Managed Portfolio Series

04/23/2026 | Press release | Distributed by Public on 04/23/2026 11:16

Exemption Application under Investment Company Act (Form 40-APP/A)

File No. 812-15967
As filed with the Securities and Exchange Commission on April 23, 2026
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDED AND RESTATED APPLICATION PURSUANT TO SECTION 6(c) OF THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED ("ACT"), FOR AN ORDER OF
EXEMPTION FROM SECTIONS 2(a)(32), 5(a)(1), 18(f)(1), 18(i), 22(d) AND 22(e) OF THE ACT
AND RULE 22c-1 UNDER THE ACT AND PURSUANT TO SECTIONS 6(c) AND 17(b) OF THE
ACT FOR AN ORDER OF EXEMPTION FROM SECTIONS 17(a)(1) AND 17(a)(2) OF THE
ACT
KENSINGTON ASSET MANAGEMENT, LLC
901 S Mopac Expressway
Building II Suite 225
Austin, TX 78746
MANAGED PORTFOLIO SERIES
615 East Michigan Street
Milwaukee, WI 53202
Please direct all communications regarding this Application to:
William Bower
Kensington Asset Management, LLC
901 S Mopac Expressway
Building II Suite 225
Austin, TX 78746
With copies to:
Christopher D. Menconi
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Ave, NW
Washington, DC 20004-2541
(202) 373-6173
This Application (including Exhibits) contains 32 pages.
TABLE OF CONTENTS
Page
I.INTRODUCTION
1
II.THE APPLICANTS
4
a.The Company
4
b.Kensington
4
III.BACKGROUND
5
IV.IN SUPPORT OF THE APPLICATION
5
a.Benefits of an ETF Class for Mutual Fund Class Shareholders
8
b.Benefits of a Mutual Fund Class for ETF Class Shareholders
9
c.Adopting Release Concerns about ETF Classes
11
V.REQUEST FOR EXEMPTIVE RELIEF
13
VI.LEGAL ANALYSIS AND DISCUSSION
13
a.ETF Operational Relief
13
1.Sections 2(a)(32) and 5(a)(1) of the Act
14
2.Section 22(d) of the Act and Rule 22c-1 under the Act
14
3.Section 22(e) of the Act
15
4.Sections 17(a)(1) and 17(a)(2) of the Act
15
b.ETF Class Relief
15
1.Section 18 of the Act and Rule 18f-3 under the Act
15
2.Addressing Policy Concerns under Section 18 and Rule 18f-3
17
c.Precedent
24
VII.CONDITIONS
24
VIII.PROCEDURAL MATTERS
25
IX.CONCLUSION
26
EXHIBITS TO APPLICATION
27
Exhibit A-1: Authorization Managed Portfolio Series
28
Exhibit A-2: Authorization Kensington Asset Management, LLC
30
Exhibit B-1: Verification Managed Portfolio Series
31
Exhibit B-2: Verification Kensington Asset Management, LLC
32
1 All entities that currently intend to rely on the Order are named as Applicants. Any other entity, existing now or
in the future, that relies on the Order in the future will comply with the terms and conditions in the Application.
2 The term "Advisor" includes (i) Kensington, and (ii) any entity controlling, controlled by or under common
control with, Kensington or its successors. For the purposes of the requested order, "successor" is limited to an
entity resulting from a reorganization into another jurisdiction or a change in the type of business organization.
3
UNITED STATES OF AMERICA
BEFORE THE
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
In the Matter of:
KENSINGTON ASSET MANAGEMENT, LLC
MANAGED PORTFOLIO SERIES
901 S Mopac Expressway
Building II Suite 225
Austin, TX 78746
Investment Company Act of 1940
File No. 812-15967
AMENDED AND RESTATED
APPLICATION PURSUANT TO
SECTION 6(c) OF THE INVESTMENT
COMPANY ACT OF 1940, AS
AMENDED ("ACT"), FOR AN ORDER
OF EXEMPTION FROM SECTIONS
2(a)(32), 5(a)(1), 18(f)(1), 18(i), 22(d)
AND 22(e) OF THE ACT AND RULE
22c-1 UNDER THE ACT AND
PURSUANT TO SECTIONS 6(c) AND
17(b) OF THE ACT FOR AN ORDER
OF EXEMPTION FROM SECTIONS
17(a)(1) AND 17(a)(2) OF THE ACT
I.INTRODUCTION
Managed Portfolio Series (the "Company") and Kensington Asset Management, LLC
("Kensington" or "Advisor") (the Company and Kensington together are the "Applicants")
hereby file this application, as amended (the "Application"), for an order ("Order") of the
Securities and Exchange Commission (the "Commission") under Section 6(c) of the Investment
Company Act of 1940, as amended (the "Act"), for an exemption from Sections 2(a)(32),
5(a)(1), 18(f)(1), 18(i), 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.1 Applicants are requesting that the Order apply not only to the Applicants, but also to any
existing and future series of the Company and any other existing or future open-end management
investment companies (or series thereof) registered under the Act that are advised by the
Advisor2 (each a "Fund," and together, the "Funds").
Applicants request an Order that would permit a Fund to offer one class of exchange-
traded shares that operates as an exchange-traded fund (an "ETF Class," and such shares, "ETF
Shares") and one or more classes of shares that are not exchange-traded (each such class, a
"Mutual Fund Class," and such shares, "Mutual Fund Shares," and each such Fund, a "Multi-
Class ETF Fund"). The Order would provide Funds with two broad categories of relief: 1) the
relief necessary to permit or continue standard exchange-traded fund ("ETF") operations
3 As discussed in more detail below, a Multi-Class ETF Fund is not able to operate in reliance on Rule 6c-11.
4 A Multi-Class ETF Fund's Mutual Fund Shares will not be listed on any securities exchange, and the Multi-
Class ETF Funds do not expect there to be, nor will the Funds permit or facilitate, a secondary market for, peer-
to-peer trading of, or quotation on any quotation medium of, a Multi-Class ETF Fund's shares (other than as
described herein).
4
consistent with Rule 6c-11 under the Act ("ETF Operational Relief") and 2) the relief
necessary for a Fund to offer an ETF Class and one or more Mutual Fund Classes ("ETF Class
Relief").
Pursuant to the ETF Operational Relief, the Order would permit (i) ETF Shares of the
Multi-Class ETF Funds to be listed on a national securities exchange ("Exchange"), as defined
in Rule 6c-11, and traded at market-determined prices; (ii) ETF Shares to be issued to and
redeemed by "Authorized Participants" in "Creation Units" only (each term as defined in
Rule 6c-11), except with respect to the Exchange Privilege (as defined below) and as permitted
by Rule 6c-11(a)(2); (iii) certain affiliated persons of a Multi-Class ETF Fund to purchase
Creation Units with (or redeem Creation Units for) "Baskets," as defined in Rule 6c-11, and (iv)
certain Multi-Class ETF Funds that include foreign investments in their Baskets to pay
redemption proceeds more than seven calendar days after ETF Shares are tendered for
redemption. As described below, the ETF Operational Relief would provide the Multi-Class
ETF Funds with the same relief as contained in Rule 6c-11, subject to the same conditions and
requirements contained in Rule 6c-11 except as specifically described herein.3
Pursuant to the ETF Class Relief, the Order would permit a Multi-Class ETF Fund to
offer one ETF Class and one or more Mutual Fund Classes.4 This Multi-Class ETF Fund
structure would comply with Rule 18f-3 under the Act, except for certain ways in which an ETF
Class and Mutual Fund Class(es) would have different rights and obligations, as described
below.
II.THE APPLICANTS
a.The Company
The Company is organized as a Delaware statutory trust. The Company is registered
with the Commission as an open-end management investment company under the Act. The
offerings of the shares of the Company also are registered pursuant to the Securities Act of
1933, as amended ("Securities Act"). The Funds that initially would rely on the relief are
separate investment portfolios of the Company and pursue distinct investment objectives and
strategies.
b.Kensington
Kensington is a Texas limited liability corporation and is registered with the Commission
as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"). Any other Advisor also will be registered with the Commission as an investment adviser
under the Advisers Act. The Advisor serves or will serve as the investment adviser to each Fund
pursuant to an investment management agreement with the relevant Company.
5 Vanguard Index Funds, Investment Company Act Release Nos. 24680 (Oct. 6, 2000) (notice) and 24789 (Dec.
12, 2000) (order); The Vanguard Group, Inc., Investment Company Act Release Nos. 26282 (Dec. 2, 2003)
(notice) and 26317 (Dec. 30, 2003) (order); Vanguard International Equity Index Funds, Investment Company
Act Release Nos. 26246 (Nov. 3, 2003) (notice) and 26281 (Dec. 1, 2003) (order); and Vanguard Bond Index
Funds, Investment Company Act Release Nos. 27750 (Mar. 9, 2007) (notice) and 27773 (April 2, 2007) (order).
The Commission also recently issued additional orders granting the requested relief. See e.g., DFA Investment
Dimensions Group Inc., Investment Company Act Release Nos. 35770 (Sept. 29, 2025) (notice) and 35786
(Nov. 17, 2025) (order) ("Dimensional Order").
6 Exchange-Traded Funds, Investment Company Act Release No. 33646 (Sept. 25, 2019) ("Adopting Release").
7 Adopting Release at 122-123 (noting that "costs can include brokerage and other costs associated with buying
and selling portfolio securities in response to mutual fund share class cash inflows and outflows, cash drag
associated with holding the cash necessary to satisfy mutual fund share class redemptions, and distributable
capital gains associated with portfolio transactions.").
8 Adopting Release at 124.
5
III.BACKGROUND
The Commission granted a small number of exemptive orders between 2000 and 2007
permitting certain existing funds operating as mutual funds to offer a class of exchange-traded
shares.5 In 2019, the Commission adopted Rule 6c-11 under the Act to provide the exemptive
relief necessary under the Act to permit ETF operations.6 However, the Commission determined
not to provide the exemptive relief necessary to allow for ETF classes as part of Rule 6c-11. The
Adopting Release explains that ETF class relief raises policy considerations that are different
from those that the Commission intended to address in Rule 6c-11. The Adopting Release
specifically notes that an ETF class that transacts with Authorized Participants on an in-kind
basis and a mutual fund class that transacts with shareholders on a cash basis may give rise to
differing costs to the portfolio. As a result, certain costs may result from transactions through
one class, but all shareholders generally would bear the costs.7
The Commission concluded that share class ETFs should request relief through the
exemptive applications process so that the Commission may assess all relevant policy
considerations in the context of the facts and circumstances of particular applicants.8
IV.IN SUPPORT OF THE APPLICATION
Applicants are filing the Application because they believe that the ability of a Fund to
offer both Mutual Fund Shares and ETF Shares could be beneficial to the Fund and to
shareholders of each type of class, as discussed below. Applicants believe that the multi-class
structure will allow investors to choose the manner in which they wish to hold interests in a
Multi-Class ETF Fund based on the share class characteristics that are most important to the
investor.
Initial Evaluation and Approval
Each Multi-Class ETF Fund will operate pursuant to a written plan required by Rule
18f-3(d) that addresses the Mutual Fund Class(es) and the ETF Class (the "multiple class
plan"). Before the first issuance of a share of any class in reliance on the Order, and before any
material amendment of the multiple class plan, the board of directors of the Fund ("Board"),
including the directors who are not interested persons of the Fund under Section 2(a)(19) of the
9 If a Fund retains or has retained an investment sub-adviser, the Fund's primary Advisor will be responsible for
complying with the conditions.
10 The Board's evaluation of the Multi-Class ETF Fund structure under the terms and conditions of this
Application does not impact the Board's evaluation of a multi-class fund that is not a Multi-Class ETF Fund and
that is operating under Rule 18f-3.
11 The Advisor may include any other information it deems necessary or helpful for the Board.
12 Information that is "reasonably expected" or "reasonably estimated" throughout this application may be based
on reasonable assumptions and good faith estimates by the Advisor. This information will be based on historical
data for existing Funds, if applicable.
13 This may include the potential for higher cross-subsidization between the ETF Class and the Mutual Fund
Class(es) when transitioning an existing fund to a Multi-Class ETF Fund structure as compared to transitioning
to a multi-class mutual fund structure under Rule 18f-3.
14 Appropriateness may depend on many factors, including, but not limited to: (i) the impact of daily disclosure of
portfolio holdings; and (ii) any anticipated capacity or other constraints. See Adopting Release at 58-59
(discussing the ability of an ETF to suspend the issuance of Creation Units only for a limited time and only due
to extraordinary circumstances).
6
Act ("Independent Directors"), will find that the multiple class plan is in the best interests of
each Mutual Fund Class and the ETF Class individually and of the Multi-Class ETF Fund as a
whole. As required by Rule 18f-3, before any Board vote on a multiple class plan including an
ETF Class, the directors will request and evaluate, and any agreement relating to the class
arrangement will require the Advisor to furnish, such information as may be reasonably
necessary to evaluate the multiple class plan. To assist in the Board's finding, the Advisor9 shall
prepare a written report pertaining to the Multi-Class ETF Fund ("Initial Advisor Report").10
The Initial Advisor Report shall contain the following information11:
1.a discussion of the reasonably expected12 benefits and costs to each class individually and
the Multi-Class ETF Fund as a whole, including, as applicable:
a.the sources of potential cost savings and other benefits of operating a Multi-Class
ETF Fund structure;
b.a discussion of how each of the ETF Class and Mutual Fund Class(es) will be
affected by reasonably expected (i) cash flows and costs associated with portfolio
transactions, (ii) cash levels, (iii) distributable capital gains and (iv) (for existing
Funds only) realization, and the extent thereof, of any unrealized capital gains/
losses or carry over capital losses;
2.a discussion of how the Advisor intends to manage the reasonably expected costs
associated with the transition to a Multi-Class ETF Fund,13 as applicable;
3.a discussion of the appropriateness of the Fund's investment strategy for the Multi-Class
ETF Fund structure14; and
4.a discussion of any other potential material conflicts of interest, including any other
sources of potential cross-subsidization, identified by the Advisor associated with
operating a Multi-Class ETF Fund.
15 The Advisor may recommend establishing additional thresholds designed to identify other conflicts of interest
between the Mutual Fund Class(es) and the ETF Class.
16 This would include with respect to cash drag from holding cash to meet Mutual Fund Class redemption
requests, as well as transaction costs and realized capital gains or other tax consequences due to such requests.
17 For example, historical data relating to cash levels, costs associated with portfolio transactions, and distributable
capital gains.
18 The Advisor may fulfill these Board notification requirements by notifying a designated committee, or a
designated member, of the Board.
19 Examples of remedial actions include: (i) adjustments to the use of in-kind transactions or trade execution
strategy to manage costs associated with portfolio transactions; (ii) greater use of credit lines or other sources of
cash to reduce uninvested cash; (iii) enhancements to tax lot management and harvesting of capital losses to
reduce capital gains distributions; (iv) adjustments to transaction fees, purchase fees and/or redemption fees; (v)
enhanced disclosure to investors; and (vi) discontinuation of a class, or conversion of an entire class of a Multi-
Class ETF Fund into another class of that Multi-Class ETF Fund as otherwise permitted under the Act. The
range of remedial measures may vary depending on the particular facts and circumstances relating to a Fund's
operations. The Board may consider additional corrective measures if deemed necessary.
7
Ongoing Monitoring Process
At the time of the Board's initial approval of the multiple class plan, the Advisor will
recommend to the Board for approval a framework for ongoing monitoring of certain numerical
thresholds ("Ongoing Monitoring Process"), which is intended to assist the Board with its
ongoing oversight of the Multi-Class ETF Fund structure. The Ongoing Monitoring Process will
consist of the following:
1.Monitoring Thresholds. The Advisor will recommend to the Board approval of
certain numeric thresholds, the method for calculating such thresholds, and the time periods over
which to measure the Multi-Class ETF Fund's performance against such numerical thresholds
with respect to the Multi-Class ETF Fund's: (i) costs associated with portfolio transactions, (ii)
cash levels and (iii) capital gains distributions.15 The numerical threshold levels (including any
changes thereto), the method of calculating the thresholds, and the time periods over which to
measure the Multi-Class ETF Fund's performance against such numerical thresholds will be
reasonably designed to assist in the identification of material conflicts of interest between the
Mutual Fund Class(es) and the ETF Class, including disparities in costs between the Mutual
Fund Class(es), on the one hand, and ETF Class, on the other.16 Any recommended changes to
the numerical thresholds, or changes to the time periods over which to measure the Multi-Class
ETF Fund's performance against such numerical thresholds will be subject to Board approval. In
making its recommendations to the Board, the Advisor will consider historical data pertaining to
the Multi-Class ETF Fund or other existing Funds that the Advisor advises, to the extent such
information is available and the Advisor believes such data is relevant.17
2.Board Notification.18 If a Multi-Class ETF Fund exceeds an established numerical
threshold, the Advisor will notify the Board no later than 30 days following the end of the
applicable time period in which the threshold was exceeded. The Advisor will provide the Board
with a written explanation of the Advisor's assessment of the causes of the Multi-Class ETF
Fund exceeding the threshold(s), and any proposed recommendations for what, if any, remedial
actions the Multi-Class ETF Fund should take.19
20 The Advisor may include any other information it deems necessary or helpful for the Board.
21 For example, this may include consequences on portfolio size, liquidity, liquidity risk management, and
operations of the Multi-Class ETF Fund.
22 Among other things, this may also include a discussion of: the impact of the level of exchanges between the
Mutual Fund Class(es) and the ETF Class; and/or the impact of any transaction fees or similar charges that are
applied in connection with creation and redemption activity (for the ETF Class) or purchase or redemption
activity (for the Mutual Fund Class(es)) and that are designed to reduce the costs associated with that activity
borne by the Multi-Class ETF Fund.
23 The Advisor may include data from years before the prior year if such information is available and the Advisor
or the Board deems such data helpful.
8
Ongoing Board Approval
In addition to the initial evaluation and approval of the multiple class plan, the Board also
will periodically, but in no case less frequently than annually, find that the multiple class plan
continues to be in the best interests of each Mutual Fund Class and the ETF Class individually
and of the Multi-Class ETF Fund as a whole. To inform this finding, the Advisor will provide a
written report to the Board pertaining to the Multi-Class ETF Fund ("Ongoing Advisor Report").
The Ongoing Advisor Report shall contain the following information20:
1.a discussion of any observed benefits or cost savings to the Multi-Class ETF Fund
resulting from the Multi-Class ETF Fund structure;
2.a discussion of any observed material conflicts of interest between the ETF Class and the
Mutual Fund Class(es), or observed material negative consequences21 to the ETF Class or
the Mutual Fund Class(es) resulting from the Multi-Class ETF Fund structure, including
the following22:
a.a discussion of how creation and redemption activity in the ETF Class has
affected the Mutual Fund Class(es) and how shareholder purchase and redemption
activity in the Mutual Fund Class(es) has affected the ETF Class during the prior
year,23 with respect to: (i) cash levels; (ii) short- and long-term capital gains
distributions; and (iii) costs associated with portfolio transactions;
b.any performance difference between the Mutual Fund Class(es) and the ETF
Class due to the difference in dividend payment dates described below; and
3.any other information that the Board requests.
a.Benefits of an ETF Class for Mutual Fund Class Shareholders
Among other benefits, Applicants believe that an ETF Class would offer the following
significant benefits to shareholders in a Fund's Mutual Fund Classes.
First, in-kind transactions through the ETF Class may contribute to lower portfolio
transaction costs and greater tax efficiency. In general, in-kind transactions through the ETF
Class in connection with creations and redemptions could allow a Fund to reduce some portfolio
9
management costs. This could be particularly true through the use of the custom basket
flexibility permitted under Rule 6c-11. For example, on days when there may be limited cash
inflows through the Mutual Fund Classes, in-kind transactions through the ETF Class could
allow the Fund to rebalance its portfolio efficiently while keeping cash balances low and without
needing to sell and purchase portfolio securities in the market. In-kind redemptions also could
serve to limit the realization of capital gains and reduce unrealized capital gains within the
portfolio and improve the tax profile of the Fund. This could help shareholders defer capital
gains to the extent that portfolio adjustments and cash redemptions require the sale of portfolio
securities.
As described in greater detail below, Applicants also believe that an exchange feature
could allow mutual fund shareholders to exchange Mutual Fund Shares for ETF Shares without
adverse consequences to the Fund. To the extent that some existing mutual fund shareholders
would prefer to hold ETF Shares, the existence of an ETF Class could allow for those
shareholders to exchange their shares without disrupting the Fund portfolio or their investments.
At the same time, these shareholders could save on transaction costs and potential tax
consequences by exchanging shares into the ETF Class of the same Fund.
In addition, the ETF Class would represent an additional distribution channel for a Fund
that could lead to additional asset growth and economies of scale. ETFs are an increasingly
popular choice for investors and may attract additional investment to a Fund. Greater assets
under management may lead to additional cost efficiencies. An improved tax profile for the
Fund also may assist the competitive positioning of the Fund for attracting prospective
shareholders.
ETF Shares also could allow certain investors to engage in more frequent trading without
disrupting the Fund portfolio. For example, following market declines, to the extent that a
mutual fund shareholder wanted to engage in tax-loss harvesting, the shareholder could exchange
Mutual Fund Shares for ETF Shares and then trade more frequently in the secondary market.
Such secondary market transactions would not disrupt the portfolio of the Fund and would help
long-term investors avoid the adverse consequences of frequent trading and market timing by a
few short-term investors.
b.Benefits of a Mutual Fund Class for ETF Class Shareholders
Among other benefits, Applicants believe that Mutual Fund Classes would offer the
following significant benefits to shareholders in a Fund's ETF Class.
First, investor cash flows through a Mutual Fund Class can be used for efficient portfolio
rebalancing. A Fund's portfolio may contain a large number of portfolio positions where small
adjustments are made on a daily basis. To the extent that cash flows come into a Fund through a
Mutual Fund Class, a portfolio manager may be able to deploy that cash strategically to establish
the desired portfolio exposures. Under these circumstances, cash flows through a Mutual Fund
Class could help facilitate portfolio management to the benefit of all shareholders, including ETF
Class shareholders, particularly if there are no creations through the ETF Class on a given day.
24 Adopting Release at 83.
10
Second, cash flows through a Mutual Fund Class may allow for greater Basket flexibility
for creations and redemptions of ETF Shares, which could promote arbitrage efficiency and
smaller spreads on the trading of ETF Shares in the secondary market. Some Funds may hold a
large number of securities with a wide range of portfolio exposures. If cash flows from a Mutual
Fund Class can be utilized strategically by the portfolio manager to obtain exposure to some
portfolio positions (e.g., small portfolio positions), the portfolio manager could specify a smaller
number of different securities for the Baskets used for creations and redemptions of ETF Class
Shares by Authorized Participants. As recognized in the Adopting Release, if Baskets contain a
smaller number of securities, Authorized Participants may be able to assemble or liquidate such
Baskets with lower transaction costs. Reducing the costs of Authorized Participants to create and
redeem ETF Shares potentially could result in greater arbitrage efficiency and smaller spreads in
connection with the trading of ETF Shares in the secondary market.24
With respect to existing Funds, offering an ETF Class would permit investors that prefer
the ETF distribution channel to gain access to established Fund investment strategies. Many
Funds have a well-established, strong reputation and track record. For those investors who
prefer investing in ETFs and are interested in existing Funds, an ETF Class could be an attractive
investment opportunity. Assets under management and performance track record also can be
important criteria for an ETF to qualify for certain distribution platforms maintained by financial
intermediaries. An ETF Class of an existing Fund could benefit from pre-existing assets and
performance, which could improve the distribution of the ETF Shares to investors.
Applicants also believe that the establishment of Mutual Fund Class(es) as part of an
existing ETF could represent an additional distribution channel for a Fund that could lead to
additional asset growth and economies of scale as it attracts additional investments into the Fund,
which benefits the Fund and all of its shareholders. Retirement, or "401(k)", plans may not offer
ETFs to their plan participants, and so such retirement plan investors often invest in mutual
funds. If the relief sought by this Application were granted, Mutual Fund Shares of a Multi-Class
ETF Fund could be made available to retirement plan participants on retirement plan platforms
that do not currently offer ETFs, which could be beneficial to both ETF Class and Mutual Fund
Class shareholders of the Multi-Class ETF Fund. By having a Mutual Fund Class, a Multi-Class
ETF Fund may benefit from having access to a retirement or "401(k)" distribution channel and
ultimately from greater scale. Such asset growth could make it possible for a Fund's shareholders
to realize the benefits of breakpoints, if any, and for a Fund to spread fixed costs over a larger
asset base, driving economies of scale to the benefit of all shareholders. Similarly, the ability to
add an ETF Class to a Mutual Fund would allow a Fund that already has access to the retirement
distribution channel to attract assets from investors seeking access to the same strategy through
an ETF.
Applicants also believe that the establishment of an ETF Class as part of an existing Fund
could lead to cost efficiencies. In terms of fund expenses, an ETF Class could have initial and
ongoing advantages for its shareholders. As an initial matter, creating an ETF Class of an
25 As noted above, the Initial Advisor Report will address any potential for higher cross-subsidization between
classes at the outset when adding a new type of class to an existing Fund, or launching a new Fund that is a
Multi-Class ETF Fund, as well as possible actions to minimize the impact of any such cross-subsidization.
Possible actions could include having a new class bear its own organizational costs or subjecting such costs to
an expense limitation arrangement with the Advisor.
26 See Exemption for Open-End Management Investment Companies Issuing Multiple Classes of Shares;
Disclosure by Multiple Class and Master-Feeder Funds; Class Voting on Distribution Plans, Investment
Company Act Release No. 20915 (Feb. 23, 1995) (adopting release) ("Fund sponsors assert that multiple classes
may enable funds to attract larger asset bases, permitting them to spread fixed costs over more shares, qualify
for discounts in advisory fees ("breakpoints"), and otherwise experience economies of scale, resulting in lower
fees and expenses. They also state that multiple classes avoid the need to create "clone" funds, which require
duplicative portfolio and fund management expenses. Furthermore, fund sponsors state that a larger asset base
permits greater portfolio liquidity and diversification.")
11
existing Fund should entail lower organizational costs as compared to establishing a new ETF.25
As an ongoing matter, an ETF Class also could have lower expenses as a result of economies of
scale such as breakpoints on service contracts or advisory contracts. These are the same types of
benefits that the Commission originally recognized in adopting Rule 18f-3.26
Tax-free exchanges of shares from the Mutual Fund Class for shares of the ETF Class
also may accelerate the development of an ETF shareholder base. Subsequent secondary market
transactions by the ETF Class shareholders could generate greater trading volume, resulting in
lower trading spreads and/or premiums or discounts in the market prices of the ETF Shares to the
benefit of ETF shareholders.
c.Adopting Release Concerns about ETF Classes
The Adopting Release indicates that share class ETFs raise certain additional policy
considerations. Specifically, the Commission notes that the cash flows associated with one class
or another could impact a fund's portfolio, generating costs that shareholders of all classes would
share.
With respect to the potential consequences of cash flows, the Commission identifies three
categories of costs: 1) brokerage and other costs associated with buying and selling portfolio
securities in response to mutual fund share class inflows and outflows; 2) cash drag associated
with holding the cash necessary to satisfy mutual fund share class redemptions; and 3)
distributable capital gains associated with portfolio transactions. Applicants believe that each of
these issues could be considered by the Advisor and the Board initially and on an ongoing basis
in determining whether a particular Fund should offer or continue to offer both Mutual Fund
Classes and an ETF Class.
As described above, cash inflows also may allow a portfolio manager to make specific
portfolio adjustments that could be more difficult to achieve strictly using Basket transactions
through an ETF Class. At times, an active ETF may not be able to establish desired portfolio
positions purely through in-kind creation and redemption activity, and therefore could incur
portfolio transaction costs if it becomes necessary to sell portfolio securities in order to generate
cash to invest in new positions. Accordingly, the possibility of cash inflows through a Mutual
Fund Class and in-kind transactions through an ETF class is a combination that could allow for
27 Adopting Release at footnote 433.
12
benefits to all Fund shareholders: in-kind creations and redemptions through the ETF Class
could save some portfolio transaction costs, while cash inflows through the Mutual Fund Class
could save transaction costs that the active manager might have incurred if otherwise forced to
liquidate holdings to reposition the portfolio.
Finally, the tax management of a Fund portfolio can have many elements. As a general
matter, in-kind redemptions through the ETF Class could limit the realization of capital gains and
reduce the unrealized capital gains for the portfolio generally, in which case cash redemption
activity through the Mutual Fund Class might not generate capital gains on an ongoing basis for
any of the classes. In addition, a Mutual Fund Class also may have the ability to engage in in-
kind redemptions with large shareholders, which could minimize capital gains. The Mutual Fund
Class may also provide cash inflows that could reduce the need to liquidate holdings to
reposition the portfolio (as described in connection with transaction costs above) and thereby
reduce capital gain realization that may otherwise occur on liquidation of holdings. A portfolio
manager also may engage in careful tax management through portfolio transactions, and could
generate capital losses in connection with some cash redemptions that could offset gains from
other portfolio transactions. Such capital losses could be particularly useful in connection with
actively managed investment companies, where the realization of some capital gains can be in
connection with portfolio management activity rather than as a result of cash redemptions. Cash
redemptions through a Mutual Fund Class therefore could allow for some tax loss harvesting and
potentially generate tax offsets for capital gains that in-kind redemptions through an ETF Class
would not.
In addition to the specific issues that the Commission raised in the Adopting Release
relating to cash flows through a Mutual Fund Class, the Commission also noted in the Adopting
Release that unlike the ETFs covered by Rule 6c-11, existing share class ETFs do not provide
daily portfolio transparency.27 Applicants note that a lack of daily portfolio transparency is not a
necessary characteristic of investment companies that offer exchange-traded classes, and as such,
Applicants will disclose each Fund's complete portfolio holdings on a daily basis in accordance
with the requirements of Rule 6c-11. The Advisor believes that a Mutual Fund that currently
discloses portfolio holdings on a delayed basis could offer an ETF Class and begin providing full
daily portfolio transparency without any anticipated significant adverse consequences to
shareholders.
As reflected above, the Advisor and the Board will be attentive to the Commission's
concerns in the Adopting Release, and Applicants have proposed terms and conditions to the
relief that will ensure that the Advisor and the Board focus on these issues on an initial and
ongoing basis. These terms and conditions include a framework for initial reporting, ongoing
monitoring, and ongoing reporting and Board oversight as described below. Applicants also will
take appropriate Disclosure Steps (defined below) to ensure that investors clearly understand the
differences between Mutual Fund Shares and ETF Shares. Accordingly, investors will be able to
make an informed investment decision when investing in a Fund with Mutual Fund Classes and
an ETF Class.
28 Applicants note that the requirements of Rule 6c-11 include the condition that the portfolio holdings that form
the basis for the ETF's next calculation of current net asset value ("NAV") per share must be the ETF's
portfolio holdings as of the close of business on the prior business day. As a result, a Multi-Class ETF Fund
would not include changes in portfolio holdings in the next calculation of current NAV on a T+0 basis.
13
V.REQUEST FOR EXEMPTIVE RELIEF
Section 6(c) 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 provisions of
the Act, or any rule thereunder, if such relief 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 provides that the Commission will grant an exemption from the
provisions of Section 17(a) of the Act 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.
Applicants believe that the requested relief described in this Application meets these
standards.
VI.LEGAL ANALYSIS AND DISCUSSION
a.ETF Operational Relief
With respect to the ETF Operational Relief, Applicants seek the same exemptive relief as
provided by Rule 6c-11, subject to the same requirements contained in Rule 6c-11, except as
specifically described herein.28 Applicants believe that they are unable to rely on Rule 6c-11
because "exchange-traded fund" is defined, in part, to mean a registered open-end management
investment company "whose shares are listed on an Exchange and traded at market-determined
prices." Because this definition suggests that all of the investment company's shares must be
listed on an Exchange, a Multi-Class ETF Fund with Mutual Fund Shares in addition to ETF
Shares would not meet this definition.
In addition, the Multi-Class ETF Funds may offer an "Exchange Privilege" that would
permit shareholders in a Mutual Fund Class to exchange Mutual Fund Shares for ETF Shares.
The Exchange Privilege would not permit shareholders of ETF Shares to exchange such shares
for Mutual Fund Shares, except in situations where the ETF Class is terminated or where the
Multi-Class ETF Fund merges into a Fund with no ETF Class. Any exchange pursuant to the
Exchange Privilege will conform to the requirements of Section 11(a) of the Act. In particular,
any exchange would occur at the relative NAVs of the respective share classes. To the extent a
Multi-Class ETF Fund imposes any administrative fee on the exchange, the fee will be applied in
compliance with Rule 11a-3 under the Act. A Multi-Class ETF Fund will impose restrictions on
exchanges around the dates of dividend payments if necessary to prevent a shareholder from
collecting a dividend from both the Mutual Fund Class and the ETF Class as a result of an
29 In light of the relief requested from Section 2(a)(32) and the fact that Mutual Fund Shares are individually
redeemable, Applicants note that Multi-Class ETF Funds would meet the definition of an "open-end company"
contained in Section 5(a)(1) of the Act. However, out of an abundance of caution, Applicants are seeking relief
from Section 5(a)(1) to clarify that a Fund with an ETF Class is an open-end investment company.
14
exchange of shares. ETF Shares issued to a shareholder as part of the Exchange Privilege will be
newly issued ETF Shares, and not ETF Shares purchased in the secondary market. The issuance
of ETF Shares in connection with the Exchange Privilege will comply with the Securities Act.
Because the definition of "exchange-traded fund" in Rule 6c-11 requires that the ETF "issues
(and redeems) creation units to (and from) authorized participants in exchange for a basket and a
cash balancing amount if any," a Multi-Class ETF Fund that permits a shareholder of Mutual
Fund Shares to acquire individual ETF Shares directly from the Multi-Class ETF Fund through
the Exchange Privilege may not satisfy this definition. Although Applicants otherwise would
comply with Rule 6c-11 as required by condition 1 below, because the Multi-Class ETF Funds
cannot rely on Rule 6c-11, Applicants request the ETF Operational Relief described below.
1.Sections 2(a)(32) and 5(a)(1) of the Act
Section 5(a)(1) of the Act defines an "open-end company" as a management investment
company that is offering for sale or has outstanding any redeemable security of which it is the
issuer. Section 2(a)(32) of the Act defines a redeemable security as any security, other than short-
term paper, under the terms of which the holder, upon its presentation to the issuer, is entitled to
receive approximately his proportionate share of the issuer's current net assets, or the cash
equivalent.
Because ETF shares are not individually redeemable, a possible question arises as to
whether the definitional requirements of a "redeemable security" or an "open-end company"
under the Act are met. Rule 6c-11(b)(1) resolves this issue for exchange-traded funds relying on
Rule 6c-11 by specifically providing that an exchange-traded fund share is considered a
redeemable security within the meaning of Section 2(a)(32). Because the operations of an ETF
Class would adhere to all of the requirements of Rule 6c-11, except that, as described in Section
VI.a. above, a Multi-Class ETF Fund will list only one class of its shares on an Exchange and
also may offer an Exchange Privilege, Applicants request an Order under Section 6(c) granting
an exemption from Section 2(a)(32) so that ETF Shares also are considered redeemable securities
and from Section 5(a)(1) to permit a Multi-Class ETF Fund to register or remain registered as an
open-end management investment company and redeem ETF Shares in Creation Units only.29
2.Section 22(d) of the Act and Rule 22c-1 under the Act
Section 22(d) of the Act, among other things, prohibits investment companies, their
principal underwriters, and dealers from selling a redeemable security to the public 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.
Because investors may purchase and sell individual ETF shares from and to dealers on
the secondary market at market-determined prices (i.e., at prices other than those described in the
15
prospectus or based on NAV), Rule 6c-11 provides exemptions from these provisions. As noted,
the operations of an ETF Class, including the ways in which the ETF Shares trade at market-
determined prices, would be the same as for ETFs relying on Rule 6c-11. Accordingly,
Applicants seek the same relief pursuant to Section 6(c) as provided by Rule 6c-11.
3.Section 22(e) of the Act
Section 22(e) generally prohibits a registered open-end management investment company
from postponing the date of satisfaction of redemption requests for more than seven days after
the tender of a security for redemption.
Rule 6c-11 provides an exemption from Section 22(e) to permit an ETF to delay
satisfaction of a redemption request for more than seven days if a local market holiday, or series
of consecutive holidays, or the extended delivery cycles for transferring foreign investments to
redeeming Authorized Participants, or the combination thereof, prevents timely delivery of the
foreign investment included in the ETF's Basket. Pursuant to Section 6(c), Applicants seek the
same relief for an ETF Class, subject to the requirements of Rule 6c-11.
4.Sections 17(a)(1) and 17(a)(2) of the Act
Section 17(a) of the Act generally prohibits an affiliated person of a registered investment
company, or an affiliated person of such person, from knowingly selling any security or other
property to or purchasing any security or other property from the company.
Rule 6c-11 provides an exemption from these provisions to permit purchases and
redemptions of Creation Units through Basket transactions between exchange-traded funds and
certain types of affiliated persons as described in Rule 6c-11. Applicants seek an exemption
from Sections 17(a)(1) and 17(a)(2) of the Act pursuant to Sections 6(c) and 17(b) of the Act to
permit the Multi-Class ETF Funds to engage in the same types of Basket transactions through the
ETF Class, subject to the requirements of Rule 6c-11.
b.ETF Class Relief
In addition to the ETF Operational Relief that parallels the exemptive relief provided by
Rule 6c-11, Applicants request an order under Section 6(c) for relief from Sections 18(f)(1) and
18(i) of the Act in order for a Fund to offer an ETF Class and one or more Mutual Fund Classes.
1.Section 18 of the Act and Rule 18f-3 under the Act
Section 18(f)(1) of the Act provides that "it shall be unlawful for any registered open-end
investment company to issue any class of senior security or to sell any senior security of which it
is the issuer" with exceptions not here relevant. The term "senior security" is defined in Section
18(g) to mean "any stock of a class having priority over any other class as to distribution of
assets or payment of dividends," Section 18(i) provides that every share of stock issued by an
30 See Exemption for Open-End Management Investment Companies Issuing Multiple Classes of Shares;
Disclosure by Multiple Class and Master-Feeder Funds, Investment Company Act Release No. 19955 (Dec. 13,
1993) (proposing release) (citing Investment Trusts and Investment Companies: Hearings on S.3580 Before a
Subcomm. of the Senate Comm. on Banking and Currency, 76th Cong., 3d Sess. 265-75, 1025-37 (1940)).
31 See supra footnote 26.
16
open-end investment company "shall be a voting stock and have equal voting rights with every
other outstanding voting stock."
Section 18(f)(1) was enacted to protect investors from abuses associated with complex
investment company capital structures, including excessive leverage, conflicts of interest among
classes, and investor confusion, while Section 18(i) was intended to prevent inequitable and
discriminatory shareholder voting provisions.30 The Commission generally takes the position
that an open-end investment company that issues multiple classes could raise issues under
Sections 18(f)(1) and 18(i) because differences in the rights accorded to, or expenses paid by,
different shareholders of the same investment company may raise senior security issues under
Section 18.
In 1995, the Commission adopted Rule 18f-3, which provides an exemption from
Sections 18(f)(1) and 18(i) for any open-end investment company (or series thereof) with a
multi-class structure, provided that the company complies with the requirements of the rule.31
Although Applicants will comply substantially with the requirements of Rule 18f-3, the Funds
would not be able to comply with the requirement in Rule 18f-3(a)(4) that, aside from the
differences permitted by the rule, the Mutual Fund Classes and the ETF Class will have the same
rights and obligations.
Applicants have identified seven ways in which Mutual Fund Shares and ETF Shares will
have different rights. First, Mutual Fund Shares will be individually redeemable while ETF
Shares generally will be redeemable only in Creation Units. Second, ETF Shares will be tradable
on an Exchange while Mutual Fund Shares will not. Third, any Exchange Privilege generally
will be limited to the Mutual Fund Class (i.e., the Exchange Privilege will not be offered to
holders of ETF Shares of the Multi-Class ETF Fund except in unusual situations as noted above).
Fourth, dividends of Mutual Fund Shares may be automatically reinvested in additional Mutual
Fund Shares issued by a Multi-Class ETF Fund at its NAV, while holders of ETF Shares may
only participate in a dividend reinvestment plan to the extent their broker-dealers make available
the DTC book-entry and/or broker-dealer sponsored dividend reinvestment service. Fifth, the
Mutual Fund Classes and the ETF Class may declare dividends on different days, as described
below. Sixth, it is currently expected that the record date for dividends on Mutual Fund Shares
will be one business day before the ex-dividend date, whereas due to Exchange requirements, the
record date for dividends on ETF Shares is expected to be the ex-dividend date. Seventh, while
all share classes of a Multi-Class ETF Fund will pay dividends on the same schedule (e.g.,
monthly, quarterly, annually), the payment date for the Mutual Fund Shares is expected to be
prior to the payment date for ETF Shares.
32 The dividend rate for ETF Shares will be announced after market close on the ETF Class's declaration date,
which is also the record date for the dividend for Mutual Fund Shares. Therefore, the dividend rate for ETF
Shares will be announced after the deadline for receipt of an order to purchase Mutual Fund Shares to become a
shareholder as of the Mutual Fund Class's record date.
17
2.Addressing Policy Concerns under Section 18 and Rule 18f-3
Applicants do not believe that the differences in class rights noted above implicate
the concerns at which Section 18 is directed - i.e., excessive leverage, conflicts of interest, and
investor confusion, but have proposed certain terms and conditions discussed below to address
possible issues in this regard.
A.Leverage. The issuance of classes of shares with different rights and obligations,
and different dividend declaration and payable dates, does not create any opportunity for
leverage.
B.Conflicts of Interest. Rule 18f-3 contains provisions designed to minimize or
eliminate potential conflicts between classes, such as requiring separate approval on any matter
submitted to shareholders in which the interests of one class differ from the interests of any other
class, and requiring the use of certain formulas for allocating income, gains and losses, and
appreciation and depreciation. Under this framework, multi-class funds have successfully
addressed conflicts of interest between classes and have become one of the prevalent types of
registered investment companies in the asset management industry. The Multi-Class ETF Funds
will comply with these voting and allocation provisions. For the reasons stated below and
considering the representations and conditions discussed elsewhere in the Application,
Applicants believe the requested relief, and the proposed representations and conditions,
sufficiently protect against the potential conflicts of interest that are raised in a Multi-Class ETF
Fund structure when classes have different redemption and trading rights, different timing of
dividend declaration, record, and payment dates, differences in the availability of a dividend
reinvestment plan, and, in some cases, different exchange rights.
(i)Potential conflicts of interest resulting from different classes declaring
dividends on different days and having different record dates for dividends.
For Multi-Class ETF Funds other than Daily/Monthly Declaration Multi-Class ETF
Funds (as defined below), the dividend declaration date for Mutual Fund Shares is expected to be
the ex-dividend date while the declaration date for ETF Shares is expected to be one business
day before the ex-dividend date.32 Applicants expect that the difference in the dates on which
dividends of these Multi-Class ETF Funds are declared for Mutual Fund Shares and ETF Shares
will be due solely to Exchange rules applicable to ETFs, not to the intent of management to
adopt specific measures that could be favorable to one class and prejudicial to another.
Applicants note that there will not be an economic impact on a particular share class as a result
of this difference in dividend declaration dates. The ex-dividend date will be the same for all
classes of these Multi-Class ETF Funds, and these Multi-Class ETF Funds will adjust the NAV
for all classes on the same day as a result of the dividends to be paid.
33 For example, some fixed income mutual funds may declare dividends on a daily basis, while fixed income ETFs
typically declare dividends on monthly basis.
34 If dividends are declared monthly, each day's accrued income would be reflected as an increase in the shares'
net assets and NAV. At the end of the month, on the ex-dividend date, the net assets and NAV per share would
decrease by the amount of the declared dividend. By contrast, if dividends are declared daily, as would be the
case with the Mutual Fund Shares of a Daily/Monthly Declaration Multi-Class ETF Fund, the amount of the
daily income accrual generally would be offset by a corresponding distribution payable liability, except in
unusual circumstances where the daily income accrual may be larger than the daily declared dividend. As a
result, the net effect on the Mutual Fund Shares' net assets and NAV normally would be zero.
35 The Board of a Daily/Monthly Declaration Multi-Class ETF Fund would determine that, after applying the
Asset Adjustment, the annualized rates of return of the ETF Shares and Mutual Fund Shares generally will
differ only by the expense differentials among the classes as required by Rule 18f-3(c)(1)(v) under the Act.
18
Applicants note that it could be possible that certain Multi-Class ETF Funds may wish to
declare dividends on a daily basis for their Mutual Fund Shares and on a monthly basis for their
ETF Shares ("Daily/Monthly Declaration Multi-Class ETF Funds").33 Applicants believe that
this flexibility could be desirable because declaring dividends on a daily basis for an ETF Class
could create daily reporting obligations to the Exchange, which could be impractical. For Daily/
Monthly Declaration Multi-Class ETF Funds, the net assets of the ETF Shares therefore would
reflect the presence of accrued but undistributed income, while the net assets of the Mutual Fund
Shares would not.34 If a Daily/Monthly Declaration Multi-Class ETF Fund were to allocate
income, realized capital gains and losses, and unrealized appreciation and depreciation
(collectively, "Allocable Items") among classes based on relative net assets, any difference in
net assets (i.e., higher net assets attributable to the ETF Class as a result of the accrued but
undistributed income) could result in a disproportionate allocation of Allocable Items to ETF
Shares relative to Mutual Fund Shares of the same Multi-Class ETF Fund.
Applicants believe it is appropriate to propose to address any such potential inequality by
allocating the Allocable Items on the basis of an allocation ratio ("Allocation Ratio") where
class-level net assets would be adjusted to factor out differences potentially introduced by the
application of different dividend declaration policies (the "Asset Adjustment"). Specifically,
the Allocation Ratio for each class would utilize a denominator equal to the Daily/Monthly
Declaration Multi-Class ETF Fund's prior day's net assets reduced by the Daily/Monthly
Declaration Multi-Class ETF Fund's undistributed net income, plus the net share activity at the
fund level recorded on the current day. The numerator of the Allocation Ratio for each class
would be equal to the prior day's net assets attributed to that class reduced by the class's
undistributed net income, plus the net share activity for the class recorded on the current day.
Applicants believe the use of the Asset Adjustment would prevent the daily allocation of
Allocable Items to ETF Shares and Mutual Fund Shares within a Daily/Monthly Declaration
Multi-Class ETF Fund from being affected by the classes' differing dividend declaration dates
and, therefore, that the annualized rates of return of the ETF Shares and Mutual Fund Shares
generally would differ only by the expense differentials among the classes, as required by Rule
18f-3(c)(l)(v) under the Act.35 Applicants anticipate that as a result of the application of the Asset
Adjustment to the Allocation Ratio, there would not be a material economic impact on a
36 Shareholders in the Mutual Fund Class would be entitled to the dividend by virtue of purchasing Mutual Fund
Shares on the day before ex-dividend date and therefore becoming recordholders as of the end of the day before
the ex-dividend date. Shareholders in the ETF Class that purchase ETF Shares on the day before the ex-
dividend date would have their shares settle on T+1 and therefore become recordholders on the ex-dividend date
as required by Exchange rules.
19
particular share class as a result of the difference in dividend declaration dates for the Daily/
Monthly Declaration Multi-Class ETF Funds.
In addition to the differences in dividend declaration dates, the record date for dividend
distributions for Mutual Fund Shares is expected to be one business day before the ex-dividend
date, while the record date for dividend distributions for ETF Shares is expected to be the ex-
dividend date. Applicants expect that the difference in the record dates for Mutual Fund Shares
and ETF Shares will be due solely to Exchange rules applicable to ETFs. Applicants do not
expect this difference in record dates to have any material economic impact on a particular share
class. In the case of Multi-Class ETF Funds that are not Daily/Monthly Declaration Multi-Class
ETF Funds, the difference in record dates does not create an economic difference between
shareholders because all shareholders up to and including shareholders that purchase shares in
either class on the day before the ex-dividend date would be entitled to the dividend.36 In the
case of the Daily/Monthly Declaration Multi-Class ETF Funds, the application of the Asset
Adjustment to the Allocation Ratio as described above also should provide that there will be no
material economic impact due to the differences in record dates between the classes.
(ii)Potential conflicts of interest resulting from different classes paying/
reinvesting dividends on different days.
Although Mutual Fund Shares and ETF Shares may both pay cash dividends, the cash
payment date for Mutual Fund Shares is expected to be one or more business days before the
cash payment date for ETF Shares. To avoid a potential conflict from the situation where the
dividends to be paid to the ETF Class remain invested for the benefit of the entire Multi-Class
ETF Fund, the cash held to pay dividends would be held in a custodial account and would not be
invested outside of participation in cash sweep vehicles (including money market funds),
custodial credit earning programs, or interest-bearing accounts. Applicants anticipate any
earnings on such cash held to be negligible.
With respect to dividend reinvestment, shareholders in the Mutual Fund Class who wish
to reinvest their dividends will be able to do so on the ex-dividend date and, in certain cases, may
be able to reinvest the cash dividend automatically in additional Mutual Fund Shares.
Shareholders in the ETF Class who wish to reinvest their dividends will generally not be able to
reinvest their dividends until several days later, after the cash payments have been received by
the ETF Class shareholders for reinvestment, and may reinvest such amounts automatically in
additional ETF Shares only to the extent the broker-dealer through which an investor buys the
ETF Shares offers an ETF dividend reinvestment program. The delay between the ex-dividend
date and the payment/reinvestment date occurs for all ETFs, whether they are stand-alone ETFs
or part of a multi-class structure, and regardless of whether an ETF shareholder elects to reinvest
dividends.
20
As a result of the difference in when dividends are paid and received for reinvestment,
Mutual Fund Class shareholders who reinvest dividends will be continuously invested, while
ETF Class shareholders who reinvest will be "out of the market" for several days with respect to
the amount of the dividend. This difference will affect the relative performance of the classes
because, during the period when the dividend is out of the market, ETF Class shareholders will
not receive income or experience appreciation or depreciation on the amount of the dividend.
Applicants do not believe that this economic difference will be significant.
Applicants do not believe that this difference between Mutual Fund Classes and ETF
Classes resulting from the different dividend payment schedules is inconsistent with the purposes
underlying Section 18 of the Act for the following reasons:
•As noted above, Applicants do not believe the potential performance difference will
be significant.
•Applicants do not believe that the potential performance difference will consistently
favor one class over the other. Because share prices may move up or down, the
payment delay experienced by ETF Class shareholders may help or hurt investment
performance depending upon market conditions.
•Section 18 does not guarantee equality of performance among different classes of the
same Multi-Class ETF Fund. Indeed, different classes will always have different
performance as a result of the different expense ratios that apply to the classes.
Typically, those performance differences are far greater than the performance
differences that will result from different classes having different dividend payment
dates.
•The use of different dividend payment dates is a necessary consequence of the fact
that ETF Shares are exchange-traded while Mutual Fund Shares are not. The delay
between the ex-dividend date and the payment date is an inherent feature of any ETF
that investors currently must accept in order to obtain the other inherent features of
the exchange-traded structure, such as intra-day trading.
•The delay between the ex-dividend date and the payment date cannot be avoided; it
would exist whether an ETF was structured as a separate share class of a multi-class
fund or as a stand-alone fund.
(iii)Potential inequitable voting power.
As noted, Section 18(i) provides that "every share of stock . . . issued by a registered
management investment company . . . shall be a voting stock and have equal voting rights with
every other outstanding voting stock." Because shareholders of each Multi-Class ETF Fund have
voting rights based on the number of shares owned (including fractional shares) or the dollar
amount of shares owned (including fractional dollar amounts), and because the shareholders in
the Mutual Fund Class may be able to reinvest dividends sooner than shareholders in the ETF
Class, each Mutual Fund Class shareholder could obtain more voting power than an ETF Class
shareholder in the days immediately following an ex-dividend date.
21
In addition, because shareholders of each Daily/Monthly Declaration Multi-Class ETF
Fund may have voting rights based on the NAV of their shares, the accrual of dividends in the
NAV of ETF Shares and not Mutual Fund Shares could have an effect on the voting power of the
respective classes of a Daily/Monthly Declaration Multi-Class ETF Fund. However, Applicants
expect that this effect will be minor because the intra-month difference in NAV of the respective
classes due to the accrual of dividends is not expected to be significant with respect to proxy
voting.
Applicants believe that their proposed treatment of voting rights meets the standards of
Section 18(i) because every share issued by the Multi-Class ETF Funds will have equal voting
rights in that each share will be entitled to one vote per share and a fractional vote per fractional
share or, alternatively, one vote per each dollar of NAV (number of shares owned multiplied by
the NAV per share) and a fractional vote per each fractional dollar amount, in each case as
described in the applicable Fund's organizational documents. While the voting power of a
Mutual Fund Class shareholder arguably could be different due to the ability to reinvest
dividends more quickly or due to the fact that NAV of the Mutual Fund Class for a Daily/
Monthly Declaration Multi-Class ETF Fund would not include accrued dividends, voting power
and voting rights are not necessarily the same thing. Even if one takes the position that the ETF
Class and Mutual Fund Class(es) have different voting rights as a result of their different
dividend policies, Applicants' proposal merits an exemption from Section 18(i) because, given
the immaterial difference in voting power between these classes, it is extremely unlikely that the
outcome of a proxy vote would ever be affected. In addition, Applicants note that proxy votes
are expected to be infrequent, and Applicants will endeavor to establish the date of any proxy
vote at a time when there would be less potential for disparities in voting power between the
classes (e.g., shortly, but not immediately, after ex-dividend date for the ETF Class).
(iv)Cross-Subsidization.
As discussed above in section IV.C. of the Application, the Commission recently has
expressed concern in the context of the Adopting Release that the cash flows associated with
Mutual Fund Classes could impact a Multi-Class ETF Fund's portfolio, generating costs that
shareholders of all classes, including the ETF Class, would share. This potential for "cross-
subsidization" between the classes might be viewed as a potential conflict between the classes,
and Applicants will consider it as such under the monitoring, evaluation, oversight and approval
processes described in the Application. However, Applicants note as an initial matter that an
inherent part of the mutual fund structure is the fact that some investors in the mutual fund will
transact with the mutual fund more frequently than others, which may generate transaction costs
and tax realizations that are experienced by all shareholders, including non-transacting
shareholders. In this regard, the creation of an ETF Class could permit shareholders that wish to
purchase and sell shares on a more frequent basis to do so through secondary market trading of
ETF Shares rather than through purchases and redemptions of Mutual Fund Shares. Because
such secondary market transactions would not impact the portfolio of a Multi-Class ETF Fund,
the existence of the ETF Class could reduce transaction costs and adverse tax consequences for
the Multi-Class ETF Fund as a general matter, a benefit that would be shared by all Multi-Class
ETF Fund shareholders.
37 Adopting Release at 116.
38 Adopting Release at 124.
22
Applicants also note that the sharing of portfolio transaction costs and tax realizations at
the portfolio level is a characteristic of all multi-class funds that operate under Rule 18f-3. For
example, even though different classes may be offered to different types of investors that may
have different levels of transaction activity or different transaction sizes (e.g., institutional
investors, retail investors), Rule 18f-3 does not seek to isolate the portfolio transaction costs or
any tax realizations caused by cash inflows and outflows to the specific class "responsible" for
that transaction activity. Instead of seeking to allocate such costs, Rule 18f-3 requires that the
Board, including a majority of the Independent Directors, determine that the multiple class plan
for the Fund is in the best interests of each class individually and of the Fund as a whole.
Applicants generally propose to take the same approach with respect to a Fund that would
offer Mutual Fund Classes and an ETF Class. However, in light of the Commission concerns,
Applicants propose terms and conditions to the requested relief that will help ensure that the
Advisor and the Board, including the Independent Directors, are keenly focused on these issues
as an initial and ongoing matter. As noted above, Applicants believe that shareholders of both
Mutual Fund Classes and an ETF Class of certain Funds would benefit from the Multi-Class ETF
Fund structure. As addressed in the next section, Applicants also will take steps to inform and
educate investors regarding the characteristics of the Multi-Class ETF Fund structure, including
the potential that transactions through one class could generate portfolio transaction costs and tax
consequences for shareholders in other classes.
C.Investor Confusion. With respect to the issue of investor confusion, Applicants
intend to take numerous steps that Applicants believe will minimize or eliminate any potential
for investor confusion. At the outset, Applicants believe the potential for confusion is limited.
Applicants note that ETFs have been in existence for more than twenty-five years, and some
ETFs are so popular that they consistently are among the highest volume securities on the
Exchange on which they trade. As a general matter, it appears that investors are familiar with the
concept of ETF shares and understand the fundamental differences between them and
conventional mutual fund shares, regardless of whether the ETF shares are issued by ETFs or
through ETF classes. As the Commission noted in the Adopting Release, "ETF investors have
grown familiar with ETFs and the fundamental distinctions between ETFs and mutual funds,"
and the Commission therefore determined that Rule 6c-11 did not need to include special
disclosure requirements to highlight the ways in which mutual funds and ETFs differ.37 Further,
even though Rule 6c-11 does not include exemptive relief to permit ETF Classes, the
Commission did consider the disclosure requirements that apply to ETF Classes at the time of the
rulemaking, and its amendments to Form N-1A regarding ETF trading costs apply equally to
ETFs and ETF Classes.38 Applicants also believe that it is unlikely that any investor acquiring
ETF Shares through the Exchange Privilege, if available, will do so without understanding the
differences between the classes, since an investor would make an exchange only if the investor
wanted to own shares with different characteristics.
Notwithstanding the limited potential for confusion, Applicants will take numerous steps
to ensure that investors clearly understand the structure of a Multi-Class ETF Fund and the
23
differences between Mutual Fund Shares and ETF Shares (collectively, "Disclosure Steps"),
including:
•Different products, different names. All references to the ETF Shares will use a
generic term such as "ETF" in connection with such shares, or a form of trade name,
as determined by the Advisor, indicating that the shares are exchange-traded, rather
than the Fund name.
•Separate prospectuses. There will be separate prospectuses for a Multi-Class ETF
Fund's ETF Shares and Mutual Fund Shares.
•Prominent disclosure that the Multi-Class ETF Fund offers an ETF Class and one or
more Mutual Fund Classes. Each Mutual Fund Class of a Multi-Class ETF Fund will
prominently disclose in its prospectus and on its website that the Multi-Class ETF
Fund offers an ETF Class, and each ETF Class of a Multi-Class ETF Fund will
prominently disclose in its prospectus and on its website that it offers one or more
Mutual Fund Classes.
•Prominent disclosure in the ETF Shares Prospectus. The cover and summary section
of a Multi-Class ETF Fund's ETF Shares prospectus will include disclosure that the
ETF Shares are listed on an Exchange and are not individually redeemable.
•Disclosure about the Exchange Privilege in the Mutual Fund Shares Prospectus. To
the extent Mutual Fund Shares may be converted into ETF Shares as part of an
Exchange Privilege, a Multi-Class ETF Fund's Mutual Fund Shares prospectus will
contain appropriate disclosure about the ETF Shares and the Exchange Privilege.
•No reference to ETF Shares as a mutual fund investment. The ETF Shares will not be
marketed as a mutual fund investment. Marketing materials may refer to ETF Shares
as an interest in an investment company or Multi-Class ETF Fund, but will not make
reference to a "mutual fund" except to compare or contrast the ETF Shares with
Mutual Fund Shares. Where appropriate, there may be express disclosure that ETF
Shares are not a mutual fund product.
•Disclosure regarding dividends. The prospectus for each Multi-Class ETF Fund's
ETF Shares will disclose, to the extent applicable, that shareholders of ETF Shares
will generally receive cash dividend payments later than shareholders of Mutual Fund
Shares and may reinvest such cash automatically in additional ETF Shares only if the
broker through whom the investor purchased shares makes such option available.
Daily/Monthly Declaration Multi-Class ETF Funds also will describe the applicable
dividend declaration dates for the Mutual Fund Class (daily) or the ETF Class
(monthly) in the relevant prospectus for each class.
•Educational material. The Fund will provide plain English disclosure on its website
about ETF Shares and how they differ from Mutual Fund Shares.
•Disclosure of relief and risks. For each Multi-Class ETF Fund, the prospectus(es) for
each of the Mutual Fund Class(es) and the prospectus for the ETF Class will: include
appropriate disclosure in its registration statement regarding the multi-class structure,
39 See supra footnote 5.
24
the key characteristics of, and any risks associated with, the multi-class structure,
including the potential that transactions through one class could generate portfolio
transaction costs and tax consequences for shareholders in other classes; and disclose
the existence, substance and effect of any order granted pursuant to the Application.
Applicants believe that the efforts outlined above will ensure that every interested investor will
understand the differences between Mutual Fund Shares and ETF Shares. Investors therefore
will be able to assess whether they wish to invest in the Multi-Class ETF Fund, and through
which type of class.
c.Precedent
As noted above, the Commission has granted the requested relief on four previous
occasions between 2000 and 2007, and more recently in the Dimensional Order.39 Applicants
seek the same relief as recently granted in the Dimensional Order, subject to the same conditions
that reflect the adoption of Rule 6c-11 and that address the concerns expressed by the
Commission in the Adopting Release relating to ETF Class Relief. Applicants believe that the
Advisor and the Board will be well-positioned to determine whether it is appropriate for a given
Fund to offer both Mutual Fund Classes and an ETF Class and to evaluate this structure on an
initial and ongoing basis, as required by the conditions. In addition, one of the conditions would
require each Multi-Class ETF Fund to make certain specific disclosures designed to help
investors understand the Multi-Class ETF Fund structure and the potential conflicts of interest
that may arise between an ETF Class and Mutual Fund Class(es).
VII.CONDITIONS
Applicants agree that any order of the Commission granting the requested relief will be
subject to the following conditions:
1.A Multi-Class ETF Fund will operate an ETF Class as an "exchange-traded fund" in
compliance with the requirements of Rule 6c-11 under the Act, except that a Multi-Class
ETF Fund will list only one class of its shares on an Exchange and also may offer an
Exchange Privilege, and will comply with the requirements of Form N-1A and reporting
forms such as Form N-CEN applicable to exchange-traded funds that rely on Rule 6c-11.
2.A Multi-Class ETF Fund will comply with Rule 18f-3 under the Act, except to the extent
that the ETF Class and Mutual Fund Class have different rights and obligations as
described in the Application. As required by Rule 18f-3, before the first issuance of ETF
Shares, and before any material amendment of a written plan under Rule 18f-3 to include
an ETF Class, a majority of the directors of a Fund, and a majority of the Independent
Directors, shall find that the plan is in the best interests of each Mutual Fund Class and
the ETF Class individually and of the Multi-Class ETF Fund as a whole.
3.To assist in the initial Board consideration of the appropriateness of operating a Multi-
Class ETF Fund that has both an ETF Class and Mutual Fund Class(es), the Advisor shall
25
prepare and deliver to the Board the Initial Advisor Report as described in the
Application. The Initial Advisor Report will assist the Board in its finding pursuant to
condition 2 and in evaluating the potential for any conflicts between the Mutual Fund
Class(es) and the ETF Class based on current and historical information, as applicable.
4.The Advisor will recommend for the Board's approval the Ongoing Monitoring Process
designed to help determine whether a Multi-Class ETF Fund has encountered any issues
relating to the multi-class structure, including any conflicts between the Mutual Fund
Class(es) and the ETF Class.
5.Each Multi-Class ETF Fund will be subject to an Ongoing Monitoring Process that is
approved by the Board, and the Board of the Multi-Class ETF Fund periodically, but no
less frequently than annually, will evaluate the multiple class plan of the Multi-Class ETF
Fund. A majority of the directors of a Multi-Class ETF Fund, and a majority of the
Independent Directors, shall find that the multiple class plan continues to be in the best
interests of each Mutual Fund Class and the ETF Class individually and of the Multi-
Class ETF Fund as a whole.
6.To inform this periodic evaluation, the Advisor shall prepare and deliver to the Board of
the Multi-Class ETF Fund the Ongoing Advisor Report as described in the Application.
The Board will consider whether the Ongoing Advisor Report suggests any issues
relating to the multi-class structure, including conflicts between the Mutual Fund
Class(es) and the ETF Class, that require additional Board action.
7.Each Multi-Class ETF Fund will take the Disclosure Steps outlined in the Application.
8.In addition to complying with Rule 6c-11(d) under the Act, each Multi-Class ETF Fund
will preserve for a period not less than six years, the first two in an easily accessible
place, (i) any documents created pursuant to the requirements in conditions 2, 3, 5, and 6;
and (ii) any documents created pursuant to the Ongoing Monitoring Process that evidence
a Multi-Class ETF Fund has exceeded or not exceeded an established threshold, as well
as any documents provided to the Board as part of the Ongoing Monitoring Process.
9.The requested ETF Operational Relief and ETF Class Relief to operate one or more
Multi-Class ETF Funds will expire on the compliance date (or such other date established
by the Commission) of any Commission rule under the Act that provides relief permitting
the operation of a Multi-Class ETF Fund structure.
VIII.PROCEDURAL MATTERS
All of the requirements for execution and filing of this Application on behalf of
Applicants have been complied with in accordance with the applicable organizational documents
of Applicants, and the undersigned officers of Applicants are fully authorized to execute this
Application. The authorizations of Applicants, including the resolutions of Applicants
authorizing the filing of this Application, required by Rule 0-2(c) under the Act are included as
26
Exhibits A-1 through A-2 to this Application. The verifications required by Rule 0-2(d) under the
Act are included as Exhibits B-1 through B-2 to this Application.
Pursuant to Rule 0-2(f) under the Act, Applicants state that the Advisor's address is 901 S
Mopac Expressway, Building II Suite 225, Austin TX 78746 and the Company's address is 615
East Michigan Street, Milwaukee, WI 53202, and that all written communications regarding this
Application should be directed to the individuals and addresses indicated on the first page of this
Application.
Applicants desire that the Commission issue the requested order pursuant to Rule 0-5
under the Act without conducting a hearing.
IX.CONCLUSION
For the foregoing reasons, Applicants respectfully request that the Commission issue an
order under Sections 6(c) and 17(b) of the Act granting the relief requested in the Application.
Applicants submit that the requested exemptions are necessary or appropriate in the public
interest, consistent with the protection of investors and consistent with the purposes fairly
intended by the policy and provisions of the Act. In addition, Applicants submit that the terms of
the proposed transactions 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
transactions are consistent with the policy of each registered investment company concerned, and
that the proposed transactions are consistent with the general purposes of the Act.
Applicants have caused this Application to be duly signed on their behalf on April 23,
2026.
KENSINGTON ASSET MANAGEMENT, LLC
By:
/s/ William Bower
Name: William Bower
Title: Executive Director
MANAGED PORTFOLIO SERIES
By:
/s/ Brian R. Wiedmeyer
Name: Brian R. Wiedmeyer
Title: President
27
EXHIBITS TO APPLICATION
The following materials are made a part of the Application and are attached hereto:
DesignationDocument
Exhibits A-1 through A-2Authorizations
Exhibits B-1 through B-2Verifications
28
Exhibit A-1
AUTHORIZATION
MANAGED PORTFOLIO SERIES
I, Brian R. Wiedmeyer, do hereby certify that I am the President of Managed Portfolio Series
(the "Company"). I further certify that the following resolutions were duly adopted by the
directors of the Company with respect to an application (the "Exemptive Application") for an
order pursuant to Sections 6(c) and 17(b) of the Act, exempting Kensington Asset Management,
LLC ("Kensington") from certain provisions of the Act, as described in the Exemptive
Application, to permit certain existing and future portfolios of the Company that are advised by
Kensington (and affiliated investment companies) to offer classes of exchange-traded shares in
addition to classes of mutual fund shares, and that such resolutions have not been revoked,
modified, rescinded, or amended and are in full force and effect:
WHEREAS, the Board of Trustees (the "Board") of Managed Portfolio Series
(the "Trust") has determined that it is appropriate for the Trust and Kensington
Asset Management, LLC ("Kensington") to seek exemptive relief under Section
6(c) of the Investment Company Act of 1940, as amended (the "1940 Act"), for
an order of exemption from Sections 2(a)(32), 5(a)(1), 18(f)(1), 18(i), 22(d) and
22(e) of the 1940 Act and Rule 22c-1 under the Act, and pursuant to 6(c) and
17(b) of the 1940 Act, for an order of exemption from Sections 17(a)(1) and
17(a)(2) of the 1940 Act, to permit existing and future series of the Trust advised
by Kensington (each, a "Fund", and together, the "Funds") to offer a class of
exchange-traded shares in addition to each Fund's class of shares that are not
exchange-traded (the "Application").
NOW, THEREFORE, BE IT HEREBY RESOLVED, that the Board approve, in
the name and on behalf of the Trust, the Application as discussed and summarized
at this Meeting, with such modifications, amendments, supplements and exhibits
thereto, as any officer of the Trust, with the advice of counsel, approves as
necessary, desirable or appropriate, such approval to be conclusively evidenced
by such changes; and it is
FURTHER RESOLVED, that the officers of the Trust be, and each of them
hereby is, authorized and directed to prepare or cause to be prepared, execute and
file the Application with the U.S. Securities and Exchange Commission, and to
take such additional actions, including, but not limited to, amendment or
withdrawal of the Application, and to execute and deliver on behalf of the Trust
such other documents or instruments as they deem necessary or appropriate in
furtherance of the above resolution, their authority therefore to be conclusively
evidenced by the taking of any such actions or execution or delivery of any such
document; and it is
29
FURTHER RESOLVED, that the officers of the Trust be, and they hereby are,
authorized and directed to do and perform any and all further acts and things
which are necessary or appropriate to carry out the foregoing resolutions.
IN WITNESS WHEREOF, I have hereunder subscribed my name to this Certificate as of this
April 23, 2026.
By:
/s/ Brian R. Wiedmeyer
Name: Brian R. Wiedmeyer
Title: President
30
Exhibit A-2
AUTHORIZATION
KENSINGTON ASSET MANAGEMENT, LLC
I, William Bower, do hereby certify that I am the Executive Director of Kensington Asset
Management, LLC, ("Advisor"). I further certify that the following resolutions were duly
adopted under appropriate authority on behalf of the general partner of the Advisor and that such
resolutions have not been revoked, modified, rescinded, or amended and are in full force and
effect:
RESOLVED, that the officers of the Advisor be, and each of them hereby is, authorized
and instructed to prepare, or to cause to be prepared, and to execute and file with the
SEC, in consultation with counsel, an application, and any amendments thereto, for an
order pursuant to Sections 6(c) and 17(b) of the Investment Company Act of 1940
("Act") granting exemptions from certain provisions of the Act to permit open-end
investment companies registered under the Act and advised by the Advisor (or its
affiliates) to offer classes of exchange-traded shares in addition to classes of mutual fund
shares; and
FURTHER RESOLVED, that the officers of the Advisor be, and each of them hereby is,
authorized and instructed to take any and all actions that each of them, in his or her sole
discretion, deems necessary and appropriate to carry out the intent and accomplish the
purpose of the foregoing resolution.
IN WITNESS WHEREOF, I have hereunder subscribed my name to this Certificate as of this
April 23, 2026.
By:
/s/ William Bower
Name: William Bower
Title: Executive Director
31
Exhibit B-1
VERIFICATION
The undersigned states that he has duly executed the attached application for exemption
dated April 23, 2026, for and on behalf of Managed Portfolio Series, that he is the President of
Managed Portfolio Series, and that all actions by stockholders, directors and other bodies
necessary to authorize the undersigned to execute and file such instrument have been taken. The
undersigned 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.
MANAGED PORTFOLIO SERIES
By:
/s/ Brian R. Wiedmeyer
Name: Brian R. Wiedmeyer
Title: President
32
Exhibit B-2
VERIFICATION
The undersigned states that he has duly executed the attached application for exemption
dated April 23, 2026, for and on behalf of Kensington Asset Management, LLC, and that all
actions to authorize the undersigned to execute and file such instrument have been taken. The
undersigned 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.
KENSINGTON ASSET MANAGEMENT, LLC
By:
/s/ William Bower
Name: William Bower
Title: Executive Director
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