Federal Register / Vol. 80, No. 67 / Wednesday, April 8, 2015 / Notices 18913 

45 17 CFR 200.30–3(a)(12). 

All submissions should refer to File 

Number SR–NYSEArca–2015–17. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEArca–2015–17, and should be 

submitted on or before April 29, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.45

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–07963 Filed 4–7–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

31544; File No. 812–14401] 

Janus ETF Trust, et al.; Notice of 

Application 

April 1, 2015. 

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 

17(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: 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 rather than at 

net asset value (‘‘NAV’’); (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; (e) certain registered management 

investment companies and unit 

investment trusts outside of the same 

group of investment companies as the 

series to acquire Shares; and (f) certain 

series to perform creations and 

redemptions of Creation Units in-kind 

in a master-feeder structure. 

Applicants: Janus ETF Trust (the 

‘‘Trust’’), Janus Capital Management 

LLC (the ‘‘Initial Adviser’’), and Janus 

Distributors LLC (the ‘‘Distributor’’). 

DATES: Filing Dates: The application was 

filed on December 18, 2014, and 

amended on March 20, 2015. 

Hearing or Notification of Hearing: An 

order granting the requested relief will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on April 27, 2015, and 

should be accompanied by proof of 

service on 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: The Commission: Secretary, 

U.S. Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090; 

Applicants: 151 Detroit Street, Denver, 

Colorado 80206. 

FOR FURTHER INFORMATION CONTACT: 

David J. Marcinkus, Senior Counsel at 

(202) 551–6882, or David P. Bartels, 

Branch Chief, at (202) 551–6821 

(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 for an applicant using the 

Company name box, at http://

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Applicants’ Representations 

1. Janus ETF Trust is organized as a 

Delaware statutory trust. The Trust will 

be registered under the Act as an openend management investment company. 

2. The Initial Adviser is registered as 

an investment adviser under the 

Investment Advisers Act of 1940 (the 

‘‘Advisers Act’’) and will be the 

investment adviser to the initial series 

of the Trust (the ‘‘Initial Fund’’). Any 

other Adviser (defined below) will also 

be registered as an investment adviser 

under the Advisers Act. Each Adviser 

may enter into sub-advisory agreements 

with one or more investment advisers to 

act as sub-advisers to particular Funds 

(each, a ‘‘Sub-Adviser’’). Any SubAdviser will either be registered under 

the Advisers Act or will not be required 

to register thereunder. 

3. The Trust will enter into a 

distribution agreement with the 

Distributor. The distributor for the 

Initial Fund will be the Distributor. The 

Distributor is a broker-dealer (‘‘Broker’’) 

registered under the Securities 

Exchange Act of 1934 (the ‘‘Exchange 

Act’’) and will act as distributor and 

principal underwriter of one or more of 

the Funds. The distributor of any Fund 

may be an affiliated person, as defined 

in section 2(a)(3) of the Act (‘‘Affiliated 

Person’’), or an affiliated person of an 

Affiliated Person (‘‘Second-Tier 

Affiliate’’), of that Fund’s Adviser and/ 

or Sub-Advisers. No distributor will be 

affiliated with any Exchange (defined 

below). 

4. Applicants request that the order 

apply to the Initial Fund and any 

additional series of the Trust, and any 

other open-end management investment 

company or series thereof, that may be 

created in the future that operate as an 

exchanged-traded fund (‘‘ETF’’) and that 

track a specified index comprised of 

domestic or foreign equity and/or fixed 

income securities (each, an ‘‘Underlying 

Index’’) (together, the ‘‘Future Funds’’). 

Any Future Fund will (a) be advised by 

the Initial Adviser or an entity 

controlling, controlled by, or under 

common control with the Initial Adviser 

(each, an ‘‘Adviser’’) and (b) comply 


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1All existing entities that intend to rely on the 

requested 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 order. A Fund of 

Funds (as defined below) may rely on the order 

only to invest in Funds and not in any other 

registered investment company. 

2Operating in a master-feeder structure could 

also impose costs on a Feeder Fund and reduce its 

tax efficiency. The Feeder Fund’s Board will 

consider any such potential disadvantages against 

the benefits of economies of scale and other benefits 

of operating within a master-feeder structure. In a 

master-feeder structure, the Master Fund—rather 

than the Feeder Fund—would generally invest its 

portfolio in compliance with the requested order. 

3A ‘‘to-be-announced transaction’’ or ‘‘TBA 

Transaction’’ is a method of trading mortgagebacked securities. In a TBA Transaction, the buyer 

and seller agree upon general trade parameters such 

as agency, settlement date, par amount and price. 

The actual pools delivered generally are determined 

two days prior to settlement date. 

4 Depositary receipts representing foreign 

securities (‘‘Depositary Receipts’’) include 

American Depositary Receipts and Global 

Depositary Receipts. The Funds, or their respective 

Master Funds, may invest in Depositary Receipts 

representing foreign securities in which they seek 

to invest. Depositary Receipts are typically issued 

by a financial institution (a ‘‘depositary bank’’) and 

evidence ownership interests in a security or a pool 

of securities that have been deposited with the 

depositary bank. A Fund, or its respective Master 

Fund, will not invest in any Depositary Receipts 

that the Adviser or any Sub-Adviser deems to be 

illiquid or for which pricing information is not 

readily available. No affiliated person of a Fund, the 

Adviser or any Sub-Adviser will serve as the 

depositary bank for any Depositary Receipts held by 

a Fund, or its respective Master Fund. 

5Underlying Indexes that include both long and 

short positions in securities are referred to as 

‘‘Long/Short Indexes.’’ 

6Under accounting procedures followed by each 

Fund, trades made on the prior Business Day (‘‘T’’) 

will be booked and reflected in NAV on the current 

Business Day (T+1). Accordingly, the Funds will be 

able to disclose at the beginning of the Business Day 

the portfolio that will form the basis for the NAV 

calculation at the end of the Business Day. 

7The licenses for the Self-Indexing Funds will 

specifically state that the Affiliated Index Provider 

(or in case of a sub-licensing agreement, the 

Adviser) must provide the use of the Underlying 

Indexes and related intellectual property at no cost 

to the Trust and the Self-Indexing Funds. 

8The Affiliated Indexes may be made available to 

registered investment companies, as well as 

with the terms and conditions of the 

application. The Initial Fund and Future 

Funds, together, are the ‘‘Funds.’’ 1

5. Applicants state that a Fund may 

operate as a feeder fund in a masterfeeder structure (‘‘Feeder Fund’’). 

Applicants request that the order permit 

a Feeder Fund to acquire shares of 

another registered investment company 

in the same group of investment 

companies having substantially the 

same investment objectives as the 

Feeder Fund (‘‘Master Fund’’) beyond 

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

the Act and permit the Master Fund, 

and any principal underwriter for the 

Master Fund, to sell shares of the Master 

Fund to the Feeder Fund beyond the 

limitations in section 12(d)(1)(B) of the 

Act (‘‘Master-Feeder Relief’’). 

Applicants may structure certain Feeder 

Funds to generate economies of scale 

and incur lower overhead costs.2 There 

would be no ability by Fund 

shareholders to exchange Shares of 

Feeder Funds for shares of another 

feeder series of the Master Fund. 

6. Each Fund, or its respective Master 

Fund, will hold certain securities, 

currencies, other assets and other 

investment positions (‘‘Portfolio 

Holdings’’) selected to correspond 

generally to the performance of its 

Underlying Index. Certain of the Funds 

will be based on Underlying Indexes 

that will be comprised solely of equity 

and/or fixed income securities issued by 

one or more of the following categories 

of issuers: (i) Domestic issuers and (ii) 

non-domestic issuers meeting the 

requirements for trading in U.S. 

markets. Other Funds will be based on 

Underlying Indexes that will be 

comprised solely of foreign and 

domestic, or solely foreign, equity and/ 

or fixed income securities (‘‘Foreign 

Funds’’). 

7. Applicants represent that each 

Fund, or its respective Master Fund, 

will invest at least 80% of its assets 

(excluding securities lending collateral) 

in the component securities of its 

respective Underlying Index 

(‘‘Component Securities’’) and TBA 

Transactions 3, and in the case of 

Foreign Funds, Component Securities 

and Depositary Receipts 4 representing 

Component Securities. Each Fund, or its 

respective Master Fund, may also invest 

up to 20% of its assets in certain index 

futures, options, options on index 

futures, swap contracts or other 

derivatives, as related to its respective 

Underlying Index and its Component 

Securities, cash and cash equivalents, 

other investment companies, as well as 

in securities and other instruments not 

included in its Underlying Index but 

which the applicable Adviser believes 

will help the Fund track its Underlying 

Index. A Fund may also engage in short 

sales in accordance with its investment 

objective. 

8. Future Funds may seek to track 

Underlying Indexes constructed using 

130/30 investment strategies (‘‘130/30 

Funds’’) or other long/short investment 

strategies (‘‘Long/Short Funds’’). Each 

Long/Short Fund will establish (i) 

exposures equal to approximately 100% 

of the long positions specified by the 

Long/Short Index 5 and (ii) exposures 

equal to approximately 100% of the 

short positions specified by the Long/

Short Index. Each 130/30 Fund will 

include strategies that: (i) Establish long 

positions in securities so that total long 

exposure represents approximately 

130% of a Fund’s net assets; and (ii) 

simultaneously establish short positions 

in other securities so that total short 

exposure represents approximately 30% 

of such Fund’s net assets. Each Business 

Day, the Adviser for each Long/Short 

Fund and 130/30 Fund will provide full 

portfolio transparency on the Fund’s 

publicly available Web site (‘‘Web site’’) 

by making available the Long/Short 

Fund or 130/30 Fund’s, or its respective 

Master Fund’s, Portfolio Holdings before 

the commencement of trading of Shares 

on the Listing Exchange (defined 

below).6 The information provided on 

the Web site will be formatted to be 

reader-friendly. 

9. A Fund, or its respective Master 

Fund, will utilize either a replication or 

representative sampling strategy to track 

its Underlying Index. A Fund, or its 

respective Master Fund, using a 

replication strategy will invest in the 

Component Securities of its Underlying 

Index in the same approximate 

proportions as in such Underlying 

Index. A Fund, or its respective Master 

Fund, using a representative sampling 

strategy will hold some, but not 

necessarily all of the Component 

Securities of its Underlying Index. 

Applicants state that a Fund, or its 

respective Master Fund, using a 

representative sampling strategy will 

not be expected to track the 

performance of its Underlying Index 

with the same degree of accuracy as 

would an investment vehicle that 

invested in every Component Security 

of the Underlying Index with the same 

weighting as the Underlying Index. 

Applicants expect that each Fund will 

have an annual tracking error relative to 

the performance of its Underlying Index 

of less than 5%. 

10. Each Fund will be entitled to use 

its Underlying Index pursuant to either 

a licensing agreement with the entity 

that compiles, creates, sponsors or 

maintains the Underlying Index (each, 

an ‘‘Index Provider’’) or a sub-licensing 

arrangement with the applicable 

Adviser, which will have a licensing 

agreement with such Index Provider.7 A 

‘‘Self-Indexing Fund’’ is a Fund for 

which an Affiliated Person, or a SecondTier Affiliate, of the Trusts or a Fund, 

of the Advisers, of any Sub-Adviser to 

or promoter of a Fund, or of the 

Distributor (each, an ‘‘Affiliated Index 

Provider’’) will serve as the Index 

Provider. In the case of Self-Indexing 

Funds, an Affiliated Index Provider will 

create a proprietary, rules-based 

methodology to create Underlying 

Indexes (each an ‘‘Affiliated Index’’).8


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separately managed accounts of institutional 

investors and privately offered funds that are not 

deemed to be ‘‘investment companies’’ in reliance 

on section 3(c)(1) or 3(c)(7) of the Act for which the 

Advisor acts as advisor or subadviser (‘‘Affiliated 

Accounts’’) as well as other such registered 

investment companies, separately managed 

accounts and privately offered funds for which it 

does not act either as advisor or subadviser 

(‘‘Unaffiliated Accounts’’). The Affiliated Accounts 

and the Unaffiliated Accounts, like the Funds, 

would seek to track the performance of one or more 

Underlying Index(es) by investing in the 

constituents of such Underlying Indexes or a 

representative sample of such constituents of the 

Underlying Index. Consitent with the relief 

requested from section 17(a), the Affiliated 

Accounts will not engage in Creation Unit 

transactions with a Fund. 

9See, e.g., In the Matter of WisdomTree 

Investments Inc., et al., Investment Company Act 

Release Nos. 27324 (May 18, 2006) (notice) and 

27391 (June 12, 2006) (order); In the Matter of 

IndexIQ ETF Trust, et al., Investment Company Act 

Release Nos. 28638 (Feb. 27, 2009) (notice) and 

28653 (March 20, 2009) (order); and Van Eck 

Associates Corporation, et al., et al., Investment 

Company Act Release Nos. 29455 (Oct. 1, 2010) 

(notice) and 29490 (Oct. 26, 2010) (order). 

10See, e.g., In the Matter of Huntington Asset 

Advisors, Inc., et al., Investment Company Act 

Release Nos. 30032 (April 10, 2012) (notice) and 

30061 (May 8, 2012) (order); In the Matter of Russell 

Investment Management Co., et al., Investment 

Company Act Release Nos. 29655 (April 20, 2011) 

(notice) and 29671 (May 16, 2011) (order); In the 

Matter of Eaton Vance Management, et al., 

Investment Company Act Release Nos. 29591 

(March 11, 2011) (notice) and 29620 (March 30, 

2011) (order) and; In the Matter of iShares Trust, et 

al., Investment Company Act Release Nos. 29543 

(Dec. 27, 2010) (notice) and 29571 (Jan. 24, 2011) 

(order). 

11See, e.g., Rule 17j–1 under the Act and Section 

204A under the Advisers Act and Rules 204A–1 

and 206(4)–7 under the Advisers Act. 

12Each Adviser has also adopted or will adopt a 

code of ethics pursuant to Rule 17j–1 under the Act 

and Rule 204A–1 under the Advisers Act, which 

contains provisions reasonably necessary to prevent 

Access Persons (as defined in Rule 17j–1) from 

engaging in any conduct prohibited in Rule 17j–1 

(‘‘Code of Ethics’’). 

13The instruments and cash that the purchaser is 

required to deliver in exchange for the Creation 

Units it is purchasing is referred to as the ‘‘Portfolio 

Deposit.’’ 

Except with respect to the Self-Indexing 

Funds, no Index Provider is or will be 

an Affiliated Person, or a Second-Tier 

Affiliate, of a Trust or a Fund, of an 

Adviser, of any Sub-Adviser to or 

promoter of a Fund, or of the 

Distributor. 

11. Applicants recognize that SelfIndexing Funds could raise concerns 

regarding the ability of the Affiliated 

Index Provider to manipulate the 

Underlying Index to the benefit or 

detriment of the Self-Indexing Fund. 

Applicants further recognize the 

potential for conflicts that may arise 

with respect to the personal trading 

activity of personnel of the Affiliated 

Index Provider who have knowledge of 

changes to an Underlying Index prior to 

the time that information is publicly 

disseminated. Prior orders granted to 

self-indexing ETFs (‘‘Prior Self-Indexing 

Orders’’) addressed these concerns by 

creating a framework that required: (i) 

Transparency of the Underlying 

Indexes; (ii) the adoption of policies and 

procedures not otherwise required by 

the Act designed to mitigate such 

conflicts of interest; (iii) limitations on 

the ability to change the rules for index 

compilation and the component 

securities of the index; (iv) that the 

index provider enter into an agreement 

with an unaffiliated third party to act as 

‘‘Calculation Agent’’; and (v) certain 

limitations designed to separate 

employees of the index provider, 

adviser and Calculation Agent (clauses 

(ii) through (v) are hereinafter referred 

to as ‘‘Policies and Procedures’’).9

12. Instead of adopting the same or 

similar Policies and Procedures, 

Applicants propose that each day that a 

Fund, the NYSE and the national 

securities exchange (as defined in 

section 2(a)(26) of the Act) (an 

‘‘Exchange’’) on which the Fund’s 

Shares are primarily listed (‘‘Listing 

Exchange’’) are open for business, 

including any day that a Fund is 

required to be open under section 22(e) 

of the Act (a ‘‘Business Day’’), each SelfIndexing Fund will post on its Web site, 

before commencement of trading of 

Shares on the Listing Exchange, the 

identities and quantities of the Portfolio 

Holdings that will form the basis for the 

Fund’s calculation of its NAV at the end 

of the Business Day. Applicants believe 

that requiring Self-Indexing Funds, and 

their respective Master Funds, to 

maintain full portfolio transparency will 

provide an effective alternative 

mechanism for addressing any such 

potential conflicts of interest. 

13. Applicants represent that each 

Self-Indexing Fund’s Portfolio Holdings 

will be as transparent as the portfolio 

holdings of existing actively managed 

ETFs. Applicants observe that the 

framework set forth in the Prior SelfIndexing Orders was established before 

the Commission began issuing 

exemptive relief to allow the offering of 

actively managed ETFs.10 Unlike 

passively managed ETFs, actively 

managed ETFs do not seek to replicate 

the performance of a specified index but 

rather seek to achieve their investment 

objectives by using an ‘‘active’’ 

management strategy. Applicants 

contend that the structure of actively 

managed ETFs presents potential 

conflicts of interest that are the same as 

those presented by Self-Indexing Funds 

because the portfolio managers of an 

actively managed ETF by definition 

have advance knowledge of pending 

portfolio changes. However, rather than 

requiring Policies and Procedures 

similar to those required under the Prior 

Self-Indexing Orders, Applicants 

believe that actively managed ETFs 

address these potential conflicts of 

interest appropriately through full 

portfolio transparency, as the conditions 

to their relevant exemptive relief 

require. 

14. In addition, Applicants do not 

believe the potential for conflicts of 

interest raised by an Adviser’s use of the 

Underlying Indexes in connection with 

the management of the Self Indexing 

Funds, their respective Master Funds, 

and the Affiliated Accounts will be 

substantially different from the potential 

conflicts presented by an adviser 

managing two or more registered funds. 

Both the Act and the Advisers Act 

contain various protections to address 

conflicts of interest where an adviser is 

managing two or more registered funds 

and these protections will also help 

address these conflicts with respect to 

the Self-Indexing Funds.11

15. Each Adviser and any SubAdviser has adopted or will adopt, 

pursuant to Rule 206(4)–7 under the 

Advisers Act, written policies and 

procedures designed to prevent 

violations of the Advisers Act and the 

rules thereunder. These include policies 

and procedures designed to minimize 

potential conflicts of interest among the 

Self-Indexing Funds, their respective 

Master Funds, and the Affiliated 

Accounts, such as cross trading policies, 

as well as those designed to ensure the 

equitable allocation of portfolio 

transactions and brokerage 

commissions. In addition, each Adviser 

has adopted policies and procedures as 

required under section 204A of the 

Advisers Act, which are reasonably 

designed in light of the nature of its 

business to prevent the misuse, in 

violation of the Advisers Act or the 

Exchange Act or the rules thereunder, of 

material non-public information by the 

Adviser or an associated person (‘‘Inside 

Information Policy’’). Any Sub-Adviser 

will be required to adopt and maintain 

a similar Inside Information Policy. In 

accordance with the Code of Ethics 12

and Inside Information Policy of each 

Adviser and Sub-Adviser, personnel of 

those entities with knowledge about the 

composition of the Portfolio Deposit 13

will be prohibited from disclosing such 

information to any other person, except 

as authorized in the course of their 

employment, until such information is 

made public. In addition, an Index 

Provider will not provide any 

information relating to changes to an 

Underlying Index’s methodology for the 


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14The Funds must comply with the federal 

securities laws in accepting Deposit Instruments 

and satisfying redemptions with Redemption 

Instruments, including that the Deposit Instruments 

and Redemption Instruments are sold in 

transactions that would be exempt from registration 

under the Securities Act of 1933 (‘‘Securities Act’’). 

In accepting Deposit Instruments and satisfying 

redemptions with Redemption Instruments that are 

restricted securities eligible for resale pursuant to 

rule 144A under the Securities Act, the Funds will 

comply with the conditions of rule 144A. 15The portfolio used for this purpose will be the 

same portfolio used to calculate the Fund’s NAV for 

the Business Day. 

16A tradeable round lot for a security will be the 

standard unit of trading in that particular type of 

security in its primary market. 

17This includes instruments that can be 

transferred in kind only with the consent of the 

original counterparty to the extent the Fund does 

not intend to seek such consents. 

18Because these instruments will be excluded 

from the Deposit Instruments and the Redemption 

Instruments, their value will be reflected in the 

determination of the Cash Amount (as defined 

below). 

19A Fund may only use sampling for this purpose 

if the sample: (i) Is designed to generate 

performance that is highly correlated to the 

performance of the Fund’s portfolio; (ii) consists 

entirely of instruments that are already included in 

the Fund’s portfolio; and (iii) is the same for all 

Authorized Participants (as defined below) on a 

given Business Day. 

20 In determining whether a particular Fund will 

sell or redeem Creation Units entirely on a cash or 

in-kind basis (whether for a given day or a given 

order), the key consideration will be the benefit that 

would accrue to the Fund and its investors. For 

instance, in bond transactions, the Adviser may be 

able to obtain better execution than Share 

purchasers because of the Adviser’s size, experience 

and potentially stronger relationships in the fixed 

income markets. Purchases of Creation Units either 

on an all cash basis or in-kind are expected to be 

neutral to the Funds from a tax perspective. In 

contrast, cash redemptions typically require selling 

portfolio holdings, which may result in adverse tax 

consequences for the remaining Fund shareholders 

that would not occur with an in-kind redemption. 

As a result, tax consideration may warrant in-kind 

redemptions. 

21A ‘‘custom order’’ is any purchase or 

redemption of Shares made in whole or in part on 

a cash basis in reliance on clause (e)(i) or (e)(ii). 

inclusion of component securities, the 

inclusion or exclusion of specific 

component securities, or methodology 

for the calculation or the return of 

component securities, in advance of a 

public announcement of such changes 

by the Index Provider. Each Adviser 

will also include under Item 10.C. of 

Part 2 of its Form ADV a discussion of 

its relationship to any Affiliated Index 

Provider and any material conflicts of 

interest resulting therefrom, regardless 

of whether the Affiliated Index Provider 

is a type of affiliate specified in Item 10. 

16. To the extent the Self-Indexing 

Funds or their respective Master Funds 

transact with an Affiliated Person of an 

Adviser or Sub-Adviser, such 

transactions will comply with the Act, 

the rules thereunder and the terms and 

conditions of the requested order. In 

this regard, each Self-Indexing Fund’s 

board of directors or trustees (‘‘Board’’) 

will periodically review the SelfIndexing Fund’s use of an Affiliated 

Index Provider. Subject to the approval 

of the Self-Indexing Fund’s Board, an 

Adviser, Affiliated Persons of the 

Adviser (‘‘Adviser Affiliates’’) and 

Affiliated Persons of any Sub-Adviser 

(‘‘Sub-Adviser Affiliates’’) may be 

authorized to provide custody, fund 

accounting and administration and 

transfer agency services to the SelfIndexing Funds. Any services provided 

by an Adviser, Adviser Affiliates, SubAdviser and Sub-Adviser Affiliates will 

be performed in accordance with the 

provisions of the Act, the rules under 

the Act and any relevant guidelines 

from the staff of the Commission. 

17. In light of the foregoing, 

Applicants believe it is appropriate to 

allow the Self-Indexing Funds and their 

respective Master Funds to be fully 

transparent in lieu of Policies and 

Procedures from the Prior Self-Indexing 

Orders discussed above. 

18. The Shares of each Fund will be 

purchased and redeemed in Creation 

Units and generally on an in-kind basis. 

Except where the purchase or 

redemption will include cash under the 

limited circumstances specified below, 

purchasers will be required to purchase 

Creation Units by making an in-kind 

deposit of specified instruments 

(‘‘Deposit Instruments’’), and 

shareholders redeeming their Shares 

will receive an in-kind transfer of 

specified instruments (‘‘Redemption 

Instruments’’).14 On any given Business 

Day, the names and quantities of the 

instruments that constitute the Deposit 

Instruments and the names and 

quantities of the instruments that 

constitute the Redemption Instruments 

will be identical, unless the Fund is 

Rebalancing (as defined below). In 

addition, the Deposit Instruments and 

the Redemption Instruments will each 

correspond pro rata to the positions in 

the Fund’s portfolio (including cash 

positions) 15 except: (a) In the case of 

bonds, for minor differences when it is 

impossible to break up bonds beyond 

certain minimum sizes needed for 

transfer and settlement; (b) for minor 

differences when rounding is necessary 

to eliminate fractional shares or lots that 

are not tradeable round lots; 16 (c) TBA 

Transactions, short positions, 

derivatives and other positions that 

cannot be transferred in kind 17 will be 

excluded from the Deposit Instruments 

and the Redemption Instruments; 18 (d) 

to the extent the Fund determines, on a 

given Business Day, to use a 

representative sampling of the Fund’s 

portfolio; 19 or (e) for temporary periods, 

to effect changes in the Fund’s portfolio 

as a result of the rebalancing of its 

Underlying Index (any such change, a 

‘‘Rebalancing’’). If there is a difference 

between the NAV attributable to a 

Creation Unit and the aggregate market 

value of the Deposit Instruments or 

Redemption Instruments exchanged for 

the Creation Unit, the party conveying 

instruments with the lower value will 

also pay to the other an amount in cash 

equal to that difference (the ‘‘Cash 

Amount’’). 

19. Purchases and redemptions of 

Creation Units may be made in whole or 

in part on a cash basis, rather than in 

kind, solely under the following 

circumstances: (a) To the extent there is 

a Cash Amount; (b) if, on a given 

Business Day, the Fund announces 

before the open of trading that all 

purchases, all redemptions or all 

purchases and redemptions on that day 

will be made entirely in cash; (c) if, 

upon receiving a purchase or 

redemption order from an Authorized 

Participant, the Fund determines to 

require the purchase or redemption, as 

applicable, to be made entirely in 

cash; 20 (d) if, on a given Business Day, 

the Fund requires all Authorized 

Participants purchasing or redeeming 

Shares on that day to deposit or receive 

(as applicable) cash in lieu of some or 

all of the Deposit Instruments or 

Redemption Instruments, respectively, 

solely because: (i) Such instruments are 

not eligible for transfer through either 

the NSCC or DTC (defined below); or (ii) 

in the case of Foreign Funds holding 

non-U.S. investments, such instruments 

are not eligible for trading due to local 

trading restrictions, local restrictions on 

securities transfers or other similar 

circumstances; or (e) if the Fund permits 

an Authorized Participant to deposit or 

receive (as applicable) cash in lieu of 

some or all of the Deposit Instruments 

or Redemption Instruments, 

respectively, solely because: (i) Such 

instruments are, in the case of the 

purchase of a Creation Unit, not 

available in sufficient quantity; (ii) such 

instruments are not eligible for trading 

by an Authorized Participant or the 

investor on whose behalf the 

Authorized Participant is acting; or (iii) 

a holder of Shares of a Foreign Fund 

holding non-U.S. investments would be 

subject to unfavorable income tax 

treatment if the holder receives 

redemption proceeds in kind.21

20. Creation Units will consist of 

specified large aggregations of Shares, 

e.g., at least 25,000 Shares, and it is 

expected that the initial price of a 

Creation Unit will range from $1 million 

to $10 million. All orders to purchase 


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22Applicants are not requesting relief from 

section 18 of the Act. Accordingly, a Master Fund 

may require a Transaction Fee payment to cover 

expenses related to purchases or redemptions of the 

Master Fund’s shares by a Feeder Fund only if it 

requires the same payment for equivalent purchases 

or redemptions by any other feeder fund. Thus, for 

example, a Master Fund may require payment of a 

Transaction Fee by a Feeder Fund for transactions 

for 20,000 or more shares so long as it requires 

payment of the same Transaction Fee by all feeder 

funds for transactions involving 20,000 or more 

shares. 

23Where a Fund permits an in-kind purchaser to 

substitute cash-in-lieu of depositing one or more of 

the requisite Deposit Instruments, the purchaser 

may be assessed a higher Transaction Fee to cover 

the cost of purchasing such Deposit Instruments. 

24Shares will be registered in book-entry form 

only. DTC or its nominee will be the record or 

registered owner of all outstanding Shares. 

Beneficial ownership of Shares will be shown on 

the records of DTC or the DTC Participants. 

Creation Units must be placed with the 

Distributor by or through an 

‘‘Authorized Participant’’ which is 

either (1) a ‘‘Participating Party,’’ i.e., a 

broker-dealer or other participant in the 

Continuous Net Settlement System of 

the NSCC, a clearing agency registered 

with the Commission, or (2) a 

participant in The Depository Trust 

Company (‘‘DTC’’) (‘‘DTC Participant’’), 

which, in either case, has signed a 

participant agreement with the 

Distributor. The Distributor will be 

responsible for transmitting the orders 

to the Funds and will furnish to those 

placing such orders confirmation that 

the orders have been accepted, but 

applicants state that the Distributor may 

reject any order which is not submitted 

in proper form. 

21. Each Business Day, before the 

open of trading on the Listing Exchange, 

each Fund will cause to be published 

through the NSCC the names and 

quantities of the instruments comprising 

the Deposit Instruments and the 

Redemption Instruments, as well as the 

estimated Cash Amount (if any), for that 

day. The list of Deposit Instruments and 

Redemption Instruments will apply 

until a new list is announced on the 

following Business Day, and there will 

be no intra-day changes to the list 

except to correct errors in the published 

list. Each Listing Exchange will 

disseminate, every 15 seconds during 

regular Exchange trading hours, through 

the facilities of the Consolidated Tape 

Association, an amount for each Fund 

stated on a per individual Share basis 

representing the sum of (i) the estimated 

Cash Amount and (ii) the current value 

of the Deposit Instruments. 

22. Transaction expenses, including 

operational processing and brokerage 

costs, will be incurred by a Fund when 

investors purchase or redeem Creation 

Units in-kind and such costs have the 

potential to dilute the interests of the 

Fund’s existing shareholders. Each 

Fund will impose purchase or 

redemption transaction fees 

(‘‘Transaction Fees’’) in connection with 

effecting such purchases or redemptions 

of Creation Units. With respect to 

Feeder Funds, the Transaction Fee 

would be paid indirectly to the Master 

Fund.22 In all cases, such Transaction 

Fees will be limited in accordance with 

requirements of the Commission 

applicable to management investment 

companies offering redeemable 

securities. Since the Transaction Fees 

are intended to defray the transaction 

expenses as well as to prevent possible 

shareholder dilution resulting from the 

purchase or redemption of Creation 

Units, the Transaction Fees will be 

borne only by such purchasers or 

redeemers.23 The Distributor 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. 

23. Shares of each Fund will be listed 

and traded individually on an 

Exchange. It is expected that one or 

more member firms of an Exchange will 

be designated to act as a market maker 

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

a market for Shares trading on the 

Exchange. Prices of Shares trading on an 

Exchange will be based on the current 

bid/offer market. Transactions involving 

the sale of Shares on an Exchange will 

be subject to customary brokerage 

commissions and charges. 

24. Applicants expect that purchasers 

of Creation Units will include 

institutional investors and arbitrageurs. 

Market Makers, acting in their roles to 

provide a fair and orderly secondary 

market for the Shares, may from time to 

time find it appropriate to purchase or 

redeem Creation Units. Applicants 

expect that secondary market 

purchasers of Shares will include both 

institutional and retail investors.24 The 

price at which Shares trade will be 

disciplined by arbitrage opportunities 

created by the option continually to 

purchase or redeem Shares in Creation 

Units, which should help prevent 

Shares from trading at a material 

discount or premium in relation to their 

NAV. 

25. 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 must accumulate 

enough Shares to constitute a Creation 

Unit. Redemption requests must be 

placed through an Authorized 

Participant. 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. 

26. Neither the Trusts nor any Fund 

will be advertised or marketed or 

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

fund.’’ Instead, each such Fund will be 

marketed as 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 will 

disclose that the owners of Shares may 

acquire those Shares from the Fund or 

tender such Shares for redemption to 

the Fund in Creation Units only. The 

Funds will provide copies of their 

annual and semi-annual shareholder 

reports to DTC Participants for 

distribution to beneficial owners of 

Shares. 

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 section 12(d)(1)(J) of the 

Act for an exemption from sections 

12(d)(1)(A) and (B) of the Act, and 

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. 

2. Section 6(c) of the Act provides that 

the Commission may exempt any 

person, security or transaction, or any 

class of persons, securities or 

transactions, from any provision of the 

Act, if and to the extent that such 

exemption is necessary or appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. Section 17(b) 

of the Act authorizes the Commission to 

exempt a proposed transaction from 

section 17(a) of the Act if evidence 

establishes that the terms of the 

transaction, including the consideration 

to be paid or received, are reasonable 

and fair and do not involve 

overreaching on the part of any person 

concerned, and the proposed 

transaction is consistent with the 

policies of the registered investment 

company and the general provisions of 

the Act. Section 12(d)(1)(J) of the Act 

provides that the Commission may 

exempt any person, security, or 


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25The Master Funds will not require relief from 

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

Funds will issue individually redeemable 

securities. 

26Certain countries in which a Fund may invest 

have historically had settlement periods of up to 

fifteen (15) calendar days. 

27Applicants acknowledge that no relief obtained 

from the requirements of section 22(e) will affect 

any obligations applicants may otherwise have 

under rule 15c6–1 under the Exchange Act 

requiring that most securities transactions be settled 

within three business days of the trade date. 

28 In addition, the requested exemption from 

section 22(e) would only apply to in-kind 

redemptions by the Feeder Funds and would not 

apply to in-kind redemptions by other feeder funds. 

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 a proportionate 

share of the issuer’s current net assets, 

or the cash equivalent. Because Shares 

will not be individually redeemable, 

applicants request an order that would 

permit the Funds to register as open-end 

management investment companies and 

issue Shares that are redeemable in 

Creation Units only.25 Applicants state 

that investors may purchase Shares in 

Creation Units and redeem Creation 

Units from each Fund. Applicants 

further state that because Creation Units 

may always be purchased and redeemed 

at NAV, the price of Shares on the 

secondary market should not vary 

materially from 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 that is 

currently being offered to the public by 

or through an 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 risklesstrading 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 price at which Shares 

trade will be disciplined by arbitrage 

opportunities created by the option 

continually to purchase or redeem 

Shares in Creation Units, which should 

help prevent Shares from trading at a 

material discount or premium in 

relation to their NAV. 

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 

state that settlement of redemptions for 

Foreign Funds will be contingent not 

only on the settlement cycle of the 

United States market, but also on 

current delivery cycles in local markets 

for the underlying foreign securities 

held by a Foreign Fund. Applicants 

state that the delivery cycles currently 

practicable for transferring Redemption 

Instruments to redeeming investors, 

coupled with local market holiday 

schedules, may require a delivery 

process of up to fifteen (15) calendar 

days.26 Accordingly, with respect to 

Foreign Funds only, applicants hereby 

request relief under section 6(c) from 

the requirement imposed by section 

22(e) to allow Foreign Funds to pay 

redemption proceeds within fifteen (15) 

calendar days following the tender of 

Creation Units for redemption.27

8. Applicants believe that Congress 

adopted section 22(e) to prevent 

unreasonable, undisclosed or 

unforeseen delays in the actual payment 

of redemption proceeds. Applicants 

propose that allowing redemption 

payments for Creation Units of a Foreign 

Fund to be made within fifteen calendar 

days would not be inconsistent with the 

spirit and intent of section 22(e). 

Applicants suggest that a redemption 

payment occurring within fifteen 

calendar days following a redemption 

request would adequately afford 

investor protection. 

9. Applicants are not seeking relief 

from section 22(e) with respect to 

Foreign Funds that do not effect 

creations and redemptions of Creation 

Units in-kind.28

Section 12(d)(1) 

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

prohibits a registered investment 

company from acquiring securities of an 

investment company if such securities 

represent more than 3% of the total 

outstanding voting stock of the acquired 

company, more than 5% of the total 

assets of the acquiring company, or, 

together with the securities of any other 

investment companies, more than 10% 

of the total assets of the acquiring 

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

prohibits a registered open-end 

investment company, its principal 

underwriter and any other broker-dealer 

from knowingly 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. 

11. Applicants request an exemption 

to permit registered management 

investment companies and unit 

investment trusts (‘‘UITs’’) that are not 

advised or sponsored by the Advisers 

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 (such management investment 


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29A ‘‘Fund of Funds Affiliate’’ is a Fund of Funds 

Adviser, Fund of Funds Sub-Adviser, Sponsor, 

promoter, and principal underwriter of a Fund of 

Funds, and any person controlling, controlled by, 

or under common control with any of those entities. 

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

promoter, or principal underwriter of a Fund and 

any person controlling, controlled by or under 

common control with any of these entities. 

30Any references to NASD Conduct Rule 2830 

include any successor or replacement FINRA rule 

to NASD Conduct Rule 2830. 

companies are referred to as ‘‘Investing 

Management Companies,’’ such UITs 

are referred to as ‘‘Investing Trusts,’’ 

and Investing Management Companies 

and Investing Trusts are collectively 

referred to as ‘‘Funds of Funds’’), to 

acquire Shares beyond the limits of 

section 12(d)(1)(A) of the Act; and the 

Funds, and any principal underwriter 

for the Funds, and/or any Broker 

registered under the Exchange Act, to 

sell Shares to Funds of Funds beyond 

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

Act. 

12. Each Investing Management 

Company will be advised by an 

investment adviser within the meaning 

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

‘‘Fund of Funds Adviser’’) and may be 

sub-advised by investment advisers 

within the meaning of section 

2(a)(20)(B) of the Act (each a ‘‘Fund of 

Funds Sub-Adviser’’). Any investment 

adviser to an Investing Management 

Company will be registered under the 

Advisers Act. Each Investing Trust will 

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

13. Applicants submit that the 

proposed conditions to the requested 

relief adequately address the concerns 

underlying the limits in sections 

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

concerns about undue influence by a 

fund of funds over underlying funds, 

excessive layering of fees and overly 

complex fund structures. Applicants 

believe that the requested exemption is 

consistent with the public interest and 

the protection of investors. 

14. Applicants believe that neither a 

Fund of Funds nor a Fund of Funds 

Affiliate would be able to exert undue 

influence over a Fund.29 To limit the 

control that a Fund of Funds may have 

over a Fund, applicants propose a 

condition prohibiting a Fund of Funds 

Adviser or Sponsor, any person 

controlling, controlled by, or under 

common control with a Fund of Funds 

Adviser or Sponsor, and any investment 

company and any issuer that would be 

an investment company but for sections 

3(c)(1) or 3(c)(7) of the Act that is 

advised or sponsored by a Fund of 

Funds Adviser or Sponsor, or any 

person controlling, controlled by, or 

under common control with a Fund of 

Funds Adviser or Sponsor (‘‘Fund of 

Funds 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 Fund of 

Funds Sub-Adviser, any person 

controlling, controlled by or under 

common control with the Fund of 

Funds Sub-Adviser, and any investment 

company or issuer that would be an 

investment company but for sections 

3(c)(1) or 3(c)(7) of the Act (or portion 

of such investment company or issuer) 

advised or sponsored by the Fund of 

Funds Sub-Adviser or any person 

controlling, controlled by or under 

common control with the Fund of 

Funds Sub-Adviser (‘‘Fund of Funds 

Sub-Advisory Group’’). 

15. Applicants propose other 

conditions to limit the potential for 

undue influence over the Funds, 

including that no Fund of Funds or 

Fund of Funds 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, 

Fund of Funds Adviser, Fund of Funds 

Sub-Adviser, employee or Sponsor of 

the Fund of Funds, or a person of which 

any such officer, director, member of an 

advisory board, Fund of Funds Adviser 

or Fund of Funds Sub-Adviser, 

employee or Sponsor 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). 

16. Applicants do not believe that the 

proposed arrangement will involve 

excessive layering of fees. The board of 

directors or trustees of any Investing 

Management Company, including a 

majority of the directors or trustees who 

are not ‘‘interested persons’’ within the 

meaning of section 2(a)(19) of the Act 

(‘‘disinterested directors or trustees’’), 

will find that the advisory fees charged 

under the contract are based on services 

provided that will be in addition to, 

rather than duplicative of, services 

provided under the advisory contract of 

any Fund, or its respective Master Fund, 

in which the Investing Management 

Company may invest. In addition, under 

condition B.5., a Fund of Funds 

Adviser, or a Fund of Funds’ trustee or 

Sponsor, as applicable, will waive fees 

otherwise payable to it by the Fund of 

Funds in an amount at least equal to any 

compensation (including fees received 

pursuant to any plan adopted by a 

Fund, or its respective Master Fund, 

under rule 12b–1 under the Act) 

received from a Fund by the Fund of 

Funds Adviser, trustee or Sponsor or an 

affiliated person of the Fund of Funds 

Adviser, trustee or Sponsor, other than 

any advisory fees paid to the Fund of 

Funds Adviser, trustee or Sponsor or its 

affiliated person by a Fund, in 

connection with the investment by the 

Fund of Funds in the Fund. Applicants 

state that any sales charges and/or 

service fees charged with respect to 

shares of a Fund of Funds will not 

exceed the limits applicable to a fund of 

funds as set forth in NASD Conduct 

Rule 2830.30

17. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that no Fund, nor its 

respective Master Fund, will acquire 

securities of any investment company or 

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

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

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

Act, except to the extent permitted by 

exemptive relief from the Commission 

permitting the Fund, or its respective 

Master Fund, to purchase shares of 

other investment companies for shortterm cash management purposes or 

pursuant to the Master-Feeder Relief. To 

ensure a Fund of Funds is aware of the 

terms and conditions of the requested 

order, the Fund of Funds will enter into 

an agreement with the Fund (‘‘FOF 

Participation Agreement’’). The FOF 

Participation Agreement will include an 

acknowledgement from the Fund of 

Funds that it may rely on the order only 

to invest in the Funds and not in any 

other investment company. 

18. Applicants also note that a Fund 

may choose to reject a direct purchase 

of Shares in Creation Units by a Fund 

of Funds. To the extent that a Fund of 

Funds purchases Shares in the 

secondary market, a Fund would still 

retain its ability to reject any initial 

investment by a Fund of Funds in 

excess of the limits of section 

12(d)(1)(A) by declining to enter into a 

FOF Participation Agreement with the 

Fund of Funds. 

19. Applicants also are seeking the 

Master-Feeder Relief to permit the 

Feeder Funds to perform creations and 

redemptions of Shares in-kind in a 

master-feeder structure. Applicants 

assert that this structure is substantially 

identical to traditional master-feeder 

structures permitted pursuant to the 

exception provided in section 

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


asabaliauskas on DSK5VPTVN1PROD with NOTICES
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31Although applicants believe that most Funds of 

Funds will purchase Shares in the secondary 

market and will not purchase Creation Units 

directly from a Fund, a Fund of Funds might seek 

to transact in Creation Units directly with a Fund 

that is an affiliated person of a Fund of Funds. To 

the extent that purchases and sales of Shares occur 

in the secondary market and not through principal 

transactions directly between a Fund of Funds and 

a Fund, relief from section 17(a) would not be 

necessary. However, the requested relief would 

apply to direct sales of Shares in Creation Units by 

a Fund to a Fund of Funds and redemptions of 

those Shares. Applicants are not seeking relief from 

section 17(a) for, and the requested relief will not 

apply to, transactions where a Fund could be 

deemed an affiliated person, or an affiliated person 

of an affiliated person of a Fund of Funds because 

an Adviser or an entity controlling, controlled by 

or under common control with an Adviser provides 

investment advisory services to that Fund of Funds. 

32Applicants acknowledge that the receipt of 

compensation by (a) an affiliated person of a Fund 

of Funds, or an affiliated person of such person, for 

the purchase by the Fund of Funds of Shares of a 

Fund or (b) an affiliated person of a Fund, or an 

affiliated person of such person, for the sale by the 

Fund of its Shares to a Fund of Funds, may be 

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

Participation Agreement also will include this 

acknowledgment. 

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

limitations of section 12(d)(1)(A) and (B) 

shall not apply to a security issued by 

an investment company (in this case, 

the shares of the applicable Master 

Fund) if, among other things, that 

security is the only investment security 

held by the investing investment 

company (in this case, the Feeder 

Fund). Applicants believe the proposed 

master-feeder structure complies with 

section 12(d)(1)(E) because each Feeder 

Fund will hold only investment 

securities issued by its corresponding 

Master Fund; however, the Feeder 

Funds may receive securities other than 

securities of its corresponding Master 

Fund if a Feeder Fund accepts an inkind creation. To the extent that a 

Feeder Fund may be deemed to be 

holding both shares of the Master Fund 

and other securities, applicants request 

relief from section 12(d)(1)(A) and (B). 

The Feeder Funds would operate in 

compliance with all other provisions of 

section 12(d)(1)(E). 

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

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

generally prohibit an affiliated person of 

a registered investment company, or an 

affiliated person of such a person, from 

selling any security to or purchasing any 

security from the company. Section 

2(a)(3) of the Act defines ‘‘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 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 defines ‘‘control’’ as the power 

to exercise a controlling influence over 

the management or policies of a 

company, and provides that a control 

relationship will be presumed where 

one person owns more than 25% of a 

company’s voting securities. The Funds 

may be deemed to be controlled by an 

Adviser or an entity controlling, 

controlled by or under common control 

with an Adviser and hence affiliated 

persons of each other. In addition, the 

Funds may be deemed to be under 

common control with any other 

registered investment company (or 

series thereof) advised by an Adviser or 

an entity controlling, controlled by or 

under common control with an Adviser 

(an ‘‘Affiliated Fund’’). Any investor, 

including Market Makers, owning 5% or 

holding in excess of 25% of the Trust or 

such Funds, may be deemed affiliated 

persons of the Trust or such Funds. In 

addition, an investor could own 5% or 

more, or in excess of 25% of the 

outstanding shares of one or more 

Affiliated Funds making that investor a 

Second-Tier Affiliate of the Funds. 

21. Applicants request an exemption 

from sections 17(a)(1) and 17(a)(2) of the 

Act pursuant to sections 6(c) and 17(b) 

of the Act to permit persons that are 

Affiliated Persons of the Funds, or 

Second-Tier Affiliates of the Funds, 

solely by virtue of one or more of the 

following: (a) Holding 5% or more, or in 

excess of 25%, of the outstanding 

Shares of one or more Funds; (b) 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 

Affiliated Funds, to effectuate purchases 

and redemptions ‘‘in-kind.’’ 

22. Applicants assert that no useful 

purpose would be served by prohibiting 

such affiliated persons from making ‘‘inkind’’ purchases or ‘‘in-kind’’ 

redemptions of Shares of a Fund in 

Creation Units. Both the deposit 

procedures for ‘‘in-kind’’ purchases of 

Creation Units and the redemption 

procedures for ‘‘in-kind’’ redemptions of 

Creation Units will be effected in 

exactly the same manner for all 

purchases and redemptions, regardless 

of size or number. There will be no 

discrimination between purchasers or 

redeemers. Deposit Instruments and 

Redemption Instruments for each Fund 

will be valued in the identical manner 

as those Portfolio Holdings currently 

held by such Fund and the valuation of 

the Deposit Instruments and 

Redemption Instruments will be made 

in an identical manner regardless of the 

identity of the purchaser or redeemer. 

Applicants do not believe that ‘‘in-kind’’ 

purchases and redemptions will result 

in abusive self-dealing or overreaching, 

but rather assert that such procedures 

will be implemented consistently with 

each Fund’s objectives and with the 

general purposes of the Act. Applicants 

believe that ‘‘in-kind’’ purchases and 

redemptions will be made on terms 

reasonable to applicants and any 

affiliated persons because they will be 

valued pursuant to verifiable objective 

standards. The method of valuing 

Portfolio Holdings held by a Fund is 

identical to that used for calculating 

‘‘in-kind’’ purchase or redemption 

values and therefore creates no 

opportunity for affiliated persons or 

Second-Tier Affiliates of applicants to 

effect a transaction detrimental to the 

other holders of Shares of that Fund. 

Similarly, applicants submit that, by 

using the same standards for valuing 

Portfolio Holdings held by a Fund as are 

used for calculating ‘‘in-kind’’ 

redemptions or purchases, the Fund 

will ensure that its NAV will not be 

adversely affected by such securities 

transactions. Applicants also note that 

the ability to take deposits and make 

redemptions ‘‘in-kind’’ will help each 

Fund to track closely its Underlying 

Index and therefore aid in achieving the 

Fund’s objectives. 

23. Applicants also seek relief under 

sections 6(c) and 17(b) from section 

17(a) to permit a Fund that is an 

affiliated person, or an affiliated person 

of an affiliated person, of a Fund of 

Funds to sell its Shares to and redeem 

its Shares from a Fund of Funds, and to 

engage in the accompanying in-kind 

transactions with the Fund of Funds.31

Applicants state that the terms of the 

transactions are fair and reasonable and 

do not involve overreaching. Applicants 

note that any consideration paid by a 

Fund of Funds for the purchase or 

redemption of Shares directly from a 

Fund will be based on the NAV of the 

Fund.32 Applicants believe that any 

proposed transactions directly between 

the Funds and Funds of Funds will be 

consistent with the policies of each 

Fund of Funds. The purchase of 

Creation Units by a Fund of Funds 

directly from a Fund will be 

accomplished in accordance with the 

investment restrictions of any such 

Fund of Funds and will be consistent 

with the investment policies set forth in 

the Fund of Funds’ registration 

statement. Applicants also state that the 

proposed transactions are consistent 


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Federal Register / Vol. 80, No. 67 / Wednesday, April 8, 2015 / Notices 18921 

with the general purposes of the Act and 

are appropriate in the public interest. 

24. To the extent that a Fund operates 

in a master-feeder structure, applicants 

also request relief permitting the Feeder 

Funds to engage in in-kind creations 

and redemptions with the applicable 

Master Fund. Applicants state that the 

customary section 17(a)(1) and 17(a)(2) 

relief would not be sufficient to permit 

such transactions because the Feeder 

Funds and the applicable Master Fund 

could also be affiliated by virtue of 

having the same investment adviser. 

However, applicants believe that inkind creations and redemptions 

between a Feeder Fund and a Master 

Fund advised by the same investment 

adviser do not involve ‘‘overreaching’’ 

by an affiliated person. Such 

transactions will occur only at the 

Feeder Fund’s proportionate share of 

the Master Fund’s net assets, and the 

distributed securities will be valued in 

the same manner as they are valued for 

the purposes of calculating the 

applicable Master Fund’s NAV. Further, 

all such transactions will be effected 

with respect to pre-determined 

securities and on the same terms with 

respect to all investors. Finally, such 

transaction would only occur as a result 

of, and to effectuate, a creation or 

redemption transaction between the 

Feeder Fund and a third-party investor. 

Applicants believe that the terms of the 

proposed transactions are reasonable 

and fair and do not involve 

overreaching on the part of any person 

concerned, the proposed transactions 

are consistent with the policy of each 

Fund and will be consistent with the 

investment objectives and policies of 

each Fund of Funds, and the proposed 

transactions are consistent with the 

general purposes of the Act. 

Applicants’ Conditions 

Applicants agree that any order of the 

Commission granting the requested 

relief will be subject to the following 

conditions: 

A. ETF Relief 

1. The requested relief, other than the 

section 12(d)(1) Relief and the section 

17 relief related to a master-feeder 

structure, will expire on the effective 

date of any Commission rule under the 

Act that provides relief permitting the 

operation of index-based ETFs. 

2. As long as a Fund operates in 

reliance on the requested order, Shares 

of such Fund will be listed on an 

Exchange. 

3. Neither the Trusts nor any Fund 

will be advertised or marketed as an 

open-end investment company or a 

mutual fund. Any advertising material 

that describes the purchase or sale of 

Creation Units or refers to redeemability 

will prominently disclose that Shares 

are not individually redeemable and 

that owners of Shares may acquire those 

Shares from the Fund and tender those 

Shares for redemption to a Fund in 

Creation Units only. 

4. Each Fund’s Web site, which is and 

will be publicly accessible at no charge, 

will contain, on a per Share basis for the 

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. 

5. Each Self-Indexing Fund, Long/

Short Fund and 130/30 Fund will post 

on its Web site on each Business Day, 

before commencement of trading of 

Shares on the Exchange, the Fund’s, or 

its respective Master Fund’s, Portfolio 

Holdings. 

6. Neither Adviser nor any SubAdviser to a Self-Indexing Fund, 

directly or indirectly, will cause any 

Authorized Participant (or any investor 

on whose behalf an Authorized 

Participant may transact with the SelfIndexing Fund) to acquire any Deposit 

Instrument for a Self-Indexing Fund, or 

its respective Master Fund, through a 

transaction in which the Self-Indexing 

Fund, or its respective Master Fund, 

could not engage directly. 

B. Section 12(d)(1) Relief 

1. The members of a Fund of Funds’ 

Advisory Group will not control 

(individually or in the aggregate) a 

Fund, or its respective Master Fund, 

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

the Act. The members of a Fund of 

Funds’ Sub-Advisory Group will not 

control (individually or in the aggregate) 

a Fund, or its respective Master Fund, 

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

the Act. If, as a result of a decrease in 

the outstanding voting securities of a 

Fund, the Fund of Funds’ Advisory 

Group or the Fund of Funds’ SubAdvisory Group, each in the aggregate, 

becomes a holder of more than 25 

percent of the outstanding voting 

securities of a Fund, it will vote its 

Shares of the Fund in the same 

proportion as the vote of all other 

holders of the Fund’s Shares. This 

condition does not apply to the Fund of 

Funds’ Sub-Advisory Group with 

respect to a Fund, or its respective 

Master Fund, for which the Fund of 

Funds’ Sub-Adviser or a person 

controlling, controlled by or under 

common control with the Fund of 

Funds’ Sub-Adviser acts as the 

investment adviser within the meaning 

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

2. No Fund of Funds or Fund of 

Funds Affiliate will cause any existing 

or potential investment by the Fund of 

Funds in a Fund to influence the terms 

of any services or transactions between 

the Fund of Funds or Fund of Funds 

Affiliate and the Fund, or its respective 

Master 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 Fund of Funds Adviser 

and Fund of Funds Sub-Adviser are 

conducting the investment program of 

the Investing Management Company 

without taking into account any 

consideration received by the Investing 

Management Company or a Fund of 

Funds Affiliate from a Fund, or its 

respective Master Fund, or Fund 

Affiliate in connection with any services 

or transactions. 

4. Once an investment by a Fund of 

Funds in the securities of a Fund 

exceeds the limits in section 

12(d)(1)(A)(i) of the Act, the Board of 

the Fund, or its respective Master Fund, 

including a majority of the directors or 

trustees who are not ‘‘interested 

persons’’ within the meaning of section 

2(a)(19) of the Act (‘‘non-interested 

Board members’’), will determine that 

any consideration paid by the Fund, or 

its respective Master Fund, to the Fund 

of Funds or a Fund of Funds Affiliate 

in connection with any services or 

transactions: (i) Is fair and reasonable in 

relation to the nature and quality of the 

services and benefits received by the 

Fund, or its respective Master Fund; (ii) 

is within the range of consideration that 

the Fund would be required to pay to 

another unaffiliated entity in connection 

with the same services or transactions; 

and (iii) does not involve overreaching 

on the part of any person concerned. 

This condition does not apply with 

respect to any services or transactions 

between a Fund, or its respective Master 

Fund, and its investment adviser(s), or 

any person controlling, controlled by or 

under common control with such 

investment adviser(s). 

5. The Fund of Funds Adviser, or 

trustee or Sponsor of an Investing Trust, 

as applicable, will waive fees otherwise 

payable to it by the Fund of Funds in 

an amount at least equal to any 

compensation (including fees received 

pursuant to any plan adopted by a 

Fund, or its respective Master Fund, 

under rule 12b–l under the Act) 

received from a Fund, or its respective 

Master Fund, by the Fund of Funds 

Adviser, or trustee or Sponsor of the 


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18922 Federal Register / Vol. 80, No. 67 / Wednesday, April 8, 2015 / Notices 

Investing Trust, or an affiliated person 

of the Fund of Funds Adviser, or trustee 

or Sponsor of the Investing Trust, other 

than any advisory fees paid to the Fund 

of Funds Adviser, trustee or Sponsor of 

an Investing Trust, or its affiliated 

person by the Fund, or its respective 

Master Fund, in connection with the 

investment by the Fund of Funds in the 

Fund. Any Fund of Funds Sub-Adviser 

will waive fees otherwise payable to the 

Fund of Funds Sub-Adviser, directly or 

indirectly, by the Investing Management 

Company in an amount at least equal to 

any compensation received from a 

Fund, or its respective Master Fund, by 

the Fund of Funds Sub-Adviser, or an 

affiliated person of the Fund of Funds 

Sub-Adviser, other than any advisory 

fees paid to the Fund of Funds SubAdviser or its affiliated person by the 

Fund, or its respective Master Fund, in 

connection with the investment by the 

Investing Management Company in the 

Fund made at the direction of the Fund 

of Funds Sub-Adviser. In the event that 

the Fund of Funds Sub-Adviser waives 

fees, the benefit of the waiver will be 

passed through to the Investing 

Management Company. 

6. No Fund of Funds or Fund of 

Funds Affiliate (except to the extent it 

is acting in its capacity as an investment 

adviser to a Fund) will cause a Fund, or 

its respective Master Fund, to purchase 

a security in any Affiliated 

Underwriting. 

7. The Board of a Fund, or its 

respective Master Fund, including a 

majority of the non-interested Board 

members, will adopt procedures 

reasonably designed to monitor any 

purchases of securities by the Fund, or 

its respective Master Fund, in an 

Affiliated Underwriting, once an 

investment by a Fund of Funds in the 

securities of the Fund exceeds the limit 

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

including any purchases made directly 

from an Underwriting Affiliate. The 

Board will review these purchases 

periodically, but no less frequently than 

annually, to determine whether the 

purchases were influenced by the 

investment by the Fund of Funds in the 

Fund. The Board will consider, among 

other things: (i) Whether the purchases 

were consistent with the investment 

objectives and policies of the Fund, or 

its respective Master Fund; (ii) how the 

performance of securities purchased in 

an Affiliated Underwriting compares to 

the performance of comparable 

securities purchased during a 

comparable period of time in 

underwritings other than Affiliated 

Underwritings or to a benchmark such 

as a comparable market index; and (iii) 

whether the amount of securities 

purchased by the Fund, or its respective 

Master Fund, in Affiliated 

Underwritings and the amount 

purchased directly from an 

Underwriting Affiliate have changed 

significantly from prior years. The 

Board will take any appropriate actions 

based on its review, including, if 

appropriate, the institution of 

procedures designed to ensure that 

purchases of securities in Affiliated 

Underwritings are in the best interest of 

shareholders of the Fund. 

8. Each Fund, or its respective Master 

Fund, will maintain and preserve 

permanently in an easily accessible 

place a written copy of the procedures 

described in the preceding condition, 

and any modifications to such 

procedures, and will maintain and 

preserve for a period of not less than six 

years from the end of the fiscal year in 

which any purchase in an Affiliated 

Underwriting occurred, the first two 

years in an easily accessible place, a 

written record of each purchase of 

securities in Affiliated Underwritings 

once an investment by a Fund of Funds 

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 a Fund in 

excess of the limit in section 

12(d)(1)(A), a Fund of Funds and the 

Trust will execute a FOF Participation 

Agreement 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 

Shares of a Fund in excess of the limit 

in section 12(d)(1)(A)(i), a Fund of 

Funds will notify the Fund of the 

investment. At such time, the Fund of 

Funds will also transmit to the Fund a 

list of the names of each Fund of Funds 

Affiliate and Underwriting Affiliate. The 

Fund of Funds will notify the Fund of 

any changes to the list of the names as 

soon as reasonably practicable after a 

change occurs. The Fund and the Fund 

of Funds 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 

contract are based on services provided 

that will be in addition to, rather than 

duplicative of, the services provided 

under the advisory contract(s) of any 

Fund, or its respective Master Fund, in 

which the Investing Management 

Company may invest. These findings 

and their basis will be fully recorded in 

the minute books of the appropriate 

Investing Management Company. 

11. Any sales charges and/or service 

fees charged with respect to shares of a 

Fund of Funds will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

12. No Fund, or its respective Master 

Fund, will acquire securities of an 

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 (i) the Fund, or its 

respective Master Fund, acquires 

securities of another investment 

company pursuant to exemptive relief 

from the Commission permitting the 

Fund, or its respective Master Fund, to 

acquire securities of one or more 

investment companies for short-term 

cash management purposes or (ii) the 

Fund acquires securities of the Master 

Fund pursuant to the Master–Feeder 

Relief. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–07971 Filed 4–7–15; 8:45 am] 

BILLING CODE 8011–01–P 

SMALL BUSINESS ADMINISTRATION 

Interest Rates 

The Small Business Administration 

publishes an interest rate called the 

optional ‘‘peg’’ rate (13 CFR 120.214) on 

a quarterly basis. This rate is a weighted 

average cost of money to the 

government for maturities similar to the 

average SBA direct loan. This rate may 

be used as a base rate for guaranteed 

fluctuating interest rate SBA loans. This 

rate will be 2.125 (21⁄4) percent for the 

April–June quarter of FY 2015. 

Pursuant to 13 CFR 120.921(b), the 

maximum legal interest rate for any 

third party lender’s commercial loan 

which funds any portion of the cost of 

a 504 project (see 13 CFR 120.801) shall 

be 6% over the New York Prime rate or, 

if that exceeds the maximum interest 

rate permitted by the constitution or 


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