Document ID: SEC-2013-0734-0001
Agency: sec
Document Type: Notice
Title: Applications: Millington Securities, Inc. and Millington Exchange Traded MAVINS Fund, LLC
Posted Date: 2013-04-16T04:00Z

[Federal Register Volume 78, Number 73 (Tuesday, April 16, 2013)]
[Notices]
[Pages 22580-22587]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08854]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30459; File No. 812-13887]

Millington Securities, Inc. and Millington Exchange Traded MAVINS 
Fund, LLC; Notice of Application

April 10, 2013.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') for an exemption from 
sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c-1 
under the Act, under sections 6(c) and 17(b) of the Act for an 
exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under 
section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and 
12(d)(1)(B) of the Act.

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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 only (``Creation 
Units''); (b) secondary market transactions in Shares to occur at 
negotiated market prices; (c) certain series to pay redemption 
proceeds, under certain circumstances, more than seven days after the 
tender of Shares for redemption; (d) certain affiliated persons of the 
series to deposit securities into, and receive securities from, the 
series in connection with the purchase and redemption of Creation Units 
(collectively, the ``ETF Relief''); and (e) certain registered 
management investment companies and unit investment trusts outside of 
the same group of investment companies as the series to acquire Shares 
(the ``12(d)(1) Relief'').

APPLICANTS: Millington Securities, Inc., (the ``Adviser''), and 
Millington Exchange Traded MAVINS Fund, LLC (the ``Company'').

DATES: Filing Dates: The application was filed on April 6, 2011, and 
amended on September 23, 2011, June 15, 2012, November 16, 2012, and 
April 5, 2013.

HEARING OR NOTIFICATION OF HEARING: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on May 3, 2013 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: Elizabeth M. Murphy, Secretary, Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants, 
222 South Mill Street, Naperville, IL 60540.

FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel at 
(202) 551-6990, or Jennifer L. Sawin, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Exemptive Applications Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

[[Page 22581]]

Applicants' Representations

    1. The Company is organized as a Delaware limited liability company 
and intends to register under the Act as an open-end management 
investment company. The Company will initially offer one series 
(``Initial Fund'') whose performance will correspond generally to the 
price and yield performance of a specified index consisting solely of 
equity and/or fixed income securities (``Underlying Index'').\1\
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    \1\ The name of the Initial Fund is expected to be the 
Millington ISE PIGS\TM\ Index ETF and its Underlying Index is 
expected to be the ISE PIGS\TM\ Index, an international equity 
index.
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    2. Applicants request that the order apply to the Initial Fund and 
any future series of the Company and any other future registered open-
end management investment company or series thereof that (a) is advised 
by the Adviser or an entity controlling, controlled by, or under common 
control with the Adviser,\2\ and (b) complies with the terms and 
conditions of the application (``Future Funds'' and collectively with 
the Initial Fund, the ``Funds'').\3\ Future Funds may be based on 
Underlying Indexes comprised of foreign and/or domestic equity 
securities, fixed income securities or a blend of equity securities and 
fixed income securities.\4\ Funds may also invest in ``Depositary 
Receipts''.\5\ A Fund will not invest in any Depositary Receipts that 
the Adviser deems to be illiquid or for which pricing information is 
not readily available.
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    \2\ Each such entity and any successor thereto included in the 
term ``Adviser''. For the purposes of the requested order, 
``successor'' is limited to an entity that results from a 
reorganization into another jurisdiction or a change in the type of 
business organization.
    \3\ All entities that currently intend to rely on the requested 
order are named as applicants. An Acquiring Fund (as defined below) 
may rely on the requested order only to invest in Underlying Funds 
(as defined below) and not in any other registered investment 
company.
    \4\ Funds based on underlying indices that consist of or include 
foreign equity securities (``International Equity Indices''), 
foreign fixed income securities, or both foreign equity and fixed 
income securities are referred to as ``International Funds''.
    \5\ Depositary Receipts are typically issued by a financial 
institution, a ``depositary'', and evidence ownership in a security 
or pool of securities that have been deposited with the depositary. 
No affiliated persons of applicants, any Future Fund, any Adviser, 
or any Subadviser, will serve as the depositary bank for any 
Depositary Receipts held by a Fund.
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    3. Millington Securities, Inc. or another Adviser will be the 
investment adviser to the Funds. Each Adviser is, or will be registered 
as an investment adviser under the Investment Advisers Act of 1940 (the 
``Advisers Act''). The Adviser, subject to the oversight and approval 
of the board of directors or trustees of the Company (the 
``Board''),\6\ will implement each Fund's investment program and 
oversee the day to day portfolio activities of each Fund. The Adviser 
may enter into sub-advisory agreements with investment advisers to act 
as subadvisers with respect to a Fund (each, a ``Subadviser''). Each 
Subadviser will be registered under the Advisers Act or not subject to 
such registration and will not otherwise be affiliated with the Company 
or a Fund. Millington Securities, Inc., a broker-dealer registered 
under the Securities Exchange Act of 1934 (the ``Exchange Act'') or 
another entity that is a broker-dealer registered under the Exchange 
Act (such brokers or dealers, ``Brokers''), will initially act as the 
distributor and principal underwriter of the Creation Units of Shares 
(``Distributor'').
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    \6\ The term ``Board'' includes the board of directors or 
trustees of any Future Fund.
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    4. Each Fund will consist of a portfolio of securities and other 
assets and positions (``Portfolio Positions'') selected to correspond 
generally to the price and yield performance of a specified Underlying 
Index. No entity that creates, compiles, sponsors or maintains an 
Underlying Index (``Index Provider'') is or will be an affiliated 
person, as defined in section 2(a)(3) of the Act, or an affiliated 
person of an affiliated person, of the Company or a Fund, a promoter, 
the Adviser, a Subadviser, or the Distributor.
    5. The investment objective of each Fund will be to provide 
investment returns that closely correspond to the price and yield 
performance of its Underlying Index.\7\ Each Fund will sell and redeem 
Creation Units on a ``Business Day,'' which is defined to include any 
day that the Company is open for business as required by section 22(e) 
of the Act. A Fund will utilize either a replication or representative 
sampling strategy to track its Underlying Index. A Fund using a 
replication strategy will invest in substantially all of the Component 
Securities in its Underlying Index in the same approximate proportions 
as in the Underlying Index. A Fund using a representative sampling 
strategy will hold some, but not necessarily all of the Component 
Securities of its Underlying Index.\8\ Applicants state that use of the 
representative sampling strategy may prevent a Fund from tracking the 
performance of its Underlying Index with the same degree of accuracy as 
a Fund employing the replication strategy. Applicants expect that each 
Fund will have a tracking error relative to the performance of its 
Underlying Index of no more than 5 percent, net of fees and expenses.
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    \7\ Applicants represent that each Fund will invest at least 80% 
of its total assets, exclusive of collateral held from securities 
lending, in the component securities that comprise its Underlying 
Index (``Component Securities''), or in the case of certain fixed 
income funds, in the Component Securities of its respective 
Underlying Index and TBA transactions (as defined below) 
representing such Component Securities, and in the case of 
International Funds, in Component Securities, TBA Transactions 
representing such Component Securities (to the extent applicable), 
and Depositary Receipts representing such Component Securities. Each 
Fund also may invest up to 20% of its total assets in certain 
futures, options, options on futures, and swap contracts, cash and 
cash equivalents, other investment companies, as well as instruments 
that are not included in its Underlying Index but which the Adviser 
believes will help the Fund track its Underlying Index.
    A TBA Transaction is a method of trading mortgage-backed 
securities. In a TBA Transaction, the buyer and seller agree upon 
general trade parameters such as agency, settlement date, par amount 
and price. The actual pools delivered generally are determined two 
days prior to the settlement date.
    \8\ Using the representative sampling strategy, the Adviser or 
Subadviser will select each security for inclusion in the Fund's 
portfolio to have aggregate investment characteristics, fundamental 
characteristics, and liquidity measures similar to those of the 
Fund's Underlying Index taken in its entirety.
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    6. Applicants anticipate that the price of a Share will range from 
$10 and $250, and the price of one Creation Unit will range from 
$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 transmit all purchase orders to the relevant Fund. 
An Authorized Participant must be either: (a) a Broker 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 will be purchased and redeemed in Creation Units and generally 
on an in-kind basis. Accordingly, except where the purchase or 
redemption will include cash under the limited circumstances specified 
below, purchasers will be required to purchase Creation Units by making 
an in-kind deposit of specified instruments (``Deposit Securities''), 
and shareholders redeeming their Shares will receive an in-kind 
transfer of specified instruments (``Redemption Securities'').\9\ On 
any given Business

[[Page 22582]]

Day the names and quantities of the instruments that constitute the 
Deposit Securities and the names and quantities of the instruments that 
constitute the Redemption Securities will be identical, unless the Fund 
is Rebalancing (as defined below). In addition, the Deposit Securities 
and the Redemption Securities will each correspond pro rata to the 
positions in a Fund's portfolio (including cash positions),\10\ except: 
(a) In the case of bonds, for minor differences when it is impossible 
to break up bonds beyond certain minimum sizes needed for transfer and 
settlement; (b) for minor differences when rounding is necessary to 
eliminate fractional shares or lots that are not tradeable round lots; 
\11\ or (c) TBA Transactions, derivatives and other positions that 
cannot be transferred in kind \12\ will be excluded from the Deposit 
Securities and the Redemption Securities; \13\ or (d) to the extent the 
Fund determines, on a given Business Day, to use a representative 
sampling of the Fund's portfolio; \14\ or (e) for temporary periods, to 
effect changes in the Fund's portfolio as a result of the rebalancing 
of its Underlying Index (any such change, a ``Rebalancing''). If there 
is a difference between the net asset value attributable to a Creation 
Unit and the aggregate market value of the Deposit Securities or 
Redemption Securities exchanged for the Creation Unit, the party 
conveying instruments with the lower value will also pay to the other 
an amount in cash equal to that difference (the ``Balancing Amount''). 
A difference may occur where the market value of the Deposit Securities 
or Redemption Securities, as applicable, changes relative to the net 
asset value of the Fund for the reasons identified in clauses (a) 
through (e) above.
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    \9\ The Funds must comply with the federal securities laws in 
accepting Deposit Securities and satisfying redemptions with 
Redemption Securities, including that the Deposit Securities and 
Redemption Securities are sold in transactions that would be exempt 
from registration under the Securities Act of 1933 (``Securities 
Act''). In accepting Deposit Securities and satisfying redemptions 
with Redemption Securities that are restricted securities eligible 
for resale pursuant to Rule 144A under the Securities Act, the Funds 
will comply with the conditions of Rule 144A.
    \10\ The portfolio used for this purpose will be the same 
portfolio used to calculate the Fund's NAV for that Business Day.
    \11\ A tradeable round lot for a security will be the standard 
unit of trading in that particular type of security in its primary 
market.
    \12\ This includes instruments that can be transferred in kind 
only with the consent of the original counterparty to the extent the 
Fund does not intend to seek such consents.
    \13\ Because these instruments will be excluded from the Deposit 
Securities and the Redemption Securities, their value will be 
reflected in the determination of the Balancing Amount (defined 
below).
    \14\ A Fund may only use sampling for this purpose if the 
sample: (i) Is designed to generate performance that is highly 
correlated to the performance of the Fund's portfolio; (ii) consists 
entirely of instruments that are already included in the Fund's 
portfolio; and (iii) is the same for all Authorized Participants on 
a given Business Day.
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    7. Purchases and redemptions of Creation Units may be made in whole 
or in part on a cash basis, rather than in kind, solely under the 
following circumstances: (a) To the extent there is a Balancing Amount, 
as described above; (b) if, on a given Business Day, a Fund announces 
before the open of trading that all purchases, all redemptions or all 
purchases and redemptions on that day will be made entirely in cash; 
(c) if, upon receiving a purchase or redemption order from an 
Authorized Participant, the Fund determines to require the purchase or 
redemption, as applicable, to be made entirely in cash; \15\ (d) if, on 
a given Business Day, the Fund requires all Authorized Participants 
purchasing or redeeming Shares on that day to deposit or receive (as 
applicable) cash-in-lieu of some or all of the Deposit Securities or 
Redemption Securities, respectively, solely because: (i) such 
instruments are not eligible for transfer through either the NSCC 
Process or DTC Process; or (ii) in the case of Funds holding non-U.S. 
investments, such instruments are not eligible for trading due to local 
trading restrictions, local restrictions on securities transfers or 
other similar circumstances; or (e) if the Fund permits an Authorized 
Participant to deposit or receive (as applicable) cash-in-lieu of some 
or all of the Deposit Securities or Redemption Securities, 
respectively, solely because: (i) Such instruments are, in the case of 
the purchase of a Creation Unit, not available in sufficient quantity; 
(ii) such instruments are not eligible for trading by an Authorized 
Participant or the investor on whose behalf the Authorized Participant 
is acting; or (iii) a holder of Shares of a Fund holding non-U.S. 
investments would be subject to unfavorable income tax treatment if the 
holder receives redemption proceeds in kind.\16\
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    \15\ In determining whether a particular Fund will sell or 
redeem Creation Units entirely on a cash or in-kind basis (whether 
for a given day or a given order) the key consideration will be the 
benefit that would accrue to the Fund and its investors. For 
instance, in bond transactions, the Adviser may be able to obtain 
better execution than Share purchasers because of the Adviser's 
size, experience and potentially stronger relationships in the fixed 
income markets. Purchases of Creation Units either on an all cash 
basis or in-kind are expected to be neutral to the Funds from a tax 
perspective. In contrast, cash redemptions typically require selling 
portfolio holdings, which may result in adverse tax consequences for 
the remaining Fund shareholders that would not occur with an in-kind 
redemption. As a result, tax considerations may warrant in-kind 
redemptions.
    \16\ A ``custom order'' is any purchase or redemption of Shares 
made in whole or in part on a cash basis in reliance on clause 
(e)(i) or (e)(ii).
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    8. Each Business Day, before the open of trading on a national 
securities exchange, as defined in section 2(a)(26) of the Act 
(``Exchange''), on which Shares are listed, the Fund will cause to be 
published through the NSCC the names and quantities of the instruments 
comprising the Deposit Securities and the Redemption Securities, as 
well as the estimated Balancing Amount (if any), for that day.\17\ The 
list of Deposit Securities and Redemption Securities will apply until a 
new list is announced on the following Business Day, and there will be 
no intra-day changes to the list except to correct errors in the 
published list.
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    \17\ If the Fund is Rebalancing, it may need to announce two 
estimated Balancing Amounts for that day, one for deposits and one 
for redemptions.
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    9. Each Fund may impose transaction fees (``Transaction Fee'') in 
connection with the purchase or redemption of Creation Units. The 
purpose of the Transaction Fee is to protect the existing shareholders 
of the Funds from the dilutive costs associated with the purchase and 
redemption of Creation Units.\18\ The Distributor will furnish a 
current prospectus (``Prospectus'') or a current summary prospectus and 
will maintain records of the purchase orders, confirmations of purchase 
orders and the instructions given to the applicable Fund to implement 
the delivery of its Shares.
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    \18\ Where a Fund permits an in-kind purchaser to deposit cash-
in-lieu of depositing one or more Deposit Securities, the purchaser 
may be assessed a higher Transaction Fee to offset the transaction 
cost to the Fund of buying those particular Deposit Securities. In 
all cases, the Transaction Fees will be limited in accordance with 
the requirements of the Commission applicable to open-end management 
investment companies offering redeemable securities.
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    10. Shares will be listed and traded on an Exchange. It is expected 
that one or more Exchange member firms will be designated to act as a 
``Market Maker'', and maintain a market for the Shares trading on the 
Exchange. The secondary market price of Shares trading on an Exchange 
will be based on a current bid/offer market. Purchases and sales of 
Shares on an Exchange will be subject to customary brokerage 
commissions and charges.
    11. Applicants expect that purchasers of Creation Units will 
include institutional investors and arbitrageurs. Authorized 
Participants also may purchase Creation Units for use in market-making 
activities.\19\ Applicants

[[Page 22583]]

expect that secondary market purchasers of Shares will include both 
institutional investors and retail investors.\20\ Applicants believe 
that the price at which Shares trade will be disciplined by arbitrage 
opportunities created by the option to continually purchase or redeem 
Creation Units, which should help prevent Shares from trading at a 
material discount or premium in relation to their NAV.
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    \19\ If Shares are listed on Nasdaq or a similar electronic 
Exchange, one or more member firms of that Exchange will act as 
market maker (``Market Maker''). On Nasdaq, no particular Market 
Maker would be contractually obligated to make a market in Shares. 
However, the listing requirements on Nasdaq, for example, stipulate 
that at least two Market Makers are required to make a continuous 
two-sided market or subject themselves to regulatory sanctions.
    \20\ Shares 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.
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    12. Shares will not be individually redeemable, and owners of 
Shares may acquire those Shares from the Fund, or tender such Shares 
for redemption to the Fund, in Creation Units only. To redeem, an 
investor will have to accumulate enough Shares to constitute a Creation 
Unit. Redemption orders must be placed by or through an Authorized 
Participant. As discussed above, Creation Units of each Fund will be 
redeemed generally on an in-kind basis, except under the circumstances 
described above. The Adviser may adjust the Transaction Fee imposed on 
redemption wholly or partly in cash to take into account any additional 
brokerage or other transaction costs incurred by the Fund.
    13. Neither the Company nor any individual Fund will be marketed or 
otherwise held out as a traditional open-end investment company or a 
mutual fund. Instead, each Fund will be marketed as an ``exchange-
traded fund'' or an ``ETF.'' All marketing materials that describe the 
features or method of obtaining, buying or selling Creation Units, or 
Shares being listed and traded on an Exchange, or refer to 
redeemability, will prominently disclose that Shares are not 
individually redeemable and that the owners of Shares may acquire those 
Shares from the Fund or tender such Shares for redemption to the Fund 
only in Creation Units.
    14. The Web site for the Funds (the ``Web site''), which will be 
publicly accessible at no charge will contain on a per Share basis for 
each Fund, the prior Business Day's NAV and the market closing price or 
midpoint 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 market closing price or Bid/Ask Price against such NAV.

Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act for an 
exemption from sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act 
and rule 22c-1 under the Act, under sections 6(c) and 17(b) of the Act 
for an exemption from sections 17(a)(1) and 17(a)(2) of the Act, and 
under section 12(d)(1)(J) of the Act for an exemption from sections 
12(d)(1)(A) and 12(d)(1)(B) of the Act.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction, or any class of persons, 
securities or transactions, from any provision of the 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 Shares will not be individually redeemable, 
applicants request an order for the ETF Relief that would permit the 
Funds to register as open-end management investment companies and issue 
Shares that are redeemable in Creation Units only. Applicants state 
that Creation Units will always be redeemable in accordance with the 
provisions of the Act. Owners of Shares may purchase the requisite 
number of Shares and tender the resulting Creation Unit for redemption. 
Applicants state that because Creation Units may always be purchased 
and redeemed at NAV, the price of individual Shares on the secondary 
market should not vary materially from the NAV.

Section 22(d) of the Act and Rule 22c-1 Under the Act

    4. Section 22(d) of the Act, among other things, prohibits a dealer 
from selling a redeemable security, which is currently being offered to 
the public by or through a principal underwriter, except at a current 
public offering price described in the prospectus. Rule 22c-1 under the 
Act generally requires that a dealer selling, redeeming or repurchasing 
a redeemable security do so only at a price based on its NAV. 
Applicants state that secondary market trading in Shares will take 
place at negotiated prices, not at a current offering price described 
in a Fund's prospectus, and not at a price based on NAV. Thus, 
purchases and sales of Shares in the secondary market will not comply 
with section 22(d) of the Act and rule 22c-1 under the Act. Applicants 
request an exemption under section 6(c) from these provisions.
    5. Applicants assert that the concerns sought to be addressed by 
section 22(d) of the Act and rule 22c-1 under the Act with respect to 
pricing are equally satisfied by the proposed method of pricing Shares. 
Applicants maintain that while there is little legislative history 
regarding section 22(d), its provisions, as well as those of rule 22c-
1, appear to have been designed to (a) Prevent dilution caused by 
certain riskless trading schemes by principal underwriters and contract 
dealers, (b) prevent unjust discrimination or preferential treatment 
among buyers, and (c) ensure an orderly distribution of investment 
company shares by eliminating price competition from non-contract 
dealers who could offer shares at less than the published sales price 
and who could pay investors 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 secondary market transactions in Shares 
would not cause dilution for owners of such Shares, because such 
transactions do not directly involve Fund assets. Similarly, secondary 
market trading in Shares should not create discrimination or 
preferential treatment among buyers. To the extent different prices 
exist during a given trading day, or from day to day, such variances 
occur as a result of third-

[[Page 22584]]

party market forces, such as supply and demand, but do not occur as a 
result of discriminatory manipulation. Finally, applicants contend that 
the proposed distribution system will be orderly because competitive 
forces in the marketplace will ensure that the margin between NAV and 
the price for Shares in the secondary market remains narrow.

Section 22(e)

    7. Section 22(e) of the Act generally prohibits a registered 
investment company from suspending the right of redemption or 
postponing the date of payment of redemption proceeds for more than 
seven days after the tender of a security for redemption. Applicants 
observe that the settlement of redemptions of Creation Units of the 
International Funds is contingent not only on the settlement cycle of 
the U.S. securities markets, but also on the delivery cycles present in 
foreign markets in which those Funds invest. Applicants have been 
advised that, under certain circumstances, the delivery cycles for 
transferring Portfolio Positions to redeeming investors, coupled with 
local market holiday schedules, will require a delivery process of up 
to 14 calendar days. Applicants therefore request relief from section 
22(e) in order to provide for payment or satisfaction of redemptions 
within the maximum number of calendar days required for such payment or 
satisfaction in the principal local markets where transactions in the 
Portfolio Positions of each International Fund customarily clear and 
settle, but in all cases no later than 14 calendar days following the 
tender of a Creation Unit.\21\ With respect to Future Funds that are 
International Funds, applicants seek the same relief from section 22(e) 
only to the extent that circumstances exist similar to those described 
in the application.
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    \21\ Applicants acknowledge that no relief obtained from the 
requirements of section 22(e) will affect any obligations applicants 
may have under rule 15c6-1 under the Exchange Act. Rule 15c6-1 
requires that most securities transactions be settled within three 
business days of the trade.
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    8. Applicants submit that section 22(e) was designed to prevent 
unreasonable, undisclosed and unforeseen delays in the actual payment 
of redemption proceeds. Applicants state that allowing redemption 
payments for Creation Units of a Fund to be made within the number of 
days indicated above would not be inconsistent with the spirit and 
intent of section 22(e). Applicants state that the statement of 
additional information (``SAI'') will identify those instances in a 
given year where, due to local holidays, more than seven days, up to a 
maximum of 14 calendar days, will be needed to deliver redemption 
proceeds and will list such holidays. Applicants are not seeking relief 
from section 22(e) with respect to International Funds that do not 
effect 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 (``Acquiring Management Companies'') and unit investment 
trusts (``Acquiring Trusts'') registered under the Act that are not 
advised or sponsored by an Adviser and are not part of the same ``group 
of investment companies,'' as defined in section 12(d)(1)(G)(ii) of the 
Act, as the Underlying Funds \22\ (collectively, ``Acquiring Funds'') 
to acquire Underlying Fund Shares beyond the limits of section 
12(d)(1)(A). In addition, applicants seek relief to permit an 
Underlying Fund and/or a Broker to sell Underlying Fund Shares to 
Acquiring Funds in excess of the limits of section 12(d)(1)(B).
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    \22\ Any registered open-end management investment company and 
any of its series that is advised by an Adviser and that, pursuant 
to a separate order of the Commission (File No. 812-13886), operates 
as an exchange-traded fund that utilizes active management 
investment strategies (``Actively Managed Funds''), and collectively 
with the Funds, the ``Underlying Funds''. For purposes of the 
12(d)(1) Relief, shares of Actively Managed Funds and Shares are 
referred to collectively as ``Underlying Fund Shares''.
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    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 Adviser'') and may be sub-advised by one or more 
investment advisers within the meaning of section 2(a)(20)(B) of the 
Act (each an ``Acquiring Fund Subadviser''). Any investment adviser to 
an Acquiring Fund 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)(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 necessary and 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.
    13. Applicants believe that neither the Acquiring Funds nor an 
Acquiring Fund Affiliate would be able to exert undue influence over 
the Underlying Funds.\23\ To limit the control that an Acquiring Fund 
may have over an Underlying Fund, applicants propose a condition 
prohibiting an Acquiring Fund Adviser or a Sponsor, any person 
controlling, controlled by, or under common control with the Acquiring 
Fund Adviser or Sponsor, and any investment company or issuer that 
would be an investment company but for section 3(c)(1) or 3(c)(7) of 
the Act that is advised or sponsored by the Acquiring Fund Adviser or 
Sponsor, or any person controlling, controlled by, or under common 
control with the Acquiring Fund Adviser or Sponsor (``Acquiring Fund's 
Advisory Group'') from controlling (individually or in the aggregate) 
an Underlying Fund within the meaning of section 2(a)(9) of the Act. 
The same prohibition would apply to any Acquiring Fund Subadviser, any 
person controlling, controlled by or under common control with the 
Acquiring Fund Subadviser, and any investment company or issuer that 
would be an investment company but for section 3(c)(1) or 3(c)(7) of 
the Act (or portion of such investment company or issuer) advised or 
sponsored by the Acquiring Fund Subadviser or any person controlling, 
controlled by or

[[Page 22585]]

under common control with the Acquiring Fund Subadviser (``Acquiring 
Fund's Subadvisory Group''). Applicants propose other conditions to 
limit the potential for undue influence over the Underlying 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 an 
Underlying Fund) will cause an Underlying Fund to purchase a security 
in an offering of securities during the existence of an underwriting or 
selling syndicate of which a principal underwriter is an Underwriting 
Affiliate (``Affiliated Underwriting''). An ``Underwriting Affiliate'' 
is a principal underwriter in any underwriting or selling syndicate 
that is an officer, director, member of an advisory board, Acquiring 
Fund Adviser, Acquiring Fund Subadviser, Sponsor, or employee of the 
Acquiring Fund, or a person of which any such officer, director, member 
of an advisory board, Acquiring Fund Adviser, Acquiring Fund 
Subadviser, Sponsor, or employee is an affiliated person (except that 
any person whose relationship to the Underlying Fund is covered by 
section 10(f) of the Act is not an Underwriting Affiliate).
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    \23\ An ``Acquiring Fund Affiliate'' is the Acquiring Fund 
Adviser, Acquiring Fund Subadviser(s), any Sponsor, promoter, or 
principal underwriter of an Acquiring Fund, and any person 
controlling, controlled by, or under common control with any of 
these entities. An ``Underlying Fund Affiliate'' is the investment 
adviser, promoter, or principal underwriter of an Underlying Fund 
and any person controlling, controlled by or under common control 
with any of these entities.
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    14. Applicants assert that the proposed conditions address any 
concerns regarding excessive layering of fees. The board of directors 
or trustees of any Acquiring Management Company, 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 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 Underlying Fund in which the Acquiring 
Management Company may invest. In addition, under condition 13, an 
Acquiring Fund Adviser or a trustee (``Trustee'') or Sponsor of an 
Acquiring Trust will, as applicable, 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 under rule 12b-1 
under the Act) received from the Underlying Fund by the Acquiring Fund 
Adviser, Trustee or Sponsor or an affiliated person of the Acquiring 
Fund Adviser, Trustee or Sponsor, in connection with the investment by 
the Acquiring Fund in the Underlying Fund. Applicants 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 National Association of Security 
Dealers (``NASD'').\24\
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    \24\ Any references to Conduct Rule 2830 of the NASD include any 
successor or replacement rule that may be adopted by Financial 
Industry Regulatory Authority.
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    15. Applicants submit that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that no Underlying 
Fund will acquire securities of any investment company or company 
relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the 
limits contained in section 12(d)(1)(A) of the Act, except to the 
extent permitted by exemptive relief from the Commission permitting the 
Underlying Fund to purchase shares of other investment companies for 
short-term cash management purposes. 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 an 
Underlying Fund in reliance on the requested order will enter into an 
agreement (``Acquiring Fund Agreement'') between the Underlying Fund 
and the Acquiring Fund 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 an Underlying 
Fund and not in any other investment company.
    16. Applicants also note that an Underlying Fund may choose to 
reject any direct purchase of Creation Units \25\ by an Acquiring Fund. 
To the extent that an Acquiring Fund purchases Shares in the secondary 
market, an Underlying Fund would still retain its right to reject 
initial purchases of Shares made in reliance on the requested order by 
declining to enter into the Acquiring Fund Agreement prior to any 
investment by an Acquiring Fund in excess of the limits of section 
12(d)(1)(A).
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    \25\ For purposes of the requested 12(d)(1) Relief, the term 
``Creation Unit'' applies to both Funds and Actively Managed Funds.
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Sections 17(a)(1) and (2) of the Act

    17. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such a person (``second tier affiliate''), from selling any security to 
or acquiring any security from the company. Section 2(a)(3) of the Act 
defines ``affiliated person'' to include (a) Any person directly or 
indirectly owning, controlling, or holding with power to vote, 5% or 
more of the outstanding voting securities of the other person, (b) any 
person 5% or more of whose outstanding voting securities are directly 
or indirectly owned, controlled, or held with the power to vote, by the 
other person, and (c) any person directly or indirectly controlling, 
controlled by, or under common control with, the other person. Section 
2(a)(9) of the Act defines ``control'' as the power to exercise a 
controlling influence over the management or policies of a company and 
provides that a control relationship will be presumed where one person 
owns more than 25% of another person's voting securities. The Funds may 
be deemed to be controlled by the Adviser and hence affiliated persons 
of each other. In addition, the Funds may be deemed to be under common 
control with any other registered investment company (or series 
thereof) advised by the Adviser (an ``Affiliated Fund'').
    18. 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 or second-tier affiliates of the Funds solely by 
virtue of: (1) Holding 5% or more, or in excess of 25% of the 
outstanding Shares of one or more Funds; (2) having an affiliation with 
a person with an ownership interest described in (1); or (3) holding 5% 
or more, or more than 25% of the shares of one or more Affiliated 
Funds.
    19. Applicants assert that no useful purpose would be served by 
prohibiting such affiliated persons from making in-kind purchases or 
in-kind redemptions of Shares of a Fund in Creation Units. Both the 
deposit procedures for in-kind purchases of Creation Units and the 
redemption procedures of in-kind redemptions will be effected in 
exactly the same manner for all purchases and redemptions. Deposit 
Securities and Redemption Securities will be valued in the same manner 
as those Portfolio Positions currently held by the relevant Funds, and 
the valuation of the Deposit Securities and Redemption Securities will 
be made in the same manner, regardless of the identity or affiliation 
of the purchaser or redeemer. Further, the Deposit Securities and 
Redemption Securities for a Fund will be the same, except for any cash 
determined in accordance with the procedures described in Section 
III.B.1.b. of the application, and in-kind purchases and redemptions 
will be on the same terms, for all persons regardless of the identity 
of the purchaser or redeemer. Therefore, applicants state that in-kind 
purchases and redemptions will afford no

[[Page 22586]]

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 
Fund.
    20. Applicants also seek an exemption from section 17(a) to permit 
an Underlying Fund, to the extent that the Underlying Fund is an 
affiliated person of an Acquiring Fund, to sell its Underlying Fund 
Shares to, and purchase Underlying Fund Shares from, an Acquiring Fund 
and to engage in the accompanying in-kind transactions with the 
Acquiring Fund.\26\
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    \26\ Applicants are not seeking relief from section 17(a) for, 
and the requested relief will not apply to, transactions where an 
Underlying Fund could be deemed an affiliated person, or an 
affiliated person of an affiliated person, of an Acquiring Fund 
because an investment adviser to the Underlying Fund is also an 
investment adviser to the Acquiring Fund.
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    21. Applicants believe that an exemption is appropriate under 
sections 17(b) and 6(c) because the proposed arrangement meets the 
standards in those sections.\27\ First, applicants state that the terms 
of the transactions are fair and reasonable and do not involve 
overreaching. Applicants note that any consideration paid for the 
purchase or redemption of Underlying Fund Shares directly from an 
Underlying Fund will be based on the NAV of the Underlying Fund 
Shares.\28\ Second, applicants believe that the proposed transactions 
directly between the Underlying 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 an Underlying Fund 
will be accomplished in accordance 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. Third, 
applicants believe that the proposed transactions are consistent with 
the general purposes of the Act and appropriate in the public interest. 
Applicants also submit that the exemption is consistent with the 
protection of investors and the purposes fairly intended by the policy 
and provisions of the Act.
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    \27\ To the extent that purchases and sale of Underlying Fund 
Shares of an Underlying Fund occur in the secondary market and not 
through principal transactions directly between an Acquiring Fund 
and an Underlying Fund, relief from Section 17(a) would not be 
necessary. However, the requested relief would apply to direct sales 
of Underlying Fund Shares in Creation Units by an Underlying Fund to 
an Acquiring Fund and redemptions of those Underlying Fund Shares. 
The requested relief is intended to cover both those direct sales 
and redemptions and any in-kind transactions that would accompany 
such sales and redemptions.
    \28\ Applicants 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 Underlying 
Fund Shares or (b) an affiliated person of an Underlying Fund, or an 
affiliated person of such person, for the sale by the Underlying 
Fund of its Underlying Fund 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.
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Applicants' Conditions

    Applicants agree that any order of the Commission granting the 
requested relief will be subject to the following conditions:

A. ETF Relief

    1. As long as the Company or a Fund operates in reliance on the 
requested order, the Shares will be listed on an Exchange.
    2. Neither the Company nor any Fund will be advertised or marketed 
as an open-end investment company or a mutual fund. Any advertising 
material that describes the purchase or sale of Creation Units or 
refers to redeemability will prominently disclose that Shares are not 
individually redeemable and that owners of Shares may acquire those 
Shares from a Fund and tender those Shares for redemption to a Fund in 
Creation Units only.
    3. The Web site for each Fund, which will be publicly accessible at 
no charge, will contain, on a per Share basis, for each Fund, the prior 
Business Day's NAV and the market closing price or the Bid/Ask Price, 
and a calculation of the premium or discount of the market closing 
price or Bid/Ask Price against such NAV.
    4. The requested relief to permit ETF operations will expire on the 
effective date of any Commission rule under the Act that provides 
relief permitting the operation of index-based exchange-traded funds.

B. Section 12(d)(1) Relief

    5. The members of an Acquiring Fund's Advisory Group will not 
control (individually or in the aggregate) an Underlying Fund within 
the meaning of section 2(a)(9) of the Act. The members of an Acquiring 
Fund's Subadvisory Group will not control (individually or in the 
aggregate) an Underlying Fund within the meaning of section 2(a)(9) of 
the Act. If, as a result of a decrease in the outstanding voting 
securities of an Underlying Fund, the Acquiring Fund's Advisory Group 
or the Acquiring Fund's Subadvisory Group, each in the aggregate, 
becomes a holder of more than 25% of the outstanding voting securities 
of an Underlying Fund, it will vote its Underlying Fund Shares in the 
same proportion as the vote of all other holders of the Underlying Fund 
Shares. This condition does not apply to the Acquiring Fund's 
Subadvisory Group with respect to an Underlying Fund for which the 
Acquiring Fund Subadviser or a person controlling, controlled by, or 
under common control with the Acquiring Fund Subadviser acts as the 
investment adviser within the meaning of section 2(a)(20)(A) of the 
Act.
    6. No Acquiring Fund or Acquiring Fund Affiliate will cause any 
existing or potential investment by the Acquiring Fund in an Underlying 
Fund to influence the terms of any services or transactions between the 
Acquiring Fund or an Acquiring Fund Affiliate and the Underlying Fund 
or an Underlying Fund Affiliate.
    7. The board of directors or trustees of an Acquiring Management 
Company, 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 directors or trustees''), will adopt procedures 
reasonably designed to ensure that the Acquiring Fund Adviser and any 
Acquiring Fund Subadviser 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 an Underlying Fund or an Underlying Fund 
Affiliate in connection with any services or transactions.
    8. Once an investment by an Acquiring Fund in Underlying Fund 
Shares exceeds the limit in section 12(d)(1)(A)(i) of the Act, the 
Board of the Underlying Fund, including a majority of the independent 
directors or trustees, will determine that any consideration paid by 
the Underlying Fund to an Acquiring Fund or an 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 the Underlying Fund; (b) is within the range of 
consideration that the Underlying 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 an Underlying Fund and its investment 
adviser(s), or any person controlling, controlled by, or under common 
control with such investment adviser(s).
    9. No Acquiring Fund or Acquiring Fund Affiliate (except to the 
extent it is acting in its capacity as an investment

[[Page 22587]]

adviser to an Underlying Fund) will cause the Underlying Fund to 
purchase a security in any Affiliated Underwriting.
    10. The Board of the Underlying Fund, including a majority of the 
independent directors or trustees, will adopt procedures reasonably 
designed to monitor any purchases of securities by the Underlying Fund 
in an Affiliated Underwriting, once an investment by an Acquiring Fund 
in the securities of the Underlying 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 of the Underlying Fund 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 Underlying Fund. The Board of the Underlying 
Fund will consider, among other things: (i) Whether the purchases were 
consistent with the investment objectives and policies of the 
Underlying Fund; (ii) how the performance of securities purchased in an 
Affiliated Underwriting compares to the performance of comparable 
securities purchased during a comparable period of time in 
underwritings other than Affiliated Underwritings or to a benchmark 
such as a comparable market index; and (iii) whether the amount of 
securities purchased by the Underlying Fund in Affiliated Underwritings 
and the amount purchased directly from an Underwriting Affiliate have 
changed significantly from prior years. The Board of the Underlying 
Fund will take any appropriate actions based on its review, including, 
if appropriate, the institution of procedures designed to ensure that 
purchases of securities in Affiliated Underwritings are in the best 
interest of shareholders of the Underlying Fund.
    11. Each Underlying Fund will maintain and preserve permanently in 
an easily accessible place a written copy of the procedures described 
in the preceding condition, and any modifications to such procedures, 
and will maintain and preserve for a period of not less than six years 
from the end of the fiscal year in which any purchase in an Affiliated 
Underwriting occurred, the first two years in an easily accessible 
place, a written record of each purchase of securities in Affiliated 
Underwritings, once an investment by an Acquiring Fund in the 
securities of the Underlying 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 
determinations of the Board of the Underlying Fund were made.
    12. Before investing in Underlying Fund Shares in excess of the 
limits in section 12(d)(1)(A), each Acquiring Fund and the Underlying 
Fund will execute an Acquiring Fund Agreement stating, without 
limitation, that their boards of directors or trustees and their 
investment adviser(s) or their 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 Underlying Fund Shares in excess of the limit in section 
12(d)(1)(A)(i), an Acquiring Fund will notify the Underlying Fund of 
the investment. At such time, the Acquiring Fund will also transmit to 
the Underlying Fund a list of the names of each Acquiring Fund 
Affiliate and Underwriting Affiliate. The Acquiring Fund will notify 
the Underlying Fund of any changes to the list as soon as reasonably 
practicable after a change occurs. The Underlying Fund and the 
Acquiring Fund will maintain and preserve a copy of the order, the 
Acquiring 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.
    13. The Acquiring Fund Adviser, 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 
pursuant to any plan adopted under rule 12b-1 under the Act) received 
from the Underlying Fund by the Acquiring Fund Adviser, Trustee or 
Sponsor, or an affiliated person of the Acquiring Fund Adviser, Trustee 
or Sponsor, other than any advisory fees paid to the Acquiring Fund 
Adviser, or Trustee or Sponsor, or its affiliated person by the 
Underlying Fund, in connection with the investment by the Acquiring 
Fund in the Underlying Fund. Any Acquiring Fund Subadviser will waive 
fees otherwise payable to the Acquiring Fund Subadviser, directly or 
indirectly, by the Acquiring Management Company in an amount at least 
equal to any compensation received from an Underlying Fund by the 
Acquiring Fund Subadviser, or an affiliated person of the Acquiring 
Fund Subadviser, other than any advisory fees paid to the Acquiring 
Fund Subadviser or its affiliated person by the Underlying Fund, in 
connection with any investment by the Acquiring Management Company in 
the Underlying Fund made at the direction of the Acquiring Fund 
Subadviser. In the event that the Acquiring Fund Subadviser waives 
fees, the benefit of the waiver will be passed through to the Acquiring 
Management Company.
    14. 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 Conduct Rule 2830 of the NASD.
    15. No Underlying Fund will acquire securities of any investment 
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in 
excess of the limits contained in section 12(d)(1)(A) of the Act, 
except to the extent permitted by exemptive relief from the Commission 
permitting the Underlying Fund to purchase shares of other investment 
companies for short-term cash management purposes.
    16. 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 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 Underlying 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.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08854 Filed 4-15-13; 8:45 am]
BILLING CODE 8011-01-P