Document ID: SEC-2012-2050-0001
Agency: sec
Document Type: Notice
Title: Applications: T. Rowe Price Associates, Inc., et al.
Posted Date: 2012-12-13T05:00Z

[Federal Register Volume 77, Number 240 (Thursday, December 13, 2012)]
[Notices]
[Pages 74237-74245]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30054]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30299; 812-13726]

T. Rowe Price Associates, Inc., et al.; Notice of Application

December 7, 2012.
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 (``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 (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.

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    Applicants: T. Rowe Price Associates, Inc. (``TRP''), T. Rowe Price 
Institutional Income Funds, Inc. (the ``Corporation'') and T. Rowe 
Price Investment Services, Inc. (the ``Distributor'').
    Summary of Application: Applicants request an order that permits: 
(a) Actively managed 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 
from the tender of Shares for redemption; (d) certain affiliated 
persons of the series to deposit securities into, and receive 
securities from, the series in connection with the purchase and 
redemption of Creation Units; (e) certain registered management 
investment companies and unit investment trusts outside of the same

[[Page 74238]]

group of investment companies as the series to acquire Shares; and (f) 
certain series to perform creations and redemptions of Shares in-kind 
in a master-feeder structure.
    Filing Dates: The application was filed on December 4, 2009, and 
amended on February 26, 2010, December 30, 2010, May 7, 2012, September 
24, 2012, and December 4, 2012. Applicants have agreed to file an 
amendment during the notice period, the substance of which is reflected 
in this notice.
    Hearing or Notification of Hearing: An order granting the 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 December 31, 2012, 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, U.S. Securities and Exchange 
Commission, 100 F Street, NE., Washington, DC 20549-1090. Applicants, 
100 East Pratt Street, Baltimore, MD 21202.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 551-6817 or Daniele Marchesani, 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 Corporation is organized as a Maryland corporation and is 
registered as an open-end management investment company under the Act. 
The Corporation will initially offer one actively-managed investment 
series: T. Rowe Price Diversified Bond ETF (``Initial Fund''). The 
investment objective of the Initial Fund will be to achieve positive 
total returns with an emphasis on income.
    2. The Adviser will be the investment adviser to each Fund. TRP is 
and any other Adviser will be registered as an investment adviser under 
the Investment Advisers Act of 1940 (the ``Advisers Act''). The Adviser 
may enter sub-advisory agreements with one or more investment advisers 
to serve as sub-advisers to a Fund (each, a ``Sub-Adviser''). Each Sub-
Adviser will be registered, or not subject to registration, under the 
Advisers Act. TRIPS, a broker-dealer registered under the Securities 
Exchange Act of 1934 (``Exchange Act'' and such persons registered 
under the Exchange Act, a ``Broker'') will serve as distributor 
(``Distributor'') for the Funds. Applicants request that the order also 
apply to any other Distributor to the Funds that complies with the 
terms and conditions of the application.
    3. Applicants are requesting relief to permit the Corporation to 
create and operate the Initial Fund that offers Shares redeemable in 
large aggregations only (``ETF Relief''). Applicants request that the 
ETF Relief apply to the Initial Fund and to any future series of the 
Corporation or any other registered open-end management company that 
(a) is advised by TRP or an entity controlling, controlled by, or under 
common control with TRP (collectively, the ``Adviser''), and (b) 
utilizes active management investment strategies (``Future Funds'').\1\ 
The Initial Fund and Future Funds together are the ``Funds.'' Each Fund 
will consist of a portfolio of securities and other assets (``Portfolio 
Instruments'').\2\ Funds may invest in ``Depositary Receipts.'' 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.\3\ 
Each Fund will operate as an actively managed exchanged-traded fund 
(``ETF''). In addition, each Fund may operate as an acquiring fund in a 
fund of funds structure (``FOF''), as an acquired fund in a fund of 
funds structure (``Non-FOF''), or as a feeder fund in a master-feeder 
structure (``Feeder Fund'').\4\
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    \1\ All entities that currently intend to rely on the order are 
named as applicants. Any other entity that relies on the order in 
the future will comply with the terms and conditions of the 
application. An Acquiring Fund (as defined below) may rely on the 
order only to invest in a Non-FOF (as defined below) and not in any 
other registered investment company.
    \2\ If a Fund (or in the case of a Feeder Fund, its Master Fund, 
as defined below) invests in derivatives: (a) The Board periodically 
will review and approve (i) the Fund's (or in the case of a Feeder 
Fund, its Master Fund's) use of derivatives and (ii) how the Fund's 
investment adviser assesses and manages risk with respect to the 
Fund's (or in the case of a Feeder Fund, its Master Fund's) use of 
derivatives; and (b) in the Fund's disclosure of its (in the case of 
a Feeder Fund, its Master Fund's) use of derivatives in its offering 
documents and periodic reports will be consistent with relevant 
Commission and staff guidance.
    \3\ 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, the Future Funds, the Adviser, 
or any Subadviser will serve as the depositary bank for any 
Depositary Receipts held by a Fund.
    \4\ Feeder Funds are Non-FOFs that comply with condition 17 
below, unless their respective Master Funds invest in other 
investment companies or companies that rely on section 3(c)(1) or 
3(c)(7) of the Act in excess of the limits in section 12(d)(1)(A) of 
the Act.
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    4. Applicants also request that pursuant to section 12(d)(1)(J) the 
order permit certain investment companies registered under the Act to 
acquire Shares of a Non-FOF beyond the limitations in section 
12(d)(1)(A) and permit a Non-FOF, the Distributor, and any Brokers to 
sell Shares beyond the limitations in section 12(d)(1)(B) (``12(d)(1) 
Relief'').\5\ Applicants request that the 12(d)(1) Relief apply to each 
management investment company or unit investment trust registered under 
the Act that is not part of the same ``group of investment companies'' 
as the Non-FOFs within the meaning of section 12(d)(1)(G)(ii) of the 
Act and that enters into an Acquiring Fund Agreement (defined below) 
with a Non-FOF (such management investment companies, ``Acquiring 
Management Companies,'' such unit investment trusts, ``Acquiring 
Trusts,'' and Acquiring Management Companies and Acquiring Trusts 
together, ``Acquiring Funds''). The 12(d)(1) Relief would not apply to 
any Fund that is, either directly or through a master-feeder structure, 
acquiring 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 in 
section 12(d)(1)(A) of the Act.
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    \5\ Applicants do not request 12(d)(1) Relief for any FOF.
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    5. Applicants further request that the order permit each Feeder 
Fund to acquire securities of another registered investment company 
managed by the Adviser having substantially the same investment 
objectives as the Feeder Fund (``Master Fund'') beyond the limitation 
in section 12(d)(1)(A) and permit the Master Fund and any principal 
underwriter for the Master Fund, to sell shares of the Master Fund to 
the Feeder Fund beyond the limitations in section 12(d)(1)(B) (``Feeder 
Relief''). Applicants may structure certain Funds as Feeder Funds to 
generate economies of scale and tax

[[Page 74239]]

efficiencies for shareholders of all feeders of the Master Fund that 
could not otherwise be realized.\6\ There would be no ability by Fund 
shareholders to exchange Shares of Feeder Funds for shares of another 
feeder series of the Master Fund.
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    \6\ Operating in a master-feeder structure could also impose 
costs on a Feeder Fund and reduce its tax efficiency. In determining 
whether a Fund will operate in a master-feeder structure, the Board 
will weigh the potential advantages and disadvantages of such a 
structure for the Fund. In a master-feeder structure, the Master 
Fund--rather than the Feeder Fund--would invest the portfolio in 
compliance with the Order.
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    6. Applicants anticipate that a Creation Unit will consist of at 
least 25,000 Shares and that the price of a Share will be at least $20. 
All orders to purchase Creation Units must be placed with the 
Distributor by or through a party that has entered into a participant 
agreement with the Distributor and the Corporation (``Authorized 
Participant'') with respect to the creation and redemption of Creation 
Units. An Authorized Participant is 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 and affiliated with the Depository Trust 
Company (``DTC''), or (b) a participant in the DTC (such participant, 
``DTC Participant'').
    7. The Shares will be purchased and redeemed in Creation Units and 
generally on an in-kind basis. Except where the purchase or redemption 
will include cash under the limited circumstances specified below, 
purchasers will be required to purchase Creation Units by making an in-
kind deposit of specified instruments (``Deposit Instruments''), and 
shareholders redeeming their Shares will receive an in-kind transfer of 
specified instruments (``Redemption Instruments'').\7\ On any given 
Business Day \8\ the names and quantities of the instruments that 
constitute the Deposit Instruments and the names and quantities of the 
instruments that constitute the Redemption Instruments will be 
identical, and these instruments may be referred to, in the case of 
either a purchase or redemption, as the ``Creation Basket.'' In 
addition, the Creation Basket will correspond pro rata to the positions 
in a Fund's portfolio (including cash positions),\9\ 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; \10\ or 
(c) TBA Transactions,\11\ short positions and other positions that 
cannot be transferred in kind \12\ will be excluded from the Creation 
Basket.\13\ If there is a difference between the net asset value 
(``NAV'') attributable to a Creation Unit and the aggregate market 
value of the Creation Basket exchanged for the Creation Unit, the party 
conveying instruments with the lower value will also pay to the other 
an amount in cash equal to that difference (the ``Cash Amount'').
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    \7\ The Funds must comply with the federal securities laws in 
accepting Deposit Instruments and satisfying redemptions with 
Redemption Instruments, including that the Deposit Instruments and 
Redemption Instruments are sold in transactions that would be exempt 
from registration under the Securities Act of 1933 (``Securities 
Act''). In accepting Deposit Instruments and satisfying redemptions 
with Redemption Instruments that are restricted securities eligible 
for resale pursuant to Rule 144A under the Securities Act, the Funds 
will comply with the conditions of Rule 144A.
    \8\ Each Fund will sell and redeem Creation Units on any day the 
Fund is open, including as required by section 22(e) of the Act 
(each a ``Business Day'').
    \9\ The portfolio used for this purpose will be the same 
portfolio used to calculate the Fund's NAV for that Business Day.
    \10\ A tradeable round lot for a security will be the standard 
unit of trading in that particular type of security in its primary 
market.
    \11\ A TBA Transaction is a method of trading mortgage-backed 
securities. In a TBA Transaction, the buyer and seller agree on 
general trade parameters such as agency, settlement date, par amount 
and price.
    \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 
Creation Basket, their value will be reflected in the determination 
of the Cash Amount (as defined below).
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    8. Purchases and redemptions of Creation Units may be made in whole 
or in part on a cash basis, rather than in kind, solely under the 
following circumstances: (a) To the extent there is a Cash Amount, 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, a Fund determines to require the purchase or 
redemption, as applicable, to be made entirely in cash; (d) if, on a 
given Business Day, a Fund requires all Authorized Participants 
purchasing or redeeming Shares on that day to deposit or receive (as 
applicable) cash in lieu of some or all of the Deposit Instruments or 
Redemption Instruments, respectively, solely because: (i) such 
instruments are not eligible for transfer through either the NSCC 
enhanced clearing process or DTC manual clearing process; or (ii) in 
the case of Funds holding securities traded on global markets (``Global 
Funds''), such instruments are not eligible for trading due to local 
trading restrictions, local restrictions on securities transfers or 
other similar circumstances; or (e) if a Fund permits an Authorized 
Participant to deposit or receive (as applicable) cash in lieu of some 
or all of the Deposit Instruments or Redemption Instruments, 
respectively, solely because: (i) Such instruments are, in the case of 
the purchase of a Creation Unit, not available in sufficient quantity; 
(ii) such instruments are not eligible for trading by an Authorized 
Participant or the investor on whose behalf the Authorized Participant 
is acting; or (iii) a holder of Shares of a Global Fund would be 
subject to unfavorable income tax treatment if the holder receives 
redemption proceeds in kind.\14\
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    \14\ 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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    9. 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 primarily listed (the ``Listing 
Exchange''), each Fund will cause to be published through the NSCC the 
names and quantities of the instruments comprising the Creation Basket, 
as well as the estimated Cash Amount (if any), for that day. The 
published Creation Basket will apply until a new Creation Basket is 
announced on the following Business Day, and there will be no intra-day 
changes to the Creation Basket except to correct errors in the 
published Creation Basket. The Listing Exchange will disseminate every 
15 seconds throughout the trading day an amount representing, on a per 
Share basis, the sum of the current value of the Deposit Instruments 
and the estimated Cash Amount.
    10. An investor purchasing or redeeming a Creation Unit from a Fund 
may be charged a fee (``Transaction Fee'') to protect existing 
shareholders of the Funds from the dilutive costs associated with the 
purchase and redemption of Creation Units.\15\ With respect to Feeder 
Funds, the Transaction Fee would be paid by purchasers and redeemers of 
Creation Units directly to the Feeder Fund. Because, however, certain 
costs covered by the Transaction Fee, such as brokerage costs incurred 
in connection with the purchase of Deposit

[[Page 74240]]

Instruments not deposited by a purchaser in kind, may be borne by the 
Master Fund rather than the Feeder Fund, the Feeder Fund may pass a 
portion of the Transaction Fee through to the Master Fund.\16\
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    \15\ Where a Fund permits an in-kind purchaser to substitute 
cash in lieu of depositing one or more Deposit Instruments, the 
Transaction Fee imposed on a purchaser or redeemer may be higher.
    \16\ Applicants are not requesting relief from section 18 of the 
Act. Accordingly, a Master Fund may require a Transaction Fee 
payment to cover expenses related to purchases or redemptions of the 
Master Fund's shares by a Feeder Fund only if it requires the same 
payment for equivalent purchases or redemptions by any other feeder 
fund. Thus, for example, a Master Fund may require payment of a 
Transaction Fee by a Feeder Fund for transactions for 5,000 or more 
shares so long as it requires payment of the same Transaction Fee by 
all feeder funds for transactions involving 5,000 or more shares.
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    11. All orders to purchase Creation Units will be placed with the 
Distributor by or through an Authorized Participant and the Distributor 
will transmit all purchase orders to the relevant Fund. The Distributor 
will be responsible for delivering a prospectus (``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.
    12. Shares will be listed and traded at negotiated prices on an 
Exchange and traded in the secondary market. Applicants expect that 
exchange specialists and market makers (collectively, ``Exchange 
Specialists'') will be assigned to Shares. The price of Shares trading 
on an Exchange will be based on a current bid/offer in the secondary 
market. Transactions involving the purchases and sales of Shares on an 
Exchange will be subject to customary brokerage commissions and 
charges.
    13. Applicants expect that purchasers of Creation Units will 
include institutional investors and arbitrageurs. Authorized 
Participants also may purchase Creation Units in connection with market 
making activities.\17\ Applicants expect that secondary market 
purchasers of Shares will include both institutional and retail 
investors.\18\ Applicants expect that arbitrage opportunities created 
by the ability to continually purchase or redeem Creation Units at 
their NAV per Share should ensure that the Shares will not trade at a 
material discount or premium in relation to their NAV.
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    \17\ Applicants note that Nasdaq's listing requirements require 
at least two market makers to be registered in Shares in order to 
maintain the Nasdaq listing. Applicants also note that market makers 
on Nasdaq and NYSE Arca must make a continuous, two-sided market at 
all times or risk regulatory sanctions. Applicants believe that the 
competition on Nasdaq and NYSE Arca among market makers, many of 
whom may be Authorized Participants, engaging in arbitrage 
activities would result in a highly efficient and effective market 
for Shares.
    \18\ Shares will be registered in book-entry form only. DTC or 
its nominee will be the record or registered owner of all 
outstanding Shares. Beneficial ownership of Shares will be shown on 
the records of DTC or DTC Participants.
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    14. Shares will not be individually redeemable and owners of Shares 
may acquire Shares from a Fund or tender shares for redemption to the 
Fund in Creation Units only. To redeem, an investor must accumulate 
enough Shares to constitute a Creation Unit. Redemption requests must 
be placed by or through an Authorized Participant. As discussed above, 
redemptions of Creation Units will generally be made on an in-kind 
basis, subject to certain specified exceptions under which redemptions 
may be made in whole or in part on a cash basis, and will be subject to 
a Transaction Fee.
    15. No Fund will be marketed or otherwise held out as a mutual 
fund. All marketing materials that describe the features or method of 
obtaining, buying or selling Creation Units, or Shares traded on an 
Exchange, or refer to redeemability, will prominently disclose that 
Shares are not individually redeemable shares and owners of Shares may 
acquire Shares from a Fund, or tender those Shares for redemption to a 
Fund in Creation Units only.
    16. Each Fund's Web site, accessible to all investors at no charge, 
will publish the current version of the Prospectus and other 
information about the Fund that is updated on a daily basis, including, 
on a per Share basis for the Fund, daily trading volume, 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 such NAV (``Bid/Ask 
Price''), and a calculation of the premium or discount of either the 
market closing price to the NAV or the Bid/Ask Price to the NAV. On 
each Business Day, before commencement of trading in Shares on the 
Exchange, the Fund will disclose on its Web site the identities and 
quantities of the Portfolio Instruments held by the Fund,\19\ that will 
form the basis for the Fund's calculation of NAV at the end of the 
Business Day.\20\
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    \19\ Feeder Funds will disclose the portfolio of their Master 
Fund.
    \20\ Applicants note that under accounting procedures followed 
by the Funds (and the Master Funds), trades made on the prior 
Business Day will be booked and reflected in NAV on the current 
Business Day. Accordingly, the Funds will be able to disclose at the 
beginning of the Business Day the portfolio that will form the basis 
for the NAV calculation at the end of the Business Day.
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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 provision 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 a 
proportionate share of the issuer's current net assets, or the cash 
equivalent. Because Shares will not be individually redeemable, 
applicants request an order to permit the Corporation to register as an 
open-end management investment company and the Funds to redeem Shares 
in Creation Units only.\21\ Applicants state that investors may 
purchase Shares in Creation Units and redeem Creation Units from each 
Fund. Applicants further state that because the market

[[Page 74241]]

price of Creation Units will be disciplined by arbitrage opportunities, 
investors should be able to sell Shares in the secondary market at 
prices that do not vary materially from their NAV.
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    \21\ The Master Funds will not require relief from sections 
2(a)(32) and 5(a)(1) because the Master Funds will operate as 
traditional mutual funds and issue individually redeemable 
securities.
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Section 22(d) of the Act and Rule 22c-1 Under the Act

    4. Section 22(d) of the Act, among other things, prohibits a dealer 
from selling a redeemable security, that is currently being offered to 
the public by or through 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 the 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 resulting from sales at different prices, and (c) assure 
an orderly distribution system of investment company shares by 
eliminating price competition from Brokers offering shares at less than 
the published sales price and repurchasing shares at more than the 
published redemption price.
    6. Applicants believe that none of these purposes will be thwarted 
by permitting Shares to trade in the secondary market at negotiated 
prices. Applicants state that (a) secondary market trading in Shares 
would not cause dilution of an investment in Shares because such 
transactions do not directly involve Fund assets, and (b) to the extent 
different prices exist during a given trading day, or from day to day, 
such variances occur as a result of third-party market forces, such as 
supply and demand. Therefore, applicants assert that secondary market 
transactions in Shares will not lead to discrimination or preferential 
treatment among purchasers. Finally, applicants contend that the 
proposed distribution system will be orderly because arbitrage activity 
should ensure that the difference between NAV and the market price of 
Shares remains immaterial.

Sections 22(e) of the Act

    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 settlement of redemptions of Creation Units of the Global 
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 Global Funds may invest. Applicants have been advised 
that, under certain circumstances, the delivery cycles for transferring 
Redemption Instruments 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 payment or satisfaction of redemptions within the 
maximum number of calendar days required for such payment or 
satisfaction, up to a maximum of 14 calendar days, in the principal 
local markets where transactions in the Redemption Instruments of each 
Global Fund customarily clear and settle, but in all cases no later 
than 14 calendar days following the tender of a Creation Unit.
    8. Applicants state that section 22(e) was designed to prevent 
unreasonable, undisclosed or unforeseen delays in the actual payment of 
redemption proceeds. Applicants state that allowing redemption payments 
for Creation Units of a Global Fund (and in the case of a Feeder Fund, 
the Master Funds),\22\ to be made within a maximum of 14 calendar days 
would not be inconsistent with the spirit and intent of section 22(e). 
Applicants state the SAI will identify those instances in a given year 
where, due to local holidays, more than seven days will be needed to 
deliver redemption proceeds and will list such holidays and the maximum 
number of days, but in no case more than 14 calendar days. Applicants 
are not seeking relief from section 22(e) with respect to Global Funds 
that do not effect creations or redemptions in-kind.
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    \22\ Other feeder funds invested in any Master Fund are not 
seeking, and will not rely on, the section 22(e) relief requested 
herein.
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    9. With respect to Feeder Funds, only in-kind redemptions may 
proceed on a delayed basis pursuant to the relief requested from 
section 22(e). In the event of such an in-kind redemption, the Feeder 
Fund would make a corresponding redemption from the Master Fund. 
Applicants do not believe the master-feeder structure would have any 
impact on the delivery cycle.

Section 12(d)(1) of the Act

    10. Section 12(d)(1)(A) of the Act prohibits a registered 
investment company from acquiring shares of an investment company if 
the securities represent more than 3% of the total outstanding voting 
stock of the acquired company, more than 5% of the total assets of the 
acquiring company, or, together with the securities of any other 
investment companies, more than 10% of the total assets of the 
acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter, or 
any other broker or dealer from selling its shares to another 
investment company if the sale will cause the acquiring company to own 
more than 3% of the acquired company's voting stock, or if the sale 
will cause more than 10% of the acquired company's voting stock to be 
owned by investment companies generally.
    11. Applicants request relief to permit Acquiring Funds to acquire 
Shares beyond the limits of section 12(d)(l)(A) of the Act and to 
permit the Non-FOFs, their principal underwriters and any Broker to 
sell Shares to an Acquiring Fund beyond the limits of section 
12(d)(l)(B) of the Act. Applicants submit that the proposed conditions 
to the requested relief address the concerns underlying the limits in 
section 12(d)(1) which include concerns about undue influence, 
excessive layering of fees and overly complex structures.
    12. Applicants submit that their proposed conditions address any 
concerns regarding the potential for undue influence. To limit the 
control that an Acquiring Fund may have over a Fund, applicants propose 
a condition prohibiting the adviser of an Acquiring Management Company 
(``Acquiring Fund Adviser''), sponsor of an Acquiring Trust 
(``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 sections 
3(c)(l) or 3(c)(7) of the Act that is advised or sponsored by the 
Acquiring Fund Adviser, the Sponsor, or any person controlling, 
controlled by,

[[Page 74242]]

or under common control with the Acquiring Fund Adviser or Sponsor 
(``Acquiring 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 sub-adviser to an 
Acquiring Management Company (``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 sections 3(c)(l) 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 under common control with the Acquiring Fund 
Subadviser (``Acquiring Fund's Subadvisory Group'').
    13. Applicants propose a condition to ensure that no Acquiring Fund 
or Acquiring Fund Affiliate \23\ (except to the extent it is acting in 
its capacity as an investment adviser to a Fund) will cause a Non-FOF 
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 any person whose relationship to the 
Non-FOF is covered by section 10(f) of the Act is not an Underwriting 
Affiliate).
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    \23\ An ``Acquiring Fund Affiliate'' is any Acquiring Fund 
Adviser, Acquiring Fund Subadviser(s), Sponsor, promoter or 
principal underwriter of an Acquiring Fund, and any person 
controlling, controlled by or under common control with any of these 
entities. A ``Fund Affiliate'' is an investment adviser, promoter or 
principal underwriter of a Non-FOF (or in the case of a Feeder Fund, 
the Master Fund) and any person controlling, controlled by or under 
common control with any of these entities.
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    14. Applicants propose several conditions to address the potential 
for layering of fees. Applicants note that the board of directors or 
trustees (``Board'') of any Acquiring Management Company, including a 
majority of the directors or trustees who are not ``interested 
persons'' within the meaning of section 2(a)(19) of the Act 
(``independent directors or trustees''), will be required to find that 
the advisory fees charged under the contract(s) are based on services 
provided that will be in addition to, rather than duplicative of, 
services provided under the advisory contract(s) of any Non-FOF (or in 
the case of a Feeder Fund, the Master Fund) in which the Acquiring 
Management Company may invest. Applicants also state that any sales 
charges and/or service fees charged with respect to shares of an 
Acquiring Fund will not exceed the limits applicable to a fund of funds 
as set forth in NASD Conduct Rule 2830.\24\
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    \24\ Any 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 Authority.
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    15. Applicants submit that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that a Non-FOF (and 
in the case of a Feeder Fund, the Master Fund) will be prohibited from 
acquiring securities of any investment company or company relying on 
section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained 
in section 12(d)(1)(A) of the Act, except to the extent that the Non-
FOF acquires such securities in compliance with Section 12(d)(1)(E) of 
the Act or this order or the Non-FOF (or in the case of a Feeder Fund, 
the Master Fund) (a) receives securities of another investment company 
as a dividend or as a result of a plan of reorganization of a company 
(other than a plan devised for the purpose of evading Section 12(d)(1) 
of the Act) or (b) acquires (or is deemed to have acquired) securities 
of another investment company pursuant to exemptive relief from the 
Commission permitting the Non-FOF (or in the case of a Feeder Fund, the 
Master Fund) to (i) acquire securities of one or more investment 
companies for short-term cash management purposes or (ii) engage in 
interfund borrowing and lending transactions.
    16. To ensure that an Acquiring Fund is aware of the terms and 
conditions of the requested order, the Acquiring Fund must enter into 
an agreement with the respective Non-FOF (``Acquiring Fund 
Agreement''). The Acquiring Fund Agreement will include an 
acknowledgment from the Acquiring Fund that it may rely on the order 
only to invest in a Non-FOF and not in any other investment company.
    17. Applicants also are seeking the Feeder Relief to permit the 
Feeder Funds to perform creations and redemptions of Shares in-kind 
with their Master Funds. Applicants assert that this structure is 
substantially identical to traditional master-feeder structures 
permitted pursuant to the exception provided in section 12(d)(1)(E) of 
the Act. Section 12(d)(1)(E) provides that the percentage limitations 
of sections 12(d)(1)(A) and (B) will not apply to a security issued by 
an investment company (in this case, the shares of the applicable 
Master Fund) if, among other things, that security is the only 
investment security held in the investing fund's portfolio (in this 
case, the Feeder Fund's portfolio). Applicants believe the proposed 
master-feeder structure complies with section 12(d)(1)(E) because each 
Feeder Fund will hold only investment securities issued by its 
corresponding Master Fund; however, the Feeder Funds may receive 
securities other than securities of its corresponding Master Fund if a 
Feeder Fund accepts an in-kind creation. To the extent that a Feeder 
Fund may be deemed to be holding both shares of the Master Fund and 
other securities, applicants request relief from sections 12(d)(1)(A) 
and (B). The Feeder Funds would operate in compliance with all other 
provisions of section 12(d)(1)(E).

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

    18. 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 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 and 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'').
    19. Applicants request an exemption from section 17(a) under 
sections 6(c) and 17(b) to permit in-kind purchases and redemptions by 
persons that are affiliated persons or second tier affiliates of the 
Funds solely by virtue of: (a) Holding 5% or more, or in excess of 25%, 
of the outstanding Shares of one

[[Page 74243]]

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 Affiliated Funds.\25\ Applicants 
also request an exemption in order to permit a Non-FOF to sell Shares 
to and redeem Shares from, and engage in the in-kind transactions that 
would accompany such sales and redemptions with, an Acquiring Fund 
which the Non-FOF is an affiliated person or a second tier 
affiliate.\26\
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    \25\ Applicants are not seeking relief from section 17(a) for, 
and the requested relief will not apply to, transactions where a 
Fund could be deemed an affiliated person, or an affiliated person 
of an affiliated person, of an Acquiring Fund because the Adviser 
provides investment advisory services to that Acquiring Fund.
    \26\ Applicants state that although they believe that an 
Acquiring Fund generally will purchase Shares in the secondary 
market, an Acquiring Fund might seek to transact in Creation Units 
directly with a Non-FOF.
---------------------------------------------------------------------------

    20. Applicants assert that no useful purpose would be served by 
prohibiting the affiliated persons from making in-kind purchases or in-
kind redemptions of Shares of a Fund in Creation Units. Except in 
certain circumstances described above, the Deposit Instruments and 
Redemption Instruments will be the same for all purchasers and 
redeemers, respectively, and will correspond pro rata to the Fund's 
Portfolio Instruments. The deposit procedures for in-kind purchases of 
Creation Units and the redemption procedures for in-kind redemptions 
will be the same for all purchases and redemptions. Deposit Instruments 
and Redemption Instruments will be valued in the same manner as those 
Portfolio Instruments currently held by the relevant Fund. Applicants 
do not believe that in-kind purchases and redemptions will result in 
abusive self-dealing or overreaching of the Fund.
    21. Applicants also submit that the sale of Shares to and 
redemption of Shares from an Acquiring Fund meets the standards for 
relief under sections 17(b) and 6(c) of the Act. Applicants note that 
any consideration paid for the purchase or redemption of Shares 
directly from a Non-FOF will be based on the NAV of the Non-FOF.\27\ 
Applicants also state that the proposed transactions are consistent 
with the general purposes of the Act and appropriate in the public 
interest.
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    \27\ Applicants acknowledge that the receipt of compensation by 
(a) an affiliated person of an Acquiring Fund, or an affiliated 
person of such person, for the purchase by the Acquiring Fund of 
Shares or (b) an affiliated person of a Non-FOF, or an affiliated 
person of such person, for the sale by the Non-FOF of its Shares to 
an Acquiring Fund, may be prohibited by section 17(e)(1) of the Act. 
The Acquiring Fund Agreement also will include this acknowledgment.
---------------------------------------------------------------------------

    22. To the extent that a Fund operates in a master-feeder 
structure, applicants also request relief permitting the Feeder Funds 
to engage in in-kind creations and redemptions with the applicable 
Master Fund. Applicants state that the customary section 17(a)(1) and 
17(a)(2) relief would not be sufficient to permit such transactions 
because the Feeder Funds and the applicable Master Fund could also be 
affiliated by virtue of having the same investment adviser. However, 
applicants believe that in-kind creations and redemptions between a 
Feeder Fund and a Master Fund advised by the same investment adviser do 
not involve ``overreaching'' by an affiliated person. Such transactions 
will occur only at the Feeder Fund's proportionate share of the Master 
Fund's net assets, and the distributed securities will be valued in the 
same manner as they are valued for the purposes of calculating the 
applicable Master Fund's NAV. Further, all such transactions will be 
effected with respect to pre-determined securities and on the same 
terms with respect to all investors. Finally, such transactions would 
only occur as a result of, and to effectuate, a creation or redemption 
transaction between the Feeder Fund and a third-party investor. 
Applicants believe that the terms of the proposed transactions are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned and that the transactions are consistent with the 
general purposes of the Act.

Applicants' Conditions

ETF Relief

    Applicants agree that any order of the Commission granting the 
requested ETF Relief will be subject to the following conditions:
    1. As long as a Fund operates in reliance on the requested order, 
its Shares will be listed on an Exchange.
    2. Neither the Corporation 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 the 
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 the Funds, which is and 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 Bid/
Ask Price of the Shares, and a calculation of the premium or discount 
of the market closing price or Bid/Ask Price against such NAV.
    4. On each Business Day, before commencement of trading in Shares 
on the Listing Exchange, the Fund (or in the case of a Feeder Fund, the 
Master Fund) will disclose on its Web site the identities and 
quantities of the Portfolio Instruments held by the Fund that will form 
the basis for the Fund's calculation of NAV at the end of the Business 
Day.
    5. The Adviser or Subadviser, directly or indirectly, will not 
cause any Authorized Participant (or any investor on whose behalf an 
Authorized Participant may transact with the Fund) to acquire any 
Deposit Instrument for the Fund through a transaction in which the Fund 
could not engage directly.
    6. The requested ETF Relief, other than the Feeder Relief, will 
expire on the effective date of any Commission rule under the Act that 
provides relief permitting the operation of actively managed exchange-
traded funds.

12(d)(1) Relief

    Applicants agree that any order of the Commission granting the 
requested 12(d)(1) Relief will be subject to the following conditions:
    7. The members of an Acquiring Fund's Advisory Group will not 
control (individually or in the aggregate) a Non-FOF (or in the case of 
a Feeder Fund, the Master 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) a Non-FOF (or in the 
case of a Feeder Fund, the Master Fund) within the meaning of section 
2(a)(9) of the Act. If, as a result of a decrease in the outstanding 
voting securities of the Non-FOF, the Acquiring Fund's Advisory Group 
or the Acquiring Fund's Subadvisory Group, each in the aggregate, 
becomes a holder of more than 25 percent of the outstanding voting 
securities of a Non-FOF, it will vote its Shares of the Non-FOF in the 
same proportion as the vote of all other holders of such Shares. This 
condition does not apply to the Acquiring Fund's Subadvisory Group with 
respect to a Non-FOF (or in the case of a Feeder Fund, the Master 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.
    8. No Acquiring Fund or Acquiring Fund Affiliate will cause any 
existing or potential investment by the Acquiring

[[Page 74244]]

Fund in a Non-FOF to influence the terms of any services or 
transactions between the Acquiring Fund or an Acquiring Fund Affiliate 
and the Non-FOF (or in the case of a Feeder Fund, the Master Fund) or a 
Fund Affiliate.
    9. The board of directors or trustees of an Acquiring Management 
Company, including a majority of the 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 a Non-FOF (or in the case 
of a Feeder Fund, the Master Fund) or a Fund Affiliate in connection 
with any services or transactions.
    10. Once an investment by an Acquiring Fund in Shares exceeds the 
limits in section 12(d)(1)(A)(i) of the Act, the board of directors 
(``Board'') of a Non-FOF (or in the case of a Feeder Fund, the Master 
Fund), including a majority of the independent directors or trustees, 
will determine that any consideration paid by the Non-FOF (or in the 
case of a Feeder Fund, the Master 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 Non-FOF (or in the 
case of a Feeder Fund, the Master Fund); (b) is within the range of 
consideration that the Non-FOF (or in the case of a Feeder Fund, the 
Master 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 Non-FOF (or in the case of a Feeder Fund, the Master Fund) 
and its investment adviser(s), or any person controlling, controlled by 
or under common control with such investment adviser(s).
    11. No Acquiring Fund or Acquiring Fund Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to a Non-
FOF (or in the case of a Feeder Fund, the Master Fund)) will cause a 
Non-FOF (or in the case of a Feeder Fund, the Master Fund) to purchase 
a security in any Affiliated Underwriting.
    12. The Board of a Non-FOF (or in the case of a Feeder Fund, the 
Master Fund), including a majority of the independent directors or 
trustees, will adopt procedures reasonably designed to monitor any 
purchases of securities by the Non-FOF (or in the case of a Feeder 
Fund, the Master Fund) in an Affiliated Underwriting, once an 
investment by an Acquiring Fund in the securities of the Non-FOF 
exceeds the limit of section 12(d)(1)(A)(i) of the Act, including any 
purchases made directly from an Underwriting Affiliate. The Board will 
review these purchases periodically, but no less frequently than 
annually, to determine whether the purchases were influenced by the 
investment by the Acquiring Fund in the Non-FOF. The Board will 
consider, among other things: (a) Whether the purchases were consistent 
with the investment objectives and policies of the Non-FOF (or in the 
case of a Feeder Fund, the Master Fund); (b) how the performance of 
securities purchased in an Affiliated Underwriting compares to the 
performance of comparable securities purchased during a comparable 
period of time in underwritings other than Affiliated Underwritings or 
to a benchmark such as a comparable market index; and (c) whether the 
amount of securities purchased by the Non-FOF (or in the case of a 
Feeder Fund, the Master Fund) in Affiliated Underwritings and the 
amount purchased directly from an Underwriting Affiliate have changed 
significantly from prior years. The Board will take any appropriate 
actions based on its review, including, if appropriate, the institution 
of procedures designed to assure that purchases of securities in 
Affiliated Underwritings are in the best interest of shareholders.
    13. Each Non-FOF (or in the case of a Feeder Fund, the Master Fund) 
will maintain and preserve permanently in an easily accessible place a 
written copy of the procedures described in the preceding condition, 
and any modifications to such procedures, and will maintain and 
preserve for a period of not less than six years from the end of the 
fiscal year in which any purchase in an Affiliated Underwriting 
occurred, the first two years in an easily accessible place, a written 
record of each purchase of securities in Affiliated Underwritings, once 
an investment by an Acquiring Fund in the securities of the Non-FOF 
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 
were made.
    14. Before investing in a Non-FOF in excess of the limits in 
section 12(d)(1)(A), an Acquiring Fund and the Non-FOF will execute an 
Acquiring Fund Agreement stating that their boards of directors or 
trustees and their investment adviser(s), or Trustee and Sponsor, as 
applicable, understand the terms and conditions of the order, and agree 
to fulfill their responsibilities under the order. At the time of its 
investment in Shares in excess of the limit in section 12(d)(1)(A)(i), 
an Acquiring Fund will notify the Non-FOF of the investment. At such 
time, the Acquiring Fund will also transmit to the Non-FOF a list of 
the names of each Acquiring Fund Affiliate and Underwriting Affiliate. 
The Acquiring Fund will notify the Non-FOF of any changes to the list 
of the names as soon as reasonably practicable after a change occurs. 
The Non-FOF 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.
    15. 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 a Non-FOF (or in the case of a Feeder Fund, the Master 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, Trustee or Sponsor, 
or its affiliated person by the Non-FOF (or in the case of a Feeder 
Fund, the Master Fund), in connection with the investment by the 
Acquiring Fund in the Non-FOF. 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 a Non-FOF (or in the case of a 
Feeder Fund, the Master 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 Non-FOF (or in the case of a Feeder Fund, the Master 
Fund), in connection with any investment by the Acquiring Management 
Company in the Non-FOF made at the direction of the Acquiring Fund 
Subadviser. In the event that the Acquiring Fund Subadviser waives 
fees, the benefit of

[[Page 74245]]

the waiver will be passed through to the Acquiring Management Company.
    16. Any sales charges and/or service fees charged with respect to 
shares of an Acquiring Fund will not exceed the limits applicable to a 
fund of funds as set forth in NASD Conduct Rule 2830.
    17. No Non-FOF (or in the case of a Feeder Fund, the Master Fund) 
will acquire securities of any investment company or company relying on 
section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained 
in section 12(d)(1)(A) of the Act, except to the extent that the Non-
FOF acquires such securities in compliance with section 12(d)(1)(E) of 
the Act or the Feeder Relief in this order; or the Non-FOF (or in the 
case of a Feeder Fund, the Master Fund) (a) receives securities of 
another investment company as a dividend or as a result of a plan of 
reorganization of a company (other than a plan devised for the purpose 
of evading section 12(d)(1) of the Act), or (b) acquires securities of 
another investment company pursuant to exemptive relief from the 
Commission permitting such Non-FOF (or in the case of a Feeder Fund, 
the Master Fund) to (i) acquire securities of one or more investment 
companies for short-term cash management purposes or (ii) engage in 
interfund borrowing and lending transactions.
    18. 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 Non-FOF (or in the case of a Feeder Fund, the Master 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. 2012-30054 Filed 12-12-12; 8:45 am]
BILLING CODE 8011-01-P