Notice of Application; Precidian ETFs Trust, et al., 36022-36024 [2012-14629]

Download as PDF 36022 Federal Register / Vol. 77, No. 116 / Friday, June 15, 2012 / Notices Subadvised Fund will make the Multimanager Information Statement available on the Web site identified in the Multi-manager Notice no later than when the Multi-manager Notice (or Multi-manager Notice and Multimanager Information Statement) is first sent to shareholders, and will maintain it on that Web site for at least 90 days. In the circumstances described in this application, a proxy solicitation to approve the appointment of new SubAdvisers provides no more meaningful information to shareholders than the proposed Multi-manager Information Statement. Moreover, as indicated above, the applicable Board would comply with the requirements of section 15(a) and 15(c) of the Act before entering into or amending Sub-Advisory Agreements. Applicants’ Conditions srobinson on DSK4SPTVN1PROD with NOTICES Applicants agree that any order granting the requested relief will be subject to the following conditions: 1. Before a Subadvised Fund may rely on the requested order, the operation of the Subadvised Fund in the manner described in the application will have been approved by a majority of the Subadvised Fund’s outstanding voting securities as defined in the Act or, in the case of a Subadvised Fund whose public shareholders purchase shares on the basis of a prospectus containing the disclosure contemplated by condition 2 below, by the initial shareholder(s) before such Subadvised Fund’s shares are offered to the public. 2. The prospectus for each Subadvised Fund will disclose the existence, substance, and effect of any order granted pursuant to this application. In addition, each Subadvised Fund will hold itself out to the public as employing a multimanager structure as described in the application. The prospectus will prominently disclose that the Adviser has ultimate responsibility, subject to oversight by the Board, to oversee the Sub-Advisers and recommend their hiring, termination, and replacement. 3. Subadvised Funds will inform shareholders of the hiring of a new SubStatement will remain available on that Web site; (e) provide instructions for accessing and printing the Multi-manager Information Statement; and (f) instruct the shareholder that a paper or email copy of the Multi-manager Information Statement may be obtained, without charge, by contacting the Subadvised Funds. A ‘‘Multi-manager Information Statement’’ will meet the requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under the Exchange Act for an information statement. Multimanager Information Statements will be filed electronically with the Commission via the EDGAR system. VerDate Mar<15>2010 17:05 Jun 14, 2012 Jkt 226001 Adviser within 90 days after the hiring of the new Sub-Adviser pursuant to the Modified Notice and Access Procedures. 4. The Adviser will not enter into a Sub-Advisory Agreement with any Affiliated Sub-Adviser without that agreement, including the compensation to be paid thereunder, being approved by the shareholders of the applicable Subadvised Fund. 5. At all times, at least a majority of the Board will be Independent Trustees, and the nomination of new or additional Independent Trustees will be placed within the discretion of the thenexisting Independent Trustees. 6. Whenever a Sub-Adviser change is proposed for a Subadvised Fund with an Affiliated Sub-Adviser, the Board, including a majority of the Independent Trustees, will make a separate finding, reflected in the Board minutes, that the change is in the best interests of the Subadvised Fund and its shareholders, and does not involve a conflict of interest from which the Adviser or the Affiliated Sub-Adviser derives an inappropriate advantage. 7. The Adviser will provide general management services to each Subadvised Fund, including overall supervisory responsibility for the general management and investment of the Subadvised Fund’s assets, and subject to review and approval of the Board, will: (i) Set the Subadvised Fund’s overall investment strategies; (ii) evaluate, select and recommend SubAdvisers to manage all or a portion of the Subadvised Fund’s assets; (iii) allocate and, when appropriate, reallocate the Subadvised Fund’s assets among Sub-Advisers; (iv) monitor and evaluate the Sub-Advisers’ performance; and (v) implement procedures reasonably designed to ensure that the Sub-Advisers comply with the Subadvised Fund’s investment objective, policies and restrictions. 8. No trustee or officer of the Trust or of a Subadvised Fund or director or officer of the Adviser will own directly or indirectly (other than through a pooled investment vehicle that is not controlled by such person) any interest in a Sub-Adviser, except for (i) ownership of interests in the Adviser or any entity that controls, is controlled by, or is under common control with the Adviser; or (ii) ownership of less than 1% of the outstanding securities of any class of equity or debt of a publicly traded company that is either a SubAdviser or an entity that controls, is controlled by, or is under common control with a Sub-Adviser. 9. In the event the Commission adopts a rule under the Act providing substantially similar relief to that in the PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 order requested in the application, the requested order will expire on the effective date of that rule. 10. Subadvised Funds pay fees to a Sub-Adviser directly from Fund assets. Any changes to a Sub-Advisory Agreement that would result in an increase in the total management and advisory fees payable by a Subadvised Fund will be approved by the shareholders of that Subadvised Fund. For the Commission, by the Division of Investment Management, under delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–14630 Filed 6–14–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 30101; 812–13981] Notice of Application; Precidian ETFs Trust, et al. June 8, 2012. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application to amend a prior order under section 6(c) of the Investment Company Act of 1940 (‘‘Act’’) granting an exemption from sections 2(a)(32), 5(a)(1), 22(d) and 22(e) of the Act and rule 22c–1 under the Act, and under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and (2) of the Act, and under section 12(d)(1)(J) of the Act for an exemption from sections 12(d)(1)(A) and (B) of the Act (‘‘Prior Order’’). AGENCY: Applicants seek to amend the Prior Order 1 to permit the Funds (as defined below) to issue Shares in less than Creation Unit size to investors participating in the Distribution Reinvestment Program (as defined below). APPLICANTS: Precidian ETFs Trust (‘‘Trust’’), Precidian Funds LLC (‘‘Adviser’’) and Foreside Fund Services, LLC (‘‘Foreside’’). DATES: Filing Dates: The application was filed on November 28, 2011, and amended on March 23, 2012, and May 29, 2012. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in this notice. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief will SUMMARY OF APPLICATION: 1 Precidian ETFs Trust, Investment Company Act Release Nos. 29692 (June 9, 2011) (notice) and 29712 (July 1, 2011) (order). E:\FR\FM\15JNN1.SGM 15JNN1 Federal Register / Vol. 77, No. 116 / Friday, June 15, 2012 / Notices 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 July 3, 2012 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. Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. Applicants, Trust and Adviser, c/o Mark Criscitello, 350 Main St., Suite 9, Bedminster, New Jersey 07921, Foreside, Three Canal Plaza, Suite 100, Portland, ME 04101. ADDRESSES: FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Special Counsel, at (202) 551–6813 or Mary Kay Frech, 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: srobinson on DSK4SPTVN1PROD with NOTICES Applicants’ Representations 1. The Trust is registered under the Act as an open-end management investment company with multiple series and organized as a Delaware statutory trust. The Adviser is a Delaware limited liability corporation that is registered under the Investment Advisers Act of 1940 and serves as investment adviser to Maxis Nikkei 225 Index Fund (‘‘Initial Fund’’). The distributor for the Initial Fund is Foreside, a Delaware limited liability company. Applicants request relief for the Initial Fund and for any Future Funds (collectively, the ‘‘Funds’’).2 The Funds will operate as exchange-traded funds (‘‘ETFs’’). 2 As defined in the Prior Order, Future Funds are future series of the Trust as well as any other openend management investment companies or their series that may be created in the future that track a specified domestic and/or foreign securities index and are advised by the Adviser or an entity controlling, controlled by, or under common control with the Adviser. VerDate Mar<15>2010 17:05 Jun 14, 2012 Jkt 226001 2. The application for the Prior Order (‘‘Prior Application’’) 3 stated that ‘‘No Fund will make DTC book-entry dividend reinvestment service available for use by Beneficial Owners for reinvestment of their cash proceeds but certain individual Brokers may make a dividend reinvestment service available to their clients.’’ In addition, the Prior Application included several representations and a condition noting that Shares could be acquired from the Funds and the Funds would issue Shares in Creation Units only. The applicants seek an order amending the Prior Order (‘‘Amended Order’’) to specifically permit the Funds to operate the ‘‘Distribution Reinvestment Program,’’ as described below.4 3. The Trust will make the DTC Dividend Reinvestment Service available for use by the beneficial owners of Shares (‘‘Beneficial Owners’’) through DTC Participants for reinvestment of their cash dividends.5 DTC Participants whose customers participate in the program will have the distributions of their customers automatically reinvested in additional whole Shares issued by the applicable Fund at NAV per Share. Shares will be issued at NAV under the DTC Dividend Reinvestment Service regardless of whether the Shares are trading in the secondary market at a premium or discount to NAV as of the time NAV is calculated. Thus, Shares may be purchased through the DTC Dividend Reinvestment Service at prices that are higher (or lower) than the contemporaneous secondary market trading price. Applicants state that the DTC Dividend Reinvestment Service differs from dividend reinvestment services offered by broker-dealers in two ways. First, in dividend reinvestment programs typically offered by brokerdealers, the additional shares are purchased in the secondary market at current market prices at a date and time determined by the broker-dealer at its discretion. Shares purchased through the DTC Dividend Reinvestment Service are purchased directly from the fund on the date of the distribution at the NAV per share on such date. Second, in dividend reinvestment programs 3 All capitalized terms not otherwise defined herein have the meanings ascribed to them in the Prior Application. 4 All entities that currently intend to rely on the Amended Order are named as applicants. Any other entity that relies on the Amended Order in the future will comply with the terms and conditions of the application. 5 Some DTC Participants may not elect to utilize the DTC Dividend Reinvestment Service. Beneficial Owners will be encouraged to contact their broker to ascertain the availability of the DTC Dividend Reinvestment Service through such broker. PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 36023 typically offered by broker-dealers, shareholders are typically charged a brokerage or other fee in connection with the secondary market purchase of shares. Applicants state that brokers typically do not charge customers any fees for reinvesting distributions through the DTC Dividend Reinvestment Service. 4. Applicants state that the DTC Dividend Reinvestment Service will be operated by DTC in exactly the same way it runs such service for other openend management investment companies. The initial decision to participate in the DTC Dividend Reinvestment Service is made by the DTC Participant. Once a DTC Participant elects to participate in the DTC Dividend Reinvestment Service, it offers its customers the option to participate. Beneficial Owners will have to make an affirmative election to participate by completing an election notice. Before electing to participate, Beneficial Owners will receive disclosure describing the terms of the DTC Dividend Reinvestment Service and the consequences of participation. This disclosure will include a clear and concise explanation that under the Distribution Reinvestment Program, Shares will be issued at NAV, which could result in such Shares being acquired at a price higher or lower than that at which they could be sold in the secondary market on the day they are issued (this will also be clearly disclosed in the Prospectus). Brokers providing the DTC Dividend Reinvestment Service to their customers will determine whether to charge Beneficial Owners a fee for this service. Applicants represent that brokers typically do not charge a fee for the DTC Dividend Reinvestment Service. 5. The Prospectus will make clear to Beneficial Owners that the Distribution Reinvestment Program is optional and that its availability is determined by their broker, at its own discretion. Broker-dealers are not required to utilize the DTC Dividend Reinvestment Service, and may instead offer a dividend reinvestment program under which Shares are purchased in the secondary market at current market prices or no dividend reinvestment program at all. Applicants’ Legal Analysis 1. 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 E:\FR\FM\15JNN1.SGM 15JNN1 srobinson on DSK4SPTVN1PROD with NOTICES 36024 Federal Register / Vol. 77, No. 116 / Friday, June 15, 2012 / Notices with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. 2. Applicants seek to amend the Prior Order to specifically permit the Funds to operate the Distribution Reinvestment Program. The only difference between the terms and conditions in the Prior Order and the Amended Order relates to a Fund issuing shares in less than Creation Unit sizes under the Distribution Reinvestment Program. Applicants represent that the relief granted in the Prior Order under section 6(c) remains 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. 3. Applicants state that the Distribution Reinvestment Program is reasonable and fair because it is voluntary and each Beneficial Owner will have in advance accurate and explicit information that makes clear the terms of the Distribution Reinvestment Program and the consequences of participation. The Distribution Reinvestment Program does not involve any overreaching on the part of any person concerned because it operates the same for each Beneficial Owner who elects to participate, and is structured in the public interest because it is designed to give those Beneficial Owners who elect to participate a convenient and efficient method to reinvest distributions without paying a brokerage commission. In addition, although brokers providing the Distribution Reinvestment Program could charge a fee, applicants represent that typically brokers do not charge for this service. 4. Applicants do not believe that the issuance of Shares under the Distribution Reinvestment Program will have a material effect on the overall operation of the Funds, including on the efficiency of the arbitrage mechanism inherent in ETFs. In addition, applicants do not believe that providing Beneficial Owners with an added optional benefit (the ability to reinvest in Shares at NAV) will change the Beneficial Owners’ expectations about the Funds or the fact that individual Shares trade at secondary market prices. Applicants believe that Beneficial Owners (other than Authorized Participants) generally expect to buy and sell individual Shares only through secondary market transactions at market prices and that such owners will not be confused by the Distribution Reinvestment Program. Therefore, applicants believe that the Distribution Reinvestment Program meets the standards for relief under section 6(c) of the Act. VerDate Mar<15>2010 17:05 Jun 14, 2012 Jkt 226001 Applicants’ Conditions Applicants agree that the Amended Order will be subject to the same conditions as those imposed by the Prior Order, except that condition A.2 is revised in its entirety as follows: Neither the Trust nor any Fund will be advertised or marketed as an openend investment company or a mutual fund. Any advertising material that describes the purchase or sale of Creation Units or refers to redeemability will prominently disclose that Shares are not individually redeemable and that owners of Shares may acquire those Shares from a Fund (other than pursuant to the Distribution Reinvestment Program) and tender those Shares for redemption to a Fund in Creation Units only. For the Commission, by the Division of Investment Management, under delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–14629 Filed 6–14–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67175; File No. SR–C2– 2012–016] Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule June 11, 2012. 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 May 29, 2012, C2 Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘C2’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Fees Schedule. The text of the proposed rule change is available on the Exchange’s Web site (https:// www.c2exchange.com/Legal/), at the 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00087 Fmt 4703 Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. 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 Exchange 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 Exchange 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 The Exchange proposes to amend its Fees Schedule in order to state that, in regards to complex orders in multiplylisted, equity and ETF options classes, the rebate that would otherwise apply to Public Customer orders will not apply when a Public Customer order is trading with another Public Customer order. In such a circumstance, there will be no Maker or Taker fee or rebate. The reason for this change is to ensure that the Exchange pays rebates only on transactions in which the Exchange also collects some revenue. The proposed change is to take effect on June 1, 2012. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.3 Specifically, the Exchange believes the proposed rule change is consistent with Section 6(b)(4) of the Act,4 which provides that Exchange rules may provide for the equitable allocation of reasonable dues, fees, and other charges among its Trading Permit Holders and other persons using its facilities. The proposed change is reasonable because, while Public Customers trading complex orders in multiply-listed, equity and ETF classes with other Public Customers will no longer be receiving a rebate, they will still not be paying a fee for such transactions. The proposed change is equitable and not 3 15 4 15 Sfmt 4703 E:\FR\FM\15JNN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(4). 15JNN1

Agencies

[Federal Register Volume 77, Number 116 (Friday, June 15, 2012)]
[Notices]
[Pages 36022-36024]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14629]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30101; 812-13981]


Notice of Application; Precidian ETFs Trust, et al.

June 8, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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

Summary of Application: Applicants seek to amend the Prior Order \1\ to 
permit the Funds (as defined below) to issue Shares in less than 
Creation Unit size to investors participating in the Distribution 
Reinvestment Program (as defined below).
---------------------------------------------------------------------------

    \1\ Precidian ETFs Trust, Investment Company Act Release Nos. 
29692 (June 9, 2011) (notice) and 29712 (July 1, 2011) (order).

Applicants: Precidian ETFs Trust (``Trust''), Precidian Funds LLC 
---------------------------------------------------------------------------
(``Adviser'') and Foreside Fund Services, LLC (``Foreside'').

DATES: Filing Dates: The application was filed on November 28, 2011, 
and amended on March 23, 2012, and May 29, 2012. Applicants have agreed 
to file an amendment during the notice period, the substance of which 
is reflected in this notice.

Hearing or Notification of Hearing: An order granting the requested 
relief will

[[Page 36023]]

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 
July 3, 2012 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, Trust and Adviser, 
c/o Mark Criscitello, 350 Main St., Suite 9, Bedminster, New Jersey 
07921, Foreside, Three Canal Plaza, Suite 100, Portland, ME 04101.

FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Special Counsel, at 
(202) 551-6813 or Mary Kay Frech, 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 is registered under the Act as an open-end management 
investment company with multiple series and organized as a Delaware 
statutory trust. The Adviser is a Delaware limited liability 
corporation that is registered under the Investment Advisers Act of 
1940 and serves as investment adviser to Maxis Nikkei 225 Index Fund 
(``Initial Fund''). The distributor for the Initial Fund is Foreside, a 
Delaware limited liability company. Applicants request relief for the 
Initial Fund and for any Future Funds (collectively, the ``Funds'').\2\ 
The Funds will operate as exchange-traded funds (``ETFs'').
---------------------------------------------------------------------------

    \2\ As defined in the Prior Order, Future Funds are future 
series of the Trust as well as any other open-end management 
investment companies or their series that may be created in the 
future that track a specified domestic and/or foreign securities 
index and are advised by the Adviser or an entity controlling, 
controlled by, or under common control with the Adviser.
---------------------------------------------------------------------------

    2. The application for the Prior Order (``Prior Application'') \3\ 
stated that ``No Fund will make DTC book-entry dividend reinvestment 
service available for use by Beneficial Owners for reinvestment of 
their cash proceeds but certain individual Brokers may make a dividend 
reinvestment service available to their clients.'' In addition, the 
Prior Application included several representations and a condition 
noting that Shares could be acquired from the Funds and the Funds would 
issue Shares in Creation Units only. The applicants seek an order 
amending the Prior Order (``Amended Order'') to specifically permit the 
Funds to operate the ``Distribution Reinvestment Program,'' as 
described below.\4\
---------------------------------------------------------------------------

    \3\ All capitalized terms not otherwise defined herein have the 
meanings ascribed to them in the Prior Application.
    \4\ All entities that currently intend to rely on the Amended 
Order are named as applicants. Any other entity that relies on the 
Amended Order in the future will comply with the terms and 
conditions of the application.
---------------------------------------------------------------------------

    3. The Trust will make the DTC Dividend Reinvestment Service 
available for use by the beneficial owners of Shares (``Beneficial 
Owners'') through DTC Participants for reinvestment of their cash 
dividends.\5\ DTC Participants whose customers participate in the 
program will have the distributions of their customers automatically 
reinvested in additional whole Shares issued by the applicable Fund at 
NAV per Share. Shares will be issued at NAV under the DTC Dividend 
Reinvestment Service regardless of whether the Shares are trading in 
the secondary market at a premium or discount to NAV as of the time NAV 
is calculated. Thus, Shares may be purchased through the DTC Dividend 
Reinvestment Service at prices that are higher (or lower) than the 
contemporaneous secondary market trading price. Applicants state that 
the DTC Dividend Reinvestment Service differs from dividend 
reinvestment services offered by broker-dealers in two ways. First, in 
dividend reinvestment programs typically offered by broker-dealers, the 
additional shares are purchased in the secondary market at current 
market prices at a date and time determined by the broker-dealer at its 
discretion. Shares purchased through the DTC Dividend Reinvestment 
Service are purchased directly from the fund on the date of the 
distribution at the NAV per share on such date. Second, in dividend 
reinvestment programs typically offered by broker-dealers, shareholders 
are typically charged a brokerage or other fee in connection with the 
secondary market purchase of shares. Applicants state that brokers 
typically do not charge customers any fees for reinvesting 
distributions through the DTC Dividend Reinvestment Service.
---------------------------------------------------------------------------

    \5\ Some DTC Participants may not elect to utilize the DTC 
Dividend Reinvestment Service. Beneficial Owners will be encouraged 
to contact their broker to ascertain the availability of the DTC 
Dividend Reinvestment Service through such broker.
---------------------------------------------------------------------------

    4. Applicants state that the DTC Dividend Reinvestment Service will 
be operated by DTC in exactly the same way it runs such service for 
other open-end management investment companies. The initial decision to 
participate in the DTC Dividend Reinvestment Service is made by the DTC 
Participant. Once a DTC Participant elects to participate in the DTC 
Dividend Reinvestment Service, it offers its customers the option to 
participate. Beneficial Owners will have to make an affirmative 
election to participate by completing an election notice. Before 
electing to participate, Beneficial Owners will receive disclosure 
describing the terms of the DTC Dividend Reinvestment Service and the 
consequences of participation. This disclosure will include a clear and 
concise explanation that under the Distribution Reinvestment Program, 
Shares will be issued at NAV, which could result in such Shares being 
acquired at a price higher or lower than that at which they could be 
sold in the secondary market on the day they are issued (this will also 
be clearly disclosed in the Prospectus). Brokers providing the DTC 
Dividend Reinvestment Service to their customers will determine whether 
to charge Beneficial Owners a fee for this service. Applicants 
represent that brokers typically do not charge a fee for the DTC 
Dividend Reinvestment Service.
    5. The Prospectus will make clear to Beneficial Owners that the 
Distribution Reinvestment Program is optional and that its availability 
is determined by their broker, at its own discretion. Broker-dealers 
are not required to utilize the DTC Dividend Reinvestment Service, and 
may instead offer a dividend reinvestment program under which Shares 
are purchased in the secondary market at current market prices or no 
dividend reinvestment program at all.

Applicants' Legal Analysis

    1. 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

[[Page 36024]]

with the protection of investors and the purposes fairly intended by 
the policy and provisions of the Act.
    2. Applicants seek to amend the Prior Order to specifically permit 
the Funds to operate the Distribution Reinvestment Program. The only 
difference between the terms and conditions in the Prior Order and the 
Amended Order relates to a Fund issuing shares in less than Creation 
Unit sizes under the Distribution Reinvestment Program. Applicants 
represent that the relief granted in the Prior Order under section 6(c) 
remains 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.
    3. Applicants state that the Distribution Reinvestment Program is 
reasonable and fair because it is voluntary and each Beneficial Owner 
will have in advance accurate and explicit information that makes clear 
the terms of the Distribution Reinvestment Program and the consequences 
of participation. The Distribution Reinvestment Program does not 
involve any overreaching on the part of any person concerned because it 
operates the same for each Beneficial Owner who elects to participate, 
and is structured in the public interest because it is designed to give 
those Beneficial Owners who elect to participate a convenient and 
efficient method to reinvest distributions without paying a brokerage 
commission. In addition, although brokers providing the Distribution 
Reinvestment Program could charge a fee, applicants represent that 
typically brokers do not charge for this service.
    4. Applicants do not believe that the issuance of Shares under the 
Distribution Reinvestment Program will have a material effect on the 
overall operation of the Funds, including on the efficiency of the 
arbitrage mechanism inherent in ETFs. In addition, applicants do not 
believe that providing Beneficial Owners with an added optional benefit 
(the ability to reinvest in Shares at NAV) will change the Beneficial 
Owners' expectations about the Funds or the fact that individual Shares 
trade at secondary market prices. Applicants believe that Beneficial 
Owners (other than Authorized Participants) generally expect to buy and 
sell individual Shares only through secondary market transactions at 
market prices and that such owners will not be confused by the 
Distribution Reinvestment Program. Therefore, applicants believe that 
the Distribution Reinvestment Program meets the standards for relief 
under section 6(c) of the Act.

Applicants' Conditions

    Applicants agree that the Amended Order will be subject to the same 
conditions as those imposed by the Prior Order, except that condition 
A.2 is revised in its entirety as follows:
    Neither the Trust nor any Fund will be advertised or marketed as an 
open-end investment company or a mutual fund. Any advertising material 
that describes the purchase or sale of Creation Units or refers to 
redeemability will prominently disclose that Shares are not 
individually redeemable and that owners of Shares may acquire those 
Shares from a Fund (other than pursuant to the Distribution 
Reinvestment Program) and tender those Shares for redemption to a Fund 
in Creation Units only.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14629 Filed 6-14-12; 8:45 am]
BILLING CODE 8011-01-P
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