9442 Federal Register / Vol. 74, No. 41 / Wednesday, March 4, 2009 / Notices 

Fund of Funds Affiliate and 

Underwriting Affiliate. The Fund of 

Funds will notify the Open-end 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 Participation 

Agreement and, in the case of an Openend Fund, 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. 

9. 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 

Trustees, will find that the advisory fees 

charged under such advisory contract 

are based on services provided that will 

be in addition to, rather than 

duplicative of, the services provided 

under the advisory contract(s) of any 

Open-end Fund in which the Investing 

Management Company may invest. 

These findings and their basis will be 

recorded fully in the minute books of 

the appropriate Investing Management 

Company. 

10. A Fund of Funds Adviser, or 

trustee, or Sponsor of a Fund of Funds, 

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 

from any plan adopted by an Open-end 

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 an Open-end Fund, 

in connection with the investment by 

the Fund of Funds in the Fund. Any 

Subadviser will waive fees otherwise 

payable to the Subadviser, directly or 

indirectly, by the Investing Management 

Company in an amount at least equal to 

any compensation received from a Fund 

by the Subadviser, or an affiliated 

person of the Subadviser, other than any 

advisory fees paid to the Subadviser or 

its affiliated person by an Open-end 

Fund, in connection with the 

investment by the Investing 

Management Company in the Fund 

made at the direction of the Subadviser. 

In the event that the Subadviser waives 

fees, the benefit of the waiver will be 

passed through to the Investing 

Management Company. 

11. With respect to registered separate 

accounts that invest in a Fund of Funds, 

no sales load will be charged at the 

Fund of Funds level or at the Fund 

level. Other sales charges and service 

fees, as defined in Rule 2830, if any, 

will only be charged at the Fund of 

Funds level or at the Fund level, not 

both. With respect to other investments 

in a Fund of Funds, any sales charges 

and/or service fees charged with respect 

to shares of the Fund of Funds will not 

exceed the limits applicable to a fund of 

funds as set forth in Rule 2830. 

12. No Fund will acquire securities of 

any investment company or company 

relying on section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

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

to the extent that the Fund (a) acquires 

such securities in compliance with 

section 12(d)(1)(E) of the Act; (b) 

receives securities of another 

investment company as a dividend or as 

a result of a plan of reorganization of a 

company (other than a plan devised for 

the purpose of evading section 12(d)(1) 

of the Act), or (c) acquires (or is deemed 

to have acquired) securities of another 

investment company pursuant to 

exemptive relief from the Commission 

permitting such Fund to (i) acquire 

securities of one or more investment 

companies for short-term cash 

management purposes, or (ii) engage in 

interfund borrowing and lending 

transactions. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–4604 Filed 3–3–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

28638; 812–13441] 

IndexIQ ETF Trust, et al.; Notice of 

Application 

February 27, 2009. 

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; and 

under Sections 6(c) and 17(b) of the Act 

for an exemption from Sections 17(a)(1) 

and (a)(2) of the Act; and under Section 

12(d)(1)(J) for an exemption from 

Sections 12(d)(1)(A) and (B) of the Act. 

APPLICANTS: IndexIQ ETF Trust 

(‘‘Trust’’), IndexIQ Advisors LLC 

(‘‘Advisor’’) and ALPS Distributors, Inc. 

(‘‘Distributor’’). 

SUMMARY OF APPLICATION: Applicants 

request an order that permits: (a) Series 

of certain open-end management 

investment companies to issue shares 

(‘‘Shares’’) redeemable in large 

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

secondary market transactions in Shares 

to occur at negotiated market prices; (c) 

certain series to pay redemption 

proceeds, under certain circumstances, 

more than seven days after the tender of 

Shares for redemption; (d) certain 

affiliated persons of the series to deposit 

securities into, and receive securities 

from, the series in connection with the 

purchase and redemption of Creation 

Units; and (e) certain registered 

management investment companies and 

unit investment trusts outside of the 

same group of investment companies as 

the series to acquire Shares of certain 

series. 

FILING DATES: The application was filed 

on October 23, 2007 and amended on 

August 1, 2008, November 19, 2008, 

January 28, 2009 and February 12, 2009. 

Applicants have agreed to file an 

amendment during the notice period, 

the substance of which is reflected in 

this notice. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the application will be 

issued unless the Commission orders a 

hearing. Interested persons may request 

a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on March 19, 2009, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit, or for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F 

Street, NE., Washington, DC 20549– 

1090; Applicants: Gregory Bassuk, 

IndexIQ ETF Trust and IndexIQ 

Advisors LLC, 800 Westchester Avenue, 

Suite N–611, Rye Brook, NY 10573; 

ALPS Distributors, Inc., c/o Thomas A. 

Carter, 1290 Broadway, Suite 1100, 

Denver, CO 80203. 

FOR FURTHER INFORMATION CONTACT: Jean 

E. Minarick, Senior Counsel at (202) 

551–6811 or Mary Kay Frech, Branch 

Chief, at (202) 551–6821 (Division of 

Investment Management, Office of 

Investment Company Regulation). 

Federal Register / Vol. 74, No. 41 / Wednesday, March 4, 2009 / Notices 9443 

1The Initial Funds are: IQ Hedge Multi-Strategy 

Composite ETF, IQ Hedge Long/Short ETF, IQ 

Hedge Macro ETF, IQ Hedge Event-Driven ETF, and 

IQ Hedge Market Neutral ETF. 

2All existing entities that intend to rely on the 

order are named as applicants. Any other existing 

or future entity that relies on the order in the future 

will comply with the terms and conditions of the 

application. A Fund of Funds (as defined below) 

may rely on the order only to invest in Single-Tier 

Funds (as defined below) and not in any other 

registered investment company, Initial Fund or FOF 

Fund (as defined below). 

3Each ETV will be structured as a special 

purpose vehicle that owns a pool of assets and has 

issued equity interests in such pool for sale by 

registering with the Commission under the 

Securities Act of 1933, as amended (‘‘Securities 

Act’’). 

4The Calculation Agent will determine the 

number, type and weight of Index Constituents that 

comprise each Index and will perform all other 

calculations that are necessary to determine the 

proper constitution of each Index. FDH will not 

disclose any information about any Index’s 

constitution to the Advisor, any Subadvisor or the 

Funds prior to the publication of such information 

on the Web site. However, an employee of FDH will 

monitor the Rules-Based Process and the Indexes 

(‘‘Index Administrator’’), and other employees of 

FDH may be appointed to assist the Index 

Administrator (‘‘Index Group,’’ and together with 

the Index Administrator, ‘‘Index Provider’’). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained for a fee at the 

Commission’s Public Reference Room, 

100 F Street, NE., Washington DC 

20549–1520, telephone (202) 551–5850. 

Applicants’ Representations 

1. The Trust is organized as a 

Delaware statutory trust and is 

registered as an open-end management 

investment company under the Act. The 

Trust will initially offer Shares of five 

series (‘‘Initial Funds’’), each of which 

will track an equity securities index 

(‘‘Index’’).1

2. Applicants request that the order 

apply to the Initial Funds and any 

additional series of the Trust and other 

open-end investment management 

companies registered under the Act or 

series thereof, that may be created in the 

future (the ‘‘Future Funds’’).2 Any 

Future Fund will be (a) advised by the 

Advisor or an entity controlling, 

controlled by or under common control 

with the Advisor, and (b) comply with 

the terms and conditions of the 

application. The Initial Funds and the 

Future Funds together are the ‘‘Funds.’’ 

3. The Advisor, a Delaware limited 

liability company, is registered as an 

investment adviser under the 

Investment Advisers Act of 1940, as 

amended (the ‘‘Advisers Act’’) and will 

serve as the investment adviser to each 

Fund. The Advisor may enter into subadvisory agreements with one or more 

investment advisers each of which will 

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

a ‘‘Subadvisor’’). Each Subadvisor will 

be registered under the Advisers Act. 

The Distributor is a broker-dealer 

registered under the Securities 

Exchange Act of 1934 (the ‘‘Exchange 

Act’’) and will act as the principal 

underwriter and distributor for the 

Creation Units of Shares. The 

Distributor is not affiliated with the 

Advisor or any Subadvisor. 

4. Each Fund will hold certain equity 

securities and other financial 

instruments (‘‘Portfolio Holdings’’) 

selected to correspond, before fees and 

expenses, generally to the price and 

yield performance of an Index. The 

Index for each Initial Fund will consist 

primarily of exchange-traded funds 

(‘‘ETFs’’) and shares of pooled 

investment vehicles (‘‘ETVs’’) 3 (each 

such Index, a ‘‘FOF Index’’). The Initial 

Funds and any other Fund that has a 

FOF Index as its Index are referred to 

herein as ‘‘FOF Funds.’’ Certain of the 

Indexes for Future Funds may be 

composed of equity securities of 

domestic issuers and non-domestic 

issuers meeting the requirements for 

trading in U.S. markets (‘‘Domestic 

Indexes’’). Other Indexes for Future 

Funds may be composed of equity 

securities of non-domestic issuers 

(‘‘International Indexes’’). Funds that 

track Domestic Indexes are referred to as 

‘‘Domestic Funds’’ and Funds that track 

International Indexes are referred to as 

‘‘International Funds.’’ Funds that track 

Indexes that are not FOF Indexes are 

referred to as ‘‘Single-Tier Funds.’’ The 

Indexes are based on a proprietary, 

rules-based methodology developed by 

Financial Development HoldCo LLC (d/ 

b/a INDEXIQ) (‘‘FDH’’) (‘‘Rules-Based 

Process’’). The Rules-Based Process, 

including the rules which govern the 

inclusion and weighting of securities in 

the Indexes, will be publicly available, 

including on the Funds’ Web site (‘‘Web 

site’’), along with the identities and 

weightings of the component securities 

of each Index (‘‘Index Constituents’’) 

and the Portfolio Holdings of each 

Fund. While FDH may modify the 

Rules-Based Process in the future, FDH 

does not intend to do so. Any change to 

the Rules-Based Process would not take 

effect until FDH had given the public at 

least 60 days advance notice of the 

change and had given reasonable notice 

of the change to the Calculation Agent. 

The ‘‘Calculation Agent’’ is the entity 

that, pursuant to an agreement with 

FDH, is solely responsible for all Index 

calculation, maintenance and 

dissemination activities.4 The 

Calculation Agent is not, and will not 

be, an affiliated person, or an affiliated 

person of an affiliated person, of the 

Funds, the Advisor, any Subadvisor, the 

Distributor or any promoter of the 

Funds. The Indexes will be 

reconstituted on a periodic basis no 

more frequently that monthly. 

5. Applicants state that the Index 

Provider will not have any 

responsibility for the management of the 

Funds. In addition, applicants have 

adopted policies and procedures that, 

among other things, are designed to 

limit or prohibit communications 

between the Index Provider and its 

other employees (‘‘Firewalls’’). Among 

other things, the Firewalls prohibit the 

Index Provider from disseminating nonpublic information about the Indexes, 

including potential changes to the 

Rules-Based Process, to, among others, 

the employees of the Advisor and any 

Subadvisor responsible for managing 

the Funds or any Affiliated Account (as 

defined below) (‘‘advisory personnel’’). 

An Affiliated Account is any registered 

investment company, separately 

managed account of institutional 

investors or privately offered fund that 

is not deemed to be an investment 

company in reliance on Section 3(c)(1) 

or Section 3(c)(7) of the Act for which 

FDH acts as investment advisor or 

subadvisor. The Advisor also has 

adopted Firewalls that prohibit advisory 

personnel from sharing any non-public 

information about the Funds and any 

Affiliated Account with the Index 

Provider. Further, the Advisor and any 

Subadvisor has or will have, 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 under the 

Advisers Act. The Advisor, any 

Subadvisor and Distributor also have 

adopted or will adopt a Code of Ethics 

as required under rule 17j–1 under the 

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. In addition, the Advisor and 

any Subadvisor has adopted or will 

adopt policies and procedures to detect 

and prevent insider trading as required 

under Section 204A of the Advisers Act, 

which are reasonably designed taking 

into account the nature of their 

business, to prevent the misuse in 

violation of the Advisers Act, Exchange 

Act, or rules and regulations under the 

Advisers Act and Exchange Act, of 

material non-public information. 

6. The investment objective of each 

Fund will be to provide investment 

results that correspond, before fees and 

expenses, generally to the price and 

9444 Federal Register / Vol. 74, No. 41 / Wednesday, March 4, 2009 / Notices 

5Applicants represent that each Single-Tier Fund 

will invest at least 80% of its total assets in some 

or all of the Index Constituents of its Index or, in 

the case of International Funds, Index Constituents 

and depositary receipts representing such Index 

Constituents. ‘‘Depositary Receipts’’ will typically 

be American Depositary Receipts, but may include 

Global Depositary Receipts and Euro Depositary 

Receipts. Each FOF Fund will invest at least 80% 

of its total assets in ETFs, ETVs and other Index 

Constituents of its FOF Index. Each Fund also may 

invest up to 20% of its assets in certain futures, 

options and swap contracts, cash and cash 

equivalents, as well as in stocks not included in its 

Index, but which the Advisor or Subadvisor 

believes will help the Fund track its Index. 6All representations and conditions contained in 

the application that require a Fund to disclose 

particular information in the Fund’s Prospectus 

and/or annual report shall be effective with respect 

to the Fund until the time that the Fund complies 

with the disclosure requirements adopted by the 

Commission in Investment Company Act Release 

No. 28584 (Jan. 13, 2009). 

7Under the representative sampling strategy, the 

Advisor and any Subadvisor will seek to construct 

a Fund’s portfolio so that its market capitalization, 

industry weightings, fundamental investment 

characteristics (such as return variability, earnings 

valuation and yield) and liquidity measures 

perform like those of the Index. 

8Each Fund will sell and redeem Creation Units 

only on a ‘‘Business Day’’ which is defined as any 

day that the New York Stock Exchange, the Listing 

Exchange (defined below), and the custodian of the 

Fund are open for business, and includes any day 

that a Fund is required to be open under section 

22(e) of the Act. Each Business Day, prior to the 

opening of trading on the Listing Exchange (defined 

below), the list of names and amount of each 

security constituting the current Deposit Securities 

and the Balancing Amount will be made available. 

Any national securities exchange (as defined in 

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

Shares are listed (‘‘Listing Exchange’’) will 

disseminate, every 15 seconds during its regular 

trading hours, through the facilities of the 

Consolidated Tape Association, an amount per 

individual Share representing the sum of the 

estimated Balancing Amount and the current value 

of the Deposit Securities. 

9Applicants state that in some circumstances or 

in certain countries, it may not be practicable or 

convenient, or permissible under the laws of certain 

countries or the regulations of certain foreign stock 

exchanges, for an International Fund to operate 

exclusively on an ‘‘in-kind’’ basis. Applicants also 

note that when a substantial rebalancing of a Fund’s 

portfolio is required, the Advisor or a Subadvisor 

might prefer to receive cash rather than stocks so 

that the Fund may avoid transaction costs involved 

in liquidating part of its portfolio to achieve the 

rebalancing. 

10Where a Fund permits a purchaser to substitute 

cash in lieu of depositing a portion of the requisite 

Deposit Securities, the purchaser may be assessed 

a higher Transaction Fee to cover the cost of 

purchasing such Deposit Securities, including 

operational processing and brokerage costs, and 

part or all of the spread between the expected bid 

and the offer side of the market relating to such 

Deposit Securities. 

11Shares will be registered in book-entry form 

only. DTC or its nominee will be the registered 

owner of all outstanding Shares. DTC or DTC 

Participants will maintain records reflecting 

beneficial owners of Shares. 

yield performance of its Index.5 Intraday values of each Index will be 

disseminated every 15 seconds 

throughout the trading day. A Fund will 

utilize either a replication or 

representative sampling strategy which 

will be disclosed with regard to each 

Fund in its prospectus (‘‘Prospectus’’).6

A Fund using a replication strategy will 

invest in the Index Constituents in its 

Index in approximately the same 

proportions as in the Index. In certain 

circumstances, such as when there are 

practical difficulties or substantial costs 

involved in holding every security in an 

Index or when one or more Index 

Constituents is less liquid, illiquid or 

unavailable, a Fund may use a 

representative sampling strategy 

pursuant to which it will invest in 

some, but not all of the Index 

Constituents of its Index.7 Applicants 

anticipate that a Fund that utilizes a 

representative sampling strategy will 

not track the performance of its Index 

with the same degree of accuracy as an 

investment vehicle that invests in all 

Index Constituents of the Index with the 

same weighting as the Index. Applicants 

expect that each Fund will have a 

tracking error relative to the 

performance of its Index of less than 5 

percent. 

7. Creation Units are expected to 

range between 15,000 to 200,000 Shares 

as will be clearly stated in the relevant 

Fund’s Prospectus. Applicants expect 

that the initial price of a Creation Unit 

will fall in the range of $1,000,000 to 

$10,000,000. All orders to purchase 

Creation Units must be placed with the 

Distributor, by or through a party that 

has entered into an agreement with the 

Distributor (‘‘Authorized Participant’’). 

The Distributor will be responsible for 

transmitting the orders to the Funds. An 

Authorized Participant must be either: 

(a) A broker-dealer or other participant 

in the continuous net settlement system 

of the National Securities Clearing 

Corporation (‘‘NSCC’’), a clearing 

agency registered with the Commission, 

or (b) a participant in the Depository 

Trust Company (‘‘DTC’’, and such 

participant, ‘‘DTC Participant’’). Shares 

of each Fund generally will be sold in 

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

portfolio of securities designated by the 

Advisor or Subadvisor to correspond 

generally to the price and yield 

performance of the relevant Index (the 

‘‘Deposit Securities’’), together with the 

deposit of a specified cash payment 

(‘‘Balancing Amount’’). The Balancing 

Amount is an amount equal to the 

difference between (a) the net asset 

value (‘‘NAV’’) per Creation Unit of a 

Fund and (b) the total aggregate market 

value per Creation Unit of the Deposit 

Securities.8 Each Fund may permit a 

purchaser of Creation Units to substitute 

cash in lieu of depositing some or all of 

the Deposit Securities if the Advisor or 

Sub-Advisor believes such method 

would reduce the Fund’s transaction 

costs or enhance the Fund’s operating 

efficiency.9

8. An investor purchasing a Creation 

Unit from a Fund will be charged a fee 

(‘‘Transaction Fee’’) to prevent the 

dilution of the interests of the remaining 

shareholders resulting from costs in 

connection with the purchase or 

redemption of Creation Units.10 The 

maximum Transaction Fees relevant to 

each Fund and the method of 

calculating such Transaction Fees will 

be disclosed in the Prospectus or 

statement of additional information 

(‘‘SAI’’) of such Fund. The Distributor 

also will be responsible for delivering 

the Fund’s Prospectus to those persons 

purchasing 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. 

9. Purchasers of Shares in Creation 

Units may hold such Shares or may sell 

such Shares into the secondary market. 

Shares of the Funds will be listed and 

traded on an Exchange. It is expected 

that one or more member firms of a 

Listing Exchange will be designated to 

act as a specialist (‘‘Specialist’’) or a 

market maker (‘‘Market Maker’’) and 

maintain a market for Shares trading on 

the Listing Exchange. Prices of Shares 

trading on an Exchange will be based on 

the current bid/offer market. Shares sold 

in the secondary market will be subject 

to customary brokerage commissions 

and charges. 

10. Applicants expect that purchasers 

of Creation Units will include 

institutional investors and arbitrageurs 

(which could include institutional 

investors). A Specialist or Market 

Maker, in providing a fair and orderly 

secondary market for the Shares, also 

may purchase Creation Units for use in 

its market-making activities. Applicants 

expect that secondary market 

purchasers of Shares will include both 

institutional investors and retail 

investors.11 Applicants expect that the 

price at which Shares trade will be 

disciplined by arbitrage opportunities 

created by the option to continually 

purchase or redeem Creation Units at 

their NAV, which should ensure that 

Shares will not trade at a material 

discount or premium in relation to their 

NAV. 

11. Shares will not be individually 

redeemable, and owners of Shares may 

Federal Register / Vol. 74, No. 41 / Wednesday, March 4, 2009 / Notices 9445 

acquire those Shares from a Fund, or 

tender such Shares for redemption to 

the Fund, in Creation Units only. To 

redeem, an investor will have to 

accumulate enough Shares to constitute 

a Creation Unit. Redemption orders 

must be placed by or through an 

Authorized Participant. An investor 

redeeming a Creation Unit generally 

will receive (a) Portfolio Holdings 

designated to be delivered for Creation 

Unit redemptions on the date that the 

request for redemption is submitted 

(‘‘Fund Securities’’) and (b) a ‘‘Cash 

Redemption Payment,’’ consisting of an 

amount calculated in the same manner 

as the Balancing Amount, although the 

actual amount of the Cash Redemption 

Payment may differ if the Fund 

Securities are not identical to the 

Deposit Securities on that day. An 

investor may receive the cash equivalent 

of a Fund Security in certain 

circumstances, such as if the investor is 

constrained from effecting transactions 

in the security by regulation or policy. 

A redeeming investor will pay a 

Transaction Fee, calculated in the same 

manner as a Transaction Fee payable in 

connection with purchases of Creation 

Units. 

12. Applicants state that in accepting 

Deposit Securities and satisfying 

redemptions with Fund Securities, the 

relevant Funds will comply with the 

federal securities laws, including that 

the Deposit Securities and Fund 

Securities are sold in transactions that 

would be exempt from registration 

under the Securities Act. As a general 

matter, the Deposit Securities and Fund 

Securities will correspond pro rata to 

the Portfolio Holdings held by each 

Fund, although Fund Securities 

received on redemption may not always 

be identical to Deposit Securities 

deposited in connection with the 

purchase of Creation Units for the same 

day. 

13. Neither the Trust nor any 

individual Fund will be marketed or 

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

fund. Instead, each Fund will be 

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

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

marketing materials that describe the 

features or method of obtaining, buying 

or selling Creation Units or Shares, or 

refer to redeemability, will prominently 

disclose that Shares are not individually 

redeemable and that the owners of 

Shares may purchase or redeem Shares 

from the Fund in Creation Units only. 

The same approach will be followed in 

the SAI, shareholder reports and 

investor educational materials issued or 

circulated in connection with the 

Shares. The Funds will provide copies 

of their annual and semi-annual 

shareholder reports to DTC Participants 

for distribution to shareholders. 

Applicants’ Legal Analysis 

1. Applicants request an order under 

Section 6(c) of the Act granting 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; and under 

Sections 6(c) and 17(b) of the Act 

granting an exemption from Sections 

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

under Section 12(d)(1)(J) of the Act for 

an exemption from Sections 12(d)(1)(A) 

and (B) of the Act. 

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

the Commission may exempt any 

person, security or transaction, or any 

class of persons, securities or 

transactions, from any provision of the 

Act, if and to the extent that such 

exemption is necessary or appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. Section 17(b) 

of the Act authorizes the Commission to 

exempt a proposed transaction from 

Section 17(a) of the Act if evidence 

establishes that the terms of the 

transaction, including the consideration 

to be paid or received, are reasonable 

and fair and do not involve 

overreaching on the part of any person 

concerned, and the proposed 

transaction is consistent with the 

policies of the registered investment 

company and the general provisions of 

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

provides that the Commission may 

exempt any person, security, or 

transaction, or any class or classes of 

persons, securities or transactions, from 

any provisions of Section 12(d)(1) if the 

exemption is consistent with the public 

interest and the protection of investors. 

Sections 5(a)(1) and 2(a)(32) of the Act 

3. Section 5(a)(1) of the Act defines an 

‘‘open-end company’’ as a management 

investment company that is offering for 

sale or has outstanding any redeemable 

security of which it is the issuer. 

Section 2(a)(32) of the Act defines a 

redeemable security as any security, 

other than short-term paper, under the 

terms of which the holder, upon its 

presentation to the issuer, is entitled to 

receive approximately his proportionate 

share of the issuer’s current net assets, 

or the cash equivalent. Because the 

Shares will not be individually 

redeemable, applicants request an order 

that would permit each Fund, as a series 

of an open-end management investment 

company, to issue Shares that are 

redeemable in Creation Units only. 

Applicants state that investors may 

purchase the Shares in Creation Units 

and redeem Creation Units from each 

Fund. Applicants state that because 

Creation Units may always be 

purchased and redeemed at NAV, the 

market price of the Shares should not 

vary substantially from their NAV. 

Section 22(d) of the Act and Rule 22c– 

1 Under the Act 

4. Section 22(d) of the Act, among 

other things, prohibits a dealer from 

selling a redeemable security, which is 

currently being offered to the public by 

or through a principal underwriter, 

except at a current public offering price 

described in the prospectus. Rule 22c– 

1 under the Act generally requires that 

a dealer selling, redeeming or 

repurchasing a redeemable security do 

so only at a price based on its NAV. 

Applicants state that secondary market 

trading in the 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 the 

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 of Shares. Applicants maintain 

that while there is little legislative 

history regarding Section 22(d), its 

provisions, as well as those of rule 22c– 

1, appear to have been designed to (a) 

prevent dilution caused by certain 

riskless-trading schemes by principal 

underwriters and contract dealers, (b) 

prevent unjust discrimination or 

preferential treatment among buyers, 

and (c) ensure an orderly distribution of 

investment company shares by 

eliminating price competition from 

dealers offering shares at less than the 

published sales price and repurchasing 

shares at more than the published 

redemption price. 

6. Applicants believe that none of 

these purposes will be thwarted by 

permitting Shares to trade in the 

secondary market at negotiated prices. 

Applicants state that (a) secondary 

market trading in Shares does not 

involve the Funds as parties 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 

9446 Federal Register / Vol. 74, No. 41 / Wednesday, March 4, 2009 / Notices 

12Rule 15c6–1 under the Exchange Act requires 

that most securities transactions be settled within 

three business days of the trade. Applicants 

acknowledge that no relief obtained from the 

requirements of section 22(e) will affect any 

obligations applicants may have under rule 

15c6–1. 

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

Fund Advisor, Acquiring Fund Subadvisor, 

Sponsor, promoter, or principal underwriter of an 

Acquiring Fund, and any person controlling, 

controlled by, or under common control with any 

of these entities. A ‘‘Single-Tier Fund Affiliate’’ is 

the Advisor, Subadvisor, promoter, or principal 

underwriter of a Single-Tier Fund and any person 

controlling, controlled by or under common control 

with any of these entities. 

discrimination or preferential treatment 

among purchasers. Finally, applicants 

contend that the proposed distribution 

system will be orderly because 

competitive forces will ensure that the 

difference between the market price of 

Shares and their NAV remains narrow. 

Section 22(e) 

7. Section 22(e) of the Act generally 

prohibits a registered investment 

company from suspending the right of 

redemption or postponing the date of 

payment of redemption proceeds for 

more than seven days after the tender of 

a security for redemption. Applicants 

state that settlement of redemptions for 

the International Funds is contingent 

not only on the settlement cycle of the 

United States market, but also on 

currently practicable delivery cycles in 

local markets for underlying foreign 

securities held by the International 

Funds. Applicants state that local 

market delivery cycles for transferring 

Fund Securities to redeeming investors, 

coupled with local market holiday 

schedules, will, under certain 

circumstances, require a delivery 

process longer than seven calendar days 

for International Funds. Applicants 

request relief under Section 6(c) of the 

Act from Section 22(e) to allow the 

International Funds to pay redemption 

proceeds up to 12 calendar days after 

the tender of any Creation Units for 

redemption. Except as disclosed in the 

relevant International Fund’s Prospectus 

and/or SAI, applicants expect that each 

International Fund will be able to 

deliver redemption proceeds within 

seven days.12 Applicants state that the 

SAI will disclose those local holidays 

(over the period of at least one year 

following the date thereof), if any, that 

are expected to prevent the delivery of 

redemption proceeds in seven calendar 

days and the maximum number of days 

needed to deliver the proceeds for each 

affected Fund. 

8. Applicants state that Section 22(e) 

was designed to prevent unreasonable, 

undisclosed and unforeseen delays in 

the payment of redemption proceeds. 

Applicants assert that the requested 

relief will not lead to the problems that 

Section 22(e) was designed to prevent. 

Section 12(d)(1) 

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

relevant part, prohibits a registered 

investment company from acquiring 

shares of an investment company if the 

securities represent more than 3% of the 

total outstanding voting stock of the 

acquired company, more than 5% of the 

total assets of the acquiring company, 

or, together with the securities of any 

other investment companies, more than 

10% of the total assets of the acquiring 

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

prohibits a registered open-end 

investment company, its principal 

underwriter, or any other broker or 

dealer from selling the investment 

company’s shares to another investment 

company if the sale will cause the 

acquiring company to own more than 

3% of the acquired company’s voting 

stock, or if the sale will cause more than 

10% of the acquired company’s voting 

stock to be owned by investment 

companies generally. 

10. Applicants request an exemption 

to permit management investment 

companies (‘‘Acquiring Management 

Companies’’) and unit investment trusts 

(‘‘Acquiring Trusts’’) registered under 

the Act that are not sponsored or 

advised by the Advisor or any entity 

controlling, controlled by, or under 

common control with the Advisor 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 

Trust (collectively, ‘‘Acquiring Funds’’) 

to acquire Shares of a Single-Tier Fund 

beyond the limits of Section 12(d)(1)(A). 

No Acquiring Fund will be in the same 

group of investment companies as 

defined in Section 12(d)(1)(G)(ii) of the 

Act as the Single-Tier Funds. In 

addition, applicants seek relief to permit 

a Single-Tier Fund or a broker-dealer 

(‘‘Broker’’) that is registered under the 

Exchange Act to sell Shares of such 

Single-Tier Fund to an Acquiring Fund 

in excess of the limits of Section 

12(d)(1)(B). 

11. Each Acquiring Management 

Company will be advised by an 

investment adviser within the meaning 

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

‘‘Acquiring Fund Advisor’’) and may be 

sub-advised by one or more investment 

advisers within the meaning of Section 

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

‘‘Acquiring Fund Subadvisor’’). Each 

Acquiring Fund Advisor and Acquiring 

Fund Subadvisor will be registered 

under the Advisers Act. Each Acquiring 

Trust will be sponsored by a sponsor 

(‘‘Sponsor’’). 

12. Applicants submit that the 

proposed conditions to the requested 

relief adequately address the concerns 

underlying the limits in Section 

12(d)(1), which include concerns about 

undue influence by a fund of funds over 

underlying funds, excessive layering of 

fees and overly complex fund 

structures. Applicants believe that the 

requested exemption is consistent with 

the public interest and the protection of 

investors. 

13. Applicants believe that neither the 

Acquiring Funds nor an Acquiring Fund 

Affiliate would be able to exert undue 

influence over the Single-Tier Funds.13

To limit the control that an Acquiring 

Fund may have over a Single-Tier Fund, 

applicants propose a condition 

prohibiting an Acquiring Fund Advisor 

or Sponsor, any person controlling, 

controlled by, or under common control 

with the Acquiring Fund Advisor 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 the Acquiring 

Fund Advisor or Sponsor, or any person 

controlling, controlled by, or under 

common control with an Acquiring 

Fund Advisor or Sponsor (‘‘Acquiring 

Fund’s Advisory Group’’) from 

controlling (individually or in the 

aggregate) a Single-Tier Fund within the 

meaning of Section 2(a)(9) of the Act. 

The same prohibition would apply to 

any Acquiring Fund’s Subadvisor, any 

person controlling, controlled by or 

under common control with the 

Acquiring Fund’s Subadvisor, 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 

Acquiring Fund’s Subadvisor or any 

person controlling, controlled by or 

under common control with the 

Acquiring Fund’s Subadvisor 

(‘‘Acquiring Fund’s Sub-Advisory 

Group’’). 

14. Applicants propose other 

conditions to limit the potential for 

undue influence over the Single-Tier 

Funds, including that no Acquiring 

Fund or Acquiring Fund Affiliate 

(except to the extent it is acting in its 

capacity as an investment adviser to a 

Single-Tier Fund) will cause a SingleTier Fund to purchase a security in any 

offering of securities during the 

existence of any 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 

Federal Register / Vol. 74, No. 41 / Wednesday, March 4, 2009 / Notices 9447 

14Applicants believe that an Acquiring Fund 

likely will purchase Shares of the Single-Tier Funds 

in the secondary market and will not purchase or 

redeem Creation Units directly from a Single-Tier 

Fund. 15Applicants acknowledge that receipt of 

compensation by (a) an affiliated person of an 

Acquiring Fund, or an affiliated person of such 

person, for the purchase by the Acquiring Fund of 

Shares of a Single-Tier Fund or (b) an affiliated 

person of a Single-Tier Fund, or an affiliated person 

of such person, for the sale by the Single-Tier Fund 

of its Shares to an Acquiring Fund may be 

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

Acquiring Fund Agreement also will include this 

acknowledgment. 

selling syndicate that is an officer, 

director, member of an advisory board, 

Acquiring Fund Advisor, Acquiring 

Fund Subadvisor, employee or Sponsor 

of an Acquiring Fund, or a person of 

which any such officer, director, 

member of an advisory board, Acquiring 

Fund Advisor, Acquiring Fund 

Subadvisor, 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). 

15. Applicants do not believe that the 

proposed arrangement will involve 

excessive layering of fees. The board of 

directors or trustees of any Acquiring 

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 

to the Acquiring Management Company 

are based on services provided that will 

be in addition to, rather than 

duplicative of, services provided under 

the advisory contract(s) of any SingleTier Fund in which the Acquiring 

Management Company may invest. In 

addition, except as provided in 

condition 12, an Acquiring Fund 

Advisor or a trustee (‘‘Trustee’’) or 

Sponsor of an Acquiring Trust, as 

applicable, will waive fees otherwise 

payable to it by the Acquiring Fund in 

an amount at least equal to any 

compensation (including fees received 

pursuant to any plan adopted by a Fund 

under rule 12b–1 under the Act) 

received by the Acquiring Fund Advisor 

or Trustee or Sponsor or an affiliated 

person of the Acquiring Fund Advisor, 

Trustee or Sponsor, from a Single-Tier 

Fund in connection with the investment 

by the Acquiring Fund in the SingleTier Fund. Applicants also state that 

any sales charges or service fees charged 

with respect to shares of an Acquiring 

Fund will not exceed the limits 

applicable to a fund of funds set forth 

in Conduct Rule 2830 of the NASD. 

16. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that no Single-Tier 

Fund may acquire securities of any 

investment company or company 

relying on Section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

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

ensure that Acquiring Funds comply 

with the terms and conditions of the 

requested relief from Section 12(d)(1), 

any Acquiring Fund that intends to 

invest in a Single-Tier Fund in reliance 

on the requested order will enter into a 

written agreement with such Single-Tier 

Fund (‘‘Acquiring Fund Agreement’’) 

requiring the Acquiring Fund to adhere 

to the terms and conditions of the 

requested order. The Acquiring Fund 

Agreement also will include an 

acknowledgement from the Acquiring 

Fund that it may rely on the requested 

order only to invest in the Single-Tier 

Funds and not in any other investment 

company, Initial Fund or FOF Fund. 

17. Applicants also note that a SingleTier Fund may choose to reject any 

direct purchase of Creation Units by an 

Acquiring Fund. To the extent that an 

Acquiring Fund purchases Shares of a 

Single-Tier Fund in the secondary 

market, a Single-Tier Fund would still 

retain its right to reject any initial 

investment by an Acquiring Fund in 

excess of the limits in Section 

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

Acquiring Fund Agreement with an 

Acquiring Fund. 

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

18. Section 17(a)(1) and (2) of the Act 

generally prohibit an affiliated person of 

a registered investment company, or an 

affiliated person of such a person 

(‘‘Second-Tier Affiliate’’), from selling 

any security to or purchasing any 

security from the company. Section 

2(a)(3) of the Act defines ‘‘affiliated 

person’’ to include (a) any person 

directly or indirectly owning, 

controlling or holding with power to 

vote 5% or more of the outstanding 

voting securities of the other person, (b) 

any person 5% or more of whose 

outstanding voting securities are 

directly or indirectly owned, controlled 

or held with the power to vote by the 

other person, and (c) any person directly 

or indirectly controlling, controlled by 

or under common control with the other 

person. Section 2(a)(9) of the Act 

provides that a control relationship will 

be presumed where one person owns 

more than 25% of another person’s 

voting securities. 

19. Applicants request an exemption 

from Section 17(a) of the Act pursuant 

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

permit persons to effectuate in-kind 

purchases and redemptions with a Fund 

when they are affiliated persons of the 

Fund or Second-Tier Affiliates solely by 

virtue of one or more of the following: 

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

25%, of the outstanding Shares of one 

or more Funds; (b) having an affiliation 

with a person with an ownership 

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

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

shares of one or more other registered 

investment companies (or series thereof) 

advised by the Advisor or an entity 

controlling, controlled by or under 

common control with the Advisor. 

20. Applicants believe that permitting 

the affiliated persons described above to 

effect in-kind purchases or redemptions 

of Creation Units would not give rise to 

the abuses that section 17(a) seeks to 

prevent. The deposit procedures for 

both in-kind purchases and in-kind 

redemptions of Creation Units will be 

the same for all purchases and 

redemptions. Deposit Securities and 

Fund Securities will be valued in the 

same manner as Portfolio Holdings. 

Therefore, applicants state that in-kind 

purchases and redemptions will afford 

no opportunity for the specified 

affiliated persons, or Second-Tier 

Affiliates, of a Fund to effect a 

transaction detrimental to other holders 

of Shares. Applicants also believe that 

in-kind purchases and redemptions will 

not result in self-dealing or overreaching 

of the Funds. 

21. Applicants also seek relief from 

Section 17(a) to permit a Single-Tier 

Fund that is an affiliated person of an 

Acquiring Fund to sell its Shares to and 

redeem its Shares from an Acquiring 

Fund, and to engage in the 

accompanying in-kind transactions with 

the Acquiring Fund.14 Applicants state 

that the terms of the transactions are fair 

and reasonable and do not involve 

overreaching. Applicants note that any 

consideration paid by an Acquiring 

Fund for the purchase or redemption of 

Shares directly from a Single-Tier Fund 

will be based on the NAV of the SingleTier Fund.15 Applicants believe that any 

proposed transactions directly between 

the Single-Tier Funds and Acquiring 

Funds will be consistent with the 

policies of each Acquiring Fund. The 

purchase of Creation Units by an 

Acquiring Fund directly from a SingleTier Fund will be accomplished in 

accordance with the investment 

restrictions of any such Acquiring Fund 

and will be consistent with the 

investment policies set forth in the 

Acquiring Fund’s registration statement. 

The Acquiring Fund Agreement will 

require any Acquiring Fund that 

purchases Creation Units directly from 

a Single-Tier Fund to represent that the 

purchase of Creation Units from a 

9448 Federal Register / Vol. 74, No. 41 / Wednesday, March 4, 2009 / Notices 

16See note 7, supra. 

Single-Tier Fund by an Acquiring Fund 

will be accomplished in compliance 

with the investment restrictions of the 

Acquiring Fund and will be consistent 

with the investment policies set forth in 

the Acquiring Fund’s registration 

statement. 

Applicants’ Conditions 

Applicants agree that any order of 

granting the requested relief will be 

subject to the following conditions: 16

ETF Relief 

1. As long as the Trust operates in 

reliance on the requested order, the 

Shares of each Fund will be listed on an 

Exchange. 

2. Neither the Trust nor any Fund will 

be advertised or marketed as an openend investment company or a mutual 

fund. Each Fund’s Prospectus will 

prominently disclose that Shares are not 

individually redeemable shares and will 

disclose that the owners of Shares may 

acquire those Shares from the Fund and 

tender those Shares for redemption to 

the Fund in Creation Units only. 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 the Fund in Creation Units only. 

3. The Website, which will be 

publicly accessible at no charge, will 

contain the following information, on a 

per Share basis, for each Fund: (a) The 

prior Business Day’s NAV and the midpoint of the bid-ask spread at the time 

of the calculation of NAV (‘‘Bid/Ask 

Price’’), and a calculation of the 

premium or discount of the Bid/Ask 

Price at the time of calculation of the 

NAV against such NAV; and (b) data in 

chart format displaying the frequency 

distribution of discounts and premiums 

of the daily Bid/Ask Price against the 

NAV, within appropriate ranges, for 

each of the four previous calendar 

quarters. 

4. The Prospectus and annual report 

for each Fund also will include: (a) the 

information listed in condition 3(b), (i) 

in the case of the Fund’s Prospectus, for 

the most recently completed year (and 

the most recently completed quarter or 

quarters, as applicable) and (ii) in the 

case of the annual report, for the 

immediately preceding five years, as 

applicable; and (b) the following data, 

calculated on a per Share basis for one, 

five and ten year periods (or life of the 

Fund): (i) The cumulative total return 

and the average annual total return 

based on NAV and Bid/Ask Price, and 

(ii) the cumulative total return of the 

relevant Index. 

5. Each Fund’s Prospectus will clearly 

disclose that, for purposes of the Act, 

Shares are issued by the Fund, which is 

a registered investment company, and 

that the acquisition of Shares by 

investment companies is subject to the 

restrictions of Section 12(d)(1) of the 

Act. In addition, the Prospectus for each 

Single-Tier Fund will disclose that it 

has received an exemptive order that 

permits registered investment 

companies to invest in such Single-Tier 

Fund beyond the limits in Section 

12(d)(1), subject to certain terms and 

conditions, including that the registered 

investment company enter into an 

Acquiring Fund Agreement with the 

Single-Tier Fund regarding the terms of 

the investment. 

6. The requested ETF Relief will 

expire on the effective date of any 

Commission rule under the Act that 

provides relief permitting the operation 

of index-based exchange-traded funds. 

Section 12(d)(1) Relief 

7. The members of an Acquiring 

Fund’s Advisory Group will not control 

(individually or in the aggregate) a 

Single-Tier Fund within the meaning of 

Section 2(a)(9) of the Act. The members 

of an Acquiring Fund’s Sub-Advisory 

Group will not control (individually or 

in the aggregate) a Single-Tier Fund 

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

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

the outstanding Shares of a Single-Tier 

Fund, an Acquiring Fund’s Advisory 

Group or an Acquiring Fund’s SubAdvisory Group, each in the aggregate, 

becomes a holder of more than 25% of 

the outstanding Shares of a Single-Tier 

Fund, it will vote its Shares in the same 

proportion as the vote of all other 

holders of the Shares. This condition 

will not apply to the Acquiring Fund’s 

Sub-Advisory Group with respect to a 

Single-Tier Fund for which the 

Acquiring Fund’s Subadvisor or a 

person controlling, controlled by, or 

under common control with the 

Acquiring Fund’s Subadvisor acts as the 

investment adviser within the meaning 

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

8. No Acquiring Fund or Acquiring 

Fund Affiliate will cause any existing or 

potential investment by the Acquiring 

Fund in a Single-Tier Fund to influence 

the terms of any services or transactions 

between an Acquiring Fund or an 

Acquiring Fund Affiliate and the SingleTier Fund or the Single-Tier Fund 

Affiliate. 

9. The board of directors or trustees of 

an Acquiring Management Company, 

including a majority of the disinterested 

directors or trustees, will adopt 

procedures reasonably designed to 

ensure that the Acquiring Fund Advisor 

and any Acquiring Fund Subadvisor are 

conducting the investment program of 

the Acquiring Management Company 

without taking into account any 

consideration received by the Acquiring 

Management Company or an Acquiring 

Fund Affiliate from a Single-Tier Fund 

or a Single-Tier Fund Affiliate in 

connection with any services or 

transactions. 

10. No Acquiring Fund or Acquiring 

Fund Affiliate (except to the extent it is 

acting in its capacity as an investment 

adviser to a Single-Tier Fund) will cause 

a Single-Tier Fund to purchase a 

security in any Affiliated Underwriting. 

11. Before investing in the Shares of 

a Single-Tier Fund in excess of the 

limits in Section 12(d)(1)(A), each 

Acquiring Fund and such Single-Tier 

Fund will execute an Acquiring Fund 

Agreement stating, without limitation, 

that their boards of directors or trustees 

and their investment advisers or 

Sponsors or Trustees, as applicable, 

understand the terms and conditions of 

the order, and agree to fulfill their 

responsibilities under the order. At the 

time of its investment in Shares of a 

Single-Tier Fund in excess of the limit 

in Section 12(d)(1)(A)(i), an Acquiring 

Fund will notify such Single-Tier Fund 

of the investment. At such time, the 

Acquiring Fund will also transmit to 

such Single-Tier Fund a list of names of 

each Acquiring Fund Affiliate and 

Underwriting Affiliate. The Acquiring 

Fund will notify the Single-Tier Fund of 

any changes to the list of names as soon 

as reasonably practicable after a change 

occurs. The Single-Tier Fund and the 

Acquiring Fund will maintain and 

preserve a copy of the order, the 

Acquiring Fund Agreement, and the list 

of names 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. 

12. The Acquiring Fund Advisor, 

Trustee or Sponsor, as applicable, will 

waive fees otherwise payable to it by the 

Acquiring Fund in an amount at least 

equal to any compensation (including 

fees received under any plan adopted by 

a Fund under rule 12b–1 under the Act) 

received from a Single-Tier Fund by the 

Acquiring Fund Advisor, Trustee or 

Sponsor, or an affiliated person of the 

Acquiring Fund Advisor, Trustee or 

Sponsor, other than any advisory fees 

paid to the Acquiring Fund Advisor, 

Trustee or Sponsor, or its affiliated 

person by the Single-Tier Fund, in 

connection with the investment by the 

Acquiring Fund in the Single-Tier Fund. 

Federal Register / Vol. 74, No. 41 / Wednesday, March 4, 2009 / Notices 9449 

Any Acquiring Fund Subadvisor will 

waive fees otherwise payable to the 

Acquiring Fund Subadvisor, directly or 

indirectly, by the Acquiring 

Management Company in an amount at 

least equal to any compensation 

received from a Single-Tier Fund by the 

Acquiring Fund Subadvisor, or an 

affiliated person of the Acquiring Fund 

Subadvisor, other than any advisory fees 

paid to the Acquiring Fund Subadvisor 

or its affiliated person by a Single-Tier 

Fund, in connection with any 

investment by the Acquiring 

Management Company in such SingleTier Fund made at the direction of the 

Acquiring Fund Subadvisor. In the 

event that the Acquiring Fund 

Subadvisor waives fees, the benefit of 

the waiver will be passed through to the 

Acquiring Management Company. 

13. Any sales charges and/or service 

fees charged with respect to shares of an 

Acquiring Fund will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

14. Once an investment by an 

Acquiring Fund in the securities of a 

Single-Tier Fund exceeds the limit in 

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

board of directors or trustees of a Fund 

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

directors or trustees that are not 

‘‘interested persons’’ within the 

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

(‘‘independent trustees’’), will 

determine that any consideration paid 

by such Single-Tier Fund to an 

Acquiring Fund or Acquiring Fund 

Affiliate in connection with any services 

or transactions: (a) Is fair and reasonable 

in relation to the nature and quality of 

the services and benefits received by 

such Single-Tier Fund; (b) is within the 

range of consideration that such SingleTier Fund would be required to pay to 

another unaffiliated entity in connection 

with the same services or transactions; 

and (c) does not involve overreaching 

on the part of any person concerned. 

This condition does not apply with 

respect to any services or transactions 

between a Single-Tier Fund and its 

investment adviser(s), or any person 

controlling, controlled by, or under 

common control with such investment 

adviser. 

15. The Board, including a majority of 

the independent trustees, will adopt 

procedures reasonably designed to 

monitor any purchases of securities by 

a Single-Tier Fund in an Affiliated 

Underwriting once an investment by an 

Acquiring Fund in the securities of such 

Single-Tier Fund exceeds the limit of 

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

including any purchases made directly 

from an Underwriting Affiliate. The 

Board will review these purchases 

periodically, but no less frequently than 

annually, to determine whether the 

purchases were influenced by the 

investment by the Acquiring Fund in 

the Single-Tier Fund. The Board will 

consider, among other things: (a) 

Whether the purchases were consistent 

with the investment objectives and 

policies of the Single-Tier Fund; (b) how 

the performance of securities purchased 

in an Affiliated Underwriting compares 

to the performance of comparable 

securities purchased during a 

comparable period of time in 

underwritings other than Affiliated 

Underwritings or to a benchmark such 

as a comparable market index; and (c) 

whether the amount of securities 

purchased by the Single-Tier Fund in 

Affiliated Underwritings and the 

amount purchased directly from an 

Underwriting Affiliate have changed 

significantly from prior years. The 

Board will take any appropriate actions 

based on its review, including, if 

appropriate, the institution of 

procedures designed to assure that 

purchases of securities in Affiliated 

Underwritings are in the best interests 

of shareholders of the Single-Tier Fund. 

16. Each Single-Tier 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 

not less than six years from the end of 

the fiscal year in which any purchase in 

an Affiliated Underwriting occurred, the 

first two years in an easily accessible 

place, a written record of each purchase 

of securities in Affiliated Underwritings, 

once an investment by an Acquiring 

Fund in the Shares of the Single-Tier 

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. 

17. Before approving any advisory 

contract under Section 15 of the Act, the 

board of directors or trustees of each 

Acquiring Management Company, 

including a majority of the independent 

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 

Single-Tier Fund in which the 

Acquiring Management Company may 

invest. These findings and their basis 

will be recorded fully in the minute 

books of the appropriate Acquiring 

Management Company. 

18. No Single-Tier Fund will acquire 

securities of any investment company or 

companies relying on Sections 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. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–4602 Filed 3–3–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Thursday, March 5, 2009 at 2 p.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(5), (7), 9(B) and (10) and 

17 CFR 200.402(a)(5), (7), 9(ii) and (10), 

permit consideration of the scheduled 

matters at the Closed Meeting. 

Commissioner Casey, as duty officer, 

voted to consider the items listed for the 

Closed Meeting in closed session and 

determined that no earlier notice thereof 

was possible. 

The subject matter of the Closed 

Meeting scheduled for Thursday, March 

5, 2009 will be: 

Institution and settlement of injunctive 

actions; 

Institution and settlement of 

administrative proceedings of an 

enforcement nature; 

Other matters relating to enforcement 

proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact: 

The Office of the Secretary at (202) 

551–5400.