51068 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 

1NETS Trust, et al., Investment Company Act 

Release Nos. 28166 (Feb. 25, 2008) (notice) and 

28195 (Mar. 17, 2008) (order). 

at 202–789–6873 or via electronic mail 

at prc-webmaster@prc.gov. 

The appeal and all related documents 

are also available for public inspection 

in the Commission’s docket section. 

Docket section hours are 8 a.m. to 4:30 

p.m., eastern time, Monday through 

Friday, except on Federal government 

holidays. Docket section personnel may 

be contacted via electronic mail at prcdockets@prc.gov or via telephone at 

202–789–6846. 

Filing of documents. All filings of 

documents in this case shall be made 

using the Internet (Filing Online) 

pursuant to Commission rules 9(a) and 

10(a) at the Commission’s Web site, 

http://www.prc.gov, unless a waiver is 

obtained. See 39 CFR 3001.9(a) and 

3001.10(a). Instructions for obtaining an 

account to file documents online may be 

found on the Commission’s Web site or 

by contacting the Commission’s docket 

section at prc-dockets@prc.gov or via 

telephone at 202–789–6846. 

The Commission reserves the right to 

redact personal information which may 

infringe on an individual’s privacy 

rights from documents filed in this 

proceeding. 

Intervention. Persons, other than 

Petitioner and respondent, wishing to be 

heard in this matter are directed to file 

a notice of intervention. See 39 CFR 

3001.111(b). Notices of intervention in 

this case are to be filed on or before 

September 6, 2011. A notice of 

intervention shall be filed using the 

Internet (Filing Online) at the 

Commission’s Web site unless a waiver 

is obtained for hardcopy filing. See 39 

CFR 3001.9(a) and 3001.10(a). 

Further procedures. By statute, the 

Commission is required to issue its 

decision within 120 days from the date 

it receives the appeal. See 39 U.S.C. 

404(d)(5). A procedural schedule has 

been developed to accommodate this 

statutory deadline. In the interest of 

expedition, in light of the 120-day 

decision schedule, the Commission may 

request the Postal Service or other 

participants to submit information or 

memoranda of law on any appropriate 

issue. As required by the Commission 

rules, if any motions are filed, responses 

are due 7 days after any such motion is 

filed. See 39 CFR 3001.21. 

It is ordered: 

1. The Postal Service shall file the 

applicable administrative record 

regarding this appeal no later than 

August 25, 2011. 

2. Any responsive pleading by the 

Postal Service to this notice is due no 

later than August 25, 2011. 

3. The procedural schedule listed 

below is hereby adopted. 

4. Pursuant to 39 U.S.C. 505, James 

Waclawski is designated officer of the 

Commission (Public Representative) to 

represent the interests of the general 

public. 

5. The Secretary shall arrange for 

publication of this notice and order in 

the Federal Register. 

By the Commission. 

Ruth Ann Abrams, 

Acting Secretary. 

PROCEDURAL SCHEDULE

August 10, 

2011.

Filing of Appeal. 

August 25, 

2011.

Deadline for the Postal Service to file the applicable 

administrative record in 

this appeal. 

August 25, 

2011.

Deadline for the Postal Service to file any responsive 

pleading. 

September 6, 

2011.

Deadline for notices to intervene (see 39 CFR 

3001.111(b)). 

September 14, 

2011.

Deadline for Petitioner’s 

Form 61 or initial brief in 

support of petition (see 39 

CFR 3001.115(a) and (b)). 

October 4, 

2011.

Deadline for answering brief 

in support of the Postal 

Service (see 39 CFR 

3001.115(c)). 

October 19, 

2011.

Deadline for reply briefs in 

response to answering 

briefs (see 39 CFR 

3001.115(d)). 

October 26, 

2011.

Deadline for motions by any 

party requesting oral argument; the Commission will 

schedule oral argument 

only when it is a necessary addition to the written filings (see 39 CFR 

3001.116). 

November 28, 

2011.

Expiration of the Commission’s 120-day decisional 

schedule (see 39 U.S.C. 

404(d)(5)). 

[FR Doc. 2011–20875 Filed 8–16–11; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

29752; File No. 812–13773] 

Northern Trust Investments, N.A., et 

al.; Notice of Application 

August 10, 2011. 

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 

‘‘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 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. The order 

would supersede a prior order (the 

‘‘Prior Order’’).1

Applicants: Northern Trust 

Investments, Inc. (the ‘‘Adviser’’), 

FlexShares Trust (the ‘‘Trust’’) and 

Foreside Fund Services, LLC (the 

‘‘Distributor’’). 

DATES: Filing Dates: The application 

was filed on May 14, 2010, and 

amended on November 3, 2010, and 

August 2, 2011. 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 September 2, 2011, 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, 


Emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 51069 

2Markit North America, Inc. (‘‘Markit’’) and 

Morningstar Inc. (‘‘Morningstar’’) will serve as 

index providers for the Initial Funds. The Markit 

Underlying Indexes for the Initial Funds are iBoxx 

3-Year Target Duration TIPS Index, iBoxx 5-Year 

Target Duration TIPS Index, and iBoxx 7-Year 

Target Duration TIPS Index. The Morningstar 

Underlying Indexes for the Initial Funds are 

Morningside Global Upstream Natural Resources 

Index and Morningstar US Market Factor Tilt Index. 

Neither Markit nor Morningstar is affiliated with 

the Trust, the Adviser or the Distributor. 

3All 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 Investing Fund (as 

defined below) may rely on the order only to invest 

in Funds and not in any other registered investment 

company. 

4Each Fund will comply with the disclosure 

requirements adopted by the Commission in 

Investment Company Act Release No. 28584 (Jan. 

13, 2009) before offering Shares. 

5 Depositary Receipts are typically issued by a 

financial institution, a ‘‘depositary’’, and evidence 

ownership in a security or pool of securities that 

have been deposited with the depositary. No 

affiliated persons of applicants will serve as the 

depositary bank for any Depositary Receipts held by 

a Fund. 

6Applicants 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’’), in the case of 

International Funds, Component Securities and 

Depositary Receipts (defined below) representing 

such Component Securities, or in the case of certain 

Fixed Income Funds, in Component Securities and 

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. 

7Securities are selected for inclusion in a Fund 

following a representative sampling strategy to have 

aggregate investment characteristics (based on 

market capitalization and industry weightings), 

fundamental characteristics (such as return 

variability, duration maturity, earnings valuation 

and yield) and liquidity measures similar to those 

of the Fund’s Underlying Index taken in its entirety. 

NE., Washington, DC 20549–1090; 

Applicants, c/o Peter K. Ewing and 

Craig R. Carberry, Esq., 50 S. LaSalle 

Street, Chicago, IL 60603. 

FOR FURTHER INFORMATION CONTACT: 

Bruce R. MacNeil, Senior Counsel at 

(202) 551–6817, or Janet M. Grossnickle, 

Assistant Director, at (202) 551–6821 

(Division of Investment Management, 

Office of Investment Company 

Regulation). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

Web site by searching for the file 

number, or an applicant using the 

Company name box, at http://www.sec.

gov/search/search.htm or by calling 

(202) 551–8090. 

Applicants’ Representations 

1. The Trust is a newly organized 

Maryland statutory trust and will be 

registered under the Act as an open-end 

management investment company. The 

Trust initially will offer five series 

(‘‘Initial Funds’’) whose performance 

will correspond generally to the price 

and yield performance of a specified 

securities index (‘‘Underlying Index’’).2

2. Applicants request that the order 

apply to the Initial Fund and any future 

series of the Trust and any other openend management investment companies 

or series thereof, that may be created in 

the future and that track a specified 

index comprised solely of securities 

(‘‘Future Funds’’ and collectively with 

the Initial Fund, the ‘‘Funds’’).3 Any 

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 equity 

securities (‘‘Equity Funds’’), Underlying 

Indexes comprised of fixed income 

securities (‘‘Fixed Income Funds’’) or 

Underlying Indexes comprised of equity 

securities or fixed income securities 

traded in foreign markets (‘‘International 

Funds’’). The Funds may also invest in 

a combination of equity, fixed income 

and U.S. money market securities and/ 

or non-U.S. money market securities.4

Funds may also invest in ‘‘Depositary 

Receipts’’.5 A Fund will not invest in 

any Depositary Receipts that the 

Adviser or Subadviser deems to be 

illiquid or for which pricing information 

is not readily available. 

3. The Adviser is registered as an 

investment adviser under the 

Investment Advisers Act of 1940 (the 

‘‘Advisers Act’’), and subject to approval 

by the Board of Trustees of the Trust or 

a Fund (the ‘‘Board’’) 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 

Funds. 

4. Each Fund will consist of a 

portfolio of securities and other 

instruments (‘‘Portfolio Securities’’) 

selected to correspond generally to the 

price and yield performance of a 

specified 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 

price and yield performance of its 

Underlying Index.6 Each Fund will sell 

and redeem Creation Units on a 

‘‘Business Day,’’ which is defined as any 

day that a Fund is required to be open 

under section 22(e) of the Act. 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 

hold some, but not necessarily all of the 

Component Securities of its Underlying 

Index.7 Applicants state that use of the 

representative sampling strategy may 

prevent a Fund from tracking the 

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 at least 25,000 Shares and to 

have an initial price in the range of 

$625,000 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 inkind deposit by the purchaser of a 

portfolio of securities (the ‘‘Deposit 

Securities’’), designated by the Adviser, 

together with the deposit or refund of a 

specified cash payment (‘‘Cash 

Component’’ and collectively with the 

Deposit Securities, ‘‘Fund Deposit’’). 

The Cash Component 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 


Emcdonald on DSK2BSOYB1PROD with NOTICES
51070 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 

8On each Business Day, prior to the opening of 

trading on the ‘‘Exchange’’ (as defined below), a list 

of the names and the required number of shares of 

each Deposit Security to be included in the current 

Fund Deposit (based on the information at the end 

of the previous Business Day) for each Fund or cash 

information for each Fund, including when the 

purchase of Creation Units from the Fund is an AllCash Payment (as defined below), will be made 

available. In addition, the All-Cash 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 Association, an amount per 

individual Share representing the sum of the 

current value of the Deposit Securities and the 

estimated Cash Component. 

9Where 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. 

10Shares 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. 

11Applicants state that a cash-in-lieu amount will 

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

that is listed as a Deposit Security or Fund 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 Fund 

Security. 

12 In accepting Deposit Securities and satisfying 

redemptions with Fund 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. 13 In either case, the Deposit Securities and Fund 

Securities may differ from each other (and from the 

Portfolio Securities) (a) to reflect minor differences 

when it is not possible to break up bonds beyond 

certain minimum sizes needed for transfer and 

settlement, (b) for temporary periods to effect 

changes in the Portfolio Securities as a result of the 

rebalancing of an Underlying Index; or (c) in the 

case of equity securities, when rounding is 

necessary to eliminate fractional shares or lots that 

are not tradeable round lots. 

Unit) of the Deposit Securities.8 Each 

Fund may permit a purchaser of 

Creation Units to substitute cash in lieu 

of depositing some or all of the Deposit 

Securities, under certain circumstances. 

To preserve maximum efficiency and 

flexibility, a Fund reserves the right to 

accept and deliver Creation Units 

entirely for cash (‘‘All-Cash Payment’’), 

if doing so would reduce the Fund’s 

transaction costs or enhance the Fund’s 

operating efficiency. 

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.9 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 Exchange market makers (‘‘Market 

Makers’’), will be assigned to the Shares 

and maintain a market for Shares 

trading on the Exchange. Prices of 

Shares trading on an Exchange will be 

based on the current bid/offer 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. 

Market Makers 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.10 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 (‘‘Fund Securities’’) on the 

date that the request for redemption is 

submitted and (b) a ‘‘Cash Redemption 

Amount,’’ consisting of an amount 

calculated in the same manner as the 

Cash Amount. 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.11 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 Fund Securities, the 

relevant Funds will comply with the 

Federal securities laws, including that 

the Deposit Securities and Fund 

Securities are sold in transactions that 

would be exempt from registration 

under the Securities Act of 1933 

(‘‘Securities Act’’).12 The specified 

Deposit Securities and Fund 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 Fund 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.13

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 ‘‘exchange-traded fund’’ 

or an ‘‘ETF.’’ 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 


Emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 51071 

14Applicants acknowledge that no relief obtained 

from the requirements of section 22(e) will affect 

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. 

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 

International 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 14 calendar days. 

Applicants therefore request relief from 

section 22(e) in order to provide for 

payment or satisfaction of redemptions 

within a longer number of calendar days 

as required for such payment or 

satisfaction in the principal local 

markets where transactions in the 

Portfolio Securities of each International 

Fund customarily clear and settle, but in 

all cases no later than 14 calendar days 

following the tender of a Creation 

Unit.14 With respect to Future Funds 

that are International 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 International 

Fund. Applicants are not seeking relief 

from section 22(e) with respect to 

International 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 


Emcdonald on DSK2BSOYB1PROD with NOTICES
51072 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 

15An ‘‘Investing Fund Affiliate’’ is the Investing 

Fund Adviser, Investing Fund Subadviser(s), any 

Sponsor, promoter, or principal underwriter of an 

Investing 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. 

16Any references to NASD Conduct Rule 2830 

include any successor or replacement rule to NASD 

Conduct Rule 2830 that may be adopted by 

Financial Industry Regulatory Authority. 

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 (‘‘Investing Management 

Companies’’) and unit investment trusts 

(‘‘Investing 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, 

‘‘Investing 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 

Investing Funds in excess of the limits 

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

11. Each Investing Management 

Company will be advised by an 

investment adviser within the meaning 

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

‘‘Investing 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 a ‘‘Investing 

Fund Subadviser’’). Any investment 

adviser to an Investing Fund will be 

registered under the Advisers Act. Each 

Investing 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 section 

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 

Investing Funds nor an Investing Fund 

Affiliate would be able to exert undue 

influence over the Funds.15 To limit the 

control that an Investing Fund may have 

over a Fund, applicants propose a 

condition prohibiting an Investing Fund 

Adviser or a Sponsor, any person 

controlling, controlled by, or under 

common control with the Investing 

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 

Investing Fund Adviser or Sponsor, or 

any person controlling, controlled by, or 

under common control with the 

Investing Fund Adviser or Sponsor 

(‘‘Investing 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 

Investing Fund Subadviser, any person 

controlling, controlled by or under 

common control with the Investing 

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 Investing 

Fund Subadviser or any person 

controlling, controlled by or under 

common control with the Investing 

Fund Subadviser (‘‘Investing Fund’s 

Subadvisory Group’’). Applicants 

propose other conditions to limit the 

potential for undue influence over the 

Funds, including that no Investing Fund 

or Investing 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, 

Investing Fund Adviser, Investing Fund 

Subadviser, Sponsor, or employee of the 

Investing Fund, or a person of which 

any such officer, director, member of an 

advisory board, Investing Fund Adviser, 

Investing 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 Investing Management Company, 

including a majority of the disinterested 

directors or trustees, will find that the 

advisory fees charged to the Investing 

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 

Investing Management Company may 

invest. In addition, under condition B.5, 

an Investing Fund Adviser or a trustee 

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

Trust will, as applicable, waive fees 

otherwise payable to it by the Investing 

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 Investing Fund Adviser, 

Trustee or Sponsor or an affiliated 

person of the Investing Fund Adviser, 

Trustee or Sponsor, from the Funds in 

connection with the investment by the 

Investing Fund in the Fund. Applicants 

state that any sales charges or service 

fees charged with respect to shares of an 

Investing Fund will not exceed the 

limits applicable to a fund of funds set 

forth in NASD Conduct Rule 2830.16

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 Investing Funds comply with the 

terms and conditions of the requested 

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

Investing Fund that intends to invest in 

a Fund in reliance on the requested 

order will enter into an agreement 

(‘‘FOF Participation Agreement’’) 

between the Fund and the Investing 

Fund requiring the Investing Fund to 

adhere to the terms and conditions of 

the requested order. The FOF 

Participation Agreement also will 

include an acknowledgement from the 

Investing 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 


Emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 51073 

17Applicants believe that an Investing 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 Investing 

Fund and redemptions of those Shares. The 

requested relief is intended to cover the 

transactions that would accompany such sales and 

redemptions. 

18Applicants acknowledge that receipt of 

compensation by (a) an affiliated person of an 

Investing Fund, or an affiliated person of such 

person, for the purchase by the Investing 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 Investing Fund may be 

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

Participation Agreement also will include this 

acknowledgment. 

Investing Fund. To the extent that an 

Investing 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 FOF Participation Agreement 

prior to any investment by an Investing 

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 the 

Trust or 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. The 

composition of a Fund Deposit made by 

a purchaser or Fund Redemption given 

to a redeeming investor (except for any 

cash in lieu amounts) on any Business 

Day will be the same regardless of the 

investor’s identity, and Fund Deposits 

and Fund Redemptions 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 secondtier 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 self-dealing 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 Investing Fund to 

sell its Shares to and redeem its Shares 

from an Investing Fund, and to engage 

in the accompanying in-kind 

transactions with the Investing Fund.17

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 

Investing Fund for the purchase or 

redemption of Shares directly from a 

Fund will be based on the NAV of the 

Shares.18 Applicants believe that any 

proposed transactions directly between 

the Funds and Investing Funds will be 

consistent with the policies of each 

Investing Fund. The purchase of 

Creation Units by an Investing Fund 

directly from a Fund will be 

accomplished in accordance with the 

investment restrictions of any such 

Investing Fund and will be consistent 

with the investment policies set forth in 

the Investing Fund’s registration 

statement. The FOF Participation 

Agreement will require any Investing 

Fund that purchases Creation Units 

directly from a Fund to represent that 

the purchase of Creation Units from a 

Fund by an Investing Fund will be 

accomplished in compliance with the 

investment restrictions of the Investing 

Fund and will be consistent with the 

investment policies set forth in the 

Investing 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: 

A. ETF Relief 

1. As long as the Trust operates in 

reliance on the requested order, the 

Shares of the Funds 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 the following 

information, 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 

closing price or 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. 

B. Section 12(d)(1) Relief 

1. The members of an Investing 

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 Investing 

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 Shares of a 

Fund, the Investing Fund’s Advisory 

Group or the Investing Fund’s 

Subadvisory Group, each in the 

aggregate, becomes a holder of more 

than 25% of the outstanding Shares of 

a Fund, it will vote its Shares in the 

same proportion as the vote of all other 

holders of the Fund’s Shares. This 

condition does not apply to the 

Investing Fund’s Subadvisory Group 

with respect to a Fund for which the 

Investing Fund Subadviser or a person 

controlling, controlled by, or under 

common control with the Investing 

Fund Subadviser acts as the investment 

adviser within the meaning of section 

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

2. No Investing Fund or Investing 

Fund Affiliate will cause any existing or 


Emcdonald on DSK2BSOYB1PROD with NOTICES
51074 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 

potential investment by the Investing 

Fund in a Fund to influence the terms 

of any services or transactions between 

the Investing Fund or an Investing Fund 

Affiliate and the Fund or a Fund 

Affiliate. 

3. The board of directors or trustees of 

an Investing Management Company, 

including a majority of the disinterested 

directors or trustees, will adopt 

procedures reasonably designed to 

ensure that the Investing Fund Adviser 

and any Investing Fund Subadviser are 

conducting the investment program of 

the Investing Management Company 

without taking into account any 

consideration received by the Investing 

Management Company or an Investing 

Fund Affiliate from a Fund or a Fund 

Affiliate in connection with any services 

or transactions. 

4. Once an investment by an Investing 

Fund in Fund Shares exceeds the limit 

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

board of trustees of the Fund (‘‘Board’’), 

including a majority of the disinterested 

Board members, will determine that any 

consideration paid by the Fund to an 

Investing Fund or an Investing 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). 

5. The Investing Fund Adviser, 

Trustee or Sponsor, as applicable, will 

waive fees otherwise payable to it by the 

Investing 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 from a Fund by 

the Investing Fund Adviser, Trustee or 

Sponsor, or an affiliated person of the 

Investing Fund Adviser, Trustee or 

Sponsor, other than any advisory fees 

paid to the Investing Fund Adviser, or 

Trustee or Sponsor, or its affiliated 

person by the Fund, in connection with 

the investment by the Investing Fund in 

the Fund. Any Investing Fund 

Subadviser will waive fees otherwise 

payable to the Investing Fund 

Subadviser, directly or indirectly, by the 

Investing Management Company in an 

amount at least equal to any 

compensation received from a Fund by 

the Investing Fund Subadviser, or an 

affiliated person of the Investing Fund 

Subadviser, other than any advisory fees 

paid to the Investing Fund Subadviser 

or its affiliated person by the Fund, in 

connection with any investment by the 

Investing Management Company in the 

Fund made at the direction of the 

Investing Fund Subadviser. In the event 

that the Investing Fund Subadviser 

waives fees, the benefit of the waiver 

will be passed through to the Investing 

Management Company. 

6. No Investing Fund or Investing 

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. 

7. The Board of the Fund, including 

a majority of the disinterested Board 

members, will adopt procedures 

reasonably designed to monitor any 

purchases of securities by the Fund in 

an Affiliated Underwriting, once an 

investment by an Investing Fund in 

Fund Shares 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 

Investing 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. 

8. 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 Investing 

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. 

9. Before investing in Fund Shares in 

excess of the limits in section 

12(d)(1)(A), an Investing Fund will 

execute a FOF Participation Agreement 

with the Fund stating, without 

limitation, 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 Fund Shares in excess of 

the limit in section 12(d)(1)(A)(i), an 

Investing Fund will notify the Fund of 

the investment. At such time, the 

Investing Fund will also transmit to the 

Fund a list of the names of each 

Investing Fund Affiliate and 

Underwriting Affiliate. The Investing 

Fund will notify the Fund of any 

changes to the list as soon as reasonably 

practicable after a change occurs. The 

Fund and the Investing 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. 

10. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Investing Management Company, 

including a majority of the 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 Investing 

Management Company may invest. 

These findings and their basis will be 

recorded fully in the minute books of 

the appropriate Investing Management 

Company. 

11. Any sales charges and/or service 

fees charged with respect to shares of an 

Investing Fund will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

12. No Fund will acquire securities of 

any investment company or company 


Emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 51075 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Securities Exchange Act Release No. 64719 

(June 22, 2011), 76 FR 37863 (‘‘Notice’’). 

5Under the proposal, CMMs can select the 

options classes to which they seek appointment, but 

the Exchange retains the authority to make such 

appointments and to remove appointments from 

CMMs based on their performance. Under the 

proposal, either the Exchange or a committee 

designated by the Board will be permitted to make 

appointments. 

6The Exchange will notify CMMs of the 

procedure for requesting changes to their 

appointments, including the length of advance 

notification required. The Exchange will establish 

the shortest advance notification period that is 

operationally feasible, such as a specific time on the 

day prior to the intended effectiveness of a change 

in a CMM’s appointments, or by a specified time 

prior to the opening on the same trading day. 

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. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20870 Filed 8–16–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65047; File No. SR– 

NYSEAmex–2011–56] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending NYSE Amex 

Options Rule 985NY To Permit 

Qualified Contingent Cross Orders To 

Be Electronically Submitted to the 

NYSE Amex System From the Floor of 

the Exchange for Potential Execution 

August 5, 2011. 

Correction 

In notice document 2011–20388 

appearing on pages 49812–49815 in the 

issue of August 11, 2011, make the 

following correction: 

On page 49815, in the third column, 

in the first full paragraph, in the last 

line, ‘‘August 31, 2011’’ should read 

‘‘September 1, 2011.’’ 

[FR Doc. C1–2011–20388 Filed 8–16–11; 8:45 am] 

BILLING CODE 1505–01–D 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65100; File No. SR–ISE– 

2011–33] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Order Granting Approval to a 

Proposed Rule Change Relating to 

Appointments to Competitive Market 

Makers 

August 11, 2011. 

I. Introduction 

On June 10, 2011, the International 

Securities Exchange, LLC (the 

‘‘Exchange’’ or the ‘‘ISE’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) 1 of the Securities Exchange Act 

of 1934 (‘‘Act’’) 2 and Rule 19b–4 

thereunder,3 a proposed rule change to 

revise the manner in which Competitive 

Market Makers are appointed to options 

classes. The proposed rule change was 

published for comment in the Federal 

Register on June 28, 2011.4 The 

Commission received no comments 

regarding the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposal 

The ISE’s membership is divided into 

three categories, Primary Market Makers 

(‘‘PMMs’’), Competitive Market Makers 

(‘‘CMMs’’) and Electronic Access 

Members. There are 10 PMM trading 

rights and 160 CMM trading rights 

(collectively ‘‘market maker rights’’). In 

order to access the Exchange as a market 

maker, a member must own or lease one 

or more market maker rights. EAMs are 

not required to purchase such a right in 

order to access the Exchange. Under the 

current structure, options traded on the 

Exchange are divided into 10 groups, 

with one of the 10 PMM trading rights 

and 16 of the 160 CMM trading rights 

appointed to each group. Thus, each 

PMM and CMM trading right is 

associated with a specific group of 

options. Under the existing structure, a 

member is required to own and/or lease 

10 CMM trading rights (one in each of 

the 10 options groups) in order to have 

the ability to make markets in all of the 

options classes traded on the Exchange. 

Moreover, because the number of 

options classes contained in each group 

varies, CMM trading rights currently 

represent 10 different levels of 

participation. 

The Exchange proposes to change the 

structure of CMM appointments to 

allow CMMs to seek appointment in the 

options classes listed on the Exchange 

across the groups of options assigned to 

particular PMMs. Under the proposal, 

the Exchange will assign points to each 

options class equal to its percentage of 

overall industry volume (not including 

exclusively-traded index options), 

rounded down to the nearest tenth of a 

percentage. A CMM will be able to seek 

appointments to options classes that 

total: (i) 20 points for the first CMM 

trading right it owns or leases; and (ii) 

10 points for the second and each 

subsequent CMM trading right it owns 

or leases.5 CMMs will be able to change 

their appointments at any time upon 

advance notification to the Exchange.6

The Exchange will provide members 

with a transition period of 30 to 60 days 

following approval of the proposed rule 

change. During the transition period, the 

Exchange will work with existing 

market makers to restructure their 

appointments within the new pointbased structure. 

The proposal seeks to standardize the 

level of access gained by owning or 

leasing a CMM trading right. In 

addition, the proposal will make 

additional memberships available. 

Specifically, by assigning 20 points to 

the first CMM trading right owned or 

leased by a member and 10 points to 

each subsequent CMM trading right 

owned or leased by the same member, 

only 9 CMM trading rights (instead of 

10) will be required to cover the entire 

ISE market. 

The Exchange also proposes to adjust 

its CMM quotation requirements to 

reflect the proposed elimination of 

specified groups of options associated 

with CMM trading rights. Under the 

current structure, CMMs are required to 

participate in the opening and provide 

continuous quotations in a minimum 

number of options classes in each of 

their assigned groups. Since CMMs will 

have the flexibility to choose the 

options classes to which they are 

appointed, rather than being appointed 

to a pre-determined group of options, 

the Exchange proposes to modify this 

requirement to limit the number of 

appointed options classes in which a 

CMM can initiate intraday quoting to 

the number of options classes in which 

it participates in the opening rotation. 

Under the current rules, a CMM is 

required to participate in the opening in 

60% of the options classes in its 

appointed group of options or 40 

options classes, whichever is lesser. If, 

for example, a CMM is appointed to a 

group with 100 options classes, then it 

must participate in the opening for 40 

options classes and may initiate intraday quoting in 60 options classes. Under 

the proposed structure, a CMM 

appointed to 100 options classes that 

participates in the opening in 40 options 


Emcdonald on DSK2BSOYB1PROD with NOTICES