Forum Investment Advisors, LLC, et al.;, 27444-27451 [2013-11146]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 78, Number 91 (Friday, May 10, 2013)]
[Notices]
[Pages 27444-27451]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-11146]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30507; 812-13915]


Forum Investment Advisors, LLC, et al.; Notice of Application

May 6, 2013.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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    Applicants: Forum Investment Advisors, LLC (``FIA''), Forum ETF 
Trust (the ``Trust''), and Foreside Fund Services, LLC (collectively, 
``Applicants'').
SUMMARY: Summary of Application: Applicants request an order that 
permits: (a) Series of certain actively managed open-end management 
investment companies to issue shares (``Shares'') redeemable in large 
aggregations only (``Creation Units''); (b) secondary market 
transactions in Shares to occur at negotiated market prices; (c) 
certain series to pay redemption proceeds, under certain circumstances, 
more than seven days from the tender of Shares for redemption; (d) 
certain affiliated persons of the series to deposit securities into, 
and receive securities from, the series in connection with the purchase 
and redemption of Creation Units; and (e) certain registered management 
investment companies and unit investment trusts outside of the same 
group of investment companies as the series to acquire Shares.

DATES: Filing Dates: The application was filed on June 27, 2011, and 
amended on December 12, 2011, October 29, 2012 and April 1, 2013. 
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 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 June 3, 2013, 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: 
Forum Investment Advisors, LLC and Forum ETF Trust, Three Canal Plaza, 
Suite 600, Portland, ME 04101 and Foreside Fund Services, LLC, Three 
Canal Plaza, Suite 100, Portland, ME 04101.

FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel, 
at (202) 551-6990 or Jennifer L. Sawin, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Exemptive Applications Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at https://

[[Page 27445]]

www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicants' Representations

    1. The Trust is registered as an open-end management investment 
company under the Act and is a statutory trust organized under the laws 
of Delaware. The Trust will create and operate an actively managed 
investment series of the Trust (``Initial Fund'') that will offer 
Shares.\1\ The investment objective of the Initial Fund will be to seek 
to profit from a rise in hard currencies relative to the U.S. dollar. 
The Initial Fund will seek to achieve its investment objective by 
investing at least 80% of the value of its net assets (plus borrowing 
for investment purposes) in ``hard currency'' denominated investments 
and gold.
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    \1\ The Initial Fund is expected to be called the Merk Hard 
Currency ETF.
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    2. Applicants request that the order apply to the Initial Fund and 
any future series of the Trust or of other open-end management 
companies that may utilize active management investment strategies 
(``Future Funds''). Any Future Fund will (a) be advised by FIA or an 
entity controlling, controlled by, or under common control with FIA 
(FIA and each such other entity and any successor thereto included in 
the term ``Investment Manager'') \2\, and (b) comply with the terms and 
conditions of the application.\3\ The Initial Fund and Future Funds 
together are the ``Funds''. Each Fund will operate as an actively 
managed exchange-traded fund (``ETF''). Each Fund will consist of a 
portfolio of securities (including fixed income securities and/or 
equity securities) and/or currencies, other assets and other positions 
including short sales and other short positions (``Short Positions'') 
traded in the U.S. and/or non-U.S. markets (``Portfolio Instruments''). 
To the extent consistent with other investment limitations, the Funds 
may invest all of their assets in mortgage- or asset-backed securities, 
including ``to-be-announced transactions'' or ``TBA Transactions'',\4\ 
and may engage in forward commitment transactions \5\, forward foreign 
currency contracts, options contracts, futures contracts or swap 
agreements.\6\ Funds may also invest in ``Depositary Receipts''.\7\ A 
Fund will not invest in any Depositary Receipts that the Investment 
Advisor (as defined below) deems to be illiquid or for which pricing 
information is not readily available. The Future Funds might include 
one or more ETFs that invest in other open-end and/or closed-end 
investment companies and/or ETFs.\8\
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    \2\ For the purposes of the requested order, a ``successor'' is 
limited to an entity that results from a reorganization into another 
jurisdiction or a change in the type of business organization.
    \3\ All entities that currently intend to rely on the order are 
named as Applicants. Any entity that relies on the order in the 
future will comply with the terms and conditions of this 
application. An Investing Fund (as defined below) may rely on the 
order only to invest in Funds and not in any other registered 
investment company.
    \4\ A TBA Transaction is a method of trading mortgage-backed 
securities. In a TBA Transaction, the buyer and seller agree upon 
general trade parameters such as agency, settlement date, par amount 
and price. The actual pools delivered generally are determined two 
days prior to the settlement date.
    \5\ In a forward commitment transaction, the buyer/seller enters 
into a contract to purchase/sell, for example, specific securities 
for a fixed price at a future date beyond normal settlement time.
    \6\ If a Fund invests in derivatives: (a) the Board periodically 
will review and approve (i) the Fund's use of derivatives and (ii) 
how the Fund's Investment Advisor assesses and manages risk with 
respect to the Fund's use of derivatives; and (b) the Fund's 
disclosure of its use of derivatives in its offering documents and 
periodic reports will be consistent with relevant Commission and 
staff guidance.
    \7\ Depositary Receipts are typically issued by a financial 
institution, a ``depositary'', and evidence ownership in a security 
or pool of securities that have been deposited with the depositary. 
No affiliated persons of Applicants, nor of any Investment Manager, 
any Investment Advisor, or the Funds, will serve as the depositary 
bank for any Depositary Receipts held by a Fund.
    \8\ In no case, however, will such a Fund rely on the exemption 
from section 12(d)(1) being requested in this application.
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    3. An Investment Manager will be an investment adviser to the 
Initial Fund and each of the other Funds. On February 28, 2013, FIA, a 
Delaware limited liability company, filed a Form ADV with the 
Commission to register as an ``investment adviser'' under section 203 
of the Investment Advisers Act of 1940 (``Advisers Act''). Subject to 
the oversight and authority of the board of trustees of the Trust 
(``Board''), \9\ an Investment Manager will develop the overall 
investment program for each Fund, which includes working with the 
Investment Advisors to define principal investment strategies (the 
Investment Advisors, and not the Investment Manager, will make 
investment decisions with respect to assets of each Fund allocated by 
the Investment Manager to that Investment Advisor, subject to 
supervision and oversight by the Investment Manager of each Investment 
Advisor). The Trust may retain one or more investment advisers 
(``Investment Advisors'') with respect to the Funds to manage specific 
strategies suited to the Investment Advisors' expertise, including 
having multiple Investment Advisors managing portions of a single 
Fund.\10\ Each Investment Advisor will be registered under the Advisers 
Act.\11\ A registered broker-dealer under the Securities Exchange Act 
of 1934, as amended (``Exchange Act''), which may be an affiliate of 
the Investment Manager or any Investment Advisor, will be selected and 
approved by the Board to act as the distributor and principal 
underwriter of the Funds (``Distributor''). Foreside Fund Services LLC 
will serve as the initial Distributor of Shares and Applicants request 
that the requested order apply to any future Distributor of Shares. 
Foreside is not affiliated with FIA.
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    \9\ The term ``Board'' includes any board of directors or 
trustees of a Future Fund, if different.
    \10\ No Fund will utilize investment sub-advisers.
    \11\ The Investment Manager will be responsible for each 
Investment Advisor's compliance, in addition to its own compliance, 
with the terms and conditions set forth in the application, 
including any such terms and conditions that may relate to the 
investment activity of an Investment Advisor. Before a Fund enters 
into an advisory contract with an Investment Advisor, the Investment 
Manager and the Investment Advisor will execute a compliance 
agreement (``Compliance Agreement''). Any advisory contract between 
a Fund and an Investment Advisor will include provisions that 
obligate the Investment Advisor to comply with the terms and 
conditions of the order and empower the Investment Manager to 
terminate the advisory contract if there is a material breach of the 
terms and conditions of the order by the Investment Advisor.
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    4. Applicants anticipate that a Creation Unit will consist of at 
least 50,000 Shares and that the price of a Share will range from $20 
to $200. All orders to purchase Creation Units must be placed with the 
Distributor by or through a party (``Authorized Participant'') that has 
entered into a participant agreement with the Distributor with respect 
to the creation and redemption of Creation Units. An Authorized 
Participant is either: (a) A broker or dealer registered under the 
Exchange Act (``Broker'') or other participant in the Continuous Net 
Settlement System of the National Securities Clearing Corporation 
(``NSCC''), a clearing agency registered with the Commission and 
affiliated with the Depository Trust Company (``DTC''); or (b) a 
participant in the DTC (such participant, ``DTC Participant''). The 
Initial Fund and certain Future Funds will generally be purchased 
entirely for cash and will be redeemed in Creation Units and generally 
on an in-kind basis. Except where the purchase or redemption will be 
entirely in cash or include cash under limited circumstances specified 
below, purchasers will be required to purchase Creation Units by making 
an in-kind deposit of specified instruments (``Deposit Instruments''), 
and shareholders redeeming their Shares will receive an in-kind 
transfer of

[[Page 27446]]

specified instruments (``Redemption Instruments'') in each case 
accompanied by a deposit (or refund) of a specified Balancing Amount 
(as defined below).\12\ On any given Business Day \13\ the names and 
quantities of the instruments that constitute the Deposit Instruments 
and the names and quantities of the instruments that constitute the 
Redemption Instruments will be identical, and these instruments may be 
referred to, in the case of either a purchase or a redemption, as the 
``Creation Basket''. In addition, the Creation Basket will correspond 
pro rata to the positions in the Fund's portfolio (including cash 
positions),\14\ except: (a) In the case of bonds, for minor differences 
when it is impossible to break up bonds beyond certain minimum sizes 
needed for transfer and settlement; (b) for minor differences when 
rounding is necessary to eliminate fractional shares or lots that are 
not tradeable round lots; \15\ or (c) TBA Transactions, Short Positions 
\16\ and other positions that cannot be transferred in kind \17\ will 
be excluded from the Creation Basket.\18\ If there is a difference 
between the net asset value attributable to a Creation Unit and the 
aggregate market value of the Creation Basket exchanged for the 
Creation Unit, the party conveying instruments with the lower value 
will also pay to the other an amount in cash equal to that difference 
(the ``Balancing Amount'').
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    \12\ The Funds must comply with the federal securities laws in 
accepting Deposit Instruments and satisfying redemptions with 
Redemption Instruments, including that the Deposit Instruments and 
Redemption Instruments are sold in transactions that would be exempt 
from registration under the Securities Act of 1933 (``Securities 
Act''). In accepting Deposit Instruments and satisfying redemptions 
with Redemption Instruments that are restricted securities eligible 
for resale pursuant to rule 144A under the Securities Act, the Funds 
will comply with the conditions of Rule 144A.
    \13\ ``Business Day'' is defined to include any day that the 
Fund is open for business, including as required by section 22(e) of 
the Act.
    \14\ The portfolio used for this purpose will be the same 
portfolio used to calculate the Fund's NAV (as defined below) for 
that Business Day.
    \15\ A tradeable round lot for a security will be the standard 
unit of trading in that particular type of security in its primary 
market.
    \16\ To the extent required by section 18(f) of the Act, 
Portfolio Instruments and/or cash held in a Fund's portfolio will be 
segregated to cover Short Positions in such portfolio. See, 
Securities Trading Practices of Registered Investment Companies, 
Investment Company Act Rel. No. 10666 (Apr. 18, 1979).
    \17\ This includes instruments that can be transferred in kind 
only with the consent of the original counterparty to the extent the 
Fund does not intend to seek such consents.
    \18\ Because these instruments will be excluded from the 
Creation Basket, their value will be reflected in the determination 
of the Balancing Amount (defined below).
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    5. Purchases and redemptions of Creation Units may be made in whole 
or in part on a cash basis, rather than in kind, solely under the 
following circumstances: (a) To the extent there is a Balancing Amount, 
as described above; (b) if, on a given Business Day, the Fund announces 
before the open of trading that all purchases, all redemptions or all 
purchases and redemptions on that day will be made entirely in cash; 
(c) if, upon receiving a purchase or redemption order from an 
Authorized Participant, the Fund determines to require the purchase or 
redemption, as applicable, to be made entirely in cash; \19\ (d) if, on 
a given Business Day, the Fund requires all Authorized Participants 
purchasing or redeeming Shares on that day to deposit or receive (as 
applicable) cash in lieu of some or all of the Deposit Instruments or 
Redemption Instruments, respectively, solely because; (i) such 
instruments are not eligible for transfer through either the NSCC 
Process or DTC Process; or (ii) in the case of Funds holding non-U.S. 
investments (``Global Funds''), such instruments are not eligible for 
trading due to local trading restrictions, local restrictions on 
securities transfers or other similar circumstances; or (e) if the Fund 
permits an Authorized Participant to deposit or receive (as applicable) 
cash in lieu of some or all of the Deposit Instruments or Redemption 
Instruments, respectively, solely because: (i) Such instruments are, in 
the case of the purchase of a Creation Unit, not available in 
sufficient quantity; (ii) such instruments are not eligible for trading 
by an Authorized Participant or the investor on whose behalf the 
Authorized Participant is acting; or (iii) a holder of Shares of a 
Global Fund would be subject to unfavorable income tax treatment if the 
holder receives redemption proceeds in kind.\20\
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    \19\ Applicants state that in determining whether a particular 
Fund will sell or redeem Creation Units entirely on a cash or in-
kind basis (whether for a given day or a given order), the key 
consideration will be the benefit which would accrue to the Fund and 
its investors. Purchases of Creation Units either on an all cash 
basis or in-kind are expected to be neutral to the Funds from a tax 
perspective. In contrast, cash redemptions typically require selling 
portfolio holdings, which may result in adverse tax consequences for 
the remaining Fund shareholders that would not occur with an in-kind 
redemption. As a result, tax considerations may warrant in-kind 
redemptions.
    \20\ A ``custom order'' is any purchase or redemption of Shares 
made in whole or in part on a cash basis in reliance on clause 
(e)(i) or (e)(ii).
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    6. Each Business Day, before the open of trading on a national 
securities exchange as defined in section 2(a)(26) of the Act (``Stock 
Exchange''), on which the Shares are listed, the Fund will cause to be 
published through the NSCC the names and quantities of the instruments 
comprising the Creation Basket, as well as the estimated Balancing 
Amount (if any) for that day. The published Creation Basket will apply 
until a new Creation Basket is announced on the following Business Day, 
and there will be no intra-day changes to the Creation Basket except to 
correct errors in the published Creation Basket. The Stock Exchange 
will disseminate every 15 seconds throughout the trading day through 
the facilities of the Consolidated Tape Association an amount 
representing, on a per Share basis, the sum of the current value of the 
Portfolio Instruments that were publicly disclosed prior to the 
commencement of trading in Shares on the Stock Exchange.
    7. An investor purchasing or redeeming a Creation Unit from a Fund 
may be charged a fee (``Transaction Fee'') to protect existing 
shareholders of the Funds from the dilutive costs associated with the 
purchase and redemption of Creation Units.\21\ All orders to purchase 
Creation Units must be placed with the Distributor by or through an 
Authorized Participant and the Distributor will transmit all purchase 
orders to the relevant Fund. The Distributor will be responsible for 
delivering a prospectus (``Prospectus'') to those persons purchasing 
Creation Units and for maintaining records of both the orders placed 
with it and the confirmations of acceptance furnished by it.
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    \21\ Where a Fund permits an in-kind purchaser or redeemer to 
deposit or receive cash in lieu of one or more Deposit or Redemption 
Instruments, the purchaser or redeemer may be assessed a higher 
Transaction Fee to offset the transaction cost to the Fund of buying 
or selling those particular Deposit or Redemption Instruments.
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    8. Shares will be listed and traded at negotiated prices on a Stock 
Exchange and traded in the secondary market. Applicants expect that the 
Stock Exchange will select, designate or appoint one or more 
specialists (``Specialists'') or market makers (``Market Makers'') for 
the Shares. The price of Shares will be based on a current bid/offer in 
the secondary market. Transactions involving the purchases and sales of 
Shares on the Stock Exchange will be subject to customary brokerage 
fees and charges.
    9. Applicants expect that purchasers of Creation Units will include 
arbitrageurs. Applicants expect that arbitrage opportunities created by 
the ability to continually purchase or redeem Creation Units at their 
net asset value per individual Share (``NAV'') should ensure that the 
Shares will not

[[Page 27447]]

trade at a material discount or premium in relation to their NAV. 
Applicants also expect that Specialists or Market Makers, acting in 
their unique role to provide a fair and orderly secondary market for 
Shares, also may purchase Creation Units for use in their own market 
making activities.\22\ Applicants expect that secondary market 
purchasers of Shares will include both institutional and retail 
investors.\23\
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    \22\ If Shares are listed on NASDAQ, no Specialist will be 
contractually obligated to make a market in Shares. Rather, under 
NASDAQ's listing requirements, two or more Market Makers will be 
registered as Market Makers in Shares and required to make a 
continuous, two-sided market or face regulatory sanctions. No Market 
Maker or Specialist will be an affiliated person, or an affiliated 
person of an affiliated person, of the Funds, except within the 
meaning of section 2(a)(3)(A) or (C) of the Act due solely to 
ownership of Shares, as discussed below.
    \23\ Shares will be registered in book-entry form only. DTC or 
its nominee will be the record or registered owner of all 
outstanding Shares. Beneficial ownership of Shares will be shown on 
the records of DTC or DTC Participants.
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    10. Neither the Trust nor any Fund will be marketed or otherwise 
held out as a ``mutual fund''. Instead, each Fund will be marketed as 
an ``actively managed exchange-traded fund.'' Any advertising material 
where features of obtaining, buying or selling Creation Units are 
described or where there is reference to redeemability will prominently 
disclose that Shares are not individually redeemable and that owners of 
Shares may acquire Shares from a Fund and tender those Shares for 
redemption to a Fund in Creation Units only.
    11. Each Fund's Web site, which will be publicly available prior to 
the public offering of Shares, will include the Prospectus for each 
Fund and additional quantitative information updated on a daily basis, 
including, on a per Share basis for each Fund, the prior Business Day's 
NAV and the market closing price or mid-point of the bid/ask spread at 
the time of the calculation of such NAV (``Bid/Ask Price''), and a 
calculation of the premium or discount of the market closing price or 
Bid/Ask Price against such NAV. On each Business Day, before 
commencement of trading in Shares on the Stock Exchange, the Fund will 
disclose on its Web site the identities and quantities of the Portfolio 
Instruments held by the Fund that will form the basis for the Fund's 
calculation of NAV at the end of the Business Day.\24\
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    \24\ Applicants note that under accounting procedures followed 
by the Fund, trades made on the prior Business Day (``T'') will be 
booked and reflected in NAV on the current Business Day (``T+1''). 
Accordingly, the Fund will be able to disclose at the beginning of 
the Business Day the portfolio that will form the basis for the NAV 
calculation at the end of the Business Day.
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Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act for an 
exemption from sections 2(a)(32), 5(a)(1), 22(d) and 22(e) of the Act 
and rule 22c-1 under the Act, under sections 6(c) and 17(b) of the Act 
for an exemption from sections 17(a)(1) and 17(a)(2) of the Act, and 
under section 12(d)(1)(J) of the Act for an exemption from sections 
12(d)(1)(A) and (B) of the Act.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction, or any class of persons, 
securities or transactions, from any provisions of the Act, if and to 
the extent that such exemption is necessary or appropriate in the 
public interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act. 
Section 17(b) of the Act authorizes the Commission to exempt a proposed 
transaction from section 17(a) of the Act if evidence establishes that 
the terms of the transaction, including the consideration to be paid or 
received, are reasonable and fair and do not involve overreaching on 
the part of any person concerned, and the proposed transaction is 
consistent with the policy of each registered investment company 
concerned and the general provisions of the Act. Section 12(d)(1)(J) of 
the Act provides that the Commission may exempt any person, security, 
or transaction, or any class or classes of persons, securities or 
transactions, from any provision of section 12(d)(1) if the exemption 
is consistent with the public interest and the protection of investors.

Sections 5(a)(1) and 2(a)(32) of the Act

    3. Section 5(a)(1) of the Act defines an ``open-end company'' as a 
management investment company that is offering for sale or has 
outstanding any redeemable security of which it is the issuer. Section 
2(a)(32) of the Act defines a redeemable security as any security, 
other than short-term paper, under the terms of which the holder, upon 
its presentation to the issuer, is entitled to receive approximately a 
proportionate share of the issuer's current net assets, or the cash 
equivalent. Because Shares will not be individually redeemable, 
Applicants request an order that would permit the Trust and any Fund to 
register as an open-end management investment company and redeem Shares 
in Creation Units only. Applicants state that investors may purchase 
Shares in Creation Units from each Fund and redeem Creation Units from 
each Fund. Applicants further state that because the market price of 
Creation Units will be disciplined by arbitrage opportunities, 
investors should be able to sell Shares in the secondary market at 
prices that do not vary materially from their NAV.

Section 22(d) of the Act and Rule 22c-1 Under the Act

    4. Section 22(d) of the Act, among other things, prohibits a dealer 
from selling a redeemable security that is currently being offered to 
the public by or through a principal underwriter, except at a current 
public offering price described in the prospectus. Rule 22c-1 under the 
Act generally requires that a dealer selling, redeeming, or 
repurchasing a redeemable security do so only at a price based on its 
NAV. Applicants state that secondary market trading in Shares will take 
place at negotiated prices, not at a current offering price described 
in the Prospectus, and not at a price based on NAV. Thus, purchases and 
sales of Shares in the secondary market will not comply with section 
22(d) of the Act and rule 22c-1 under the Act. Applicants request an 
exemption under section 6(c) from these provisions.
    5. Applicants assert that the concerns sought to be addressed by 
section 22(d) of the Act and rule 22c-1 under the Act with respect to 
pricing are equally satisfied by the proposed method of pricing Shares. 
Applicants maintain that while there is little legislative history 
regarding section 22(d), its provisions, as well as those of rule 22c-
1, appear to have been designed to (a) Prevent dilution caused by 
certain riskless-trading schemes by principal underwriters and contract 
dealers, (b) prevent unjust discrimination or preferential treatment 
among buyers resulting from sales at different prices, and (c) assure 
an orderly distribution of investment company shares by eliminating 
price competition from Brokers offering shares at less than the 
published sales price and repurchasing shares at more than the 
published redemption price.
    6. Applicants believe that none of these purposes will be thwarted 
by permitting Shares to trade in the secondary market at negotiated 
prices. Applicants state that (a) secondary market trading in Shares 
does not involve the Funds as parties and cannot result in dilution of 
an investment in Shares, and (b) to the extent different prices exist 
during a given trading day, or from day to day, such variances occur as 
a result of third-party market forces, such as supply and demand. 
Therefore, Applicants assert that secondary market transactions in 
Shares will not lead to discrimination or preferential treatment among 
purchasers. Finally, Applicants

[[Page 27448]]

contend that the proposed distribution system will be orderly because 
arbitrage activity should ensure that the differences between the 
market price of Shares and their NAV remain low.

Section 22(e) of the Act

    7. Section 22(e) of the Act generally prohibits a registered 
investment company from suspending the right of redemption or 
postponing the date of payment of redemption proceeds for more than 
seven days after the tender of a security for redemption. Applicants 
observe that settlement of redemptions of Creation Units of the Global 
Funds is contingent not only on the settlement cycle of the U.S. 
securities markets but also on the delivery cycles present in foreign 
markets in which those Funds invest. Applicants have been advised that, 
under certain circumstances, the delivery cycles for transferring 
Redemption Instruments to redeeming investors, coupled with local 
market holiday schedules, will require a delivery process of up to 14 
calendar days. Applicants therefore request relief from section 22(e) 
in order to provide payment or satisfaction of redemptions within the 
maximum number of calendar days required for such payment or 
satisfaction in the principal local markets where transactions in the 
Redemption Instruments of each Global Fund customarily clear and 
settle, but in all cases no later than 14 calendar days following the 
tender of a Creation Unit.\25\ With respect to Future Funds that are 
Global Funds, Applicants seek the same relief from section 22(e) only 
to the extent that circumstances exist similar to those described in 
the application. Except as disclosed in the statement of additional 
information (``SAI'') for any Future Fund for analogous dates in 
subsequent years, deliveries of redemption proceeds for Global Funds 
are expected to be made within seven days.
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    \25\ Applicants acknowledge that no relief obtained from the 
requirements of section 22(e) will affect any obligations that it 
may otherwise have under rule 15c6-1 under the Exchange Act. Rule 
15c6-1 requires that most securities transactions be settled within 
three business days of the trade date.
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    8. Applicants submit that Congress adopted section 22(e) to prevent 
unreasonable, undisclosed or unforeseen delays in the actual payment of 
redemption proceeds. Applicants state that allowing redemption payments 
for Creation Units of a Fund to be made within a maximum of 14 calendar 
days would not be inconsistent with the spirit and intent of section 
22(e). Applicants state the SAI will disclose those local holidays 
(over the period of at least one year following the date of the SAI), 
if any, that are expected to prevent the delivery of redemption 
proceeds in seven calendar days and the maximum number of days, up to 
fourteen calendar days, needed to deliver the proceeds for each 
affected Global Fund. Applicants are not seeking relief from section 
22(e) with respect to Global Funds that do not effect redemptions in-
kind.

Section 12(d)(1) of the Act

    9. Section 12(d)(1)(A) of the Act 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, or 
any other broker or dealer from selling its 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.
    10. Applicants request relief to permit Investing Funds (as defined 
below) to acquire Shares in excess of the limits in section 12(d)(l)(A) 
of the Act and to permit the Funds, their principal underwriters and 
any Brokers to sell Shares to Investing Funds in excess of the limits 
in section 12(d)(l)(B) of the Act. Applicants request that these 
exemptions apply to: (a) any Fund as well as any principal underwriter 
for the Fund and any Brokers selling Shares of a Fund to an Investing 
Fund; and (b) each management investment company or unit investment 
trust registered under the Act that is not part of the same ``group of 
investment companies'' within the meaning of section 12(d)(1)(G)(ii) of 
the Act as the Funds, and that enters into a FOF Participation 
Agreement (as defined below) with a Fund (such management investment 
companies are referred to herein as ``Investing Management Companies,'' 
such unit investment trusts are referred to herein as ``Investing 
Trusts,'' and Investing Management Companies and Investing Trusts 
together are referred to herein as ``Investing Funds'').\26\ Investing 
Funds do not include the Funds. Each Investing Trust will have a 
sponsor (``Sponsor'') and each Investing Management Company will have 
an investment adviser within the meaning of section 2(a)(20)(A) of the 
Act (``Investing Fund Advisor'') that does not control, is not 
controlled by or under common control with the Investment Manager or 
any Investment Advisor. Each Investing Management Company may also have 
one or more investment advisers within the meaning of section 
2(a)(20)(B) of the Act (each, an ``Investing Fund Sub-Advisor''). Each 
Investing Fund Advisor and any Investing Fund Sub-Advisor will be 
registered as an investment adviser under the Advisers Act.
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    \26\ Applicants anticipate that there may be Investing Funds 
that are not part of the same group of investment companies as the 
Funds, but are subadvised by the Investment Manager or an Investment 
Advisor.
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    11. Applicants submit that the proposed conditions to the requested 
relief are designed to address the concerns underlying the limits in 
section 12(d)(1), which include concerns about undue influence, 
excessive layering of fees and overly complex structures.
    12. Applicants propose a condition to prohibit an Investing Fund or 
Investing Fund Affiliate \27\ from causing an investment by an 
Investing Fund in a Fund to influence the terms of services or 
transactions between an Investing Fund or an Investing Fund Affiliate 
and the Fund or Fund Affiliate. Applicants propose a condition to limit 
the ability of the Investing Fund Advisor, or Sponsor, any person 
controlling, controlled by or under common control with such Investing 
Fund Advisor or Sponsor, and any investment company or issuer that 
would be an investment company but for sections 3(c)(1) or 3(c)(7) of 
the Act that is advised or sponsored by the Investing Fund Advisor, the 
Sponsor, or any person controlling, controlled by, or under common 
control with such Investing Fund Advisor or Sponsor (``Investing Fund's 
Advisory Group'') from (individually or in the aggregate) controlling a 
Fund within the meaning of section 2(a)(9) of the Act. The same 
prohibition would apply to any Investing Fund Sub-Advisor, any person 
controlling, controlled by, or under common control with the Investing 
Fund Sub-Advisor, and any investment

[[Page 27449]]

company or issuer that would be an investment company but for sections 
3(c)(1) or 3(c)(7) of the Act (or portion of such investment company or 
issuer) advised or sponsored by the Investing Fund Sub-Advisor or any 
person controlling, controlled by or under common control with the 
Investing Fund Sub-Advisor (``Investing Fund's Sub-Advisory Group'').
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    \27\ An ``Investing Fund Affiliate'' is defined as the Investing 
Fund Advisor, Investing Fund Sub-Advisor, Sponsor, promoter and 
principal underwriter of an Investing Fund, and any person 
controlling, controlled by or under common control with any of these 
entities. A ``Fund Affiliate'' is defined as an investment adviser, 
promoter or principal underwriter of a Fund and any person 
controlling, controlled by or under common control with any of these 
entities.
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    13. Applicants propose other conditions to limit the potential for 
an Investing Fund and certain affiliates of an Investing Fund 
(including Underwriting Affiliates) to exercise undue influence over a 
Fund and certain of its affiliates, including that no Investing Fund or 
Investing Fund Affiliate (except to the extent it is acting in its 
capacity as an investment adviser to a Fund) will cause a Fund to 
purchase a security in an offering of securities during the existence 
of an underwriting or selling syndicate of which a principal 
underwriter is an Underwriting Affiliate (``Affiliated Underwriting''). 
An ``Underwriting Affiliate'' is a principal underwriter in any 
underwriting or selling syndicate that is an officer, director, member 
of an advisory board, Investing Fund Advisor, Investing Fund Sub-
Advisor, employee or Sponsor of the Investing Fund, or a person of 
which any such officer, director, member of an advisory board, 
Investing Fund Advisor or Investing Fund Sub-Advisor, employee or 
Sponsor is an affiliated person. An Underwriting Affiliate does not 
include any person whose relationship to the Fund is covered by section 
10(f) of the Act.
    14. Applicants propose several conditions to address the concerns 
regarding layering of fees and expenses. Applicants note that the board 
of directors or trustees of any Investing Management Company, including 
a majority of the directors or trustees who are not ``interested 
persons'' within the meaning of section 2(a)(19) of the Act 
(``disinterested directors or trustees''), will be required to find 
that the advisory fees charged under any advisory contract with the 
Investment Manager or with any Investment Advisor are based on services 
provided that will be in addition to, rather than duplicative of, 
services provided under the advisory contract of any Fund in which the 
Investing Management Company may invest. In addition, an Investing Fund 
Advisor, trustee of an Investing Trust (``Trustee'') or Sponsor, as 
applicable, will waive fees otherwise payable to it by the Investing 
Fund in an amount at least equal to any compensation (including fees 
received pursuant to any plan adopted by a Fund under rule 12b-1 under 
the Act) received from a Fund by the Investing Fund Advisor, Trustee or 
Sponsor or an affiliated person of the Investing Fund Advisor, Trustee 
or Sponsor, other than any advisory fees paid to the Investing Fund 
Advisor, Trustee or Sponsor or its affiliated person by a Fund, in 
connection with the investment by the Investing Fund in the Fund. 
Applicants also propose a condition to prevent any sales charges or 
service fees on shares of an Investing Fund from exceeding the limits 
applicable to a fund of funds set forth in NASD Conduct Rule 2830.\28\
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    \28\ Any references to NASD Conduct Rule 2830 include any 
successor or replacement rule to NASD Conduct Rule 2830 that may be 
adopted by the Financial Industry Regulatory Authority.
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    15. Applicants submit that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that a Fund will be 
prohibited from acquiring securities of any investment company or 
company relying on sections 3(c)(1) or 3(c)(7) of the Act in excess of 
the limits contained in section 12(d)(1)(A) of the Act, except to the 
extent permitted by exemptive relief from the Commission permitting the 
Fund to purchase shares of other investment companies for short-term 
cash management purposes.
    16. To ensure that the Investing Funds understand and comply with 
the terms and conditions of the requested order, any Investing Fund 
that intends to invest in a Fund in reliance on the requested order 
will be required to enter into a participation agreement (``FOF 
Participation Agreement'') with the Fund. The FOF Participation 
Agreement will include an acknowledgment from the Investing Fund that 
it may rely on the order only to invest in the Funds and not in any 
other investment company.

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

    17. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such a person (``second tier affiliate''), from selling any security to 
or purchasing any security from the company. Section 2(a)(3) of the Act 
defines ``affiliated person'' to include any person directly or 
indirectly owning, controlling, or holding with power to vote, 5% or 
more of the outstanding voting securities of the other person and any 
person directly or indirectly controlling, controlled by, or under 
common control with, the other person. Section 2(a)(9) of the Act 
defines ``control'' as the power to exercise a controlling influence 
over the management or policies of a company and provides that a 
control relationship will be presumed where one person owns more than 
25% of another person's voting securities. Each Fund may be deemed to 
be controlled by the Investment Manager or any Investment Advisor and 
hence be an affiliated person of each other Fund. In addition, the 
Funds may be deemed to be under common control with any other 
registered investment company (or series thereof) advised by the 
Investment Manager or an Investment Advisor (an ``Affiliated Fund'').
    18. Applicants request an exemption under sections 6(c) and 17(b) 
of the Act from sections 17(a)(1) and 17(a)(2) of the Act to permit in-
kind purchases and redemptions of Creation Units by persons that are 
affiliated persons or second tier affiliates of the Funds solely by 
virtue of one or more of the following: (a) Holding 5% or more, or in 
excess of 25% of the outstanding Shares of one or more Funds; (b) 
having an affiliation with a person with an ownership interest 
described in (a); or (c) holding 5% or more, or more than 25% of the 
Shares of one or more Affiliated Funds.\29\ Applicants also request an 
exemption in order to permit a Fund to sell its Shares to, and redeem 
its Shares from, an Investing Fund and to engage in any accompanying 
in-kind transactions with certain Investing Funds of which the Funds 
are affiliated persons or a second-tier affiliates.\30\
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    \29\ Applicants are not seeking relief from section 17(a) for, 
and the requested relief will not apply to, transactions where a 
Fund could be deemed an affiliated person, or an affiliated person 
of an affiliated person, of an Investing Fund because an investment 
adviser to the Funds is also an investment adviser to an Investing 
Fund.
    \30\ Applicants expect most Investing Funds will purchase Shares 
in the secondary market and will not purchase Creation Units 
directly from a Fund. To the extent that purchases and sales of 
Shares occur in the secondary market and not through principal 
transactions directly between an Investing Fund and a Fund, relief 
from section 17(a) would not be necessary. However, the requested 
relief would apply to direct sales of Shares in Creation Units by a 
Fund to an Investing Fund and redemptions of those Shares. The 
requested relief is also intended to cover any in-kind transactions 
that may accompany such sales and redemptions.
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    19. Applicants assert that no useful purpose would be served by 
prohibiting such affiliated persons from making in-kind purchases or 
in-kind redemptions of Shares of a Fund in Creation Units. Except as 
described above, the Deposit Instruments and Redemption Instruments 
available for a Fund will be the same for all purchasers and redeemers, 
respectively, and will correspond pro rata to the Fund's Portfolio 
Instruments. Both the deposit procedures for in-kind purchases of 
Creation Units and the redemption

[[Page 27450]]

procedures for in-kind redemptions will be effected in exactly the same 
manner for all purchases and redemptions. Deposit Instruments and 
Redemption Instruments will be valued in the same manner as those 
Portfolio Instruments currently held by the relevant Funds. Therefore, 
Applicants state that the in-kind purchases and redemptions create no 
opportunity for affiliated persons or the Applicants to effect a 
transaction detrimental to other holders of Shares of a Fund. 
Applicants do not believe that in-kind purchases and redemptions will 
result in abusive self-dealing or overreaching of any Fund.
    20. Applicants also submit that the sale of Shares to and 
redemption of Shares from an Investing Fund meets the standards for 
relief under sections 17(b) and 6(c) of the Act. Applicants note that 
any consideration paid for the purchase or redemption of Shares 
directly from a Fund will be based on the NAV of the Fund in accordance 
with policies and procedures set forth in the Fund's registration 
statement.\31\ Applicants also state that the proposed transactions are 
consistent with the general purposes of the Act and appropriate in the 
public interest.
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    \31\ Applicants acknowledge that the receipt of compensation by 
(a) an affiliated person of an Investing Fund, or an affiliated 
person of such person, for the purchase by the Investing Fund of 
Shares of the Fund or (b) an affiliated person of a Fund, or an 
affiliated person of such person, for the sale by the Fund of its 
Shares to an Investing Fund, may be prohibited by section 17(e)(1) 
of the Act. The FOF Participation Agreement also will include this 
acknowledgment.
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Applicants' Conditions

    Applicants agree that any order of the Commission granting the 
requested relief will be subject to the following conditions:

A. Actively Managed Exchange-Traded Fund Relief

    1. As long as a Fund operates in reliance on the requested order, 
the Shares of the Fund will be listed on a Stock Exchange.
    2. 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 the Shares are 
not individually redeemable and that owners of the Shares may acquire 
those Shares from the Fund and tender those Shares for redemption to 
the Fund in Creation Units only.
    3. The Web site for the Funds, which is and will be publicly 
accessible at no charge, will contain, on a per Share basis, for each 
Fund the prior Business Day's NAV and the market closing price or Bid/
Ask Price, and a calculation of the premium or discount of the market 
closing price or Bid/Ask Price against such NAV.
    4. On each Business Day, before commencement of trading in Shares 
on the Stock Exchange, the Fund will disclose on its Web site the 
identities and quantities of the Portfolio Instruments held by the Fund 
that will form the basis for the Fund's calculation of NAV at the end 
of the Business Day.
    5. The Investment Manager or any Investment Advisor, directly or 
indirectly, will not cause any Authorized Participant (or any investor 
on whose behalf an Authorized Participant may transact with the Fund) 
to acquire any Deposit Instrument for the Fund through a transaction in 
which the Fund could not engage directly.
    6. The requested relief to permit ETF operations will expire on the 
effective date of any Commission rule under the Act that provides 
relief permitting the operation of actively managed exchange-traded 
funds.

B. Section 12(d)(1) Relief

    1. The members of the Investing Fund's Advisory Group will not 
control (individually or in the aggregate) a Fund within the meaning of 
section 2(a)(9) of the Act. The members of the Investing Fund's Sub-
Advisory Group will not control (individually or in the aggregate) a 
Fund within the meaning of section 2(a)(9) of the Act. If, as a result 
of a decrease in the outstanding voting securities of a Fund, the 
Investing Fund's Advisory Group or the Investing Fund's Sub-Advisory 
Group, each in the aggregate, becomes a holder of more than 25 percent 
of the outstanding voting securities of a Fund, it will vote its Shares 
of the Fund in the same proportion as the vote of all other holders of 
the Fund's Shares. This condition does not apply to the Investing 
Fund's Sub-Advisory Group with respect to a Fund for which the 
Investing Fund Sub-Advisor or a person controlling, controlled by or 
under common control with the Investing Fund Sub-Advisor acts as the 
investment adviser within the meaning of section 2(a)(20)(A) of the 
Act.
    2. No Investing Fund or Investing Fund Affiliate will cause any 
existing or potential investment by the Investing Fund in a Fund to 
influence the terms of any services or transactions between the 
Investing Fund or an Investing Fund Affiliate and the Fund or a Fund 
Affiliate.
    3. The board of directors or trustees of an Investing Management 
Company, including a majority of the disinterested directors or 
trustees, will adopt procedures reasonably designed to assure that the 
Investing Fund Advisor and any Investing Fund Sub-Advisor are 
conducting the investment program of the Investing Management Company 
without taking into account any consideration received by the Investing 
Management Company or an Investing Fund Affiliate from a Fund or a Fund 
Affiliate in connection with any services or transactions.
    4. Once an investment by an Investing Fund in the Shares of a Fund 
exceeds the limit in section 12(d)(1)(A)(i) of the Act, the Board of 
the Fund, including a majority of the disinterested Board members, will 
determine that any consideration paid by the Fund to the Investing Fund 
or an Investing Fund Affiliate in connection with any services or 
transactions: (i) Is fair and reasonable in relation to the nature and 
quality of the services and benefits received by the Fund; (ii) is 
within the range of consideration that the Fund would be required to 
pay to another unaffiliated entity in connection with the same services 
or transactions; and (iii) does not involve overreaching on the part of 
any person concerned. This condition does not apply with respect to any 
services or transactions between a Fund and its investment adviser(s), 
or any person controlling, controlled by or under common control with 
such investment adviser(s).
    5. The Investing Fund Advisor, or Trustee or Sponsor, as 
applicable, will waive fees otherwise payable to it by the Investing 
Fund in an amount at least equal to any compensation (including fees 
received pursuant to any plan adopted by a Fund under rule 12b-1 under 
the Act) received from a Fund by the Investing Fund Advisor, or Trustee 
or Sponsor, or an affiliated person of the Investing Fund Advisor, or 
Trustee or Sponsor, other than any advisory fees paid to the Investing 
Fund Advisor, or Trustee, or Sponsor, or its affiliated person by the 
Fund, in connection with the investment by the Investing Fund in the 
Fund. Any Investing Fund Sub-Advisor will waive fees otherwise payable 
to the Investing Fund Sub-Advisor, directly or indirectly, by the 
Investing Management Company in an amount at least equal to any 
compensation received from a Fund by the Investing Fund Sub-Advisor, or 
an affiliated person of the Investing Fund Sub-Advisor, other than any 
advisory fees paid to the Investing Fund Sub-Advisor or its affiliated 
person by the Fund, in connection with the investment by the Investing 
Management Company in the Fund made at the direction of the Investing

[[Page 27451]]

Fund Sub-Advisor. In the event that the Investing Fund Sub-Advisor 
waives fees, the benefit of the waiver will be passed through to the 
Investing Management Company.
    6. No Investing Fund or Investing Fund Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to a Fund) 
will cause a Fund to purchase a security in an Affiliated Underwriting.
    7. The Board of a Fund, including a majority of the disinterested 
Board members, will adopt procedures reasonably designed to monitor any 
purchases of securities by the Fund in an Affiliated Underwriting, once 
an investment by an Investing Fund in the securities of the Fund 
exceeds the limit of section 12(d)(1)(A)(i) of the Act, including any 
purchases made directly from an Underwriting Affiliate. The Board will 
review these purchases periodically, but no less frequently than 
annually, to determine whether the purchases were influenced by the 
investment by the Investing Fund in the Fund. The Board will consider, 
among other things: (i) Whether the purchases were consistent with the 
investment objectives and policies of the Fund; (ii) how the 
performance of securities purchased in an Affiliated Underwriting 
compares to the performance of comparable securities purchased during a 
comparable period of time in underwritings other than Affiliated 
Underwritings or to a benchmark such as a comparable market index; and 
(iii) whether the amount of securities purchased by the Fund in 
Affiliated Underwritings and the amount purchased directly from an 
Underwriting Affiliate have changed significantly from prior years. The 
Board will take any appropriate actions based on its review, including, 
if appropriate, the institution of procedures designed to assure that 
purchases of securities in Affiliated Underwritings are in the best 
interest of shareholders.
    8. Each Fund will maintain and preserve permanently in an easily 
accessible place a written copy of the procedures described in the 
preceding condition, and any modifications to such procedures, and will 
maintain and preserve for a period of not less than six years from the 
end of the fiscal year in which any purchase in an Affiliated 
Underwriting occurred, the first two years in an easily accessible 
place, a written record of each purchase of securities in Affiliated 
Underwritings once an investment by an Investing Fund in the securities 
of the Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, 
setting forth from whom the securities were acquired, the identity of 
the underwriting syndicate's members, the terms of the purchase, and 
the information or materials upon which the Board's determinations were 
made.
    9. Before investing in a Fund in excess of the limits in section 
12(d)(1)(A), an Investing Fund will execute a FOF Participation 
Agreement with the Fund stating that their respective boards of 
directors or trustees and their investment advisers, or Trustee and 
Sponsor, as applicable, understand the terms and conditions of the 
order, and agree to fulfill their responsibilities under the order. At 
the time of its investment in shares of a Fund in excess of the limit 
in section 12(d)(1)(A)(i), an Investing Fund will notify the Fund of 
the investment. At such time, the Investing Fund will also transmit to 
the Fund a list of the names of each Investing Fund Affiliate and 
Underwriting Affiliate. The Investing Fund will notify the Fund of any 
changes to the list as soon as reasonably practicable after a change 
occurs. The Fund and the Investing Fund will maintain and preserve a 
copy of the order, the FOF Participation Agreement, and the list with 
any updated information for the duration of the investment and for a 
period of not less than six years thereafter, the first two years in an 
easily accessible place.
    10. Before approving any advisory contract under section 15 of the 
Act, the board of directors or trustees of each Investing Management 
Company, including a majority of the disinterested directors or 
trustees, will find that the advisory fees charged under such contract 
are based on services provided that will be in addition to, rather than 
duplicative of, the services provided under the advisory contract(s) of 
any Fund in which the Investing Management Company may invest. These 
findings and their basis will be recorded fully in the minute books of 
the appropriate Investing Management Company.
    11. Any sales charges and/or service fees charged with respect to 
shares of an Investing Fund will not exceed the limits applicable to a 
fund of funds as set forth in NASD Conduct Rule 2830.
    12. No Fund relying on this section 12(d)(1) relief will acquire 
securities of any investment company or company relying on section 
3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in 
section 12(d)(1)(A) of the Act, except to the extent permitted by 
exemptive relief from the Commission permitting the Fund to purchase 
shares of other investment companies for short-term cash management 
purposes.

C. Compliance Obligations

    1. Any advisory contract between a Fund and the Investment Manager 
will include provisions that obligate the Investment Manager (i) to 
comply with the terms and conditions of the Order and (ii) to monitor 
and enforce compliance by any Investment Advisor with the terms and 
conditions of the Order, including any terms and conditions that may 
relate to investment activity of the Investment Advisor with respect to 
the Fund.
    2. Any advisory contract between a Fund and an Investment Advisor 
will include provisions that obligate the Investment Advisor to comply 
with the terms and conditions of the Order. Before a Fund enters into 
an advisory contract with an Investment Advisor, the Investment Manager 
and the Investment Advisor will execute a Compliance Agreement (i) 
obligating the Investment Advisor to comply with the terms and 
conditions of the Order, (ii) obligating the Investment Manager to 
monitor compliance by the Investment Advisor with the terms and 
conditions of the Order, and (iii) establishing the Investment 
Manager's power to enforce compliance by the Investment Advisor with 
the terms and conditions of the Order.
    3. The Board, including a majority of the trustees that are not 
interested persons within the meaning of Section 2(a)(19) of the 1940 
Act, shall review and approve each Compliance Agreement annually. The 
Chief Compliance Officer of the Investment Manager will conduct reviews 
at least annually to ensure compliance by the Investment Manager and 
each Investment Advisor with the terms and conditions of the requested 
Order. The Chief Compliance Officer of each Investment Advisor will 
conduct reviews at least annually to ensure compliance by such 
Investment Advisor with the terms and conditions of the requested 
Order. Their reports shall be reviewed at least annually by the Fund's 
Chief Compliance Officer and the Fund's Board in connection with the 
Board's consideration of the Compliance Agreement and in connection 
with its Section 15 review and approval of advisory contracts with the 
Investment Manager and each Investment Advisor.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-11146 Filed 5-9-13; 8:45 am]
BILLING CODE 8011-01-P