37258 Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 

5. CFF states that it engages in several 

banking activities, that it is controlled as 

to financing it can undertake and loans 

it can extend through French banking 

laws and through oversight and 

regulation implemented by the Banking 

Commission. CFF asserts that as a SCF, 

it is governed by a legal regime in many 

respects stricter than the regime 

applicable to commercial banks in 

France. CFF further states that it fulfills 

a public interest objective of providing 

financial resources for the favored 

sectors in France and the United States 

and other developed nations, and that 

its activities do not lend themselves to 

the abuses against which the Act was 

directed. Therefore, CFF states that it 

satisfies the standards for relief under 

section 6(c) of the Act. 

Applicant’s Conditions 

Applicant agrees that the order 

granting the requested relief will be 

subject to the following conditions: 

1. In connection with any offering by 

Applicant of its Privileged Debt 

Securities in the United States, 

Applicant will appoint an agent to 

accept service of process in any suit, 

action or proceeding brought on such 

Privileged Debt Securities and instituted 

in any State or Federal court presiding 

in the City and County of New York by 

any such holder of any such Privileged 

Debt Securities. Applicant will 

expressly submit to the jurisdiction of 

the New York State and United States 

Federal courts presiding in the City and 

County of New York with respect to any 

such suit, action or proceeding. 

Applicant will also waive the defense of 

forum non conveniens to the 

maintenance of any such action or 

proceeding in the New York State or 

United States Federal courts presiding 

in the City and County of New York. 

Such appointment of an agent to accept 

service of process and such submission 

to jurisdiction shall be irrevocable until 

all amounts due and to become due in 

respect of such Privileged Debt 

Securities have been paid. No such 

submission to jurisdiction or 

appointment of agent for service of 

process will affect the right, if any, of a 

holder of any such security to bring suit 

in any court that will have jurisdiction 

over Applicant by virtue of the offer and 

sale of such Privileged Debt Securities 

or otherwise. 

2. Applicant’s activities will conform 

in all material respects to the activities 

described in the application. 

3. Applicant is regulated as a SCF by 

the French banking authorities, as 

described in the application. 

4. Applicant will only offer and sell 

Privileged Debt Securities on a private 

basis in the United States to persons 

reasonably believed by Applicant to be 

(i) institutional accredited investors as 

defined in paragraphs (1), (2), (3) and (7) 

of Rule 501(a) under the 1933 Act, (ii) 

any entity in which all of the equity 

owners come within such paragraphs, or 

(iii) qualified institutional buyers, as 

defined in Rule 144A under the 1933 

Act. 

5. Applicant will not make public 

offers or sales of equity or debt 

securities in the United States and will 

not make offers or sales of equity 

securities on either a public or private 

basis in the United States. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–17892 Filed 7–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

28834; File No. 812–13503] 

Pax World Funds Trust II, et al.; Notice 

of Application 

July 22, 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, under 

sections 6(c) and 17(b) of the Act for an 

exemption from sections 17(a)(1) and 

17(a)(2) of the Act, and under section 

12(d)(1)(J) of the Act for an exemption 

from sections 12(d)(1)(A) and 

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

SUMMARY OF APPLICATION: Applicants 

request an order that would permit (a) 

certain open-end management 

investment companies and their series, 

to issue shares (‘‘Fund Shares’’) that can 

be redeemed only in large aggregations 

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

transactions in Fund Shares to occur at 

negotiated prices; (c) certain series to 

pay redemption proceeds, under certain 

circumstances, more than seven days 

after the tender of Fund 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 Fund Shares. 

APPLICANTS: Pax World Funds Trust II 

(‘‘Trust’’), Pax World Management Corp. 

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

(‘‘Distributor’’). 

DATES: Filing Dates: The application 

was filed on February 29, 2008, and 

amended on May 8, 2008, November 17, 

2008, May 8, 2009, and July 7, 2009. 

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 August 12, 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, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090; 

Applicants: Pax World Management 

Corp. and Pax World Funds Trust II, 30 

Penhallow Street, Suite 400, 

Portsmouth, NH 03801; ALPS 

Distributors, Inc., 1290 Broadway, Suite 

1100, Denver, CO 80203. 

FOR FURTHER INFORMATION CONTACT: 

Laura J. Riegel, Senior Counsel at (202) 

551–6873, or Julia Kim Gilmer, Branch 

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

Investment Management, Office of 

Investment Company Regulation). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

Web site by searching for the file 

number, or an applicant using the 

Company name box, at http:// 

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

calling (202) 551–8090. 

Applicants’ Representations 

1. The Trust is registered as an openend management investment company 

and is organized as a Massachusetts 

trust that will offer multiple series. The 

Trust will initially offer Fund Shares of 

two series (the ‘‘Initial Funds’’). 

Applicants may offer additional 

registered open-end investment 

companies in the future as well as 

additional series of the Trust and series 

of any existing or future open-end 

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Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 37259 

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 application. 

2The Underlying Indices for the Initial Funds are 

KLD Europe Asia Pacific Sustainability SM Index 

and KLD North America Sustainability SM Index. 

3The Index Provider to the Initial Funds is KLD 

Research & Analytics, Inc. 

4Applicants represent that each Fund will invest 

at least 80% of its total assets in the component 

securities that comprise its Underlying Index 

(‘‘Component Securities’’) or, in the case of Foreign 

Funds, Component Securities and depositary 

receipts representing such securities. ‘‘Depositary 

Receipts’’ will typically be American Depositary 

Receipts, but also include Global Depositary 

Receipts and European Depositary Receipts. 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 Underlying Index, but which the 

Advisor or Sub-Advisor believes will help the Fund 

track its Underlying Index. 

5All 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). 

6Under the representative sampling strategy, the 

Advisor or the Sub-Advisor 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 Underlying Index. 

7Each Fund will sell and redeem Creation Units 

only on a ‘‘Business Day’’ which 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 

Fund Shares are primarily 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 Fund Shares representing 

the sum of the estimated Balancing Amount and the 

current value of the Deposit Securities. 

8Applicants 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 a Foreign 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 Sub-Advisor 

might prefer to receive cash rather than stocks so 

that the Fund may avoid transaction costs involved 

Continued 

investment companies registered under 

the Act, which will be advised by the 

Advisor or an entity controlling, 

controlled by, or under common control 

with the Advisor (‘‘Future Funds’’ and 

together with the Initial Funds, the 

‘‘Funds’’).1

2. The Advisor will serve as the 

investment adviser to the Initial Funds. 

The Advisor is registered as an 

investment adviser under the 

Investment Advisers Act of 1940, as 

amended (the ‘‘Advisers Act’’). In the 

future, the Advisor may enter into subadvisory agreements with one or more 

additional investment advisers to act as 

sub-advisors to particular Funds (‘‘SubAdvisors’’). Each Sub-Advisor 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 

Fund Shares. The Distributor is not 

affiliated with the Advisor or any SubAdvisor. 

3. Each Fund will hold certain equity 

securities (‘‘Portfolio Securities’’) and 

financial instruments selected to 

correspond, before fees and expenses, 

generally to the price and yield 

performance of a specified equity 

securities index (each, an ‘‘Underlying 

Index’’ and collectively, ‘‘Underlying 

Indices’’).2 Certain of the Underlying 

Indices are composed of equity 

securities of domestic issuers and nondomestic issuers meeting the 

requirements for trading in U.S. markets 

(‘‘Domestic Indices’’). Other Underlying 

Indices include equity securities trading 

in non-U.S. markets or a combination of 

such securities with domestic equity 

securities (collectively ‘‘Foreign 

Indices’’). Funds which track Domestic 

Indices are referred to as ‘‘Domestic 

Funds’’ and Funds which track Foreign 

Indices are referred to as ‘‘Foreign 

Funds.’’ No entity that compiles, 

creates, sponsors or maintains an 

Underlying Index (‘‘Index Provider’’) is 

or will be an affiliated person, as 

defined in section 2(a)(3) of the Act, or 

an affiliated person of an affiliated 

person, of the Trust or a Fund, of the 

Advisor, of any Sub-Advisor to or 

promoter of a Fund, or of the 

Distributor.3

4. The investment objective of each 

Fund will be to provide investment 

results that correspond, before fees and 

expenses, generally to the price and 

yield performance of its Underlying 

Index.4 The value of a Foreign Index 

and the value of a Domestic 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 statutory prospectus 

(‘‘Prospectus’’).5 A Fund using a 

replication strategy will invest in the 

Component Securities in its Underlying 

Index in approximately the same 

proportions as in the Underlying Index. 

In certain circumstances, such as when 

there are practical difficulties or 

substantial costs involved in holding 

every security in an Underlying Index or 

when a Component Security 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 Component 

Securities of its Underlying Index.6

Applicants anticipate that a Fund that 

utilizes a representative sampling 

strategy will not track the performance 

of its Underlying Index with the same 

degree of accuracy as an investment 

vehicle that invests in every Component 

Security of the Underlying Index with 

the same weighting as the Underlying 

Index. Applicants expect that each Fund 

will have a tracking error relative to the 

performance of its Underlying Index of 

less than 5 percent. 

5. The Trust will issue Creation Units 

in specified large aggregations of Fund 

Shares (e.g., 25,000 Fund Shares for 

each Fund) 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’’). Fund 

Shares of each Fund generally will be 

sold in Creation Units in exchange for 

an in-kind deposit by the purchaser of 

a portfolio of securities designated by 

the Advisor or Sub-Advisor to 

correspond generally to the price and 

yield performance of the relevant 

Underlying 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.7 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.8

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37260 Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 

in liquidating part of its portfolio to achieve the 

rebalancing. 9Where a Fund permits a purchaser to substitute 

cash in lieu of depositing a portion of the requisite 

Deposit Securities, the purchaser may be assessed 

a higher Transaction Fee to cover the cost of 

purchasing such Deposit Securities, 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. 10Fund Shares will be registered in book-entry 

form only. DTC or its nominee will be the registered 

owner of all outstanding Fund Shares. DTC or DTC 

Participants will maintain records reflecting 

beneficial owners of Fund Shares. 

11As a general matter, the Deposit Securities and 

Fund Securities will correspond pro rata to the 

Portfolio Securities held by each Fund, but 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. The Funds will comply with the 

Federal securities laws in accepting Deposit 

Securities and satisfying redemptions with Fund 

Securities, including that the Deposit Securities and 

Fund Securities are sold in transactions that would 

be exempt from registration under the Securities 

Act. 

6. An investor purchasing or 

redeeming a Creation Unit from a Fund 

will be charged a fee (‘‘Transaction 

Fee’’) to prevent the dilution of the 

interests of the remaining shareholders 

resulting from costs in connection with 

the purchase or redemption of Creation 

Units.9 The maximum Transaction Fees 

relevant to each Fund and the method 

of calculating such Transaction Fees 

will be fully disclosed in the Prospectus 

of such Fund or statement of additional 

information (‘‘SAI’’). The Distributor 

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 

Fund Shares. 

7. Purchasers of Fund Shares in 

Creation Units may hold such Fund 

Shares or may sell such Fund Shares 

into the secondary market. Fund Shares 

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 or a market maker and 

maintain a market for Fund Shares 

trading on the Listing Exchange. Prices 

of Fund Shares trading on an Exchange 

will be based on the current bid/ask 

market. Fund Shares sold in the 

secondary market will be subject to 

customary brokerage commissions and 

charges. 

8. 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 Fund Shares, 

also may purchase Creation Units for 

use in its market-making activities. 

Applicants expect that secondary 

market purchasers of Fund Shares will 

include both institutional investors and 

retail investors.10 Applicants expect that 

the price at which Fund 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 Fund Shares will not 

trade at a material discount or premium 

in relation to their NAV. 

9. Fund Shares will not be 

individually redeemable, and owners of 

Fund Shares may acquire those Fund 

Shares from the Fund, or tender such 

Fund Shares for redemption to the 

Fund, in Creation Units only. To 

redeem, an investor will have to 

accumulate enough Fund Shares to 

constitute a Creation Unit. Redemption 

orders must be placed by or through an 

Authorized Participant. An investor 

redeeming a Creation Unit generally 

will receive (a) Portfolio Securities 

designated to be delivered for Creation 

Unit redemptions (‘‘Fund Securities’’) 

on the date that the request for 

redemption is submitted 11 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. 

10. No 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 Fund Shares 

traded on an Exchange, or refer to 

redeemability, will prominently 

disclose that Fund Shares are not 

individually redeemable and that the 

owners of Fund Shares may purchase or 

redeem Fund 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 Fund Shares. The 

Funds will provide copies of their 

annual and semi-annual shareholder 

reports to DTC Participants for 

distribution to shareholders. 

Applicants’ Legal Analysis 

1. Applicants request an order under 

section 6(c) of the Act for an exemption 

from sections 2(a)(32), 5(a)(1), 22(d), and 

22(e) of the Act and rule 22c–1 under 

the Act, under sections 6(c) and 17(b) of 

the Act for an exemption from sections 

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

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

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

and (B) of the Act. 

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

the Commission may exempt any 

person, security or transaction, or any 

class of persons, securities or 

transactions, from any provision of the 

Act, if and to the extent that such 

exemption is necessary or appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. Section 17(b) 

of the Act authorizes the Commission to 

exempt a proposed transaction from 

section 17(a) of the Act if evidence 

establishes that the terms of the 

transaction, including the consideration 

to be paid or received, are reasonable 

and fair and do not involve 

overreaching on the part of any person 

concerned, and the proposed 

transaction is consistent with the 

policies of the registered investment 

company and the general provisions of 

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

provides that the Commission may 

exempt any person, security, or 

transaction, or any class or classes of 

persons, securities or transactions, from 

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

exemption is consistent with the public 

interest and the protection of investors. 

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

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

‘‘open-end company’’ as a management 

investment company that is offering for 

sale or has outstanding any redeemable 

security of which it is the issuer. 

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

redeemable security as any security, 

other than short-term paper, under the 

terms of which the owner, upon its 

presentation to the issuer, is entitled to 

receive approximately his proportionate 

share of the issuer’s current net assets, 

or the cash equivalent. Because Fund 

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 Fund Shares that 

are redeemable in Creation Units only. 

Applicants state that investors may 

purchase Fund Shares in Creation Units 

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Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 37261 

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. 

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 Fund 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 Fund 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 

Fund 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 Fund 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 Fund Shares to trade in the 

secondary market at negotiated prices. 

Applicants state that (a) secondary 

market trading in Fund Shares does not 

involve a Fund as a party and will not 

result in dilution of an investment in 

Fund 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 

Fund Shares will not lead to 

discrimination or preferential treatment 

among purchasers. Finally, applicants 

contend that the proposed distribution 

system will be orderly because 

competitive forces will ensure that the 

difference between the market price of 

Fund 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 Foreign 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 Foreign 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 Foreign Funds. Applicants request 

relief under section 6(c) of the Act from 

section 22(e) to allow the Foreign Funds 

to pay redemption proceeds up to 

fourteen calendar days after the tender 

of any Creation Units for redemption. 

Except as disclosed in the relevant 

Foreign Fund’s Prospectus and/or SAI, 

applicants expect that each Foreign 

Fund will be able to deliver redemption 

proceeds within seven days.12 With 

respect to Future Funds that are Foreign 

Funds, applicants seek the same relief 

from section 22(e) only to the extent that 

circumstances similar to those described 

in the application exist. 

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. 

Applicants state that the SAI will 

disclose those local holidays (over the 

period of at least one year following the 

date of the SAI), if any, that are 

expected to prevent the delivery of 

redemption proceeds in seven calendar 

days, and the maximum number of 

days, up to fourteen calendar days, 

needed to deliver the proceeds for the 

relevant Foreign Fund. 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. 

Section 12(d)(1) 

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

relevant part, prohibits a registered 

investment company from acquiring 

securities of an investment company if 

such securities represent more than 3% 

of the total outstanding voting stock of 

the acquired company, more than 5% of 

the total assets of the acquiring 

company, or, together with the 

securities of any other investment 

companies, more than 10% of the total 

assets of the acquiring company. Section 

12(d)(1)(B) of the Act prohibits a 

registered open-end investment 

company, its principal underwriter and 

any other broker-dealer from selling the 

investment company’s shares to another 

investment company if the sale will 

cause the acquiring company to own 

more than 3% of the acquired 

company’s voting stock, or if the sale 

will cause more than 10% of the 

acquired company’s voting stock to be 

owned by investment companies 

generally. 

10. Applicants request an exemption 

to permit management investment 

companies (‘‘Purchasing Management 

Companies’’) and unit investment trusts 

(‘‘Purchasing 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, ‘‘Purchasing Funds’’) 

to acquire shares of a Fund beyond the 

limits of section 12(d)(1)(A). Purchasing 

Funds do not include the Funds. In 

addition, applicants seek relief to permit 

a Fund or broker-dealer (‘‘Broker’’) that 

is registered under the Exchange Act to 

sell Fund Shares to a Purchasing Fund 

in excess of the limits of section 

12(d)(1)(B). 

11. Each Purchasing Management 

Company will be advised by an 

investment adviser within the meaning 

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

‘‘Purchasing 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 a 

‘‘Purchasing Fund Sub-Advisor’’). Any 

investment adviser to a Purchasing 

Management Company will be 

registered under the Advisers Act. Each 

Purchasing Trust will be sponsored by 

a sponsor (‘‘Sponsor’’). 

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37262 Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 

13A ‘‘Purchasing Fund Affiliate’’ is a Purchasing 

Fund Advisor, Purchasing Fund Sub-Advisor, 

Sponsor, promoter, and principal underwriter of a 

Purchasing Fund, and any person controlling, 

controlled by, or under common control with any 

of these 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. 

14Any references to NASD Conduct Rule 2830 

include any successor or replacement rule to NASD 

Conduct Rule 2830 that may be adopted by the 

Financial Industry Regulatory Association. 

12. Applicants submit that the 

proposed conditions to the requested 

relief adequately address the concerns 

underlying the limits in sections 

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

concerns about undue influence by a 

fund of funds over underlying funds, 

excessive layering of fees and overly 

complex fund structures. Applicants 

believe that the requested exemption is 

consistent with the public interest and 

the protection of investors. 

13. Applicants believe that neither the 

Purchasing Funds nor a Purchasing 

Fund Affiliate would be able to exert 

undue influence over the Funds.13 To 

limit the control that a Purchasing Fund 

may have over a Fund, applicants 

propose a condition prohibiting a 

Purchasing Fund Advisor or a Sponsor, 

any person controlling, controlled by, or 

under common control with a 

Purchasing 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 a Purchasing Fund 

Advisor or Sponsor, or any person 

controlling, controlled by, or under 

common control with a Purchasing 

Fund Advisor or Sponsor (‘‘Purchasing 

Fund’s Advisory Group’’) from 

controlling (individually or in the 

aggregate) a Fund within the meaning of 

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

prohibition would apply to any 

Purchasing Fund Sub-Advisor, any 

person controlling, controlled by or 

under common control with the 

Purchasing Fund Sub-Advisor, 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 

Purchasing Fund Sub-Advisor or any 

person controlling, controlled by or 

under common control with the 

Purchasing Fund Sub-Advisor 

(‘‘Purchasing Fund’s Sub-Advisory 

Group’’). Applicants propose other 

conditions to limit the potential for 

undue influence over the Funds, 

including that no Purchasing Fund or 

Purchasing Fund Affiliate (except to the 

extent it is acting in its capacity as an 

investment adviser to a Fund) will cause 

a Fund to purchase a security in 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 

selling syndicate that is an officer, 

director, member of an advisory board, 

Purchasing Fund Advisor, Purchasing 

Fund Sub-Advisor, employee or 

Sponsor of a Purchasing Fund, or a 

person of which any such officer, 

director, member of an advisory board, 

Purchasing Fund Advisor, Purchasing 

Fund Sub-Advisor, 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). 

14. Applicants assert that the 

proposed conditions address any 

concerns regarding excessive layering of 

fees. The board of directors or trustees 

of any Purchasing 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 Purchasing Management 

Company are based on services 

provided that will be in addition to, 

rather than duplicative of, services 

provided under the advisory contract(s) 

of any Fund in which the Purchasing 

Management Company may invest. In 

addition, except as provided in 

condition 12, a Purchasing Fund 

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

Sponsor of a Purchasing Trust will, as 

applicable, waive fees otherwise 

payable to it by the Purchasing 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 Purchasing Fund 

Advisor or Trustee or Sponsor or an 

affiliated person of the Purchasing Fund 

Advisor, Trustee or Sponsor, from the 

Fund in connection with the investment 

by the Purchasing Fund in the Fund. 

Applicants state that any sales loads or 

service fees charged with respect to 

shares of a Purchasing Fund will not 

exceed the limits applicable to a fund of 

funds set forth in Conduct Rule 2830 of 

the National Association of Securities 

Dealers (‘‘NASD’’).14

15. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that no Fund may 

acquire securities of any investment 

company or company relying on 

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, except to the 

extent permitted by exemptive relief 

from the Commission permitting the 

Fund to purchase shares of a money 

market fund for short-term cash 

management purposes. To ensure that 

Purchasing Funds comply with the 

terms and conditions of the requested 

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

Purchasing Fund that intends to invest 

in a Fund in reliance on the requested 

order will enter into a Purchasing Fund 

Agreement between the Fund and the 

Purchasing Fund requiring the 

Purchasing Fund to adhere to the terms 

and conditions of the requested order. 

The Purchasing Fund Agreement also 

will include an acknowledgement from 

the Purchasing Fund that it may rely on 

the requested order only to invest in the 

Funds and not in any other investment 

company. 

16. Applicants also note that a Fund 

may choose to reject a direct purchase 

of Fund Shares in Creation Units by a 

Purchasing Fund. To the extent that a 

Purchasing Fund purchases Fund 

Shares in the secondary market, a Fund 

would still retain its ability to reject 

initial purchases of Fund Shares made 

in reliance on the requested order by 

declining to enter into the Purchasing 

Fund Agreement prior to any 

investment by a Purchasing Fund in 

excess of the limits of section 

12(d)(1)(A). 

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

17. Section 17(a) of the Act generally 

prohibits an affiliated person of a 

registered investment company, or an 

affiliated person of such a person 

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

any security to or 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. 

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15Applicants acknowledge that the receipt of 

compensation by (a) an affiliated person of a 

Purchasing Fund, or an affiliated person of such 

person, for the purchase by the Purchasing Fund of 

Fund 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 Fund Shares to a 

Purchasing Fund, may be prohibited by section 

17(e)(1) of the Act. The Purchasing Fund Agreement 

also will include this acknowledgment. 

16Applicants believe that a Purchasing Fund will 

purchase Fund Shares in the secondary market and 

will not purchase or redeem Creation Units directly 

from a Fund. However, the requested relief would 

apply to direct sales of Creation Units by a Fund 

to a Purchasing Fund and redemptions of those 

Fund Shares. 17See note 5, supra. 

18. Applicants request an exemption 

from section 17(a) of the Act pursuant 

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

permit persons to effectuate in-kind 

purchases and redemptions with a Fund 

when they are affiliated persons of the 

Fund or Second-Tier Affiliates solely by 

virtue of one or more of the following: 

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

25%, of the outstanding Fund 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. 

19. Applicants assert that no useful 

purpose would be served by prohibiting 

these types of affiliated persons from 

purchasing or redeeming Creation Units 

through ‘‘in-kind’’ transactions. The 

deposit procedures for both in-kind 

purchases and in-kind redemptions of 

Creation Units will be the same for all 

purchases and redemptions. Deposit 

Securities and Fund Securities will be 

valued in the same manner as Portfolio 

Securities. Therefore, applicants state 

that in-kind purchases and redemptions 

will afford no opportunity for the 

specified affiliated persons, or SecondTier Affiliates, of a Fund to effect a 

transaction detrimental to other holders 

of Fund Shares. Applicants also believe 

that in-kind purchases and redemptions 

will not result in self-dealing or 

overreaching of the Fund. 

20. Applicants also seek relief from 

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

affiliated person of a Purchasing Fund 

to sell its Fund Shares to and redeem its 

Fund Shares from a Purchasing Fund, 

and to engage in the accompanying inkind transactions with the Purchasing 

Fund.15 Applicants state that the terms 

of the transactions are fair and 

reasonable and do not involve 

overreaching. Applicants note that any 

consideration paid by a Purchasing 

Fund for the purchase or redemption of 

Fund Shares directly from a Fund will 

be based on the NAV of the Fund.16

Applicants believe that any proposed 

transactions directly between the Funds 

and Purchasing Funds will be consistent 

with the policies of each Purchasing 

Fund. The purchase of Creation Units 

by a Purchasing Fund directly from a 

Fund will be accomplished in 

accordance with the investment 

restrictions of any such Purchasing 

Fund and will be consistent with the 

investment policies set forth in the 

Purchasing Fund’s registration 

statement. The Purchasing Fund 

Agreement will require any Purchasing 

Fund that purchases Creation Units 

directly from a Fund to represent that 

the purchase of Creation Units from a 

Fund by a Purchasing Fund will be 

accomplished in compliance with the 

investment restrictions of the 

Purchasing Fund and will be consistent 

with the investment policies set forth in 

the Purchasing Fund’s registration 

statement. 

Applicants’ Conditions 

Applicants agree that any order of 

granting the requested relief will be 

subject to the following conditions: 17

ETF Relief 

1. As long as the Funds operate in 

reliance on the requested order, Fund 

Shares will be listed on an Exchange. 

2. Neither the Trust nor any Fund will 

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

fund. Each Fund’s Prospectus will 

prominently disclose that Fund Shares 

are not individually redeemable shares 

and will disclose that the owners of 

Fund Shares may acquire those Fund 

Shares from the Fund and tender those 

Fund 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 Fund Shares are not individually 

redeemable, and that owners of Fund 

Shares may acquire those Fund Shares 

from the Fund and tender those Fund 

Shares for redemption to the Fund in 

Creation Units only. 

3. The Web site maintained for each 

Fund, which will be publicly accessible 

at no charge, will contain the following 

information, on a per individual Fund 

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

Business Day’s NAV and the mid-point 

of the bid-ask spread at the time of the 

calculation of the 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 individual Fund 

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 Underlying 

Index. 

5. Each Fund’s Prospectus will clearly 

disclose that, for purposes of the Act, 

Fund Shares are issued by the Fund, 

which is a registered investment 

company, and that the acquisition of 

Fund Shares by investment companies 

is subject to the restrictions of section 

12(d)(1) of the Act, except as permitted 

by an exemptive order that permits 

registered investment companies to 

invest in a Fund beyond the limits in 

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

and conditions, including that the 

registered investment company enter 

into a Purchasing Fund Agreement with 

the Fund regarding the terms of the 

investment. 

6. The requested relief to permit ETF 

operations will expire on the effective 

date of any Commission rule under the 

Act that provides relief permitting the 

operation of index-based exchangetraded funds. 

Section 12(d)(1) Relief 

7. The members of a Purchasing 

Fund’s Advisory Group will not control 

(individually or in the aggregate) a Fund 

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

the Act. The members of a Purchasing 

Fund’s Sub-Advisory Group will not 

control (individually or in the aggregate) 

a Fund within the meaning of section 

2(a)(9) of the Act. If as a result of a 

decrease in the outstanding Fund Shares 

of a Fund, a Purchasing Fund’s 

Advisory Group or a Purchasing Fund’s 

Sub-Advisory Group, each in the 

aggregate, becomes a holder of more 

than 25 percent of the outstanding Fund 

Shares of a Fund, it will vote its Fund 

Shares in the same proportion as the 

vote of all other holders of the Fund 

Shares. This condition does not apply to 

the Purchasing Fund’s Sub-Advisory 

Group with respect to a Fund for which 

the Purchasing Fund’s Sub-Advisor or a 

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37264 Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 

person controlling, controlled by, or 

under common control with the 

Purchasing Fund Sub-Advisor acts as 

the investment adviser within the 

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

Act. 

8. No Purchasing Fund or Purchasing 

Fund Affiliate will cause any existing or 

potential investment by the Purchasing 

Fund in a Fund to influence the terms 

of any services or transactions between 

the Purchasing Fund or Purchasing 

Fund Affiliate and the Fund or a Fund 

Affiliate. 

9. The board of directors or trustees of 

a Purchasing Management Company, 

including a majority of the disinterested 

directors or trustees, will adopt 

procedures reasonably designed to 

ensure that the Purchasing Fund 

Advisor and Purchasing Fund SubAdvisor are conducting the investment 

program of the Purchasing Management 

Company without taking into account 

any consideration received by the 

Purchasing Management Company or a 

Purchasing Fund Affiliate from a Fund 

or a Fund Affiliate in connection with 

any services or transactions. 

10. No Purchasing Fund or 

Purchasing Fund Affiliate (except to the 

extent it is acting in its capacity as an 

investment adviser to a Fund) will cause 

a Fund to purchase a security in any 

Affiliated Underwriting. 

11. Before investing in the Fund 

Shares of a Fund in excess of the limits 

in section 12(d)(1)(A), each Purchasing 

Fund and the Fund will execute a 

Purchasing Fund Agreement stating, 

without limitation, that their boards of 

directors or trustees and their 

investment advisers or Sponsors and 

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 Fund Shares of a Fund in 

excess of the limit in section 

12(d)(1)(A)(i), a Purchasing Fund will 

notify such Fund of the investment. At 

such time, the Purchasing Fund will 

also transmit to the Fund a list of names 

of each Purchasing Fund Affiliate and 

Underwriting Affiliate. The Purchasing 

Fund will notify the Fund of any 

changes to the list of the names as soon 

as reasonably practicable after a change 

occurs. The relevant Fund and the 

Purchasing Fund will maintain and 

preserve a copy of the order, the 

Purchasing Fund Agreement, and the 

list with any updated information for 

the duration of the investment and for 

a period of not less than six years 

thereafter, the first two years in an 

easily accessible place. 

12. The Purchasing Fund Advisor, 

Trustee or Sponsor, as applicable, will 

waive fees otherwise payable to it by the 

Purchasing 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 Fund by the Purchasing 

Fund Advisor, Trustee or Sponsor, or an 

affiliated person of the Purchasing Fund 

Advisor, Trustee or Sponsor, other than 

any advisory fees paid to the Purchasing 

Fund Advisor, Trustee or Sponsor, or its 

affiliated person by a Fund, in 

connection with the investment by the 

Purchasing Fund in the Fund. Any 

Purchasing Fund Sub-Advisor will 

waive fees otherwise payable to the 

Purchasing Fund Sub-Advisor, directly 

or indirectly, by the Purchasing 

Management Company in an amount at 

least equal to any compensation 

received from a Fund by the Purchasing 

Fund Sub-Advisor, or an affiliated 

person of the Purchasing Fund SubAdvisor, other than any advisory fees 

paid to the Purchasing Fund SubAdvisor or its affiliated person by a 

Fund, in connection with any 

investment by the Purchasing 

Management Company in a Fund made 

at the direction of the Purchasing Fund 

Sub-Advisor. In the event that the 

Purchasing Fund Sub-Advisor waives 

fees, the benefit of the waiver will be 

passed through to the Purchasing 

Management Company. 

13. Any sales charges and/or service 

fees charged with respect to shares of a 

Purchasing 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 a 

Purchasing Fund in the Fund Shares of 

a Fund exceeds the limit in section 

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

Fund, including a majority of the 

directors or trustees that are not 

‘‘interested persons’’ within the 

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

(‘‘disinterested Board members’’), will 

determine that any consideration paid 

by the Fund to a Purchasing Fund or 

Purchasing Fund Affiliate in connection 

with any services or transactions: (a) Is 

fair and reasonable in relation to the 

nature and quality of the services and 

benefits received by the Fund; (b) is 

within the range of consideration that 

the Fund would be required to pay to 

another unaffiliated entity in connection 

with the same services or transactions; 

and (c) does not involve overreaching 

on the part of any person concerned. 

This condition does not apply with 

respect to any services or transactions 

between a Fund and its investment 

adviser(s), or any person controlling, 

controlled by, or under common control 

with such investment adviser(s). 

15. The Board, including a majority of 

the disinterested Board members, will 

adopt procedures reasonably designed 

to monitor any purchases of securities 

by a Fund in an Affiliated Underwriting 

once an investment by the Purchasing 

Fund in the securities of the Fund 

exceeds the limit of section 

12(d)(1)(A)(i) of the Act, including any 

purchases made directly from an 

Underwriting Affiliate. The Board will 

review these purchases periodically, but 

no less frequently than annually, to 

determine whether the purchases were 

influenced by the investment by the 

Purchasing Fund in a Fund. The Board 

will consider, among other things: (a) 

Whether the purchases were consistent 

with the investment objectives and 

policies of the Fund; (b) how the 

performance of securities purchased in 

an Affiliated Underwriting compares to 

the performance of comparable 

securities purchased during a 

comparable period of time in 

underwritings other than Affiliated 

Underwritings or to a benchmark such 

as a comparable market index; and (c) 

whether the amount of securities 

purchased by a Fund in Affiliated 

Underwritings and the amount 

purchased directly from an 

Underwriting Affiliate have changed 

significantly from prior years. The 

Board will take any appropriate actions 

based on its review, including, if 

appropriate, the institution of 

procedures designed to assure that 

purchases of securities in Affiliated 

Underwritings are in the best interest of 

shareholders of the Fund. 

16. Each Fund will maintain and 

preserve permanently in an easily 

accessible place a written copy of the 

procedures described in the preceding 

condition, and any modifications to 

such procedures, and will maintain and 

preserve for a period 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 Purchasing 

Fund in the Fund Shares 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. 

17. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Purchasing Management Company, 

including a majority of the disinterested 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 37265 

1 15 U.S.C. 78k-1(a). 

2 17 CFR 242.608. 

3See letter from Peter G. Armstrong, NYSE Arca, 

to Elizabeth Murphy, Secretary, Commission, dated 

June 24, 2009; letter from Michael Babel, NYSE 

Amex, to Elizabeth Murphy, Secretary, 

Commission, dated June 24, 2009; letter from 

Michael J. Simon, ISE, to Elizabeth Murphy, 

Secretary, Commission, dated July 1, 2009; letter 

from Edward J. Joyce, CBOE, to Elizabeth Murphy, 

Secretary, Commission, dated July 1, 2009; letter 

from Maura A. Looney, Associate Vice President, 

BX, to Elizabeth Murphy, Secretary, Commission, 

dated July 6, 2009; letter from letter from Richard 

S. Rudolph, Assistant General Counsel, Phlx, to 

Elizabeth Murphy, Secretary, Commission, dated 

July 16, 2009; and letter from Jeffrey S. Davis, Vice 

President and Deputy General Counsel, Nasdaq, to 

Elizabeth Murphy, Secretary, Commission, dated 

July 17, 2009. 

4On July 28, 2000, the Commission approved a 

national market system plan for the purpose of 

creating and operating an intermarket options 

market linkage proposed by the American Stock 

Exchange LLC (n/k/a Amex), CBOE, and ISE. See 

Securities Exchange Act Release No. 43086 (July 28, 

2000), 65 FR 48023 (August 4, 2000). Subsequently, 

Philadelphia Stock Exchange, Inc. (n/k/a Phlx), 

Pacific Exchange, Inc. (n/k/a NYSE Arca), Boston 

Stock Exchange, Inc. (n/k/a BX), and Nasdaq joined 

the Linkage Plan. See Securities Exchange Act 

Release Nos. 43573 (November 16, 2000), 65 FR 

70851 (November 28, 2000); 43574 (November 16, 

2000), 65 FR 70850 (November 28, 2000); 49198 

(February 5, 2004), 69 FR 7029 (February 12, 2004); 

and 57545 (March 21, 2008), 73 FR 16394 (March 

27, 2008). 

5See Securities Exchange Act Release No. 59647 

(March 30, 2009), 74 FR 15010 (April 2, 2009). 

6Section 5(a)(i) of the New Plan. 

7Section 5(a)(ii) of the New Plan. 

8Section 6 of the New Plan. 

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 in which the Purchasing 

Management Company may invest. 

These findings and their basis will be 

recorded fully in the minute books of 

the appropriate Purchasing Management 

Company. 

18. No 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, except 

to the extent permitted by exemptive 

relief from the Commission permitting 

the Fund to purchase shares of a money 

market fund for short-term cash 

management purposes. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–17884 Filed 7–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60360; File No. 4–429] 

Joint Industry Plan; Chicago Board 

Options Exchange, Incorporated, 

International Securities Exchange, 

LLC, The NASDAQ Stock Market LLC, 

NASDAQ OMX BX, Inc., NASDAQ OMX 

PHLX, Inc., NYSE Amex LLC, and 

NYSE Arca, Inc.; Notice of Filing of 

Amendments to the Intermarket 

Options Linkage Plan To Withdraw 

From the Plan 

July 21, 2009. 

I. Introduction 

Pursuant to Section 11A of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 1 and Rule 608 of Regulation 

NMS thereunder (‘‘Rule 608’’),2 notice is 

hereby given that on June 25, 2009, June 

25, 3009, July 2, 2009, July 2, 2009, July 

7, 2009, July 17, 2009, July 20, 2009, 

NYSE Arca, Inc. (‘‘NYSE Arca’’), NYSE 

Amex, LLC (‘‘NYSE Amex’’), 

International Securities Exchange, LLC 

(‘‘ISE’’), Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’), 

NASDAQ OMX BX, Inc. (‘‘BX’’), 

NASDAQ OMX PHLX, Inc. (‘‘Phlx’’), 

and The NASDAQ Stock Market LLC 

(‘‘Nasdaq’’) (collectively, 

‘‘Participants’’) 3 respectively submitted 

to the Securities and Exchange 

Commission (‘‘Commission’’) 

amendments to the Plan for the Purpose 

of Creating and Operating an 

Intermarket Option Linkage (‘‘Linkage 

Plan’’) (‘‘Amendments’’).4 Each 

Amendment proposes to modify Section 

4(a) of the Linkage Plan to delete the 

name of the submitting Participant. The 

Commission is publishing this notice to 

solicit comments from interested 

persons on the proposed Amendments 

to the Linkage Plan. 

II. Description of the Proposed 

Amendments 

The purpose of each Amendment is 

for the Participant submitting such 

Amendment to withdraw from the 

Linkage Plan. Pursuant to Section 4(d) 

of the Linkage Plan, a Participant may 

withdraw by: (i) Providing not less than 

30 days’ prior written notice to each of 

the other Participants and to The 

Options Clearing Corporation (‘‘OCC,’’ 

the facilities manager) of such intent to 

withdraw; and (ii) effecting an 

amendment to the Linkage Plan as 

specified in Section 5(c)(iii) of the 

Linkage Plan. In turn, Section 5(c)(iii) of 

the Linkage Plan states that a Participant 

can withdraw from the Linkage Plan by 

filing an amendment deleting its name 

in Section 4(a) of the Linkage Plan and 

submitting such amendment to the 

Commission for approval. The 

submitting Participant must state how it 

plans to accomplish, by alternate means, 

the goals of the Linkage Plan regarding 

limiting Trade-Throughs. The 

amendment is effective upon 

Commission approval. 

The Participants plan to accomplish 

the Linkage Plan’s goals through 

membership in the Options Order 

Protection and Locked/Crossed Market 

Plan (‘‘New Plan’’). The Commission 

has published the New Plan for 

comment.5 The participants to the New 

Plan currently plan to begin 

implementing that plan on August 31st, 

subject to Commission approval. The 

New Plan contains a requirement that 

each participant establish, maintain and 

enforce written procedures and policies 

that are reasonably designed to prevent 

Trade-Throughs.6 The New Plan will 

accomplish this in a more efficient 

manner than the Linkage Plan. 

Specifically, the New Plan eliminates a 

central hub and addresses TradeThrough compliance through the use of 

intermarket sweep orders. This is based 

on the concepts of Regulation NMS, 

which, among other things, addresses 

trade-throughs in the equity market. The 

New Plan also requires its participants 

to conduct surveillance of their markets 

to ascertain the effectiveness of these 

policies and procedures.7 Finally, the 

New Plan contains provisions requiring 

its participants to establish, maintain 

and enforce written rules addressing 

locked and crossed markets.8 The 

Participants believe that the New Plan 

will fully accomplish the same goals of 

the Plan, including imposing limits on 

Trade-Throughs. 

III. Implementation of the Plan 

Amendment 

The proposed Amendments to the 

Linkage Plan will be effective upon 

approval by the Commission pursuant 

to Rule 608. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the Amendments to 

the Linkage Plan are consistent with the 

Act. Comments may be submitted by 

any of the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number 4–429 on the subject line. 

mstockstill on DSKH9S0YB1PROD with NOTICES