and hold all of the outstanding 

equity interests in each Subsidiary that 

is formed as a Corporation. Fifth Street 

and/or one or more other Subsidiaries 

will at all times be the sole limited 

partner of any Subsidiary that is formed 

as a Partnership and the sole owner of 

such Subsidiary’s general partner. 

2. The existing Subsidiaries, and any 

future Subsidiaries, may not acquire any 

asset if the acquisition would cause 

Fifth Street to violate section 55(a). 

3. No person shall serve or act as 

investment adviser to a Subsidiary 

unless the board of directors and 

stockholders of Fifth Street shall have 

taken the action with respect thereto 

also required to be taken by the board 

of directors of the Subsidiary and 

stockholders of the Subsidiary as if the 

Subsidiary were a BDC. 

Relief From Section 18(a) 

4. Fifth Street will not issue or sell 

any senior security and Fifth Street will 

not cause or permit the SBIC Subsidiary 

to issue or sell any senior security of 

which Fifth Street or the SBIC 

Subsidiary is the issuer except to the 

extent permitted by section 18 (as 

modified for BDCs by section 61); 

provided that immediately after 

issuance or sale by any of Fifth Street 

or the SBIC Subsidiary of any such 

senior security, Fifth Street individually 

and on a consolidated basis, shall have 

the asset coverage required by section 

18(a) (as modified by section 61(a)), 

except that, in determining whether 

Fifth Street on a consolidated basis has 

the asset coverage required by section 

18(a) (as modified by section 61(a)), any 

senior securities representing 

indebtedness of the SBIC Subsidiary 

shall not be considered senior securities 

and, for purposes of the definition of 

‘‘asset coverage’’ in section 18(h), will be 

treated as indebtedness not represented 

by senior securities. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29559 Filed 11–23–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

29501; File No. 812–13774] 

ETSpreads, LLC, et al.; Notice of 

Application 

November 18, 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 (the 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 71747 

1The Underlying Index for the Initial Fund is the 

Markit iBoxx TIPS Inflation-Linked 5–10 Index. 

2All entities that currently intend to rely on the 

order have been named as applicants. Any other 

existing or future entity that subsequently relies on 

the order will comply with the terms and 

conditions of the application. An Acquiring Fund 

(as defined below) may rely on the order only to 

invest in Funds and not in any other registered 

investment company. 

3Each Fund will comply with the disclosure 

requirements adopted by the Commission in 

Investment Company Act Release No. 28584 (Jan. 

13, 2009) before offering Shares. 

4Applicants represent that each Fund will invest 

at least 80% of its total assets (exclusive of 

collateral held from securities lending) in the 

component securities that comprise its Underlying 

Index (‘‘Component Securities’’) or TBAs (as defined 

below) representing Component Securities. Each 

Fund also may invest up to 20% of its total assets 

in futures contracts, options on future contracts, 

options and swaps, cash, cash equivalents, other 

investment companies, and securities that are not 

Component Securities but which the Adviser 

believes will assist the Fund in tracking the 

performance of its Underlying Index. 

5Under the representative sampling strategy, the 

Adviser will seek to construct a Fund’s portfolio so 

that its duration, sector, credit rating, coupon and 

option characteristics closely correlate to those 

characteristics of the Underlying Index. 

‘‘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) for an exemption from 

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

the Act. 

SUMMARY OF APPLICATION: Applicants 

request an order that would permit (a) 

Series of certain open-end management 

investment companies whose portfolios 

will consist of the component securities 

of certain domestic, global or 

international fixed income securities 

indexes to issue shares (‘‘Shares’’) 

redeemable in large aggregations only 

(‘‘Creation Units’’); (b) secondary market 

transactions in Shares to occur at 

negotiated market prices; (c) certain 

series to pay redemption proceeds, 

under certain circumstances, more than 

seven days after the tender of Shares for 

redemption; (d) certain affiliated 

persons of the series to deposit 

securities into, and receive securities 

from, the series in connection with the 

purchase and redemption of Creation 

Units; and (e) certain registered 

management investment companies and 

unit investment trusts outside of the 

same group of investment companies as 

the series to acquire Shares. 

APPLICANTS: ETSpreads, LLC (the 

‘‘Adviser’’), Exchange Traded Spreads 

Trust (the ‘‘Trust’’) and ALPS 

Distributors, Inc. (the ‘‘Distributor’’). 

FILING DATES: The application was filed 

on May 18, 2010 and amended on 

September 27, 2010. Applicants have 

agreed to file an amendment during the 

notice period, the substance of which is 

reflected in this notice. 

HEARING OR NOTIFICATION OF HEARING: 

An order granting the application 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 13, 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, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090; 

Applicants, 44 Montgomery Street, 

Suite 2100, San Francisco, California 

94104. 

FOR FURTHER INFORMATION CONTACT: 

Keith A. Gregory, Senior Counsel at 

(202) 551–6815, or Mary Kay Frech, 

Branch Chief, at (202) 551–6820 

(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 registered as an openend management investment company 

and is organized as a Delaware statutory 

trust that will offer an unlimited 

number of series. The Trust initially 

will offer one series (‘‘Initial Fund’’) 

whose performance will correspond 

generally to the total return of a 

specified fixed income securities index 

(‘‘Underlying Index’’).1

2. Applicants request that the order 

apply to the Initial Fund and any 

additional series of the Trust and any 

other open-end management investment 

companies or series thereof, that may be 

created in the future and that track a 

specified fixed income securities 

Underlying Index (‘‘Future Funds’’).2

Any Future Fund will be (a) advised by 

the Adviser or an entity controlling, 

controlled by, or under common control 

with the Adviser, and (b) comply with 

the terms and conditions of the 

application. Future Funds may be based 

on Underlying Indexes comprised of 

domestic fixed income securities 

(‘‘Domestic Funds’’) or Underlying 

Indexes comprised of global or 

international fixed income securities 

(‘‘Global Funds’’). The Initial Fund and 

Future Funds, together, are the 

‘‘Funds.’’ 3

3. The Adviser is registered as an 

investment adviser under the 

Investment Advisers Act of 1940 (the 

‘‘Advisers Act’’), and will serve as 

investment adviser to the Funds. The 

Adviser may enter into sub-advisory 

agreements with one or more 

investment advisers each of which will 

serve as a sub-adviser to a Fund (each, 

a ‘‘Subadviser’’). Each Subadviser will be 

registered under the Advisers Act. The 

Distributor is a broker-dealer registered 

under the Securities Exchange Act of 

1934 (the ‘‘Exchange Act’’) and will act 

as the principal underwriter and 

distributor for the Creation Units of 

Shares. 

4. Each Fund will consist of a 

portfolio of securities (‘‘Portfolio 

Securities’’) selected to correspond 

generally to the total return of a 

specified fixed income Underlying 

Index. No entity that creates, compiles, 

sponsors or maintains an Underlying 

Index (‘‘Index Provider’’) is or will be an 

affiliated person, as defined in section 

2(a)(3) of the Act, or an affiliated person 

of an affiliated person, of the Trust, a 

Fund, the Adviser, any Subadviser, or 

promoter of a Fund, or of the 

Distributor. 

5. The investment objective of each 

Fund will be to provide investment 

results that closely correspond to the 

total return of its Underlying Index.4

The value of the Underlying Index will 

be disseminated once each ‘‘Business 

Day,’’ which is defined as any day that 

a Fund is required to be open under 

section 22(e) of the Act, at the end of the 

Business Day. A Fund will utilize either 

a replication or representative sampling 

strategy to track its Underlying Index. A 

Fund using a replication strategy will 

invest in substantially all of the 

Component Securities in its Underlying 

Index in the same approximate 

proportions as in the Underlying Index. 

A Fund using a representative sampling 

strategy will attempt to match the risk 

and return characteristics of a Fund’s 

portfolio to the risk and return 

characteristics of its Underlying Index.5

Applicants state that use of the 

representative sampling strategy may 

prevent a Fund from tracking the 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

71748 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

6Each Fund will sell and redeem Creation Units 

only on a Business Day. Each Business Day, prior 

to the opening of trading on the ‘‘Primary Listing 

Exchange’’ (as defined below), a list of securities 

and the required number of shares of each Deposit 

Security to be included in the Creation Deposit for 

each Fund or cash information for each Fund, 

including when the purchase of Creation Units from 

the Fund is an All-Cash Payment (as defined 

below), will be made available. In addition, the AllCash Payment will be disclosed, if applicable. Any 

national securities exchange (as defined in section 

2(a)(26) of the Act) (‘‘Exchange’’) on which Shares 

are listed will disseminate, every 15 seconds during 

its regular trading hours, through the facilities of 

the Consolidated Tape, an amount per individual 

Share representing the sum of the estimated Cash 

Amount and the current value of the Deposit 

Securities. The Primary Listing Exchange is the 

Exchange on which the Shares of a Fund are 

primarily listed. 

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 cover the cost 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. DTC or DTC 

Participants will maintain records reflecting 

beneficial owners of Shares. 

9Applicants state that a cash-in-lieu amount will 

replace any ‘‘to-be-announced’’ (‘‘TBA’’) transaction 

that is listed as a Deposit Security or Redemption 

Security of any Fund. A TBA transaction is a 

method of trading mortgage-backed securities where 

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 a Redemption Security. 

10 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, the relevant 

Funds will comply with the conditions of rule 

144A. 

11The Deposit Securities and Redemption 

Securities may differ from each other (and from the 

Portfolio Securities) (a) to reflect minor differences 

performance of its Underlying Index 

with the same degree of accuracy as 

would a Fund that invests in every 

Component Security of the Underlying 

Index. Applicants expect that each Fund 

will have a tracking error relative to the 

performance of its Underlying Index of 

less than 5 percent. 

6. Creation Units are expected to 

consist of 100,000 Shares and to have an 

initial price in the range of $1,000,000 

to $10,000,000. All orders to purchase 

Creation Units must be placed with the 

Distributor by or through a party that 

has entered into an agreement with the 

Distributor (‘‘Authorized Participant’’). 

The Distributor will be responsible for 

transmitting the orders to the Funds. An 

Authorized Participant must be a 

participant in the Depository Trust 

Company (‘‘DTC’’, and such participant, 

‘‘DTC Participant’’). Shares of the Fund 

generally will be sold in Creation Units 

in exchange for an in-kind deposit by 

the purchaser of a portfolio of fixedincome securities designated by the 

Adviser to correspond generally to the 

total return of the relevant Underlying 

Index (the ‘‘Deposit Securities’’), 

together with the deposit of a specified 

cash payment (‘‘Cash Amount’’ and 

collectively with the Deposit Securities, 

‘‘Creation Deposit’’). The Cash Amount 

is an amount equal to the difference 

between (a) the net asset value (‘‘NAV’’) 

(per Creation Unit) of a Fund and (b) the 

total aggregate market value (per 

Creation Unit) of the Deposit 

Securities.6 Each Fund may permit a 

purchaser of Creation Units to substitute 

cash in lieu of depositing some or all of 

the Deposit Securities if the method 

would reduce the Fund’s transaction 

costs or enhance the Fund’s operating 

efficiency. To preserve maximum 

efficiency and flexibility, a Fund 

reserves the right to accept and deliver 

Creation Units entirely for cash (‘‘AllCash Payment’’). 

7. An investor acquiring or redeeming 

a Creation Unit from a Fund will be 

charged a fee (‘‘Transaction Fee’’) to 

prevent the dilution of the interests of 

the remaining shareholders resulting 

from costs in connection with the 

purchase or redemption of Creation 

Units.7 The Distributor also will be 

responsible for delivering the Fund’s 

prospectus to those persons acquiring 

Shares in Creation Units and for 

maintaining records of both the orders 

placed with it and the confirmations of 

acceptance furnished by it. In addition, 

the Distributor will maintain a record of 

the instructions given to the applicable 

Fund to implement the delivery of its 

Shares. 

8. 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 an 

Exchange. It is expected that one or 

more member firms of an Exchange will 

be designated to act as a market maker 

(each, a ‘‘Market Maker’’) and maintain 

a market for Shares trading on the 

Exchange. Prices of Shares trading on an 

Exchange will be based on the current 

bid/ask market. Shares sold in the 

secondary market will be subject to 

customary brokerage commissions and 

charges. 

9. Applicants expect that purchasers 

of Creation Units will include 

institutional investors and arbitrageurs 

(which could include institutional 

investors). Authorized Participants also 

may purchase Creation Units for use in 

market-making activities. Applicants 

expect that secondary market 

purchasers of Shares will include both 

institutional investors and retail 

investors.8 Applicants expect that the 

price at which Shares trade will be 

disciplined by arbitrage opportunities 

created by the option to continually 

purchase or redeem Creation Units at 

their NAV, which should ensure that 

Shares will not trade at a material 

discount or premium in relation to their 

NAV. 

10. Shares will not be individually 

redeemable, and owners of Shares may 

acquire those Shares from the Fund, or 

tender such Shares for redemption to 

the Fund, in Creation Units only. To 

redeem, an investor will have to 

accumulate enough Shares to constitute 

a Creation Unit. Redemption orders 

must be placed by or through an 

Authorized Participant. An investor 

redeeming a Creation Unit generally 

will receive (a) Portfolio Securities 

designated to be delivered for 

redemptions (‘‘Redemption Securities’’) 

on the date that the request for 

redemption is submitted and (b) a ‘‘Cash 

Redemption Payment,’’ consisting of an 

amount calculated in the same manner 

as the Cash Amount, although the actual 

amount of the Cash Redemption 

Payment may differ if the Redemption 

Securities are not identical to the 

Deposit Securities on that day. An 

investor may receive the cash equivalent 

of a Redemption Security in certain 

circumstances, such as if the investor is 

constrained from effecting transactions 

in the security by regulation or policy.9

A redeeming investor may pay a 

Transaction Fee, calculated in the same 

manner as a Transaction Fee payable in 

connection with purchases of Creation 

Units. 

11. Applicants state that in accepting 

Deposit Securities and satisfying 

redemptions with Redemption 

Securities, the relevant Funds will 

comply with the federal securities laws, 

including that the Deposit Securities 

and Redemption Securities are sold in 

transactions that would be exempt from 

registration under the Securities Act of 

1933 (‘‘Securities Act’’).10 The specified 

Deposit Securities and Redemption 

Securities either (a) will correspond pro 

rata to the Portfolio Securities of a Fund, 

or (b) will not correspond pro rata to the 

Portfolio Securities, provided that the 

Deposit Securities and Redemption 

Securities (i) Consist of the same 

representative sample of Portfolio 

Securities designed to generate 

performance that is highly correlated to 

the performance of the Portfolio 

Securities, (ii) consist only of securities 

that are already included among the 

existing Portfolio Securities, and (iii) are 

the same for all Authorized Participants 

on a given Business Day.11

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 71749 

when it is not possible to break up bonds beyond 

certain minimum sizes needed for transfer and 

settlement, or (b) for temporary periods to effect 

changes in the Portfolio Securities as a result of the 

rebalancing of an Underlying Index. 

12Applicants acknowledge that no relief obtained 

from the requirements of section 22(e) will affect 

Continued 

12. Neither the Trust nor any 

individual Fund will be marketed or 

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

fund. Instead, each Fund will be 

marketed as an ‘‘ETF,’’ an ‘‘investment 

company,’’ a ‘‘fund,’’ or a ‘‘trust.’’ All 

marketing materials that describe the 

features or method of obtaining, buying 

or selling Creation Units or Shares 

traded on an Exchange, or refer to 

redeemability, will prominently 

disclose that Shares are not individually 

redeemable and that the owners of 

Shares may purchase or redeem Shares 

from the Fund in Creation Units only. 

The same approach will be followed in 

the shareholder reports and investor 

educational materials issued or 

circulated in connection with the 

Shares. The Funds will provide copies 

of their annual and semi-annual 

shareholder reports to DTC Participants 

for distribution to shareholders. 

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 provisions 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 owner, upon its 

presentation to the issuer, is entitled to 

receive approximately his proportionate 

share of the issuer’s current net assets, 

or the cash equivalent. Because Shares 

will not be individually redeemable, 

applicants request an order that would 

permit the Funds to register as open-end 

management investment companies and 

issue Shares that are redeemable in 

Creation Units only. Applicants state 

that investors may purchase Shares in 

Creation Units and redeem Creation 

Units from each Fund. Applicants state 

that because Creation Units may always 

be purchased and redeemed at NAV, the 

market price of the Shares should not 

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, not at a current 

offering price described in a Fund’s 

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, 

and (c) ensure an orderly distribution of 

investment company shares by 

eliminating price competition from 

dealers offering shares at less than the 

published sales price and repurchasing 

shares at more than the published 

redemption price. 

6. Applicants believe that none of 

these purposes will be thwarted by 

permitting Shares to trade in the 

secondary market at negotiated prices. 

Applicants state that (a) secondary 

market trading in Shares does not 

involve a Fund as a party and will not 

result in dilution of an investment in 

Shares, and (b) to the extent different 

prices exist during a given trading day, 

or from day to day, such variances occur 

as a result of third party market forces, 

such as supply and demand. Therefore, 

applicants assert that secondary market 

transactions in Shares will not lead to 

discrimination or preferential treatment 

among purchasers. Finally, applicants 

contend that the proposed distribution 

system will be orderly because 

competitive forces will ensure that the 

difference between the market price of 

Shares and their NAV 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 

a security for redemption. Applicants 

observe that the settlement of 

redemptions of Creation Units of the 

Global Funds is contingent not only on 

the settlement cycle of the U.S. 

securities markets, but also on the 

delivery cycles present in international 

markets in which those Funds invest. 

Applicants have been advised that, 

under certain circumstances, the 

delivery cycles for transferring Portfolio 

Securities to redeeming investors, 

coupled with local market holiday 

schedules, will require a delivery 

process of up to 12 calendar days. 

Applicants therefore request relief from 

section 22(e) in order to provide for 

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 

Portfolio Securities of each Global Fund 

customarily clear and settle, but in all 

cases no later than 12 calendar days 

following the tender of a Creation 

Unit.12 With respect to Future Funds 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

71750 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

any obligations applicants may 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. 

13An ‘‘Acquiring Fund Affiliate’’ is the Acquiring 

Fund Adviser, Acquiring Fund SubAdviser(s), any 

Sponsor, promoter, or principal underwriter of a 

Fund, and any person controlling, controlled by, or 

under common control with any of those entities. 

A ‘‘Fund Affiliate’’ is the investment adviser, 

promoter, or principal underwriter of a Fund and 

any person controlling, controlled by or under 

common control with any of these entities. 

that are Global Funds, applicants seek 

the same relief from section 22(e) only 

to the extent that circumstances exist 

similar to those described in the 

application. 

8. Applicants submit that section 

22(e) was designed to prevent 

unreasonable, undisclosed and 

unforeseen delays in the actual payment 

of redemption proceeds. Applicants 

state that allowing redemption 

payments for Creation Units of a Fund 

to be made within the number of days 

indicated above would not be 

inconsistent with the spirit and intent of 

section 22(e). Applicants state that the 

SAI will disclose those local holidays 

(over the period of at least one year 

following the date of the SAI), if any, 

that are expected to prevent the delivery 

of redemption proceeds in seven 

calendar days, and the maximum 

number of days needed to deliver the 

proceeds for each affected Global Fund. 

Applicants are not seeking relief from 

section 22(e) with respect to Global 

Funds that do not effect creations and 

redemptions of Creation Units in-kind. 

Section 12(d)(1) 

9. Section 12(d)(1)(A) of the Act, in 

relevant part, prohibits a registered 

investment company from acquiring 

securities of an investment company if 

such 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 and 

any other broker-dealer from selling the 

investment company’s 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 an exemption 

to permit management investment 

companies (‘‘Acquiring Management 

Companies’’) and unit investment trusts 

(‘‘Acquiring 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 

Funds (collectively, ‘‘Acquiring Funds’’) 

to acquire shares of a Fund beyond the 

limits of section 12(d)(1)(A). In addition, 

applicants seek relief to permit a Fund 

or broker-dealer that is registered under 

the Exchange Act (‘‘Broker’’) to sell 

Shares to Acquiring Funds in excess of 

the limits of section 12(d)(1)(B). 

11. Each Acquiring Management 

Company will be advised by an 

investment adviser within the meaning 

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

‘‘Acquiring Fund Adviser’’) and may be 

sub-advised by one or more investment 

advisers within the meaning of section 

2(a)(20)(B) of the Act (each an 

‘‘Acquiring Fund SubAdviser’’). Any 

investment adviser to an Acquiring 

Fund will be registered under the 

Advisers Act. Each Acquiring Trust will 

be sponsored by a sponsor (‘‘Sponsor’’). 

12. Applicants submit that the 

proposed conditions to the requested 

relief adequately address the concerns 

underlying the limits in sections 

12(d)(1)(A) and (B), which include 

concerns about undue influence by a 

fund of funds over underlying funds, 

excessive layering of fees and overly 

complex fund structures. Applicants 

believe that the requested exemption is 

consistent with the public interest and 

the protection of investors. 

13. Applicants believe that neither the 

Acquiring Funds nor an Acquiring Fund 

Affiliate would be able to exert undue 

influence over the Funds.13 To limit the 

control that an Acquiring Fund may 

have over a Fund, applicants propose a 

condition prohibiting an Acquiring 

Fund Adviser or a Sponsor, any person 

controlling, controlled by, or under 

common control with the Acquiring 

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 

Acquiring Fund Adviser or Sponsor, or 

any person controlling, controlled by, or 

under common control with the 

Acquiring Fund Adviser or Sponsor 

(‘‘Acquiring Fund’s Advisory Group’’) 

from controlling (individually or in the 

aggregate) a Fund within the meaning of 

section 2(a)(9) of the Act. The same 

prohibition would apply to any 

Acquiring Fund SubAdviser, any person 

controlling, controlled by or under 

common control with the Acquiring 

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 Acquiring 

Fund SubAdviser or any person 

controlling, controlled by or under 

common control with the Acquiring 

Fund SubAdviser (‘‘Acquiring Fund’s 

SubAdvisory Group’’). Applicants 

propose other conditions to limit the 

potential for undue influence over the 

Funds, including that no Acquiring 

Fund or Acquiring Fund Affiliate 

(except to the extent it is acting in its 

capacity as an investment adviser to a 

Fund) will cause a Fund to purchase a 

security in an offering of securities 

during the existence of an underwriting 

or selling syndicate of which a principal 

underwriter is an Underwriting Affiliate 

(‘‘Affiliated Underwriting’’). An 

‘‘Underwriting Affiliate’’ is a principal 

underwriter in any underwriting or 

selling syndicate that is an officer, 

director, member of an advisory board, 

Acquiring Fund Adviser, Acquiring 

Fund SubAdviser, Sponsor, or employee 

of the Acquiring Fund, or a person of 

which any such officer, director, 

member of an advisory board, Acquiring 

Fund Adviser, Acquiring Fund 

SubAdviser, Sponsor, or employee is an 

affiliated person (except that any person 

whose relationship to the Fund is 

covered by section 10(f) of the Act is not 

an Underwriting Affiliate). 

14. Applicants assert that the 

proposed conditions address any 

concerns regarding excessive layering of 

fees. The board of directors or trustees 

of any Acquiring Management 

Company, including a majority of the 

disinterested directors or trustees, will 

find that the advisory fees charged to 

the Acquiring Management Company 

are based on services provided that will 

be in addition to, rather than 

duplicative of, services provided under 

the advisory contract(s) of any Fund in 

which the Acquiring Management 

Company may invest. In addition, 

except as provided in condition 13, an 

Acquiring Fund Adviser or a trustee 

(‘‘Trustee’’) or Sponsor of an Acquiring 

Trust will, as applicable, waive fees 

otherwise payable to it by the Acquiring 

Fund in an amount at least equal to any 

compensation (including fees received 

pursuant to any plan adopted by a Fund 

under rule 12b–1 under the Act) 

received by the Acquiring Fund 

Adviser, Trustee or Sponsor or an 

affiliated person of the Acquiring Fund 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 71751 

14Any references to NASD Conduct Rule 2830 

include any successor or replacement rule to NASD 

Conduct Rule 2830 that may be adopted by FINRA. 

15Applicants believe that an Acquiring Fund 

likely will purchase Shares of the Funds in the 

secondary market and will not purchase or redeem 

Creation Units directly from a Fund. However, the 

requested relief would apply to direct sales of 

Shares in Creation Units by a Fund to an Acquiring 

Fund and redemptions of those Shares. The 

requested relief is intended to cover the in-kind 

transactions that would accompany such sales and 

redemptions. 

16Applicants acknowledge that receipt of 

compensation by (a) an affiliated person of an 

Acquiring Fund, or an affiliated person of such 

person, for the purchase by the Acquiring 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 an Acquiring Fund may be 

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

Acquiring Fund Agreement also will include this 

acknowledgment. 

Adviser, Trustee or Sponsor, from the 

Funds in connection with the 

investment by the Acquiring Fund in 

the Fund. Applicants state that any sales 

charges or service fees charged with 

respect to shares of an Acquiring Fund 

will not exceed the limits applicable to 

a fund of funds set forth in NASD 

Conduct Rule 2830.14

15. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that no Fund may 

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 permitted by exemptive relief 

from the Commission permitting the 

Fund to purchase shares of other 

investment companies for short-term 

cash management purposes. To ensure 

that Acquiring Funds comply with the 

terms and conditions of the requested 

relief from section 12(d)(1), any 

Acquiring Fund that intends to invest in 

a Fund in reliance on the requested 

order will enter into an agreement 

(‘‘Acquiring Fund Agreement’’) between 

the Fund and the Acquiring Fund 

requiring the Acquiring Fund to adhere 

to the terms and conditions of the 

requested order. The Acquiring Fund 

Agreement also will include an 

acknowledgement from the Acquiring 

Fund that it may rely on the requested 

order only to invest in Funds and not 

in any other investment company. 

16. Applicants also note that a Fund 

may choose to reject a direct purchase 

of Shares in Creation Units by an 

Acquiring Fund. To the extent that an 

Acquiring Fund purchases Shares in the 

secondary market, a Fund would still 

retain its ability to reject initial 

purchases of Shares made in reliance on 

the requested order by declining to enter 

into the Acquiring Fund Agreement 

prior to any investment by an Acquiring 

Fund in excess of the limits of section 

12(d)(1)(A). 

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

17. Section 17(a) of the Act generally 

prohibits an affiliated person of a 

registered investment company, or an 

affiliated person of such a person 

(‘‘second-tier affiliate’’), from selling any 

security to or acquiring any security 

from the company. Section 2(a)(3) of the 

Act defines ‘‘affiliated person’’ to 

include (a) 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, (b) any person 5% or 

more of whose outstanding voting 

securities are directly or indirectly 

owned, controlled or held with the 

power to vote by the other person, and 

(c) 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. 

18. Applicants request an exemption 

from section 17(a) of the Act pursuant 

to sections 17(b) and 6(c) of the Act to 

permit persons to effectuate in-kind 

purchases and redemptions with a Fund 

when they are affiliated persons of the 

Fund or second-tier affiliates solely by 

virtue of one or more of the following: 

(a) Holding 5% or more, or in excess of 

25%, of the outstanding Shares of one 

or more Funds; (b) having an affiliation 

with a person with an ownership 

interest described in (a); or (c) holding 

5% or more, or more than 25%, of the 

shares of one or more other registered 

investment companies (or series thereof) 

advised by the Adviser. 

19. Applicants assert that no useful 

purpose would be served by prohibiting 

these types of affiliated persons from 

acquiring or redeeming Creation Units 

through ‘‘in-kind’’ transactions. The 

deposit procedures for both in kind 

purchases and in-kind redemptions of 

Creation Units will be the same for all 

purchases and redemptions. Deposit 

Securities and Redemption Securities 

will be valued in the same manner as 

Portfolio Securities. Therefore, 

applicants state that in-kind purchases 

and redemptions will afford no 

opportunity for the specified affiliated 

persons, or second-tier affiliates, of a 

Fund to effect a transaction detrimental 

to other holders of Shares. Applicants 

also believe that in-kind purchases and 

redemptions will not result in selfdealing or overreaching of the Fund. 

20. Applicants also seek relief from 

section 17(a) to permit a Fund that is an 

affiliated person of an Acquiring Fund 

to sell its Shares to and redeem its 

Shares from an Acquiring Fund, and to 

engage in the accompanying in-kind 

transactions with the Acquiring Fund.15

Applicants state that the terms of the 

transactions are fair and reasonable and 

do not involve overreaching. Applicants 

note that any consideration paid by an 

Acquiring Fund for the purchase or 

redemption of Shares directly from a 

Fund will be based on the NAV of the 

Fund.16 Applicants believe that any 

proposed transactions directly between 

the Funds and Acquiring Funds will be 

consistent with the policies of each 

Acquiring Fund. The purchase of 

Creation Units by an Acquiring Fund 

directly from a Fund will be 

accomplished in accordance with the 

investment restrictions of any such 

Acquiring Fund and will be consistent 

with the investment policies set forth in 

the Acquiring Fund’s registration 

statement. The Acquiring Fund 

Agreement will require any Acquiring 

Fund that purchases Creation Units 

directly from a Fund to represent that 

the purchase of Creation Units from a 

Fund by an Acquiring Fund will be 

accomplished in compliance with the 

investment restrictions of the Acquiring 

Fund and will be consistent with the 

investment policies set forth in the 

Acquiring Fund’s registration statement. 

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 Trust operates in 

reliance on the requested order, the 

Shares will be listed on an 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 Shares 

are not individually redeemable and 

that owners of Shares may acquire those 

Shares from a Fund and tender those 

Shares for redemption to a 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 the midpoint of the bid/ask spread at 

the time of the calculation of such NAV 

(‘‘Bid/Ask Price’’), and a calculation of 

the premium or discount of the market 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

71752 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

closing price or the Bid/Ask Price 

against such NAV. 

4. The requested relief to permit ETF 

operations will expire on the effective 

date of any Commission rule under the 

Act that provides relief permitting the 

operation of index-based exchangetraded funds. 

Section 12(d)(1) Relief 

5. The members of an Acquiring 

Fund’s Advisory Group will not control 

(individually or in the aggregate) a Fund 

within the meaning of section 2(a)(9) of 

the Act. The members of an Acquiring 

Fund’s SubAdvisory Group will not 

control (individually or in the aggregate) 

a 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 Acquiring 

Fund’s Advisory Group or the Acquiring 

Fund’s SubAdvisory Group, each in the 

aggregate, becomes a holder of more 

than 25% of the outstanding voting 

securities of a Fund, it will vote its 

Shares in the same proportion as the 

vote of all other holders of the Shares. 

This condition does not apply to the 

Acquiring Fund’s SubAdvisory Group 

with respect to a Fund for which the 

Acquiring Fund SubAdviser or a person 

controlling, controlled by, or under 

common control with the Acquiring 

Fund SubAdviser acts as the investment 

adviser within the meaning of section 

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

6. No Acquiring Fund or Acquiring 

Fund Affiliate will cause any existing or 

potential investment by the Acquiring 

Fund in a Fund to influence the terms 

of any services or transactions between 

the Acquiring Fund or an Acquiring 

Fund Affiliate and the Fund or a Fund 

Affiliate. 

7. The board of directors or trustees of 

an Acquiring Management Company, 

including a majority of the disinterested 

directors or trustees, will adopt 

procedures reasonably designed to 

ensure that the Acquiring Fund Adviser 

and any Acquiring Fund SubAdviser are 

conducting the investment program of 

the Acquiring Management Company 

without taking into account any 

consideration received by the Acquiring 

Management Company or an Acquiring 

Fund Affiliate from a Fund or a Fund 

Affiliate in connection with any services 

or transactions. 

8. Once an investment by an 

Acquiring Fund in Shares exceeds the 

limits in section 12(d)(1)(A)(i) of the 

Act, the board of trustees of the Trust 

(‘‘Board’’), including a majority of the 

disinterested trustees, will determine 

that any consideration paid by the Fund 

to an Acquiring Fund or an Acquiring 

Fund Affiliate in connection with any 

services or transactions: (a) Is fair and 

reasonable in relation to the nature and 

quality of the services and benefits 

received by the Fund; (b) is within the 

range of consideration that the Fund 

would be required to pay to another 

unaffiliated entity in connection with 

the same services or transactions; and 

(c) 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 and its investment adviser(s), or 

any person controlling, controlled by, or 

under common control with such 

investment adviser(s). 

9. No Acquiring Fund or Acquiring 

Fund Affiliate (except to the extent it is 

acting in its capacity as an investment 

adviser to a Fund) will cause the Fund 

to purchase a security in any Affiliated 

Underwriting. 

10. The Board, including a majority of 

the disinterested trustees, will adopt 

procedures reasonably designed to 

monitor any purchases of securities by 

the Fund in an Affiliated Underwriting, 

once an investment by an Acquiring 

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 

Acquiring Fund in the Fund. The Board 

will consider, among other things: (a) 

Whether the purchases were consistent 

with the investment objectives and 

policies of the Fund; (b) 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 (c) 

whether the amount of securities 

purchased by the 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 of the Fund. 

11. Each 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 an Acquiring 

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 determinations of the Board were 

made. 

12. Before investing in Shares in 

excess of the limits in section 

12(d)(1)(A), each Acquiring Fund and 

the Fund will execute an Acquiring 

Fund Agreement stating, without 

limitation, that their boards of directors 

or trustees and their investment 

adviser(s) or their Sponsors or Trustees, 

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 in excess of the limit in section 

12(d)(1)(A)(i), an Acquiring Fund will 

notify the Fund of the investment. At 

such time, the Acquiring Fund will also 

transmit to the Fund a list of the names 

of each Acquiring Fund Affiliate and 

Underwriting Affiliate. The Acquiring 

Fund will notify the Fund of any 

changes to the list of names as soon as 

reasonably practicable after a change 

occurs. The Fund and the Acquiring 

Fund will maintain and preserve a copy 

of the order, the Acquiring Fund 

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. 

13. The Acquiring Fund Adviser, 

Trustee or Sponsor, as applicable, will 

waive fees otherwise payable to it by the 

Acquiring Fund in an amount at least 

equal to any compensation (including 

fees received pursuant to any plan 

adopted under rule 12b–1 under the 

Act) received from the Fund by the 

Acquiring Fund Adviser, Trustee or 

Sponsor, or an affiliated person of the 

Acquiring Fund Adviser, Trustee or 

Sponsor, other than any advisory fees 

paid to the Acquiring Fund Adviser, 

Trustee, or Sponsor, or its affiliated 

person by the Fund, in connection with 

the investment by the Acquiring Fund 

in the Fund. Any Acquiring Fund 

SubAdviser will waive fees otherwise 

payable to the Acquiring Fund 

SubAdviser, directly or indirectly, by 

the Acquiring Management Company in 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

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