40-APP/A

Fifth amended application for an order under section 6(c) of the Investment Company Act of 1940 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 and under sections 6(c) and 17(b) of the Act for exemptions from sections 17(a)(1) and 17(a)(2) of the Act

In this amended application, Invesco Capital Management LLC (“Invesco”), Invesco Distributors, Inc. (the “Distributor”) and Invesco Actively Managed Exchange-Traded Fund Trust (the “Trust” and together with Invesco and the Distributor, the “Applicants”) request an order under section 6(c) of the Investment Company Act of 1940, as amended (“1940 Act” or “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 and 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 (“Order”). Applicants request that the Order apply to the series of the Trust described in Appendix A hereto (“Initial Fund”) as well as to additional series of the Trust or any other open-end management investment company or series thereof that will utilize active management investment strategies (together with the Initial Fund, the “Funds”). The Funds will (i) be advised by Invesco or any investment adviser controlling, controlled by, or under common control with Invesco (each such entity and any successor thereto collectively referred to as the “Adviser”)¹ and (ii) comply with the terms and conditions of the application. Each Fund will operate as an exchange-traded fund (“ETF”).

Applicants are seeking the Order for an exemption from sections 2(a)(32), 5(a)(1), 17(a), 22(d) and 22(e) of the Act and rule 22c-l under the Act (“ETF Relief”).

While the Securities and Exchange Commission (“SEC” or “Commission”) has issued orders permitting actively-managed ETFs (“Active ETFs”), and recently adopted a rule permitting the operation of Active ETFs that meet certain conditions², these orders historically have been granted with a condition requiring the daily disclosure of the portfolio holdings of the Active ETF; the rule, similarly, requires daily disclosure of portfolio holdings.³ Recently, however, the Commission has granted a number of orders that do not require full portfolio transparency and instead allow for an alternative arbitrage mechanism.⁴ Similar to the relief granted in these orders, Applicants

are seeking relief for Active ETFs that will not disclose their portfolio holdings daily. Instead, they will disclose a basket of cash and securities that is designed to closely track the daily performance of a Fund’s portfolio (a “Substitute Basket”), as well as certain other information that together Applicants believe will be sufficient to enable the ETF arbitrage and pricing mechanisms.

The requested ETF Relief would permit (i) shares of the Funds (“Shares”) to trade on a national securities exchange as defined in section 2(a)(26) of the Act (“Exchange”) at prices set by the market rather than at net asset value per Share (“NAV”); (ii) certain Funds that invest in foreign common stocks (as defined below) to pay redemption proceeds more than seven calendar days after Shares are tendered for redemption; (iii) Shares to be purchased and redeemed only in large aggregations (“Creation Units”); and (iv) certain affiliated persons of the Funds to buy securities from, and sell securities to, them in connection with the purchase and redemption of Creation Units.

Applicants further request that, following approval, the terms and conditions of the Order may apply to other registered open-end management investment companies or series thereof not advised by the Adviser (“Authorized Funds”). Applicants anticipate that the Adviser or an affiliate of the Adviser may in the future enter into agreements concerning Applicant’s intellectual property rights in the Funds (including, without limitation, trade secrets, processes and patents, as applicable) with the registered investment advisers advising the Authorized Funds (together with the Authorized Funds, “Future Applicants”). Future Applicants will apply for a separate exemptive order that incorporates by reference all the terms and conditions of this application and any amendments thereto.⁵

The principal difference between the Funds and most existing Active ETFs is that the Funds, instead of providing daily portfolio transparency to facilitate market participants’ intra-day arbitrage in Shares, including hedging their positions in Shares, would provide other information that Applicants believe will be sufficient on its own to enable such arbitrage. Specifically, on each “Business Day,”⁶ each Fund would disclose a Substitute Basket, which generally would also serve as the Creation Basket (as defined below), to be used by market participants as a pricing and hedging tool.⁷ Further, on each Business Day before commencement of trading of Shares, the Basket Overlap (as defined below) will be published on each Fund’s website. The “Basket Overlap” will be the percentage weight overlap between the holdings of the prior Business Day’s Substitute Basket compared to the holdings of the Fund that formed the basis for that Fund’s calculation of NAV at the end of the prior Business Day.⁸ In addition, each Fund would disclose its Tracking Error (as defined below).

To further reduce market participants’ risk and to provide intra-day price certainty, each Fund may strike and publish its NAV more than once during each Business Day at intervals determined by the Adviser. For example, the Fund may strike an NAV once during normal trading at 12:00 p.m. Eastern Time (an “Intra-Day NAV”) and again at the close of trading at 4:00 p.m. Eastern Time (the “End of Day NAV” and, together with the Intra-Day NAV, the “Published NAVs”).⁹ If a Fund strikes an Intra-Day NAV, market participants will have the

choice of purchasing or redeeming Shares at either of the Published NAVs, understanding that the Fund will always process purchases and sales consistent with the next NAV struck following the purchase or sale request. Applicants believe that providing market participants with the ability to create and redeem during the trading day, coupled with the information available to market participants,¹⁰ will reduce the risk that market participants face intra-day, which should enable them to reduce spreads on Shares. Market participants will be able to “lock in” their creation and redemption transactions during the trading day at the Intra-Day NAV, and at the end of the trading day at the End of Day NAV. In addition, each Fund will make its full portfolio holdings available on the Fund’s website at a minimum on a quarterly basis with a 30-day lag (“Periodic Holdings Disclosure”).

Applicants expect that market participants will calculate their own real-time value of the Substitute Basket and determine whether and how to engage in arbitrage transactions, including hedging their positions. Applicants believe that disclosure of the Basket Overlap, Tracking Error and related summary data will help market participants understand the relationship between the performance of a Fund’s actual portfolio and the Substitute Basket. Taken together, Applicants expect that all of this information will provide market participants with high-quality pricing and hedging signals (as discussed in more detail below) for the Funds.

Thus, Applicants believe that the arbitrage and pricing mechanisms of the proposed Funds will be effective and that the ETF Relief requested meets the standards required under the Act and should be granted.

Applicants request the ETF Relief under sections 6(c) and 17(b) of the Act. Applicants believe that:

All entities that currently intend to rely on the Order are named as Applicants. No form having been specifically prescribed for this application, Applicants proceed under rule 0-2 under the Act.

The Trust is a statutory trust organized under the laws of the State of Delaware, which may be comprised of multiple separate series. The Trust is registered with the Commission as an open-end management investment company and overseen by a board of trustees (the “Board”). A description of the Initial Fund to be offered pursuant to the requested Relief is attached hereto as Appendix A.

Invesco will be the investment adviser to the Initial Fund. Invesco is a Delaware limited liability company, with its principal office located at 3500 Lacey Road, Suite 700, Downers Grove, Illinois 60515. Invesco is, and each Adviser will be, registered as an investment adviser under section 203 of the Investment Advisers Act of 1940, as amended (“Advisers Act”). As of September 30, 2020, Invesco and its affiliates serve as the investment adviser

to ETFs with assets of over $250 billion. As of September 30, 2020, Invesco and its affiliates managed approximately $1.2 trillion in assets globally.

Subject to the oversight and authority of the Board, the Adviser will develop and manage the overall investment program of each Fund and will arrange and oversee the provision of necessary services for each Fund. The Adviser may enter into subadvisory agreements with other investment advisers to act as subadvisers with respect to the Funds (“Subadvisers”). Any Subadviser will be registered under section 203 of the Advisers Act.¹¹

The Trust will enter into a distribution agreement with the Distributor to act as the distributor and principal underwriter of Creation Units of the Funds. The Distributor, a Delaware corporation, is an affiliated person of the Adviser, a member firm of the Financial Industry Regulatory Authority (“FINRA”) and a member of the Securities Investor Protection Corporation. The Distributor will comply with the applicable terms and conditions of the application. Distributor is and any future distributor will be registered as a broker-dealer under the Securities Exchange Act of 1934 (the “Exchange Act”). The Distributor will distribute Shares on an agency basis. The Distributor will also enter into authorized participation agreements with each Authorized Participant (as defined below) to enable the Authorized Participants to create and redeem Shares in Creation Unit aggregations. No secondary sales will be made to Brokers at a concession by the Distributor or by a Fund. The Distributor is not and will not be affiliated with an Exchange.

The Commission has now been issuing orders for ETFs that seek to track the performance of an underlying index (“Index ETFs”) for more than twenty-five years and for Active ETFs for more than ten years. A key condition to these orders historically has been daily portfolio transparency.

It appears that the Commission has based this condition, at least in part, on the view that transparency is important to permit market participants, including market makers, Authorized Participants (as defined below) and arbitrageurs (collectively, “arbitrageurs”), to value and hedge a position in an ETF’s shares. This ability to value permits arbitrageurs to transact, with a reasonable likelihood of profitability, with the ETF in creation units and with investors in the secondary market as required for the ETF’s arbitrage mechanism to function. For existing Active ETFs, the arbitrage mechanism works to move ETF share prices in the secondary market toward the ETF’s NAV by creating profit opportunities for arbitrageurs when the secondary market price differs from the NAV: when the market price is lower (higher) than the NAV, an arbitrageur can buy (sell short) ETF shares and simultaneously sell short (buy) a basket of securities that are highly correlated to the NAV in order to capture the difference in value between the two. The hedging basket used by arbitrageurs is often the creation or deposit basket made publicly available by the ETF, which the arbitrageur uses to close out its position by transacting directly with the ETF in creation units. The arbitrageurs’ transactions in ETF shares generally have the effect of driving the shares’ price closer to NAV. Transparency facilitates this mechanism because, if the arbitrageur knows the positions in the ETF’s portfolio, then it can easily identify a basket of securities and/or other instruments that is highly correlated to the NAV and can be used to hedge trades in the ETF’s shares, or if it is using the creation or deposit basket to hedge, it can easily determine that this basket is highly correlated with the NAV.

However, the historical condition of daily portfolio transparency has shaped and continues to shape, and in Applicants’ view, has limited the market for Active ETFs. In particular, active equity managers have been concerned that daily portfolio transparency would enable traders to “front-run” an ETF’s portfolio transactions and

would allow investors to “free-ride” on the investment manager’s portfolio selections.¹² As a result, the number and range of types of Active ETFs (and thus of investors’ options) have both been smaller than they otherwise might be.

Recently, however, the Commission issued the Proxy Portfolio Relief and the Precidian Relief, pursuant to which the applicants thereunder may offer Active ETFs that do not disclose their portfolio holdings daily.¹³ In issuing this relief, the Commission recognized that an arbitrage mechanism alternative to full portfolio transparency can work in an efficient manner to maintain secondary market prices close to a fund’s NAV.¹⁴ Applicants are similarly requesting relief for Active ETFs that do not disclose their portfolios daily and instead employ a different arbitrage mechanism. Although Applicants’ proposed arbitrage mechanism differs from the one in the Precidian Relief, Applicants likewise believe their proposed mechanism, like the one in the Proxy Portfolio Relief, will facilitate effective arbitrage.

Applicants believe that daily portfolio transparency is not per se required for an ETF’s arbitrage mechanism to function efficiently. Rather, in Applicants’ view, transparency is one way to facilitate the ETF arbitrage mechanism.

In Applicants’ view, an efficient ETF arbitrage mechanism is a result of arbitrageurs being able to execute low-risk arbitrage trades in the ETF’s shares. Applicants’ view is based on the observation that, as the risk of a trade decreases, so can the profit potential necessary to induce a trade to be undertaken by a trader or arbitrageur. An ETF’s arbitrage mechanism is most effective when arbitrage trades are low risk and thus arbitrageurs require minimal profit potential to enter into such trades.¹⁵

As explained in more detail below, arbitrageurs’ risk principally derives from the degree of uncertainty in identifying successful arbitrage opportunities and in successfully hedging trades in ETF shares. These are in turn a function of the accuracy of the arbitrageur’s knowledge of the ETF’s NAV and of the hedging vehicle’s value and characteristics, as well as the efficiency, depth, liquidity and degree of synchronous trading of the markets for the positions in the ETF’s portfolio and the instruments underlying the hedging basket. Reducing the risk of an arbitrage trade should encourage market activity that drives the market price of an ETF’s shares toward NAV and reduces any premium/discount between such market price and NAV.

In addition, reducing this risk should encourage market makers in ETF shares to quote tighter bid/ask spreads. The spread offered by a market maker is generally viewed as compensating the market maker for providing

liquidity and accepting exposure to risk in the process. The risk component in the spread compensates a market maker for exposure to the risks deriving from uncertainty about the profitability of a trade. The liquidity component in the spread compensates a market maker for providing liquidity and varies with trading volume, which Applicants do not expect to be different from that of many existing Active ETFs. The lower the premium/discount and the tighter the spread, the more efficient will be the ETF’s pricing mechanism, and the better the execution prices that investors will receive.

Because the Adviser is an active manager that uses proprietary research and expertise to manage client portfolios, the Adviser believes that, in many circumstances, it may not be appropriate for it to make its portfolios or strategies transparent on a daily basis. In developing this proposal, therefore, the Adviser has focused on the role played by portfolio transparency in the existing ETF arbitrage mechanism and on an alternative means of providing the market with substitute information of sufficient quantity and quality as to permit low-risk arbitrage trades in Shares.¹⁶ Applicants have concluded that low-risk arbitrage trades in Shares can be facilitated by providing, in lieu of daily portfolio transparency, the Substitute Basket¹⁷ and a set of other proxy information that arbitrageurs should be able to use to derive a hedging basket for positions in Shares. Taken together, this information also should enable arbitrageurs to use the Substitute Basket as a pricing signal reflecting the correlation between the value of a Fund’s NAV and of its Substitute Basket’s NAV. In arriving at these conclusions, Applicants have discussed their proposal with potential market makers and market makers have represented to Applicants that they expect to make markets in Shares based on the proposed arbitrage mechanism.

Specifically, Applicants anticipate that if Shares begin trading at a discount to the Substitute Basket, an Authorized Participant could purchase the Shares in secondary market transactions and, after accumulating enough Shares to comprise a Creation Unit (as defined below), redeem them with the Fund in exchange for Redemption Instruments (as defined below) reflecting the NAV per share of the Fund’s portfolio holdings.¹⁸ The purchases of Shares would reduce the supply of Shares in the market, and thus tend to drive up the Shares’ market price closer to the Fund’s NAV.¹⁹ Additionally, like with traditional ETFs, market participants also can engage in arbitrage without using the creation or redemption processes. For example, if a Fund is trading at a premium to the Substitute Basket, the market participant may sell Shares short and take a long position in the Substitute Basket securities, wait for the trading prices to move toward parity, and then close out the positions in both the Shares and the securities, to realize a profit from the relative movement of their trading prices.²⁰

In addition, Applicants currently expect that each Fund will strike an Intra-Day NAV during the trading day. This will reduce the level of risk that market participants face intra-day, which will enable them to reduce spreads on Shares by “locking in” their creation and redemption transactions at a more current NAV during the day than the End of Day NAV. Applicants believe this structure will appeal to market participants, resulting in greater participation by market participants, more efficient trading of Shares and better results for investors.

Applicants will provide market participants with the ability to create and redeem Shares by delivering (and receiving) the securities in a Substitute Basket that is designed to closely track the performance of the Fund’s actual portfolio. The Substitute Basket will often include a significant percentage of the securities held in the Fund’s portfolio, but will exclude certain securities held in the Fund’s portfolio (or modify their weightings), such as those the Fund’s portfolio managers are actively looking to purchase or sell, or securities which, if disclosed, could increase the risk of front-running or free-riding (“Protected Securities”).

A process developed by the Adviser will be used to optimize the Substitute Basket for each Fund, which Applicants expect will cause the performance of the Substitute Basket to closely track the performance of the Fund’s portfolio. Applicants expect that there will be sufficient average daily trading volume in the Substitute Basket assets such that market participants will be able to establish, at market value, positions in the components of the Substitute Basket (or in assets that, in the opinion of a market participant, are highly correlated with those components), concurrently with establishing a position in Shares. Applicants’ methodology for constructing the Substitute Basket seeks to emphasize liquid securities, such that the Substitute Basket will provide market participants with a readily deployable hedging and/or valuation tool that has the added benefit of being relatively inexpensive to compile and deliver as a Creation Basket.

In order to help provide these attributes to the Funds’ arbitrageurs, Applicants have proposed that 100% of the value of a Fund’s investments (other than cash, cash equivalents and Treasury securities) (“Portfolio Positions”) will be liquid and listed on an Exchange (or, with respect to exchange-traded futures, a U.S. futures exchange such as the Chicago Board of Trade or the Chicago Mercantile Exchange, or a foreign exchange, with respect to foreign common stocks) and the primary trading session of such Exchange or U.S. futures exchange will be the same as the primary trading session for the Fund’s Shares.²¹ The Substitute Basket also will meet these standards. As a result, the value of the Substitute Basket – as dictated by its market price – will always be known to arbitrageurs for purposes of hedging transactions. Moreover, the Substitute Basket instruments will be readily available to arbitrageurs for purchase or sale in connection with their hedging and/or arbitrage transactions with respect to Shares.

Consistent with these representations, each Fund will only invest in Exchange-traded common stocks,²² common stocks listed on a foreign exchange that trade on such exchange synchronously with the Shares (“foreign common stocks”), ETFs, Exchange-traded notes, Exchange-traded preferred stocks, Exchange-traded American Depositary Receipts (“ADRs”),²³ Exchange-traded real estate investment trusts, Exchange-traded commodity pools, Exchange-traded metals trusts, Exchange-traded currency trusts and exchange-traded futures contracts²⁴ that trade synchronously with the Shares, as well as cash and cash equivalents.²⁵ No Fund will borrow for investment purposes or hold short positions. The Funds also will not purchase any securities that are illiquid investments (as defined in Rule 22e-4(a)(8)) at the time of purchase. The Substitute Basket will be subject to the same limitations.

For each Fund, the Adviser will identify its Substitute Basket,²⁶ which will often include a significant percentage of the securities held in the Fund’s portfolio.²⁷ Applicants anticipate that the Substitute Basket for each Fund will exhibit a Basket Overlap of between 70% and 95% of the portfolio weightings of the Fund.²⁸ The Adviser will publish a new Substitute Basket for a Fund only before the commencement of trading of such Fund’s Shares on that Business Day, and the Adviser will not make intra-day changes to the Substitute Basket except to correct errors in the published Substitute Basket. Because the Substitute Basket will be designed to closely track the daily performance of the Fund’s holdings, the Substitute Basket would serve to estimate the value of those holdings. For the same reason, trading the Substitute Basket would allow market participants to get exposure to the performance of the Fund’s holdings, so that a Fund’s Substitute Basket could serve to hedge a position in Shares.

The Adviser also will publish additional key data on each Business Day. Applicants expect that the Substitute Basket, the Basket Overlap, the Tracking Error and related information will provide a set of high-quality proxy information that arbitrageurs will use to construct a hedging basket. The Basket Overlap and Tracking Error will help arbitrageurs by describing the market behavior of the Substitute Basket and how it relates to the Fund’s portfolio holdings, and by providing historical valuation data and analysis. Applicants currently anticipate that the Funds will also provide certain other information with respect to the Substitute Basket on each Business Day.

The Basket Overlap will be calculated by taking the lesser weight of each asset held in common between a Fund’s portfolio and Substitute Basket, and adding the totals.²⁹ The Adviser will calculate and disseminate the Basket Overlap each Business Day on the Funds’ website prior to the commencement of trading. Applicants believe that the Basket Overlap will support the use of the Substitute Basket by arbitrageurs in determining hedging transactions. In particular, the Basket Overlap should help market participants evaluate the risk that the performance of the Substitute Basket may deviate from the performance of the portfolio holdings of a Fund.

Applicants define “Tracking Error” to mean the standard deviation over the past three months of the daily proxy spread (i.e., the difference, in percentage terms, between the Substitute Basket’s per share NAV and that of the Fund at the end of the trading day). Tracking Error measures the ability of the Substitute Basket to accurately reflect changes in the Fund’s NAV and allows arbitrageurs to estimate the risk of large daily proxy spreads by

In this example, the Portfolio Overlap with respect to these holdings would be 7% (the sum of 5% for Security A and 2% for Security B).

examining the variability of daily proxy spreads over the past three months.³⁰ The Funds’ website will include each Fund’s Tracking Error.

Applicants acknowledge that a Fund’s Substitute Basket may contain securities not included in the Fund’s portfolio.³¹ Applicants recognize the potential that arbitrageurs’ trading in such non-portfolio securities could impact the market for those securities. Nonetheless, for the reasons set forth below, Applicants believe they have structured the proposed arbitrage mechanism to avoid having a significant market impact on securities included in the Substitute Basket, but not in the Fund’s portfolio.

Applicants note that 100% of the value of every security in a Substitute Basket will be liquid and listed on an Exchange (or a U.S. futures exchange, in the case of exchange-traded futures contracts, or a foreign exchange, in the case of foreign common stocks). Further, the Funds expect to include in the Substitute Basket only securities that have exhibited a high average daily trading volume. Applicants believe that the liquidity and trading volume of the Substitute Basket’s constituents assures that trading activity of the type engaged in by arbitrageurs would not, in and of itself, cause unusual disruption or price volatility in the market.³²

Further, Applicants do not believe the proposed arbitrage mechanism raises new or novel concerns. Currently, an arbitrageur’s hedging basket for existing ETFs frequently is not identical to the ETF’s creation or redemption basket.³³ Thus, in practice arbitrageurs typically trade other securities not held in the ETF’s portfolio when creating their own hedges. Even fully transparent ETFs often give rise to trading activity in instruments (including publicly traded securities) that are not included in an ETF’s portfolio due to arbitrageurs’ hedging activities. Applicants therefore believe that the Substitute Basket is no more likely than the creation/redemption baskets for existing ETFs to lead to substantial additional trading in securities not in the portfolio arising from market participants’ hedging activities.

Since the Substitute Basket will generally contain a significant subset of the Fund’s portfolio holdings, the Substitute Basket will not misrepresent the Fund’s portfolio holdings. Rather, the Substitute Basket is designed to give arbitrageurs sufficient information about the Fund’s portfolio holdings so they may identify and construct their own hedging baskets for hedging purposes.

In addition, the Funds will take steps to avoid investor confusion by providing plain English disclosures regarding the Funds, the Substitute Basket, and the Basket Overlap. As described below, each Fund’s prospectus and summary prospectus will prominently disclose that the Substitute Basket is not a precise rendition of the Fund’s actual portfolio.³⁴ Further, the Basket Overlap will be publicly disclosed on each Business Day, providing investors

with an understanding of the degree to which the Substitute Basket and a Fund’s actual portfolio overlap. Applicants believe these steps will minimize confusion about the Fund’s investments and how they differ from the disclosed Substitute Basket.

Applicants have focused on the possibility that market participants might reverse engineer a Fund’s portfolio to front-run its trades or to free-ride on the Adviser’s investment decisions, which could result in potential harm to the Fund and investors. More specifically, the concern associated with reverse engineering is that adversaries could use a Fund’s Periodic Holdings Disclosure, as well as the daily Substitute Basket and the Basket Overlap, to ascertain the Fund’s portfolio. These adversaries would be attempting either (a) to determine the changes in a Fund’s portfolio in order to predict with sufficient certainty the Fund’s current positions over multiple days to then try to predict pending or upcoming trades so as to front-run them, or (b) to ascertain the Fund’s current portfolio so as to free-ride on the Adviser’s investment decisions.

Applicants conclude that it is highly unlikely that potential adversaries and other observers without inside information about the Adviser’s portfolio management would be able to reverse engineer a Fund’s portfolio with any regularity or with the level of accuracy that would be necessary to front-run the Fund’s trades or free-ride on the Adviser’s portfolio decisions.³⁵ Applicants acknowledge that they cannot completely exclude the possibility that market participants may infer some information about a Fund’s portfolio holdings and attempt to front-run or free-ride accordingly. However, Applicants will operate the Funds in a manner designed to minimize the risk of reverse engineering and, for the reasons set forth above, believe successful front-running or free-riding is highly unlikely.

Except for the unique features of the Funds described above, the Funds will generally operate in the same manner as existing ETFs.

Each Fund will be organized and registered as an open-end management investment company (or series thereof). Each Fund will adopt fundamental and non-fundamental policies. Each Fund and its Shares will be registered under the Securities Act of 1933, as amended (“Securities Act”), and the Act.

Each Fund intends to maintain the required level of diversification and otherwise conduct its operations so as to qualify as a “regulated investment company” under the Internal Revenue Code (“Code”). Under such circumstances, dividends and other distributions by the Funds will be declared and paid in the same manner as by other registered open-end investment companies.

The Funds’ Adviser and Board will oversee the effectiveness of the Funds’ arbitrage mechanism. As part of this oversight, the Board will receive periodic reports from the Adviser summarizing key data and metrics relating to the Funds’ trading performance. This information is intended to be both informational and instructive and will be designed to familiarize the Board members with the Funds’ arbitrage mechanism, as well as to provide them with historical information that will help them to assess whether a Fund’s arbitrage mechanism is effective and whether trading activity in Fund Shares warrants additional scrutiny.

Applicants intend to implement a structure, as specified in policies and procedures, involving both robust governance and a series of escalating and calibrated potential responses that are designed to respond to the

seriousness and the specific causes of an arbitrage or pricing issue. These policies and procedures, will provide for, among other things, the measures discussed below.

The Adviser will monitor on an ongoing basis how Shares trade, including the level of any market price premium or discount to NAV and the bid/ask spreads on market transactions. For at least the first three years after the launch of a Fund,³⁶ the Adviser will promptly call a meeting of the Fund’s Board (and will present to the Board recommendations for appropriate remedial measures) and the Board will promptly meet (1) if the Tracking Error exceeds 1.00%; or (2) if, for 30 or more days in any quarter or 15 days in a row: (a) the absolute difference between either the Closing Price or the Bid/Ask Price, on the one hand, and the Fund’s End of Day NAV, on the other, exceeds a threshold set by the Adviser, which in no event will exceed 2.00% (the “Corrective Action Threshold”), or (b) the bid-ask spread exceeds the Corrective Action Threshold.³⁷ In such a circumstance, the Board will consider the continuing viability of the Fund, whether shareholders are being harmed, and what, if any, action would be appropriate to, among other things, narrow the premium/discount or spread, as applicable.³⁸ The Board will then decide whether to take any such action.³⁹ Such actions may include, but are not limited to, changing lead market makers, listing the Fund on a different Exchange, changing the size of Creation Units, changing the construction of the Substitute Basket, changing the Fund’s investment objective or strategy, or liquidating the Fund.

In addition, to the extent the Adviser determines that a security held in a Fund’s portfolio but not in the Substitute Basket does not have readily available market quotations and such circumstance may affect the reliability of the Substitute Basket as an arbitrage vehicle, that information, along with the identity and weighting of that security in the Fund’s portfolio, will be publicly disclosed on the Fund’s website.⁴⁰ Applicants believe that in situations where a security in the Substitute Basket does not have readily available market quotations, arbitrageurs will have enough information to determine the value of the security and evaluate the accuracy of the market price for the Fund.⁴¹ The Adviser will also assess other appropriate remedial measures.

Beneficial owners of Shares (“Beneficial Owners”) will have one vote per Share with respect to matters for which a shareholder vote is required, consistent with the requirements of the Act and the rules promulgated thereunder and the laws of the State of Delaware. Shares will be registered in book-entry form only. No Beneficial Owner shall have the right to receive a certificate representing Shares.

The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York (“DTC”), or its nominee will be the record or registered owner of all outstanding Shares. Beneficial Owners will be shown on the records of DTC or DTC-participating institutions (e.g., Brokers, banks, trust companies and other financial institutions) (“DTC Participants”).

Beneficial Owners of Shares will exercise their rights in Shares indirectly through DTC and DTC Participants. Dividends will normally be paid and all notices, statements, shareholder reports and other communications required under the Act and other applicable laws to be given to Beneficial Owners will normally be provided through the customary practices and facilities of DTC and DTC Participants.

Shares will be listed on an Exchange in the same manner as other ETF shares. The principal secondary market for the Shares will be the Exchange on which they are listed (the “Listing Exchange”).

Except as permitted by the relief requested from Section 17(a), no affiliated person, or affiliated person of an affiliated person, of the Funds will maintain a secondary market in Shares. It is expected that the Exchange (in collaboration with the Adviser) will select, designate or appoint one or more market makers for the Shares of each Fund.⁴²As long as a Fund operates in reliance on the requested Order, its Shares will be listed on an Exchange.

The Trust will offer, issue and sell Shares to investors only in Creation Units through the Distributor on a continuous basis at the NAV per Share next determined after an order in proper form is received. The NAV of each Fund is expected to be determined two times each Business Day. Applicants currently expect that each Fund will strike and publish an Intra-Day NAV at 12:00 p.m. Eastern Time and the End of Day NAV as of the close of the regular trading session of the New York Stock Exchange, ordinarily 4:00 p.m. Eastern Time (“ET”), on each Business Day. The Trust will sell and redeem Creation Units of each Fund only on a Business Day. Applicants anticipate that a Creation Unit will consist of at least 5,000 Shares and be offered at an initial price of $25 per Share. Creation Units of the Initial Fund and certain future Funds may be purchased and/or redeemed entirely for cash, as permissible under the procedures described below.

In order to keep costs low and permit each Fund to be as fully invested as possible, Shares will be purchased and redeemed in Creation Units and generally on an in-kind basis. Accordingly, except where the purchase or redemption will include cash under the 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 specified instruments (“Redemption Instruments”). The names and quantities of the instruments that constitute the Deposit Instruments and the Redemption Instruments for a Fund (collectively, the “Creation Basket”) will be the same as the Fund’s designated Substitute Basket, except to the extent that the Fund requires purchases and redemptions to be made entirely or in part on a cash basis.⁴³

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 “Cash Amount”).

Each Fund will adopt and implement policies and procedures regarding the composition of its Creation Baskets. The policies and procedures will set forth detailed parameters for the construction and acceptance of baskets that are in the best interests of the Fund and its shareholders, including the process for any revisions to or deviations from, those parameters. The Fund’s basket policies and procedures would be covered by the Fund’s compliance program and other requirements under rule 38a-1 of the 1940 Act.

A Fund that normally issues and redeems Creation Units in kind may require purchases and redemptions to be made entirely or in part on a cash basis. In such an instance, the Fund will announce, before the open of trading on a given Business Day, that all purchases, all redemptions or all purchases and redemptions on that day will be made wholly or partly in cash. A Fund may also determine, upon receiving a purchase or redemption order from an Authorized Participant (as defined below), to have the purchase or redemption, as applicable, be made entirely or in part in cash.

Each Business Day, before the open of trading on the Exchange where the Fund is listed, the Fund will cause to be published through the National Securities Clearing Corporation (“NSCC”) the names and quantities of the instruments comprising the Creation Basket, as well as the estimated Cash 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 Substitute Basket will be published each Business Day regardless of whether a Fund decides to issue or redeem Creation Units entirely or in part on a cash basis.

All orders to purchase Creation Units must be placed with the Distributor by or through an “Authorized Participant,” which is a member or participant of a clearing agency registered with the Commission, which has a written agreement with the Fund or one of its service providers that allows the Authorized Participant to place orders for the purchase and redemption of Creation Units. An investor does not have to be an Authorized Participant, but must place an order through, and make appropriate arrangements with, an Authorized Participant. Except as permitted by the relief requested from section 17(a), no promoter, principal underwriter (e.g., Distributor) or affiliated person of the Fund, or any affiliated person of such person, will be an Authorized Participant in Shares.

The Funds will issue and redeem Shares in Creation Units at the NAV per Share next determined after an order in proper form is received (which may be the Intra-Day NAV or the End of Day NAV depending on when the order is received). Validly submitted orders to purchase or redeem Creation Units on each Business Day will be accepted until the NAV strike times (“Order Cut-Off Time”), which may be the Intra-Day NAV or the End of Day NAV depending on when the order is received, on the Business Day that the order is placed (“Transmittal Date”). All Creation Unit orders must be received by the Distributor no later than a Fund’s Order Cut-Off Time in order to receive the next available Intra-Day NAV or the End of Day NAV determined on the Transmittal Date. The Funds may require certain orders to be submitted at earlier times. Any such order will be described in each Fund’s registration statement. When the Listing Exchange closes earlier than normal, a Fund may require orders for Creation Units to be placed earlier in the Business Day.

A Fund may recoup the settlement costs charged to it by NSCC and DTC by imposing a transaction fee on investors purchasing or redeeming Creation Units (“Transaction Fee”). Because the DTC Process is generally more expensive than the NSCC Process, investors purchasing or redeeming through the DTC Process may pay a higher Transaction Fee than investors transacting through the NSCC Process.⁴⁴No Fund will impose sales charges on

purchases of Shares. The Transaction Fee will be borne only by purchasers and redeemers of Creation Units and will be limited to amounts that have been determined to be appropriate by the Adviser to defray the transaction expenses that will be incurred by a Fund when an investor purchases or redeems Creation Units.⁴⁵ The purpose of the Transaction Fee is to protect the existing shareholders of the Funds from the dilutive costs associated with the purchase and redemption of Creation Units.⁴⁶ Transaction Fees will differ for each Fund. Variations in the Transaction Fee may be made from time to time.

The market price of Shares will be based on the current Bid/Ask Price in the secondary market. Such price, like the price of all traded securities, will be subject to the factors of supply and demand, as well as the Fund’s NAV (either an Intra-Day NAV or the End of Day NAV). The price of Shares in the secondary market, however, will not have a fixed relationship to the current or previous day’s End of Day NAV. Rather, the price at which Shares trade in the secondary market may be below, at or above the End of Day NAV. No secondary sales will be made to Brokers at a concession by the Distributor or by a Fund. Further, secondary market transactions in Shares are expected to be subject to brokerage fees and charges.

No Fund will make the DTC book-entry dividend reinvestment service available for use by Beneficial Owners for reinvestment of their cash proceeds, though certain Brokers may make a dividend reinvestment service available to their clients. Brokerage commissions and other costs, if any, incurred in purchasing Shares with the cash from Fund distributions will be an expense borne by the individual Beneficial Owners reinvesting through such service.

A great deal of information will be available to prospective investors about the Funds. Investors interested in a particular Fund can also obtain its prospectus, summary prospectus, SAI, shareholder reports, Form N-CSR and Form N-CEN. The prospectus, summary prospectus, SAI and shareholder reports will be available free upon request from the Funds, and those documents and the Form N-CSR and Form N-CEN may be viewed on-screen or downloaded from the Commission’s website at http://www.sec.gov.

The Funds’ website, which will be publicly available at no charge prior to the public offering of Shares, will include a prospectus and summary prospectus for each Fund that may be downloaded. In addition, the website will include the following:

In addition, because the Shares will be listed on an Exchange, prospective investors will have access to more information about them than what is normally available about a security of an open-end investment company. Specifically, information regarding the market price of Shares and trading volume in Shares will be continually available on a real-time basis throughout the day on Brokers’ computer screens and other electronic services. The previous day’s Closing Price and trading volume information may be published daily in the financial section of newspapers.

While Applicants believe that the Funds will trade and perform in a manner similar to other ETFs, Applicants will take such steps as may be necessary to avoid confusion in the public’s mind between the Funds and those ETFs that disclose their portfolio holdings daily. In a prominent location near the Fund’s name, on both the outside front cover of each Fund’s prospectus and summary prospectus, as well as each Fund’s website and any marketing material, the Fund will include the following legend (“the Legend”) unless otherwise requested by the staff of the Commission:

Traditional ETFs tell the public what assets they hold each day. This ETF will not. This may create additional risks for your investment. For example:

The differences between this ETF and other ETFs may also have advantages. By keeping certain information about the ETF secret, this ETF may face less risk that other traders can predict or copy its investment strategy. This may improve the ETF’s performance. If other traders are able to copy or predict the ETF’s investment strategy, however, this may hurt the ETF’s performance.

For additional information regarding the unique attributes and risks of the ETF, see section [X – i.e., the later discussion of the Substitute Basket and the risks of the ETF] below.

Further, in its prospectus, summary prospectus, marketing materials and website, each Fund will describe in plain English the nature and purpose of the Substitute Basket, how the Substitute Basket is designed to differ from the Fund’s actual portfolio, and where an investor can get access to the Substitute Basket and the Basket Overlap. Each Fund will describe in more detail and in plain English that, (1) although the Substitute Basket is intended to provide investors with enough information to allow for an effective arbitrage mechanism that will keep the market price of the Fund at or close to the underlying NAV per Share of the Fund, there is a risk (which may increase during periods of market disruption or volatility) that market prices will vary significantly from the underlying NAV per Share of the Fund; (2) ETFs trading on the basis of a Substitute Basket may trade at a wider bid/ask spread than shares of ETFs that publish their portfolios on a daily basis, especially during periods of market disruption or volatility, and, therefore, may cost investors more to trade; and (3) although the Fund seeks to benefit from keeping its portfolio information secret, market participants may attempt to use the Substitute Basket to identify the Fund’s

trading strategy, which, if successful, could result in such market participants engaging in certain predatory trading practices that may have the potential to harm the Fund and its shareholders.

The Funds will also disclose that because the Shares are traded in the secondary market, a broker may charge a commission to execute a transaction in Shares, and an investor also may incur the cost of the spread between the price at which a dealer will buy Shares and the somewhat higher price at which a dealer will sell Shares.

Finally, the Applicants note that because the Funds will not publicly disclose their portfolio holdings daily, the selective disclosure of material nonpublic information, including information other than portfolio information, would be more likely to provide an unfair advantage to the recipient than in other ETFs. Thus, each Fund and each person acting on behalf of a Fund will comply with and agree to be subject to the requirements of Regulation Fair Disclosure as if it applied to them (except that the exemptions provided in Rule 100(b)(2)(iii) therein will not apply).

Applicants assert that the Funds would allow investors to access active investment strategies offered by certain investment advisors that are currently only available via mutual funds, while also taking advantage of the traditional benefits of ETFs (i.e., tax efficiency, lower cash drag and lower operational expenses) and without raising investor protection concerns that are not otherwise addressed by the terms and conditions of the requested relief.⁴⁸ The Adviser believes that the Funds will appeal to investors because the Funds will provide the following benefits associated with ETFs:

Applicants currently anticipate that the Funds will provide investors with a more cost-efficient investment vehicle than a comparable mutual fund because they anticipate the Funds charging management fees that are comparable to those charged by traditional mutual funds but having lower total annual operating expense ratios. Applicants expect the Funds to have lower total annual operating expense ratios because many of the costs embedded in the expense ratios of mutual funds, such as transfer agency fees, are generally much lower in the case of ETFs (like the Funds). This is the case because, among other matters, while shareholders of mutual funds typically receive shareholder servicing directly from funds, shareholders of ETFs receive servicing through third parties – namely the Brokers with whom they hold accounts and through whom they transact in ETF shares. Thus, unlike mutual funds, ETFs do not incur substantial shareholder servicing and transfer agency fees. Rather, such costs are displaced and paid by shareholders, if at all, to Brokers and other intermediaries.

In addition, Applicants anticipate that the Funds will provide investors with the same type of intra-day liquidity as they have come to associate with ETFs. Applicants expect the Funds to offer investors the same level of

liquidity as they enjoy in existing ETFs because the Funds will operate as ETFs whose Shares investors may purchase and sell intra-day at market prices rather than only at designated times when the Funds strike their NAVs.

Further, Applicants anticipate that the Funds will provide investors with a relatively tax-efficient investment option as compared to similar traditional mutual funds. The tax efficiency of the ETF structure is primarily a result of ETFs generally honoring redemptions in-kind and, thereby, taking advantage of a provision in the Code that allows them not to recognize capital gains on appreciated securities delivered “out.” The Funds, like existing ETFs, expect to take advantage of this same structure and to honor redemptions in-kind as much as possible so as to avoid recognizing capital gains on appreciated securities.

Applicants concede that the Funds may not be as tax efficient as, for example, Index ETFs because the Funds will not hold precisely those instruments that they receive in the Creation Basket, whereas Index ETFs may normally hold precisely the securities they receive in a creation (or issue in a redemption). Thus, each Fund expects to incur some taxable gains reconfiguring the Creation Basket received in a creation and compiling the Creation Basket for a redemption. In the case of the Funds, however, Applicants expect these potential inefficiencies to be minimized for at least two reasons.

First, on any Business Day during which a Fund experiences creations and redemptions, it will be able to “cross” the transactions; that is, it will be able to take those Deposit Instruments that are not wanted as Portfolio Positions and deliver them out as Redemption Instruments. Thus, on Business Days where the number of creations equals the number of redemptions, a Fund will experience no tax inefficiencies as a result of its portfolio not matching the Creation Basket precisely. It will operate at the same level of tax efficiencies as an Index ETF. Even on days when creations and redemptions are not equal in number but are able, at least in part, to be offset, a Fund’s tax inefficiencies due to a mismatch between its Portfolio Positions and Deposit/Redemption Instruments will be minimized.

Second, as discussed above, Applicants anticipate that between 70-95% of the assets of each Fund will be invested in securities that are in its identified Substitute Basket, which is also the Creation Basket (except in the case of the circumstances described in section III.D.5 above). Purchases and sales of Protected Securities that are necessary to align the Creation Basket with the Fund’s portfolio will be effected by the Funds in connection with creation and redemption transactions. The Authorized Participants will bear the transaction costs of creations and redemptions. Because Applicants anticipate that the majority (70-95%) of each Fund’s assets will be represented in the Substitute Basket, Applicants expect that the creation and redemption process will enable the Funds to closely replicate the standard ETF in-kind creation and redemption mechanism, acquiring (in connection with creation transactions) or disposing of (in connection with redemption transactions) Protected Securities. Accordingly, Applicants expect that a Fund will trade significantly fewer securities for its portfolio relative to a mutual fund operating a comparable investment strategy.

Applicants regard such tax efficiencies as material, particularly to investors who seek tax-efficient investment vehicles, and supportive of the contention that the Funds will provide investors with these important benefits of the ETF structure.

Finally, Applicants note that the Commission recently recognized that, as long as arbitrage keeps the secondary market price and NAV of ETFs close and does so efficiently so spreads remain narrow, investors can “benefit from the opportunity to invest in active strategies through a vehicle that offers the traditional benefits of ETFs.”⁴⁹ Applicants acknowledge that circumstances may occur in which markets operate less efficiently or with less liquidity and/or trading volume than normally. In such circumstances, intraday premiums/discounts may grow larger and spreads may widen for all or most ETFs. Stock-specific activity (e.g., a merger or acquisition) may, in certain circumstances, cause a larger than average Tracking Error. Furthermore, at times a Fund’s Tracking Error may increase as the correlation of returns of the respective securities in the Fund’s portfolio and the Substitute Basket change. Nonetheless, Applicants believe that the Funds’ arbitrage mechanisms will function as well as those of many existing ETFs. Because of the Applicants’ proposed conditions, the securities in the Funds’ portfolios and Substitute Baskets will almost all be in U.S. equities (or futures thereon), listed on U.S. exchanges, trading in the

deeper and more liquid markets synchronously with Shares. Even in abnormal market conditions, the pricing signals and hedging vehicles for the Funds, and thus hedging and arbitrage transactions in Shares, will be less risky than those for many existing ETFs, such as some ETFs investing in fixed income or foreign securities. Applicants thus expect that in such circumstances the Funds’ arbitrage mechanism will maintain intraday premiums/discounts at least as low, and spreads at least as narrow, as those of many existing ETFs.

Another category of investors to whom Applicants expect Shares to appeal is short-term and tactical traders. Shares are expected to appeal to these investors because they can be bought and sold continuously throughout the day at a price that reflects current market sentiment regarding the Shares. Further, the Intra-Day NAV strikes will enable such traders to establish price certainty at various times throughout each Business Day.

Applicants believe that investors should be able to access the full spectrum of active management strategies in the ETF format. Applicants further believe that many of the same advantages that are currently associated with the ETF format, including lower fees and tax efficiency, can be provided by other types of actively managed ETFs, including the Funds. Applicants seek the ETF Relief requested herein to bring those advantages to ETF investors in the form of the Funds.

Since the advent of the ETF structure in 1993, a consistently increasing number of investors invest in ETFs. In some cases, investors have found their way into ETFs on their own. Others have found their way into ETFs with the guidance of their financial advisers. Registered advisers who use ETFs generally indicate a preference for them over mutual funds for a variety of reasons, including that the total operating expenses associated with owning ETFs are typically lower than those associated with owning comparable mutual funds and, therefore, their clients’ investment expenses are reduced by owning ETF shares instead of mutual fund shares, normally resulting in improved returns. Applicants’ proposal is designed to take a step toward removing limits on investing in Active ETFs whose strategies are amenable to daily portfolio disclosure.

Although the Funds have features that distinguish them from existing ETFs, Applicants seek the same exemptive relief from the Act upon which existing ETFs rely—from sections 2(a)(32), 5(a)(1), 17(a) and 22(d) of the Act and rule 22c-1 under the Act. The ETF Relief is requested pursuant to sections 6(c) and 17(b) of the Act.

Section 6(c) provides that the Commission may exempt any person, security or transaction or any class of persons, securities or transactions from any provision of the Act:

if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of [the Act].

Section 17(b) provides that the Commission will grant an exemption from the provisions of section 17(a) if evidence establishes that the terms of the proposed transaction are reasonable and fair, including the consideration to be paid or received, and do not involve overreaching on the part of any person concerned, that the proposed transaction is consistent with the policy of each registered investment company concerned and that the proposed transaction is consistent with the general purposes of the Act.

Section 5(a)(1) of the Act defines an “open-end company” as a “management company which is offering for sale or has outstanding any redeemable security of which it is the issuer.” The term “redeemable security” is defined in section 2(a)(32) of the Act as:

any security, other than short-term paper, under the terms of which the holder is, upon its presentation to the issuer or to a person designated by the issuer, ... entitled (whether absolutely or only out of surplus) to receive approximately his proportionate share of the issuer’s current net assets, or the cash equivalent thereof.

Applicants believe that Shares could be viewed as satisfying the section 2(a)(32) definition of a redeemable security and that, consequently, the Funds could be viewed as satisfying the definitional requirement of an open-end company offering for sale a redeemable security of which it is the issuer because Shares are securities “under the terms of which” an owner may receive his proportionate share of a Fund’s current net assets. The unusual aspect of Shares is that their terms provide for a right of redemption upon presentation to the issuer only when aggregated into one or more Creation Units. In other words, Shares are not individually redeemable to a Fund or its agent under all circumstances, and therefore a possible question arises as to whether the definitional requirements of a “redeemable security” and “open-end company” are met. For avoidance of doubt, Applicants request an order to permit the Trust to register as an open-end management investment company and the Funds to issue Shares that are generally redeemable in Creation Units only.

Creation Units are continuously redeemable in accordance with the provisions of the Act. Owners of Shares may purchase the requisite number of Shares and tender the resulting Creation Unit for redemption. Moreover, all holders of Shares will have the ability to buy and sell Shares throughout the day in the secondary market at market prices that are disciplined by the Funds’ efficient arbitrage mechanism and, therefore, should reflect narrow premiums/discounts. While Applicants recognize the potential for wider spreads and more significant deviations between a Share’s Closing Price and/or Bid/Ask Price due to the absence of portfolio transparency, Applicants do not believe that such deviations will develop, given the disclosure, with respect to each Fund, of the Substitute Basket and the Basket Overlap, as well as the Tracking Error. Applicants thus believe that the Funds do not present any new issues with respect to the previously granted exemptions that allow for Index ETFs and Active ETFs to redeem their shares only in Creation Unit quantities.

For these reasons, Applicants believe that the proposal to permit Shares to be sold and redeemed as described is 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. Accordingly, Applicants request that the Order be granted in respect of sections 2(a)(32) and 5(a)(1).

no registered investment company shall sell any redeemable security issued by it to any person except to or through a principal underwriter for distribution or at a current public offering price described in the prospectus, and, if such class of security is being currently offered to the public by or through an underwriter, no principal underwriter of such security and no dealer shall sell any such security to any person except a dealer, a principal underwriter, or the issuer, except at current public offering price described in the prospectus.

no registered investment company issuing any redeemable security, no person designated in such issuer’s prospectus as authorized to consummate transactions in any such security, and no principal underwriter of, or dealer in, any such security shall sell, redeem, or repurchase any such security except at a price based on the current net asset value of such security which is next computed after receipt of a tender of such security for redemption or of an order to purchase or sell such security.

Shares will be sold in Creation Units through the Distributor to Authorized Participants (and persons transacting through Authorized Participants) at the “current public offering price as described in the prospectus,” as

required by section 22(d). Creation Units may also be unbundled, and individual Shares will trade in the secondary market at prices that are below, at or above NAV.

Secondary market trading in Shares will take place at negotiated prices, not at a current offering price described in the prospectus and summary prospectus, and not at a price based on NAV. In particular, Shares of each Fund will be listed on an Exchange and may trade on and away from the Exchange at all times on the basis of current Bid/Ask Prices. Thus, purchases and sales of Shares in the secondary market will not comply with section 22(d) and rule 22c-1. Applicants request an exemption under section 6(c) from section 22(d) and rule 22c-1 to permit the Shares to trade at negotiated prices.

The concerns sought to be addressed by section 22(d) and rule 22c-1 with respect to pricing are equally satisfied by the proposed method of pricing Shares. While there is little legislative history regarding section 22(d), its provisions, as well as those of rule 22c-1, appear to have been intended (a) to prevent dilution caused by certain riskless-trading schemes by principal underwriters and contract dealers, (b) to prevent unjust discrimination or preferential treatment among buyers and (c) to ensure an orderly system of distribution by contract dealers by eliminating price competition from non-contract dealers who could offer investors shares at less than the published sales price and who could pay investors a little more than the published redemption price.⁵⁰

The first two purposes – preventing dilution caused by riskless-trading schemes and preventing unjust discrimination among buyers – do not seem to be relevant to secondary trading in Shares. Secondary market transactions in Shares will not cause dilution of the Funds because such transactions will not directly involve Fund assets. Similarly, secondary market trading in Shares should not create unjust discrimination or preferential treatment among buyers because, to the extent Share trading prices vary over the course of a given trading day or from day to day, such variances will generally reflect market forces of supply and demand, and not result from unjust or discriminatory manipulation. Applicants believe that, with proper disclosure to all parties, the Funds do not create any new potential for discrimination or preferential treatment among investors purchasing and selling Shares in the secondary market and those purchasing and redeeming directly from the Fund.⁵¹ Specifically, Applicants do not believe that the fact that a Creation Unit of Shares can be purchased or redeemed at NAV, while individual Shares can trade at market prices creates the potential for discrimination or preferential treatment among investors. As described above, Applicants believe that the ETF structure and the standards and conditions set forth herein will facilitate arbitrage activity in Shares, which should limit the differences between NAV and market prices. Accordingly, all investors will be able to transact in Shares at prices at or close to NAV, whether the investors are transacting in the secondary market or through purchases or redemptions with the Fund, as a result of the ability to create or redeem Shares at NAV. Further, any profits that are generated as a result of arbitrage transactions would not be a result of any discriminatory or preferential treatment of certain investors.

With respect to the third possible purpose of section 22(d) – ensuring an orderly distribution system – Applicants note that anyone may dispose of (acquire) Shares either by selling (purchasing) them on an Exchange or by redeeming (purchasing) a Creation Unit through an Authorized Participant. Therefore, no dealer should have a material advantage over any other dealer in the sale of Shares. In addition, secondary market transactions in Shares should generally occur at prices at or close to NAV. If the prices for Shares should fall below the proportionate NAV of the underlying assets of the Fund, an investor need only to accumulate enough of such Shares to constitute a Creation Unit in order to redeem such Shares at NAV. Competitive forces in the marketplace and the ability of market professionals to create and redeem at the NAV should thus ensure that the difference between the NAV and the price for Shares in the secondary market remains narrow.

On the basis of the foregoing, Applicants contend that the protections intended to be afforded by section 22(d) are adequately addressed by the proposed methods for purchasing, redeeming and pricing Creation Units and buying, selling and pricing Shares. Applicants therefore contend that the relief requested is 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. Accordingly, Applicants request the Order be granted in respect of section 22(d) and rule 22c-1.

for any affiliated person or promoter of or principal underwriter for a registered investment company... or any affiliated person of such a person, promoter, or principal underwriter, acting as principal, knowingly to sell any security or other property to such registered company or to any company controlled by such registered company, unless such sale involves solely (A) securities of which the buyer is the issuer, (B) securities of which the seller is the issuer and which are part of a general offering to the holders of a class of its securities or (C) securities deposited with a trustee of a unit investment trust … by the depositor thereof.

An “affiliated person” of a person, pursuant to section 2(a)(3)(A) of the Act, includes “any person directly or indirectly owning, controlling, or holding with the power to vote, 5 per centum or more of the outstanding voting securities of such other person” and pursuant to section 2(a)(3)(C) of the Act “any person, directly or indirectly, controlling, controlled by or under common control with, such 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, unless such power is solely the result of an official position with such company. Any person who owns beneficially, either directly or through one or more controlled companies, more than 25 per centum of the voting securities of a company shall be presumed to control such company. Any person who does not so own more than 25 per centum of the voting securities of any company shall be presumed not to control such company.

The Funds may be deemed to be controlled by the Adviser and hence affiliated persons of each other. In addition, the Funds may be deemed to be under common control with any other registered investment company, or series thereof, advised by the Adviser (an “Affiliated Fund”). A large institutional investor could own more than 5% of a Fund, or in excess of 25% of a Fund, making that investor a first-tier affiliate of the Fund under section 2(a)(3)(A) or (C). In addition, there exists a possibility that, with respect to Affiliated Funds, a large institutional investor could own 5% or more, or in excess of 25%, of such other Affiliated Fund, making that investor a second-tier affiliate of a Fund. For so long as such an investor was deemed to be an affiliate, sections 17(a)(1) and 17(a)(2) could be read to prohibit such person from purchasing and redeeming Shares through in-kind transactions with the Fund.

Section 17(b) provides that the Commission will grant an exemption from the provisions of section 17(a) if evidence establishes that the terms of the proposed transaction are reasonable and fair, including the consideration to be paid or received, and do not involve overreaching on the part of any person concerned, that the proposed transaction is consistent with the policy of each registered investment company concerned, and that the proposed transaction is consistent with the general purposes of the Act.⁵²Applicants seek an exemption from sections 17(a)(1)

and 17(a)(2) pursuant to sections 6(c) and 17(b) to permit persons that are first-tier affiliates or second-tier affiliates of the Funds solely by virtue of: (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, to effectuate purchases and redemptions in kind.

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. Both the deposit procedures for in-kind purchases of Creation Units and the redemption procedures for in-kind redemptions will be effectuated in exactly the same manner for all purchases and redemptions and for all purchasers and redeemers. There will be no discrimination among purchasers or redeemers. Except in the limited circumstances described in section III.D.5 above, the Creation Basket composition will be the same regardless of the identity of the purchaser or redeemer.

The Deposit and Redemption Instruments will be valued in the same manner as they are valued for purposes of calculating the Fund’s NAV, and such valuation will be made in the same manner regardless of the identity of any purchaser or redeemer. Further, the total consideration paid for the purchase or redemption of a Creation Unit of Shares will be based on the NAV of such Fund, as calculated in accordance with the policies and procedures set forth in its registration statement. Each basket will consist of instruments that are appropriate, in type and amount, for inclusion in light of the Fund’s investment objectives and policies, current Portfolio Positions and current trading program.

Because the Creation Basket will be the Substitute Basket, except in the limited instances described in section III.D.5 above, a person purchasing Shares could not cause the Fund to include unwanted instruments in it. Under these circumstances, Applicants do not believe that in-kind purchases and redemptions will result in abusive self-dealing or overreaching of a Fund by any Creation Unit investor.

Moreover, Applicants note that the ability of each Fund to take deposits and make redemptions in-kind may aid in achieving the Fund’s investment objectives by allowing it to be more fully invested, minimizing cash drag and reducing flow-related trading costs. In-kind transactions may also increase a Fund’s tax efficiency and promote efficient secondary market trading in Shares by reducing the Transaction Fee applicable to purchases and redemptions of Shares.

For the reasons set forth above, Applicants contend that, with respect to the relief requested pursuant to section 17(b), the terms of the proposed transactions, 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 that the proposed transactions are consistent with the policy of each registered investment company concerned and with the general purposes of the Act. Applicants also contend that, with respect to the relief requested pursuant to section 6(c), the requested exemption for the proposed transactions is 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. Thus, Applicants request the Order under section 6(c) and 17(b) in respect of sections 17(a)(1) and 17(a)(2).

Section 22(e) of the Act provides that, except under circumstances not relevant to this request⁵³:

No registered company shall suspend the right of redemption, or postpone the date of payment or satisfaction upon redemption of any redeemable security in accordance with its terms for more than seven days after the tender of such security to the company or its agent designated for that purpose for redemption…

Applicants seek an exemption from the seven-day redemption delivery requirement of Section 22(e) of the Act under the circumstances described below.⁵⁴

Applicants observe that the settlement of redemptions of Creation Units of the 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 portfolio instruments to redeeming investors, coupled with local market holiday schedules, will require a delivery process of up to fifteen (15) calendar days, rather than the seven (7) calendar days required by Section 22(e). Therefore, Applicants request relief from Section 22(e) with respect to a Fund’s delivery of foreign common stocks in its Creation Basket when delivered-in kind, in order to provide payment or satisfaction of redemptions more than seven days after tender. A Fund will deliver the foreign common stock as soon as practicable, but in all cases no later than fifteen (15) days following the tender of a Creation Unit.

Applicants submit that Congress adopted Section 22(e) of the Act to prevent unreasonable, undisclosed or unforeseen delays in the actual payment of redemption proceeds. Applicants propose that allowing redemption payments for Creation Units of a Fund to be made within up to 15 calendar days would not be inconsistent with the spirit and intent of Section 22(e). Applicants suggest that a redemption payment occurring within up to 15 calendar days following a redemption request would adequately afford investor protection.

Applicants desire to incorporate the creation and redemption mechanism for Creation Units of each Fund as much as possible into the processing and settlement cycles for securities deliveries currently practicable in the principal market(s) for the portfolio instruments of a given Fund. Currently, Applicants believe that no significant additional system or operational procedures will be needed to purchase or redeem Creation Units beyond those already generally in place in the relevant jurisdiction. Applicants believe that this approach may make creations and redemptions of Creation Units less costly to administer, enhance the appeal of the product to institutional participants, and thereby promote the liquidity of Shares in the secondary market with benefits to all holders thereof. As noted above, Applicants may utilize in-kind redemptions. Applicants are not seeking relief from Section 22(e) with respect to Funds that do not effect redemptions in-kind.

Given the rationale for what amounts to a delay typically of a few days in the redemption process on certain occasions and given the facts as recited above, Applicants believe that the redemption mechanism described above will not lead to unreasonable, undisclosed or unforeseen delays in the redemption process. Applicants assert that the request for relief from the strict seven (7) day rule imposed by Section 22(e) is not inconsistent with the standards articulated in Section 6(c). Given the facts as recited above, Applicants believe that the granting of the requested relief is consistent with the protection of investors and the purposes fairly intended by the policies and provisions of the Act.

On the basis of the foregoing, Applicants believe that (i) the protections intended to be afforded by Section 22(e) are adequately addressed by the proposed method and securities delivery cycles for redeeming Creation Units and (ii) the relief requested is 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.

Applicants agree that any Order of the Commission granting the requested ETF Relief will be subject to the following conditions:

1. As long as a Fund operates in reliance on the requested order, Shares of the Fund will be listed on an Exchange.

2. The website for the Funds, which will be publicly accessible at no charge, will contain, on a per Share basis for each Fund, the prior Business Day’s Intra-Day NAV and End of Day NAV and Closing Price or

Bid/Ask Price of the Shares, a calculation of the premium or discount of the Closing Price or Bid/Ask Price against such End of Day NAV, and any other information regarding premiums and discounts as may be required for other ETFs under rule 6c-11 under the Act, as amended. The website will also disclose any information regarding the bid-ask spread for each Fund as may be required for other ETFs under rule 6c-11 under the Act, as amended.

3. Each Fund will include the Legend in a prominent location on the outside cover page of its prospectus, as well as on its website and any marketing materials.

4. On each Business Day, before the commencement of trading of Shares, each Fund will publish on its website the Substitute Basket and Basket Overlap for that day.

5. No Adviser or Subadviser, directly or indirectly, will cause any Authorized Participant (or any investor on whose behalf an Authorized Participant may transact with the Fund) to acquire any Deposit Instrument for a 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 ETFs that disclose a proxy portfolio on each Business Day, without fully disclosing the ETF’s entire portfolio at the same time.

7. Each Fund will provide Commission staff with periodic reports (for which confidential treatment may be requested) containing such information as the Commission staff may request.

8. Each Fund and each person acting on behalf of a Fund⁵⁵ will comply with and agree to be subject to the requirements of Regulation Fair Disclosure as if it applied to them (except that the exemptions provided in Rule 100(b)(2)(iii) therein shall not apply).

9. Each Fund will maintain and preserve, for a period of not less than five years, in an easily accessible place, (i) all written agreements (or copies thereof) between an Authorized Participant and the Fund or one of its service providers that allows the Authorized Participant to place orders for the purchase or redemption of Creation Units; (ii) a copy of the Substitute Basket published on the Fund’s website for each Business Day; and (iii) a list of all creation or redemption baskets exchanged with an Authorized Participant where cash was included in the basket in lieu of some or all of the Substitute Basket securities (except for cash included because the securities are not eligible for trading by the Authorized Participant or the investor on whose behalf the Authorized Participant is acting), the amount of any such cash in lieu and the identity of the Authorized Participant conducting the transaction.

Pursuant to rule 0-2(f) under the Act, Applicants state that their addresses are as indicated on the first page of this application. Applicants further state that all written or oral communications concerning this application should be directed to the persons listed on the cover.

Applicants file this application in accordance with rule 0-2 under the Act. Applicants have attached the required verifications to the application. In accordance with rule 0-2(c) under the Act, Applicants state that all actions necessary to authorize the execution and filing of this application have been taken, and the persons signing and filing this document are authorized to do so on behalf of the Applicants. In accordance with rule 0-5 under the Act, Applicants request that the Commission issue the requested Order without holding a hearing.

Based on the facts, analysis and conditions in the application, Applicants respectfully request that the Commission issue an Order under sections 6(c) and 17(b) of the Act granting the relief requested by this application.


INVESCO CAPITAL MANAGEMENT LLC

	By:	/s/ Anna Paglia
	Name: Anna Paglia
	Title: Managing Director, Chief Executive Officer and Principal Executive Officer

INVESCO DISTRIBUTORS, INC.

	By:	/s/ Jeffrey H. Kupor
	Name: Jeffrey H. Kupor
	Title: Secretary

INVESCO ACTIVELY MANAGED EXCHANGE-TRADED FUND TRUST

	By:	/s/ Anna Paglia
	Name: Anna Paglia
	Title: President and Principal Executive Officer

In accordance with rule 0-2(d) under the Act, the undersigned, being duly sworn, deposes and says that she has duly executed the attached Application for an order for, and on behalf of, Invesco Capital Management LLC; that she is the Managing Director, Chief Executive Office and Principal Executive Officer of such company; and that all actions taken by the directors or other persons necessary to authorize deponent to execute and file such instrument this 4th day of November 2020, have been taken. Deponent further says that she is familiar with such instrument, and the contents thereof, and that the facts therein set forth are true to the best of her knowledge, information and belief.


By:		/s/ Anna Paglia
Name: Anna Paglia
Title: Managing Director, Chief Executive Officer and Principal Executive Officer

In accordance with rule 0-2(d) under the Act, the undersigned, being duly sworn, deposes and says that he has duly executed the attached Application for an order for, and on behalf of, Invesco Distributors, Inc.; that he is the Secretary of such company; and that all actions taken by the directors or other persons necessary to authorize deponent to execute and file such instrument this 4th day of November 2020, have been taken. Deponent further says that he is familiar with such instrument, and the contents thereof, and that the facts therein set forth are true to the best of his knowledge, information and belief.


By:		/s/ Jeffrey H. Kupor
Name: Jeffrey H. Kupor
Title: Secretary

In accordance with rule 0-2(d) under the Act, the undersigned, being duly sworn, deposes and says that she has duly executed the attached Application for an order for, and on behalf of, Invesco Actively Managed Exchange-Traded Fund Trust that she is the President and Principal Executive Officer of such company; and that all actions taken by the directors or other persons necessary to authorize deponent to execute and file such instrument this 4th day of November 2020, have been taken. Deponent further says that she is familiar with such instrument, and the contents thereof, and that the facts therein set forth are true to the best of her knowledge, information and belief.


By:		/s/ Anna Paglia
Name: Anna Paglia
Title: President and Principal Executive Officer

I, Adam Henkel, do hereby certify that I am the Secretary of Invesco Actively Managed Exchange-Traded Fund Trust. I hereby certify that the following resolutions were duly adopted by the Board of Trustees of Invesco Actively Managed Exchange-Traded Fund Trust on December 12, 2019, that such resolutions are in full force and effect as of the date hereof and that I am fully authorized to so certify.

RESOLVED, that the execution and filing of an application for exemptive relief (the “Application”) by the officers of Invesco Actively Managed Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Commodity Fund Trust (together, the “Trusts”) be, and it hereby is ratified and approved, and the officers of the Trusts are each hereby authorized to execute and file amendments to the Application on behalf of the Trusts, and to take any and all such other actions, as they may deem necessary, desirable or appropriate to in connection with or related to the filing of the application for exemptive relief; and it is further

RESOLVED, that any and all actions previously taken by any officer, representative or agent of the Trusts, by or on behalf of the Trusts, in connection with or related to the matters set forth in the foregoing resolutions, be, and each of them hereby is, ratified, adopted and confirmed.

The investment objective of the Invesco US Equity ETF will be to provide long-term capital growth. Income is a secondary objective. The Fund will primarily invest in the common stocks of large and medium-sized companies that have the potential for above-average earnings growth and are well established in their respective industries.


I.	SUMMARY OF REQUEST	1

II.	APPLICANTS	3

III.	APPLICANTS’ PROPOSAL FOR THE FUNDS	4

IV.	REQUEST FOR ETF RELIEF	16

V.	CONDITIONS TO THE APPLICATION	23

VI.	NAMES AND ADDRESSES	24

VII.	PROCEDURAL MATTERS, CONCLUSION AND SIGNATURES	25