25802 Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices 

1See PowerShares Exchange-Traded Fund Trust, 

Investment Company Act Release Nos. 25961 

(March 4, 2003) (notice) and 25985 (March 28, 

2003) (order) (the ‘‘Prior Order’’). 

57(o) of the Act, of HTGC’s directors on 

the basis that such issuance is in the 

best interests of HTGC and its 

stockholders. 

3. The amount of voting securities 

that would result from the exercise of all 

of HTGC’s outstanding warrants, 

options, and rights, together with any 

Restricted Stock issued pursuant to the 

Amended and Restated Plans, at the 

time of issuance shall not exceed 25% 

of the outstanding voting securities of 

HTGC, except that if the amount of 

voting securities that would result from 

the exercise of all of HTGC’s 

outstanding warrants, options, and 

rights issued to HTGC’s directors, 

officers, and employees, together with 

any Restricted Stock issued pursuant to 

the Amended and Restated Plans, would 

exceed 15% of the outstanding voting 

securities of HTGC, then the total 

amount of voting securities that would 

result from the exercise of all 

outstanding warrants, options, and 

rights, together with any Restricted 

Stock issued pursuant to the Amended 

and Restated Plans, at the time of 

issuance shall not exceed 20% of the 

outstanding voting securities of HTGC. 

4. The maximum amount of shares of 

Restricted Stock that may be issued 

under the Amended and Restated Plans 

will be 10% of the outstanding shares of 

common stock of HTGC on the effective 

date of the Amended and Restated Plans 

plus 10% of the number of shares of 

HTGC’s common stock issued or 

delivered by HTGC (other than pursuant 

to compensation plans) during the term 

of the Amended and Restated Plans. 

5. The Board will review the 

Amended and Restated Plans at least 

annually. In addition, the Board will 

review periodically the potential impact 

that the issuance of Restricted Stock 

under the Amended and Restated Plans 

could have on HTGC’s earnings and 

NAV per share, such review to take 

place prior to any decisions to grant 

Restricted Stock under the Amended 

and Restated Plans, but in no event less 

frequently than annually. Adequate 

procedures and records will be 

maintained to permit such review. The 

Board will be authorized to take 

appropriate steps to ensure that the 

grant of Restricted Stock under the 

Amended and Restated Plans would not 

have an effect contrary to the interests 

of HTGC’s stockholders. This authority 

will include the authority to prevent or 

limit the granting of additional 

Restricted Stock under the Amended 

and Restated Plans. All records 

maintained pursuant to this condition 

will be subject to examination by the 

Commission and its staff. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–8683 Filed 5–4–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

27811; 812–13335] 

PowerShares Exchange-Traded Fund 

Trust, et al.; Notice of Application 

April 30, 2007. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 6(c) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) for an exemption from sections 

2(a)(32), 5(a)(1), 22(d), 22(e) and 24(d) 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 (a)(2) of the Act. 

SUMMARY OF APPLICATION: Applicants 

request an order that would permit (a) 

series of open-end management 

investment companies, whose portfolios 

will consist of the component securities 

of certain foreign equity securities 

indexes or fixed income securities 

indexes, to issue shares (‘‘Fund Shares’’) 

that can be purchased from the 

investment companies and redeemed 

only in large aggregations (‘‘Creation 

Units’’); (b) secondary market 

transactions in Fund Shares to occur at 

negotiated prices on a national 

securities exchange; (c) dealers to sell 

Fund Shares to purchasers in the 

secondary market unaccompanied by a 

prospectus, when prospectus delivery is 

not required by the Securities Act of 

1933 (the ‘‘Securities Act’’); (d) certain 

affiliated persons of the series to deposit 

securities into, and receive securities 

from, the series in connection with the 

purchase and redemption of Creation 

Units; and (e) the series to pay 

redemption proceeds, under certain 

circumstances, more than seven days 

after the tender of a Creation Unit for 

redemption. In addition, the order 

would delete a condition related to 

future relief and expand the scope of 

future relief in a prior order.1

APPLICANTS: PowerShares ExchangeTraded Fund Trust (the ‘‘Initial Trust’’), 

PowerShares Global Exchange-Traded 

Fund Trust (the ‘‘New Trust,’’ and 

together with the Initial Trust, the 

‘‘Trusts’’), PowerShares Capital 

Management LLC (the ‘‘Adviser’’), and 

AIM Distributors, Inc. (the 

‘‘Distributor’’). 

FILING DATES: The application was filed 

on October 19, 2006 and amended on 

March 29, 2007 and April 26, 2007. 

Applicants have agreed to file an 

amendment during the notice period, 

the substance of which is contained in 

this notice. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the application will be 

issued unless the Commission orders a 

hearing. Interested persons may request 

a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on May 24, 2007, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit, or for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, Securities and 

Exchange Commission, 100 F Street, NE, 

Washington, DC 20549–1090. The 

Trusts and the Adviser: 301 West 

Roosevelt Road, Wheaton, IL 60187; the 

Distributor: 11 Greenway Plaza, Suite 

100, Houston, TX 77046–1173. 

FOR FURTHER INFORMATION CONTACT: 

Marilyn Mann, Senior Counsel, at (202) 

551–6813, or Mary Kay Frech, Branch 

Chief, at (202) 551–6821 (Division of 

Investment Management, Office of 

Investment Company Regulation). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained for a fee at the 

Commission’s Public Reference Branch, 

100 F Street, NE., Washington, DC 

20549–0102 (telephone (202) 551–5850). 

Applicants’ Representations 

1. The Trusts are open-end 

management investment companies 

registered under the Act and organized 

as Massachusetts business trusts. The 

Trusts are organized as series funds 

(each such series, an ‘‘Index Fund’’). 

The Initial Trust currently offers and 

sells certain Index Funds. The Initial 

Trust intends to offer nine new Index 

Funds and the New Trust intends to 

offer 37 new Index Funds (each, a ‘‘New 

Fund’’). The Adviser is registered as an 


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2The Fixed Income Indexes for the Fixed Income 

Funds are: DB Emerging Markets USD Liquid Bond 

Index, Merrill Lynch U.S. Domestic Index, Merrill 

Lynch Global Inflation-Linked Government Index, 

Merrill Lynch 1–10 Years U.S. Inflation-Linked 

Treasury Index, Ryan/Mergent 1–30 Year Laddered 

Treasury Index, DB U.S. Agency Mortgage TBA 

Index, Wachovia Global ex-U.S. Bond Index, 

Wachovia Yield Focused Investment Grade Bond 

Index, and Wachovia High Yield Bond Index. 

3The Foreign Indexes for the Foreign Funds are: 

the FTSE RAFI Developed Markets ex-U.S. 1000 

Index, FTSE RAFI Developed Markets ex-U.S. Small 

Index, FTSE RAFI Emerging Markets Index, FTSE 

RAFI Europe Index, FTSE RAFI Europe Small 

Index, FTSE RAFI Latin America Index, FTSE RAFI 

Asia Pacific ex-Japan Index, FTSE RAFI Asia Pacific 

ex-Japan Small Index, FTSE RAFI BRIC Index, 

FTSE RAFI Japan Index, FTSE RAFI Canada Index, 

FTSE RAFI Germany Index, FTSE RAFI Hong Kong 

Index, FTSE RAFI Mexico Index, FTSE RAFI South 

Korea Index, FTSE RAFI Taiwan Index, FTSE RAFI 

United Kingdom Index, FTSE RAFI China Index, 

FTSE RAFI Australia Index, FTSE RAFI Brazil 

Index, FTSE RAFI France Index, FTSE RAFI South 

Africa Index, Indus India Index, WilderHill New 

Energy Global Innovation Index, International 

Listed Private Equity Index, Palisades Global Water 

Index, QSG Developed International Opportunities 

Index, QSG Developed International Value Index, 

QSG Developed International Growth Index, QSG 

Active Japan Index, QSG Asia-Pacific Opportunities 

Index, QSG Active Europe Index, QSG Active 

Australia Index, QSG Active Canada Index, QSG 

Active France Index, QSG Active Germany Index, 

and QSG Active UK Index. 

4All existing entities that currently intend to rely 

on the requested order have been named as 

applicants. Any other existing or future entity that 

subsequently relies on the order will comply with 

the terms and conditions of the application. 

investment adviser under the 

Investment Advisers Act of 1940 (the 

‘‘Advisers Act’’) and will serve as the 

investment adviser to each New Fund. 

The Distributor, a broker-dealer 

registered under the Securities 

Exchange Act of 1934 (the ‘‘Exchange 

Act’’), will serve as the principal 

underwriter for each New Fund. The 

Adviser may in the future retain one or 

more sub-advisers (‘‘Sub-Advisers’’) to 

manage one or more of the New Funds 

for which it will act as the investment 

adviser. The Sub-Advisers will be 

registered under the Advisers Act or 

will be exempt from such registration. 

2. Each New Fund will invest in a 

portfolio of securities (‘‘Portfolio 

Securities’’) generally consisting of the 

component securities (‘‘Component 

Securities’’) of a specified securities 

index (the ‘‘Underlying Indexes’’). In the 

case of the New Funds offered by Initial 

Trust, the Underlying Indexes will be 

composed of fixed-income securities 

(each, a ‘‘Fixed Income Index’’) and in 

the case of the New Funds offered by 

the New Trust, the Underlying Indexes 

will be composed of foreign securities 

(each, a ‘‘Foreign Index’’). Each New 

Fund based on a Fixed Income Index is 

referred to as a ‘‘Fixed Income Fund.’’ 2

Each New Fund based on a Foreign 

Index is a ‘‘Foreign Fund.’’ 3 The board 

of trustees of each Trust or of additional 

open-end management investment 

companies created by the Adviser 

(‘‘Board’’) may establish additional 

Index Funds in the future (the ‘‘Future 

Funds’’) that will be based on other 

Foreign Indexes or Fixed Income 

Indexes. Applicants request that the 

relief requested in the application apply 

to any such Future Funds. Any Future 

Fund will (a) be advised by the Adviser 

or an entity controlling, controlled by or 

under common control with the Adviser 

and (b) comply with the terms and 

conditions of the order.4 No entity that 

creates, compiles, sponsors or maintains 

an Underlying Index is or will be an 

affiliated person, as defined in section 

2(a)(3) of the Act, or an affiliated person 

of an affiliated person, of the Trusts, the 

Adviser, the Sub-Adviser, the 

Distributor, or a promoter of a New 

Fund. 

3. The investment objective of each 

New Fund will be to provide investment 

results that generally correspond, before 

fees and expenses, to the total return of 

the relevant Underlying Index. A 

Foreign Fund will invest at least 90% of 

its assets in the Component Securities of 

its Foreign Index and in Depositary 

Receipts (as defined below) representing 

such Component Securities. A Foreign 

Fund may invest up to 10% of its assets 

in certain stock index futures, stock 

options, options on stock index futures, 

and swap contracts, in each case related 

to its respective Foreign Index and its 

Component Securities, as well as cash 

and cash equivalents. Each Fixed 

Income Fund generally will invest at 

least 90% of its assets in Component 

Securities of its respective Fixed Income 

Index (except with respect to the 

PowerShares Domestic Aggregate Bond 

Portfolio and the PowerShares 

Mortgage-Backed Securities Portfolio, as 

set forth below). However, each Fixed 

Income Fund may at times invest up to 

20% of its assets in certain futures, 

options and swap contracts, cash and 

cash equivalents, as well as in bonds not 

included in its Fixed Income Index, but 

which the Adviser or Sub-Adviser 

believes will help the Fixed Income 

Fund track its Fixed Income Index. 

4. The PowerShares Domestic 

Aggregate Bond Portfolio will seek to 

track that portion of the Merrill Lynch 

U.S. Domestic Index devoted to 

government mortgage-backed securities 

(‘‘MBS’’) by investing a corresponding 

percentage of its assets either in MBS 

included in the index or in to-beannounced (‘‘TBA’’) transactions on 

MBS. The PowerShares MortgageBacked Securities Portfolio will invest 

at least 90% of its assets in MBS 

included in the DB U.S. Agency 

Mortgage TBA Index or in TBA 

transactions on MBS. A ‘‘TBA 

transaction’’ essentially is a purchase or 

sale of a pass-through security for future 

settlement at an agreed-upon date. 

Applicants state that most mortgage 

pass-through securities trades are 

executed as TBA transactions. 

Applicants state that TBA transactions 

increase the liquidity and pricing 

efficiency of transactions in MBS 

because they permit similar MBS to be 

traded interchangeably pursuant to 

commonly observed settlement and 

delivery requirements. 

5. Each Foreign Fund will utilize as 

an investment approach either a 

replication strategy or a representative 

sampling strategy, and each Fixed 

Income Fund will use a representative 

sampling strategy. A Foreign Fund using 

a replication strategy generally will hold 

most of the Component Securities of the 

Foreign Index in the same approximate 

proportions as the Foreign Index, but 

may not hold all of the securities that 

comprise the Foreign Index in certain 

instances. A New Fund using a 

representative sampling strategy will 

seek to hold a representative sample of 

the Component Securities of the 

Underlying Index and will invest in 

some but not all of the Component 

Securities of its Underlying Index. 

Applicants anticipate that a New Fund 

that utilizes a representative sampling 

strategy will not track its Underlying 

Index with the same degree of accuracy 

as an investment vehicle that invested 

in every Component Security of the 

Underlying Index with the same 

weighting as the Underlying Index. 

Applicants expect that each New Fund 

will have a tracking error relative to the 

performance of its respective 

Underlying Index of less than 5 percent. 

6. Any Depositary Receipts held by a 

Foreign Fund will be negotiable 

securities that represent ownership of a 

non-U.S. company’s publicly traded 

stock. Depositary Receipts will typically 

be American Depositary Receipts 

(‘‘ADRs’’), but may include Global 

Depositary Receipts (‘‘GDRs’’) and Euro 

Depositary Receipts (‘‘EDRs’’). ADRs, 

GDRs and EDRs are collectively referred 

to herein as ‘‘Depositary Receipts.’’

Applicants believe that, in certain cases, 

holding one or more Depositary 

Receipts rather than Component 

Securities of the relevant Foreign Index, 

will improve the liquidity, tradability 

and settlement of a Foreign Fund’s then 

current Fund Deposit (as defined below) 

(thereby improving the efficiency of the 

creation and redemption process and 

facilitating efficient arbitrage activity), 

while at the same time permitting a 

Foreign Fund to maintain direct 


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5Over time, the Adviser or Sub-Adviser may 

conclude that operating on an exclusively in-kind 

basis for a New Fund may present operational 

problems for such New Fund. Therefore, each Trust 

may permit, in its discretion, with respect to a New 

Fund under certain circumstances, an in-kind 

purchaser to substitute cash in lieu of depositing 

some or all of the requisite Deposit Securities. For 

example, each of the PowerShares Domestic 

Aggregate Bond Portfolio and the PowerShares 

Mortgage-Backed Securities Portfolio will require 

purchasing investors to substitute cash in lieu of 

any Deposit Security that is a mortgage TBA 

transaction. This cash in lieu of mortgage TBAs will 

likely result in cash-only creations with respect to 

the PowerShares Mortgage-Backed Securities 

Portfolio. More generally, substitution might be 

permitted or required because one or more Deposit 

Securities may be unavailable, may not be available 

in the quantity needed to make a Portfolio Deposit, 

or may not be eligible for trading by an Authorized 

Participant (or the investor on whose behalf the 

Authorized Participant is acting). Applicants 

currently expect that PowerShares FTSE RAFI 

Taiwan Portfolio, PowerShares FTSE RAFI South 

Korea Portfolio, PowerShares FTSE RAFI Brazil 

Portfolio, PowerShares FTSE RAFI BRIC Portfolio 

and PowerShares Indus India Portfolio will utilize 

‘‘cash-only’’ purchases and redemptions of Creation 

Units due to local exchange restrictions on short 

sales and/or free delivery of stocks, as well as 

difficulty associated with borrowing stocks in the 

applicable markets. 

6On each business day, prior to the opening of 

trading on the Exchange (as defined below), the 

Adviser or Sub-Adviser will make available a list 

of the names and the required number of shares of 

each Deposit Security required for the Fund Deposit 

for each New Fund. That Fund Deposit will apply 

to all purchases of Creation Units until a new Fund 

Deposit for a New Fund is announced. Each New 

Fund reserves the right to permit or require the 

substitution of an amount of cash in lieu of 

depositing some or all of the Deposit Securities in 

certain circumstances. With respect to the Foreign 

Funds, the Exchange or other market information 

provider will disseminate every 15 seconds 

throughout the trading day via the facilities of the 

Consolidated Tape Association an amount 

representing on a per share basis the sum of the 

current value of the Deposit Securities and the 

estimated Cash Component. As the respective 

international local markets close, the market value 

of the Deposit Securities will continue to be 

updated for foreign exchange rates for the 

remainder of the U.S. trading day at the prescribed 

15 second interval. With respect to the Fixed 

Income Funds, the Exchange or other market 

information provider will disseminate a calculation 

of the approximate NAV of a Fund Share (the 

‘‘Intra-day Indicative Value’’ or ‘‘IIV’’) every 15 

seconds throughout the trading day, separately from 

the consolidated tape. 

7When a New Fund permits a purchaser to 

substitute cash for Deposit Securities, the purchaser 

may be assessed an additional fee to offset the 

brokerage and other transaction costs associated 

with using cash to purchase the requisite Deposit 

Securities. 

8Fund Shares will be registered in book-entry 

form only. DTC or its nominee will be the registered 

owner of all outstanding Fund Shares. DTC or its 

participants will maintain records reflecting the 

beneficial owners of Fund Shares. 

9The New Funds will comply with the federal 

securities laws in accepting Deposit Securities and 

satisfying redemptions with Fund Securities, 

including that the Deposit Securities and Fund 

Securities are sold in transactions that would be 

exempt from registration under the Securities Act. 

As a general matter, the Deposit Securities and 

Fund Securities will correspond pro rata to the 

securities held by the New Funds. In accepting 

Deposit Securities and satisfying redemptions with 

Fund Securities that are restricted securities eligible 

for resale pursuant to rule 144A under the 

Securities Act, each New Fund will comply with 

exposure to Component Securities of its 

Foreign Index. Applicants intend that 

any Foreign Fund would be able to treat 

Depositary Receipts that represent 

Component Securities of its Foreign 

Index as Component Securities for 

purposes of any requirements that a 

percentage of a Foreign Fund’s portfolio 

be invested in Component Securities of 

its Foreign Index. 

7. Creation Units will consist of either 

50,000 or 100,000 Shares, as specified in 

the relevant prospectus (‘‘Prospectus’’). 

The price of a Creation Unit will range 

from $1,000,000 to $5,000,000. Creation 

Units may be purchased only by or 

through a party that has entered into an 

agreement with the Distributor 

regarding creations and redemptions of 

Creation Units (an ‘‘Authorized 

Participant’’). An Authorized 

Participant must be either (a) a brokerdealer or other participant in the 

continuous net settlement system of the 

National Securities Clearing 

Corporation, a clearing agency that is 

registered with the Commission, or (b) 

a participant in the Depository Trust 

Company (‘‘DTC’’) system. Creation 

Units generally will be issued in 

exchange for an in-kind deposit of 

securities and cash. A New Fund also 

may sell Creation Units on a cash-only 

basis in limited circumstances.5 An 

investor wishing to purchase a Creation 

Unit from a New Fund will have to 

transfer to the New Fund a ‘‘Fund 

Deposit’’ consisting of: (a) a portfolio of 

securities that has been selected by the 

Adviser to correspond to the returns on 

the relevant Underlying Index (‘‘Deposit 

Securities’’), and (b) a cash payment to 

equalize any differences between the 

market value per Creation Unit of the 

Deposit Securities and the net asset 

value (‘‘NAV’’) per Creation Unit (‘‘Cash 

Component’’).6 An investor purchasing 

a Creation Unit from a New Fund will 

be charged a fee (‘‘Transaction Fee’’) to 

prevent the dilution of the interests of 

the remaining shareholders resulting 

from the New Fund incurring costs in 

connection with the purchase of the 

Creation Units.7 Each New Fund will 

disclose the Transaction Fees charged 

by the New Fund in its Prospectus and 

the method of calculating the 

Transaction Fees in its Prospectus or 

statement of additional information 

(‘‘SAI’’). 

8. Orders to purchase Creation Units 

of a New Fund will be placed with the 

Distributor who will be responsible for 

transmitting each order to each New 

Fund. The Distributor will issue, and 

maintain records of, confirmations of 

acceptance to purchasers of Creation 

Units and delivery instructions to the 

Trusts (to implement the delivery of 

Creation Units). The Distributor will 

also be responsible for delivering 

Prospectuses to purchasers of Creation 

Units. 

9. Persons purchasing Creation Units 

from a New Fund may hold the Fund 

Shares or sell some or all of them in the 

secondary market. Shares of the New 

Funds will be listed on a national 

securities exchange, as defined in 

section 2(a)(26) of the Act (an 

‘‘Exchange’’), and traded in the 

secondary market in the same manner as 

other equity securities. An Exchange 

specialist (‘‘Specialist’’) will be assigned 

to make a market in Shares. If The 

NASDAQ Stock Market, Inc. 

(‘‘NASDAQ’’) is the listing Exchange, 

one or more member firms of NASDAQ 

will act as a market maker (‘‘Market 

Maker’’) and maintain a market on 

NASDAQ for Fund Shares trading on 

NASDAQ. The price of Fund Shares 

traded on an Exchange will be based on 

a current bid/offer market. Each Fund 

Share is currently expected to have a 

market value of between $20 and $50. 

Transactions involving the sale of Fund 

Shares in the secondary market will be 

subject to customary brokerage 

commissions and charges. 

10. Applicants expect that purchasers 

of Creation Units will include 

institutional investors and arbitrageurs 

(which could include institutional 

investors). The Specialist or Market 

Maker, in providing for a fair and 

orderly secondary market for Fund 

Shares, also may purchase Creation 

Units for use in its market-making 

activities. Applicants expect that 

secondary market purchasers of Fund 

Shares will include both institutional 

and retail investors.8 Applicants expect 

that the price at which the Fund Shares 

trade will be disciplined by arbitrage 

opportunities created by the ability to 

continually purchase or redeem 

Creation Units at their NAV, which 

should ensure that the Fund Shares will 

not trade at a material discount or 

premium in relation to their NAV. 

11. Fund Shares will not be 

individually redeemable. Fund Shares 

will only be redeemable in Creation 

Units through a New Fund. To redeem, 

an investor will have to accumulate 

enough Fund Shares to constitute a 

Creation Unit. An investor redeeming a 

Creation Unit generally will receive (a) 

the Portfolio Securities designated to be 

delivered for Creation Unit redemptions 

on the date the request for redemption 

is made (‘‘Fund Securities’’),9 which 


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the conditions of rule 144A, including in satisfying 

redemptions with such rule 144A eligible restricted 

Fund Securities. The Prospectus for each New Fund 

will also state that an Authorized Participant that 

is not a Qualified Institutional Buyer (‘‘QIB’’) will 

not be able to receive Fund Securities that are 

restricted securities eligible for resale under rule 

144A. 

may not be identical to the Deposit 

Securities applicable to the purchase of 

Creation Units, and (b) a ‘‘Cash 

Redemption Payment,’’ consisting of an 

amount calculated in the same manner 

as the Cash Component, although the 

actual amount of the Cash Redemption 

Payment may differ from the Cash 

Component if the Fund Securities are 

not identical to the Deposit Securities 

on a given day. An investor may receive 

the cash equivalent of a Fund Security 

upon its request if, for example, the 

investor were constrained from effecting 

transactions in the Fund Security by 

regulation or policy. 

12. A redeeming investor will pay a 

Transaction Fee to offset transaction 

costs, whether the redemption proceeds 

are in kind or cash. When an investor 

redeems for cash rather than in kind, the 

investor may pay a higher Transaction 

Fee. Such Transaction Fee will be 

calculated in the same manner as a 

Transaction Fee payable in connection 

with the purchase of a Creation Unit. 

13. Applicants state that neither the 

Trusts nor any New Fund will be 

marketed or otherwise held out as a 

‘‘mutual fund.’’ Rather, applicants state 

that each New Fund will be marketed as 

an ‘‘exchange-traded fund.’’ No New 

Fund marketing materials (other than as 

required in the Prospectus) will refer to 

a New Fund as an ‘‘open-end’’ or 

‘‘mutual fund,’’ except to contrast a New 

Fund with a conventional open-end 

management investment company. In all 

marketing materials where the method 

of obtaining, buying, or selling Fund 

Shares is described, applicants will 

include a statement to the effect that 

Fund Shares are not redeemable through 

a New Fund except in Creation Units. 

The same type of disclosure will be 

provided in each New Fund’s 

Prospectus, SAI, advertising materials, 

and all reports to shareholders. The 

New Funds will provide copies of their 

annual and semi-annual shareholder 

reports to DTC participants for 

distribution to beneficial holders of 

Fund Shares. 

14. Applicants also seek to amend the 

Prior Order to modify the terms under 

which the Initial Trust may offer 

additional series in the future. The Prior 

Order is currently subject to a condition 

that does not permit applicants to 

register any series by means of filing a 

post-effective amendment to the Initial 

Trust’s registration statement or by any 

other means, unless (a) applicants have 

requested and received with respect to 

such series, either exemptive relief from 

the Commission or a no-action letter 

from the Division of Investment 

Management of the Commission, or (b) 

the series will be listed on a national 

securities exchange without the need for 

filing pursuant to rule 19b–4 under the 

Exchange Act. The order would amend 

the Prior Order to delete this condition. 

In addition, the order would expand the 

relief under the Prior Order to include 

registered investment companies other 

than the Initial Trust. As amended, the 

Prior Order would permit the 

introduction of series of the Initial Trust 

and series of other open-end 

management investment companies 

(collectively, ‘‘Future Index Funds’’) 

that (a) are advised by the Adviser or an 

entity controlling, controlled by or 

under common control with the 

Adviser; (b) track Underlying Indices 

comprised of equity securities issued by 

domestic issuers that are created, 

compiled, sponsored or maintained by 

an entity that is not an affiliated person, 

as defined in section 2(a)(3) of the Act, 

or an affiliated person of an affiliated 

person, of the Adviser, the Distributor, 

the Initial Trust, the New Trust or any 

sub-advisor or promoter of an Index 

Fund, and (c) comply with the 

respective terms and conditions of the 

Prior Order, as amended by the order. 

15. Applicants believe that the 

modification of the future relief 

available under the Prior Order would 

be consistent with section 6(c) and 17(b) 

of the Act and that granting the 

requested relief will facilitate the timely 

creation of Future Index Funds and the 

commencement of secondary market 

trading of such Future Index Funds by 

removing the need to seek additional 

exemptive relief. Applicants submit that 

the terms and conditions of the Prior 

Order have been appropriate for the 

exchange-traded funds advised by the 

Adviser and would remain appropriate 

for Future Index Funds. Applicants also 

submit that tying exemptive relief under 

the Act to the ability of a Future Index 

Fund to be listed on an Exchange 

without the need for a rule 19b–4 filing 

under the Exchange Act is not necessary 

to meet the standards under section 6(c) 

and 17(b) of the Act. 

Applicants’ Legal Analysis 

1. Applicants request an order under 

section 6(c) of the Act granting an 

exemption from sections 2(a)(32), 

5(a)(1), 22(d), 22(e) and 24(d) of the Act 

and rule 22c–1 under the Act; and 

under sections 6(c) and 17(b) of the Act 

granting an exemption from sections 

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

2. Section 6(c) of the Act provides that 

the Commission may exempt any 

person, security or transaction, or any 

class of persons, securities or 

transactions, from any 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. 

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

3. Section 5(a)(1) of the Act defines an 

‘‘open-end company’’ as a management 

investment company that is offering for 

sale or has outstanding any redeemable 

security of which it is the issuer. 

Section 2(a)(32) of the Act defines a 

redeemable security as any security, 

other than short-term paper, under the 

terms of which the holder, upon its 

presentation to the issuer, is entitled to 

receive approximately his proportionate 

share of the issuer’s current net assets, 

or the cash equivalent. Because Fund 

Shares will not be individually 

redeemable, applicants request an order 

that would permit each New Fund, as a 

series of an open-end management 

investment company, to issue Fund 

Shares that are redeemable in Creation 

Units only. Applicants state that 

investors may purchase Fund Shares in 

Creation Units from each New Fund and 

redeem Creation Units. Applicants 

further state that because the market 

price of Fund Shares will be disciplined 

by arbitrage opportunities, investors 

should be able to sell Fund Shares in 

the secondary market at prices that do 

not vary substantially from their NAV. 

Section 22(d) of the Act and Rule 22c–

1 Under the Act 

4. Section 22(d) of the Act, among 

other things, prohibits a dealer from 

selling a redeemable security, which is 

currently being offered to the public by 

or through a principal underwriter, 

except at a current public offering price 

described in the prospectus. Rule 22c–

1 under the Act generally requires that 

a dealer selling, redeeming, or 

repurchasing a redeemable security do 

so only at a price based on its NAV. 

Applicants state that secondary market 

trading in Fund Shares will take place 

at negotiated prices, not at a current 

offering price described in the 

prospectus, and not at a price based on 

NAV. Thus, purchases and sales of 

Fund Shares in the secondary market 

will not comply with section 22(d) of 

the Act and rule 22c–1 under the Act. 

Applicants request an exemption under 

section 6(c) from these provisions. 


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25806 Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices 

10Rule 15c6–1 under the Exchange Act requires 

that most securities transactions be settled within 

three business days of the trade. Applicants 

acknowledge that no relief obtained from the 

requirements of section 22(e) will affect any 

obligations applicants may have under rule 15c6–

1. 

11Applicants do not seek relief from the 

prospectus delivery requirement for non-secondary 

market transactions, including purchases of 

Creation Units or those involving an underwriter. 

Applicants state that persons purchasing Creation 

Units will be cautioned in a New Fund’s Prospectus 

that some activities on their part may, depending 

on the circumstances, result in their being deemed 

statutory underwriters and subject them to the 

prospectus delivery and liability provisions of the 

Securities Act. For example, a broker-dealer firm 

and/or its client may be deemed a statutory 

underwriter if it takes Creation Units after placing 

an order with the Adviser, breaks them down into 

the constituent Fund Shares, and sells Fund Shares 

directly to its customers, or if it chooses to couple 

the purchase of a supply of new Fund Shares with 

an active selling effort involving solicitation of 

secondary market demand for Fund Shares. A New 

Fund’s Prospectus will state that whether a person 

is an underwriter depends upon all the facts and 

circumstances pertaining to that person’s activities. 

A New Fund’s Prospectus also will state that 

dealers who are not ‘‘underwriters’’ but are 

participating in a distribution (as contrasted to 

ordinary secondary market trading transactions), 

and thus dealing with Fund Shares that are part of 

an ‘‘unsold allotment’’ within the meaning of 

section 4(3)(C) of the Securities Act, would be 

unable to take advantage of the prospectus delivery 

exemption provided by section 4(3) of the 

Securities Act. 

5. Applicants assert that the concerns 

sought to be addressed by section 22(d) 

of the Act and rule 22c–1 under the Act 

with respect to pricing are equally 

satisfied by the proposed method of 

pricing Fund Shares. Applicants 

maintain that while there is little 

legislative history regarding section 

22(d), its provisions, as well as those of 

rule 22c–1, appear to have been 

designed to (a) prevent dilution caused 

by certain riskless-trading schemes by 

principal underwriters and contract 

dealers, (b) prevent unjust 

discrimination or preferential treatment 

among buyers resulting from sales at 

different prices, and (c) assure an 

orderly distribution of investment 

company shares by eliminating price 

competition from dealers offering shares 

at less than the published sales price 

and repurchasing shares at more than 

the published redemption price. 

6. Applicants believe that none of 

these purposes will be thwarted by 

permitting Fund Shares to trade in the 

secondary market at negotiated prices. 

Applicants state that (a) secondary 

market trading in Fund Shares does not 

involve the New Funds as parties and 

cannot result in dilution of an 

investment in Fund Shares, and (b) to 

the extent different prices exist during 

a given trading day, or from day to day, 

such variances occur as a result of thirdparty market forces, such as supply and 

demand. Therefore, applicants assert 

that secondary market transactions in 

Fund Shares will not lead to 

discrimination or preferential treatment 

among purchasers. Finally, applicants 

contend that the proposed distribution 

system will be orderly because arbitrage 

activity will ensure that the difference 

between the market price of Fund 

Shares and their NAV remains narrow. 

Section 22(e) of the Act 

7. Section 22(e) generally prohibits a 

registered investment company from 

suspending the right of redemption or 

postponing the date of payment of 

redemption proceeds for more than 

seven days after the tender of a security 

for redemption. The principal reason for 

the requested exemption is that 

settlement of redemptions for the 

Foreign Funds is contingent not only on 

the settlement cycle of the United States 

market, but also on currently practicable 

delivery cycles in local markets for 

underlying foreign securities held by the 

Foreign Funds. Applicants state that 

local market delivery cycles for 

transferring certain foreign securities to 

investors redeeming Creation Units, 

together with local market holiday 

schedules, will under certain 

circumstances require a delivery process 

in excess of seven calendar days for the 

Foreign Funds. Applicants request relief 

under section 6(c) of the Act from 

section 22(e) to allow the Foreign Funds 

to pay redemption proceeds more than 

seven days after the tender of Fund 

Shares for redemption. Applicants 

anticipate that the delivery of 

redemption proceeds would be made at 

the latest within 14 calendar days after 

the redemption request except to the 

extent that a redemption delivery is 

delayed due to the proclamation of new 

or special holidays, the treatment by 

market participants of certain days as 

‘‘informal holidays,’’ the elimination of 

existing holidays or changes in local 

securities delivery practices. At all other 

times and except as disclosed in the 

relevant Prospectus, product description 

(‘‘Product Description’’) and/or SAI, 

applicants expect that each Foreign 

Fund will be able to deliver redemption 

proceeds within seven days.10 With 

respect to Future Funds that are Foreign 

Funds, applicants seek the same relief 

from section 22(e) only to the extent that 

circumstances similar to those described 

in the application exist. Applicants state 

that section 22(e) was designed to 

prevent unreasonable, undisclosed and 

unforeseen delays in the payment of 

redemption proceeds. Applicants assert 

that their requested relief will not lead 

to the problems that section 22(e) was 

designed to prevent. Applicants state 

that the Prospectus, the Product 

Description and/or the SAI for each 

Foreign Fund will disclose those local 

holidays (over the period of at least one 

year following the date of the 

Prospectus, Product Description or SAI), 

if any, that are expected to prevent the 

delivery of redemption proceeds in 

seven calendar days, and the maximum 

number of days needed to deliver the 

proceeds for the New Fund. Applicants 

are not requesting relief from section 

22(e) with respect to Foreign Funds that 

do not effect creations and redemptions 

of Creation Units in-kind. 

Section 24(d) of the Act 

8. Section 24(d) of the Act provides, 

in relevant part, that the prospectus 

delivery exemption provided to dealer 

transactions by section 4(3) of the 

Securities Act does not apply to any 

transaction in a redeemable security 

issued by an open-end investment 

company. Applicants request an 

exemption from section 24(d) to permit 

dealers selling Fund Shares to rely on 

the prospectus delivery exemption 

provided by section 4(3) of the 

Securities Act.11

9. Applicants state that Fund Shares 

will be listed on an Exchange and will 

be traded in a manner similar to other 

equity securities, including the shares of 

closed-end investment companies. 

Applicants note that dealers selling 

shares of closed-end investment 

companies in the secondary market 

generally are not required to deliver a 

prospectus to the purchaser. Applicants 

contend that Fund Shares, as a listed 

security, merit a reduction in the 

compliance costs and regulatory 

burdens resulting from the imposition of 

prospectus delivery obligations in the 

secondary market. Because Fund Shares 

will be exchange-listed, prospective 

investors will have access to several 

types of market information about Fund 

Shares. Applicants state that 

information regarding market price and 

volume 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 volume information 

for Fund Shares also will be published 

daily in the financial section of 

newspapers. The website maintained for 

the Trusts will include, for each New 

Fund, the prior business day’s NAV, the 

mid-point of the bid-ask spread at the 

time of calculation of NAV (‘‘Bid/Ask 

Price’’) and calculation of the premium 

or discount of the Bid/Ask Price at the 

time of calculation of the NAV against 

such NAV, and data in chart format 

displaying the frequency distribution of 


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Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices 25807 

12The Bid/Ask Price per Fund Share of a New 

Fund is determined using the highest bid and the 

lowest offer on the Exchange at the time of 

calculation of such New Fund’s NAV. 

discounts and premiums of the Bid/Ask 

Price against the NAV, within 

appropriate ranges, for each of the four 

previous calendar quarters.12

10. Investors also will receive a 

Product Description describing a New 

Fund and its Fund Shares. Applicants 

state that, while not intended as a 

substitute for a Prospectus, the Product 

Description will contain information 

about Fund Shares that is tailored to 

meet the needs of investors purchasing 

Fund Shares in the secondary market. 

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

11. Section 17(a)(1) and (2) of the Act 

generally prohibit an affiliated person of 

a registered investment company, or an 

affiliated person of such a person 

(‘‘second tier affiliate’’), from selling any 

security to or purchasing any security 

from the company. Section 2(a)(3) of the 

Act defines ‘‘affiliated person’’ to 

include any person directly or indirectly 

owning, controlling, or holding with 

power to vote 5% or more of the 

outstanding voting securities of the 

other person and any person directly or 

indirectly controlling, controlled by, or 

under common control with, the other 

person. Section 2(a)(9) of the Act 

provides that a control relationship will 

be presumed where one person owns 

more than 25% of another person’s 

voting securities. The New Funds may 

be deemed to be controlled by the 

Adviser or an entity controlling, 

controlled by or under common control 

with the Adviser and hence affiliated 

persons of each other. In addition, the 

New Funds may be deemed to be under 

common control with any other 

registered investment company (or 

series thereof) advised by the Adviser or 

an entity controlling, controlled by or 

under common control with the Adviser 

(an ‘‘Affiliated Fund’’). Applicants state 

that because the definition of ‘‘affiliated 

person’’ includes any person owning 

5% or more of an issuer’s outstanding 

voting securities, every purchaser of a 

Creation Unit will be affiliated with the 

New Fund so long as fewer than twenty 

Creation Units are in existence, and any 

purchaser that owns more than 25% of 

a New Fund’s outstanding Fund Shares 

will be affiliated with a New Fund. 

Applicants request an exemption from 

section 17(a) under sections 6(c) and 

17(b), to permit in-kind purchases and 

redemptions by persons that are 

affiliated persons or second tier 

affiliates of the New Funds solely by 

virtue of one or more of the following: 

(1) Holding 5% or more, or more than 

25%, of the outstanding Fund Shares of 

either Trust or one or more New Funds; 

(2) an affiliation with a person with an 

ownership interest described in (1); or 

(3) holding 5% or more, or more than 

25%, of the shares of one or more 

Affiliated Funds. 

12. Section 17(b) of the Act authorizes 

the Commission to exempt a proposed 

transaction from section 17(a) of the Act 

if evidence establishes that the terms of 

the transaction, including the 

consideration to be paid or received, are 

reasonable and fair and do not involve 

overreaching on the part of any person 

concerned, and the proposed 

transaction is consistent with the 

policies of the registered investment 

company and the general provisions of 

the Act. Applicants contend that no 

useful purpose would be served by 

prohibiting affiliated persons or second 

tier affiliates of a New Fund from 

purchasing or redeeming Creation Units 

through ‘‘in-kind’’ transactions. The 

deposit procedure for in-kind purchases 

and the redemption procedure for inkind redemptions will be the same for 

all purchases and redemptions. Deposit 

Securities and Fund Securities will be 

valued under the same objective 

standards applied to valuing Portfolio 

Securities. Therefore, applicants state 

that in-kind purchases and redemptions 

will afford no opportunity for the 

affiliated persons and second tier 

affiliates described above to effect a 

transaction detrimental to the other 

holders of Fund Shares. Applicants also 

believe that in-kind purchases and 

redemptions will not result in abusive 

self-dealing or overreaching by these 

persons of the New Fund. 

Applicants’ Conditions 

Applicants agree that the Prior Order 

will continue to be subject to the same 

conditions, except that condition 1 will 

be deleted. With respect to the New 

Funds, applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 

1. Each New Fund’s Prospectus and 

Product Description will clearly 

disclose that, for purposes of the Act, 

the Fund Shares are issued by a 

registered investment company, and the 

acquisition of Fund Shares by 

investment companies is subject to the 

restrictions of section 12(d)(1) of the 

Act, except as permitted by an 

exemptive order that permits registered 

investment companies to invest in a 

New Fund beyond the limits in section 

12(d)(1), subject to certain terms and 

conditions, including that the registered 

investment company enter into an 

agreement with the New Fund regarding 

the terms of the investment. 

2. As long as a Trust operates in 

reliance on the requested order, its Fund 

Shares will be listed on an Exchange. 

3. Neither the Trusts nor any of the 

New Funds will be advertised or 

marketed as an open-end fund or a 

mutual fund. Each New Fund’s 

Prospectus will prominently disclose 

that Fund Shares are not individually 

redeemable shares and will disclose that 

the owners of Fund Shares may acquire 

those Fund Shares from the New Fund 

and tender those Fund Shares for 

redemption to such New Fund in 

Creation Units only. Any advertising 

material that describes the purchase or 

sale of Creation Units or refers to 

redeemability will prominently disclose 

that Fund Shares are not individually 

redeemable and that owners of Fund 

Shares may acquire those Fund Shares 

from the New Fund and tender those 

Fund Shares for redemption to the New 

Fund in Creation Units only. 

4. The Web site maintained for the 

Trusts, which is and will be publicly 

accessible at no charge, will contain the 

following information, on a per Fund 

Share basis, for each New Fund: (a) the 

prior business day’s NAV and the Bid/ 

Ask Price, and a calculation of the 

premium or discount of the Bid/Ask 

Price at the time of calculation of the 

NAV against such NAV; and (b) data in 

chart format displaying the frequency 

distribution of discounts and premiums 

of the daily Bid/Ask Price against the 

NAV, within appropriate ranges, for 

each of the four previous calendar 

quarters. In addition, the Product 

Description for each New Fund will 

state that the website for the New Fund 

has information about the premiums 

and discounts at which the Fund Shares 

have traded. 

5. Each New Fund’s Prospectus and 

annual report will also include: (a) the 

information listed in condition 4(b), (i) 

in the case of the Prospectus, for the 

most recently completed year (and the 

most recently completed quarter or 

quarters, as applicable) and (ii) in the 

case of the annual report, for the 

immediately preceding five years, as 

applicable; and (b) the following data, 

calculated on a per Fund Share basis for 

one, five and ten year periods (or life of 

the New Fund), (i) the cumulative total 

return and the average annual total 

return based on NAV and Bid/Ask Price, 

and (ii) the cumulative total return of 

the applicable Underlying Index. 

6. Before a New Fund may rely on the 

order, the Commission will have 

approved, pursuant to rule 19b–4 under 

the Exchange Act, an Exchange rule 

requiring Exchange members and 


pwalker on PROD1PC71 with NOTICES
25808 Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices 

1State Street Bank and Trust Company, et al., 

Investment Company Act Release No. 24666 (Sept. 

24, 2000), superseding The Select Sector SPDR 

Trust, Investment Company Act Release No. 23534 

(Nov. 13, 1998), as amended by SSgA Funds 

Management, Inc., et al., Investment Company Act 

Release No. 27543 (Nov. 1, 2006). 

member organizations effecting 

transactions in Fund Shares to deliver a 

Product Description to purchasers of 

Fund Shares. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–8599 Filed 5–4–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. IC–27809; 812–13356] 

SSgA Funds Management, Inc., et al.; 

Notice of Application 

April 30, 2007. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of application to amend 

a prior order under section 6(c) of the 

Investment Company Act of 1940 

(‘‘Act’’) for an exemption from sections 

2(a)(32), 5(a)(1), 22(d), 22(e) and 24(d) 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 (a)(2) of the Act. 

SUMMARY OF APPLICATION: Applicants 

request an order to amend a prior order 

that permits: (a) Open-end management 

investment companies, whose series are 

based on certain equity securities 

indices, to issue shares of limited 

redeemability; (b) secondary market 

transactions in the shares of the series 

to occur at negotiated prices; (c) dealers 

to sell shares to purchasers in the 

secondary market unaccompanied by a 

prospectus when prospectus delivery is 

not required by the Securities Act of 

1933 (‘‘Securities Act’’); (d) certain 

affiliated persons of the series to deposit 

securities into, and receive securities 

from, the series in connection with the 

purchase and redemption of 

aggregations of the series’ shares; and (e) 

under certain circumstances, the series 

that track certain foreign equity 

securities indices to pay redemption 

proceeds more than seven days after the 

tender of shares (the ‘‘Prior Order’’).1

Applicants seek to amend the Prior 

Order in order to offer additional series 

based on certain fixed income securities 

indices (the ‘‘New Funds’’). In addition, 

the order would delete a condition 

related to future relief in the Prior 

Order. 

APPLICANTS: SSgA Funds Management, 

Inc. (‘‘Adviser’’), State Street Global 

Markets LLC (‘‘Distributor’’), 

streetTRACKS Series Trust, and 

streetTRACKS Index Shares Funds 

(each, a ‘‘Trust’’ and together, the 

‘‘Trusts’’). 

FILING DATES: The application was filed 

on January 5, 2007 and amended on 

April 23, 2007. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the requested relief will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on May 24, 2007, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F 

Street, NE, Washington, DC 20549–

1090. Applicants: Scott M. Zoltowski, 

Esq., State Street Global Advisors, One 

Lincoln Street, Boston Massachusetts 

02111; Vincent Manzi, State Street 

Global Markets LLC, One Lincoln Street, 

Boston, Massachusetts 02111; and W. 

John McGuire, Esq., Morgan, Lewis & 

Bockius LLP, 1111 Pennsylvania 

Avenue, NW, Washington, DC 20004. 

FOR FURTHER INFORMATION CONTACT: 

Emerson S. Davis, Sr., Senior Counsel, 

at (202) 551–6868, or Mary Kay Frech, 

Branch Chief, at (202) 551–6821 

(Division of Investment Management, 

Office of Investment Company 

Regulation). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained for a fee at the 

Commission’s Public Reference Branch, 

100 F Street, NE, Washington, DC 

20549–0102 (tel. 202–551–5850). 

Applicants’ Representations 

1. Each Trust is an open-end 

management investment company 

registered under the Act and organized 

as a Massachusetts business trust. The 

Trusts are organized as series funds 

with multiple series. The Adviser, an 

investment adviser registered under the 

Investment Advisers Act of 1940, will 

serve as investment adviser to the New 

Funds. The Adviser may retain subadvisers (‘‘Sub-Advisers’’) to manage the 

assets of a New Fund. Any Sub-Adviser 

will be registered under the Advisers 

Act. The Distributor, a broker-dealer 

registered under the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’), 

will serve as the principal underwriter 

of the New Funds’’ shares. 

2. Each Trust is currently permitted to 

offer series based on equity securities 

indices in reliance on the Prior Order. 

Applicants seek to amend the Prior 

Order to permit the Trusts to offer the 

New Funds that, except as described in 

the application, would operate in a 

manner identical to the existing series of 

the Trusts that are subject to the Prior 

Order. 

3. The New Funds will invest in 

portfolios of securities generally 

consisting of the component securities 

of the Lehman Brothers 1–3 Year U.S. 

Treasury Index, Lehman Brothers 

Intermediate U.S. Treasury Index, 

Lehman Brothers Long U.S. Treasury 

Index, Lehman Brothers U.S. Aggregate 

Index, Lehman Brothers 1–3 Year U.S. 

Corporate Investment Grade Index, 

Lehman Brothers U.S. Intermediate 

Corporate Grade Index, and Lehman 

Brothers U.S. Long Corporate 

Investment Grade Index (the 

‘‘Underlying Indexes’’). No entity that 

creates, compiles, sponsors, or 

maintains an Underlying Index is or 

will be an affiliated person, as defined 

in section 2(a)(3) of the Act, or an 

affiliated person of an affiliated person, 

of the Trusts, the Adviser, any SubAdviser, the Distributor, or a promoter 

of a New Fund. 

4. The investment objective of each 

New Fund will be to provide investment 

results that correspond generally to the 

price and yield performance of the 

relevant Underlying Index. The Adviser 

may fully replicate a New Fund’s 

relevant Underlying Index or use a 

representative sampling strategy where 

the New Fund will seek to hold a 

representative sample of the component 

securities of the Underlying Index. Each 

New Fund generally will invest at least 

80% or 90% of its total assets, as 

disclosed in the relevant prospectus, in 

the securities that comprise the relevant 

Underlying Index, but at times may 

invest up to 20% of its total assets in 

certain futures, options, and swap 

contracts, cash and cash equivalents, as 

well as securities not included in its 

Underlying Index which the Adviser 

believes will help the New Fund track 

the Underlying Index. At all times, a 

New Fund will hold, in the aggregate, at 


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