[Federal Register Volume 83, Number 36 (Thursday, February 22, 2018)]
[Notices]
[Pages 7827-7828]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03570]


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SECURITIES AND EXCHANGE COMMISSION


Investment Company Act Release No. 33005A; File No. 812-14808 
Morningstar Funds Trust, et al.; Notice of Application

February 15, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of an application for an order under section 12(d)(1)(J) of 
the Investment Company Act of 1940 (the ``Act'') for an exemption from 
sections 12(d)(1)(A), (B), and (C) of the Act and under sections 6(c) 
and 17(b) of the Act for an exemption from sections 17(a)(1) and (2) of 
the Act. The requested order would permit certain registered open-end 
investment companies to acquire shares of certain registered open-end 
investment companies (each an ``Unaffiliated Open-End Investment 
Company''), registered closed-end investment companies and ``business 
development companies,'' as defined in section 2(a)(48) of the Act 
(each registered closed-end management and each business development 
company, an ``Unaffiliated Closed-End Investment Company'' and, 
together with the Unaffiliated Open-End Investment Companies, the 
``Unaffiliated Investment Companies''), and registered unit investment 
trusts (the ``Unaffiliated Trusts,'' and together with the Unaffiliated 
Investment Companies, the ``Unaffiliated Funds'') that are within the 
same group of investment companies (collectively, the ``Affiliated 
Funds'') and outside the same group of investment companies as the 
acquiring investment companies (collectively, the Affiliated Funds and, 
together with the Unaffiliated Funds, the ``Underlying Funds''), in 
excess of the limits in section 12(d)(1) of the Act.
    Applicants: Morningstar Funds Trust, a Delaware statutory trust 
that is registered under the Act as an open-end management investment 
company and intends to introduce multiple series, and Morningstar 
Investment Management LLC, a Delaware limited liability company 
registered as an investment adviser under the Investment Advisers Act 
of 1940.
    Filing Dates: The application was filed on August 10, 2017 and 
amended on January 19, 2018.
    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 March 12, 2018 and should be accompanied by proof of 
service on the applicants, in the form of an affidavit, or, for 
lawyers, a certificate of service. Pursuant to Rule 0-5 under the Act, 
hearing requests should state the nature of the writer's interest, any 
facts bearing upon the desirability of a hearing on the matter, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE, Washington, DC 20549-1090. Applicants: Daniel Needham, 
Morningstar Investment Management LLC, 22 West Washington Street, 
Chicago, IL 60602; and Michael W. Mundt, Esq., Stradley Ronon Stevens & 
Young, LLP, 1250 Connecticut Avenue NW, Suite 500, Washington, DC 
20036.

FOR FURTHER INFORMATION CONTACT: Judy Lee, Senior Special Counsel, at 
(202) 551-6259, or Holly Hunter-Ceci, Assistant Chief Counsel, at (202) 
551-

[[Page 7828]]

6825 (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 website by searching for the file number, or for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.

Summary of the Application

    1. Applicants request an order to permit (a) a Fund \1\ (each a 
``Fund of Funds'') to acquire shares of Underlying Funds \2\ in excess 
of the limits in sections 12(d)(1)(A) and (C) of the Act and (b) the 
Underlying Funds that are registered open-end investment companies or 
series thereof, their principal underwriters and any broker or dealer 
registered under the Securities Exchange Act of 1934 to sell shares of 
the Underlying Fund to the Fund of Funds in excess of the limits in 
section 12(d)(1)(B) of the Act.\3\ Applicants also request an order of 
exemption under sections 6(c) and 17(b) of the Act from the prohibition 
on certain affiliated transactions in section 17(a) of the Act to the 
extent necessary to permit the Underlying Funds to sell their shares 
to, and redeem their shares from, the Funds of Funds.\4\ Applicants 
state that such transactions will be consistent with the policies of 
each Fund of Funds and each Underlying Fund and with the general 
purposes of the Act and will be based on the net asset values of the 
Underlying Funds.
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    \1\ Applicants request that the order apply to each existing and 
future series of Morningstar Funds Trust and to each existing and 
future registered open-end investment company or series thereof that 
is advised by Morningstar Investment Management LLC or its successor 
or by any other investment adviser controlling, controlled by or 
under common control with Morningstar Investment Management LLC or 
its successor and is part of the same ``group of investment 
companies'' as Morningstar Funds Trust (each, a ``Fund''). For 
purposes of the requested order, ``successor'' is limited to an 
entity that results from a reorganization into another jurisdiction 
or a change in the type of business organization. For purposes of 
the request for relief, the term ``group of investment companies'' 
means any two or more registered investment companies, including 
closed-end investment companies and business development companies, 
that hold themselves out to investors as related companies for 
purposes of investment and investor services.
    \2\ Certain of the Underlying Funds have obtained exemptions 
from the Commission necessary to permit their shares to be listed 
and traded on a national securities exchange at negotiated prices 
and, accordingly, to operate as an exchange-traded fund (``ETF'').
    \3\ Applicants do not request relief for Funds of Funds to 
invest in reliance on the order in business development companies 
and registered closed-end investment companies that are not listed 
and traded on a national securities exchange.
    \4\ A Fund of Funds generally would purchase and sell shares of 
an Underlying Fund that operates as an ETF or closed-end fund 
through secondary market transactions rather than through principal 
transactions with the Underlying Fund. Applicants nevertheless 
request relief from sections 17(a)(1) and (2) to permit each ETF or 
Unaffiliated Closed-End Investment Company that is an affiliated 
person, or an affiliated person of an affiliated person, as defined 
in section 2(a)(3) of the 1940 Act, of a Fund of Funds to sell 
shares to or redeem shares from the Fund of Funds. This includes, in 
the case of sales and redemptions of shares of ETFs, the in-kind 
transactions that accompany such sales and redemptions. The 
Applicants are not seeking relief from section 17(a) for, and the 
requested relief will not apply to, transactions where an ETF, 
business development company, or closed-end fund could be deemed an 
affiliated person, or an affiliated person of an affiliated person, 
of a Fund of Funds because an investment adviser to the ETF, 
business development company, or closed-end fund or an entity 
controlling, controlled by or under common control with the 
investment adviser to the ETF, business development company, or 
closed-end fund, is also an investment adviser to the Fund of Funds.
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    2. Applicants agree that any order granting the requested relief 
will be subject to the terms and conditions stated in the application. 
Such terms and conditions are designed to, among other things, help 
prevent any potential (i) undue influence over an Underlying Fund that 
is not in the same ``group of investment companies'' as the Fund of 
Funds through control or voting power, or in connection with certain 
services, transactions, and underwritings, (ii) excessive layering of 
fees, and (iii) overly complex fund structures, which are the concerns 
underlying the limits in sections 12(d)(1)(A), (B), and (C) of the Act.
    3. 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. Section 17(b) of the Act authorizes the 
Commission to grant an order permitting a transaction otherwise 
prohibited by section 17(a) if it finds that (a) the terms of the 
proposed transaction are fair and reasonable and do not involve 
overreaching on the part of any person concerned; (b) the proposed 
transaction is consistent with the policies of each registered 
investment company involved; and (c) the proposed transaction is 
consistent with the general purposes of the Act. Section 6(c) of the 
Act permits the Commission to exempt any persons or transactions from 
any provision of the Act if 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.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-03570 Filed 2-21-18; 8:45 am]
 BILLING CODE 8011-01-P