[Federal Register Volume 83, Number 231 (Friday, November 30, 2018)]
[Notices]
[Pages 61625-61626]
[FR Doc No: 2018-25985]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. CP19-17-000]

Notice of Amendment: Midship Pipeline Company, LLC

    Take notice that on November 14, 2018, Midship Pipeline Company,
LLC (Midship), 700 Milam Street, Suite 1900, Houston, Texas 77002,
filed an application pursuant to section 7(c) of the Natural Gas Act
and Parts 157 and 284 of the Commission's regulations requesting
authorization to amend its Certificate of Public Convenience and
Necessity issued on August 13, 2018, in Docket No. CP17-458-000 \1\ in
order to allow for a minor re-route on its Midcontinent Supply Header
Interstate Pipeline Project (MIDSHIP Project). Specifically, Midship
requests an estimated 0.8-mile pipeline reroute in Bryan County,
Oklahoma, located approximately 400-feet southwest of the certificated
pipeline route to avoid a sensitive feature and mitigate stakeholder
concerns. Midship states that the proposed route modification would not
result in any changes to the estimated project costs of the MIDSHIP
Project and that no shippers would be adversely affected, all as more
fully set forth in the application, which is on file with the
Commission and open to public inspection.
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    \1\ Midship Pipeline Company, LLC, 164 FERC ] 61,103 (2018).
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    The filing is available for review at the Commission in the Public
Reference Room or may be viewed on the Commission's website web at
http://www.ferc.gov using the ``eLibrary'' link. Enter the docket
number excluding the last three digits in the docket number field to
access the document. For assistance, contact FERC at
[email protected] or call toll-free,<PHONE_NUMBER> or TYY,
(202) 502-8659.
    Any questions regarding the proposed amendment should be directed
to Karri Mahmoud, Director, Regulatory Project Development, 700 Milam
Street, Suite 1900, Houston, Texas 77002, by telephone at (713) 375-
5000, or by email at [email protected].
    Pursuant to section 157.9 of the Commission's rules, 18 CFR 157.9,
within 90 days of this Notice, the Commission staff will either:
Complete its environmental analysis (EA) and place it into the
Commission's public record (eLibrary) for this proceeding, or issue a
Notice of Schedule for Environmental Review. If a Notice of Schedule
for Environmental Review is issued, it will indicate, among other
milestones, the anticipated date for the Commission staff's issuance of
the EA for this proposal. The filing of the EA in the Commission's
public record for this proceeding or the issuance of a Notice of
Schedule will serve to notify federal and state agencies of the timing
for the completion of all necessary reviews, and the subsequent need to
complete all federal authorizations within 90 days of the date of
issuance of the Commission staff's EA.
    There are two ways to become involved in the Commission's review of
this project. First, any person wishing to obtain legal status by
becoming a party to the proceedings for this project should, on or
before the comment date stated below, file with the Federal Energy
Regulatory Commission, 888 First Street NE, Washington, DC 20426, a
motion to intervene in accordance with the requirements of the
Commission's Rules of Practice and Procedure (18 CFR 385.214 or
385.211) and the Regulations under the NGA (18 CFR 157.10). A person
obtaining party status will be placed on the service list maintained by
the Secretary of the Commission and will receive copies of all
documents filed by the applicant and by all other parties. A party must
submit 3 copies of filings made with the Commission and must provide a
copy to the applicant and to every other party in

the proceeding. Only parties to the proceeding can ask for court review
of Commission orders in the proceeding.
    However, a person does not have to intervene in order to have
comments considered. The second way to participate is by filing with
the Secretary of the Commission, as soon as possible, an original and
two copies of comments in support of or in opposition to this project.
The Commission will consider these comments in determining the
appropriate action to be taken, but the filing of a comment alone will
not serve to make the filer a party to the proceeding. The Commission's
rules require that persons filing comments in opposition to the project
provide copies of their protests only to the party or parties directly
involved in the protest.
    Persons who wish to comment only on the environmental review of
this project should submit an original and two copies of their comments
to the Secretary of the Commission. Environmental commenters will be
placed on the Commission's environmental mailing list and will be
notified of any meetings associated with the Commission's environmental
review process. Environmental commenters will not be required to serve
copies of filed documents on all other parties. However, the non-party
commenters will not receive copies of all documents filed by other
parties or issued by the Commission and will not have the right to seek
court review of the Commission's final order.
    As of the February 27, 2018 date of the Commission's order in
Docket No. CP16-4-001, the Commission will apply its revised practice
concerning out-of-time motions to intervene in any new Natural Gas Act
section 3 or section 7 proceeding.\2\ Persons desiring to become a
party to a certificate proceeding are to intervene in a timely manner.
If seeking to intervene out-of-time, the movant is required to ``show
good cause why the time limitation should be waived,'' and should
provide justification by reference to factors set forth in Rule
214(d)(1) of the Commission's Rules and Regulations.\3\
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    \2\ Tennessee Gas Pipeline Company, L.L.C., 162 FERC ] 61,167 at
] 50 (2018).
    \3\ 18 CFR 385.214(d)(1).
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    The Commission strongly encourages electronic filings of comments,
protests, and interventions in lieu of paper using the ``eFiling'' link
at http://www.ferc.gov. Persons unable to file electronically should
submit an original and 3 copies of the protest or intervention to the
Federal Energy Regulatory Commission, 888 First Street NE, Washington,
DC 20426.
    Comment Date: 5:00 p.m. Eastern Time on December 14, 2018.

    Dated: November 23, 2018.
Kimberly D. Bose,
Secretary.
[FR Doc. 2018-25985 Filed 11-29-18; 8:45 am]
 BILLING CODE 6717-01-P


[Federal Register Volume 81, Number 33 (Friday, February 19, 2016)]
[Notices]
[Pages 8573-8581]
[FR Doc No: 2016-03397]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31996; File No. 812-14532]

Innovator Management LLC, et al.; Notice of Application

February 12, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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Summary of Application:  Applicants request an order that 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 be effected 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 open-end investment company to
deposit securities into, and receive securities from, such investment
company 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 beyond the limits of section
12(d)(1)(A) and (B) of the Act.

Applicants:  Innovator Management LLC (the ``Innovator''), Academy
Funds Trust (the ``Trust''), and Quasar Distributors, LLC (the
``Distributor'').

Filing Dates:  The application was filed on August 12, 2015, and
amended on December 3, 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 March 8, 2016, 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: The Commission: Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants:
Innovator and the Trust, 325 Chestnut Street, Suite 512, Philadelphia,
PA 19106; Distributor, 615 East Michigan Street, Milwaukee, WI 53202.

FOR FURTHER INFORMATION CONTACT: Parisa Haghshenas, Senior Counsel at
(202) 551-6723, or Holly L. Hunter-Ceci, Branch Chief, at (202) 551-
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 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 organized as a Delaware statutory trust. The Trust
is registered under the Act as an open-end management investment
company.
    2. Innovator is registered with the Commission as an investment
adviser under the Investment Advisers Act of 1940 (the ``Advisers
Act'') and will be the investment adviser to the Initial Funds (as
described in Appendix A of the application). Any other Adviser (defined
below) will also be registered as an investment adviser under the
Advisers Act. Each 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 subject to
registration under the Advisers Act.
    3. Quasar is, and each distributor for a Fund will be, a broker-
dealer registered under the Securities Exchange Act of 1934, as amended
(``Exchange Act'') and will act as distributor and principal
underwriter of one or more of the Funds. The distributor of any Fund
may be 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 that Fund's Adviser and/or Sub-
Advisers. No distributor will be affiliated with any Exchange (defined
below).
    4. Applicants request that the order apply to the Initial Funds and
any future series of the Trust, and any other open-end management
investment company or series thereof, that may be created in the future
that operate as exchange-traded funds (``ETFs'') and that track a
specified index comprised of domestic and/or foreign equity securities
and/or domestic and/or foreign fixed income securities (``Fixed Income
Funds'') (``Future Funds'' and together with the Initial Funds,
``Funds''). Each Fund will (a) be advised by Innovator or an entity
controlling, controlled by, or under common control with Innovator
(each, an ``Adviser'') and

(b) comply with the terms and conditions of the application.\1\
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    \1\ Applicants represent that all existing entities that intend
to rely on the requested order have been named as applicants, and
that any other existing or future entity that subsequently relies on
the order will comply with the terms and conditions of the order.
Applicants acknowledge that 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.
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    5. Each Fund will hold certain securities, assets and other
positions (``Portfolio Holdings'') selected to correspond generally to
the performance of its Underlying Index. Certain of the Funds will be
based on Underlying Indexes which will be comprised 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 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, exclusive of collateral held from securities lending, in
the component securities of its respective Underlying Index
(``Component Securities''), or in the case of Fixed Income Funds, in
the Component Securities of its respective Underlying Index and TBA
Transactions \2\ representing Component Securities. Funds that track
Foreign Indexes are referred to as ``Foreign Funds,'' and may include
Component Securities and depositary receipts representing foreign
securities such as American Depositary Receipts (``ADRs'') and Global
Depositary Receipts (``GDRs'')(``Depository Receipts'') representing
such Component Securities (or, in the case of Foreign Funds tracking
Underlying Indexes for which Depositary Receipts are themselves
Component Securities, underlying stocks in respect of such Depositary
Receipts).\3\ A Fund may also engage in short sales in accordance with
its investment objective.
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    \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\ 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.
Applicants represent that 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, and that 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.
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    7. The 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. At the end of each Business Day (defined
below), the applicable Adviser for each Long/Short Fund and 130/30 Fund
will provide full portfolio transparency on the Fund's Web site (``Web
site'') by making available the identities and quantities of the
Portfolio Holdings, including short positions and financial instruments
that will form the basis for the Fund's calculation of NAV. In
addition, with respect to each Self-Indexing Fund (defined below), the
Web site will contain, each day that that NYSE, the relevant Exchange
on which the Shares are listed (``Listing Exchange'') and the Trust are
open for business and includes any day that a Fund is required to be
open under section 22(e) of the Act (a ``Business Day''), before the
commencement of trading of Shares on the Exchange (defined below),\5\
the identities and quantities of the portfolio securities and other
assets held by each Self-Indexing Fund that will form the basis for the
Self-Indexing Fund's calculation of NAV at the end of the Business Day.
The information provided on the Web site will be formatted to be
reader-friendly.
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    \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.
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    8. A Fund will utilize either a replication or representative
sampling strategy to track its Underlying Index. A Fund using a
replication strategy will invest in the Component Securities in 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 in 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 the returns of each Fund will have an annual
tracking error of less than 5% relative to its Underlying Index.
    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 an Underlying Index (each, an ``Index Provider'')
or a sub-licensing arrangement with the applicable Adviser, which has
or will have a licensing agreement with such Index Provider.\6\ A
``Self-Indexing Fund'' is a Fund for which an Affiliated Person, or a
Second-Tier Affiliate, of the Trust or a Fund, of the Advisers, 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 the Trust or a Fund, of an Adviser, of any
Sub-Adviser to or promoter of a Fund, or of the Distributor.
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    \6\ The licenses for the Self-Indexing Funds will specifically
state that the Affiliated Index Provider (or in case of a sub-
licensing agreement, the Adviser) must provide the use of the
Affiliated Indexes 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 (collectively referred to herein as
``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 index. Consistent with the relief requested from
section 17(a), the Affiliated Accounts will not engage in Creation
Unit transactions with a Fund.

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    10. Applicants recognize that Self-Indexing Funds could raise
concerns regarding the potential ability of an affiliated person 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 person who may have access to or
knowledge of changes to an Underlying Index's composition methodology
or the constituent securities in an Underlying Index prior to the time
that information is publicly disseminated.
    11. Applicants propose that each Business Day, each Self-Indexing
Fund will post on its Web site, before commencement of trading of
Shares on the Exchange, the identities and quantities of the Portfolio
Holdings held by the Fund that will form the basis for the Fund's
calculation of NAV at the end of the Business Day. Applicants believe
that the disclosure of Portfolio Holdings would be unlikely to lead to
``front-running'' (where other persons would trade ahead of the Fund
and the investors assembling the Deposit Instruments (as defined below)
for purchases of Creation Units) any more than is the case with the
ETFs now trading. Similarly, Applicants assert that the frequent
disclosures of Portfolio Holdings would not lead to ``free riding''
(where other persons mirror the Fund's investment strategies without
paying the Fund's advisory fees) any more than such disclosures cause
this problem in connection with the ETFs now trading.
    12. Applicants do not believe the potential for conflicts of
interest raised by an 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. Applicants contend that 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\
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    \8\ In this regard, applicants cite 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.
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    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, Innovator has
adopted 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 Innovator or an associated person (``Inside Information
Policy''). Any other Adviser and/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 each
Adviser and 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. If the requested order is
granted and the Adviser is required to prepare a Part 2 of its Form
ADV, the Adviser will 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.
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    \9\ Applicants represent that each 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 is
referred to as the ``Portfolio Deposit.''
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    14. To the extent the Self-Indexing Funds transact with an
Affiliated Person of an 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, an 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 an
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.
    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'').\11\ 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) \12\ 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; \13\ (c) TBA Transactions, short
positions, derivatives and other positions that cannot be transferred
in kind \14\ will be excluded from the Deposit Instruments and the
Redemption Instruments; \15\ (d) to the extent the Fund determines, on
a given Business Day, to use a representative sampling of the Fund's
portfolio; \16\ 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'').
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    \11\ Applicants acknowledge that 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''). Applicants further
acknowledge that 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.
    \12\ The portfolio used for this purpose will be the same
portfolio used to calculate the Fund's NAV for that Business Day.
    \13\ A tradeable round lot for a security will be the standard
unit of trading in that particular type of security in its primary
market.
    \14\ 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.
    \15\ 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).
    \16\ 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 (as
defined below) on a given Business Day.
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    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, as
described above; (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;\17\ (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.\18\
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    \17\ 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.
    \18\ A ``custom order'' is any purchase or redemption of Shares
made in whole or in part on a cash basis in reliance on clause
(e)(i) or (e)(ii).
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    17. Creation Units for Funds will consist of specified large
aggregations of Shares, e.g., at least 25,000 Shares, and it is
expected that the initial price of a Creation Unit for Future Funds
will be a minimum of $1 million and will fall in the range of $1
million to $10 million, and that the initial trading price per
individual Share of each Fund will fall in the range of $10 to $100.
All orders to purchase Shares of a Fund in 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-dealer or
other participant in the Continuous Net Settlement System of the
National Securities Clearing Corporation (``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 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 or other major market data provider will disseminate, every 15
seconds during regular Exchange trading hours, through the facilities
of the Consolidated Tape Association or other widely disseminated
means, 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.\19\ The Distributor will be
responsible for delivering the Fund's prospectus to those persons
purchasing 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.
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    \19\ 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 market makers (each, a ``Market
Maker'') and maintain a market for Shares trading on the Exchange. The
price of Shares trading on an Exchange will be based on a 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, among others, 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.\20\ 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 to ensure that
Shares will not trade at a material discount or premium in relation to
their NAV.
---------------------------------------------------------------------------

    \20\ 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 are not individually redeemable; 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 through the
applicable Fund, an investor must accumulate enough Shares to
constitute a Creation Unit. Redemption requests must be placed by or
through an Authorized Participant. A redeeming investor will pay a
Transaction Fee, imposed in the same amount and manner as a Transaction
Fee payable in connection with purchases of Creation Units.
    23. Although the Trust will be classified and registered under the
Act as an open-end management investment company, the Funds will not be
advertised or marketed or otherwise ``held out'' as a traditional open-
end investment companies or a ``mutual funds.'' 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
shareholders.

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 each Fund to register as
an open-end management investment company and issue individual 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
Creation Units on the secondary market and the price of the individual
shares of a Creation Unit, taken together, should not vary materially
from the NAV of a Creation Unit.

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 occurring on any Exchange
will be effected at negotiated prices, not on the basis of NAV next
calculated after receipt of any sale order. The Shares will trade on
and away from the Listing Exchange at all times on the basis of current
bid/offer prices. Thus, purchases and sales of Shares of each Fund 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 intended to (a) prevent dilution caused by
certain riskless-trading schemes by principal underwriters and contract
dealers, (b) prevent unjust discrimination or preferential treatment
among buyers, and (c) ensure an orderly distribution system of Shares
by contract dealers by eliminating price competition from non-contract
dealers who could offer investors Shares at less than the published
sales price and who could pay investors a little more than the
published redemption price.
    6. Applicants believe that the first two purposes would not seem to
be relevant issues for secondary trading by dealers in Shares of the
Fund. Applicants state that (a) secondary market trading in Shares do
not directly involve a Fund's assets and will not result in dilution
for

owners of such 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 ensure that Shares will not trade 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 delivery cycles in local markets for the underlying
foreign securities held by a Foreign Fund. Applicants have been advised
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 applicants hereby request
relief under section 6(c) from the requirement imposed by section 22(e)
to allow Foreign Funds holding Redemption Instruments, which require a
delivery process in excess of seven calendar days, may provide payment
or satisfaction of redemptions within not more than the maximum number
of calendar days required for such payment or satisfaction in the
principal local foreign market(s) where transactions in the Portfolio
Holdings of each such Foreign Fund customarily clear and settle, but in
all cases no later than fourteen calendar days following the tender of
a Creation Unit.\21\
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    \21\ 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.
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    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 are not part of the same
``group of investment companies,'' as defined in section
12(d)(1)(G)(ii) of the Act as the Funds (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)
and (B) of the Act; and the Funds, and any principal underwriter for
the Funds, and/or any broker-dealer 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 have 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 such as through the threat of large scale redemptions of the
acquired fund's shares, layering of fees and expenses and unnecessary
complexity. 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.\22\
To limit the control that a Fund of Funds may have over a Fund,
applicants propose a condition limiting the ability of 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 limitation 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'').
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    \22\ 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 duplication or 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 be required to 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
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.\23\
---------------------------------------------------------------------------

    \23\ 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 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 purchases of Shares made
in reliance on the requested order by declining to enter into a FOF
Participation Agreement prior to any investment by a Fund of Funds in
excess of the limits of section 12(d)(1)(A).

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

    19. Sections 17(a)(1) and 17(a)(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 an
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''). To the extent that there are twenty
or fewer holders of Creation Units of all of the Funds or of one or
more particular Funds, some or all of such holders will be at least 5
percent owners of such Funds, and one or more may hold in excess of 25
percent of such Funds, as the case may be and would therefore be deemed
to be affiliated persons of such Funds either under Section 2(a)(3)(A)
or Section 2(a)(3)(C).
    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.\24\
Applicants state that the terms of the proposed arrangement are fair
and reasonable and do not involve overreaching. Applicants note that
any consideration paid by the purchase or redemption of Shares directly
from a Fund will be based on the NAV of the Fund in accordance with
policies and procedures set forth in the Fund's registration
statement.\25\ 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 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.
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    \24\ 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.
    \25\ 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. A Fund will not 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 the 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, Long/Short 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 a 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-l 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, 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 a 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 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 any other investment company
or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess
of the limits contained in section 12(d)(1)(A) of the Act, except to
the extent (i) the Fund 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.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-03397 Filed 2-18-16; 8:45 am]
 BILLING CODE 8011-01-P