[Federal Register Volume 78, Number 227 (Monday, November 25, 2013)]
[Notices]
[Pages 70359-70368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-28219]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30790; File No. 812-14238]


WisdomTree Trust, et al.; Notice of Application

November 20, 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 (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 would permit 
(a) certain open-end management investment companies or series thereof 
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; (e) certain registered management investment companies and unit 
investment trusts outside of the same group of investment companies as 
the series to acquire Shares; and (f) certain series to perform 
creations and

[[Page 70360]]

redemptions of Shares in-kind in a master-feeder structure.

Applicants: WisdomTree Trust (the ``Trust''), WisdomTree Asset 
Management, Inc. (the ``Adviser'') and WisdomTree Investments, Inc. 
(``WTI'').

Filing Dates: The application was filed on November 15, 2013 and 
amended on November 20, 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 December 10, 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; Applicants, 380 
Madison Avenue, 21st Floor, New York, New York 10017.

FOR FURTHER INFORMATION CONTACT: Mark N. Zaruba, Senior Counsel at 
(202) 551-6878, or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

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

Applicants' Representations

    1. The Trust is registered under the Act as an open-end management 
investment company and is organized as a Delaware statutory trust. In 
reliance on the requested order, the Trust will offer one or more 
series (each a ``Fund,'' and, collectively, the ``Funds''),\1\ each of 
which will seek to provide investment returns that correspond, before 
fees and expenses, generally to the performance of a specified equity 
and/or a fixed income securities index that either: (i) Includes both 
long and short positions in securities (``Long/Short Index''); or (ii) 
uses a 130/30 investment strategy (``130/30 Index'' and, collectively 
with the Long/Short Indexes, ``Underlying Indexes'').
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    \1\ In addition to the Initial Fund (defined below), the Trust 
includes series that rely on prior ETF (defined below) exemptive 
relief granted by the Commission. The Funds will not rely on this 
prior exemptive relief, and ETFs relying on this prior relief will 
not rely on the relief requested in the current application.
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    2. Applicants represent that the Trust intends initially to offer 
the Fund identified in the application (``Initial Fund''), whose 
investment objective will be to seek to replicate as closely as 
possible, before fees and expenses, the price and yield performance of 
the WisdomTree Government/Corporate Bond Negative Duration Index, a 
Long/Short Index currently intended to be developed by WTI, of which 
the Adviser is a wholly owned subsidiary. The Initial Fund's Underlying 
Index is described in Appendix A to the application.
    3. Applicants request that the order apply to the Initial Fund and 
any additional series of the Trust \2\ and any other open-end 
management investment company or series thereof that may be created in 
the future (``Future Funds'') and that tracks an Underlying Index.\3\ 
Any Future Fund will (a) be advised by the Adviser, or an entity 
controlling, controlled by, or common control with the Adviser 
(included in the term ``Adviser'') and (b) comply with the terms and 
conditions of the application. For purposes of this notice, references 
to ``Funds'' include the Initial Fund, as well as any Future Funds.
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    \2\ This includes any existing ETF of the Trust currently 
relying on the prior ETF exemptive relief that becomes a Fund. As 
discussed in footnote 1, any such ETF will be subject to the terms 
and conditions of the requested order and will no longer be 
permitted to rely on the prior relief.
    \3\ All entities that currently intend to rely on the order have 
been named as applicants. Any other existing or future entity that 
subsequently relies on the order will comply with the terms and 
conditions of the application. A Fund of Funds (defined below) may 
rely on the order only to invest in Funds and not in any other 
registered investment company.
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    4. Certain of the Funds will be based on Underlying Indexes which 
will be comprised of equity and/or fixed income securities issued by 
domestic issuers or non-domestic issuers meeting the requirements for 
trading in U.S. markets. Other Funds will be based on Underlying 
Indexes which will be comprised of foreign and domestic or solely 
foreign equity and/or fixed income securities (``Foreign Funds'').
    5. An Adviser registered as an investment adviser under the 
Investment Advisers Act of 1940 (the ``Advisers Act'') will serve as 
investment adviser to the Funds. The Adviser may enter into sub-
advisory agreements with one or more investment advisers to act as a 
sub-adviser to a Fund (each, a ``Sub-Adviser''). Each Sub-Adviser will 
be registered or not subject to registration under the Advisers Act. 
ALPS Distributors, Inc. (the ``Distributor'') is a broker-dealer 
registered under the Securities Exchange Act of 1934 (the ``Exchange 
Act'') and will act as the principal underwriter and distributor for 
the Funds.\4\
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    \4\ Applicants request that the order also apply to future 
distributors that comply with the terms and conditions of the 
application.
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    6. A Fund may operate as a feeder fund in a master-feeder structure 
(``Feeder Fund''). Applicants request that the order permit the Feeder 
Funds 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 Funds, and any principal 
underwriter for the Master Fund, to sell shares of the Master Funds to 
the Feeder Funds beyond the limitations in section 12(d)(1)(B) 
(``Master-Feeder Relief''). Applicants may structure certain Feeder 
Funds to generate economies of scale and incur lower overhead costs.\5\ 
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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    \5\ Operating in a master-feeder structure could also impose 
costs on a Feeder Fund and reduce its tax efficiency. The Feeder 
Fund's board of directors will weigh the potential disadvantages 
against the benefits of economies of scale and other benefits of 
operating within a master-feeder structure. In a master-feeder 
structure, the Master Fund--rather than the Feeder Fund--would 
generally invest the portfolio in compliance with the order.
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    7. Each Fund will hold certain securities and other instruments 
(``Portfolio Securities'') selected to correspond to the performance of 
its Underlying Index.\6\ Except with respect to Affiliated Index Funds 
(defined below), no entity that creates, compiles, sponsors or 
maintains an Underlying Index (``Index Provider'') will be an 
affiliated person, as defined in section 2(a)(3) of the Act, or an 
affiliated person of an affiliated person, of the Trust, a Fund, the 
Adviser, any Sub-Adviser, or

[[Page 70361]]

promoter of a Fund, or of the Distributor.
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    \6\ Applicants represent that each Fund will invest at least 80% 
of its total assets in the component securities that comprise its 
Underlying Index (``Component Securities'') or, as applicable, 
depositary receipts or TBA Transactions (defined below) representing 
Component Securities. Each Fund also may invest up to 20% of its 
total assets (the ``20% Asset Basket'') in a broad variety of other 
instruments, including securities not included in its Underlying 
Index, which the Adviser believes will help the Fund track its 
Underlying Index.
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    8. 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 may not hold all, of the Component 
Securities of its Underlying Index. 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 
would a Fund that invests in every Component Security of the Underlying 
Index. Applicants expect that each Fund will have an annual tracking 
error relative to the performance of its Underlying Index of less than 
5 percent.
    9. Each Fund will issue, on a continuous basis, Creation Units, 
which will typically consist of at least 25,000 Shares and have an 
initial price per Share of $25 to $100. All orders to purchase Creation 
Units must be placed with the Distributor by or through a party that 
has entered into an agreement with the Distributor (``Authorized 
Participant''). The Distributor will be responsible for delivering the 
Fund's prospectus to those persons acquiring Creation Units and for 
maintaining records of both the orders placed with it and the 
confirmations of acceptance furnished by it. In addition, the 
Distributor will maintain a record of the instructions given to the 
applicable Fund to implement the delivery of its Shares. An Authorized 
Participant must be either (a) a ``Participating Party,'' (i.e., a 
broker-dealer or other participant in the Continuous Net Settlement 
System of the National Securities Clearing Corporation (``NSCC''), a 
clearing house registered with the Commission, or (b) a participant in 
the Depository Trust Company (``DTC,'' and such participant, ``DTC 
Participant''), which, in either case, has signed a ``Participant 
Agreement'' with the Distributor.
    10. 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 the names and quantities of the instruments that 
constitute the Deposit Instruments and the names and quantities of the 
instruments that constitute the Redemption Instruments will be 
identical, unless the Fund is Rebalancing (defined below). In addition, 
the Deposit Instruments and the Redemption Instruments will each 
correspond pro rata to the positions in a Fund's portfolio (including 
cash positions),\8\ 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; \9\ (c) ``to be announced'' 
transactions (``TBA Transactions''),\10\ short positions, derivatives 
and other positions that cannot be transferred in kind \11\ will be 
excluded from the Deposit Instruments and the Redemption Instruments; 
\12\ (d) to the extent the Fund determines, on a given Business Day, to 
use a representative sampling of the Fund's portfolio; \13\ 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 
(``NAV'') attributable to a Creation Unit and the aggregate market 
value of the Deposit Instruments or Redemption Instruments exchanged 
for the Creation Unit, the party conveying instruments with the lower 
value will also pay to the other an amount in cash equal to that 
difference (the ``Balancing 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\ The portfolio used for this purpose will be the same 
portfolio used to calculate the Fund's NAV for that Business Day.
    \9\ A tradeable round lot for a security will be the standard 
unit of trading in that particular type of security in its primary 
market.
    \10\ 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. The actual pools delivered generally are determined two 
days prior to the settlement date.
    \11\ 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.
    \12\ Because these instruments will be excluded from the Deposit 
Instruments and the Redemption Instruments, their value will be 
reflected in the determination of the Balancing Amount (defined 
below).
    \13\ A Fund may only use sampling for this purpose if the 
sample: (a) Is designed to generate performance that is highly 
correlated to the performance of the Fund's portfolio; (b) consists 
entirely of instruments that are already included in the Fund's 
portfolio; and (c) is the same for all Authorized Participants on a 
given Business Day.
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    11. 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, a Fund determines to require the purchase or 
redemption, as applicable, to be made entirely in cash; \14\ (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 or 
DTC; or (ii) in the case of Foreign 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

[[Page 70362]]

Authorized Participant is acting; or (iii) a holder of Shares of a 
Foreign Fund would be subject to unfavorable income tax treatment if 
the holder receives redemption proceeds in kind.\15\
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    \14\ 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 or 
Sub-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.
    \15\ 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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    12. 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 (``Listing Exchange''), each 
Fund will cause to be published through the NSCC the names and 
quantities of the instruments comprising the Deposit Instruments and 
the Redemption Instruments, as well as the estimated Balancing Amount 
(if any), for that day. The list of Deposit Instruments and the list of 
Redemption Instruments will apply until new lists are announced on the 
following Business Day, and there will be no intra-day changes to the 
lists except to correct errors in the published lists.
    13. The Adviser will provide full portfolio holdings disclosure on 
a daily basis on the Funds' publicly available Web site (``Web site'') 
and will develop an ``IIV File,'' which it will use to disclose the 
Funds' full portfolio holdings, including short positions. Before the 
opening of business on each Business Day, the Trust, Adviser or other 
third party, will make the IIV File available by email upon request. 
Applicants state that given either the IIV File or the Web site 
disclosure,\16\ anyone will be able to know in real time the intraday 
value of the Funds.\17\ The investment characteristics of any financial 
instruments and short positions used to achieve short and long 
exposures will be described in sufficient detail for market 
participants to understand the principal investment strategies of the 
Funds and to permit informed trading of their Shares.
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    \16\ The information on the Web site will be the same as that 
disclosed to Authorized Participants in the IIV File, except that 
(a) the information provided on the Web site will be formatted to be 
reader-friendly and (b) the portfolio holdings data on the Web site 
will be calculated and displayed on a per Fund basis, while the 
information in the IIV File will be calculated and displayed on a 
per Creation Unit basis.
    \17\ Each Listing Exchange or other major market data provider 
will disseminate, every 15 seconds during regular Exchange trading 
hours, through the facilities of the Consolidated Tape Association, 
an amount for each Fund representing the sum of (a) the estimated 
Balancing Amount and (b) the current value of the Deposit 
Instruments and any short positions, on a per individual Share 
basis.
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    14. Shares of each Fund will be listed and traded individually on 
an Exchange. It is expected that one or more member firms of an 
Exchange will be designated to act as a market maker (``Market Maker'') 
and maintain a market in Shares trading on the Exchange. Prices of 
Shares trading on an Exchange will be based on the current bid/ask 
market. Shares sold in the secondary market will be subject to 
customary brokerage commissions and charges.
    15. Applicants expect that purchasers of Creation Units will 
include institutional investors and arbitrageurs. Market Makers also 
may purchase Creation Units for use in market-making activities. 
Applicants expect that secondary market purchasers of Shares will 
include both institutional investors and retail investors.\18\ 
Applicants expect that the price at which Shares trade will be 
disciplined by arbitrage opportunities created by the option to 
continually purchase or redeem Creation Units at their NAV, which 
should ensure that Shares will not trade at a material discount or 
premium in relation to their NAV.
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    \18\ 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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    16. Shares will not be individually redeemable. To redeem, an 
investor must accumulate enough Shares to constitute a Creation Unit. 
Redemption orders must be placed by or through an Authorized 
Participant.
    17. 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.\19\ With respect to Feeder 
Funds, the Transaction Fee would be paid indirectly to the Master 
Fund.\20\
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    \19\ 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.
    \20\ 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 20,000 or more 
shares so long as it requires payment of the same Transaction Fee by 
all feeder funds for transactions involving 20,000 or more shares.
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    18. Neither the Trust nor any Fund will be advertised, 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 (``ETF''). All marketing materials that describe the 
features or method of obtaining, buying or selling Creation Units, or 
Shares traded on an Exchange, or refer to redeemability, will 
prominently disclose that Shares are not individually redeemable and 
that the owners of Shares may purchase or redeem Shares from the Fund 
in Creation Units. The same approach will be followed in the 
shareholder reports issued or circulated in connection with the Shares. 
The Funds will provide copies of their annual and semi-annual 
shareholder reports to DTC Participants for distribution to 
shareholders.
    19. Applicants also request that the order allow them to offer 
Funds for which an affiliated person of the Adviser will serve as the 
Index Provider (``Affiliated Index Fund''). The Index Provider to an 
Affiliated Index Fund (``Affiliated Index Provider'') will create a 
proprietary, rules based methodology (``Rules-Based Process'') to 
create Underlying Indexes for use by the Affiliated Index Funds and 
other investors (an ``Affiliated Index'').\21\ The Affiliated Index 
Provider, as owner of the Underlying Indexes and all related 
intellectual property related thereto, will license the use of the 
Affiliated Indexes, their names and other related intellectual property 
to the Adviser for use in connection with the Affiliated Index Funds, 
or their respective Master Funds. The licenses for the Affiliated Index 
Funds, or their respective Master Funds will state that the Adviser 
must provide the use of the Affiliated Indexes and related intellectual 
property at no cost to the Trust and the Affiliated Index Funds, or 
their respective Master Funds.
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    \21\ The Underlying Indexes may be made available to registered 
investment companies, as well as separately managed accounts of 
institutional investors and privately offered funds that are not 
deemed to be ``investment companies'' in reliance on section 3(c)(1) 
or 3(c)(7) of the Act and other pooled investment vehicles for which 
the Adviser acts as adviser or sub-adviser (``Affiliated Accounts'') 
as well as other such registered investment companies, separately 
managed accounts, privately offered funds and other pooled 
investment vehicles for which it does not act either as adviser or 
sub-adviser (``Unaffiliated Accounts''). The Affiliated Accounts and 
the Unaffiliated Accounts (collectively, ``Accounts''), like the 
Funds, would seek to track the performance of one or more Underlying 
Index(es) by investing in the constituents of such Underlying 
Index(es) or a representative sample of such constituents of the 
index. Consistent with the relief requested from section 17(a), the 
Affiliated Accounts will not engage in Creation Unit transactions 
with a Fund.
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    20. Applicants contend that the potential conflicts of interest 
arising from the fact that the Affiliated Index Provider will be an 
``affiliated person'' of the Adviser will not have any impact on the 
operation of the Affiliated Index Funds because the Affiliated Indexes 
will maintain transparency, the Affiliated Index Funds' portfolios will

[[Page 70363]]

be transparent, and the Affiliated Index Provider, the Adviser, any 
Sub-Adviser and the Affiliated Index Funds each will adopt policies and 
procedures to address any potential conflicts of interest (``Policies 
and Procedures''). The Affiliated Index Provider will publish in the 
public domain, including on its Web site and/or the Affiliated Index 
Funds' Web site, all of the rules that govern the construction and 
maintenance of each of its Affiliated Indexes. Applicants believe that 
this public disclosure will prevent the Adviser from possessing any 
advantage over other market participants by virtue of its affiliation 
with the Affiliated Index Provider, the owner of the Affiliated 
Indexes. Applicants note that the identity and weightings of the 
securities of any Affiliated Index will be readily ascertainable by any 
third party because the Rules-Based Process will be publicly available.
    21. Like other index providers, the Affiliated Index Provider may 
modify the Rules-Based Process in the future. The Rules-Based Process 
could be modified, for example, to reflect changes in the underlying 
market tracked by an Affiliated Index, the way in which the Rules-Based 
Process takes into account market events or to change the way a 
corporate action, such as a stock split, is handled. Such changes would 
not take effect until the Index Personnel (defined below) has given (a) 
the Calculation Agent (defined below) reasonable prior written notice 
of such rule changes, and (b) the investing public at least sixty (60) 
days published notice that such changes will be implemented. Affiliated 
Indexes may have reconstitution dates and rebalance dates that occur on 
a periodic basis more frequently than once yearly, but no more 
frequently than monthly.
    22. As owner of the Affiliated Indexes, the Affiliated Index 
Provider will hire a calculation agent (``Calculation Agent''). The 
Calculation Agent will determine the number, type, and weight of 
securities that will comprise each Affiliated Index, will perform all 
other calculations necessary to determine the proper make-up of the 
Affiliated Index, including the reconstitutions for such Affiliated 
Index, and will be solely responsible for all such Affiliated Index 
maintenance, calculation, dissemination and reconstitution activities. 
The Calculation Agent will not be an affiliated person, as such term is 
defined in the Act, or an affiliated person of an affiliated person, of 
the Funds, or their respective Master Funds, the Adviser, any Sub-
Adviser, any promoter of a Fund or the Distributor.
    23. The Adviser and the Affiliated Index Provider will adopt and 
implement Policies and Procedures to address any potential conflicts of 
interest. Among other things, the Policies and Procedures will be 
designed to limit or prohibit communication between employees of the 
Affiliated Index Provider and its affiliates who have responsibility 
for the Affiliated Indexes and the Rules-Based Process, as well as 
those employees of the Affiliated Index Provider and its affiliates 
appointed to assist such employees in the performance of his/her duties 
(``Index Personnel'') and other employees of the Affiliated Index 
Provider. The Index Personnel (a) will not have any responsibility for 
the management of the Affiliated Index Funds, or their respective 
Master Funds, or the Affiliated Accounts, (b) will be expressly 
prohibited from sharing this information with any employees of the 
Adviser or those of any Sub-Adviser, that have responsibility for the 
management of the Affiliated Index Funds, or their respective Master 
Funds, or any Affiliated Account until such information is publicly 
announced, and (c) will be expressly prohibited from sharing or using 
this non-public information in any way except in connection with the 
performance of their respective duties. In addition, the Adviser and 
any Sub-Adviser will adopt and implement, pursuant to rule 206(4)-7 
under the Advisers Act, written policies and procedures designed to 
prevent violations of the Advisers Act and the rules thereunder. Also, 
the Adviser has adopted a code of ethics pursuant to rule 17j-1 under 
the Act and rule 204A-1 under the Advisers Act (``Code of Ethics''). 
Any Sub-Adviser will be required to adopt a Code of Ethics and provide 
the Trust with the certification required by rule 17j-1 under the Act. 
In conclusion, applicants submit that the Affiliated Index Funds will 
operate in a manner very similar to the other index-based ETFs which 
are currently traded.

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 owner, upon 
its presentation to the issuer, is entitled to receive approximately 
his proportionate share of the issuer's current net assets, or the cash 
equivalent. Because Shares will not be individually redeemable, 
applicants request an order that would permit the Funds to register as 
open-end management investment companies and issue Shares that are 
redeemable in Creation Units only.\22\ Applicants state that investors 
may purchase Shares in Creation Units and redeem Creation Units from 
each Fund. Applicants further state that because the market price of 
Shares will be disciplined by arbitrage opportunities, investors should 
be able to buy and sell Shares in the secondary market at prices that 
do not vary materially from their NAV.
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    \22\ 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

[[Page 70364]]

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 system of 
investment company shares by eliminating price competition from non-
contract dealers offering shares at less than the published sales price 
and repurchasing shares at more than the published redemption price.
    6. Applicants believe that none of these purposes will be thwarted 
by permitting Shares to trade in the secondary market at negotiated 
prices. Applicants state that (a) secondary market trading in Shares 
does not involve Trust assets and will not result in dilution of an 
investment in Shares, and (b) to the extent different prices exist 
during a given trading day, or from day to day, such variances occur as 
a result of third party market forces, such as supply and demand. 
Therefore, applicants assert that secondary market transactions in 
Shares will not lead to discrimination or preferential treatment among 
purchasers. Finally, applicants contend that the proposed distribution 
system will be orderly because competitive forces will ensure that the 
difference between the market price of Shares and their NAV remains 
narrow.

Section 22(e)

    7. Section 22(e) of the Act generally prohibits a registered 
investment company from suspending the right of redemption or 
postponing the date of payment of redemption proceeds for more than 
seven days after the tender of a security for redemption. Applicants 
observe that the settlement of redemptions for the Foreign Funds will 
be contingent not only on the settlement cycle of the U.S. securities 
markets, but also on the delivery cycles in local markets for the 
underlying foreign securities held by the Foreign Funds. Applicants 
believe that under certain circumstances, the delivery cycles for 
transferring Portfolio Securities to redeeming investors, coupled with 
local market holiday schedules, will require a delivery process of up 
to 15 calendar days.\23\ 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 Securities of each Foreign Fund 
customarily clear and settle, but in all cases no later than 15 
calendar days following the tender of a Creation Unit.\24\ With respect 
to Future Funds that are Foreign 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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    \23\ In the past, settlement in certain countries, including 
Russia, has extended to 15 calendar days.
    \24\ Applicants acknowledge that relief obtained from the 
requirements of section 22(e) will not 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 date.
---------------------------------------------------------------------------

    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 Foreign Fund to be made within a 
maximum of 15 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 
15 calendar days. Applicants are only seeking relief from section 22(e) 
to the extent that the Foreign Funds effect creations and redemptions 
of Creation Units in-kind.\25\
---------------------------------------------------------------------------

    \25\ The requested exemption from section 22(e) would only apply 
to in-kind redemptions by the Feeder Funds and would not apply to 
in-kind redemptions by other feeder funds.
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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)

    10. 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 or any other broker or dealer from selling the investment 
company's shares to another investment company if the sale will cause 
the acquiring company to own more than 3% of the acquired company's 
voting stock, or if the sale will cause more than 10% of the acquired 
company's voting stock to be owned by investment companies generally.
    11. Applicants request an exemption to permit management investment 
companies (``Investing Management Companies'') and unit investment 
trusts (``Investing Trusts'') registered under the Act that are not 
sponsored or advised by the 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 Funds (collectively, ``Fund of 
Funds'') to acquire Shares beyond the limits of section 12(d)(1)(A). In 
addition, applicants seek relief to permit the Funds, the Distributor, 
and any broker-dealer that is registered under the Exchange Act to sell 
Shares to Fund of Funds in excess of the limits of section 12(d)(1)(B).
    12. Each Investing Management Company will be advised by an 
investment adviser within the meaning of section 2(a)(20)(A) of the Act 
(the ``Fund of Funds Adviser'') and may be sub-advised by one or more 
investment advisers within the meaning of section 2(a)(20)(B) of the 
Act (each a ``Fund of Funds Sub-Adviser''). Any Fund of Funds Adviser 
or Fund of Funds Sub-Adviser will be registered or not subject to 
registration under the Advisers Act. Each Investing Trust will have a 
sponsor (``Sponsor'').
    13. Applicants submit that the proposed conditions to the requested 
relief adequately address the concerns underlying the limits in section

[[Page 70365]]

12(d)(1)(A) and (B), which include concerns about undue influence by a 
fund of funds over underlying funds, excessive layering of fees and 
overly complex fund structures. Applicants believe that the requested 
exemption is consistent with the public interest and the protection of 
investors.
    14. Applicants believe that neither the Fund of Funds nor any Fund 
of Funds Affiliate would be able to exert undue influence over the 
Funds or any Fund Affiliates.\26\ To limit the control that a Fund of 
Funds may have over a Fund, applicants propose a condition prohibiting 
a Fund of Funds Adviser or a Sponsor, any person controlling, 
controlled by, or under common control with the Fund of Funds 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 Fund of Funds Adviser or Sponsor, or any 
person controlling, controlled by, or under common control with the 
Fund of Funds Adviser or Sponsor (``Fund of Funds' Advisory Group'') 
from controlling (individually or in the aggregate) a Fund within the 
meaning of section 2(a)(9) of the Act. The same prohibition would apply 
to any Fund of Funds Sub-Adviser, any person controlling, controlled by 
or under common control with the Fund of Funds Sub-Adviser, and any 
investment company or issuer that would be an investment company but 
for section 3(c)(1) or 3(c)(7) of the Act (or portion of such 
investment company or issuer) advised or sponsored by the Fund of Funds 
Sub-Adviser or any person controlling, controlled by or under common 
control with the Fund of Funds Sub-Adviser (``Fund of Funds Sub-
Advisory Group''). Applicants propose other conditions to limit the 
potential for undue influence over the Funds, including that no Fund of 
Funds or Fund of Funds Affiliate (except to the extent it is acting in 
its capacity as an investment adviser to a Fund) will cause a Fund to 
purchase a security in an offering of securities during the existence 
of an underwriting or selling syndicate of which a principal 
underwriter is an Underwriting Affiliate (``Affiliated Underwriting''). 
An ``Underwriting Affiliate'' is a principal underwriter in any 
underwriting or selling syndicate that is an officer, director, member 
of an advisory board, Fund of Funds Adviser, Fund of Funds Sub-Adviser, 
employee or Sponsor of the Fund of Funds, or a person of which any such 
officer, director, member of an advisory board, Fund of Funds Adviser, 
Fund of Funds Sub-Adviser, employee or Sponsor is an affiliated person 
(except that any person whose relationship to the Fund is covered by 
section 10(f) of the Act is not an Underwriting Affiliate).
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    \26\ A ``Fund of Funds Affiliate'' is the Fund of Funds Adviser, 
Fund of Funds Sub-Adviser, Sponsor, promoter, and principal 
underwriter of a Fund of Funds, and any person controlling, 
controlled by, or under common control with any of those entities. A 
``Fund Affiliate'' is the investment adviser, promoter, or principal 
underwriter of a Fund and any person controlling, controlled by or 
under common control with any of those entities.
---------------------------------------------------------------------------

    15. Applicants do not believe that the proposed arrangement 
involves excessive layering of fees. The board of directors or trustees 
of any Investing Management Company, including a majority of the 
disinterested directors or trustees, will find that the advisory fees 
charged under the contract are based on services provided that will be 
in addition to, rather than duplicative of, services provided under the 
advisory contract of any Fund (or its respective Master Fund) in which 
the Acquiring Management Company may invest. In addition, under 
condition B.5, a Fund of Funds Adviser or a Fund of Funds' trustee or 
Sponsor, as applicable, will waive fees otherwise payable to it by the 
Fund of Funds in an amount at least equal to any compensation 
(including fees received pursuant to any plan adopted by a Fund under 
rule 12b-1 under the Act) received from a Fund by the Fund of Funds 
Adviser, trustee or Sponsor or an affiliated person of the Fund of 
Funds Adviser, trustee or Sponsor, other than any advisory fees paid to 
Fund of Funds Adviser, trustee or Sponsor or its affiliated person by a 
Fund, in connection with the investment by the Fund of Funds in the 
Fund. Applicants state that any sales charges or service fees on shares 
of a Fund of Funds will not exceed the limits applicable to a fund of 
funds set forth in NASD Conduct Rule 2830.\27\
---------------------------------------------------------------------------

    \27\ 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.
---------------------------------------------------------------------------

    16. Applicants submit that the requested section 12(d)(1) relief 
addresses concerns over overly complex structures. Applicants note that 
a Fund (or its respective 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 permitted by 
exemptive relief from the Commission permitting the Fund (or its 
respective Master Fund) to purchase shares of other investment 
companies for short-term cash management purposes or pursuant to the 
Master-Feeder Relief.
    17. To ensure that a Fund of Funds is aware of the terms and 
conditions of the requested order, the Fund of Funds must enter into an 
agreement with the respective Fund (``FOF Participation Agreement''). 
The FOF Participation Agreement will include an acknowledgment from the 
Fund of Funds that it may rely on the order only to invest in the Funds 
and not in any other investment company.
    18. Applicants also note that a Fund may choose to reject a direct 
purchase of Shares by a Fund of Funds. To the extent that a Fund of 
Funds purchases Shares in the secondary market, a Fund would still 
retain its ability to reject initial purchases of Shares made in 
reliance on the requested order by declining to enter into the FOF 
Participation Agreement prior to any investment by a Fund of Funds in 
excess of the limits of section 12(d)(1)(A).
    19. Applicants also are seeking the Master-Feeder Relief to permit 
the Feeder Funds to perform creations and redemptions of Shares in-kind 
in a master-feeder structure. Applicants assert that this structure is 
substantially identical to traditional master-feeder structures 
permitted pursuant to the exception provided in section 12(d)(1)(E) of 
the Act. Section 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

    20. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an

[[Page 70366]]

affiliated person of such a person (``second-tier affiliate''), from 
selling any security or other property to or acquiring any security or 
other property from the company. Section 2(a)(3) of the Act defines 
``affiliated person'' of another person to include (a) any person 
directly or indirectly owning, controlling or holding with power to 
vote 5% or more of the outstanding voting securities of the other 
person, 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 of policies of a company. It 
also provides that a control relationship will be presumed where one 
person owns more than 25% of a company's voting securities. The Funds 
may be deemed to be controlled by 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'').
    21. Applicants request an exemption from section 17(a) of the Act 
pursuant to sections 17(b) and 6(c) of the Act to permit persons to 
effectuate in-kind purchases and redemptions with a Fund when they are 
affiliated persons or second-tier affiliates of the Fund solely by 
virtue of one or more of the following: (a) holding 5% or more, or more 
than 25%, of the outstanding Shares of one or more Funds; (b) having an 
affiliation with a person with an ownership interest described in (a); 
or (c) holding 5% or more, or more than 25%, of the shares of one or 
more Affiliated Funds.
    22. Applicants assert that no useful purpose would be served by 
prohibiting these types of affiliated persons from acquiring or 
redeeming Creation Units through in-kind transactions. Except as 
described in Section II.K.2 of the application, the Deposit Instruments 
and Redemption Instruments will be the same for all purchasers and 
redeemers regardless of the their identity. The deposit procedures for 
both in-kind purchases and in-kind redemptions of Creation Units will 
be the same for all purchases and redemptions, regardless of size or 
number. Deposit Instruments and Redemption Instruments will be valued 
in the same manner as Portfolio Securities are valued for purposes of 
calculating NAV. Applicants submit that, by using the same standards 
for valuing Portfolio Securities as are used for calculating in-kind 
redemptions or purchases, the Fund will ensure that its NAV will not be 
adversely affected by such transactions. Applicants also believe that 
in-kind purchases and redemptions will not result in self-dealing or 
overreaching of the Fund.
    23. Applicants also seek relief from section 17(a) to permit a Fund 
that is an affiliated person or second-tier affiliate of a Fund of 
Funds to sell its Shares to and redeem its Shares from a Fund of Funds, 
and to engage in the accompanying in-kind transactions with the Fund of 
Funds.\28\ Applicants state that the terms of the proposed transactions 
will be fair and reasonable and will not involve overreaching. 
Applicants note that any consideration paid by a Fund of Funds for the 
purchase or redemption of Shares directly from a Fund will be based on 
the NAV of the Fund in accordance with policies and procedures set 
forth in the Fund's registration statement.\29\ Further, as described 
in Section II.K.2 of the application, the Deposit Instruments and 
Redemption Instruments available for a Fund will be the same for all 
purchasers and redeemers, respectively and will correspond pro rata to 
the Fund's Portfolio Securities, except as described above. 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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    \28\ To the extent that purchases and sales of Shares occur in 
the secondary market and not through principal transactions directly 
between a Fund of Funds and a Fund, relief from section 17(a) would 
not be necessary. However, the requested relief would apply to 
direct sales of Shares in Creation Units by a Fund to a Fund of 
Funds and redemptions of those Shares. The requested relief also is 
intended to cover the in-kind transactions that may accompany such 
sales and redemptions. 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 
second-tier affiliate of a Fund of Funds because the Adviser 
provides investment advisory services to the Fund of Funds.
    \29\ Applicants acknowledge that receipt of compensation by (a) 
an affiliated person of a Fund of Funds, or an affiliated person of 
such person, for the purchase by the Fund of Funds of Shares or (b) 
an affiliated person of a Fund, or an affiliated person of such 
person, for the sale by the Fund of its Shares to a Fund of Funds 
may be prohibited by section 17(e)(1) of the Act. The FOF 
Participation Agreement also will include this acknowledgment.
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    24. To the extent that a Fund operates in a master-feeder 
structure, applicants also request relief permitting the Feeder Funds 
to engage in in-kind creations and redemptions with the applicable 
Master Fund. Applicants state that the customary section 17(a)(1) and 
17(a)(2) relief would not be sufficient to permit such transactions 
because the Feeder Funds and the applicable Master Fund could also be 
affiliated by virtue of having the same investment adviser. However, 
applicants believe that 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

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

A. ETF Relief

    1. The requested relief, other than the section 12(d)(1) relief and 
the section 17 relief related to a master-feeder structure, will expire 
on the effective date of any Commission rule under the Act that 
provides relief permitting the operation of index-based ETFs.
    2. As long as a Fund operates in reliance on the order, the Shares 
of such Fund will be listed on an Exchange.
    3. No Fund will be advertised or marketed as an open-end investment 
company or mutual fund. Any advertising material that describes the 
purchase or sale of Creation Units or refers to redeemability will 
prominently disclose that Shares are not individually redeemable and 
that owners of Shares may acquire those Shares from the Fund and tender 
those Shares for redemption to a Fund in Creation Units only.
    4. 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 the 
Bid/Ask Price, and a calculation of the premium or discount of the 
market closing price or Bid/Ask Price against such NAV.

B. Section 12(d)(1) Relief

    Applicants agree that any order of the Commission granting the 
requested

[[Page 70367]]

12(d)(1) relief will be subject to the following conditions:
    1. The members of a Fund of Funds' Advisory Group will not control 
(individually or in the aggregate) a Fund (or its respective Master 
Fund) within the meaning of section 2(a)(9) of the Act. The members of 
a Fund of Funds' Sub-Advisory Group will not control (individually or 
in the aggregate) a Fund (or its respective Master Fund) within the 
meaning of section 2(a)(9) of the Act. If, as a result of a decrease in 
the outstanding voting securities of a Fund, the Fund of Funds' 
Advisory Group or the Fund of Funds' Sub-Advisory Group, each in the 
aggregate, becomes a holder of more than 25 percent of the outstanding 
voting securities of a Fund, it will vote its Shares of the Fund in the 
same proportion as the vote of all other holders of the Fund's Shares. 
This condition does not apply to the Fund of Funds' Sub-Advisory Group 
with respect to a Fund (or its respective Master Fund) for which the 
Fund of Funds' Sub-Adviser or a person controlling, controlled by or 
under common control with the Fund of Funds' Sub-Adviser acts as the 
investment adviser within the meaning of section 2(a)(20)(A) of the 
Act.
    2. No Fund of Funds or Fund of Funds Affiliate will cause any 
existing or potential investment by the Fund of Funds in a Fund to 
influence the terms of any services or transactions between the Fund of 
Funds or Fund of Funds Affiliate and the Fund (or its respective Master 
Fund) or a Fund Affiliate.
    3. The board of directors or trustees of an Investing Management 
Company, including a majority of the non-interested directors or 
trustees, will adopt procedures reasonably designed to ensure that the 
Fund of Funds Adviser and Fund of Funds Sub-Adviser are conducting the 
investment program of the Investing Management Company without taking 
into account any consideration received by the Investing Management 
Company or a Fund of Funds Affiliate from a Fund (or its respective 
Master Fund) or Fund Affiliate in connection with any services or 
transactions.
    4. Once an investment by a Fund of Funds in the securities of a 
Fund exceeds the limit in section 12(d)(1)(A)(i) of the Act, the board 
of directors (``Board'') of the Fund (or its respective Master Fund), 
including a majority of the non-interested directors or trustees, will 
determine that any consideration paid by the Fund (or its respective 
Master Fund) to the Fund of Funds or a Fund of Funds Affiliate in 
connection with any services or transactions: (i) Is fair and 
reasonable in relation to the nature and quality of the services and 
benefits received by the Fund (or its respective Master Fund); (ii) is 
within the range of consideration that the Fund (or its respective 
Master Fund) would be required to pay to another unaffiliated entity in 
connection with the same services or transactions; and (iii) does not 
involve overreaching on the part of any person concerned. This 
condition does not apply with respect to any services or transactions 
between a Fund (or its respective Master Fund) and its investment 
adviser(s), or any person controlling, controlled by or under common 
control with such investment adviser(s).
    5. The Fund of Funds Adviser, or trustee or Sponsor of an Investing 
Trust, as applicable, will waive fees otherwise payable to it by the 
Fund of Funds in an amount at least equal to any compensation 
(including fees received pursuant to any plan adopted by a Fund (or its 
respective Master Fund) under rule 12b-l under the Act) received from a 
Fund (or its respective Master Fund) by the Fund of Funds Adviser, or 
trustee or Sponsor of the Investing Trust, or an affiliated person of 
the Fund of Funds Adviser, or trustee or Sponsor of the Investing 
Trust, other than any advisory fees paid to the Fund of Funds Adviser, 
Trustee or Sponsor of an Investing Trust, or its affiliated person by 
the Fund (or its respective Master Fund), in connection with the 
investment by the Fund of Funds in the Fund. Any Fund of Funds Sub-
Adviser will waive fees otherwise payable to the Fund of Funds Sub-
Adviser, directly or indirectly, by the Investing Management Company in 
an amount at least equal to any compensation received from a Fund (or 
its respective Master Fund) by the Fund of Funds Sub-Adviser, or an 
affiliated person of the Fund of Funds Sub-Adviser, other than any 
advisory fees paid to the Fund of Funds Sub-Adviser or its affiliated 
person by the Fund (or its respective Master Fund), in connection with 
the investment by the Investing Management Company in the Fund made at 
the direction of the Fund of Funds Sub-Adviser. In the event that the 
Fund of Funds Sub-Adviser waives fees, the benefit of the waiver will 
be passed through to the Investing Management Company.
    6. No Fund of Funds or Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to a Fund 
(or its respective Master Fund)) will cause a Fund (or its respective 
Master Fund) to purchase a security in any Affiliated Underwriting.
    7. The Board of a Fund (or its respective Master Fund), including a 
majority of the non-interested Board members, will adopt procedures 
reasonably designed to monitor any purchases of securities by the Fund 
(or its respective Master Fund) in an Affiliated Underwriting, once an 
investment by a Fund of Funds in the securities of the Fund exceeds the 
limit of section 12(d)(1)(A)(i) of the Act, including any purchases 
made directly from an Underwriting Affiliate. The Board will review 
these purchases periodically, but no less frequently than annually, to 
determine whether the purchases were influenced by the investment by 
the Fund of Funds in the Fund. The Board will consider, among other 
things: (i) Whether the purchases were consistent with the investment 
objectives and policies of the Fund (or its respective Master Fund); 
(ii) how the performance of securities purchased in an Affiliated 
Underwriting compares to the performance of comparable securities 
purchased during a comparable period of time in underwritings other 
than Affiliated Underwritings or to a benchmark such as a comparable 
market index; and (iii) whether the amount of securities purchased by 
the Fund (or its respective Master Fund) in Affiliated Underwritings 
and the amount purchased directly from an Underwriting Affiliate have 
changed significantly from prior years. The Board will take any 
appropriate actions based on its review, including, if appropriate, the 
institution of procedures designed to ensure that purchases of 
securities in Affiliated Underwritings are in the best interest of 
shareholders of the Fund.
    8. Each Fund (or its respective Master Fund) will maintain and 
preserve permanently in an easily accessible place a written copy of 
the procedures described in the preceding condition, and any 
modifications to such procedures, and will maintain and preserve for a 
period of not less than six years from the end of the fiscal year in 
which any purchase in an Affiliated Underwriting occurred, the first 
two years in an easily accessible place, a written record of each 
purchase of securities in Affiliated Underwritings once an investment 
by a Fund of Funds in the securities of the Fund exceeds the limit of 
section 12(d)(1)(A)(i) of the Act, setting forth from whom the 
securities were acquired, the identity of the underwriting syndicate's 
members, the terms of the purchase, and the information or materials 
upon which the Board's determinations were made.
    9. Before investing in a Fund in excess of the limits in section 
12(d)(1)(A), a Fund of Funds and the Trust will execute a FOF 
Participation

[[Page 70368]]

Agreement stating without limitation that their respective boards of 
directors or trustees and their investment advisers, or trustee and 
Sponsor, as applicable, understand the terms and conditions of the 
Order, and agree to fulfill their responsibilities under the Order. At 
the time of its investment in Shares of a Fund in excess of the limit 
in section 12(d)(1)(A)(i), a Fund of Funds will notify the Fund of the 
investment. At such time, the Fund of Funds will also transmit to the 
Fund a list of the names of each Fund of Funds Affiliate and 
Underwriting Affiliate. The Fund of Funds will notify the Fund of any 
changes to the list of the names as soon as reasonably practicable 
after a change occurs. The Fund and the Fund of Funds will maintain and 
preserve a copy of the Order, the FOF Participation Agreement, and the 
list with any updated information for the duration of the investment 
and for a period of not less than six years thereafter, the first two 
years in an easily accessible place.
    10. Before approving any advisory contract under section 15 of the 
Act, the board of directors or trustees of each Investing Management 
Company, including a majority of the non-interested directors or 
trustees, will find that the advisory fees charged under such contract 
are based on services provided that will be in addition to, rather than 
duplicative of, the services provided under the advisory contract(s) of 
any Fund (or its respective Master Fund) in which the Investing 
Management Company may invest. These findings and their basis will be 
fully recorded in the minute books of the appropriate Investing 
Management Company.
    11. Any sales charges and/or service fees charged with respect to 
shares of a Fund of Funds will not exceed the limits applicable to a 
fund of funds as set forth in NASD Conduct Rule 2830.
    12. No Fund (or its respective Master Fund) will acquire securities 
of an investment company or company relying on section 3(c)(1) or 
3(c)(7) of the Act in excess of the limits contained in section 
12(d)(1)(A) of the Act, except to the extent (i) the Fund (or its 
respective Master Fund) acquires securities of another investment 
company pursuant to exemptive relief from the Commission permitting the 
Fund (or its respective Master Fund) to acquire securities of one or 
more investment companies for short-term cash management purposes or 
(ii) the Fund acquires securities of the Master Fund pursuant to the 
Master-Feeder Relief.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-28219 Filed 11-22-13; 8:45 am]
BILLING CODE 8011-01-P