7650 Federal Register / Vol. 80, No. 28 / Wednesday, February 11, 2015 / Notices 

1As defined in section 2(a)(43) of the Act, a 

‘‘wholly-owned subsidiary’’ of a person means a 

company 95% or more of the outstanding voting 

securities of which are owned by such person, or 

by a company which, within the meaning of this 

paragraph, is a wholly-owned subsidiary of such 

person. 

of the Adviser on a per Subadvised 

Series basis. The information will reflect 

the impact on profitability of the hiring 

or termination of any sub-adviser during 

the applicable quarter. 

9. Whenever a sub-adviser is hired or 

terminated, the Adviser will provide the 

Board with information showing the 

expected impact on the profitability of 

the Adviser. 

10. Whenever a sub-adviser change is 

proposed for a Subadvised Series with 

an Affiliated Sub-Adviser or a WhollyOwned Sub-Adviser, the Board, 

including a majority of the Independent 

Board Members, will make a separate 

finding, reflected in the Board minutes, 

that such change is in the best interests 

of the Subadvised Series and its 

shareholders, and does not involve a 

conflict of interest from which the 

Adviser or the Affiliated Sub-Adviser or 

Wholly-Owned Sub-Adviser derives an 

inappropriate advantage. 

11. No director, trustee or officer of a 

Subadvised Series, or partner, director, 

manager or officer of the Adviser, will 

own directly or indirectly (other than 

through a pooled investment vehicle 

that is not controlled by such person), 

any interest in a Sub-Adviser, except for 

(a) ownership of interests in the Adviser 

or any entity, other than a WhollyOwned Sub-Adviser, that controls, is 

controlled by, or is under common 

control with the Adviser, or (b) 

ownership of less than 1% of the 

outstanding securities of any class of 

equity or debt of a publicly traded 

company that is either a Sub-Adviser or 

an entity that controls, is controlled by, 

or is under common control with a SubAdviser. 

12. Each Subadvised Series will 

disclose the Aggregate Fee Disclosure in 

its registration statement. 

13. In the event the Commission 

adopts a rule under the Act providing 

substantially similar relief to that 

requested in the application, the 

requested order will expire on the 

effective date of that rule. 

14. Any new Sub-Advisory 

Agreement or any amendment to a 

Subadvised Series’ existing Investment 

Management Agreement or SubAdvisory Agreement that directly or 

indirectly results in an increase in the 

aggregate advisory rate payable by the 

Subadvised Series will be submitted to 

the Subadvised Series’ shareholders for 

approval. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–02745 Filed 2–10–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

31448; File No. 812–14407] 

NexPoint Credit Strategies Fund, et al.; 

Notice of Application 

February 5, 2015. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 17(b) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) granting an exemption from 

section 17(a) of the Act, and under 

section 17(d) of the Act and rule 17d– 

1 thereunder permitting certain joint 

transactions. 

APPLICANTS: NexPoint Credit Strategies 

Fund (‘‘NHF’’), NexPoint Residential 

Trust, Inc. (‘‘NXRT REIT’’), Freedom 

REIT, LLC (‘‘Freedom REIT’’) (each, a 

‘‘Fund,’’ and together, the ‘‘Funds’’), 

NexPoint Advisors, L.P. (‘‘NHF 

Adviser’’), and NexPoint Real Estate 

Advisors, L.P. (‘‘NXRT Adviser’’) (each, 

an ‘‘Adviser,’’ and together, the 

‘‘Advisers’’), NexPoint Residential Trust 

Operating Partnership, L.P. (‘‘NXRT 

OP’’), and NexPoint Residential Merger 

Company, LLC (‘‘NXRT LLC’’) 

(collectively, the ‘‘Applicants’’). 

SUMMARY: Summary of Application: 

Applicants seek an order to permit NHF 

to transfer certain real estate assets (the 

‘‘Multifamily Properties’’) held by 

Freedom REIT, NHF’s wholly-owned 

subsidiary, to NXRT REIT, a real estate 

investment trust (‘‘REIT’’) and NHF’s 

wholly-owned subsidiary, in exchange 

for NXRT REIT common stock; to permit 

NHF to distribute such common stock to 

NHF’s shareholders; and to permit 

NXRT Adviser to enter into an 

investment advisory agreement with 

NXRT REIT. 

DATES: Filing Dates: The application was 

filed on December 22, 2014 and 

amended on February 4, 2015. 

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 February 25, 2015 and 

should be accompanied by proof of 

service on the applicants, in the form of 

an affidavit, or, for lawyers, a certificate 

of service. Pursuant to Rule 0–5 under 

the Act, hearing requests should state 

the nature of the writer’s interest, any 

facts bearing upon the desirability of a 

hearing on the matter, 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. The 

Applicants: c/o David J. Harris, Esq., 

and Thomas J. Friedmann, Esq., Dechert 

LLP, 1900 K Street NW., Washington, 

DC 20006–6808. 

FOR FURTHER INFORMATION CONTACT: Anil 

K. Abraham, Senior Special Counsel, at 

(202) 551–2614, or James M. Curtis, 

Branch Chief, at (202) 551–6712 

(Division of Investment Management, 

Chief Counsel’s Office). 

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. NHF was organized as a Delaware 

statutory trust and is registered under 

the Act as a non-diversified, closed-end 

management investment company. NHF 

has elected to be treated as a regulated 

investment company (‘‘RIC’’) under 

Subchapter M of the Internal Revenue 

Code of 1986, as amended (the ‘‘Code’’). 

NHF’s investment objectives are to 

provide both current income and capital 

appreciation, which it seeks to achieve 

by investing primarily in bonds and 

other debt obligations, including belowinvestment grade debt obligations, and 

equity. 

2. Freedom REIT, a direct, whollyowned subsidiary 1 of NHF, was 

organized on October 12, 2012 as a 

Delaware limited liability company and 

subsequently elected to be treated as a 

REIT under section 856 of the Code. 

Freedom REIT is considered a single 

investment for purposes of determining 


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2An ‘‘interested person’’ is defined under section 

2(a)(19) of the Act to include, among other things, 

‘‘any affiliated person’’ of an investment company. 

Under section 2(a)(3) of the Act, an ‘‘affiliated 

person’’ of another person means (A) any person 

directly or indirectly owning, controlling, or 

holding with power to vote, 5 per centum or more 

of whose outstanding voting securities of such other 

person; (B) any person 5 per centum or more of 

whose outstanding voting securities are directly or 

indirectly owned, controlled or held with power to 

vote, by such other person; (C) any person directly 

or indirectly controlling, controlled by, or under 

common control with, such other person; (D) any 

officer, director, partner, copartner, or employee of 

such other person; (E) if such other person is an 

investment company, any investment adviser 

thereof or any member of an advisory board thereof; 

and (F) if such other person is an unincorporated 

investment company not having a board of 

directors, the depositor thereof. 

NHF’s compliance with its RIC 

diversification requirements and in 

NHF’s financial statements pursuant to 

rule 6–03 under the Securities Exchange 

Act of 1934 (‘‘Exchange Act’’). 

3. NXRT REIT was organized as a 

Maryland corporation and filed a 

registration statement on Form 10 on 

September 29, 2014 to register its shares 

under section 12(b) of the Exchange Act. 

NXRT REIT amended that registration 

statement on November 7, 2014 and 

January 9, 2015. On the effective date of 

the Spin-Off Transaction (defined 

below) (‘‘Effective Date’’), NHF Adviser 

intends to cause the shares of NXRT 

REIT to be listed on the New York Stock 

Exchange (‘‘NYSE’’). The business 

objectives of NXRT REIT are to: (a) 

Deliver stable, attractive yields and 

long-term capital appreciation to its 

shareholders; (b) acquire multifamily 

properties in markets with attractive job 

growth and household formation 

fundamentals primarily in the 

southeastern United States and Texas; 

(c) acquire assets significantly below 

replacement costs; (d) implement a 

value-add program to increase returns to 

shareholders; and (e) own assets that 

provide lifestyle amenities and 

upgraded living spaces to low and 

moderate income renters. 

4. NXRT OP was organized as a 

Delaware limited partnership and is 

wholly-owned by NXRT REIT. NXRT 

OP was formed solely to implement the 

Spin-Off Transaction and the 

subsequent operation of NXRT REIT’s 

business on a tax-efficient basis. 

5. NXRT LLC was organized as a 

Delaware limited liability company and 

is wholly-owned by Freedom REIT. 

NXRT LLC was formed solely to 

implement the Spin-Off Transaction on 

a tax-efficient basis. 

6. NHF Adviser was organized as a 

Delaware limited liability company and 

is registered as an investment adviser 

under the Investment Advisers Act of 

1940 (‘‘Advisers Act’’). NHF Adviser is 

wholly-owned by an affiliate of 

Highland Capital Management, L.P. 

(‘‘Highland’’). Highland is also 

registered as an investment adviser 

under the Advisers Act. NHF Adviser 

currently acts as the investment adviser 

to NHF pursuant to an investment 

advisory agreement (the ‘‘NHF Advisory 

Agreement’’) between NHF and NHF 

Adviser. NHF Adviser employs portfolio 

management team members that 

currently manage Freedom REIT’s 

portfolio. 

7. NXRT Adviser was organized as a 

Delaware limited partnership and is 

registered as an investment adviser 

under the Advisers Act and is a whollyowned subsidiary of NHF Adviser. 

Following the Spin-Off Transaction, 

NXRT Adviser will serve as the 

investment adviser to NXRT REIT 

pursuant to an investment advisory 

agreement (‘‘NXRT Advisory 

Agreement’’). Following the Spin-Off 

Transaction, the portfolio management 

team members that currently manage 

Freedom REIT’s portfolio will advise 

NXRT REIT as employees of NXRT 

Adviser. 

8. NHF’s current prospectus sets forth 

a non-fundamental policy of investing at 

least 80% of NHF’s assets in loans, 

bonds, debt obligations, and structured 

products under normal market 

conditions. NHF may invest up to 20% 

of its assets in other types of 

investments (the ‘‘20% Limit’’). 

Accordingly, NHF limits its investment 

in Freedom REIT to 20% of its total 

assets, or approximately $252 million as 

of December 31, 2014. As of that date, 

the value of the Multifamily Properties 

held by Freedom REIT was 

approximately $238 million, or 

approximately 19% of the total assets of 

NHF. Based on additional multifamily 

properties under contract and expected 

to close in the first quarter of 2015, 

Freedom REIT is expected to approach 

the 20% Limit in the first quarter of 

2015, at which time NHF will be unable 

to make additional investments in 

Freedom REIT. 

9. Without the consummation of the 

Spin-Off Transaction, NHF would be 

unable to invest in additional 

multifamily real estate properties for the 

benefit of its shareholders, and NHF 

Adviser would likely have to liquidate 

Freedom REIT’s Multifamily Properties 

over time in order to maximize 

shareholder value. NHF Adviser 

believes the terms that NHF would 

realize in connection with any such 

liquidation would be significantly less 

favorable to NHF shareholders than if 

the Multifamily Properties were spunoff in the Spin-Off Transaction. 

10. To enable NHF’s shareholders to 

determine whether and to what extent 

they will have exposure to multifamily 

real estate, the NHF Board (‘‘NHF 

Board’’), including a majority of the 

trustees who are not interested persons 2

(as defined in section 2(a)(19) of the 

Act) (the ‘‘Independent Trustees’’) of 

NHF, has approved the Spin-Off 

Transaction, subject to the issuance of 

the requested order and the approval of 

a majority of the outstanding voting 

securities (as defined in section 2(a)(42) 

of the Act) of NHF of the NXRT 

Advisory Agreement. If the required 

approvals are obtained, NHF will cause: 

(a) Freedom REIT to contribute the 

Multifamily Properties to NXRT LLC; (b) 

Freedom REIT to distribute all of its 

membership interests in NXRT LLC to 

NHF; and (c) NXRT LLC to merge with 

NXRT OP, a wholly-owned subsidiary 

of NXRT REIT. NXRT REIT’s acquisition 

of the Multifamily Properties will be 

consistent with its investment goals, 

policies, and restrictions. NHF will 

distribute all of the NXRT REIT shares 

on the Effective Date to NHF 

shareholders (with the Freedom REIT’s 

contribution of the Multifamily 

Properties to NXRT LLC, the 

distribution of the membership interests 

of NXRT LLC to NHF, the merger of 

NXRT LLC with NXRT OP and the 

execution of the NXRT Advisory 

Agreement, collectively, the ‘‘Spin-Off 

Transaction’’). 

11. Each NHF shareholder will 

receive a pro rata distribution of NXRT 

REIT shares based upon the number of 

NHF shares that each shareholder owns 

on the distribution record date. If such 

distribution had occurred on December 

31, 2014, the aggregate fair value of the 

shares of NXRT REIT distributed to NHF 

shareholders would have been $238 

million. 

12. The Advisers believe that the 

Spin-Off Transaction offers the most 

cost-effective and efficient means by 

which NHF shareholders can be given 

the opportunity to choose for 

themselves whether, and to what extent, 

they will continue NXRT REIT’s 

multifamily property investment 

strategy by continuing to hold the NXRT 

REIT shares they receive in the Spin-Off 

Transaction. At the same time, the SpinOff Transaction creates a cost-effective 

way for NHF shareholders who are not 

interested in having as much exposure 

to the multifamily real estate market to 

receive immediate liquidity for all or a 

portion of such assets. 

13. The Spin-Off Transaction will not 

be consummated unless and until each 

of the following approvals is obtained: 

(a) The NHF Board and a majority of the 


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Independent Trustees will approve the 

NXRT Advisory Agreement at an inperson meeting of the NHF Board that 

complies with the procedural 

requirements of section 15 of the Act; 

(b) NHF shareholder approval of the 

NXRT Advisory Agreement will be 

sought at a special meeting of NHF 

shareholders anticipated to be held in 

March 2014; and (c) the board of 

directors of NXRT REIT (‘‘NXRT 

Board’’), including a majority of the 

directors who are not interested persons 

(as defined in section 2(a)(19) of the 

Act) (the ‘‘Independent Directors’’) of 

NXRT, will ratify and approve the 

NXRT Advisory Agreement in 

accordance with the requirements of 

section 15(c) of the Act, and NXRT 

Adviser and NXRT REIT will comply 

with section 15 of the Act, as provided 

in the Condition below. 

14. The NHF Board, including its 

Independent Trustees, has considered 

that the Spin-Off Transaction should 

result in the following benefits to NHF 

shareholders: (a) NXRT REIT shares will 

be issued to investors at a lower 

transaction cost than is typically the 

case for a newly organized REIT because 

there will be no underwriting discounts 

or commissions incurred by NHF, NXRT 

REIT, or any shareholder thereof in 

connection with the Spin-Off 

Transaction; (b) NHF shareholders will 

not incur incremental investment 

advisory fees relating to the 

management of the Multifamily 

Properties as a result of the Spin-Off 

Transaction, neither of the Advisers is 

entitled to receive, either before or after 

the Spin-Off Transaction, a 

performance-based incentive fee, 

internalization fee, or any ‘‘break-up’’ or 

termination fees under their respective 

investment advisory contracts and the 

NXRT Advisory Agreement will contain 

the same terms for reimbursement of 

administrative costs and out-of-pocket 

expenses incurred by NXRT Adviser 

and its affiliates as are currently in place 

for NHF and NHF Adviser; (c) neither 

NHF Adviser nor NXRT Adviser will 

receive any compensation other than 

fees under the NHF Advisory 

Agreement or the NXRT Advisory 

Agreement in connection with the SpinOff Transaction; (d) although NXRT 

REIT will not be an investment 

company regulated under the Act, 

NXRT REIT will commit in its articles 

of incorporation that it will not enter 

into an investment advisory agreement 

unless that agreement complies with 

section 15 of the Act and has been 

approved in compliance with section 

15(c) of the Act and any applicable rules 

thereunder or published guidance of the 

Commission or its staff; (e) the 

Independent Directors will not overlap 

with the Independent Trustees; (f) the 

Spin-Off Transaction is not expected to 

increase or decrease the aggregate net 

assets of NHF and NXRT REIT; and (g) 

NHF shareholders will be able to 

maintain, increase or decrease their 

exposure to the multifamily property 

market by holding, buying, or selling, 

respectively, shares of NXRT REIT. 

15. The NXRT Advisory Agreement 

will be approved by a majority of the 

NXRT Board, as well as by a majority of 

the Independent Directors, at an inperson meeting called for such purpose. 

That agreement will have an initial term 

of up to two years, and will continue 

thereafter only if such continuance is 

approved in accordance with section 

15(c) of the Act. Any material change in 

the terms of the NXRT Advisory 

Agreement will require the approval of 

a majority of the outstanding voting 

securities (as defined in section 2(a)(42) 

of the Act) of NXRT REIT, and the 

NXRT Advisory Agreement will 

terminate in the event of its assignment 

(as defined in section 2(a)(4) of the Act). 

The NXRT Advisory Agreement will be 

terminable by the board or shareholders 

of NXRT REIT at any time on 60 days’ 

notice without penalty. NXRT REIT’s 

articles of incorporation will also 

require that a majority of its directors be 

Independent Directors. 

16. NHF Adviser believes that holding 

the Multifamily Properties in NXRT 

REIT instead of NHF may benefit 

shareholders by reducing a discount 

that may be attributable to such assets. 

NHF shares, like shares of many 

registered closed-end funds, have traded 

at a discount to net asset value (‘‘NAV’’). 

As of January 30, 2015, NHF shares 

were trading at a 14.3% discount to 

NAV, whereas REIT shares generally 

trade closer to their NAVs than 

registered closed-end funds such as 

NHF. Based upon historical and current 

relative trading values in the secondary 

market for REITs and closed-end funds, 

the Advisers anticipate that NXRT REIT 

common stock will trade at or near its 

implied NAV after the Spin-Off 

Transaction. If the common stock of 

NXRT REIT trades at its implied NAV 

following the Spin-Off Transaction, 

NHF shareholders would, in effect, have 

eliminated the discount on a portion of 

their NHF shares. In addition, the 

discount at which many closed-end 

fund shares trade limits a closed-end 

fund’s ability to raise incremental 

capital for investment, including 

investments necessary to fund capital 

expenditures in multifamily properties. 

NXRT REIT may be better able to realize 

the value of the Multifamily Properties 

than would NHF, absent the Spin-Off 

Transaction. The Applicants believe the 

Spin-Off Transaction is the most costeffective and efficient way to maximize 

value to NHF shareholders from the 

Multifamily Properties. 

17. Counsel has advised NXRT REIT 

that the distribution of shares of NXRT 

REIT to NHF shareholders likely will be 

a taxable event for NHF shareholders, 

but NHF Adviser estimates that the tax 

impact of the Spin-Off Transaction is 

likely to be modest. The realization of 

certain taxable gains at NHF are 

expected to be substantially offset by 

existing capital loss carry-forwards, 

scheduled to expire starting in 2015, to 

the extent that the Multifamily 

Properties have been held for more than 

one year. Any gain not offset by such 

capital loss carry-forwards will be 

recognizable by NHF shareholders to the 

extent it exceeds undistributed net 

income. Distributing such gains may 

permit NHF to avoid paying or to reduce 

federal excise tax on undistributed 

income. The NHF Board, including the 

Independent Trustees, has considered 

the potential tax consequences of the 

Spin-Off Transaction and has 

determined that the significant benefits 

of the Spin-Off Transaction outweigh 

the adverse tax consequences to NHF 

and its shareholders, particularly 

because such tax consequences are 

expected to be minimal. 

18. The costs of organizing NXRT 

REIT and effecting the distribution of 

NXRT REIT shares to NHF shareholders, 

including the fees and expenses of 

counsel and accountants and printing, 

listing and registration fees, the costs of 

soliciting NHF’s shareholders’ approval 

of the Transaction, and the costs 

incurred in connection with this 

Application, are estimated to be 

approximately $3 million. These 

expenses will be borne ratably by NHF 

and NXRT REIT, with such expense 

allocations subject to the approval of the 

Independent Trustees and Independent 

Directors. A portion of this amount 

represents costs that would have been 

incurred directly or indirectly in the 

ordinary course of operations by NHF. 

NXRT REIT will incur operating 

expenses on an ongoing basis, including 

investment advisory fees and legal, 

auditing, transfer agency, and custody 

expenses that, when aggregated with the 

fees payable by NHF for similar services 

after the Spin-Off Transaction, should 

be approximately the same as, or 

slightly higher (due to marginal 

duplication) than, the fees currently 

payable by NHF for such services. 

Under the terms of the NXRT Advisory 

Agreement, NXRT Adviser will not 

receive any fees for investment advisory 


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Federal Register / Vol. 80, No. 28 / Wednesday, February 11, 2015 / Notices 7653 

services prior to the Effective Date. If the 

Spin-Off Transaction is not completed 

by March 31, 2015, NHF will be 

obligated to pay approximately $5 

million in additional fees and expenses 

to the Federal Home Loan Mortgage 

Corporation when the mortgages on the 

Multifamily Properties are assigned. 

Applicants’ Legal Analysis 

1. Applicants request an order under 

section 17(b) of the Act granting an 

exemption from section 17(a) of the Act 

and under section 17(d) of the Act and 

rule17d–1 thereunder permitting certain 

joint transactions. 

2. Section 17(a) of the Act generally 

prohibits sales or purchases of securities 

between a registered investment 

company and an affiliated person of that 

investment company. Section 2(a)(3) of 

the Act defines an ‘‘affiliated person’’ of 

another 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 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. 

Each of Freedom REIT and NXRT REIT 

may be viewed as an affiliated person of 

NHF under section 2(a)(3) because NHF 

will own, directly or indirectly, 100% of 

the outstanding voting securities of each 

prior to the consummation of the SpinOff Transaction. Each of Freedom REIT 

and NXRT REIT may also be viewed as 

an affiliated person of NHF to the extent 

that they may be deemed to be under 

common control by virtue of having 

investment advisers that are under 

common control. As a result of the 

affiliation between NHF and each of 

Freedom REIT and NXRT REIT, section 

17(a)(1) could be deemed to prohibit (a) 

Freedom REIT’s contribution of the 

Multifamily Properties to NXRT REIT 

for shares issued by NXRT REIT and (b) 

Freedom REIT’s distribution to NHF of 

the NXRT REIT shares, and section 

17(a)(2) could be deemed to prohibit 

NXRT REIT from purchasing the 

Multifamily Properties in consideration 

for shares issued by NXRT REIT. 

3. Applicants request an exemption 

pursuant to section 17(b) of the Act from 

the provisions of section 17(a) to permit 

the Applicants to effect the Spin-Off 

Transaction. Section 17(b) authorizes 

the Commission to issue such an 

exemptive order if the Commission 

finds that the terms of the proposed 

transaction are fair and reasonable and 

do not involve overreaching on the part 

of any persons concerned, and the 

proposed transaction is consistent with 

the policy of each registered investment 

company and the general purposes of 

the Act. 

4. Applicants assert that the terms of 

the Spin-Off Transaction, including the 

consideration to be paid or received, are 

fair and reasonable and do not involve 

overreaching by any person concerned. 

Applicants state that the proposed 

contribution by Freedom REIT of the 

Multifamily Properties to NXRT REIT in 

exchange for shares of NXRT REIT 

common stock will not change the fair 

value of such assets as determined by 

NHF Adviser in accordance with the 

valuation policies established by, and 

subject to the supervision of, the NHF 

Board. Such valuations will be passed 

upon by the NHF Board and NXRT REIT 

Board (including the Independent 

Trustees and Independent Directors, 

respectively, thereon) on a business day 

to be selected by the NHF Board (the 

‘‘Valuation Date’’). As noted above, it is 

anticipated that such assets will consist 

largely of the Multifamily Properties, 

which have been held by Freedom REIT, 

on average, for several fiscal quarters 

and the valuation of which is well 

understood by NHF Adviser and the 

NHF Board. The shares of NXRT REIT 

that will be distributed to the NHF 

shareholders pro rata in the Spin-Off 

Transaction will be valued based on the 

value of NXRT REIT’s assets. 

5. The Spin-Off Transaction will be 

consistent with the investment policies 

of NHF and NXRT REIT, as will be fully 

disclosed to shareholders of NHF in the 

proxy statement seeking NHF 

shareholder approval of the NXRT 

Advisory Agreement (‘‘Proxy 

Statement’’) and as disclosed by NXRT 

REIT in its registration statement on 

Form 10. The Proxy Statement that will 

be used to solicit the approval of NHF’s 

shareholders for the NXRT Advisory 

Agreement will describe the investment 

objectives and policies of NHF and 

NXRT REIT, the management of NXRT 

REIT, and the terms of the Spin-Off 

Transaction. The Proxy Statement will 

be used to solicit the approval of NHF’s 

shareholders of the Spin-Off 

Transaction at shareholder meeting to 

take place following the issuance of the 

requested order. NHF’s shareholders 

will have the opportunity to vote after 

having received all material disclosure 

concerning the NXRT Advisory 

Agreement. The Spin-Off Transaction 

will not change the underlying assets 

owned by current NHF shareholders. 

However, following the Spin-Off 

Transaction certain of such assets, the 

Multifamily Properties, will be held 

through a REIT not regulated under the 

Act. The remaining assets will continue 

to be held through NHF, a closed-end 

management investment company 

regulated under the Act. 

6. The Applicants assert that the 

proposed Spin-Off Transaction is being 

proposed to benefit NHF and its 

shareholders. The NHF Board and the 

NXRT Board, including a majority of 

each’s Independent Trustees and 

Independent Directors, respectively, 

have each determined that participation 

in the Spin-Off Transaction is in the 

best interests of NHF and NXRT REIT, 

as applicable, and that the interests of 

the existing stockholders of NHF will 

not be diluted as a result of effecting the 

Spin-Off Transaction. Such findings, 

and the basis upon which the findings 

were made, will be recorded fully in the 

minute books of NHF and NXRT REIT. 

7. Applicants also seek an order under 

section 17(d) of the Act and rule 17d– 

1 thereunder. Section 17(d) of the Act 

and rule 17d–1 thereunder generally 

prohibit, among other things, 

transactions in which a registered 

investment company and any affiliated 

person of such a company may be 

deemed to be acting jointly and as 

principal. In passing on applications for 

these orders, rule 17d–1 provides that 

the Commission will consider whether 

the participation of the investment 

company is consistent with the 

provisions, policies and purposes of the 

Act, and the extent to which the 

participation is on a basis different from 

or less advantageous than that of the 

other participants. Applicants request 

an order pursuant to rule 17d–1 to the 

extent that the participation of the 

Applicants in the Spin-Off Transaction 

may be deemed to constitute a 

prohibited joint transaction. 

8. Applicants state that the Spin-Off 

Transaction will not place any of NHF, 

NXRT REIT or existing NHF 

shareholders in a position less 

advantageous than that of any other 

participant in the Spin-Off Transaction. 

The value of NHF’s assets transferred to 

NXRT REIT (and the shares of NXRT 

REIT stock received in return) will be 

based on their fair values as determined 

by the Advisers and the Boards of the 

Funds on the Valuation Date in 

accordance with the requirements of the 

Act and pursuant to valuation policies 

and procedures adopted by the Boards 

of NHF and NXRT REIT. The NXRT 

REIT shares will be distributed to NHF’s 

shareholders, leaving such shareholders 

in the same investment posture 

immediately following the Spin-Off 

Transaction as before, subject only to 

the allocation of transaction costs and 

expenses and changes in the market 


tkelley on DSK3SPTVN1PROD with NOTICES
7654 Federal Register / Vol. 80, No. 28 / Wednesday, February 11, 2015 / Notices 

1 15 U.S.C. 78k–1. 

2 17 CFR 242.608. 

3Securities Exchange Act Release No. 67457 (July 

18, 2012), 77 FR 45722 (August 1, 2012). 

4Pursuant to Section I(C) of the Selection NMS 

Plan, a ‘‘Bid’’ is a proposal submitted by a Bidder 

in response to the RFP. 

5See Securities Exchange Act Release No. 70892 

(Nov. 15, 2013), 78 FR 69910 (Nov. 21, 2013)(Notice 

of Selection NMS Plan). 

6 Id. 

7See Securities Exchange Act Release No. 71596 

(Feb. 21, 2014), 79 FR 11152 (Feb. 27, 

2014)(Approval Order). 

8See 17 CFR 242.608(a)(4) and (a)(5). 

9See Letter from the Participants to Brent J. 

Fields, Secretary, Commission, dated December 12, 

2014. 

prices of the underlying assets 

subsequent to the Spin-Off Transaction. 

9. Applicants assert that the Spin-Off 

Transaction is being proposed to benefit 

NHF shareholders. The advisory fees for 

NXRT REIT will be substantially similar 

to those paid by NHF prior to the SpinOff Transaction, and neither Adviser 

nor any affiliated person of NHF or 

NXRT REIT will receive additional fees 

on a consolidated basis solely as a result 

of the Spin-Off Transaction. The Board 

of NHF has determined that the 

prospective benefits to the Advisers 

would be marginal compared to the 

prospective benefits to NHF 

shareholders. In addition, by 

consummating the Spin-Off 

Transaction, NHF would enable its 

shareholders to receive securities 

without the costs associated with a 

public offering. 

Applicants’ Condition 

NXRT REIT will commit in its articles 

of incorporation that it will comply with 

section 15 of the Act as if it were an 

investment company registered under 

the Act, and that it will not enter into 

an investment advisory agreement 

unless that agreement complies with 

section 15 of the Act and any applicable 

rules thereunder or published guidance 

of the Commission or its staff. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–02796 Filed 2–10–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74223; File No. 4–668] 

Joint Industry Plan; Notice of 

Amendment to the National Market 

System Plan Governing the Process of 

Selecting a Plan Processor and 

Developing a Plan for the Consolidated 

Audit Trail by BATS Exchange, Inc., 

BATS–Y Exchange, Inc., BOX Options 

Exchange LLC, C2 Options Exchange, 

Incorporated, Chicago Board Options 

Exchange, Incorporated, Chicago 

Stock Exchange, Inc., EDGA 

Exchange, Inc., EDGX Exchange, Inc., 

Financial Industry Regulatory 

Authority, Inc., International Securities 

Exchange, LLC, ISE Gemini, LLC, 

Miami International Securities 

Exchange LLC, NASDAQ OMX BX, Inc., 

NASDAQ OMX PHLX LLC, The 

NASDAQ Stock Market LLC, National 

Stock Exchange, Inc., New York Stock 

Exchange LLC, and NYSE MKT LLC, 

NYSE Arca, Inc. 

February 6, 2015. 

I. Introduction 

Pursuant to Section 11A of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 608 thereunder,2

notice is hereby given that, on December 

12, 2014, BATS Exchange, Inc., BATS– 

Y Exchange, Inc., BOX Options 

Exchange LLC, C2 Options Exchange, 

Incorporated, Chicago Board Options 

Exchange, Incorporated, Chicago Stock 

Exchange, Inc., EDGA Exchange, Inc., 

EDGX Exchange, Inc., Financial 

Industry Regulatory Authority, Inc., 

International Securities Exchange, LLC, 

ISE Gemini, LLC, Miami International 

Securities Exchange LLC, NASDAQ 

OMX BX, Inc., NASDAQ OMX PHLX 

LLC, The NASDAQ Stock Market LLC, 

National Stock Exchange, Inc., New 

York Stock Exchange LLC, NYSE MKT 

LLC, and NYSE Arca, Inc. (collectively, 

‘‘SROs’’ or ‘‘Participants’’), filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) a 

proposal to amend the Plan Governing 

the Process of Selecting a Plan Processor 

and Developing a Plan for the 

Consolidated Audit Trail (the ‘‘Selection 

Plan’’). 

II. Background 

On July 11, 2012, the Commission 

adopted Rule 613 to require the SROs to 

jointly submit a national market system 

(‘‘NMS’’) plan to create, implement, and 

maintain a consolidated audit trail 

(‘‘CAT NMS Plan’’).3 To facilitate the 

development of the consolidated audit 

trail, following the adoption of Rule 

613, the SROs created a working group 

consisting of representatives from each 

SRO. The SROs also decided to engage 

in a request for proposal (‘‘RFP’’) 

process to help them develop the CAT 

NMS Plan and to solicit bids (‘‘Bids 4’’) 

for the role of Plan Processor to build, 

operate, administer, and maintain the 

consolidated audit trail.5 In addition, on 

September 3, 2013, the SROs filed, for 

approval, the Selection Plan to govern 

how the SROs would proceed with 

formulating and submitting the CAT 

NMS Plan—and, as part of that process, 

how the SROs would review, evaluate, 

and narrow down the Bids submitted in 

response to the RFP—and ultimately 

selecting the Plan Processor.6 The 

Selection Plan was approved on 

February 21, 2014.7

The SROs propose to amend the 

Selection Plan in two ways. First, the 

SROs propose to provide opportunities 

to accept revised Bids prior to approval 

of the CAT NMS Plan, and second, to 

allow the list of Shortlisted Bids to be 

narrowed prior to Commission approval 

of the CAT NMS Plan. A copy of the 

proposed amendment to the Selection 

Plan is attached as Exhibit A hereto. The 

Commission is publishing this notice to 

solicit comments from interested 

persons on the proposed amendment to 

the Selection Plan. 

III. Description of the Plan 

Set forth in this Section II is the 

statement of the purpose of the 

Selection Plan, along with the 

information required by Rule 608(a)(4) 

and (5) under the Exchange Act,8

prepared and submitted by the SROs to 

the Commission.9

A. Background 

The Selection Plan governs the 

process for Participant review of Bids 

for the role of Plan Processor for the 

CAT NMS Plan, the procedures for 

evaluating the Bids, and ultimately, 

until approval of the CAT NMS Plan, 


tkelley on DSK3SPTVN1PROD with NOTICES