Matthews A Share Selections Fund, LLC, et al.;, 22715-22720 [2014-09235]
Download as PDF
<![CDATA[
Federal Register / Vol. 79, No. 78 / Wednesday, April 23, 2014 / Notices
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, Station Place, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number 4–536. This file number should
be included on the subject line if email
is used. To help the Commission
process and review your comments
more efficiently, please use only one
method. The Commission will post all
comments on the Commission’s Internet
Web site (https://www.sec.gov/rules/
other.shtml). Copies of the submission,
all subsequent amendments, all written
statements with respect to the proposed
plan that are filed with the Commission,
and all written communications relating
to the proposed plan between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, on official business
days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of the plan also
will be available for inspection and
copying at the principal offices of
CBOE, C2, and FINRA. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number 4–536 and
should be submitted on or before May
8, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–09208 Filed 4–22–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31020; 812–14058]
Matthews A Share Selections Fund,
LLC, et al.; Notice of Application
wreier-aviles on DSK5TPTVN1PROD with NOTICES
April 17, 2014.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order pursuant to section 6(c) of the
Investment Company Act of 1940
(‘‘Act’’) granting exemptions from
section 8(b)(1)(E) and section 22(e) of
AGENCY:
13 17
CFR 200.30–3(a)(34).
VerDate Mar<15>2010
15:37 Apr 22, 2014
Jkt 232001
the Act, and rule 22c–1 under the Act,
and pursuant to section 12(d)(1)(J) of the
Act granting exemptions from sections
12(d)(1)(A) and (B) of the Act, and
pursuant to sections 6(c) and 17(b) of
the Act, granting an exemption from
section 17(a) of the Act. Applicants:
Matthews A Share Selections Fund, LLC
(the ‘‘Fund’’), on behalf of its series (the
‘‘Series’’), Matthews International Funds
(d/b/a Matthews Asia Funds), on behalf
of its series (the ‘‘Matthews Funds’’),
Matthews Asia Funds SICAV, on behalf
of its series (the ‘‘UCITS Funds’’),
Matthews Asian Selections Funds Plc
(the ‘‘Irish Fund’’), and Matthews
International Capital Management, LLC
(the ‘‘Adviser’’).
Summary of Application:
Applicants request an order to permit
the Fund to operate as an extended
payment fund established to invest in
China A shares, to exempt the Fund
from the requirement that funds must
disclose a concentration policy
regarding investments in any industry
or group of industries, and to permit the
Fund and its Series to sell their limited
liability company interests (‘‘Interests’’)
to, and redeem their Interests from,
certain pooled investment vehicles that
are managed or subadvised by the
Adviser, including the UCITS Funds,
the Irish Fund and other entities that
may be organized outside the United
States (the UCITS Funds, the Irish Fund
and such other entities are, collectively,
the ‘‘Other Funds’’).
DATES: Filing Dates: The Application
was filed on July 17, 2012, and amended
on December 28, 2012, and August 28,
2013.
Hearing or Notification of Hearing: An
order granting the Application 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 May 12, 2014, and
should be accompanied by proof of
service on Applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
Applicants: the Fund, the Matthews
Funds, and the Adviser, Four
Embarcadero Center, Suite 550, San
SUMMARY:
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
22715
Francisco, CA 94111; the UCITS Funds,
6, route de Treves, L–2633
Senningerberg, Grand Duchy of
Luxembourg; and the Irish Fund,
Brooklawn House, Crampton Avenue/
Shelbourne Road, Ballsbridge, Dublin 4,
Ireland.
FOR FURTHER INFORMATION CONTACT:
Steven I. Amchan, Senior Counsel, at
(202) 551–6826, or Janet M. Grossnickle,
Assistant Director, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
Application. The complete Application
may be obtained via the Commission’s
Web site by searching for the file
number, or an Applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. The Fund, a Delaware limited
liability company registered as an openend management investment company
under Act, is organized as a series
investment company, and will be
operated as an extended payment fund,
as discussed below. The Fund is
designed to be a viable and economical
means to permit the Matthews Funds,
Other Funds and separate accounts
managed by the Adviser to invest in
China A Shares. Each investing
Matthews Fund, Other Fund, or separate
account will own all of the Interests
offered by a particular Series, and
investors in the Fund’s Series will be
exclusively entities advised or managed
by the Adviser. Interests will not be
registered under the Securities Act of
1933 (the ‘‘Securities Act’’); they will be
offered only in private placement
transactions to ‘‘accredited investors,’’
as defined in Regulation D under the
Securities Act, that are also ‘‘qualified
purchasers,’’ as defined in section
2(a)(51) of the Act and the rules
thereunder (‘‘Qualified Purchasers’’).1
The Fund, through its Series, will be the
entity that invests in and holds China A
Shares.2
1 The Fund will adopt a policy to permit the
transfer of Interests only to other Qualified
Purchasers.
2 Each entity that currently intends to rely on the
requested order has been named as an Applicant.
Applicants request that the relief from section
8(b)(1)(E), section 22(e), and rule 22c–1 of the Act
apply also to any existing or future Series of the
Fund, and that the relief from sections 12(d)(1)(A)
and (B) of the Act, and from section 17(a) of the Act,
apply to any existing or future Series of the Fund,
and any investment company, or series thereof,
advised by the Adviser or any entity controlling,
controlled by or under common control with the
Adviser that wishes to invest in the Fund or a Series
E:\FR\FM\23APN1.SGM
Continued
23APN1
22716
Federal Register / Vol. 79, No. 78 / Wednesday, April 23, 2014 / Notices
wreier-aviles on DSK5TPTVN1PROD with NOTICES
2. The Matthews Funds are organized
as series of a Delaware statutory trust,
which is registered under the Act as an
open-end management investment
company. The UCITS Funds are
organized as the separate series of
Matthews Asia Funds SICAV under the
laws of Luxembourg. The Irish Fund is
organized as a private limited company,
and regulated as an open-ended
umbrella investment company with
variable capital that may be offered and
sold only to qualifying investors under
the laws of the Republic of Ireland. Both
the UCITS Funds and the Irish Fund are
not sold to United States residents, are
not registered under the Act, and the
offering of their interests have not been
registered under the Securities Act.
3. The Adviser is registered as an
investment adviser under the
Investment Advisers Act of 1940
(‘‘Advisers Act’’). The Adviser will
serve as investment adviser to the Fund
and its Series, and serves as investment
adviser to the Matthews Funds, Other
Funds and separate accounts. Matthews
Global Investors (U.S.), LLC (‘‘MGI’’), a
Delaware LLC and an affiliate of the
Adviser, acts as managing member of
the Fund.3
4. Applicants state that a significant
majority of publicly traded Chinese
companies list their shares on one or
more of three stock exchanges—the
Shanghai, Shenzhen and Hong Kong
Stock Exchanges. The Shanghai and
Shenzhen exchanges are located in
mainland China and there are two
categories of stock that are listed on
these exchanges: China ‘‘A Shares’’
which trade in the currency of China,
the renminbi, and ‘‘B Shares’’ which
trade in foreign currencies. ‘‘H Shares’’
and ‘‘red chip’’ shares are listed and
traded on the Hong Kong Stock
Exchange.4 Applicants state that far
fewer Chinese companies have listed
their shares as H Shares or red chips.
5. The Matthews Funds and Other
Funds currently invest in China through
‘‘H Shares’’ or ‘‘red chip’’ stocks.
Applicants state that for a variety of
reasons, China A Shares are a more
attractive means to invest in Chinese
thereof. Any Series or investment company that
relies on the order in the future will do so only in
accordance with the terms and conditions
contained in the Application.
3 The Adviser is the sole member of MGI. In the
future, the Adviser or a different affiliate
controlling, controlled by or under common control
with the Adviser may act as managing member of
the Fund or a Series thereof.
4 H Shares are shares of companies incorporated
in mainland China, listed on the Hong Kong Stock
Exchange and traded in Hong Kong dollars. ‘‘Red
chip’’ shares are listed and traded on the Hong
Kong Stock Exchange, issued by companies based
in mainland China but incorporated outside of
mainland China.
VerDate Mar<15>2010
15:37 Apr 22, 2014
Jkt 232001
companies than H Shares, red chip
stocks, or China B Shares. Applicants
state that, while it is not practical or
feasible for a Matthews Fund, Other
Fund, or separate account to
individually invest in China A Shares,
a pooled investment vehicle, the Fund,
would allow them to obtain exposure to
China A Shares.5 The Fund will be
named as the investing vehicle in the
Adviser’s application to obtain a license
to invest in China.
6. The Fund has a board of directors
(‘‘Board’’), a majority of which will be
comprised of persons who are not
‘‘interested persons’’ (as defined by
section 2(a)(19) of the Act). Each Series
will have a portfolio manager or team of
portfolio managers. The portfolio
manager(s) for a Series are expected to
be the same individual(s) as the
portfolio manager(s) of the Matthews
Fund, Other Fund or separate account
investing in that Series. Accordingly,
the portfolio manager(s) will be able to
select China A Shares most suited for
the investor’s investment style and
strategy, consistent with the remainder
of the investor’s portfolio. As portfolio
manager(s) of a Series, the portfolio
manager(s) will have responsibilities to
the Series and be overseen by the Board.
The portfolio manager(s) also will have
responsibilities, in their capacity as
Matthews Fund, Other Fund or separate
account portfolio manager(s), to the
applicable investor for investing the
non-Series portion of the portfolio.
7. The Adviser may charge advisory
fees to the Series; however, if advisory
fees are charged to a Series used by a
Matthews Fund, any assets of a
Matthews Fund invested in that Series
will not be counted for purposes of
calculating the Matthews Fund’s
advisory fee payable to the Adviser so
that the Adviser will not receive
separate fees for managing the same
assets, except that any such assets will
be applied and counted as a Matthews
Fund’s assets for purposes of applying
breakpoints. Fees paid by an Other
Fund or separate account would be
negotiated with the Other Fund or
5 Applicants state that until 2002, the Chinese
government restricted investment in China A
Shares to domestic (i.e., Chinese) investors. Since
2002, the Chinese Government has permitted
certain non-Chinese investors to invest in China A
Shares, but to do so, a foreign investor must apply
for, and receive a license as a Qualified Foreign
Institutional Investor or ‘‘QFII’’ and be allotted a
quota, representing the amount in renminbi of
China A Shares that the investor may purchase. The
Adviser has received a QFII license and is in the
process of applying for a quota so that it can invest
in China A Shares on behalf of the Matthews Funds,
Other Funds and separate accounts. Applicants are
requesting a quota in the amount of USD 350
million, although the amount of quota received will
not be known until it is granted.
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
separate account and structured in an
appropriate manner such that, unless
additional services are provided, the
Adviser would not receive separate fees
for managing the same assets. Fee
arrangements for the Series will be
subject to review and approval by the
Fund’s Board, including its independent
members, in accordance with section
15(c) of the Act, and their impact on
overall fees for the Adviser’s client will
be fully disclosed to the Applicant
client, including the Matthews Funds.
8. Expenses of each Series, which
would include basic fees and expenses
of service providers, such as the
Adviser, administrator, accountant,
local custodian and legal counsel, will
be charged to the Series receiving the
services generating the expense and
accrued on a daily basis. Applicants
state that because the Fund’s limited
liability company agreement does not
provide to the contrary, the Delaware
Limited Liability Company Act provides
that each Series (holding distinct China
A Shares) will have its own debts,
liabilities, obligations and expenses, and
such items will not be enforceable
against any other Series. The Fund’s
books and those of the Series will be
accounted for under standard
accounting principles and in accordance
with U.S. Generally Accepted
Accounting Principles (GAAP), and they
will be audited annually by a nationally
recognized and PCAOB-registered audit
firm in accordance with U.S. Generally
Accepted Auditing Standards.
9. The Fund’s custodial arrangements
will be overseen by the Fund’s Board in
accordance with rule 17f–5 under the
Act. The Series used by Matthews
Funds will not lever themselves through
borrowing, but Series used by Other
Funds or separate accounts may, or in
the future may be permitted to, use
leverage. Applicants state that the Fund
will value its holdings daily in
accordance with section 2(a)(41) of the
Act, and the value will take into account
all relevant facts and circumstances,
including (if relevant) the length of time
before proceeds can be repatriated (as
discussed below), and will be applied
under the oversight of the Fund’s
valuation committee in accordance with
delegated authority and procedures
approved by the Fund’s Board. The
Fund also has a chief compliance officer
and will implement and maintain a
compliance program in accordance with
rule 38a–1 under the Act.
10. Applicants state that access by the
Adviser’s clients to the quota (i.e., to
China A Shares) will be a limited
opportunity and will be allocated in
accordance with the Adviser’s Access to
Research and Allocation of Portfolio
E:\FR\FM\23APN1.SGM
23APN1
Federal Register / Vol. 79, No. 78 / Wednesday, April 23, 2014 / Notices
wreier-aviles on DSK5TPTVN1PROD with NOTICES
Opportunities Procedures (‘‘Access
Allocation Procedures’’), which are
designed to ensure that allocations are
fair and equitable over time to all of the
Adviser’s accounts. The Adviser will
amend the Access Allocation
Procedures to specifically address issues
arising from the quota. Similarly, if
more than one Matthews Fund, Other
Fund or separate account seeks to
repatriate proceeds at the same time,
and Chinese regulations limit the
aggregate amount of proceeds that may
be repatriated at any given time to a
level below the aggregate amount sought
to be repatriated, the requests by the
applicable portfolio manager(s) will be
aggregated, if received at or about the
same time, and proceeds available for
repatriation will be allocated pro rata
among requesting investors.6 The
Adviser will not, however, when
making investment decisions for the
Fund or its Series, take into
consideration whether selling China A
Shares and repatriating proceeds could
impact the continued availability of the
quota. The Adviser will also not take
into consideration whether buying
China A Shares could affect the
continued availability of the quota.7
11. Applicants note that the
significant majority (at least 85%) of the
China A Shares to be held by the Fund
would be able to be disposed of in the
ordinary course of business since the
China A Share market is liquid, and
thus holdings would meet the liquidity
requirements in the context of a fund’s
ability to dispose of an asset. However,
while the China A Shares could be sold
in a timely manner in exchange for
renminbi, the investing Matthews Fund,
Other Fund or separate account would
only be able to repatriate the proceeds
weekly,8 which in some circumstances
might not be within seven days of
receipt of the redemption request. Each
Matthews Fund will deem China A
Shares to be illiquid investments and
6 Applicants are not seeking comfort and
acknowledge that the Commission is providing no
opinion on whether the Access Allocation
Procedures meet the standards applicable under the
Act or the Advisers Act.
7 Applicants state that the Chinese authorities
may reduce or revoke a QFII’s quota if the QFII does
not invest the full amount of its quota over a phasein period, or, in certain cases, if it repatriates its
investments below the quota amount.
8 Under Chinese regulations, repatriation will be
available after an initial three-month lock-up
period, during which the Fund will not be able to
repatriate proceeds, but would be able to buy and
sell different China A Shares without restrictions.
After the lock-up period, repatriation may occur
once a week, with the total amount repatriated by
the Fund in any month limited to no more than
20% of the Fund’s net asset value (‘‘NAV’’) as of
the end of the prior year. The regulations do not
currently require the repatriation to take place on
the same day each week.
VerDate Mar<15>2010
15:37 Apr 22, 2014
Jkt 232001
limit its holdings in the Fund to no
more than 15% of its net assets, unless
Chinese repatriation restrictions permit
repatriation, and the relevant Series
permits redemption, within seven days
such that the Matthews Fund, or the
Adviser in accordance with a Matthews
Fund’s policies, could deem the
Interests to be liquid under applicable
Commission and staff guidance.
12. Applicants state that the
repatriation restrictions may prevent the
Fund from being able to redeem its
Interests within the time period
otherwise required by the Act. As an
extended payment fund, the Fund
would pay redemption proceeds no less
frequently than on one day each month
(any such date, a ‘‘Redemption Payment
Date’’). Redemption payments would be
based on the Fund’s NAV on the
Redemption Payment Date, and
redemption payments would only be
made for redemptions requested on or
before the Redemption Payment Date
and time for that particular month (or
shorter period). The Fund will adopt a
fundamental policy specifying its
redemption procedures, and this policy
will be disclosed in the Fund’s
registration statement.
13. The Fund will establish, and the
Board will approve, written procedures
reasonably designed to ensure that the
Fund’s portfolio assets are sufficiently
liquid so that the Fund can comply with
its fundamental policy on redemptions,
taking into account current market
conditions and regulatory requirements
and the Fund’s investment objectives.
The Board will review the procedures
and the overall composition of the
portfolio at least annually and on such
other occasions as may be necessary in
light of changes in the markets for the
Fund’s portfolio assets and applicable
regulatory requirements concerning,
among other matters, repatriation
restrictions.
Applicants’ Legal Analysis
Applicants request an order to exempt
the Fund from section 22(e) of the Act
and rule 22c–1 thereunder to the extent
necessary to permit the Fund to operate
as an extended payment fund.
Applicants also request that the order
exempt the Fund from section 8(b)(1)(E)
of the Act and the requirement that the
Fund disclose a concentration policy
regarding investments in any industry
or group of industries. Instead, the order
would require that the Fund disclose
that it does not have a concentration
policy and require that any registered
investment company that invests in a
Series will aggregate the Series’
holdings with its own holdings for
purposes of evaluating its concentration
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
22717
policy. Applicants further request that
the order grant an exemption from
sections 12(d)(1)(A) and (B) of the Act,
and an exemption from section 17(a) of
the Act, to the extent necessary to
permit the Fund and its Series to sell
their Interests to, and redeem their
Interests from, the Other Funds.
A. Section 22(e) of the Act and Rule
22c–1 Under the Act
1. Rule 22c–1 under the Act generally
requires a registered open-end
investment company to sell, redeem, or
repurchase its securities at the price
based on the current NAV of such
security next computed after receipt of
a tender of such security for
redemption. Applicants state that rule
22c–1 was designed primarily to
address the practice of ‘‘backward
pricing’’ of fund shares. That practice
involved pricing fund shares for
purchase or redemption based on the
NAV determined prior to the purchase
or redemption request. This pricing
mechanism enabled a fund’s insiders to
engage in ‘‘riskless trading’’ by buying
shares at an NAV that they knew was
likely to increase because of market
action after the shares were priced.
Applicants assert that, in effect,
backward pricing created the possibility
that some investors could trade fund
shares at the expense of non-redeeming
shareholders. Rule 22c–1 eliminates this
problem by requiring ‘‘forward pricing,’’
or pricing fund shares at the close of the
market after a purchase or redemption
request is received. Under rule 22c–1,
an open-end equity fund typically
computes the value of shares tendered
for redemption on any given day at 4:00
p.m. on that day.
2. Applicants propose that the Fund
will price Interests tendered for
redemption at the close of business on
the Redemption Payment Date, which
will be no less frequently than one day
each month. The Fund will redeem
Interests on a given Redemption
Payment Date only for redemptions
requested on or before the close of
business (generally 4:00 p.m. Eastern
time) on the redemption pricing date
(which will be the Redemption Payment
Date). Applicants assert that their
proposal does not raise the concern of
‘‘backward pricing’’ because shares will
be priced only after a tender for
redemption is received. Applicants state
that the Fund’s pricing timeline will be
clearly disclosed and is consistent with
the Act because it will treat all investors
equally and not dilute non-redeeming
shareholders’ interests. In addition, all
investors in the Fund will be Qualified
Purchasers, who are capable of
E:\FR\FM\23APN1.SGM
23APN1
wreier-aviles on DSK5TPTVN1PROD with NOTICES
22718
Federal Register / Vol. 79, No. 78 / Wednesday, April 23, 2014 / Notices
understanding the risks presented by
the Fund’s redemption policy.
3. Section 22(e) of the Act provides
that a registered investment company
may not suspend the right of
redemption or postpone the date of
payment or satisfaction upon
redemption of any redeemable security
in accordance with its terms for more
than seven days after the tender of the
security to the company. Applicants
state that the Redemption Payment Date,
which will be no less frequent than one
day each month, may be more than
seven days from the time that a
shareholder of a Series tenders Interests
to the Series. Thus, Applicants are
requesting relief from section 22(e) to
permit the Fund and its Series to pay
redemption proceeds more than seven
days from the tender of such Interests.
4. Applicants state that the primary
purpose of section 22(e) is to address
the abusive practices of early open-end
companies that claimed that their
securities were redeemable, only to then
institute barriers to redemption.
Applicants represent that the Fund’s
policies will not raise the possibility of
such abuses. The Fund’s redemption
policy will be a fundamental policy
changeable only by a majority vote of its
shareholders and the approval of the
Commission or its staff. Applicants
undertake to disclose the Fund’s
redemption policy on the cover page of
its offering memorandum and in any
marketing materials, and to refrain from
holding itself out as a ‘‘mutual fund.’’
Most importantly, the Fund will limit
its investors to Qualified Purchasers,
who are highly sophisticated investors
capable of understanding the Fund’s
redemption policy and its associated
risks.
5. In 1992, the Commission proposed
rule 22e–3 under the Act that set forth
an ‘‘extended payment fund’’ structure
similar to that proposed for the Fund.
The Commission’s proposal was
designed to permit a registered
investment company that could both
offer redeemable securities and invest in
assets, including less liquid foreign
securities, that did not meet the sevenday liquidity standard for traditional
open-end funds. Under proposed rule
22e–3, an open-end fund could make
payment upon redemption of its
securities up to 31 days after tender of
the securities to the fund at NAV
determined on the next redemption
pricing date following the tender,
provided that: (a) The fund did so
pursuant to a fundamental policy,
setting forth the number of days
between a tender and the next
redemption pricing and payment dates,
changeable only with approval of a
VerDate Mar<15>2010
15:37 Apr 22, 2014
Jkt 232001
majority of the fund’s outstanding
voting securities; (b) at least 85% of the
fund’s assets consisted of assets that
either (i) may be sold in the ordinary
course of business at approximately the
price used to compute the fund’s NAV,
within the period between the tender
and the next redemption payment date,
or (ii) mature by the next redemption
payment date; and (c) the fund does not
hold itself out to investors as a mutual
fund. Applicants assert that the Fund
will comply with requirements that are
designed to achieve the same goals, but
which account for the repatriation
restrictions discussed above.
6. Section 6(c) of the Act permits the
Commission to exempt any person or
transaction from any provision of the
Act if the exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policies of the Act.
Applicants believe that the relief is
appropriate because the Fund can
provide a convenient and cost-effective
means of obtaining tailored exposure to
China A Shares for investing Matthews
Funds, Other Funds and separate
accounts. Applicants also believe that
the requested relief is consistent with
the protection of investors because
shares of the Fund will be available only
to Qualified Purchasers. Finally,
Applicants state that the relief is
consistent with the purposes intended
by the policies of the Act because, as
discussed above, it does not raise the
concerns addressed by section 22(e) of
the Act and rule 22c–1 under the Act.
B. Section 8(b)(1)(E) of the Act
1. Section 8(b)(1)(E) of the Act
provides that every registered
investment company shall file with the
Commission a recital of its policy in
respect of concentrating investments in
a particular industry or group of
industries. Form N–1A implements the
section 8(b) requirement to disclose a
fund’s concentration policy: Instruction
4 to Item 9 of Form N–1A requires a
fund to ‘‘[d]isclose any policy to
concentrate in securities of issuers in a
particular industry or group of
industries (i.e., investing more than
25% of a fund’s net assets in a particular
industry or group of industries).’’
Applicants state that the Commission’s
staff has taken the position that
statements of concentration policy
pursuant to which registrants reserve
the right to concentrate in particular
industries without limitation if deemed
advisable and in the best interests of the
shareholders do not comply with
section 8(b)(1). Applicants assert that
the primary purposes of the industry
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
concentration test include preventing a
fund’s investment adviser from
inappropriately concentrating a fund’s
investments contrary to investor
expectations and from reserving
freedom of action to concentrate the
fund’s investments, which may not
provide investors with sufficient clarity
to form expectations about
concentration.
2. Applicants state that the
application of section 8(b)(1)(E) at the
Series level imposes a barrier to the
efficient operation of the Series when
conducting otherwise routine portfolio
changes, contrary to the expectations of
Matthews Fund or Other Fund
shareholders. For a Series with a limited
number of holdings, routine portfolio
changes could frequently result in a
Series ‘‘concentrating’’ its investments
in different industries or groups of
industries, using the Commission’s 25%
threshold for determining
concentration, even though such Series’
‘‘concentration’’ would have little or no
meaningful impact on the industry
concentration of the investing Matthews
Fund’s or Other Fund’s’overall
portfolio. Applicants state that absent
relief and assuming a policy to
concentrate in the particular industry
has not been disclosed in the Series’
registration statement, any routine
portfolio change that results in a Series
‘‘concentrating’’ its investments
(measured solely at the Series’ level)
would need the approval of a majority
of the outstanding voting securities of
the Series in accordance with section 13
of the Act. Applicants submit that while
a Series could obtain a shareholder vote
every time it crossed the 25%
‘‘concentration’’ threshold since each
Series will be owned by a client of the
Adviser, this result would be
unnecessary, cumbersome, and serve no
policy objective.
3. Applicants propose that, due to the
structure, nature and purpose of the
Fund, each Series be exempt from
section 8(b)(1)(E) and the requirement to
disclose a policy of concentrating in a
particular industry or group of
industries. Applicants have proposed
conditions that would require each
Series to disclose that it does not have
a concentration policy and that any
registered investment company that
invests in a Series will aggregate the
Series’ holdings with its own holdings
for purposes of evaluating its
concentration policy. Applicants state
that an investor in a Matthews Fund
should have expectations regarding the
industry concentration of the portfolio
taken as a whole of the Matthews Fund
in which s/he has invested, and s/he is
protected by the requirement that the
E:\FR\FM\23APN1.SGM
23APN1
Federal Register / Vol. 79, No. 78 / Wednesday, April 23, 2014 / Notices
wreier-aviles on DSK5TPTVN1PROD with NOTICES
Matthews Fund disclose and adhere to
its own concentration policy.
Applicants submit that imposing an
additional layer of concentration
requirements on a Series would not
serve an investor protection purpose.
Accordingly, Applicants assert that
granting the requested relief is
warranted under the standards set forth
in section 6(c) of the Act.
C. Section 12(d)(1) of the Act
1. Section 12(d)(1)(A) provides that no
registered investment company may
acquire securities of another investment
company if such securities represent
more than 3% of the acquired
company’s outstanding voting stock,
more than 5% of the acquiring
company’s total assets, or if such
securities, together with the securities of
other investment companies, represent
more than 10% of the acquiring
company’s total assets. Section
12(d)(1)(B) provides that no registered
open-end investment company, its
principal underwriter or any broker or
dealer may sell the company’s securities
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 cause more
than 10% of the acquired company’s
voting stock to be owned by investment
companies.
2. Section 12(d)(1)(G) of the Act
provides, in relevant part, that section
12(d)(1) will not apply to the securities
of a registered open-end investment
company purchased by another
registered open-end investment
company, if: (a) The acquiring company
and the acquired company are part of
the same group of investment
companies; (b) the acquiring company
holds only securities of acquired
companies that are part of the same
group of investment companies,
government securities and short-term
paper; (c) the aggregate sales loads and
distribution-related fees of the acquiring
company and the acquired company are
not excessive under rules adopted
pursuant to section 22(b) or section
22(c) of the Act by a securities
association registered under section 15A
of the Securities Exchange Act of 1934
or by the Commission; and (d) the
acquired company has a policy that
prohibits it from acquiring securities of
registered open-end management
investment companies or registered unit
investment trusts in reliance on section
12(d)(1)(F) or (G) of the Act. Applicants
state that section 12(d)(1)(G) is
unavailable largely due to the Other
Funds not being ‘‘registered’’ under the
Act; its unavailability is not due to any
difference that relates to the policies
VerDate Mar<15>2010
15:37 Apr 22, 2014
Jkt 232001
supporting section 12(d)(1). Applicants
further state that if the Other Funds
were registered in the United States as
open-end funds, they, like the Matthews
Funds, would be entitled to rely on
section 12(d)(1)(G) and the rules
thereunder to invest in the Series, if
they were part of the same ‘‘group of
investment companies,’’ as defined in
Section 12(d)(1)(G)(ii).
3. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction from any provision of
section 12(d)(1), if the exemption is
consistent with the public interest and
the protection of investors. Applicants
seek an exemption under section
12(d)(1)(J) to permit the Other Funds to
purchase Interests of Series which, as
discussed herein, would result in an
Other Fund owning 100% of the
Interests of a particular Series.
4. Applicants state that the proposed
arrangement will not raise the policy
concerns underlying sections
12(d)(1)(A) and (B), including undue
influence by a fund of funds over
underlying funds, excessive layering of
fees and overly complex fund
structures. Accordingly, Applicants
believe that the requested exemption is
consistent with the public interest and
the protection of investors.
5. Applicants contend that the
proposed arrangement will not result in
undue influence by an Other Fund over
the Fund because, as manager of the
Other Funds, the Adviser will act to
prevent undue influence.
6. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. Applicants
state that, among other protections
described above, fee arrangements for
the Series will be subject to review and
approval by the Fund’s Board, including
its independent members, in accordance
with Section 15(c) of the Act, and their
impact on overall fees for the Adviser’s
client will be fully disclosed to the
client. With respect to Other Funds that
invest in the Fund, no sales load will be
charged by the Fund. Other sales
charges and service fees, as defined in
NASD Conduct Rule 2830,9 if any, will
only be charged at the Fund level or at
the Other Fund level, not both. With
respect to other investments in the
Fund, any sales charges and/or service
fees charged with respect to shares of
the Fund will not exceed the limits
9 References to NASD Conduct Rule 2830 include
any successor or replacement rule that may be
adopted by the Financial Industry Regulatory
Authority.
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
22719
applicable to a fund of funds set forth
in such Rule 2830.
7. Applicants contend that the
proposed arrangement will not create an
overly complex fund structure.
Condition 10 provides that no Series of
the 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 of section
12(d)(1)(A), except to the extent that
such Series of the Fund acquires, or is
deemed to have acquired, the securities
pursuant to exemptive relief from the
Commission permitting such Series of
the Fund to (a) acquire securities of one
or more affiliated investment companies
or companies relying on section 3(c)(1)
or 3(c)(7) for short-term cash
management purposes, or (b) engage in
interfund borrowing and lending
transactions.
D. Section 17(a) of the Act
1. Section 17(a) of the Act generally
prohibits purchases and sales of
securities, on a principal basis, between
a registered investment company and
any affiliated person of the company,
and affiliated persons of such persons.
Section 2(a)(3) of the Act defines an
‘‘affiliated person’’ of another person to
include, among other things, any person
directly or indirectly owning,
controlling or holding with power to
vote 5% or more of the other’s
outstanding voting securities; any
person 5% or more of whose
outstanding voting securities are
directly or indirectly owned, controlled
or held with power to vote by the other
person; any person directly or indirectly
controlling, controlled by or under
common control with the other person;
and any investment adviser to an
investment company. Applicants
describe several bases of potential
affiliation in the Application, and state
that if the Other Funds and the Fund are
deemed affiliates of each other, or even
second-tier affiliates, the sale of
Interests of the Fund to the Other
Funds, and the redemption of such
Interests by the Other Funds, could be
prohibited under section 17(a) of the
Act.
2. Section 17(b) of the Act authorizes
the Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction, including the consideration
to be paid or received, are fair and
reasonable and do not involve
overreaching on the part of any person
concerned, (b) the proposed transaction
is consistent with the policies of each
registered investment company
involved, and (c) the proposed
E:\FR\FM\23APN1.SGM
23APN1
22720
Federal Register / Vol. 79, No. 78 / Wednesday, April 23, 2014 / Notices
transaction is consistent with the
general purposes of the Act.
3. Applicants seek an exemption
under sections 6(c) and 17(b) to allow
the proposed transactions. Applicants
state that the transactions satisfy the
standards for relief under sections 6(c)
and 17(b). Specifically, Applicants state
that the terms of the transactions are fair
and reasonable and do not involve
overreaching. Applicants note that the
consideration paid and received for the
sale and redemption of Interests of the
Fund will be based on the NAV of the
Fund and, no sales load will be charged
by the Fund, and other sales charges
and service fees, if any, will only be
charged at the Fund level or the Other
Fund level, but not both. In addition,
Applicants represent that the proposed
transactions will be consistent with the
policies of each registered investment
company involved, and the general
purposes of the Act.
wreier-aviles on DSK5TPTVN1PROD with NOTICES
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. The Fund’s outstanding securities
will be owned exclusively by persons
who are Qualified Purchasers, as
defined in section 2(a)(51) of the Act
and the rules thereunder.
2. The Fund will adopt a fundamental
policy, which may be changed only by
a majority vote of the outstanding voting
securities of the Fund and only upon
approval by the Commission or its staff,
that will specify the circumstances in
which the Fund will redeem its
Interests, such that the Fund (a) will pay
redemptions no less frequently than on
one day each month (each such day, a
Redemption Payment Date), (b) will
calculate its NAV applicable to a
redemption request received in good
order in accordance with procedures set
forth in the Fund’s prospectus as of the
close of business on the next
redemption pricing date and time
following such redemption request,
which will be on the same day as the
Redemption Payment Date, and (c) will
redeem Interests in a given month only
for redemptions requested on or before
the redemption pricing date and time
for that Redemption Payment Date.
3. At least 85% of the assets of the
Fund will consist of assets:
(a) That the Fund reasonably believes
may be sold or disposed of in local
currency in the ordinary course of
business, at approximately the price
used in computing the Fund’s NAV,
within seven days, or
(b) that mature by the next
Redemption Payment Date.
VerDate Mar<15>2010
15:37 Apr 22, 2014
Jkt 232001
4. The Board of the Fund, including
a majority of the disinterested trustees,
will adopt written procedures designed
to ensure that the Fund will comply
with the terms and conditions of the
requested order. The Board will review
these procedures at least annually and
approve such changes as it deems
necessary.
5. The Fund will not hold itself out
as a ‘‘mutual fund.’’ The Fund will
disclose its redemption policy on the
cover page of its offering memorandum
and in any marketing materials.
6. Each Series will disclose in its
registration statement that it does not
have a concentration policy regarding
investments in any industry or group of
industries.
7. Any registered investment
company that invests in a Series will
aggregate the Series’ holdings with its
own holdings for purposes of evaluating
its concentration policy regarding
investments in any industry or group of
industries.
8. With respect to Other Funds that
invest in the Fund, no sales load will be
charged by the Fund. Other sales
charges and service fees, as defined in
NASD Conduct Rule 2830, if any, will
only be charged at the Fund level or at
the Other Fund level, not both. With
respect to other investments in the
Fund, any sales charges and/or service
fees charged with respect to Interests of
the Fund or its Series will not exceed
the limits applicable to a fund of funds
set forth in such Rule 2830.
9. The Adviser will be an investment
adviser or manager to each series of the
Matthews Funds, Other Fund, or
separate account that invests in the
Fund.
10. No Series of the Fund will acquire
securities of any investment company or
company relying on section 3(c)(1) or
3(c)(7) of the Act in excess of the limits
contained in section 12(d)(1)(A) of the
Act, except to the extent that such
Series of the Fund acquires, or is
deemed to have acquired, the securities
pursuant to exemptive relief from the
Commission permitting such Series of
the Fund to (a) acquire securities of one
or more affiliated investment companies
or companies relying on section 3(c)(1)
or 3(c)(7) of the Act for short-term cash
management purposes, or (b) engage in
interfund borrowing and lending
transactions.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–09235 Filed 4–22–14; 8:45 am]
BILLING CODE 8011–01–P
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31022; File No. 812–14261]
Elkhorn Securities, LLC and Elkhorn
Unit Trust; Notice of Application
April 17, 2014.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under section 12(d)(1)(J) of the
Investment Company Act of 1940
(‘‘Act’’) for an exemption from sections
12(d)(1)(A), (B) and (C) of the Act, and
under sections 6(c) and 17(b) of the Act
for an exemption from section 17(a) of
the Act.
AGENCY:
Summary of the Application:
Applicants request an order that would
permit certain series of a unit
investment trust (‘‘UIT’’) registered
under the Act to acquire shares of
registered management investment
companies and unit investment trusts or
series thereof (the ‘‘Funds’’) both within
and outside the same group of
investment companies.
Applicants: Elkhorn Securities, LLC
(the ‘‘Depositor’’), and Elkhorn Unit
Trust (the ‘‘Trust’’).
DATED: Filing Date: The application was
filed on January 9, 2014.
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 May 12, 2014, and
should be accompanied by proof of
service on applicants in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
Applicants: 207 Reber Street, Suite 201,
Wheaton, Illinois 60187.
FOR FURTHER INFORMATION CONTACT:
Steven I. Amchan, Senior Counsel, at
(202) 551–6826, or David P. Bartels,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
SUMMARY:
E:\FR\FM\23APN1.SGM
23APN1
]]>Agencies
[Federal Register Volume 79, Number 78 (Wednesday, April 23, 2014)]
[Notices]
[Pages 22715-22720]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09235]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31020; 812-14058]
Matthews A Share Selections Fund, LLC, et al.; Notice of
Application
April 17, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order pursuant to section 6(c) of
the Investment Company Act of 1940 (``Act'') granting exemptions from
section 8(b)(1)(E) and section 22(e) of the Act, and rule 22c-1 under
the Act, and pursuant to section 12(d)(1)(J) of the Act granting
exemptions from sections 12(d)(1)(A) and (B) of the Act, and pursuant
to sections 6(c) and 17(b) of the Act, granting an exemption from
section 17(a) of the Act. Applicants: Matthews A Share Selections Fund,
LLC (the ``Fund''), on behalf of its series (the ``Series''), Matthews
International Funds (d/b/a Matthews Asia Funds), on behalf of its
series (the ``Matthews Funds''), Matthews Asia Funds SICAV, on behalf
of its series (the ``UCITS Funds''), Matthews Asian Selections Funds
Plc (the ``Irish Fund''), and Matthews International Capital
Management, LLC (the ``Adviser'').
-----------------------------------------------------------------------
SUMMARY: Summary of Application: Applicants request an order to permit
the Fund to operate as an extended payment fund established to invest
in China A shares, to exempt the Fund from the requirement that funds
must disclose a concentration policy regarding investments in any
industry or group of industries, and to permit the Fund and its Series
to sell their limited liability company interests (``Interests'') to,
and redeem their Interests from, certain pooled investment vehicles
that are managed or subadvised by the Adviser, including the UCITS
Funds, the Irish Fund and other entities that may be organized outside
the United States (the UCITS Funds, the Irish Fund and such other
entities are, collectively, the ``Other Funds'').
DATES: Filing Dates: The Application was filed on July 17, 2012, and
amended on December 28, 2012, and August 28, 2013.
Hearing or Notification of Hearing: An order granting the
Application 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 May 12, 2014, and should be accompanied by proof of
service on Applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090. Applicants: the Fund, the
Matthews Funds, and the Adviser, Four Embarcadero Center, Suite 550,
San Francisco, CA 94111; the UCITS Funds, 6, route de Treves, L-2633
Senningerberg, Grand Duchy of Luxembourg; and the Irish Fund, Brooklawn
House, Crampton Avenue/Shelbourne Road, Ballsbridge, Dublin 4, Ireland.
FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at
(202) 551-6826, or Janet M. Grossnickle, Assistant Director, at (202)
551-6821 (Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
Application. The complete Application may be obtained via the
Commission's Web site by searching for the file number, or an Applicant
using the Company name box, at https://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. The Fund, a Delaware limited liability company registered as an
open-end management investment company under Act, is organized as a
series investment company, and will be operated as an extended payment
fund, as discussed below. The Fund is designed to be a viable and
economical means to permit the Matthews Funds, Other Funds and separate
accounts managed by the Adviser to invest in China A Shares. Each
investing Matthews Fund, Other Fund, or separate account will own all
of the Interests offered by a particular Series, and investors in the
Fund's Series will be exclusively entities advised or managed by the
Adviser. Interests will not be registered under the Securities Act of
1933 (the ``Securities Act''); they will be offered only in private
placement transactions to ``accredited investors,'' as defined in
Regulation D under the Securities Act, that are also ``qualified
purchasers,'' as defined in section 2(a)(51) of the Act and the rules
thereunder (``Qualified Purchasers'').\1\ The Fund, through its Series,
will be the entity that invests in and holds China A Shares.\2\
---------------------------------------------------------------------------
\1\ The Fund will adopt a policy to permit the transfer of
Interests only to other Qualified Purchasers.
\2\ Each entity that currently intends to rely on the requested
order has been named as an Applicant. Applicants request that the
relief from section 8(b)(1)(E), section 22(e), and rule 22c-1 of the
Act apply also to any existing or future Series of the Fund, and
that the relief from sections 12(d)(1)(A) and (B) of the Act, and
from section 17(a) of the Act, apply to any existing or future
Series of the Fund, and any investment company, or series thereof,
advised by the Adviser or any entity controlling, controlled by or
under common control with the Adviser that wishes to invest in the
Fund or a Series thereof. Any Series or investment company that
relies on the order in the future will do so only in accordance with
the terms and conditions contained in the Application.
---------------------------------------------------------------------------
[[Page 22716]]
2. The Matthews Funds are organized as series of a Delaware
statutory trust, which is registered under the Act as an open-end
management investment company. The UCITS Funds are organized as the
separate series of Matthews Asia Funds SICAV under the laws of
Luxembourg. The Irish Fund is organized as a private limited company,
and regulated as an open-ended umbrella investment company with
variable capital that may be offered and sold only to qualifying
investors under the laws of the Republic of Ireland. Both the UCITS
Funds and the Irish Fund are not sold to United States residents, are
not registered under the Act, and the offering of their interests have
not been registered under the Securities Act.
3. The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 (``Advisers Act''). The Adviser will
serve as investment adviser to the Fund and its Series, and serves as
investment adviser to the Matthews Funds, Other Funds and separate
accounts. Matthews Global Investors (U.S.), LLC (``MGI''), a Delaware
LLC and an affiliate of the Adviser, acts as managing member of the
Fund.\3\
---------------------------------------------------------------------------
\3\ The Adviser is the sole member of MGI. In the future, the
Adviser or a different affiliate controlling, controlled by or under
common control with the Adviser may act as managing member of the
Fund or a Series thereof.
---------------------------------------------------------------------------
4. Applicants state that a significant majority of publicly traded
Chinese companies list their shares on one or more of three stock
exchanges--the Shanghai, Shenzhen and Hong Kong Stock Exchanges. The
Shanghai and Shenzhen exchanges are located in mainland China and there
are two categories of stock that are listed on these exchanges: China
``A Shares'' which trade in the currency of China, the renminbi, and
``B Shares'' which trade in foreign currencies. ``H Shares'' and ``red
chip'' shares are listed and traded on the Hong Kong Stock Exchange.\4\
Applicants state that far fewer Chinese companies have listed their
shares as H Shares or red chips.
---------------------------------------------------------------------------
\4\ H Shares are shares of companies incorporated in mainland
China, listed on the Hong Kong Stock Exchange and traded in Hong
Kong dollars. ``Red chip'' shares are listed and traded on the Hong
Kong Stock Exchange, issued by companies based in mainland China but
incorporated outside of mainland China.
---------------------------------------------------------------------------
5. The Matthews Funds and Other Funds currently invest in China
through ``H Shares'' or ``red chip'' stocks. Applicants state that for
a variety of reasons, China A Shares are a more attractive means to
invest in Chinese companies than H Shares, red chip stocks, or China B
Shares. Applicants state that, while it is not practical or feasible
for a Matthews Fund, Other Fund, or separate account to individually
invest in China A Shares, a pooled investment vehicle, the Fund, would
allow them to obtain exposure to China A Shares.\5\ The Fund will be
named as the investing vehicle in the Adviser's application to obtain a
license to invest in China.
---------------------------------------------------------------------------
\5\ Applicants state that until 2002, the Chinese government
restricted investment in China A Shares to domestic (i.e., Chinese)
investors. Since 2002, the Chinese Government has permitted certain
non-Chinese investors to invest in China A Shares, but to do so, a
foreign investor must apply for, and receive a license as a
Qualified Foreign Institutional Investor or ``QFII'' and be allotted
a quota, representing the amount in renminbi of China A Shares that
the investor may purchase. The Adviser has received a QFII license
and is in the process of applying for a quota so that it can invest
in China A Shares on behalf of the Matthews Funds, Other Funds and
separate accounts. Applicants are requesting a quota in the amount
of USD 350 million, although the amount of quota received will not
be known until it is granted.
---------------------------------------------------------------------------
6. The Fund has a board of directors (``Board''), a majority of
which will be comprised of persons who are not ``interested persons''
(as defined by section 2(a)(19) of the Act). Each Series will have a
portfolio manager or team of portfolio managers. The portfolio
manager(s) for a Series are expected to be the same individual(s) as
the portfolio manager(s) of the Matthews Fund, Other Fund or separate
account investing in that Series. Accordingly, the portfolio manager(s)
will be able to select China A Shares most suited for the investor's
investment style and strategy, consistent with the remainder of the
investor's portfolio. As portfolio manager(s) of a Series, the
portfolio manager(s) will have responsibilities to the Series and be
overseen by the Board. The portfolio manager(s) also will have
responsibilities, in their capacity as Matthews Fund, Other Fund or
separate account portfolio manager(s), to the applicable investor for
investing the non-Series portion of the portfolio.
7. The Adviser may charge advisory fees to the Series; however, if
advisory fees are charged to a Series used by a Matthews Fund, any
assets of a Matthews Fund invested in that Series will not be counted
for purposes of calculating the Matthews Fund's advisory fee payable to
the Adviser so that the Adviser will not receive separate fees for
managing the same assets, except that any such assets will be applied
and counted as a Matthews Fund's assets for purposes of applying
breakpoints. Fees paid by an Other Fund or separate account would be
negotiated with the Other Fund or separate account and structured in an
appropriate manner such that, unless additional services are provided,
the Adviser would not receive separate fees for managing the same
assets. Fee arrangements for the Series will be subject to review and
approval by the Fund's Board, including its independent members, in
accordance with section 15(c) of the Act, and their impact on overall
fees for the Adviser's client will be fully disclosed to the Applicant
client, including the Matthews Funds.
8. Expenses of each Series, which would include basic fees and
expenses of service providers, such as the Adviser, administrator,
accountant, local custodian and legal counsel, will be charged to the
Series receiving the services generating the expense and accrued on a
daily basis. Applicants state that because the Fund's limited liability
company agreement does not provide to the contrary, the Delaware
Limited Liability Company Act provides that each Series (holding
distinct China A Shares) will have its own debts, liabilities,
obligations and expenses, and such items will not be enforceable
against any other Series. The Fund's books and those of the Series will
be accounted for under standard accounting principles and in accordance
with U.S. Generally Accepted Accounting Principles (GAAP), and they
will be audited annually by a nationally recognized and PCAOB-
registered audit firm in accordance with U.S. Generally Accepted
Auditing Standards.
9. The Fund's custodial arrangements will be overseen by the Fund's
Board in accordance with rule 17f-5 under the Act. The Series used by
Matthews Funds will not lever themselves through borrowing, but Series
used by Other Funds or separate accounts may, or in the future may be
permitted to, use leverage. Applicants state that the Fund will value
its holdings daily in accordance with section 2(a)(41) of the Act, and
the value will take into account all relevant facts and circumstances,
including (if relevant) the length of time before proceeds can be
repatriated (as discussed below), and will be applied under the
oversight of the Fund's valuation committee in accordance with
delegated authority and procedures approved by the Fund's Board. The
Fund also has a chief compliance officer and will implement and
maintain a compliance program in accordance with rule 38a-1 under the
Act.
10. Applicants state that access by the Adviser's clients to the
quota (i.e., to China A Shares) will be a limited opportunity and will
be allocated in accordance with the Adviser's Access to Research and
Allocation of Portfolio
[[Page 22717]]
Opportunities Procedures (``Access Allocation Procedures''), which are
designed to ensure that allocations are fair and equitable over time to
all of the Adviser's accounts. The Adviser will amend the Access
Allocation Procedures to specifically address issues arising from the
quota. Similarly, if more than one Matthews Fund, Other Fund or
separate account seeks to repatriate proceeds at the same time, and
Chinese regulations limit the aggregate amount of proceeds that may be
repatriated at any given time to a level below the aggregate amount
sought to be repatriated, the requests by the applicable portfolio
manager(s) will be aggregated, if received at or about the same time,
and proceeds available for repatriation will be allocated pro rata
among requesting investors.\6\ The Adviser will not, however, when
making investment decisions for the Fund or its Series, take into
consideration whether selling China A Shares and repatriating proceeds
could impact the continued availability of the quota. The Adviser will
also not take into consideration whether buying China A Shares could
affect the continued availability of the quota.\7\
---------------------------------------------------------------------------
\6\ Applicants are not seeking comfort and acknowledge that the
Commission is providing no opinion on whether the Access Allocation
Procedures meet the standards applicable under the Act or the
Advisers Act.
\7\ Applicants state that the Chinese authorities may reduce or
revoke a QFII's quota if the QFII does not invest the full amount of
its quota over a phase-in period, or, in certain cases, if it
repatriates its investments below the quota amount.
---------------------------------------------------------------------------
11. Applicants note that the significant majority (at least 85%) of
the China A Shares to be held by the Fund would be able to be disposed
of in the ordinary course of business since the China A Share market is
liquid, and thus holdings would meet the liquidity requirements in the
context of a fund's ability to dispose of an asset. However, while the
China A Shares could be sold in a timely manner in exchange for
renminbi, the investing Matthews Fund, Other Fund or separate account
would only be able to repatriate the proceeds weekly,\8\ which in some
circumstances might not be within seven days of receipt of the
redemption request. Each Matthews Fund will deem China A Shares to be
illiquid investments and limit its holdings in the Fund to no more than
15% of its net assets, unless Chinese repatriation restrictions permit
repatriation, and the relevant Series permits redemption, within seven
days such that the Matthews Fund, or the Adviser in accordance with a
Matthews Fund's policies, could deem the Interests to be liquid under
applicable Commission and staff guidance.
---------------------------------------------------------------------------
\8\ Under Chinese regulations, repatriation will be available
after an initial three-month lock-up period, during which the Fund
will not be able to repatriate proceeds, but would be able to buy
and sell different China A Shares without restrictions. After the
lock-up period, repatriation may occur once a week, with the total
amount repatriated by the Fund in any month limited to no more than
20% of the Fund's net asset value (``NAV'') as of the end of the
prior year. The regulations do not currently require the
repatriation to take place on the same day each week.
---------------------------------------------------------------------------
12. Applicants state that the repatriation restrictions may prevent
the Fund from being able to redeem its Interests within the time period
otherwise required by the Act. As an extended payment fund, the Fund
would pay redemption proceeds no less frequently than on one day each
month (any such date, a ``Redemption Payment Date''). Redemption
payments would be based on the Fund's NAV on the Redemption Payment
Date, and redemption payments would only be made for redemptions
requested on or before the Redemption Payment Date and time for that
particular month (or shorter period). The Fund will adopt a fundamental
policy specifying its redemption procedures, and this policy will be
disclosed in the Fund's registration statement.
13. The Fund will establish, and the Board will approve, written
procedures reasonably designed to ensure that the Fund's portfolio
assets are sufficiently liquid so that the Fund can comply with its
fundamental policy on redemptions, taking into account current market
conditions and regulatory requirements and the Fund's investment
objectives. The Board will review the procedures and the overall
composition of the portfolio at least annually and on such other
occasions as may be necessary in light of changes in the markets for
the Fund's portfolio assets and applicable regulatory requirements
concerning, among other matters, repatriation restrictions.
Applicants' Legal Analysis
Applicants request an order to exempt the Fund from section 22(e)
of the Act and rule 22c-1 thereunder to the extent necessary to permit
the Fund to operate as an extended payment fund. Applicants also
request that the order exempt the Fund from section 8(b)(1)(E) of the
Act and the requirement that the Fund disclose a concentration policy
regarding investments in any industry or group of industries. Instead,
the order would require that the Fund disclose that it does not have a
concentration policy and require that any registered investment company
that invests in a Series will aggregate the Series' holdings with its
own holdings for purposes of evaluating its concentration policy.
Applicants further request that the order grant an exemption from
sections 12(d)(1)(A) and (B) of the Act, and an exemption from section
17(a) of the Act, to the extent necessary to permit the Fund and its
Series to sell their Interests to, and redeem their Interests from, the
Other Funds.
A. Section 22(e) of the Act and Rule 22c-1 Under the Act
1. Rule 22c-1 under the Act generally requires a registered open-
end investment company to sell, redeem, or repurchase its securities at
the price based on the current NAV of such security next computed after
receipt of a tender of such security for redemption. Applicants state
that rule 22c-1 was designed primarily to address the practice of
``backward pricing'' of fund shares. That practice involved pricing
fund shares for purchase or redemption based on the NAV determined
prior to the purchase or redemption request. This pricing mechanism
enabled a fund's insiders to engage in ``riskless trading'' by buying
shares at an NAV that they knew was likely to increase because of
market action after the shares were priced. Applicants assert that, in
effect, backward pricing created the possibility that some investors
could trade fund shares at the expense of non-redeeming shareholders.
Rule 22c-1 eliminates this problem by requiring ``forward pricing,'' or
pricing fund shares at the close of the market after a purchase or
redemption request is received. Under rule 22c-1, an open-end equity
fund typically computes the value of shares tendered for redemption on
any given day at 4:00 p.m. on that day.
2. Applicants propose that the Fund will price Interests tendered
for redemption at the close of business on the Redemption Payment Date,
which will be no less frequently than one day each month. The Fund will
redeem Interests on a given Redemption Payment Date only for
redemptions requested on or before the close of business (generally
4:00 p.m. Eastern time) on the redemption pricing date (which will be
the Redemption Payment Date). Applicants assert that their proposal
does not raise the concern of ``backward pricing'' because shares will
be priced only after a tender for redemption is received. Applicants
state that the Fund's pricing timeline will be clearly disclosed and is
consistent with the Act because it will treat all investors equally and
not dilute non-redeeming shareholders' interests. In addition, all
investors in the Fund will be Qualified Purchasers, who are capable of
[[Page 22718]]
understanding the risks presented by the Fund's redemption policy.
3. Section 22(e) of the Act provides that a registered investment
company may not suspend the right of redemption or postpone the date of
payment or satisfaction upon redemption of any redeemable security in
accordance with its terms for more than seven days after the tender of
the security to the company. Applicants state that the Redemption
Payment Date, which will be no less frequent than one day each month,
may be more than seven days from the time that a shareholder of a
Series tenders Interests to the Series. Thus, Applicants are requesting
relief from section 22(e) to permit the Fund and its Series to pay
redemption proceeds more than seven days from the tender of such
Interests.
4. Applicants state that the primary purpose of section 22(e) is to
address the abusive practices of early open-end companies that claimed
that their securities were redeemable, only to then institute barriers
to redemption. Applicants represent that the Fund's policies will not
raise the possibility of such abuses. The Fund's redemption policy will
be a fundamental policy changeable only by a majority vote of its
shareholders and the approval of the Commission or its staff.
Applicants undertake to disclose the Fund's redemption policy on the
cover page of its offering memorandum and in any marketing materials,
and to refrain from holding itself out as a ``mutual fund.'' Most
importantly, the Fund will limit its investors to Qualified Purchasers,
who are highly sophisticated investors capable of understanding the
Fund's redemption policy and its associated risks.
5. In 1992, the Commission proposed rule 22e-3 under the Act that
set forth an ``extended payment fund'' structure similar to that
proposed for the Fund. The Commission's proposal was designed to permit
a registered investment company that could both offer redeemable
securities and invest in assets, including less liquid foreign
securities, that did not meet the seven-day liquidity standard for
traditional open-end funds. Under proposed rule 22e-3, an open-end fund
could make payment upon redemption of its securities up to 31 days
after tender of the securities to the fund at NAV determined on the
next redemption pricing date following the tender, provided that: (a)
The fund did so pursuant to a fundamental policy, setting forth the
number of days between a tender and the next redemption pricing and
payment dates, changeable only with approval of a majority of the
fund's outstanding voting securities; (b) at least 85% of the fund's
assets consisted of assets that either (i) may be sold in the ordinary
course of business at approximately the price used to compute the
fund's NAV, within the period between the tender and the next
redemption payment date, or (ii) mature by the next redemption payment
date; and (c) the fund does not hold itself out to investors as a
mutual fund. Applicants assert that the Fund will comply with
requirements that are designed to achieve the same goals, but which
account for the repatriation restrictions discussed above.
6. Section 6(c) of the Act permits the Commission to exempt any
person or transaction from any provision of the Act if the exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the
policies of the Act. Applicants believe that the relief is appropriate
because the Fund can provide a convenient and cost-effective means of
obtaining tailored exposure to China A Shares for investing Matthews
Funds, Other Funds and separate accounts. Applicants also believe that
the requested relief is consistent with the protection of investors
because shares of the Fund will be available only to Qualified
Purchasers. Finally, Applicants state that the relief is consistent
with the purposes intended by the policies of the Act because, as
discussed above, it does not raise the concerns addressed by section
22(e) of the Act and rule 22c-1 under the Act.
B. Section 8(b)(1)(E) of the Act
1. Section 8(b)(1)(E) of the Act provides that every registered
investment company shall file with the Commission a recital of its
policy in respect of concentrating investments in a particular industry
or group of industries. Form N-1A implements the section 8(b)
requirement to disclose a fund's concentration policy: Instruction 4 to
Item 9 of Form N-1A requires a fund to ``[d]isclose any policy to
concentrate in securities of issuers in a particular industry or group
of industries (i.e., investing more than 25% of a fund's net assets in
a particular industry or group of industries).'' Applicants state that
the Commission's staff has taken the position that statements of
concentration policy pursuant to which registrants reserve the right to
concentrate in particular industries without limitation if deemed
advisable and in the best interests of the shareholders do not comply
with section 8(b)(1). Applicants assert that the primary purposes of
the industry concentration test include preventing a fund's investment
adviser from inappropriately concentrating a fund's investments
contrary to investor expectations and from reserving freedom of action
to concentrate the fund's investments, which may not provide investors
with sufficient clarity to form expectations about concentration.
2. Applicants state that the application of section 8(b)(1)(E) at
the Series level imposes a barrier to the efficient operation of the
Series when conducting otherwise routine portfolio changes, contrary to
the expectations of Matthews Fund or Other Fund shareholders. For a
Series with a limited number of holdings, routine portfolio changes
could frequently result in a Series ``concentrating'' its investments
in different industries or groups of industries, using the Commission's
25% threshold for determining concentration, even though such Series'
``concentration'' would have little or no meaningful impact on the
industry concentration of the investing Matthews Fund's or Other
Fund's'overall portfolio. Applicants state that absent relief and
assuming a policy to concentrate in the particular industry has not
been disclosed in the Series' registration statement, any routine
portfolio change that results in a Series ``concentrating'' its
investments (measured solely at the Series' level) would need the
approval of a majority of the outstanding voting securities of the
Series in accordance with section 13 of the Act. Applicants submit that
while a Series could obtain a shareholder vote every time it crossed
the 25% ``concentration'' threshold since each Series will be owned by
a client of the Adviser, this result would be unnecessary, cumbersome,
and serve no policy objective.
3. Applicants propose that, due to the structure, nature and
purpose of the Fund, each Series be exempt from section 8(b)(1)(E) and
the requirement to disclose a policy of concentrating in a particular
industry or group of industries. Applicants have proposed conditions
that would require each Series to disclose that it does not have a
concentration policy and that any registered investment company that
invests in a Series will aggregate the Series' holdings with its own
holdings for purposes of evaluating its concentration policy.
Applicants state that an investor in a Matthews Fund should have
expectations regarding the industry concentration of the portfolio
taken as a whole of the Matthews Fund in which s/he has invested, and
s/he is protected by the requirement that the
[[Page 22719]]
Matthews Fund disclose and adhere to its own concentration policy.
Applicants submit that imposing an additional layer of concentration
requirements on a Series would not serve an investor protection
purpose. Accordingly, Applicants assert that granting the requested
relief is warranted under the standards set forth in section 6(c) of
the Act.
C. Section 12(d)(1) of the Act
1. Section 12(d)(1)(A) provides that no registered investment
company may acquire securities of another investment company if such
securities represent more than 3% of the acquired company's outstanding
voting stock, more than 5% of the acquiring company's total assets, or
if such securities, together with the securities of other investment
companies, represent more than 10% of the acquiring company's total
assets. Section 12(d)(1)(B) provides that no registered open-end
investment company, its principal underwriter or any broker or dealer
may sell the company's securities 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 cause more than 10% of the acquired
company's voting stock to be owned by investment companies.
2. Section 12(d)(1)(G) of the Act provides, in relevant part, that
section 12(d)(1) will not apply to the securities of a registered open-
end investment company purchased by another registered open-end
investment company, if: (a) The acquiring company and the acquired
company are part of the same group of investment companies; (b) the
acquiring company holds only securities of acquired companies that are
part of the same group of investment companies, government securities
and short-term paper; (c) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not
excessive under rules adopted pursuant to section 22(b) or section
22(c) of the Act by a securities association registered under section
15A of the Securities Exchange Act of 1934 or by the Commission; and
(d) the acquired company has a policy that prohibits it from acquiring
securities of registered open-end management investment companies or
registered unit investment trusts in reliance on section 12(d)(1)(F) or
(G) of the Act. Applicants state that section 12(d)(1)(G) is
unavailable largely due to the Other Funds not being ``registered''
under the Act; its unavailability is not due to any difference that
relates to the policies supporting section 12(d)(1). Applicants further
state that if the Other Funds were registered in the United States as
open-end funds, they, like the Matthews Funds, would be entitled to
rely on section 12(d)(1)(G) and the rules thereunder to invest in the
Series, if they were part of the same ``group of investment
companies,'' as defined in Section 12(d)(1)(G)(ii).
3. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt any person, security, or transaction from any provision of
section 12(d)(1), if the exemption is consistent with the public
interest and the protection of investors. Applicants seek an exemption
under section 12(d)(1)(J) to permit the Other Funds to purchase
Interests of Series which, as discussed herein, would result in an
Other Fund owning 100% of the Interests of a particular Series.
4. Applicants state that the proposed arrangement will not raise
the policy concerns underlying sections 12(d)(1)(A) and (B), including
undue influence by a fund of funds over underlying funds, excessive
layering of fees and overly complex fund structures. Accordingly,
Applicants believe that the requested exemption is consistent with the
public interest and the protection of investors.
5. Applicants contend that the proposed arrangement will not result
in undue influence by an Other Fund over the Fund because, as manager
of the Other Funds, the Adviser will act to prevent undue influence.
6. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. Applicants state that, among other
protections described above, fee arrangements for the Series will be
subject to review and approval by the Fund's Board, including its
independent members, in accordance with Section 15(c) of the Act, and
their impact on overall fees for the Adviser's client will be fully
disclosed to the client. With respect to Other Funds that invest in the
Fund, no sales load will be charged by the Fund. Other sales charges
and service fees, as defined in NASD Conduct Rule 2830,\9\ if any, will
only be charged at the Fund level or at the Other Fund level, not both.
With respect to other investments in the Fund, any sales charges and/or
service fees charged with respect to shares of the Fund will not exceed
the limits applicable to a fund of funds set forth in such Rule 2830.
---------------------------------------------------------------------------
\9\ References to NASD Conduct Rule 2830 include any successor
or replacement rule that may be adopted by the Financial Industry
Regulatory Authority.
---------------------------------------------------------------------------
7. Applicants contend that the proposed arrangement will not create
an overly complex fund structure. Condition 10 provides that no Series
of the 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 of section 12(d)(1)(A), except to the extent that such
Series of the Fund acquires, or is deemed to have acquired, the
securities pursuant to exemptive relief from the Commission permitting
such Series of the Fund to (a) acquire securities of one or more
affiliated investment companies or companies relying on section 3(c)(1)
or 3(c)(7) for short-term cash management purposes, or (b) engage in
interfund borrowing and lending transactions.
D. Section 17(a) of the Act
1. Section 17(a) of the Act generally prohibits purchases and sales
of securities, on a principal basis, between a registered investment
company and any affiliated person of the company, and affiliated
persons of such persons. Section 2(a)(3) of the Act defines an
``affiliated person'' of another person to include, among other things,
any person directly or indirectly owning, controlling or holding with
power to vote 5% or more of the other's outstanding voting securities;
any person 5% or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held with power to vote by
the other person; any person directly or indirectly controlling,
controlled by or under common control with the other person; and any
investment adviser to an investment company. Applicants describe
several bases of potential affiliation in the Application, and state
that if the Other Funds and the Fund are deemed affiliates of each
other, or even second-tier affiliates, the sale of Interests of the
Fund to the Other Funds, and the redemption of such Interests by the
Other Funds, could be prohibited under section 17(a) of the Act.
2. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
it finds that (a) the terms of the proposed transaction, including the
consideration to be paid or received, are fair and reasonable and do
not involve overreaching on the part of any person concerned, (b) the
proposed transaction is consistent with the policies of each registered
investment company involved, and (c) the proposed
[[Page 22720]]
transaction is consistent with the general purposes of the Act.
3. Applicants seek an exemption under sections 6(c) and 17(b) to
allow the proposed transactions. Applicants state that the transactions
satisfy the standards for relief under sections 6(c) and 17(b).
Specifically, Applicants state that the terms of the transactions are
fair and reasonable and do not involve overreaching. Applicants note
that the consideration paid and received for the sale and redemption of
Interests of the Fund will be based on the NAV of the Fund and, no
sales load will be charged by the Fund, and other sales charges and
service fees, if any, will only be charged at the Fund level or the
Other Fund level, but not both. In addition, Applicants represent that
the proposed transactions will be consistent with the policies of each
registered investment company involved, and the general purposes of the
Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The Fund's outstanding securities will be owned exclusively by
persons who are Qualified Purchasers, as defined in section 2(a)(51) of
the Act and the rules thereunder.
2. The Fund will adopt a fundamental policy, which may be changed
only by a majority vote of the outstanding voting securities of the
Fund and only upon approval by the Commission or its staff, that will
specify the circumstances in which the Fund will redeem its Interests,
such that the Fund (a) will pay redemptions no less frequently than on
one day each month (each such day, a Redemption Payment Date), (b) will
calculate its NAV applicable to a redemption request received in good
order in accordance with procedures set forth in the Fund's prospectus
as of the close of business on the next redemption pricing date and
time following such redemption request, which will be on the same day
as the Redemption Payment Date, and (c) will redeem Interests in a
given month only for redemptions requested on or before the redemption
pricing date and time for that Redemption Payment Date.
3. At least 85% of the assets of the Fund will consist of assets:
(a) That the Fund reasonably believes may be sold or disposed of in
local currency in the ordinary course of business, at approximately the
price used in computing the Fund's NAV, within seven days, or
(b) that mature by the next Redemption Payment Date.
4. The Board of the Fund, including a majority of the disinterested
trustees, will adopt written procedures designed to ensure that the
Fund will comply with the terms and conditions of the requested order.
The Board will review these procedures at least annually and approve
such changes as it deems necessary.
5. The Fund will not hold itself out as a ``mutual fund.'' The Fund
will disclose its redemption policy on the cover page of its offering
memorandum and in any marketing materials.
6. Each Series will disclose in its registration statement that it
does not have a concentration policy regarding investments in any
industry or group of industries.
7. Any registered investment company that invests in a Series will
aggregate the Series' holdings with its own holdings for purposes of
evaluating its concentration policy regarding investments in any
industry or group of industries.
8. With respect to Other Funds that invest in the Fund, no sales
load will be charged by the Fund. Other sales charges and service fees,
as defined in NASD Conduct Rule 2830, if any, will only be charged at
the Fund level or at the Other Fund level, not both. With respect to
other investments in the Fund, any sales charges and/or service fees
charged with respect to Interests of the Fund or its Series will not
exceed the limits applicable to a fund of funds set forth in such Rule
2830.
9. The Adviser will be an investment adviser or manager to each
series of the Matthews Funds, Other Fund, or separate account that
invests in the Fund.
10. No Series of the Fund will acquire securities of any investment
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in
excess of the limits contained in section 12(d)(1)(A) of the Act,
except to the extent that such Series of the Fund acquires, or is
deemed to have acquired, the securities pursuant to exemptive relief
from the Commission permitting such Series of the Fund to (a) acquire
securities of one or more affiliated investment companies or companies
relying on section 3(c)(1) or 3(c)(7) of the Act for short-term cash
management purposes, or (b) engage in interfund borrowing and lending
transactions.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-09235 Filed 4-22-14; 8:45 am]
BILLING CODE 8011-01-P
