[Federal Register Volume 80, Number 22 (Tuesday, February 3, 2015)]
[Notices]
[Pages 5825-5834]
[FR Doc No: 2015-02064]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31433; 812-14398]

Diamond Hill Capital Management, Inc., et al.; Notice of
Application

January 28, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').

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

-----------------------------------------------------------------------

SUMMARY: Summary of Application: Applicants request an order that would
permit (a) series of certain open-end management investment companies
to issue shares (``Shares'') redeemable in large aggregations only
(``Creation Units''); (b) secondary market transactions in Shares to
occur at negotiated market prices rather than at net asset value
(``NAV''); (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; and (e) certain
registered management investment companies and unit investment trusts
outside of the same group of investment companies as the series to
acquire Shares.

APPLICANTS: Diamond Hill Capital Management, Inc. (``Diamond Hill''),
ETF Series Solutions (``Trust'') and Quasar Distributors, LLC
(``Quasar'').

FILING DATES: The application was filed on December 10, 2014, and
amended on January 16, 2015.

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 February 23, 2015, and should be accompanied by proof of
service on 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, Securities and Exchange Commission, 100 F Street
NE., Washington, DC 20549-1090; Applicants: Diamond Hill, 325 John H.
McConnell Blvd., Suite 200, Columbus, Ohio 43215; The Trust and Quasar,
615 East Michigan Street, 4th Floor, Milwaukee, Wisconsin 53202.

FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at
(202) 551-6826, or David P. Bartels, Branch Chief, at<PHONE_NUMBER>
(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 for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling<PHONE_NUMBER>.

Applicants' Representations

    1. The Trust is a Delaware statutory trust and is registered under
the Act as an open-end management investment company with multiple
series. Each series will operate as an exchange traded fund (``ETF'').
    2. Diamond Hill will be the investment adviser to the new series of
the Trust (``Initial Fund''). Each Adviser (as defined below) will be
registered as an investment adviser under the Investment Advisers Act
of 1940 (``Advisers Act''). The Adviser may enter into sub-advisory
agreements with one or more investment advisers to act as sub-advisers
to particular Funds (each, a ``Sub-Adviser''). Any Sub-Adviser will
either be registered under the Advisers Act or will not be required to
register thereunder.
    3. The Trust will enter into a distribution agreement with one or
more distributors. Each distributor for a Fund will be a broker-dealer
(``Broker'') registered under the Securities Exchange Act of 1934
(``Exchange Act'') and will act as distributor and principal
underwriter (``Distributor'') for one or more of the Funds. No
Distributor will be affiliated with any national securities exchange,
as defined in Section 2(a)(26) of the Act (``Exchange''). The
Distributor for each Fund will comply with the terms and conditions of
the requested order. Quasar, a Delaware limited liability company and
broker-dealer registered under the Exchange Act, will act as the
initial Distributor of the Funds.
    4. Applicants request that the order apply to the Initial Fund and
any additional series of the Trust, and any other open-end management
investment company or series thereof, that may be created in the future
(``Future Funds'' and together with the Initial Fund, ``Funds''), each
of which will operate as an ETF and will track a specified index
comprised of domestic or foreign equity and/or fixed income securities
(each, an ``Underlying Index''). Any Future Fund will (a) be advised by
Diamond Hill or an entity controlling, controlled by, or under common
control with Diamond Hill (each, an ``Adviser'') and (b) comply with
the terms and conditions of the application.\1\
---------------------------------------------------------------------------

    \1\ All existing entities that intend to rely on the requested
order have been named as applicants. Any other existing or future
entity that subsequently relies on the order will comply with the
terms and conditions of the order. A Fund of Funds (as defined
below) may rely on the order only to invest in Funds and not in any
other registered investment company.
---------------------------------------------------------------------------

    5. Each Fund will hold certain securities, currencies, other
assets, and other investment positions (``Portfolio Holdings'')
selected to correspond generally to the performance of its Underlying
Index. The Underlying Indexes will be comprised solely of equity and/or
fixed income securities issued by one or more of the following
categories of issuers: (i) Domestic issuers and (ii) non-domestic
issuers meeting the requirements for trading in U.S. markets. Other
Funds will be based on Underlying Indexes that will be comprised solely
of foreign and domestic, or solely foreign, equity and/or fixed income
securities (``Foreign Funds'').
    6. Applicants represent that each Fund will invest at least 80% of
its assets (excluding securities lending collateral) in the component
securities of its respective Underlying Index (``Component
Securities'') and TBA Transactions,\2\ and in the case of Foreign
Funds, Component Securities and Depositary Receipts \3\ representing
Component Securities. Each Fund may also invest up to 20% of its assets
in certain index futures, options, options on index futures, swap
contracts or other derivatives, as related to its respective Underlying
Index and its Component Securities, cash and cash equivalents, other
investment companies, as well as in securities and other instruments
not included in its Underlying Index but which the Adviser believes
will help the Fund track its Underlying Index. A Fund may also engage
in short sales in accordance with its investment objective.
---------------------------------------------------------------------------

    \2\ A ``to-be-announced transaction'' or ``TBA Transaction'' is
a method of trading mortgage-backed securities. In a TBA
Transaction, the buyer and seller agree upon general trade
parameters such as agency, settlement date, par amount and price.
The actual pools delivered generally are determined two days prior
to settlement date.
    \3\ Depositary receipts representing foreign securities
(``Depositary Receipts'') include American Depositary Receipts and
Global Depositary Receipts. The Funds may invest in Depositary
Receipts representing foreign securities in which they seek to
invest. Depositary Receipts are typically issued by a financial
institution (a ``depositary bank'') and evidence ownership interests
in a security or a pool of securities that have been deposited with
the depositary bank. A Fund will not invest in any Depositary
Receipts that the Adviser or any Sub-Adviser deems to be illiquid or
for which pricing information is not readily available. No
affiliated person of a Fund, the Adviser or any Sub-Adviser will
serve as the depositary bank for any Depositary Receipts held by a
Fund.
---------------------------------------------------------------------------

    7. Each Trust may issue Funds that seek to track Underlying Indexes
constructed using 130/30 investment strategies (``130/30 Funds'') or
other long/short investment strategies (``Long/Short Funds''). Each
Long/Short Fund will establish (i) exposures equal to approximately
100% of the long positions specified by the Long/Short Index \4\ and
(ii) exposures equal to approximately 100% of the short positions
specified by the Long/Short Index. Each 130/30 Fund will include
strategies that: (i) Establish long positions in securities so that
total long exposure represents approximately 130% of a Fund's net
assets; and (ii) simultaneously establish short positions in other
securities so that total short exposure represents approximately 30% of
such Fund's net assets. Each Business Day, for each Long/Short Fund and
130/30 Fund, the Adviser will provide full portfolio transparency on
the Fund's publicly available Web site (``Web site'') by making
available the Fund's Portfolio

Holdings (defined below) before the commencement of trading of Shares
on the Listing Exchange (defined below).\5\ The information provided on
the Web site will be formatted to be reader-friendly.
---------------------------------------------------------------------------

    \4\ Underlying Indexes that include both long and short
positions in securities are referred to as ``Long/Short Indexes.''
    \5\ Under accounting procedures followed by each Fund, trades
made on the prior Business Day (``T'') will be booked and reflected
in NAV on the current Business Day (T+1). 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.
---------------------------------------------------------------------------

    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 the Component Securities of its
Underlying Index in the same approximate proportions as in such
Underlying Index. A Fund using a representative sampling strategy will
hold some, but not necessarily all of the Component Securities of its
Underlying Index. Applicants state that a Fund using a representative
sampling strategy will not be expected to track the performance of its
Underlying Index with the same degree of accuracy as would an
investment vehicle that invested in every Component Security of the
Underlying Index with the same weighting as 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%.
    9. Each Fund will be entitled to use its Underlying Index pursuant
to either a licensing agreement with the entity that compiles, creates,
sponsors or maintains the Underlying Index (each, an ``Index
Provider'') or a sub-licensing arrangement with the Adviser, which will
have a licensing agreement with such Index Provider.\6\ A ``Self-
Indexing Fund'' is a Fund for which an affiliated person, as defined in
section 2(a)(3) of the Act (``Affiliated Person''), or an affiliated
person of an Affiliated Person (``Second-Tier Affiliate''), of the
Trust or a Fund, of the Adviser, of any Sub-Adviser to or promoter of a
Fund, or of the Distributor (each, an ``Affiliated Index Provider'')
will serve as the Index Provider. In the case of Self-Indexing Funds,
an Affiliated Index Provider will create a proprietary, rules-based
methodology to create Underlying Indexes (each an ``Affiliated
Index'').\7 \Except with respect to the Self-Indexing Funds, no Index
Provider is or will be an Affiliated Person, or a Second-Tier
Affiliate, of a Trust or a Fund, of the Adviser, of any Sub-Adviser to
or promoter of a Fund, or of the Distributor.
---------------------------------------------------------------------------

    \6\ The licenses for the Self-Indexing Funds will specifically
state that the Affiliated Index Provider (as defined below), or in
case of a sub-licensing agreement, the Adviser, must provide the use
of the Affiliated Indexes (as defined below) and related
intellectual property at no cost to the Trust and the Self-Indexing
Funds.
    \7\ The Affiliated 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 for which the Adviser acts as adviser or
subadviser (``Affiliated Accounts'') as well as other such
registered investment companies, separately managed accounts and
privately offered funds for which it does not act either as adviser
or subadviser (``Unaffiliated Accounts''). The Affiliated Accounts
and the Unaffiliated 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 Indexes or a representative
sample of such constituents of the Underlying Index. Consistent with
the relief requested from section 17(a), the Affiliated Accounts
will not engage in Creation Unit transactions with a Fund.
---------------------------------------------------------------------------

    10. Applicants recognize that Self-Indexing Funds could raise
concerns regarding the ability of the Affiliated Index Provider to
manipulate the Underlying Index to the benefit or detriment of the
Self-Indexing Fund. Applicants further recognize the potential for
conflicts that may arise with respect to the personal trading activity
of personnel of the Affiliated Index Provider who have knowledge of
changes to an Underlying Index prior to the time that information is
publicly disseminated.
    11. Applicants propose that each Self-Indexing Fund will post on
its Web site, on each day the Fund is open, including any day when it
satisfies redemption requests as required by Section 22(e) of the Act
(a ``Business Day''), before commencement of trading of Shares on the
Listing Exchange, the identities and quantities of the Portfolio
Holdings that will form the basis for the Fund's calculation of its NAV
at the end of the Business Day. Applicants believe that requiring Self-
Indexing Funds to maintain full portfolio transparency will also
provide an additional mechanism for addressing any such potential
conflicts of interest.
    12. In addition, Applicants do not believe the potential for
conflicts of interest raised by the Adviser's use of the Underlying
Indexes in connection with the management of the Self Indexing Funds
and the Affiliated Accounts will be substantially different from the
potential conflicts presented by an adviser managing two or more
registered funds. Both the Act and the Advisers Act contain various
protections to address conflicts of interest where an adviser is
managing two or more registered funds and these protections will also
help address these conflicts with respect to the Self-Indexing
Funds.\8\
---------------------------------------------------------------------------

    \8\ See, e.g., Rule 17j-1 under the Act and Section 204A under
the Advisers Act and Rules 204A-1 and 206(4)-7 under the Advisers
Act.
---------------------------------------------------------------------------

    13. Each Adviser and any Sub-Adviser has adopted or will adopt,
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. These include policies and procedures designed to
minimize potential conflicts of interest among the Self-Indexing Funds
and the Affiliated Accounts, such as cross trading policies, as well as
those designed to ensure the equitable allocation of portfolio
transactions and brokerage commissions. In addition, Diamond Hill will
adopt policies and procedures as required under section 204A of the
Advisers Act, which are reasonably designed in light of the nature of
its business to prevent the misuse, in violation of the Advisers Act or
the Exchange Act or the rules thereunder, of material non-public
information by the ETS Securities or an associated person (``Inside
Information Policy''). Any other Adviser or Sub-Adviser will be
required to adopt and maintain a similar Inside Information Policy. In
accordance with the Code of Ethics \9\ and Inside Information Policy of
the Adviser and any Sub-Adviser, personnel of those entities with
knowledge about the composition of the Portfolio Deposit \10\ will be
prohibited from disclosing such information to any other person, except
as authorized in the course of their employment, until such information
is made public. In addition, an Index Provider will not provide any
information relating to changes to an Underlying Index's methodology
for the inclusion of component securities, the inclusion or exclusion
of specific component securities, or methodology for the calculation or
the return of component securities, in advance of a public announcement
of such changes by the Index Provider.\11\ The Adviser

will also include under Item 10.C of Part 2 of its Form ADV a
discussion of its relationship to any Affiliated Index Provider and any
material conflicts of interest resulting therefrom, regardless of
whether the Affiliated Index Provider is a type of affiliate specified
in Item 10.
---------------------------------------------------------------------------

    \9\ The Adviser has also adopted or will adopt a code of ethics
pursuant to Rule 17j-1 under the Act and Rule 204A-1 under the
Advisers Act, which contains provisions reasonably necessary to
prevent Access Persons (as defined in Rule 17j-1) from engaging in
any conduct prohibited in Rule 17j-1 (``Code of Ethics'').
    \10\ The instruments and cash that the purchaser is required to
deliver in exchange for the Creation Units it is purchasing are
referred to as the ``Portfolio Deposit.''
    \11\ In the event that an Adviser or Sub-Adviser serves as the
Affiliated Index Provider for a Self-Indexing Fund, the terms
``Affiliated Index Provider'' or ``Index Provider,'' with respect to
that Self-Indexing Fund, will be limited to the employees of the
applicable Adviser or Sub-Adviser that are responsible for creating,
compiling and maintaining the relevant Underlying Index.
---------------------------------------------------------------------------

    14. To the extent the Self-Indexing Funds transact with an
Affiliated Person of the Adviser or Sub-Adviser, such transactions will
comply with the Act, the rules thereunder and the terms and conditions
of the requested order. In this regard, each Self-Indexing Fund's board
of directors or trustees (``Board'') will periodically review the Self-
Indexing Fund's use of an Affiliated Index Provider. Subject to the
approval of the Self-Indexing Fund's Board, the Adviser, Affiliated
Persons of the Adviser (``Adviser Affiliates'') and Affiliated Persons
of any Sub-Adviser (``Sub-Adviser Affiliates'') may be authorized to
provide custody, fund accounting and administration and transfer agency
services to the Self-Indexing Funds. Any services provided by the
Adviser, Adviser Affiliates, Sub-Adviser and Sub-Adviser Affiliates
will be performed in accordance with the provisions of the Act, the
rules under the Act and any relevant guidelines from the staff of the
Commission. Applications for prior orders granted to Self-Indexing
Funds have received relief to operate such funds on the basis discussed
above.\12\
---------------------------------------------------------------------------

    \12\ See, e.g., Emerging Global Advisors, LLC, et al.,
Investment Company Act Release Nos. 30910 (February 10, 2014)
(notice) and 30975 (March 7, 2014) (order); VTL Associates, LLC, et
al., Investment Company Act Release Nos. 30815 (December 2, 2013)
(notice) and 30849 (December 30, 2013) (order); Horizons ETFs
Management (USA) LLC and Horizons ETF Trust, Investment Company Act
Release Nos. 30803 (November 21, 2013) (notice) and 30833 (December
17, 2013) (order).
---------------------------------------------------------------------------

    15. The Shares of each Fund 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'').\13\ 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 (as
defined below). In addition, the Deposit Instruments and the Redemption
Instruments will each correspond pro rata to the positions in the
Fund's portfolio (including cash positions) \14\ 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; \15\ (c)
TBA Transactions, short positions, derivatives and other positions that
cannot be transferred in kind \16\ will be excluded from the Deposit
Instruments and the Redemption Instruments; \17\(d) to the extent the
Fund determines, on a given Business Day, to use a representative
sampling of the Fund's portfolio; \18\ 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 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 ``Cash Amount'').
---------------------------------------------------------------------------

    \13\ 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.
    \14\ The portfolio used for this purpose will be the same
portfolio used to calculate the Fund's NAV for the Business Day.
    \15\ A tradeable round lot for a security will be the standard
unit of trading in that particular type of security in its primary
market.
    \16\ 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.
    \17\ Because these instruments will be excluded from the Deposit
Instruments and the Redemption Instruments, their value will be
reflected in the determination of the Cash Amount (as defined
below).
    \18\ A Fund may only use sampling for this purpose if the
sample: (i) Is designed to generate performance that is highly
correlated to the performance of the Fund's portfolio; (ii) consists
entirely of instruments that are already included in the Fund's
portfolio; and (iii) is the same for all Authorized Participants on
a given Business Day.
---------------------------------------------------------------------------

    16. 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; (b)
if, on a given Business Day, the Fund announces before the open of
trading that all purchases, all redemptions or all purchases and
redemptions on that day will be made entirely in cash; (c) if, upon
receiving a purchase or redemption order from an Authorized
Participant, the Fund determines to require the purchase or redemption,
as applicable, to be made entirely in cash; \19\ (d) if, on a given
Business Day, the Fund requires all Authorized Participants purchasing
or redeeming Shares on that day to deposit or receive (as applicable)
cash in lieu of some or all of the Deposit Instruments or Redemption
Instruments, respectively, solely because: (i) Such instruments are not
eligible for transfer through either the NSCC or DTC (defined below);
or (ii) in the case of Foreign Funds holding non-U.S. investments, such
instruments are not eligible for trading due to local trading
restrictions, local restrictions on securities transfers or other
similar circumstances; or (e) if the Fund permits an Authorized
Participant to deposit or receive (as applicable) cash in lieu of some
or all of the Deposit 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 Foreign Fund holding non-
U.S. investments would be subject to unfavorable income tax treatment
if the holder receives redemption proceeds in kind.\20\
---------------------------------------------------------------------------

    \19\ In determining whether a particular Fund will sell or
redeem Creation Units entirely on a cash or in-kind basis (whether
for a given day or a given order), the key consideration will be the
benefit that would accrue to the Fund and its investors. For
instance, in bond transactions, the Adviser may be able to obtain
better execution than Share purchasers because of the Adviser's
size, experience and potentially stronger relationships in the fixed
income markets. Purchases of Creation Units either on an all cash
basis or in-kind are expected to be neutral to the Funds from a tax
perspective. In contrast, cash redemptions typically require selling
portfolio holdings, which may result in adverse tax consequences for
the remaining Fund shareholders that would not occur with an in-kind
redemption. As a result, tax consideration may warrant in-kind
redemptions.
    \20\ 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).
---------------------------------------------------------------------------

    17. Creation Units will consist of specified large aggregations of
Shares (e.g., 25,000 Shares) as determined by the Adviser, and it is
expected that the initial price of a Creation Unit will range from $1
million to $10 million.

All orders to purchase Creation Units must be placed with the
Distributor by or through an ``Authorized Participant'' which is either
(1) a ``Participating Party,'' i.e., a Broker or other participant in
the Continuous Net Settlement System of the NSCC, a clearing agency
registered with the Commission, or (2) a participant in The Depository
Trust Company (``DTC'') (``DTC Participant''), which, in either case,
has signed a participant agreement with the Distributor. The
Distributor will be responsible for transmitting the orders to the
Funds and will furnish to those placing such orders confirmation that
the orders have been accepted, but applicants state that the
Distributor may reject any order which is not submitted in proper form.
    18. Each Business Day, before the open of trading on the Exchange
on which Shares are primarily 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 Cash Amount (if any), for that
day. The list of Deposit Instruments and Redemption Instruments will
apply until a new list is announced on the following Business Day, and
there will be no intra-day changes to the list except to correct errors
in the published list. Each Listing Exchange will disseminate, every 15
seconds during regular Exchange trading hours, through the facilities
of the Consolidated Tape Association, an amount for each Fund stated on
a per individual Share basis representing the sum of (i) the estimated
Cash Amount and (ii) the current value of the Deposit Instruments.
    19. Transaction expenses, including operational processing and
brokerage costs, will be incurred by a Fund when investors purchase or
redeem Creation Units in-kind and such costs have the potential to
dilute the interests of the Fund's existing shareholders. Each Fund
will impose purchase or redemption transaction fees (``Transaction
Fees'') in connection with effecting such purchases or redemptions of
Creation Units. In all cases, such Transaction Fees will be limited in
accordance with requirements of the Commission applicable to management
investment companies offering redeemable securities. Since the
Transaction Fees are intended to defray the transaction expenses as
well as to prevent possible shareholder dilution resulting from the
purchase or redemption of Creation Units, the Transaction Fees will be
borne only by such purchasers or redeemers.\21\ The Distributor will be
responsible for delivering the Fund's prospectus to those persons
acquiring Shares in 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.
---------------------------------------------------------------------------

    \21\ Where a Fund permits an in-kind purchaser to substitute
cash-in-lieu of depositing one or more of the requisite Deposit
Instruments, the purchaser may be assessed a higher Transaction Fee
to cover the cost of purchasing such Deposit Instruments.
---------------------------------------------------------------------------

    20. 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 (each, a ``Market
Maker'') and maintain a market for Shares trading on the Exchange.
Prices of Shares trading on an Exchange will be based on the current
bid/offer market. Transactions involving the sale of Shares on an
Exchange will be subject to customary brokerage commissions and
charges.
    21. Applicants expect that purchasers of Creation Units will
include institutional investors and arbitrageurs. Market Makers, acting
in their roles to provide a fair and orderly secondary market for the
Shares, may from time to time find it appropriate to purchase or redeem
Creation Units. Applicants expect that secondary market purchasers of
Shares will include both institutional and retail investors.\22\ The
price at which Shares trade will be disciplined by arbitrage
opportunities created by the option continually to purchase or redeem
Shares in Creation Units, which should help prevent Shares from trading
at a material discount or premium in relation to their NAV.
---------------------------------------------------------------------------

    \22\ 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 the DTC Participants.
---------------------------------------------------------------------------

    22. Shares will not be individually redeemable, and owners of
Shares may acquire those Shares from the Fund, or tender such Shares
for redemption to the Fund, in Creation Units only. To redeem, an
investor must accumulate enough Shares to constitute a Creation Unit.
Redemption requests must be placed through an Authorized Participant. A
redeeming investor may pay a Transaction Fee, calculated in the same
manner as a Transaction Fee payable in connection with purchases of
Creation Units.
    23. Neither the Trust nor any Fund will be advertised or marketed
or otherwise held out as a traditional open-end investment company or a
``mutual fund.'' Instead, each such Fund will be marketed as an
``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 will disclose that the
owners of Shares may acquire those Shares from the Fund or tender such
Shares for redemption to the Fund in Creation Units only. The Funds
will provide copies of their annual and semi-annual shareholder reports
to DTC Participants for distribution to beneficial owners of Shares.

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 section 12(d)(1)(J) of the Act for
an exemption from sections 12(d)(1)(A) and (B) of the Act, and 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.
    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 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 that would permit the Funds to
register as open-end management investment companies and issue Shares
that are redeemable in Creation Units only. Applicants state that
investors may purchase Shares in Creation Units and redeem Creation
Units from each Fund. Applicants further state that because Creation
Units may always be purchased and redeemed at NAV, the price of Shares
on the secondary market should not vary materially from NAV.

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

    4. Section 22(d) of the Act, among other things, prohibits a dealer
from selling a redeemable security that is currently being offered to
the public by or through an underwriter, except at a current public
offering price described in the prospectus. Rule 22c-1 under the Act
generally requires that a dealer selling, redeeming or repurchasing a
redeemable security do so only at a price based on its NAV. Applicants
state that secondary market trading in Shares will take place at
negotiated prices, not at a current offering price described in a
Fund's prospectus, and not at a price based on NAV. Thus, purchases and
sales of Shares in the secondary market will not comply with section
22(d) of the Act and rule 22c-1 under the Act. Applicants request an
exemption under section 6(c) from these provisions.
    5. Applicants assert that the concerns sought to be addressed by
section 22(d) of the Act and rule 22c-1 under the Act with respect to
pricing are equally satisfied by the proposed method of pricing Shares.
Applicants maintain that while there is little legislative history
regarding section 22(d), its provisions, as well as those of rule 22c-
1, appear to have been designed to (a) prevent dilution caused by
certain riskless-trading schemes by principal underwriters and contract
dealers, (b) prevent unjust discrimination or preferential treatment
among buyers, and (c) ensure an orderly distribution of investment
company shares by eliminating price competition from 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 a Fund as a party 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 price at which Shares
trade will be disciplined by arbitrage opportunities created by the
option continually to purchase or redeem Shares in Creation Units,
which should help prevent Shares from trading at a material discount or
premium in relation to their NAV.

Section 22(e)

    7. Section 22(e) of the Act generally prohibits a registered
investment company from suspending the right of redemption or
postponing the date of payment of redemption proceeds for more than
seven days after the tender of a security for redemption. Applicants
state that settlement of redemptions for Foreign Funds will be
contingent not only on the settlement cycle of the United States
market, but also on current delivery cycles in local markets for
underlying foreign securities held by a Foreign Fund. Applicants state
that the delivery cycles currently practicable for transferring
Redemption Instruments to redeeming investors, coupled with local
market holiday schedules, may require a delivery process of up to
fourteen (14) calendar days. Accordingly, with respect to Foreign Funds
only, applicants hereby request relief under section 6(c) from the
requirement imposed by section 22(e) to allow Foreign Funds to pay
redemption proceeds within fourteen calendar days following the tender
of Creation Units for redemption.\23\
---------------------------------------------------------------------------

    \23\ Applicants acknowledge that no relief obtained from the
requirements of section 22(e) will affect any obligations Applicants
may otherwise have under rule 15c6-1 under the Exchange Act
requiring that most securities transactions be settled within three
business days of the trade date.
---------------------------------------------------------------------------

    8. Applicants believe that Congress adopted section 22(e) to
prevent unreasonable, undisclosed or unforeseen delays in the actual
payment of redemption proceeds. Applicants propose that allowing
redemption payments for Creation Units of a Foreign Fund to be made
within fourteen calendar days would not be inconsistent with the spirit
and intent of section 22(e). Applicants suggest that a redemption
payment occurring within fourteen calendar days following a redemption
request would adequately afford investor protection.
    9. Applicants are not seeking relief from section 22(e) with
respect to Foreign Funds that do not effect creations and redemptions
of Creation Units in-kind.

Section 12(d)(1)

    10. Section 12(d)(1)(A) of the Act prohibits a registered
investment company from acquiring securities of an investment company
if such securities represent more than 3% of the total outstanding
voting stock of the acquired company, more than 5% of the total assets
of the acquiring company, or, together with the securities of any other
investment companies, more than 10% of the total assets of the
acquiring company. Section 12(d)(1)(B) of the Act prohibits a
registered open-end investment company, its principal underwriter and
any other broker-dealer from knowingly 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 registered management
investment companies and unit investment trusts (``UITs'') that are not
advised or sponsored by the Adviser, and not part of the same ``group
of investment companies,'' as defined in section 12(d)(1)(G)(ii) of the
Act as the Funds (such management investment companies are referred to
as ``Investing Management Companies,'' such UITs are referred to as
``Investing Trusts,'' and Investing Management Companies and Investing
Trusts are collectively referred to as ``Funds of Funds''), to acquire
Shares beyond the limits of section 12(d)(1)(A) of the Act; and the
Funds, and any principal underwriter for the Funds, and/or any Broker
registered under the Exchange Act, to sell Shares to Funds of Funds
beyond the limits of section 12(d)(1)(B) of the Act.
    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 investment
advisers within the meaning of section 2(a)(20)(B) of the Act (each, a
``Fund of

Funds Sub-Adviser''). Any investment adviser to an Investing Management
Company will be registered under the Advisers Act. Each Investing Trust
will be sponsored by a sponsor (``Sponsor'').
    13. Applicants submit that the proposed conditions to the requested
relief adequately address the concerns underlying the limits in
sections 12(d)(1)(A) and (B), which include concerns about undue
influence by a fund of funds over underlying funds, excessive layering
of fees and overly complex fund structures. Applicants believe that the
requested exemption is consistent with the public interest and the
protection of investors.
    14. Applicants believe that neither a Fund of Funds nor a Fund of
Funds Affiliate would be able to exert undue influence over a Fund.\24\
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
Sponsor, any person controlling, controlled by, or under common control
with a Fund of Funds Adviser or Sponsor, and any investment company and
any issuer that would be an investment company but for sections 3(c)(1)
or 3(c)(7) of the Act that is advised or sponsored by a Fund of Funds
Adviser or Sponsor, or any person controlling, controlled by, or under
common control with a 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 sections 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'').
---------------------------------------------------------------------------

    \24\ A ``Fund of Funds Affiliate'' is a 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 an investment adviser, promoter, or principal
underwriter of a Fund and any person controlling, controlled by or
under common control with any of these entities.
---------------------------------------------------------------------------

    15. 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
or 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).
    16. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. The board of directors or trustees
of any Investing Management Company, including a majority of the
directors or trustees who are not ``interested persons'' within the
meaning of section 2(a)(19) of the Act (``disinterested directors or
trustees''), will find that the advisory fees charged 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 in which the Investing 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 the 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
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.\25\
---------------------------------------------------------------------------

    \25\ Any references to NASD Conduct Rule 2830 include any
successor or replacement FINRA rule to NASD Conduct Rule 2830.
---------------------------------------------------------------------------

    17. Applicants submit that the proposed arrangement will not create
an overly complex fund structure. Applicants note that no Fund will
acquire securities of any investment company or company relying on
section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except to the extent permitted by
exemptive relief from the Commission permitting the Fund to purchase
shares of other investment companies for short-term cash management
purposes. To ensure a Fund of Funds is aware of the terms and
conditions of the requested order, the Fund of Funds will enter into an
agreement with the Fund (``FOF Participation Agreement''). The FOF
Participation Agreement will include an acknowledgement 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 in Creation Units 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 any initial investment by a
Fund of Funds in excess of the limits of section 12(d)(1)(A) by
declining to enter into a FOF Participation Agreement with the Fund of
Funds.

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

    19. Sections 17(a)(1) and (2) of the Act generally prohibit an
affiliated person of a registered investment company, or an affiliated
person of such a person, from selling any security to or purchasing any
security 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, (b) any person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held with
the power to vote by the other person, and (c) any person directly or
indirectly controlling, controlled by or under common control with the
other person. Section 2(a)(9) of the Act defines ``control'' as the
power to exercise a controlling influence over the management or
policies of a company, and provides that a control relationship will be
presumed where one person owns more than 25% of a company's voting
securities. The Funds may be deemed to be controlled by the Adviser or
an entity controlling, controlled by or under common control with 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 an Adviser
or an entity controlling, controlled by or under common control with an
Adviser (an ``Affiliated Fund''). Any investor, including Market
Makers, owning 5% or holding in excess of 25% of the Trust or such
Funds, may be deemed affiliated persons of the Trust or such Funds. In
addition, an investor could own 5% or more, or in excess of 25% of the
outstanding shares of one or more Affiliated Funds making that investor
a Second-Tier Affiliate of the Funds.
    20. Applicants request an exemption from sections 17(a)(1) and
17(a)(2) of the Act pursuant to sections 6(c) and 17(b) of the Act to
permit persons that are Affiliated Persons of the Funds, or Second-Tier
Affiliates of the Funds, solely by virtue of one or more of the
following: (a) Holding 5% or more, or in excess of 25%, of the
outstanding Shares of one or more Funds; (b) 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, to effectuate purchases and redemptions ``in-kind.''
    21. Applicants assert that no useful purpose would be served by
prohibiting such affiliated persons from making ``in-kind'' purchases
or ``in-kind'' redemptions of Shares of a Fund in Creation Units. Both
the deposit procedures for ``in-kind'' purchases of Creation Units and
the redemption procedures for ``in-kind'' redemptions of Creation Units
will be effected in exactly the same manner for all purchases and
redemptions, regardless of size or number. There will be no
discrimination between purchasers or redeemers. Deposit Instruments and
Redemption Instruments for each Fund will be valued in the identical
manner as those Portfolio Holdings currently held by such Fund and the
valuation of the Deposit Instruments and Redemption Instruments will be
made in an identical manner regardless of the identity of the purchaser
or redeemer. Applicants do not believe that ``in-kind'' purchases and
redemptions will result in abusive self-dealing or overreaching, but
rather assert that such procedures will be implemented consistently
with each Fund's objectives and with the general purposes of the Act.
Applicants believe that ``in-kind'' purchases and redemptions will be
made on terms reasonable to Applicants and any affiliated persons
because they will be valued pursuant to verifiable objective standards.
The method of valuing Portfolio Holdings held by a Fund is identical to
that used for calculating ``in-kind'' purchase or redemption values and
therefore creates no opportunity for affiliated persons or Second-Tier
Affiliates of applicants to effect a transaction detrimental to the
other holders of Shares of that Fund. Similarly, applicants submit
that, by using the same standards for valuing Portfolio Holdings held
by a Fund as are used for calculating ``in-kind'' redemptions or
purchases, the Fund will ensure that its NAV will not be adversely
affected by such securities transactions. Applicants also note that the
ability to take deposits and make redemptions ``in-kind'' will help
each Fund to track closely its Underlying Index and therefore aid in
achieving the Fund's objectives.
    22. Applicants also seek relief under sections 6(c) and 17(b) from
section 17(a) to permit a Fund that is an affiliated person, or an
affiliated person of an affiliated person, 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.\26\
Applicants state that the terms of the transactions are fair and
reasonable and do not involve overreaching. Applicants note that any
consideration paid by a Fund of Funds for the purchase or redemption of
Shares directly from a Fund will be based on the NAV of the Fund.\27\
Applicants believe that any proposed transactions directly between the
Funds and Funds of Funds will be consistent with the policies of each
Fund of Funds. The purchase of Creation Units by a Fund of Funds
directly from a Fund will be accomplished in accordance with the
investment restrictions of any such Fund of Funds and will be
consistent with the investment policies set forth in the Fund of Funds'
registration statement. Applicants also state that the proposed
transactions are consistent with the general purposes of the Act and
are appropriate in the public interest.
---------------------------------------------------------------------------

    \26\ Although applicants believe that most Funds of Funds will
purchase Shares in the secondary market and will not purchase
Creation Units directly from a Fund, a Fund of Funds might seek to
transact in Creation Units directly with a Fund that is an
affiliated person of a Fund of Funds. 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.
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 a Fund of Funds because an Adviser or an entity
controlling, controlled by or under common control with an Adviser
provides investment advisory services to that Fund of Funds.
    \27\ Applicants acknowledge that the 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 of a
Fund or (b) an affiliated person of a Fund, or an affiliated person
of such person, for the sale by the Fund of its 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.
---------------------------------------------------------------------------

Applicants' Conditions

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

A. ETF Relief

    1. The requested relief to permit ETF operations will expire on the
effective date of any Commission rule under the Act that provides
relief permitting the operation of index-based ETFs.
    2. As long as a Fund operates in reliance on the requested order,
the Shares of such Fund will be listed on an Exchange.
    3. Neither the Trust nor any Fund will be advertised or marketed as
an open-end investment company or a mutual fund. Any advertising
material that describes the purchase or sale of Creation Units or
refers to redeemability will prominently disclose that Shares are not
individually redeemable and that owners of Shares may acquire those
Shares from the Fund and tender those Shares for redemption to a Fund
in Creation Units only.
    4. The Web site, 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 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 the market
closing price or Bid/Ask Price against such NAV.
    5. Each Self-Indexing Fund, Long/Short Fund and 130/30 Fund will
post on the Web site on each Business Day, before commencement of
trading of Shares on the Exchange, the Fund's Portfolio Holdings.
    6. No Adviser or any Sub-Adviser to a Self-Indexing Fund, directly
or indirectly, will cause any Authorized Participant (or any investor
on whose behalf an Authorized Participant may transact with the Self-
Indexing Fund) to acquire any Deposit Instrument for the Self-Indexing
Fund through a transaction in which the Self-Indexing Fund could not
engage directly.

B. Section 12(d)(1) Relief

    1. The members of a Fund of Funds' Advisory Group will not control
(individually or in the aggregate) a Fund within the meaning of section
2(a)(9) of

the Act. The members of a Fund of Funds' Sub-Advisory Group will not
control (individually or in the aggregate) a Fund within the meaning of
section 2(a)(9) of the Act. If, as a result of a decrease in the
outstanding 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 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 a Fund Affiliate.
    3. The board of directors or trustees of an Investing Management
Company, including a majority of the disinterested 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 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 limits in section 12(d)(1)(A)(i) of the Act, the Board
of the Fund, including a majority of the directors or trustees who are
not ``interested persons'' within the meaning of Section 2(a)(19) of
the Act (``non-interested Board members''), will determine that any
consideration paid by the 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; (ii) is within the range of
consideration that the Fund would be required to pay to another
unaffiliated entity in connection with the same services or
transactions; and (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 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 under
rule 12b-1 under the Act) received from a 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, or trustee or Sponsor of an Investing Trust, or its affiliated
person by the 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 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, 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)
will cause a Fund to purchase a security in any Affiliated
Underwriting.
    7. The Board of a Fund, including a majority of the non-interested
Board members, will adopt procedures reasonably designed to monitor any
purchases of securities by the 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; (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 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 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 limit in section
12(d)(1)(A), a Fund of Funds and the applicable Trust will execute a
FOF Participation 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 disinterested directors or
trustees, will find that the advisory fees charged under such contract
are based on services provided that will be in addition to, rather than
duplicative of, the services provided under the advisory contract(s) of
any Fund in which the 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 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 the Fund acquires securities of another investment company
pursuant to exemptive relief from the Commission permitting the Fund to
acquire securities of one or more investment companies for short-term
cash management purposes.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-02064 Filed 2-2-15; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 76, Number 60 (Tuesday, March 29, 2011)]
[Notices]
[Page 17413]
[FR Doc No: 2011-7350]

-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Project No. 14105-000]

Kahawai Power 4, LLC; Notice of Preliminary Permit Application
Accepted for Filing and Soliciting Comments, Motions To Intervene, and
Competing Applications

    On March 1, 2011, Kahawai Power 4, LLC, filed an application for a
preliminary permit, pursuant to section 4(f) of the Federal Power Act
(FPA), proposing to study the feasibility of the Kekaha Waimea Water
Power Project, which would utilize water flows from the existing Kekaha
Ditch Irrigation System near the town of Waimea, Kauai County, Hawaii.
The sole purpose of a preliminary permit, if issued, is to grant the
permit holder priority to file a license application during the permit
term. A preliminary permit does not authorize the permit holder to
perform any land-disturbing activities or otherwise enter upon lands or
waters owned by others without the owners' express permission.
    The proposed project would consist of the following: (1) A 30-foot
by 8-foot intake structure on the existing Kekaha ditch; (2) a 2,180-
foot-long, 36-inch-diameter steel penstock (sections to be buried); (3)
a 40-foot-long by 55-foot-wide powerhouse containing a single 1.5-
megawatt turbine generator with a maximum hydraulic capacity of 50
cubic-feet-per-second, and an adjacent substation; (4) a 35-foot-long,
10-foot-wide tailrace channel that discharges project flows to the
Waimea River; (5) a new 610-foot-long, gravel road to access the
powerhouse location; (6) a 2-mile-long, 69-kilovolt transmission line
interconnecting the project's substation to the existing Kaumakani
substation; and (7) appurtenant facilities. The estimated annual
generation of the Kekaha Waimea Water Power Project would be 8.7
gigawatt-hours.
    Applicant Contact: Mr. Daniel R. Irvin, Free Flow Power
Corporation, 239 Causeway Street, Boston, Massachusetts 02114; Phone:
(978) 252-7631; e-mail<EMAIL_ADDRESS>    FERC Contact: Kenneth Hogan; phone:<PHONE_NUMBER>; e-mail:
<EMAIL_ADDRESS>    Deadline for filing comments, motions to intervene, competing
applications (without notices of intent), or notices of intent to file
competing applications: 60 days from the issuance of this notice.
Competing applications and notices of intent must meet the requirements
of 18 CFR 4.36. Comments, motions to intervene, notices of intent, and
competing applications may be filed electronically via the Internet.
See 18 CFR 385.2001(a)(1)(iii) and the instructions on the Commission's
Web site http://www.ferc.gov/docs-filing/efiling.asp. Commenters can
submit brief comments up to 6,000 characters, without prior
registration, using the eComment system at http://www.ferc.gov/docs-filing/ecomment.asp. You must include your name and contact information
at the end of your comments. For assistance, please contact FERC Online
Support at<EMAIL_ADDRESS>or toll free at 1-866-208-3676,
or for TTY,<PHONE_NUMBER>. Although the Commission strongly encourages
electronic filing, documents may also be paper-filed. To paper-file,
mail an original and seven copies to: Kimberly D. Bose, Secretary,
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426.
    More information about this project, including a copy of the
application, can be viewed or printed on the ``eLibrary'' link of
Commission's Web site at: http://www.ferc.gov/docs-filing/elibrary.asp.
Enter the docket number (P-14105) in the docket number field to access
the document. For assistance, contact FERC Online Support.

    Dated: March 23, 2011.
Kimberly D. Bose,
Secretary.
[FR Doc. 2011-7350 Filed 3-28-11; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 82, Number 236 (Monday, December 11, 2017)]
[Proposed Rules]
[Pages 58151-58153]
[FR Doc No: 2017-26560]

-----------------------------------------------------------------------

DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Part 165

[Docket Number USCG-2017-0930]
RIN 1625-AA00

Safety Zone; Lower Mississippi River, New Orleans, LA

AGENCY: Coast Guard, DHS.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Coast Guard proposes to establish a temporary safety zone
for the navigable waters of the Lower Mississippi River between mile
marker (MM) 94 and MM 95, above Head of Passes. This action is
necessary to provide for the safety of life on these navigable waters
near New Orleans, LA, during a fireworks display on April 22, 2018.
This proposed rulemaking would prohibit persons and vessels from
entering the safety zone unless authorized by the Captain of the Port
Sector New Orleans (COTP) or a designated representative. We invite
your comments on this proposed rulemaking.

DATES: Comments and related material must be received by the Coast
Guard on or before February 9, 2018.

ADDRESSES: You may submit comments identified by docket number USCG-
2017-0930 using the Federal eRulemaking Portal at http://www.regulations.gov. See the ``Public Participation and Request for
Comments'' portion of the SUPPLEMENTARY INFORMATION section for further
instructions on submitting comments.

FOR FURTHER INFORMATION CONTACT: If you have questions about this
proposed rulemaking, call or email Lieutenant Commander (LCDR) Howard
Vacco,

Sector New Orleans, U.S. Coast Guard; telephone<PHONE_NUMBER>, email
[email protected].

SUPPLEMENTARY INFORMATION:

I. Table of Abbreviations

CFR Code of Federal Regulations
COTP Captain of the Port Sector New Orleans
DHS Department of Homeland Security
FR Federal Register
NPRM Notice of proposed rulemaking
Sec.  Section
U.S.C. United States Code

II. Background, Purpose, and Legal Basis

    On March 14, 2017, the NOLA 2018 Foundation notified the Coast
Guard that it will be conducting a fireworks display from 8 p.m.
through 9 p.m. on April 22, 2018. The fireworks are to be launched from
a barge on the Lower Mississippi River at approximate mile marker (MM)
94.5, above Head of Passes, off Algiers Point, New Orleans, LA. Hazards
from firework displays include discharge of fireworks, dangerous
projectiles, and falling hot embers or other debris. The Captain of the
Port Sector New Orleans (COTP) has determined that potential hazards
associated with the fireworks would be a safety concern for anyone
within a one-mile length of the river.
    The purpose of this rulemaking is to ensure the safety of vessels
and the navigable waters within a one-mile range of the fireworks barge
before, during, and after the scheduled event. The Coast Guard proposes
this rulemaking under authority in 33 U.S.C. 1231.

III. Discussion of Proposed Rule

    The COTP proposes to establish a safety zone from 8:00 p.m. through
9:00 p.m. on April 22, 2018. The safety zone would cover all navigable
waters of the Lower Mississippi River between MM 94 and MM 95, above
Head of Passes. The duration of the zone is intended to ensure the
safety of vessels and these navigable waters before, during, and after
the scheduled fireworks display. No vessel or person would be permitted
to enter the safety zone without obtaining permission from the COTP or
a designated representative. The regulatory text we are proposing
appears at the end of this document.

IV. Regulatory Analyses

    We developed this proposed rule after considering numerous statutes
and Executive orders related to rulemaking. Below we summarize our
analyses based on a number of these statutes and Executive orders and
we discuss First Amendment rights of protestors.

A. Regulatory Planning and Review

    Executive Orders 12866 and 13563 direct agencies to assess the
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits. Executive Order 13771 directs agencies to control
regulatory costs through a budgeting process. This NPRM has not been
designated a ``significant regulatory action,'' under Executive Order
12866. Accordingly, the NPRM has not been reviewed by the Office of
Management and Budget (OMB), and pursuant to OMB guidance it is exempt
from the requirements of Executive Order 13771.
    This regulatory action determination is based on the size and short
duration of the waterway closure, which will remain in effect for one
hour on a one-mile section of the waterway. In addition, vessel traffic
seeking to transit the area may seek permission from the COTP or his
designated representative to do so.

B. Impact on Small Entities

    The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as
amended, requires Federal agencies to consider the potential impact of
regulations on small entities during rulemaking. The term ``small
entities'' comprises small businesses, not-for-profit organizations
that are independently owned and operated and are not dominant in their
fields, and governmental jurisdictions with populations of less than
50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this
proposed rule would not have a significant economic impact on a
substantial number of small entities.
    While some owners or operators of vessels intending to transit the
safety zone may be small entities, for the reasons stated in section
IV.A above, this proposed rule would not have a significant economic
impact on any vessel owner or operator.
    If you think that your business, organization, or governmental
jurisdiction qualifies as a small entity and that this rule would have
a significant economic impact on it, please submit a comment (see
ADDRESSES) explaining why you think it qualifies and how and to what
degree this rule would economically affect it.
    Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996 (Pub. L. 104-121), we want to assist small
entities in understanding this proposed rule. If the rule would affect
your small business, organization, or governmental jurisdiction and you
have questions concerning its provisions or options for compliance,
please contact the person listed in the FOR FURTHER INFORMATION CONTACT
section. The Coast Guard will not retaliate against small entities that
question or complain about this proposed rule or any policy or action
of the Coast Guard.

C. Collection of Information

    This proposed rule would not call for a new collection of
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520).

D. Federalism and Indian Tribal Governments

    A rule has implications for federalism under Executive Order 13132,
Federalism, if it has a substantial direct effect on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government. We have analyzed this proposed rule under that Order and
have determined that it is consistent with the fundamental federalism
principles and preemption requirements described in Executive Order
13132.
    Also, this proposed rule does not have tribal implications under
Executive Order 13175, Consultation and Coordination with Indian Tribal
Governments, because it would not have a substantial direct effect on
one or more Indian tribes, on the relationship between the Federal
Government and Indian tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian tribes. If
you believe this proposed rule has implications for federalism or
Indian tribes, please contact the person listed in the FOR FURTHER
INFORMATION CONTACT section.

E. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
requires Federal agencies to assess the effects of their discretionary
regulatory actions. In particular, the Act addresses actions that may
result in the expenditure by a State, local, or tribal government, in
the aggregate, or by the private sector of $100,000,000 (adjusted for
inflation) or more in any one year. Though this proposed rule would not
result in such an expenditure, we do discuss the effects of this rule
elsewhere in this preamble.

F. Environment

    We have analyzed this proposed rule under Department of Homeland
Security Management Directive 023-01 and Commandant Instruction

M16475.lD, which guide the Coast Guard in complying with the National
Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made
a preliminary determination that this action is one of a category of
actions that do not individually or cumulatively have a significant
effect on the human environment. This proposed rule involves a safety
zone lasting one hour that would prohibit entry within a one-mile
section of the Lower Mississippi River. Normally such actions are
categorically excluded from further review under paragraph 34(g) of
Figure 2-1 of Commandant Instruction M16475.lD. A preliminary Record of
Environmental Consideration supporting this determination is available
in the docket where indicated under ADDRESSES. We seek any comments or
information that may lead to the discovery of a significant
environmental impact from this proposed rule.

G. Protest Activities

    The Coast Guard respects the First Amendment rights of protesters.
Protesters are asked to contact the person listed in the FOR FURTHER
INFORMATION CONTACT section to coordinate protest activities so that
your message can be received without jeopardizing the safety or
security of people, places, or vessels.

V. Public Participation and Request for Comments

    We view public participation as essential to effective rulemaking,
and will consider all comments and material received during the comment
period. Your comment can help shape the outcome of this rulemaking. If
you submit a comment, please include the docket number for this
rulemaking, indicate the specific section of this document to which
each comment applies, and provide a reason for each suggestion or
recommendation.
    We encourage you to submit comments through the Federal eRulemaking
Portal at http://www.regulations.gov. If your material cannot be
submitted using http://www.regulations.gov, contact the person in the
FOR FURTHER INFORMATION CONTACT section of this document for alternate
instructions.
    We accept anonymous comments. All comments received will be posted
without change to http://www.regulations.gov and will include any
personal information you have provided. For more about privacy and the
docket, visit http://www.regulations.gov/privacyNotice.
    Documents mentioned in this NPRM as being available in the docket,
and all public comments, will be in our online docket at http://www.regulations.gov and can be viewed by following that Web site's
instructions. Additionally, if you go to the online docket and sign up
for email alerts, you will be notified when comments are posted or a
final rule is published.

List of Subjects in 33 CFR Part 165

    Marine safety, Navigation (water), Reporting and recordkeeping
requirements, Security measures, Waterways.

    For the reasons discussed in the preamble, the Coast Guard proposes
to amend 33 CFR part 165 as follows:

PART 165--REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS

0
1. The authority citation for part 165 continues to read as follows:

    Authority:  33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05-1, 6.04-
1, 6.04-6, and 160.5; Department of Homeland Security Delegation No.
0170.1.

0
2. Add Sec.  165.T08-0930 to read as follows:

Sec.  165.T08-0930   Safety Zone; Lower Mississippi River, New Orleans,
LA.

    (a) Location. The following area is a safety zone: All navigable
waters of the Lower Mississippi River between mile marker (MM) 94 and
MM 95, above Head of Passes.
    (b) Effective period. This rule is effective from 8 p.m. through 9
p.m. on April 22, 2018.
    (c) Regulations. (1) In accordance with the general regulations in
Sec.  165.23, entry into this zone is prohibited unless specifically
authorized by the Captain of the Port New Orleans (COTP) or designated
representative. A designated representative is a commissioned, warrant,
or petty officer of the U.S. Coast Guard assigned to units under the
operational control of USCG Sector New Orleans.
    (2) Vessels requiring entry into this safety zone must request
permission from the COTP or a designated representative. They may be
contacted on VHF-FM Channel 16 or 67.
    (3) Persons and vessels permitted to enter this safety zone must
transit at their slowest safe speed and comply with all lawful
directions issued by the COTP or the designated representative.
    (d) Information broadcasts. The COTP or a designated representative
will inform the public through Broadcast Notices to Mariners of any
changes in the planned schedule.

    Dated: December 4, 2017.
Wayne R. Arguin,
Captain, U.S. Coast Guard, Captain of the Port New Orleans.
[FR Doc. 2017-26560 Filed 12-8-17; 8:45 am]
 BILLING CODE 9110-04-P