PowerShares Exchange-Traded Fund Trust, et al.; Notice of Application, 60484-60488 [2012-24293]

Download as PDF 60484 Federal Register / Vol. 77, No. 192 / Wednesday, October 3, 2012 / Notices accident previously evaluated, and thus no significant hazards considerations because there is no significant increase in either the probability or consequences of an accident previously evaluated; (ii) granting the exemptions would not produce a significant change in either the types or amounts of any effluents that may be released offsite because the requested exemptions neither change the effluents nor produce additional avenues of effluent release; (iii) granting the exemptions would not result in a significant increase in either occupational radiation exposure or public radiation exposure because the requested exemptions neither introduce new radiological hazards nor increase existing radiological hazards; (iv) granting the exemptions would not result in a significant construction impact because there are no construction activities associated with the requested exemptions; and; (v) granting the exemptions would not result in a significant increase in the potential for or consequences from radiological accidents because the exemptions neither reduce the level of security in place at the Yankee Rowe ISFSI nor create new accident precursors. Accordingly, this exemption meets the criteria for a categorical exclusion in 10 CFR 51.22(c)(25)(vi)(F). erowe on DSK2VPTVN1PROD with 3.0 Conclusion Accordingly, the Commission has determined that, pursuant to 10 CFR 73.5, the exemptions are authorized by law, will not endanger life or property or the common defense and security, and are otherwise in the public interest. Therefore, the Commission hereby grants YAEC an exemption from the 10 CFR 73.55(e)(10)(ii) requirement to restrict waterborne vehicle access and perform periodic surveillance of waterway approaches as well as the 10 CFR 73.55(g)(8)(iv) requirement for escort personnel to be generally knowledgeable of visitor activities. In addition, YAEC shall continue to follow the NRC approved ISFSI PSP and applicable NRC orders. As discussed in the preceding paragraph, the Commission has determined that this exemption meets the criteria for categorical exclusion set forth in 10 CFR 51.22(c)(25)(vi)(F). Therefore, pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment need be prepared in connection with the granting of these exemptions. These exemptions are effective upon issuance. Dated at Rockville, Maryland, this 21st day of September, 2012. VerDate Mar<15>2010 15:03 Oct 02, 2012 Jkt 229001 For the Nuclear Regulatory Commission. Douglas W. Weaver, Deputy Director, Division of Spent Fuel Storage and Transportation, Office of Nuclear Material Safety and Safeguards. [FR Doc. 2012–24281 Filed 10–2–12; 8:45 am] BILLING CODE 7590–01–P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon Written Request Copies Available From: Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549–0213. Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Shagufta_Ahmed@omb.eop.gov; and (ii) Thomas Bayer, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi PavlikSimon, 6432 General Green Way, Alexandria, VA 22312 or send an email to: PRA_Mailbox@sec.gov. Comments must be submitted to OMB within 30 days of this notice. Dated: September 28, 2012. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–24340 Filed 10–2–12; 8:45 am] BILLING CODE 8011–01–P Extension: Form 11–K. OMB Control No. 3235–0082, SEC File No. 270–101. SECURITIES AND EXCHANGE COMMISSION 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 a request for extension of the previously approved collection of information discussed below. Form 11–K (17 CFR 249.311) is the annual report designed for use by employee stock purchase, savings and similar plans to comply with the reporting requirements under Section 15(d) of the Securities and Exchange Act of 1934 (the ‘‘Exchange Act’’) (15 U.S.C. 78o(d)). Section 15(d) establishes a periodic reporting obligation for every issuer of a class of securities registered under the Securities Act of 1933 (the ‘‘Securities Act’’)(15 U.S.C. 77a et seq.). Form 11–K provides employees of an issuer with financial information so that they can assess the performance of the investment vehicle or stock plan. Form 11–K is filed on occasion. The information collected must be filed with the Commission and is publicly available. Form 11–K takes approximately 30 burden hours per response and is filed by 2,000 respondents for total of 60,000 burden hours. 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. The public may view the background documentation for this information collection at the following Web site, www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory [Investment Company Act Release No. 30222; 812–13820] PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 PowerShares Exchange-Traded Fund Trust, et al.; Notice of Application September 26, 2012. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (the ‘‘Act’’) for exemptions from sections 12(d)(1)(A), (B), and (C) of the Act and under sections 6(c) and 17(b) of the Act for an exemption from section 17(a) of the Act. AGENCY: SUMMARY OF THE APPLICATION: Applicants request an order that would permit certain registered open-end management investment companies that operate as ‘‘funds of funds’’ to acquire shares of certain registered open-end and closed-end management investment companies and unit investment trusts that are within and outside the same group of investment companies as the acquiring investment companies. APPLICANTS: PowerShares ExchangeTraded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares Actively Managed Exchange-Traded Fund Trust (each, a ‘‘Trust’’) and Invesco PowerShares Capital Management LLC (the ‘‘Adviser’’). FILING DATES: The application was filed on September 3, 2010, and amended on December 22, 2010, October 13, 2011, April 23, 2012, September 5, 2012, and September 20, 2012. HEARING OR NOTIFICATION OF HEARING: An order granting the application will be issued unless the Commission orders E:\FR\FM\03OCN1.SGM 03OCN1 Federal Register / Vol. 77, No. 192 / Wednesday, October 3, 2012 / Notices 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 October 22, 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. Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. Applicants, 301 West Roosevelt Road, Wheaton, Illinois 60187. ADDRESSES: Jill Ehrlich, Senior Counsel, at (202) 551– 6819, or David P. Bartels, Branch Chief, at (202) 551–6821 (Division of Investment Management, Office of Investment Company Regulation). FOR FURTHER INFORMATION CONTACT: The following is a summary of the application. The complete application may be obtained via the Commission’s Web site by searching for the file number, or for an applicant using the Company name box, at https:// www.sec.gov/search/search.htm or by calling (202) 551–8090. SUPPLEMENTARY INFORMATION: Applicants’ Representations erowe on DSK2VPTVN1PROD with 1. Each Trust is organized as a Massachusetts business trust or Delaware statutory trust and is registered as an open-end management investment company under the Act.1 Each series of a Trust will pursue distinct investment objectives and strategies. The Adviser is a Delaware limited liability company registered under the Investment Advisers Act of 1940. The Adviser or an entity controlling, controlled by or under common control with the Adviser serves 1 Applicants request that the order extend to any future series of a Trust, and any other existing or future registered open-end management investment companies and any series thereof that are part of the same group of investment companies, as defined in section 12(d)(1)(G)(ii) of the Act, as the Trust and are, or may in the future be, advised by the Adviser or any other investment adviser controlling, controlled by, or under common control with the Adviser (together with the existing series of the Trust, the ‘‘Funds’’). All entities that currently intend to rely on the requested order are named as applicants. Any other entity that relies on the order in the future will comply with the terms and conditions set forth in the application. VerDate Mar<15>2010 15:03 Oct 02, 2012 Jkt 229001 as the investment adviser for each of the Funds.2 2. Applicants request relief to the extent necessary to permit: (a) A Fund (each, a ‘‘Fund of Funds,’’ and collectively, the ‘‘Funds of Funds’’) to acquire shares of registered management investment companies, including openend investment companies and closedend investment companies (‘‘Unaffiliated OEFs’’ and ‘‘Unaffiliated CEFs,’’ respectively, and, together, the ‘‘Unaffiliated Investment Companies’’), and unit investment trusts (‘‘UITs’’) (the ‘‘Unaffiliated Trusts,’’ and together with the Unaffiliated Investment Companies, the ‘‘Unaffiliated Funds’’), in each case, that are not part of the same ‘‘group of investment companies’’ as the Funds of Funds; 3 (b) the Unaffiliated Funds, their principal underwriters and any broker or dealer registered under the Securities Exchange Act of 1934 (‘‘Broker’’) to sell shares of such Unaffiliated Funds to the Funds of Funds; (c) the Funds of Funds to acquire shares of other registered investment companies, including openend investment companies, closed-end investment companies and UITs in the same group of investment companies (the ‘‘Affiliated Funds,’’ together with the Unaffiliated Funds, the ‘‘Underlying Funds’’); 4 and (d) the Affiliated Funds, their principal underwriters and any Broker to sell shares of such Affiliated Funds to the Funds of Funds. Applicants also request an order under sections 6(c) and 17(b) of the Act to exempt applicants from section 17(a) to the extent necessary to permit Underlying Funds to sell their shares to Funds of Funds and redeem their shares from Funds of Funds. Applicants’ Legal Analysis A. Section 12(d)(1) 1. Section 12(d)(1)(A) of the Act, in relevant part, prohibits a registered investment company from acquiring 2 All references to the term ‘‘Adviser’’ include any entity that results from reorganization into another jurisdiction or a change in the type of business organization. 3 For purposes of the application, the same ‘‘group of investment companies’’ means any two or more registered investment companies, including closed-end investment companies, that hold themselves out to investors as related companies for purposes of investment and investor services. 4 Certain of the Unaffiliated Funds may be registered under the Act as either UITs or open-end management investment companies and have obtained exemptions from the Commission necessary to permit their shares to be listed and traded on a national securities exchange at negotiated prices (‘‘ETFs’’). Underlying Funds that are registered closed-end management investment companies are referred to herein as ‘‘Underlying CEFs,’’ and Underlying Funds that are ETFs are ‘‘Underlying ETFs.’’ Underlying Funds that are registered open-end management investment companies and not ETFs are ‘‘Underlying OEFs.’’ PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 60485 shares of an investment company if the securities represent more than 3% of the total outstanding voting stock of the acquired company, more than 5% of the total assets of the acquiring company, or, together with the securities of any other investment companies, more than 10% of the total assets of the acquiring company. Section 12(d)(1)(B) of the Act prohibits a registered open-end investment company, its principal underwriter, and any Broker from selling the investment company’s shares to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company’s voting stock, or if the sale will cause more than 10% of the acquired company’s voting stock to be owned by investment companies generally. Section 12(d)(1)(C) prohibits an investment company from acquiring any security issued by a registered closed-end investment company if such acquisition would result in the acquiring company, any other investment companies having the same investment adviser, and companies controlled by such investment companies, collectively, owning more than 10% of the outstanding voting stock of the registered closed-end investment company. 2. Section 12(d)(1)(J) of the Act provides that the Commission may exempt any person, security, or transaction, or any class or classes of persons, securities or transactions, from any provision of section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors. Applicants request an exemption under section 12(d)(1)(J) of the Act from the limitations of sections 12(d)(1)(A), (B) and (C) to the extent necessary to permit: (i) the Funds of Funds to acquire shares of Underlying Funds in excess of the limits set forth in section 12(d)(1)(A) and (C) of the Act; and (ii) the Underlying Funds, their principal underwriters and any Broker to sell shares of the Underlying Funds to the Funds of Funds in excess of the limits set forth in section 12(d)(1)(B) of the Act. 3. Applicants state that the proposed arrangement will not give rise to the policy concerns underlying sections 12(d)(1)(A), (B), and (C), which include concerns about undue influence by a fund of funds over underlying funds, excessive layering of fees, and overly complex fund structures. Accordingly, applicants believe that the requested exemption is consistent with the public interest and the protection of investors. 4. Applicants submit that the proposed structure will not result in the exercise of undue influence by a Fund E:\FR\FM\03OCN1.SGM 03OCN1 60486 Federal Register / Vol. 77, No. 192 / Wednesday, October 3, 2012 / Notices erowe on DSK2VPTVN1PROD with of Funds or its affiliated persons over the Underlying Funds. Applicants assert that the concern about undue influence does not arise in connection with a Fund of Funds’ investment in the Affiliated Funds because they are part of the same group of investment companies. To limit the control a Fund of Funds or Fund of Funds Affiliate 5 may have over an Unaffiliated Fund, applicants propose a condition prohibiting the Adviser and any person controlling, controlled by or under common control with the Adviser, and any investment company and any issuer that would be an investment company but for section 3(c)(1) or section 3(c)(7) of the Act advised or sponsored by the Adviser or any person controlling, controlled by or under common control with the Adviser (collectively, the ‘‘Group’’) from controlling (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. The same prohibition would apply to any other investment adviser within the meaning of section 2(a)(20)(B) of the Act to a Fund of Funds (‘‘Sub-Adviser’’) and any person controlling, controlled by or under common control with the Sub-Adviser, and any investment company or issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act (or portion of such investment company or issuer) advised or sponsored by the Sub-Adviser or any person controlling, controlled by or under common control with the SubAdviser (collectively, the ‘‘Sub-Adviser Group’’). 5. With respect to Underlying CEFs, applicants submit that one significant difference from Underlying OEFs is that, whereas Underlying OEFs may be unduly influenced by the threat of largescale redemptions, Underlying CEFs cannot be so influenced because they do not issue redeemable securities and, therefore, are not subject to large-scale redemptions. On the other hand, applicants state that Unaffiliated CEFs may be unduly influenced by a holder’s ability to vote a large block of stock. To address this concern, applicants submit that, with respect to a Fund of Fund’s investment in an Unaffiliated CEF, (i) each member of the Group or SubAdviser Group that is an investment company or an issuer that would be an 5 A ‘‘Fund of Funds Affiliate’’ is the Adviser, any Sub-Adviser, promoter or principal underwriter of a Fund of Funds, as well as any person controlling, controlled by or under common control with any of those entities. An ‘‘Unaffiliated Fund Affiliate’’ is an investment adviser, sponsor, promoter or principal underwriter of an Unaffiliated Fund or any person controlling, controlled by, or under common control with any of those entities. VerDate Mar<15>2010 15:03 Oct 02, 2012 Jkt 229001 investment company but for section 3(c)(1) or 3(c)(7) of the Act will vote its shares of the Unaffiliated CEF in the manner prescribed by section 12(d)(1)(E) of the Act and (ii) each other member of the Group or Sub-Adviser Group will vote its shares of the Unaffiliated CEF in the same proportion as the vote of all other holders of the same type of such Unaffiliated CEF’s shares. Applicants state that, in this way, an Unaffiliated CEF will be protected from undue influence by a Fund of Funds through the voting of the Unaffiliated CEF’s shares. 6. Applicants propose other conditions to limit the potential for undue influence over the Unaffiliated Underlying Funds, including that no Fund of Funds or Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Investment Company or sponsor to an Unaffiliated Trust) will cause an Unaffiliated Fund to purchase a security in an offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an Underwriting Affiliate (‘‘Affiliated Underwriting’’).6 7. To further ensure that an Unaffiliated Investment Company understands the implications of a Fund of Funds’ investment under the requested relief, prior to its investment in the shares of an Unaffiliated Investment Company in excess of the limit of section 12(d)(1)(A)(i) of the Act, a Fund of Funds and the Unaffiliated Investment Company will execute an agreement stating, without limitation, that their boards of directors or trustees (each, a ‘‘Board’’) and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order (the ‘‘Participation Agreement’’). Applicants note that an Unaffiliated Fund (including an Unaffiliated ETF or an Unaffiliated CEF) would also retain its right to reject any initial investment by a Fund of Funds in excess of the limits in section 12(d)(1)(A)(i) of the Act by declining to execute the Participation Agreement with the Fund of Funds. In addition, an Unaffiliated Fund (other than an Unaffiliated ETF or an Unaffiliated CEF whose shares are 6 An ‘‘Underwriting Affiliate’’ is a principal underwriter in any underwriting or selling syndicate that is an officer, director, trustee, advisory board member, investment adviser, subadviser or employee of the Fund of Funds, or a person of which any such officer, director, trustee, investment adviser, sub-adviser, member of an advisory board or employee is an affiliated person. An Underwriting Affiliate does not include any person whose relationship to an Unaffiliated Fund is covered by section 10(f) of the Act. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 purchased by a Fund of Funds in the secondary market) will retain its right at all times to reject any investment by a Fund of Funds. Finally, subject solely to the giving of notice to a Fund of Funds and the passage of a reasonable notice period, an Unaffiliated Fund (including an Unaffiliated CEF) could terminate a Participation Agreement with the Fund of Funds. 8. Applicants state that they do not believe that the proposed arrangement will result in excessive layering of fees. The Board of each Fund of Funds, including a majority of the trustees who are not ‘‘interested persons’’ within the meaning of section 2(a)(19) of the Act (the ‘‘Independent Trustees’’), will find that the management or advisory fees charged under a Fund of Funds’ advisory contract(s) are based on services provided that are in addition to, rather than duplicative of, services provided pursuant to any Underlying Fund’s advisory contract. In addition, the Adviser will waive fees otherwise payable to it by a Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Investment Company under rule 12b–1 under the Act) received from an Unaffiliated Fund by the Adviser, or an affiliated person of the Adviser, other than any advisory fees paid to the Adviser or an affiliated person of the Adviser by the Unaffiliated Investment Company in connection with the investment by the Fund of Funds in the Unaffiliated Fund. 9. Applicants further state that any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to funds of funds set forth in Rule 2830 of the Conduct Rules of the NASD.7 10. Applicants submit that the proposed arrangement will not create an overly complex fund structure. Applicants note that no Underlying Fund will acquire securities of any other investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except in certain circumstances identified in condition 12 below. B. Section 17(a) 1. Section 17(a) of the Act generally prohibits sales or purchases of securities between a registered investment company and any affiliated person of the company. Section 2(a)(3) of the Act 7 Any references to NASD Conduct Rule 2830 include any successor or replacement FINRA rule to NASD Conduct Rule 2830. E:\FR\FM\03OCN1.SGM 03OCN1 Federal Register / Vol. 77, No. 192 / Wednesday, October 3, 2012 / Notices erowe on DSK2VPTVN1PROD with defines an ‘‘affiliated person’’ of another person to include (a) Any person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of the other person; (b) any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the other person; and (c) any person directly or indirectly controlling, controlled by, or under common control with the other person. 2. Applicants state that a Fund of Funds and an Affiliated Fund may be deemed to be under common control and therefore affiliated persons of one another. Applicants also state that a Fund of Funds and an Underlying Fund may also be deemed to be affiliated persons of one another if a Fund of Funds owned 5% or more of one or more of such Underlying Funds’ outstanding voting securities. Applicants state that, for example, the sale by an Underlying OEF to the Fund of Funds and the redemption by the Underlying OEF of the Fund of Funds may be deemed to violate section 17(a).8 Similarly, applicants state that, the participation by the Fund of Funds in a follow-on offering of an Underlying CEF may be deemed to violate section 17(a).9 3. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that (i) The terms of the proposed transaction are fair and reasonable and do not involve overreaching on the part of any person concerned; (ii) the proposed transaction is consistent with the policies of each registered investment company concerned; and (iii) the proposed transaction is consistent with the general purposes of the Act. Section 6(c) of the Act permits the Commission to exempt any person or transactions from any provision of the Act if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly 8 Applicants acknowledge that receipt of any compensation by (a) an affiliated person of a Fund of Funds, or an affiliated person of such person, for the purchase by the Fund of Funds of shares of an Underlying Fund or (b) an affiliated person of an Underlying Fund, or an affiliated person of such person, for the sale by the Underlying Fund of its shares to a Fund of Funds may be prohibited by section 17(e)(1) of the Act. The Participation Agreement also will include this acknowledgement. 9 Applicants assert that they would not require relief from section 17(a) for secondary market transactions in the shares of any Underlying ETF or Underlying CEF, regardless of whether the Fund of Funds and Underlying Fund may be deemed to be affiliated persons. VerDate Mar<15>2010 15:03 Oct 02, 2012 Jkt 229001 intended by the policy and provisions of the Act. 4. Applicants submit that the proposed transactions satisfy the standards for relief under sections 17(b) and 6(c) of the Act. Applicants state that the terms of the transactions are reasonable and fair and do not involve overreaching. Applicants state that the terms upon which an Underlying Fund will sell its shares to or purchase its shares from a Fund of Funds will be in accordance with the rules and regulations under the Act.10 Applicants also state that the proposed transactions will be consistent with the policies of each Fund of Funds and Underlying Fund and with the general purposes of the Act. Applicants’ Conditions Applicants agree that the order granting the requested relief shall be subject to the following conditions: 1. The members of the Group will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. The members of a Sub-Adviser Group will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. With respect to a Fund’s investment in an Unaffiliated CEF, (i) each member of the Group or Sub-Adviser Group that is an investment company or an issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act will vote its shares of the Unaffiliated CEF in the manner prescribed by section 12(d)(1)(E) of the Act and (ii) each other member of the Group or Sub-Adviser Group will vote its shares of the Unaffiliated CEF in the same proportion as the vote of all other holders of the same type of Unaffiliated CEF’s shares. If, as a result of a decrease in the outstanding voting securities of any other Unaffiliated Fund, the Group or a Sub-Adviser Group, each in the aggregate, becomes a holder of more than 25 percent of the outstanding 10 Applicants note that a Fund of Funds generally would purchase and sell shares of an Underlying ETF or an Underlying CEF through secondary market transactions rather than through principal transactions with such Underlying Fund. Applicants nevertheless request relief from sections 17(a)(1) and (2) to permit each Fund of Funds that is an affiliated person, or an affiliated person of an affiliated person, as defined in section 2(a)(3) of the Act, of an Underlying ETF or Underlying CEF to purchase and redeem shares from such Underlying ETF and to purchase shares from such Underlying CEF. Applicants are not seeking relief from section 17(a) for, and the requested relief will not apply to, transactions where an Underlying ETF or Underlying CEF could be deemed to be an affiliated person, or an affiliated person of an affiliated person, of a Fund of Funds because an investment adviser to the Underlying Fund is also an investment adviser to the Fund of Funds. PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 60487 voting securities of such Unaffiliated Fund, then the Group or the SubAdviser Group will vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund’s shares. This condition will not apply to a Sub-Adviser Group with respect to an Unaffiliated Fund for which the SubAdviser or a person controlling, controlled by, or under common control with the Sub-Adviser acts as the investment adviser within the meaning of section 2(a)(20)(A) of the Act (in the case of an Unaffiliated Investment Company) or as the sponsor (in the case of an Unaffiliated Trust). 2. No Fund of Funds or Fund of Funds Affiliate will cause any existing or potential investment by the Fund of Funds in an Unaffiliated Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated Fund or an Unaffiliated Fund Affiliate. 3. The Board of each Fund of Funds, including a majority of the Independent Trustees, will adopt procedures reasonably designed to ensure that its Adviser and any Sub-Adviser to the Fund of Funds are conducting the investment program of the Fund of Funds without taking into account any consideration received by the Fund of Funds or Fund of Funds Affiliate from an Unaffiliated Fund or an Unaffiliated Fund Affiliate in connection with any services or transactions. 4. Once an investment by a Fund of Funds in the securities of an Unaffiliated Investment Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment Company, including a majority of the Independent Trustees, will determine that any consideration paid by the Unaffiliated Investment Company to a Fund of Funds or a Fund of Funds Affiliate in connection with any services or transactions: (a) Is fair and reasonable in relation to the nature and quality of the services and benefits received by the Unaffiliated Investment Company; (b) is within the range of consideration that the Unaffiliated Investment Company would be required to pay to another unaffiliated entity in connection with the same services or transactions; and (c) does not involve overreaching on the part of any person concerned. This condition does not apply with respect to any services or transactions between an Unaffiliated Investment Company and its investment adviser(s), or any person controlling, controlled by, or under common control with such investment adviser(s). E:\FR\FM\03OCN1.SGM 03OCN1 erowe on DSK2VPTVN1PROD with 60488 Federal Register / Vol. 77, No. 192 / Wednesday, October 3, 2012 / Notices 5. No Fund of Funds or Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Investment Company or sponsor to an Unaffiliated Trust) will cause an Unaffiliated Fund to purchase a security in any Affiliated Underwriting. 6. The Board of an Unaffiliated Investment Company, including a majority of the Independent Trustees, will adopt procedures reasonably designed to monitor any purchases of securities by the Unaffiliated Investment Company in an Affiliated Underwriting once an investment by a Fund of Funds in the securities of the Unaffiliated Investment Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, including any purchases made directly from an Underwriting Affiliate. The Board of the Unaffiliated Investment Company will review these purchases periodically, but no less frequently than annually, to determine whether the purchases were influenced by the investment by the Fund of Funds in the Unaffiliated Investment Company. The Board of the Unaffiliated Investment Company will consider, among other things: (a) Whether the purchases were consistent with the investment objectives and policies of the Unaffiliated Investment Company; (b) how the performance of securities purchased in an Affiliated Underwriting compares to the performance of comparable securities purchased during a comparable period of time in underwritings other than Affiliated Underwritings or to a benchmark such as a comparable market index; and (c) whether the amount of securities purchased by the Unaffiliated Investment Company in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The Board of the Unaffiliated Investment Company will take any appropriate actions based on its review, including, if appropriate, the institution of procedures designed to ensure that purchases of securities in Affiliated Underwritings are in the best interest of shareholders. 7. Each Unaffiliated Investment Company will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase from an Affiliated Underwriting occurred, the first two years in an easily accessible place, a VerDate Mar<15>2010 15:03 Oct 02, 2012 Jkt 229001 written record of each purchase of securities in an Affiliated Underwriting once an investment by a Fund of Funds in the securities of an Unaffiliated Investment Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth (1) The party from whom the securities were acquired, (2) the identity of the underwriting syndicate’s members, (3) the terms of the purchase, and (4) the information or materials upon which the determinations of the Board of the Unaffiliated Investment Company were made. 8. Prior to its investment in shares of an Unaffiliated Investment Company in excess of the limit set forth in section 12(d)(1)(A)(i) of the Act, the Fund of Funds and the Unaffiliated Investment Company will execute a Participation Agreement stating, without limitation, that their Boards and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order. At the time of its investment in shares of an Unaffiliated Investment Company in excess of the limit set forth in section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Investment Company of the investment. At such time, the Fund of Funds will also transmit to the Unaffiliated Investment Company a list of the names of each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of Funds will notify the Unaffiliated Investment Company of any changes to the list as soon as reasonably practicable after a change occurs. The Unaffiliated Investment Company and the Fund of Funds will maintain and preserve a copy of the order, the Participation Agreement, and the list with any updated information for the duration of the investment and for a period of not less than six years thereafter, the first two years in an easily accessible place. 9. Before approving any advisory contract under section 15 of the Act, the Board of each Fund of Funds, including a majority of the Independent Trustees, shall find that the advisory fees charged under the advisory contract are based on services provided that are in addition to, rather than duplicative of, services provided under the advisory contract(s) of any Underlying Fund in which the Fund of Funds may invest. Such finding, and the basis upon which the finding was made, will be recorded fully in the minute books of the appropriate Fund of Funds. 10. The Adviser will waive fees otherwise payable to it by a Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Investment Company PO 00000 Frm 00116 Fmt 4703 Sfmt 9990 pursuant to rule 12b–1 under the Act) received from an Unaffiliated Fund by the Adviser, or an affiliated person of the Adviser, other than any advisory fees paid to the Adviser or its affiliated person by the Unaffiliated Investment Company, in connection with the investment by the Fund of Funds in the Unaffiliated Fund. Any Sub-Adviser will waive fees otherwise payable to the Sub-Adviser, directly or indirectly, by the Fund of Funds in an amount at least equal to any compensation received by the Sub-Adviser, or an affiliated person of the Sub-Adviser, from an Unaffiliated Fund, other than any advisory fees paid to the Sub-Adviser or its affiliated person by the Unaffiliated Investment Company in connection with the investment by the Fund of Funds in the Unaffiliated Fund made at the direction of the Sub-Adviser. In the event that the Sub-Adviser waives fees, the benefit of the waiver will be passed through to the Fund of Funds. 11. Any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to funds of funds set forth in NASD Conduct Rule 2830. 12. No Underlying Fund will acquire securities of any other investment company, or company relying on section 3(c)(1) or 3(c)(7) of the Act, in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent that such Underlying Fund: (a) Receives securities of another investment company as a dividend or as a result of a plan of reorganization of a company (other than a plan devised for the purpose of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed to have acquired) securities of another investment company pursuant to exemptive relief from the Commission permitting such Underlying Fund to: (i) Acquire securities of one or more investment companies, for short-term cash management purposes or (ii) engage in inter-fund borrowing and lending transactions. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–24293 Filed 10–2–12; 8:45 am] BILLING CODE 8011–01–P E:\FR\FM\03OCN1.SGM 03OCN1

Agencies

[Federal Register Volume 77, Number 192 (Wednesday, October 3, 2012)]
[Notices]
[Pages 60484-60488]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-24293]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30222; 812-13820]


PowerShares Exchange-Traded Fund Trust, et al.; Notice of 
Application

September 26, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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Summary of the Application:  Applicants request an order that would 
permit certain registered open-end management investment companies that 
operate as ``funds of funds'' to acquire shares of certain registered 
open-end and closed-end management investment companies and unit 
investment trusts that are within and outside the same group of 
investment companies as the acquiring investment companies.

Applicants: PowerShares Exchange-Traded Fund Trust, PowerShares 
Exchange-Traded Fund Trust II, PowerShares Actively Managed Exchange-
Traded Fund Trust (each, a ``Trust'') and Invesco PowerShares Capital 
Management LLC (the ``Adviser'').

Filing Dates: The application was filed on September 3, 2010, and 
amended on December 22, 2010, October 13, 2011, April 23, 2012, 
September 5, 2012, and September 20, 2012.

Hearing or Notification of Hearing:  An order granting the application 
will be issued unless the Commission orders

[[Page 60485]]

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 October 22, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants, 
301 West Roosevelt Road, Wheaton, Illinois 60187.

FOR FURTHER INFORMATION CONTACT: Jill Ehrlich, Senior Counsel, at (202) 
551-6819, or David P. Bartels, 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 for an 
applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicants' Representations

    1. Each Trust is organized as a Massachusetts business trust or 
Delaware statutory trust and is registered as an open-end management 
investment company under the Act.\1\ Each series of a Trust will pursue 
distinct investment objectives and strategies. The Adviser is a 
Delaware limited liability company registered under the Investment 
Advisers Act of 1940. The Adviser or an entity controlling, controlled 
by or under common control with the Adviser serves as the investment 
adviser for each of the Funds.\2\
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    \1\ Applicants request that the order extend to any future 
series of a Trust, and any other existing or future registered open-
end management investment companies and any series thereof that are 
part of the same group of investment companies, as defined in 
section 12(d)(1)(G)(ii) of the Act, as the Trust and are, or may in 
the future be, advised by the Adviser or any other investment 
adviser controlling, controlled by, or under common control with the 
Adviser (together with the existing series of the Trust, the 
``Funds''). All entities that currently intend to rely on the 
requested order are named as applicants. Any other entity that 
relies on the order in the future will comply with the terms and 
conditions set forth in the application.
    \2\ All references to the term ``Adviser'' include any entity 
that results from reorganization into another jurisdiction or a 
change in the type of business organization.
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    2. Applicants request relief to the extent necessary to permit: (a) 
A Fund (each, a ``Fund of Funds,'' and collectively, the ``Funds of 
Funds'') to acquire shares of registered management investment 
companies, including open-end investment companies and closed-end 
investment companies (``Unaffiliated OEFs'' and ``Unaffiliated CEFs,'' 
respectively, and, together, the ``Unaffiliated Investment 
Companies''), and unit investment trusts (``UITs'') (the ``Unaffiliated 
Trusts,'' and together with the Unaffiliated Investment Companies, the 
``Unaffiliated Funds''), in each case, that are not part of the same 
``group of investment companies'' as the Funds of Funds; \3\ (b) the 
Unaffiliated Funds, their principal underwriters and any broker or 
dealer registered under the Securities Exchange Act of 1934 
(``Broker'') to sell shares of such Unaffiliated Funds to the Funds of 
Funds; (c) the Funds of Funds to acquire shares of other registered 
investment companies, including open-end investment companies, closed-
end investment companies and UITs in the same group of investment 
companies (the ``Affiliated Funds,'' together with the Unaffiliated 
Funds, the ``Underlying Funds''); \4\ and (d) the Affiliated Funds, 
their principal underwriters and any Broker to sell shares of such 
Affiliated Funds to the Funds of Funds. Applicants also request an 
order under sections 6(c) and 17(b) of the Act to exempt applicants 
from section 17(a) to the extent necessary to permit Underlying Funds 
to sell their shares to Funds of Funds and redeem their shares from 
Funds of Funds.
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    \3\ For purposes of the application, the same ``group of 
investment companies'' means any two or more registered investment 
companies, including closed-end investment companies, that hold 
themselves out to investors as related companies for purposes of 
investment and investor services.
    \4\ Certain of the Unaffiliated Funds may be registered under 
the Act as either UITs or open-end management investment companies 
and have obtained exemptions from the Commission necessary to permit 
their shares to be listed and traded on a national securities 
exchange at negotiated prices (``ETFs''). Underlying Funds that are 
registered closed-end management investment companies are referred 
to herein as ``Underlying CEFs,'' and Underlying Funds that are ETFs 
are ``Underlying ETFs.'' Underlying Funds that are registered open-
end management investment companies and not ETFs are ``Underlying 
OEFs.''
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Applicants' Legal Analysis

A. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act, in relevant part, prohibits a 
registered investment company from acquiring shares of an investment 
company if the securities represent more than 3% of the total 
outstanding voting stock of the acquired company, more than 5% of the 
total assets of the acquiring company, or, together with the securities 
of any other investment companies, more than 10% of the total assets of 
the acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter, and 
any Broker from selling the investment company's shares to another 
investment company if the sale will cause the acquiring company to own 
more than 3% of the acquired company's voting stock, or if the sale 
will cause more than 10% of the acquired company's voting stock to be 
owned by investment companies generally. Section 12(d)(1)(C) prohibits 
an investment company from acquiring any security issued by a 
registered closed-end investment company if such acquisition would 
result in the acquiring company, any other investment companies having 
the same investment adviser, and companies controlled by such 
investment companies, collectively, owning more than 10% of the 
outstanding voting stock of the registered closed-end investment 
company.
    2. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security, or transaction, or any class or classes of 
persons, securities or transactions, from any provision of section 
12(d)(1) if the exemption is consistent with the public interest and 
the protection of investors. Applicants request an exemption under 
section 12(d)(1)(J) of the Act from the limitations of sections 
12(d)(1)(A), (B) and (C) to the extent necessary to permit: (i) the 
Funds of Funds to acquire shares of Underlying Funds in excess of the 
limits set forth in section 12(d)(1)(A) and (C) of the Act; and (ii) 
the Underlying Funds, their principal underwriters and any Broker to 
sell shares of the Underlying Funds to the Funds of Funds in excess of 
the limits set forth in section 12(d)(1)(B) of the Act.
    3. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 12(d)(1)(A), (B), and 
(C), which include concerns about undue influence by a fund of funds 
over underlying funds, excessive layering of fees, and overly complex 
fund structures. Accordingly, applicants believe that the requested 
exemption is consistent with the public interest and the protection of 
investors.
    4. Applicants submit that the proposed structure will not result in 
the exercise of undue influence by a Fund

[[Page 60486]]

of Funds or its affiliated persons over the Underlying Funds. 
Applicants assert that the concern about undue influence does not arise 
in connection with a Fund of Funds' investment in the Affiliated Funds 
because they are part of the same group of investment companies. To 
limit the control a Fund of Funds or Fund of Funds Affiliate \5\ may 
have over an Unaffiliated Fund, applicants propose a condition 
prohibiting the Adviser and any person controlling, controlled by or 
under common control with the Adviser, and any investment company and 
any issuer that would be an investment company but for section 3(c)(1) 
or section 3(c)(7) of the Act advised or sponsored by the Adviser or 
any person controlling, controlled by or under common control with the 
Adviser (collectively, the ``Group'') from controlling (individually or 
in the aggregate) an Unaffiliated Fund within the meaning of section 
2(a)(9) of the Act. The same prohibition would apply to any other 
investment adviser within the meaning of section 2(a)(20)(B) of the Act 
to a Fund of Funds (``Sub-Adviser'') and any person controlling, 
controlled by or under common control with the Sub-Adviser, and any 
investment company or issuer that would be an investment company but 
for section 3(c)(1) or 3(c)(7) of the Act (or portion of such 
investment company or issuer) advised or sponsored by the Sub-Adviser 
or any person controlling, controlled by or under common control with 
the Sub-Adviser (collectively, the ``Sub-Adviser Group'').
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    \5\ A ``Fund of Funds Affiliate'' is the Adviser, any Sub-
Adviser, promoter or principal underwriter of a Fund of Funds, as 
well as any person controlling, controlled by or under common 
control with any of those entities. An ``Unaffiliated Fund 
Affiliate'' is an investment adviser, sponsor, promoter or principal 
underwriter of an Unaffiliated Fund or any person controlling, 
controlled by, or under common control with any of those entities.
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    5. With respect to Underlying CEFs, applicants submit that one 
significant difference from Underlying OEFs is that, whereas Underlying 
OEFs may be unduly influenced by the threat of large-scale redemptions, 
Underlying CEFs cannot be so influenced because they do not issue 
redeemable securities and, therefore, are not subject to large-scale 
redemptions. On the other hand, applicants state that Unaffiliated CEFs 
may be unduly influenced by a holder's ability to vote a large block of 
stock. To address this concern, applicants submit that, with respect to 
a Fund of Fund's investment in an Unaffiliated CEF, (i) each member of 
the Group or Sub-Adviser Group that is an investment company or an 
issuer that would be an investment company but for section 3(c)(1) or 
3(c)(7) of the Act will vote its shares of the Unaffiliated CEF in the 
manner prescribed by section 12(d)(1)(E) of the Act and (ii) each other 
member of the Group or Sub-Adviser Group will vote its shares of the 
Unaffiliated CEF in the same proportion as the vote of all other 
holders of the same type of such Unaffiliated CEF's shares. Applicants 
state that, in this way, an Unaffiliated CEF will be protected from 
undue influence by a Fund of Funds through the voting of the 
Unaffiliated CEF's shares.
    6. Applicants propose other conditions to limit the potential for 
undue influence over the Unaffiliated Underlying Funds, including that 
no Fund of Funds or Fund of Funds Affiliate (except to the extent it is 
acting in its capacity as an investment adviser to an Unaffiliated 
Investment Company or sponsor to an Unaffiliated Trust) will cause an 
Unaffiliated Fund to purchase a security in an offering of securities 
during the existence of any underwriting or selling syndicate of which 
a principal underwriter is an Underwriting Affiliate (``Affiliated 
Underwriting'').\6\
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    \6\ An ``Underwriting Affiliate'' is a principal underwriter in 
any underwriting or selling syndicate that is an officer, director, 
trustee, advisory board member, investment adviser, sub-adviser or 
employee of the Fund of Funds, or a person of which any such 
officer, director, trustee, investment adviser, sub-adviser, member 
of an advisory board or employee is an affiliated person. An 
Underwriting Affiliate does not include any person whose 
relationship to an Unaffiliated Fund is covered by section 10(f) of 
the Act.
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    7. To further ensure that an Unaffiliated Investment Company 
understands the implications of a Fund of Funds' investment under the 
requested relief, prior to its investment in the shares of an 
Unaffiliated Investment Company in excess of the limit of section 
12(d)(1)(A)(i) of the Act, a Fund of Funds and the Unaffiliated 
Investment Company will execute an agreement stating, without 
limitation, that their boards of directors or trustees (each, a 
``Board'') and their investment advisers understand the terms and 
conditions of the order and agree to fulfill their responsibilities 
under the order (the ``Participation Agreement''). Applicants note that 
an Unaffiliated Fund (including an Unaffiliated ETF or an Unaffiliated 
CEF) would also retain its right to reject any initial investment by a 
Fund of Funds in excess of the limits in section 12(d)(1)(A)(i) of the 
Act by declining to execute the Participation Agreement with the Fund 
of Funds. In addition, an Unaffiliated Fund (other than an Unaffiliated 
ETF or an Unaffiliated CEF whose shares are purchased by a Fund of 
Funds in the secondary market) will retain its right at all times to 
reject any investment by a Fund of Funds. Finally, subject solely to 
the giving of notice to a Fund of Funds and the passage of a reasonable 
notice period, an Unaffiliated Fund (including an Unaffiliated CEF) 
could terminate a Participation Agreement with the Fund of Funds.
    8. Applicants state that they do not believe that the proposed 
arrangement will result in excessive layering of fees. The Board of 
each Fund of Funds, including a majority of the trustees who are not 
``interested persons'' within the meaning of section 2(a)(19) of the 
Act (the ``Independent Trustees''), will find that the management or 
advisory fees charged under a Fund of Funds' advisory contract(s) are 
based on services provided that are in addition to, rather than 
duplicative of, services provided pursuant to any Underlying Fund's 
advisory contract. In addition, the Adviser will waive fees otherwise 
payable to it by a Fund of Funds in an amount at least equal to any 
compensation (including fees received pursuant to any plan adopted by 
an Unaffiliated Investment Company under rule 12b-1 under the Act) 
received from an Unaffiliated Fund by the Adviser, or an affiliated 
person of the Adviser, other than any advisory fees paid to the Adviser 
or an affiliated person of the Adviser by the Unaffiliated Investment 
Company in connection with the investment by the Fund of Funds in the 
Unaffiliated Fund.
    9. Applicants further state that any sales charges and/or service 
fees charged with respect to shares of a Fund of Funds will not exceed 
the limits applicable to funds of funds set forth in Rule 2830 of the 
Conduct Rules of the NASD.\7\
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    \7\ Any references to NASD Conduct Rule 2830 include any 
successor or replacement FINRA rule to NASD Conduct Rule 2830.
---------------------------------------------------------------------------

    10. Applicants submit that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that no Underlying 
Fund will acquire securities of any other investment company or company 
relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the 
limits contained in section 12(d)(1)(A) of the Act, except in certain 
circumstances identified in condition 12 below.

B. Section 17(a)

    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and any 
affiliated person of the company. Section 2(a)(3) of the Act

[[Page 60487]]

defines an ``affiliated person'' of another person to include (a) Any 
person directly or indirectly owning, controlling, or holding with 
power to vote, 5% or more of the outstanding voting securities of the 
other person; (b) any person 5% or more of whose outstanding voting 
securities are directly or indirectly owned, controlled, or held with 
power to vote by the other person; and (c) any person directly or 
indirectly controlling, controlled by, or under common control with the 
other person.
    2. Applicants state that a Fund of Funds and an Affiliated Fund may 
be deemed to be under common control and therefore affiliated persons 
of one another. Applicants also state that a Fund of Funds and an 
Underlying Fund may also be deemed to be affiliated persons of one 
another if a Fund of Funds owned 5% or more of one or more of such 
Underlying Funds' outstanding voting securities. Applicants state that, 
for example, the sale by an Underlying OEF to the Fund of Funds and the 
redemption by the Underlying OEF of the Fund of Funds may be deemed to 
violate section 17(a).\8\ Similarly, applicants state that, the 
participation by the Fund of Funds in a follow-on offering of an 
Underlying CEF may be deemed to violate section 17(a).\9\
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    \8\ Applicants acknowledge that receipt of any compensation by 
(a) an affiliated person of a Fund of Funds, or an affiliated person 
of such person, for the purchase by the Fund of Funds of shares of 
an Underlying Fund or (b) an affiliated person of an Underlying 
Fund, or an affiliated person of such person, for the sale by the 
Underlying Fund of its shares to a Fund of Funds may be prohibited 
by section 17(e)(1) of the Act. The Participation Agreement also 
will include this acknowledgement.
    \9\ Applicants assert that they would not require relief from 
section 17(a) for secondary market transactions in the shares of any 
Underlying ETF or Underlying CEF, regardless of whether the Fund of 
Funds and Underlying Fund may be deemed to be affiliated persons.
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    3. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise prohibited by section 17(a) if 
it finds that (i) The terms of the proposed transaction are fair and 
reasonable and do not involve overreaching on the part of any person 
concerned; (ii) the proposed transaction is consistent with the 
policies of each registered investment company concerned; and (iii) the 
proposed transaction is consistent with the general purposes of the 
Act. Section 6(c) of the Act permits the Commission to exempt any 
person or transactions from any provision of the Act if 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.
    4. Applicants submit that the proposed transactions satisfy the 
standards for relief under sections 17(b) and 6(c) of the Act. 
Applicants state that the terms of the transactions are reasonable and 
fair and do not involve overreaching. Applicants state that the terms 
upon which an Underlying Fund will sell its shares to or purchase its 
shares from a Fund of Funds will be in accordance with the rules and 
regulations under the Act.\10\ Applicants also state that the proposed 
transactions will be consistent with the policies of each Fund of Funds 
and Underlying Fund and with the general purposes of the Act.
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    \10\ Applicants note that a Fund of Funds generally would 
purchase and sell shares of an Underlying ETF or an Underlying CEF 
through secondary market transactions rather than through principal 
transactions with such Underlying Fund. Applicants nevertheless 
request relief from sections 17(a)(1) and (2) to permit each Fund of 
Funds that is an affiliated person, or an affiliated person of an 
affiliated person, as defined in section 2(a)(3) of the Act, of an 
Underlying ETF or Underlying CEF to purchase and redeem shares from 
such Underlying ETF and to purchase shares from such Underlying CEF. 
Applicants are not seeking relief from section 17(a) for, and the 
requested relief will not apply to, transactions where an Underlying 
ETF or Underlying CEF could be deemed to be an affiliated person, or 
an affiliated person of an affiliated person, of a Fund of Funds 
because an investment adviser to the Underlying Fund is also an 
investment adviser to the Fund of Funds.
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Applicants' Conditions

    Applicants agree that the order granting the requested relief shall 
be subject to the following conditions:
    1. The members of the Group will not control (individually or in 
the aggregate) an Unaffiliated Fund within the meaning of section 
2(a)(9) of the Act. The members of a Sub-Adviser Group will not control 
(individually or in the aggregate) an Unaffiliated Fund within the 
meaning of section 2(a)(9) of the Act. With respect to a Fund's 
investment in an Unaffiliated CEF, (i) each member of the Group or Sub-
Adviser Group that is an investment company or an issuer that would be 
an investment company but for section 3(c)(1) or 3(c)(7) of the Act 
will vote its shares of the Unaffiliated CEF in the manner prescribed 
by section 12(d)(1)(E) of the Act and (ii) each other member of the 
Group or Sub-Adviser Group will vote its shares of the Unaffiliated CEF 
in the same proportion as the vote of all other holders of the same 
type of Unaffiliated CEF's shares. If, as a result of a decrease in the 
outstanding voting securities of any other Unaffiliated Fund, the Group 
or a Sub-Adviser Group, each in the aggregate, becomes a holder of more 
than 25 percent of the outstanding voting securities of such 
Unaffiliated Fund, then the Group or the Sub-Adviser Group will vote 
its shares of the Unaffiliated Fund in the same proportion as the vote 
of all other holders of the Unaffiliated Fund's shares. This condition 
will not apply to a Sub-Adviser Group with respect to an Unaffiliated 
Fund for which the Sub-Adviser or a person controlling, controlled by, 
or under common control with the Sub-Adviser acts as the investment 
adviser within the meaning of section 2(a)(20)(A) of the Act (in the 
case of an Unaffiliated Investment Company) or as the sponsor (in the 
case of an Unaffiliated Trust).
    2. No Fund of Funds or Fund of Funds Affiliate will cause any 
existing or potential investment by the Fund of Funds in an 
Unaffiliated Fund to influence the terms of any services or 
transactions between the Fund of Funds or a Fund of Funds Affiliate and 
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
    3. The Board of each Fund of Funds, including a majority of the 
Independent Trustees, will adopt procedures reasonably designed to 
ensure that its Adviser and any Sub-Adviser to the Fund of Funds are 
conducting the investment program of the Fund of Funds without taking 
into account any consideration received by the Fund of Funds or Fund of 
Funds Affiliate from an Unaffiliated Fund or an Unaffiliated Fund 
Affiliate in connection with any services or transactions.
    4. Once an investment by a Fund of Funds in the securities of an 
Unaffiliated Investment Company exceeds the limit of section 
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment 
Company, including a majority of the Independent Trustees, will 
determine that any consideration paid by the Unaffiliated Investment 
Company to a Fund of Funds or a Fund of Funds Affiliate in connection 
with any services or transactions: (a) Is fair and reasonable in 
relation to the nature and quality of the services and benefits 
received by the Unaffiliated Investment Company; (b) is within the 
range of consideration that the Unaffiliated Investment Company would 
be required to pay to another unaffiliated entity in connection with 
the same services or transactions; and (c) does not involve 
overreaching on the part of any person concerned. This condition does 
not apply with respect to any services or transactions between an 
Unaffiliated Investment Company and its investment adviser(s), or any 
person controlling, controlled by, or under common control with such 
investment adviser(s).

[[Page 60488]]

    5. No Fund of Funds or Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to an 
Unaffiliated Investment Company or sponsor to an Unaffiliated Trust) 
will cause an Unaffiliated Fund to purchase a security in any 
Affiliated Underwriting.
    6. The Board of an Unaffiliated Investment Company, including a 
majority of the Independent Trustees, will adopt procedures reasonably 
designed to monitor any purchases of securities by the Unaffiliated 
Investment Company in an Affiliated Underwriting once an investment by 
a Fund of Funds in the securities of the Unaffiliated Investment 
Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, 
including any purchases made directly from an Underwriting Affiliate. 
The Board of the Unaffiliated Investment Company will review these 
purchases periodically, but no less frequently than annually, to 
determine whether the purchases were influenced by the investment by 
the Fund of Funds in the Unaffiliated Investment Company. The Board of 
the Unaffiliated Investment Company will consider, among other things: 
(a) Whether the purchases were consistent with the investment 
objectives and policies of the Unaffiliated Investment Company; (b) how 
the performance of securities purchased in an Affiliated Underwriting 
compares to the performance of comparable securities purchased during a 
comparable period of time in underwritings other than Affiliated 
Underwritings or to a benchmark such as a comparable market index; and 
(c) whether the amount of securities purchased by the Unaffiliated 
Investment Company in Affiliated Underwritings and the amount purchased 
directly from an Underwriting Affiliate have changed significantly from 
prior years. The Board of the Unaffiliated Investment Company will take 
any appropriate actions based on its review, including, if appropriate, 
the institution of procedures designed to ensure that purchases of 
securities in Affiliated Underwritings are in the best interest of 
shareholders.
    7. Each Unaffiliated Investment Company will maintain and preserve 
permanently in an easily accessible place a written copy of the 
procedures described in the preceding condition, and any modifications 
to such procedures, and will maintain and preserve for a period of not 
less than six years from the end of the fiscal year in which any 
purchase from an Affiliated Underwriting occurred, the first two years 
in an easily accessible place, a written record of each purchase of 
securities in an Affiliated Underwriting once an investment by a Fund 
of Funds in the securities of an Unaffiliated Investment Company 
exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth 
(1) The party from whom the securities were acquired, (2) the identity 
of the underwriting syndicate's members, (3) the terms of the purchase, 
and (4) the information or materials upon which the determinations of 
the Board of the Unaffiliated Investment Company were made.
    8. Prior to its investment in shares of an Unaffiliated Investment 
Company in excess of the limit set forth in section 12(d)(1)(A)(i) of 
the Act, the Fund of Funds and the Unaffiliated Investment Company will 
execute a Participation Agreement stating, without limitation, that 
their Boards and their investment advisers understand the terms and 
conditions of the order and agree to fulfill their responsibilities 
under the order. At the time of its investment in shares of an 
Unaffiliated Investment Company in excess of the limit set forth in 
section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated 
Investment Company of the investment. At such time, the Fund of Funds 
will also transmit to the Unaffiliated Investment Company a list of the 
names of each Fund of Funds Affiliate and Underwriting Affiliate. The 
Fund of Funds will notify the Unaffiliated Investment Company of any 
changes to the list as soon as reasonably practicable after a change 
occurs. The Unaffiliated Investment Company and the Fund of Funds will 
maintain and preserve a copy of the order, the Participation Agreement, 
and the list with any updated information for the duration of the 
investment and for a period of not less than six years thereafter, the 
first two years in an easily accessible place.
    9. Before approving any advisory contract under section 15 of the 
Act, the Board of each Fund of Funds, including a majority of the 
Independent Trustees, shall find that the advisory fees charged under 
the advisory contract are based on services provided that are in 
addition to, rather than duplicative of, services provided under the 
advisory contract(s) of any Underlying Fund in which the Fund of Funds 
may invest. Such finding, and the basis upon which the finding was 
made, will be recorded fully in the minute books of the appropriate 
Fund of Funds.
    10. The Adviser will waive fees otherwise payable to it by a Fund 
of Funds in an amount at least equal to any compensation (including 
fees received pursuant to any plan adopted by an Unaffiliated 
Investment Company pursuant to rule 12b-1 under the Act) received from 
an Unaffiliated Fund by the Adviser, or an affiliated person of the 
Adviser, other than any advisory fees paid to the Adviser or its 
affiliated person by the Unaffiliated Investment Company, in connection 
with the investment by the Fund of Funds in the Unaffiliated Fund. Any 
Sub-Adviser will waive fees otherwise payable to the Sub-Adviser, 
directly or indirectly, by the Fund of Funds in an amount at least 
equal to any compensation received by the Sub-Adviser, or an affiliated 
person of the Sub-Adviser, from an Unaffiliated Fund, other than any 
advisory fees paid to the Sub-Adviser or its affiliated person by the 
Unaffiliated Investment Company in connection with the investment by 
the Fund of Funds in the Unaffiliated Fund made at the direction of the 
Sub-Adviser. In the event that the Sub-Adviser waives fees, the benefit 
of the waiver will be passed through to the Fund of Funds.
    11. Any sales charges and/or service fees charged with respect to 
shares of a Fund of Funds will not exceed the limits applicable to 
funds of funds set forth in NASD Conduct Rule 2830.
    12. No Underlying Fund will acquire securities of any other 
investment company, or company relying on section 3(c)(1) or 3(c)(7) of 
the Act, in excess of the limits contained in section 12(d)(1)(A) of 
the Act, except to the extent that such Underlying Fund: (a) Receives 
securities of another investment company as a dividend or as a result 
of a plan of reorganization of a company (other than a plan devised for 
the purpose of evading section 12(d)(1) of the Act); or (b) acquires 
(or is deemed to have acquired) securities of another investment 
company pursuant to exemptive relief from the Commission permitting 
such Underlying Fund to: (i) Acquire securities of one or more 
investment companies, for short-term cash management purposes or (ii) 
engage in inter-fund borrowing and lending transactions.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-24293 Filed 10-2-12; 8:45 am]
BILLING CODE 8011-01-P
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