U.S. One, Inc. and U.S. One Trust; Notice of Application, 6417-6421 [2010-2749]
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Federal Register / Vol. 75, No. 26 / Tuesday, February 9, 2010 / Notices
unless it displays a currently valid
control number.
Written comments regarding the
above information should be directed to
the following persons: (i) Desk Officer
for the Securities and Exchange
Commission, Office of Information and
Regulatory Affairs, Office of
Management and Budget, Room 10102,
New Executive Office Building,
Washington, DC 20503 or send an email to: Shagufta_Ahmed@omb.eop.gov;
and (ii) Charles Boucher, Director/CIO,
Securities and Exchange Commission,
C/O Shirley Martinson, 6432 General
Green Way, Alexandria, VA 22312; or
send an e-mail to:
PRA_Mailbox@sec.gov. Comments must
be submitted to OMB within 30 days of
this notice.
Dated: February 1, 2010.
Florence E. Harmon,
Deputy Secretary.
respond to, a collection of information
unless it displays a currently valid
control number.
Written comments regarding the
above information should be directed to
the following persons: (i) Desk Officer
for the Securities and Exchange
Commission, Office of Information and
Regulatory Affairs, Office of
Management and Budget, Room 10102,
New Executive Office Building,
Washington, DC 20503 or send an
e-mail to:
Shagufta_Ahmed@omb.eop.gov; and (ii)
Charles Boucher, Director/CIO,
Securities and Exchange Commission,
C/O Shirley Martinson, 6432 General
Green Way, Alexandria, VA 22312; or
send an e-mail to:
PRA_Mailbox@sec.gov. Comments must
be submitted to OMB within 30 days of
this notice.
Dated: February 1, 2010.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–2741 Filed 2–8–10; 8:45 am]
BILLING CODE 8011–01–P
[FR Doc. 2010–2738 Filed 2–8–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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Extension:
Schedule 13E–4F; OMB Control No. 3235–
0375; SEC File No. 270–340.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget this
request for extension of the previously
approved collection of information
discussed below.
Schedule 13E–4F (17 CFR 240.13e–
102) may be used by an issuer that is
incorporated or organized under the
laws of Canada to make a cash tender
or exchange offer for the issuer’s own
securities and less than 40 percent of
the securities are held by U.S. holders.
The information collected must be filed
with the Commission and is publicly
available. We estimate that it takes
approximately 2 hours per response to
prepare Schedule 13E–4F and that the
information is filed by approximately 3
respondents annually for a total annual
reporting burden of 6 hours (2 hours per
response × 3 responses).
An agency may not conduct or
sponsor, and a person is not required to
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Dated: February 1, 2010.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–2737 Filed 2–8–10; 8:45 am]
Upon Written Request; Copies Available
From: Securities and Exchange
Commission, Office of Investor
Education and Advocacy,
Washington, DC 20549–0213.
17:35 Feb 08, 2010
hours (2 hours per response × 161
responses).
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
Written comments regarding the
above information should be directed to
the following persons: (i) Desk Officer
for the Securities and Exchange
Commission, Office of Information and
Regulatory Affairs, Office of
Management and Budget, Room 10102,
New Executive Office Building,
Washington, DC 20503 or send an email to: Shagufta_Ahmed@omb.eop.gov;
and (ii) Charles Boucher, Director/CIO,
Securities and Exchange Commission,
C/O Shirley Martinson, 6432 General
Green Way, Alexandria, VA 22312; or
send an e-mail to:
PRA_Mailbox@sec.gov. Comments must
be submitted to OMB within 30 days of
this notice.
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
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6417
BILLING CODE 8011–01–P
Submission for OMB Review;
Comment Request
SECURITIES AND EXCHANGE
COMMISSION
Upon Written Request; Copies Available
From: Securities and Exchange
Commission, Office of Investor
Education and Advocacy,
Washington, DC 20549–0213.
Extension:
Form F–X, OMB Control No. 3235–0379,
SEC File No. 270–336.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget this
request for extension of the previously
approved collection of information
discussed below.
Form F–X (17 CFR 239.42) is used to
appoint an agent for service of process
by Canadian issuers registering
securities on Form F–7, F–8, F–9 or F–
10 under the Securities Act of 1933
(U.S.C. 77a et seq.), or filing periodic
reports on Form 40–F under the
Exchange Act of 1934 (15 U.S.C. 78a et
seq.). The information collected must be
filed with the Commission and is
publicly available. We estimate that it
takes approximately 2 hours per
response to prepare Form F–X and that
the information is filed by
approximately 161 respondents for a
total annual reporting burden of 322
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[Investment Company Act Release No.
29128; 812–13658–01]
U.S. One, Inc. and U.S. One Trust;
Notice of Application
February 2, 2010.
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
(‘‘Act’’) for an exemption from sections
2(a)(32), 5(a)(1) and 22(d) of the Act and
rule 22c–1 under the Act, and under
sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and
(a)(2) of the Act.
U.S. One, Inc. (the
‘‘Advisor’’) and U.S. One Trust (the
‘‘Trust’’).
SUMMARY OF APPLICATION: Applicants
request an order that permits: (a) Series
of certain open-end management
investment companies to issue shares
(‘‘Shares’’) redeemable in large
aggregations only (‘‘Creation Units’’); (b)
secondary market transactions in Shares
to occur at negotiated market prices; and
(c) certain affiliated persons of the series
to deposit securities into, and receive
securities from, the series in connection
APPLICANTS:
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Federal Register / Vol. 75, No. 26 / Tuesday, February 9, 2010 / Notices
with the purchase and redemption of
Creation Units.
FILING DATES: The application was filed
on May 20, 2009, and amended on
September 28, 2009, and February 1,
2010.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on February 26, 2010, 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: P.O. Box 17073, Reno,
NV 89511.
FOR FURTHER INFORMATION CONTACT:
Bruce R. MacNeil, Senior Counsel, at
(202) 551–6817 or Julia Kim Gilmer,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Office of Investment Company
Regulation).
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.
SUPPLEMENTARY INFORMATION:
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Applicants’ Representations
1. The Trust, a statutory trust
established under the laws of Delaware,
is registered with the Commission as an
open-end management investment
company. The Trust is organized as a
series investment company with one
initial series (the ‘‘Initial Fund’’). The
investment objective of the Initial Fund
will be to provide capital appreciation.
The Initial Fund and all future series of
the Trust (‘‘Future Funds,’’ collectively
with the Initial Fund, ‘‘Funds’’) will
attempt to achieve their investment
objectives by utilizing an active
management strategy. Each Fund’s
investment objective, policies and
investment strategies will be fully
disclosed in the Fund’s prospectus
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(‘‘Prospectus’’) 1 and statement of
additional information (‘‘SAI’’). Each
Fund will primarily hold shares of
underlying exchange-traded funds
(‘‘ETFs’’), as well as shares of certain
exchange-traded products that are not
registered as investment companies
under the Act.2 Applicants will only
invest in unaffiliated ETFs that have
received certain exemptive relief from
the Commission to permit such
investments in excess of the limits of
section 12(d)(1)(A) and (B) of the Act.
Any Future Fund (a) will be advised by
the Advisor or an entity controlled by or
under common control with the
Advisor, and (b) will comply with the
terms and conditions stated in the
application.3
2. The Advisor, a Nevada corporation,
or a subsidiary of such company, will
serve as the investment adviser to each
Fund. The Advisor, or its subsidiary, if
applicable, will be registered as an
investment adviser of the Investment
Advisers Act of 1940 (‘‘Advisers Act’’)
prior to any Fund beginning operations.
Applicants anticipate that Funds also
may engage subadvisors
(‘‘Subadvisors’’). Any Subadvisor will be
registered under the Advisers Act.
3. Applicants anticipate that shares of
the Funds (‘‘Shares’’) will be sold at a
price of between $25 and $200 per
Share in Creation Units of 50,000 or
more Shares. All orders to purchase
Creation Units must be placed with the
principal underwriter and distributor of
the Creation Units (‘‘Distributor’’) by or
through a party that has entered into a
participant agreement with the
Distributor (‘‘Authorized Participant’’).
Authorized Participants will include
broker-dealers, banks, trust companies,
and clearing companies that are
participants in the Depository Trust
1 All representations and conditions contained in
the application that require a Fund to disclose
particular information in the Fund’s Prospectus
and/or annual report shall be effective with respect
to the Fund until the time that the Fund complies
with the disclosure requirements adopted by the
Commission in Investment Company Act Release
No. 28584 (Jan. 13, 2009).
2 The Funds may invest in exchange-traded
products that invest primarily in commodities or
currency, but otherwise operate in a manner similar
to exchange-traded products registered under the
Act. In addition, the Funds may also invest in
equity securities or fixed income securities traded
in a U.S. or non-U.S. markets. Neither the Initial
Funds nor any Future Fund will invest in options
contracts, futures contracts, or swap agreements.
The Funds may also invest in equity securities or
fixed income securities traded in international
markets or in a combination of equity, fixed income
and U.S. money market securities and/or non-U.S.
money market securities.
3 All existing entities that currently intend to rely
on the requested order have been named as
applicants. Any other existing or future entity that
subsequently relies on the order will comply with
the terms and conditions of the application.
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Company (‘‘DTC,’’ and such participants,
‘‘DTC Participants’’). Purchases of
Creation Units of the Funds will be
made generally by means of an in-kind
tender of shares of specified ETFs (the
‘‘Deposit Securities’’), with any cash
portion of the purchase price (the ‘‘Cash
Amount’’) to be kept to a minimum. The
Cash Amount is an amount equal to the
difference between the NAV of a
Creation Unit and the market value of
the Deposit Securities. The Trust
reserves the right to permit, under
certain circumstances, a purchaser of
Creation Units to substitute cash in lieu
of depositing some or all of the requisite
Deposit Securities. The Trust may in the
future determine that Shares of one or
more Funds may be purchased in
Creation Units on a cash-only basis if
the Trust and the Advisor believe such
method would substantially minimize
the Trust’s transactional costs or
enhance its operational efficiencies.
4. Each Fund will charge a fee
(‘‘Transaction Fee’’) in connection with
the sale or redemption of Creation Units
to protect existing shareholders from the
dilutive costs associated with the
purchase and redemption of Creation
Units. Each purchaser of a Creation Unit
will receive a Prospectus that contains
complete disclosure about the
Transaction Fee. All orders to purchase
Creation Units must be placed with the
Distributor no later than the closing
time of the regular trading session on
the NYSE (ordinarily 4 p.m. ET) in order
for the purchaser to receive the NAV
determined on that date. The Distributor
will transmit all purchase orders to the
relevant Fund and will also maintain a
record of Creation Unit purchases, send
out confirmations of such purchases,
and furnish a Prospectus to purchasers
of Creation Units.
5. The Trust intends to list the Shares
of each Fund on a national securities
exchange (‘‘Listing Market’’) such as the
NYSE. It is expected that one or more
member firms will be designated to act
as a specialist or market maker and
maintain a market for the Shares trading
on the Listing Market (‘‘Market
Makers’’). The price of Shares trading on
the Listing Market will be based on a
current bid/offer market. No secondary
sales will be made to brokers or dealers
at a concession by the Distributor or by
a Fund. Purchases and sales of Shares
in the secondary market, which will not
involve a Fund, will be subject to
customary brokerage commissions and
charges.
6. Purchasers of Shares in Creation
Units may hold such Shares or may sell
them into the secondary market.
Applicants expect that purchasers of
Creation Units will include institutional
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Federal Register / Vol. 75, No. 26 / Tuesday, February 9, 2010 / Notices
traded fund. All marketing materials
that describe the method of obtaining,
buying or selling Creation Units, or
Shares traded on the Listing Market, or
refer to redeemability, will prominently
disclose that Shares are not individually
redeemable and that the owners of
Shares may acquire or redeem Shares
from a Fund in Creation Units only. The
same approach will be followed in the
SAI, shareholder reports and investor
educational materials issued or
circulated in connection with the
Shares. The Trust will provide copies of
its annual and semi-annual shareholder
reports to DTC Participants for
distribution to beneficial owners of
Shares.
9. The Trust (or the Listing Market)
intends to maintain a Web site that will
be publicly available at no charge,
which will include the Prospectus and
other information about the Funds that
is updated on a daily basis. On each
Business Day, before the
commencement of trading in Shares on
the Listing Market, each Fund will
disclose the identities and weightings of
the securities and other assets held by
the Fund that will form the basis for the
Fund’s calculation of NAV at the end of
the Business Day.6
investors and arbitrageurs, who will
purchase or redeem Creation Units of a
Fund in pursuit of arbitrage profit and
thereby enhance the liquidity of the
secondary market and keep the market
price of shares close to their NAV.
Applicants expect that secondary
market purchasers of Shares will
include both institutional investors and
retail investors for whom Shares will
provide a useful, retail-priced,
exchange-traded mechanism for
investing in a professionally managed,
diversified selection of ETFs.4
7. Shares will not be individually
redeemable, and owners of Shares may
acquire those Shares from a Fund, or
tender such Shares for redemption to
the Fund, in Creation Units only. To
redeem, an investor will have to
accumulate enough Shares to constitute
a Creation Unit. Redemption orders
must be placed by or through an
Authorized Participant. A redeeming
investor will receive a basket of
securities designated to be delivered for
Creation Unit redemptions on the date
that the request for redemption is
submitted (‘‘Redemption Securities’’),
which in most cases will be the same as
the Deposit Securities required to
purchase Creation Units on that date,
and will either receive from or pay to
the Fund an amount calculated in the
same manner as the Cash Amount
(‘‘Cash Redemption Payment’’).5 A Fund
may make redemptions partly in cash in
lieu of transferring one or more
Redemption Securities to a redeeming
investor if the Fund determines that
such alternative is warranted, such as if
the redeeming investor is unable, by law
or policy, to own a particular
Redemption Security. A redeeming
investor also must pay a Transaction
Fee to cover custodial costs.
8. The Trust will not be advertised or
marketed or otherwise ‘‘held out’’ as a
traditional open-end investment
company or a mutual fund. The
designation of the Trust and the Funds
in all marketing materials will be
limited to the terms ‘‘exchange-traded
fund,’’ ‘‘investment company,’’ ‘‘fund’’
and ‘‘trust’’ without reference to an
‘‘open-end fund’’ or a ‘‘mutual fund,’’
except to compare and contrast the
Trust and the Funds with traditional
mutual funds. Each Fund’s Prospectus
will also prominently disclose that the
Fund is an actively managed exchange-
Applicants’ Legal Analysis
1. Applicants request an order under
section 6(c) of the Act granting an
exemption from sections 2(a)(32), 5(a)(1)
and 22(d) of the Act and rule 22c–1
under the Act, and under sections 6(c)
and 17(b) of the Act granting an
exemption from sections 17(a)(1) and
(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
4 Shares will be registered in book-entry form
only. DTC or its nominee will be the registered
owner of all outstanding Shares. DTC or DTC
Participants will maintain records reflecting
beneficial owners of Shares.
5 Applicants state the Cash Redemption Payment
may differ if the Redemption Securities are not
identical to the Deposit Securities on that day.
6 Applicants note that under accounting
procedures followed by the Funds, 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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concerned, and the proposed
transaction is consistent with the
policies of the registered investment
company and the general provisions of
the Act.
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 holder, upon its
presentation to the issuer, is entitled to
receive approximately his proportionate
share of the issuer’s current net assets,
or the cash equivalent. Because Shares
will not be individually redeemable,
applicants request an order that would
permit each Fund, as a series of an
open-end management investment
company, to issue Shares that are
redeemable in Creation Units only.
Applicants state that Creation Units will
always be redeemable. Applicants
further state that because Creation Units
may always be purchased and redeemed
at NAV (less certain transactional
expenses), 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
substantially from the NAV of Creation
Units.
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, which is
currently being offered to the public by
or through a principal underwriter,
except at a current public offering price
described in the prospectus. Rule 22c–
1 under the Act generally requires that
a dealer selling, redeeming, or
repurchasing a redeemable security do
so only at a price based on its NAV.
Applicants state that trading in Shares
will take place on and away from the
Listing Market at all times on the basis
of current bid/offer prices, not at a
current offering price described in the
prospectus, and not at a price based on
NAV. Thus, purchases and sales of
Shares in the secondary market will not
comply with section 22(d) of the Act
and rule 22c–1 under the Act.
Applicants request an exemption under
section 6(c) from these provisions.
5. Applicants assert that the concerns
sought to be addressed by section 22(d)
of the Act and rule 22c–1 under the Act
with respect to pricing are equally
satisfied by the proposed method of
pricing Shares. Applicants maintain that
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while there is little legislative history
regarding section 22(d), its provisions,
as well as those of rule 22c–1, appear to
have been designed to (a) Prevent
dilution caused by certain risklesstrading schemes by principal
underwriters and contract dealers, (b)
prevent unjust discrimination or
preferential treatment among buyers,
and (c) assure an orderly distribution of
investment company 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 none of
these purposes will be relevant issues
for secondary trading by dealers in
Shares of a Fund. Applicants state that
(a) secondary market trading in Shares
will not cause dilution for owners of
such Shares because such transactions
do not directly involve Fund assets, 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, but do not occur as
a result of unjust or discriminatory
manipulation. Finally, applicants
contend that the proposed distribution
system will be orderly because
competitive forces in the marketplace
should ensure that the difference
between the market price of Shares and
their NAV remains narrow.
Sections 17(a)(1) and 17(a)(2) of the Act
7. Section 17(a)(1) and (2) of the Act
generally prohibit an affiliated person of
a registered investment company, or an
affiliated person of such a person
(‘‘second tier affiliate’’), from selling any
security to or purchasing any security
from the company. Section 2(a)(3) of the
Act defines ‘‘affiliated person’’ to
include any person directly or indirectly
owning, controlling, or holding with
power to vote 5% or more of the
outstanding voting securities of the
other person and any person directly or
indirectly controlling, controlled by, or
under common control with, the other
person. Section 2(a)(9) of the Act
provides that a control relationship will
be presumed where one person owns
more than 25% of another person’s
voting securities. The Funds may be
deemed to be controlled by the Advisor
or an entity controlling, controlled by or
under common control with the Advisor
and hence affiliated persons of each
other. In addition, the Funds may be
deemed to be under common control
with any other registered investment
company (or series thereof) advised by
the Advisor or an entity controlling,
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controlled by or under common control
with the Advisor (an ‘‘Affiliated Fund’’).
Applicants state that an investor could
own 5% or more of a Fund or the Trust,
or in excess of 25% of the outstanding
Shares of a Fund or the Trust, making
that investor an affiliated person of the
Fund or the Trust under section
2(a)(3)(A) or 2(a)(3)(C) of the Act. For so
long as such an investor was deemed to
be an affiliated person, section 17(a)(1)
could be read to prohibit that investor
from depositing the Deposit Securities
with a Fund in return for a Creation
Unit. Similarly, section 17(a)(2) could
be read to prohibit such an investor
from entering into an in-kind
redemption with a Fund.
8. Applicants request an exemption
from section 17(a) under sections 6(c)
and 17(b), to permit in-kind purchases
and redemptions by persons that are
affiliated persons or second tier
affiliates of the Funds solely by virtue
of one or more of the following: (a)
holding 5% or more, or more than 25%,
of the outstanding Shares of the Trust or
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.
9. Applicants contend that no useful
purpose would be served by prohibiting
the affiliated persons or second tier
affiliates of a Fund as described above
from purchasing or redeeming Creation
Units through ‘‘in-kind’’ transactions.
The purchase and redemption of
Creation Units of each Fund is on the
same terms for all investors, whether or
not such investor is an affiliate. In each
case, Creation Units are sold and
redeemed by the Trust or a Fund at their
NAV. The Deposit Securities and
Redemption Securities will be valued in
the same manner as the securities in the
Fund portfolio. Accordingly, applicants
believe the proposed transactions
described above meet the section 17(b)
standards for relief because the terms of
such proposed transactions are
reasonable and fair and do not involve
overreaching on the part of any person
concerned, and the proposed
transactions will be consistent with the
policies of each Fund and with the
general purposes of the Act.
Applicants’ Conditions
The applicants agree that any order of
the Commission granting the requested
relief will be subject to the following
conditions: 7
1. Neither the Trust nor any Fund will
be advertised or marketed as an openend investment company or mutual
7 See
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fund. Each Fund’s Prospectus will
prominently disclose that the Fund is an
actively managed exchange-traded fund.
Each Prospectus also will prominently
disclose that Shares are not individually
redeemable shares and will disclose that
owners of Shares may acquire those
Shares from a Fund and tender those
Shares to a Fund for redemption in
Creation Units only. Any advertising
material that describes the purchase or
sale of Creation Units or refers to
redeemability will prominently disclose
that the Shares are not individually
redeemable and that owners of the
Shares may acquire those Shares from
the Fund and tender those Shares for
redemption to the Fund in Creation
Units only.
2. Each Fund’s Prospectus will clearly
disclose that, for purposes of the Act,
Shares are issued by a registered
investment company, and that the
acquisition of Shares by investment
companies and companies relying on
sections 3(c)(1) or 3(c)(7) of the Act is
subject to the restrictions of section
12(d)(1) of the Act.
3. The Web site for the Funds, which
will be publicly accessible at no charge,
will contain the following information,
on a per Share basis, for each Fund: (a)
The prior Business Day’s NAV and the
reported closing price, and a calculation
of the premium or discount of the
closing price against such NAV; and (b)
data in chart format displaying the
frequency distribution of discounts and
premiums of the daily closing price
against the NAV, within appropriate
ranges, for each of the four previous
calendar quarters (or for the life of the
Fund, if shorter).
4. The Prospectus and annual report
for each Fund will also include: (a) The
information listed in condition 3(b), (i)
in the case of the Prospectus, for the
most recently completed year (and the
most recently completed quarter or
quarters, as applicable) and (ii) in the
case of the annual report, for the
immediately preceding five years (or for
the life of the Fund, if shorter), and (b)
the cumulative total return and the
average annual total return based on
NAV and closing price, calculated on a
per Share basis for one-, five- and tenyear periods (or life of the Fund, if
shorter).
5. As long as a Fund operates in
reliance on the requested order, its
Shares will be listed on a Listing
Market.
6. On each Business Day, before
commencement of trading in Shares on
a Fund’s Listing Market, the Fund will
disclose on its Web site the identities
and weightings of the component
securities and other assets held by the
E:\FR\FM\09FEN1.SGM
09FEN1
6421
Federal Register / Vol. 75, No. 26 / Tuesday, February 9, 2010 / Notices
Fund that will form the basis for the
Fund’s calculation of NAV at the end of
the Business Day.
7. The Advisor or any Subadvisor,
directly or indirectly, will not cause any
Authorized Participant (or any investor
on whose behalf an Authorized
Participant may transact with the Fund)
to acquire any Deposit Security for the
Fund through a transaction in which the
Fund could not engage directly.
8. The requested order will expire on
the effective date of any Commission
rule under the Act that provides relief
permitting the operation of actively
managed exchange-traded funds.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–2749 Filed 2–8–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61470; File No. SR–ISE–
2010–09]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Add 75 Options Classes to
the Penny Pilot Program
February 2, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1, and Rule 19b–4 thereunder,2
notice is hereby given that on January
29, 2010, the International Securities
Exchange, LLC (the ‘‘Exchange’’ or the
‘‘ISE’’) filed with the Securities and
Exchange Commission the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
Cprice-sewell on DSK2BSOYB1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The ISE proposes to designate an
additional 75 options classes to be
added to the pilot program to quote and
to trade certain options in pennies (the
‘‘Penny Pilot’’) on February 1, 2010.
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
VerDate Nov<24>2008
14:39 Feb 08, 2010
Jkt 220001
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
ISE proposes to identify the next 75
options classes to be added to the Penny
Pilot effective February 1, 2010. The
Exchange recently filed to extend and
expand the Penny Pilot through
December 31, 2010.3 In that filing, the
Exchange had proposed expanding the
Penny Pilot on a quarterly basis to add
the next 75 most actively traded
multiply listed options classes based on
national average daily volume for the
six months prior to selection, closing
under $200 per share on the Expiration
Friday prior to expansion, except that
the month immediately preceding their
addition to the Penny Pilot will not be
used for the purpose of the six month
analysis.4
ISE proposes to add the following 75
options classes to the Penny Pilot on
February 1, 2010, based on national
average daily volume for the six months
ending December 31, 2009:
Symbol
ABT ........
AEM .......
AET ........
AFL ........
AKAM .....
AMAT .....
AMR .......
ANF ........
APC .......
ATVI .......
BBD .......
BCRX .....
BK ..........
BRCM ....
BTU ........
BX ..........
Company name
Abbott Laboratories.
Agnico-Eagle Mines Ltd.
Aetna Inc.
Aflac Inc.
Akamai Technologies Inc.
Applied Materials Inc.
AMR Corp.
Abercrombie & Fitch Co.
Anadarko Petroleum Corp.
Activision Blizzard Inc.
Banco Bradesco SA.
BioCryst Pharmaceuticals Inc.
Bank of New York Mellon Corp.
Broadcom Corp.
Peabody Energy Corp.
Blackstone Group LP.
3 See Securities Exchange Act Release No. 60865
(October 22, 2009), 74 FR 55880 (October 29, 2009)
(SR–ISE–2009–82).
4 Index products would be included in the
expansion if the underlying index level was under
200.
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
Symbol
Company name
CAL ........
CF ..........
CMCSA ..
CSX .......
CVS .......
CX ..........
DD ..........
ERTS .....
EWJ .......
FDX ........
FNM .......
Continental Airlines Inc.
CF Industries Holdings Inc.
Comcast Corp.
CSX Corp.
CVS Caremark Corp.
Cemex SAB de CV.
EI du Pont de Nemours & Co.
Electronic Arts Inc.
iShares MSCI Japan Inde Fund.
FedEx Corp.
Federal National Mortgage Association.
Federal Home Loan Mortgage
Corp.
Gilead Sciences Inc.
Corning Inc.
HSBC Holdings PLC.
Hess Corp.
Hecla Mining Co.
Harley-Davidson Inc.
Honeywell International Inc.
Joy Global Inc.
Nordstrom Inc.
Kraft Foods Inc.
Leap Wireless International Inc.
Eli Lilly & Co.
Lorillard Inc.
Lowe’s Cos Inc.
Macy’s Inc.
Moody’s Corp.
MetLife Inc.
3M Co.
Micron Technology Inc.
Nucor Corp.
Occidental Petroleum Corp.
Poniard Pharmaceuticals Inc.
PepsiCo Inc/NC.
Philip Morris International Inc.
PNC Financial Services Group
Inc.
ProShares UltraShort QQQ.
Sears Holdings Corp.
SLM Corp.
Silver Wheaton Corp.
Sequenom Inc.
STEC Inc.
Seagate Technology Inc.
Suncor Energy Inc.
Teck Resources Ltd.
Teva Pharmaceutical Industries
Ltd.
iShares Barclays 20+ Year Treasury Bond Fund.
Direxion Daily Small Cap Bear 3X
Shares.
UAL Corp.
ProShares Ultra Real Estate.
United Technologies Corp.
MEMC Electronic Materials Inc.
Weatherford International Ltd.
WellPoint Inc.
Materials Select Sector SPDR
Fund.
Xerox Corp.
XTO Energy Inc.
YRC Worldwide Inc.
FRE ........
GILD ......
GLW .......
HBC .......
HES .......
HL ..........
HOG .......
HON .......
JOYG .....
JWN .......
KFT ........
LEAP ......
LLY ........
LO ..........
LOW .......
M ............
MCO ......
MET .......
MMM ......
MU .........
NUE .......
OXY .......
PARD .....
PEP ........
PM .........
PNC .......
QID ........
SHLD .....
SLM .......
SLW .......
SQNM ....
STEC .....
STX ........
SU ..........
TCK ........
TEVA .....
TLT ........
TZA ........
UAUA .....
URE .......
UTX ........
WFR .......
WFT .......
WLP .......
XLB ........
XRX .......
XTO .......
YRCW ....
2. Statutory Basis
The basis under the Securities
Exchange Act of 1934 (the ‘‘Exchange
Act’’) for this proposed rule change is
E:\FR\FM\09FEN1.SGM
09FEN1
]]>Agencies
[Federal Register Volume 75, Number 26 (Tuesday, February 9, 2010)]
[Notices]
[Pages 6417-6421]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-2749]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29128; 812-13658-01]
U.S. One, Inc. and U.S. One Trust; Notice of Application
February 2, 2010.
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 (``Act'') for an exemption from sections
2(a)(32), 5(a)(1) and 22(d) of the Act and rule 22c-1 under the Act,
and under sections 6(c) and 17(b) of the Act for an exemption from
sections 17(a)(1) and (a)(2) of the Act.
-----------------------------------------------------------------------
Applicants: U.S. One, Inc. (the ``Advisor'') and U.S. One Trust (the
``Trust'').
Summary of Application: Applicants request an order that permits: (a)
Series of certain open-end management investment companies to issue
shares (``Shares'') redeemable in large aggregations only (``Creation
Units''); (b) secondary market transactions in Shares to occur at
negotiated market prices; and (c) certain affiliated persons of the
series to deposit securities into, and receive securities from, the
series in connection
[[Page 6418]]
with the purchase and redemption of Creation Units.
Filing Dates: The application was filed on May 20, 2009, and amended on
September 28, 2009, and February 1, 2010.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on February 26, 2010, 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: P.O. Box 17073,
Reno, NV 89511.
FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at
(202) 551-6817 or Julia Kim Gilmer, Branch Chief, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
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 Trust, a statutory trust established under the laws of
Delaware, is registered with the Commission as an open-end management
investment company. The Trust is organized as a series investment
company with one initial series (the ``Initial Fund''). The investment
objective of the Initial Fund will be to provide capital appreciation.
The Initial Fund and all future series of the Trust (``Future Funds,''
collectively with the Initial Fund, ``Funds'') will attempt to achieve
their investment objectives by utilizing an active management strategy.
Each Fund's investment objective, policies and investment strategies
will be fully disclosed in the Fund's prospectus (``Prospectus'') \1\
and statement of additional information (``SAI''). Each Fund will
primarily hold shares of underlying exchange-traded funds (``ETFs''),
as well as shares of certain exchange-traded products that are not
registered as investment companies under the Act.\2\ Applicants will
only invest in unaffiliated ETFs that have received certain exemptive
relief from the Commission to permit such investments in excess of the
limits of section 12(d)(1)(A) and (B) of the Act. Any Future Fund (a)
will be advised by the Advisor or an entity controlled by or under
common control with the Advisor, and (b) will comply with the terms and
conditions stated in the application.\3\
---------------------------------------------------------------------------
\1\ All representations and conditions contained in the
application that require a Fund to disclose particular information
in the Fund's Prospectus and/or annual report shall be effective
with respect to the Fund until the time that the Fund complies with
the disclosure requirements adopted by the Commission in Investment
Company Act Release No. 28584 (Jan. 13, 2009).
\2\ The Funds may invest in exchange-traded products that invest
primarily in commodities or currency, but otherwise operate in a
manner similar to exchange-traded products registered under the Act.
In addition, the Funds may also invest in equity securities or fixed
income securities traded in a U.S. or non-U.S. markets. Neither the
Initial Funds nor any Future Fund will invest in options contracts,
futures contracts, or swap agreements. The Funds may also invest in
equity securities or fixed income securities traded in international
markets or in a combination of equity, fixed income and U.S. money
market securities and/or non-U.S. money market securities.
\3\ All existing entities that currently intend to rely on the
requested order have been named as applicants. Any other existing or
future entity that subsequently relies on the order will comply with
the terms and conditions of the application.
---------------------------------------------------------------------------
2. The Advisor, a Nevada corporation, or a subsidiary of such
company, will serve as the investment adviser to each Fund. The
Advisor, or its subsidiary, if applicable, will be registered as an
investment adviser of the Investment Advisers Act of 1940 (``Advisers
Act'') prior to any Fund beginning operations. Applicants anticipate
that Funds also may engage subadvisors (``Subadvisors''). Any
Subadvisor will be registered under the Advisers Act.
3. Applicants anticipate that shares of the Funds (``Shares'') will
be sold at a price of between $25 and $200 per Share in Creation Units
of 50,000 or more Shares. All orders to purchase Creation Units must be
placed with the principal underwriter and distributor of the Creation
Units (``Distributor'') by or through a party that has entered into a
participant agreement with the Distributor (``Authorized
Participant''). Authorized Participants will include broker-dealers,
banks, trust companies, and clearing companies that are participants in
the Depository Trust Company (``DTC,'' and such participants, ``DTC
Participants''). Purchases of Creation Units of the Funds will be made
generally by means of an in-kind tender of shares of specified ETFs
(the ``Deposit Securities''), with any cash portion of the purchase
price (the ``Cash Amount'') to be kept to a minimum. The Cash Amount is
an amount equal to the difference between the NAV of a Creation Unit
and the market value of the Deposit Securities. The Trust reserves the
right to permit, under certain circumstances, a purchaser of Creation
Units to substitute cash in lieu of depositing some or all of the
requisite Deposit Securities. The Trust may in the future determine
that Shares of one or more Funds may be purchased in Creation Units on
a cash-only basis if the Trust and the Advisor believe such method
would substantially minimize the Trust's transactional costs or enhance
its operational efficiencies.
4. Each Fund will charge a fee (``Transaction Fee'') in connection
with the sale or redemption of Creation Units to protect existing
shareholders from the dilutive costs associated with the purchase and
redemption of Creation Units. Each purchaser of a Creation Unit will
receive a Prospectus that contains complete disclosure about the
Transaction Fee. All orders to purchase Creation Units must be placed
with the Distributor no later than the closing time of the regular
trading session on the NYSE (ordinarily 4 p.m. ET) in order for the
purchaser to receive the NAV determined on that date. The Distributor
will transmit all purchase orders to the relevant Fund and will also
maintain a record of Creation Unit purchases, send out confirmations of
such purchases, and furnish a Prospectus to purchasers of Creation
Units.
5. The Trust intends to list the Shares of each Fund on a national
securities exchange (``Listing Market'') such as the NYSE. It is
expected that one or more member firms will be designated to act as a
specialist or market maker and maintain a market for the Shares trading
on the Listing Market (``Market Makers''). The price of Shares trading
on the Listing Market will be based on a current bid/offer market. No
secondary sales will be made to brokers or dealers at a concession by
the Distributor or by a Fund. Purchases and sales of Shares in the
secondary market, which will not involve a Fund, will be subject to
customary brokerage commissions and charges.
6. Purchasers of Shares in Creation Units may hold such Shares or
may sell them into the secondary market. Applicants expect that
purchasers of Creation Units will include institutional
[[Page 6419]]
investors and arbitrageurs, who will purchase or redeem Creation Units
of a Fund in pursuit of arbitrage profit and thereby enhance the
liquidity of the secondary market and keep the market price of shares
close to their NAV. Applicants expect that secondary market purchasers
of Shares will include both institutional investors and retail
investors for whom Shares will provide a useful, retail-priced,
exchange-traded mechanism for investing in a professionally managed,
diversified selection of ETFs.\4\
---------------------------------------------------------------------------
\4\ Shares will be registered in book-entry form only. DTC or
its nominee will be the registered owner of all outstanding Shares.
DTC or DTC Participants will maintain records reflecting beneficial
owners of Shares.
---------------------------------------------------------------------------
7. Shares will not be individually redeemable, and owners of Shares
may acquire those Shares from a Fund, or tender such Shares for
redemption to the Fund, in Creation Units only. To redeem, an investor
will have to accumulate enough Shares to constitute a Creation Unit.
Redemption orders must be placed by or through an Authorized
Participant. A redeeming investor will receive a basket of securities
designated to be delivered for Creation Unit redemptions on the date
that the request for redemption is submitted (``Redemption
Securities''), which in most cases will be the same as the Deposit
Securities required to purchase Creation Units on that date, and will
either receive from or pay to the Fund an amount calculated in the same
manner as the Cash Amount (``Cash Redemption Payment'').\5\ A Fund may
make redemptions partly in cash in lieu of transferring one or more
Redemption Securities to a redeeming investor if the Fund determines
that such alternative is warranted, such as if the redeeming investor
is unable, by law or policy, to own a particular Redemption Security. A
redeeming investor also must pay a Transaction Fee to cover custodial
costs.
---------------------------------------------------------------------------
\5\ Applicants state the Cash Redemption Payment may differ if
the Redemption Securities are not identical to the Deposit
Securities on that day.
---------------------------------------------------------------------------
8. The Trust will not be advertised or marketed or otherwise ``held
out'' as a traditional open-end investment company or a mutual fund.
The designation of the Trust and the Funds in all marketing materials
will be limited to the terms ``exchange-traded fund,'' ``investment
company,'' ``fund'' and ``trust'' without reference to an ``open-end
fund'' or a ``mutual fund,'' except to compare and contrast the Trust
and the Funds with traditional mutual funds. Each Fund's Prospectus
will also prominently disclose that the Fund is an actively managed
exchange-traded fund. All marketing materials that describe the method
of obtaining, buying or selling Creation Units, or Shares traded on the
Listing Market, or refer to redeemability, will prominently disclose
that Shares are not individually redeemable and that the owners of
Shares may acquire or redeem Shares from a Fund in Creation Units only.
The same approach will be followed in the SAI, shareholder reports and
investor educational materials issued or circulated in connection with
the Shares. The Trust will provide copies of its annual and semi-annual
shareholder reports to DTC Participants for distribution to beneficial
owners of Shares.
9. The Trust (or the Listing Market) intends to maintain a Web site
that will be publicly available at no charge, which will include the
Prospectus and other information about the Funds that is updated on a
daily basis. On each Business Day, before the commencement of trading
in Shares on the Listing Market, each Fund will disclose the identities
and weightings of the securities and other assets held by the Fund that
will form the basis for the Fund's calculation of NAV at the end of the
Business Day.\6\
---------------------------------------------------------------------------
\6\ Applicants note that under accounting procedures followed by
the Funds, 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.
---------------------------------------------------------------------------
Applicants' Legal Analysis
1. Applicants request an order under section 6(c) of the Act
granting an exemption from sections 2(a)(32), 5(a)(1) and 22(d) of the
Act and rule 22c-1 under the Act, and under sections 6(c) and 17(b) of
the Act granting an exemption from sections 17(a)(1) and (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.
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 holder, upon
its presentation to the issuer, is entitled to receive approximately
his proportionate share of the issuer's current net assets, or the cash
equivalent. Because Shares will not be individually redeemable,
applicants request an order that would permit each Fund, as a series of
an open-end management investment company, to issue Shares that are
redeemable in Creation Units only. Applicants state that Creation Units
will always be redeemable. Applicants further state that because
Creation Units may always be purchased and redeemed at NAV (less
certain transactional expenses), 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 substantially from the NAV of
Creation Units.
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, which is currently being offered to
the public by or through a principal underwriter, except at a current
public offering price described in the prospectus. Rule 22c-1 under the
Act generally requires that a dealer selling, redeeming, or
repurchasing a redeemable security do so only at a price based on its
NAV. Applicants state that trading in Shares will take place on and
away from the Listing Market at all times on the basis of current bid/
offer prices, not at a current offering price described in the
prospectus, and not at a price based on NAV. Thus, purchases and sales
of Shares in the secondary market will not comply with section 22(d) of
the Act and rule 22c-1 under the Act. Applicants request an exemption
under section 6(c) from these provisions.
5. Applicants assert that the concerns sought to be addressed by
section 22(d) of the Act and rule 22c-1 under the Act with respect to
pricing are equally satisfied by the proposed method of pricing Shares.
Applicants maintain that
[[Page 6420]]
while there is little legislative history regarding section 22(d), its
provisions, as well as those of rule 22c-1, appear to have been
designed to (a) Prevent dilution caused by certain riskless-trading
schemes by principal underwriters and contract dealers, (b) prevent
unjust discrimination or preferential treatment among buyers, and (c)
assure an orderly distribution of investment company 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 none of these purposes will be relevant
issues for secondary trading by dealers in Shares of a Fund. Applicants
state that (a) secondary market trading in Shares will not cause
dilution for owners of such Shares because such transactions do not
directly involve Fund assets, 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, but do not occur as a result of unjust or discriminatory
manipulation. Finally, applicants contend that the proposed
distribution system will be orderly because competitive forces in the
marketplace should ensure that the difference between the market price
of Shares and their NAV remains narrow.
Sections 17(a)(1) and 17(a)(2) of the Act
7. Section 17(a)(1) and (2) of the Act generally prohibit an
affiliated person of a registered investment company, or an affiliated
person of such a person (``second tier affiliate''), from selling any
security to or purchasing any security from the company. Section
2(a)(3) of the Act defines ``affiliated person'' to include any person
directly or indirectly owning, controlling, or holding with power to
vote 5% or more of the outstanding voting securities of the other
person and any person directly or indirectly controlling, controlled
by, or under common control with, the other person. Section 2(a)(9) of
the Act provides that a control relationship will be presumed where one
person owns more than 25% of another person's voting securities. The
Funds may be deemed to be controlled by the Advisor or an entity
controlling, controlled by or under common control with the Advisor and
hence affiliated persons of each other. In addition, the Funds may be
deemed to be under common control with any other registered investment
company (or series thereof) advised by the Advisor or an entity
controlling, controlled by or under common control with the Advisor (an
``Affiliated Fund''). Applicants state that an investor could own 5% or
more of a Fund or the Trust, or in excess of 25% of the outstanding
Shares of a Fund or the Trust, making that investor an affiliated
person of the Fund or the Trust under section 2(a)(3)(A) or 2(a)(3)(C)
of the Act. For so long as such an investor was deemed to be an
affiliated person, section 17(a)(1) could be read to prohibit that
investor from depositing the Deposit Securities with a Fund in return
for a Creation Unit. Similarly, section 17(a)(2) could be read to
prohibit such an investor from entering into an in-kind redemption with
a Fund.
8. Applicants request an exemption from section 17(a) under
sections 6(c) and 17(b), to permit in-kind purchases and redemptions by
persons that are affiliated persons or second tier affiliates of the
Funds solely by virtue of one or more of the following: (a) holding 5%
or more, or more than 25%, of the outstanding Shares of the Trust or
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.
9. Applicants contend that no useful purpose would be served by
prohibiting the affiliated persons or second tier affiliates of a Fund
as described above from purchasing or redeeming Creation Units through
``in-kind'' transactions. The purchase and redemption of Creation Units
of each Fund is on the same terms for all investors, whether or not
such investor is an affiliate. In each case, Creation Units are sold
and redeemed by the Trust or a Fund at their NAV. The Deposit
Securities and Redemption Securities will be valued in the same manner
as the securities in the Fund portfolio. Accordingly, applicants
believe the proposed transactions described above meet the section
17(b) standards for relief because the terms of such proposed
transactions are reasonable and fair and do not involve overreaching on
the part of any person concerned, and the proposed transactions will be
consistent with the policies of each Fund and with the general purposes
of the Act.
Applicants' Conditions
The applicants agree that any order of the Commission granting the
requested relief will be subject to the following conditions: \7\
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\7\ See note 1, supra.
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1. Neither the Trust nor any Fund will be advertised or marketed as
an open-end investment company or mutual fund. Each Fund's Prospectus
will prominently disclose that the Fund is an actively managed
exchange-traded fund. Each Prospectus also will prominently disclose
that Shares are not individually redeemable shares and will disclose
that owners of Shares may acquire those Shares from a Fund and tender
those Shares to a Fund for redemption in Creation Units only. Any
advertising material that describes the purchase or sale of Creation
Units or refers to redeemability will prominently disclose that the
Shares are not individually redeemable and that owners of the Shares
may acquire those Shares from the Fund and tender those Shares for
redemption to the Fund in Creation Units only.
2. Each Fund's Prospectus will clearly disclose that, for purposes
of the Act, Shares are issued by a registered investment company, and
that the acquisition of Shares by investment companies and companies
relying on sections 3(c)(1) or 3(c)(7) of the Act is subject to the
restrictions of section 12(d)(1) of the Act.
3. The Web site for the Funds, which will be publicly accessible at
no charge, will contain the following information, on a per Share
basis, for each Fund: (a) The prior Business Day's NAV and the reported
closing price, and a calculation of the premium or discount of the
closing price against such NAV; and (b) data in chart format displaying
the frequency distribution of discounts and premiums of the daily
closing price against the NAV, within appropriate ranges, for each of
the four previous calendar quarters (or for the life of the Fund, if
shorter).
4. The Prospectus and annual report for each Fund will also
include: (a) The information listed in condition 3(b), (i) in the case
of the Prospectus, for the most recently completed year (and the most
recently completed quarter or quarters, as applicable) and (ii) in the
case of the annual report, for the immediately preceding five years (or
for the life of the Fund, if shorter), and (b) the cumulative total
return and the average annual total return based on NAV and closing
price, calculated on a per Share basis for one-, five- and ten-year
periods (or life of the Fund, if shorter).
5. As long as a Fund operates in reliance on the requested order,
its Shares will be listed on a Listing Market.
6. On each Business Day, before commencement of trading in Shares
on a Fund's Listing Market, the Fund will disclose on its Web site the
identities and weightings of the component securities and other assets
held by the
[[Page 6421]]
Fund that will form the basis for the Fund's calculation of NAV at the
end of the Business Day.
7. The Advisor or any Subadvisor, directly or indirectly, will not
cause any Authorized Participant (or any investor on whose behalf an
Authorized Participant may transact with the Fund) to acquire any
Deposit Security for the Fund through a transaction in which the Fund
could not engage directly.
8. The requested order will expire on the effective date of any
Commission rule under the Act that provides relief permitting the
operation of actively managed exchange-traded funds.
For the Commission, by the Division of Investment Management,
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-2749 Filed 2-8-10; 8:45 am]
BILLING CODE 8011-01-P
