7776 Federal Register / Vol. 73, No. 28 / Monday, February 11, 2008 / Notices 

9 17 CFR 200.30–3(a)(12). 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of the filing also will be available 

for inspection and copying at the 

principal office of the Exchange. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NYSEArca–2008–06 and 

should be submitted on or before 

February 26, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E8–2442 Filed 2–8–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

28147; 812–13470] 

WisdomTree Trust, et al.; Notice of 

Application 

February 6, 2008. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 6(c) of the 

Investment Company Act of 1940 

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

2(a)(32), 5(a)(1) and 22(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, and under section 

12(d)(1)(J) for an exemption from 

sections 12(d)(1)(A) and (B) of the Act. 

APPLICANTS: WisdomTree Trust (the 

‘‘Trust’’) and WisdomTree Asset 

Management, Inc. (the ‘‘Adviser’’). 

SUMMARY OF APPLICATION: Applicants 

request an order that permits: (a) Series 

of certain open-end management 

investment companies to issue shares 

(‘‘Shares’’) redeemable in large 

aggregations only (‘‘Creation Units’’); (b) 

secondary market transactions in Shares 

to occur at negotiated market prices; (c) 

certain affiliated persons of the series to 

deposit foreign currency and money 

market securities into, and receive 

foreign currency and money market 

securities from, the series in connection 

with the purchase and redemption of 

Creation Units; and (d) certain 

registered management investment 

companies and unit investment trusts 

outside of the same group of investment 

companies as the series to acquire 

Shares. 

FILING DATES: The application was filed 

on January 8, 2008, and amended on 

February 1, 2008. Applicants have 

agreed to file an amendment during the 

notice period, the substance of which is 

reflected in this notice. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the requested relief will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on February 26, 2008, 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: 380 Madison Avenue, 

21st Floor, New York, NY 10017. 

FOR FURTHER INFORMATION CONTACT: 

Bruce R. MacNeil, Senior Counsel, at 

(202) 551–6817, or Michael W. Mundt, 

Assistant Director, 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 Desk, 

100 F Street, NE., Washington, DC 

20549–0102 (tel. 202–551–5850). 

Applicants’ Representations 

1. The Trust is an open-end 

management investment company 

registered under the Act and organized 

as a Delaware statutory trust. The Trust 

will offer five new series that will invest 

substantially all of their assets in foreign 

money market securities: WisdomTree 

Euro Fund, WisdomTree British Pound 

Sterling Fund, WisdomTree Japanese 

Yen Fund, WisdomTree Australian 

Dollar Fund and WisdomTree 

International Currency Income Fund 

(collectively, the ‘‘Foreign Funds’’) and 

three new series that will invest in U.S. 

dollar money market securities: 

WisdomTree U.S. Cash Fund, 

WisdomTree U.S. Government Cash 

Fund, and WisdomTree Tax Exempt 

Cash Fund (collectively, the ‘‘Domestic 

Funds,’’ together with the Foreign 

Funds, the ‘‘Funds’’). 

2. Each Fund will invest in high 

quality money market securities and 

instruments that provide exposure to 

money market interest rates or such 

securities (‘‘Portfolio Securities’’). The 

Foreign Funds will invest in short-term 

money market securities that are 

denominated in the currency specified 

by the Fund’s name or in multiple 

foreign currencies, and the Domestic 

Funds will invest in money market 

securities denominated in U.S. dollars. 

Each Fund’s investment objective will 

be to earn current income while 

preserving capital and maintaining 

liquidity. In addition, each Foreign 

Fund will also have an investment 

objective to provide investors with 

exposure to high-quality money market 

instruments or rates denominated in a 

particular currency or currencies. Each 

Foreign Fund is designed to decrease in 

value when the value of the U.S. dollar 

increases relative to the applicable 

foreign currency or currencies and 

increase in value when the value of the 

U.S. dollar falls relative to the 

applicable foreign currency or 

currencies. While the value of each 

Foreign Fund’s Portfolio Securities is 

expected to be relatively constant in 

foreign currency terms, a Foreign Fund’s 

net asset value (‘‘NAV’’) will be 

expressed in U.S. dollars. Because of 

this, fluctuations in the per-share NAV 

of each Foreign Fund will be caused by 

fluctuations in the exchange rate 

between U.S. dollars and the applicable 

foreign currency or currencies. 

3. The Trust plans to offer future 

series that will hold money market 

securities denominated in U.S. dollars, 

other currencies or baskets of currencies 

(‘‘Future Funds’’). Applicants request 

that the order apply to any such Future 

Funds. Any Future Fund will (a) be 

advised by the Adviser or an entity 

controlled by or under common control 

with the Adviser, and (b) comply with 

the terms and conditions set forth in the 

application. The Funds and Future 

Funds together are the ‘‘Funds.’’ Each 

Fund will operate as an activelymanaged exchange-traded fund. 

4. The Adviser, a Delaware 

corporation, is registered as an 

investment adviser under the 

Investment Advisers Act of 1940 

(‘‘Advisers Act’’) and serves as 

investment adviser to each Fund. Each 


rwilkins on PROD1PC63 with NOTICES
Federal Register / Vol. 73, No. 28 / Monday, February 11, 2008 / Notices 7777 

1All entities that currently intend to rely on the 

order are named as applicants. Any other entity that 

relies on the order in the future will comply with 

the terms and conditions of the application. An 

Investing Fund (as defined below) may rely on the 

order only to invest in Funds and not in any other 

registered investment company. 

2At the beginning of each day that a Fund is 

open, including as required by section 22(e) of the 

Act (‘‘Business Day’’), the Adviser will make 

available the Portfolio Deposit. An indicative NAV 

will be disseminated every 15 seconds during 

trading hours at the Exchange (defined below) 

representing a per Share value based on the 

Portfolio Deposit as adjusted to reflect changing 

currency rates in effect throughout the Business 

Day. 

3 If Shares are listed on the Nasdaq, no particular 

Market Maker will be contractually obligated to 

make a market in Shares, although Nasdaq’s listing 

requirements stipulate that at least two Market 

Makers must be registered as Market Makers in 

Shares to maintain the listing. Registered Market 

Makers are required to make a continuous, twosided market at all times or be subject to regulatory 

sanctions. 

4Shares will be registered in book-entry form 

only. DTC or its nominee will be the registered 

owner of all outstanding Shares. DTC or DTC 

Participants will maintain records reflecting 

beneficial owners of Shares. 

5Applicants note that under accounting 

procedures followed by the Funds, portfolio trades 

made on the prior Business Day (‘‘T’’) will be 

booked and reflected in NAV on the current 

Business Day (‘‘T+1’’). Notwithstanding the 

foregoing, portfolio trades that are executed prior to 

the opening of the Exchange on any Business Day 

may be booked and reflected in NAV on such 

Business Day. Accordingly, the Funds will be able 

to disclose at the beginning of the Business Day the 

portfolio that will form the basis for the NAV 

calculation at the end of the Business Day. 

Fund may have one or more subadvisers 

(each, a ‘‘Fund Subadviser’’). Any Fund 

Subadviser will be registered as an 

investment adviser under the Advisers 

Act. ALPS Distributors, Inc., a brokerdealer registered under the Securities 

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

will serve as distributor and principal 

underwriter for the Funds 

(‘‘Distributor’’).1

5. Shares of the Funds will be sold at 

a price of between $50 and $200 per 

Share in Creation Units of at least 

25,000 Shares. All orders to purchase 

Creation Units must be placed with the 

Distributor by or through an 

‘‘Authorized Participant,’’ an entity that 

has entered into an agreement with the 

Distributor and that is a participant in 

the Depository Trust Company (‘‘DTC,’’

and such participant, ‘‘DTC 

Participant’’). Shares of each Fund 

generally will be sold in Creation Units 

in exchange for a ‘‘Currency Deposit,’’ a 

designated amount of currency (foreign 

currency with respect to the Foreign 

Funds; U.S. dollars with respect to the 

Domestic Funds). Each Fund reserves 

the right to specify money market 

securities (‘‘Deposit Securities’’) for 

deposit instead of currency. Each Fund 

will also specify an amount of U.S. 

dollars (‘‘Dollar Deposit’’) equal to any 

difference between the NAV (per 

Creation Unit) of a Fund and the total 

aggregate market value (per Creation 

Unit) of the Currency Deposit and/or the 

Deposit Securities. Collectively, the 

Currency Deposit, any Deposit 

Securities, and the Dollar Deposit are 

the ‘‘Portfolio Deposit.’’2

6. An investor purchasing a Creation 

Unit from a Fund will be charged a fee 

(‘‘Transaction Fee’’) to prevent the 

dilution of the interests of the remaining 

shareholders resulting from costs in 

connection with the purchase of 

Creation Units. The maximum 

Transaction Fees relevant to each Fund 

will be fully disclosed in the prospectus 

(‘‘Prospectus’’) of such Fund. Orders to 

purchase Creation Units of a Fund will 

be placed with the Distributor who will 

transmit orders to the Trust. 

7. Purchasers of Shares in Creation 

Units may hold such Shares or may sell 

such Shares into the secondary market. 

Shares will be listed on a national 

securities exchange, as defined in 

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

‘‘Exchange’’). It is expected that one or 

more member firms of a listing 

Exchange that is a national securities 

exchange will be designated to act as a 

specialist and maintain a market on the 

Exchange for Shares trading on the 

Exchange (the ‘‘Exchange Specialist’’), 

or if 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 

Shares trading on Nasdaq.3 Prices of 

Shares trading on an Exchange will be 

based on the current bid/ask market. 

Shares sold in the secondary market 

will be subject to customary brokerage 

commissions and charges. 

8. 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 a fair and orderly 

secondary market for the Shares, also 

may purchase Creation Units for use in 

its market-making activities. Applicants 

expect that secondary market 

purchasers of Shares will include both 

institutional investors and retail 

investors.4 Applicants expect that the 

price at which the 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 Shares will not trade at a material 

discount or premium in relation to their 

NAV. 

9. Shares will not be individually 

redeemable, and owners of Shares may 

acquire those Shares from a Fund, or 

tender such Shares for redemption to 

the Fund, in Creation Units only. To 

redeem, an investor must accumulate 

enough Shares to constitute a Creation 

Unit. Redemption orders must be placed 

by or through an Authorized 

Participant. An investor redeeming a 

Creation Unit generally will receive a 

designated amount of the applicable 

currency and/or money market 

securities denominated in the 

applicable currency and a U.S. dollar 

component (‘‘Redemption Payment’’). A 

redeeming investor may pay a 

Transaction Fee, to offset transfer and 

other transaction costs that may be 

incurred by the Fund in processing the 

redemption. 

10. Neither the Trust nor any 

individual Fund will be marketed or 

otherwise held out as an ‘‘open-end 

investment company’’ or a ‘‘mutual 

fund.’’ The Prospectus for each Fund 

will prominently disclose that the Fund 

is an ‘‘actively-managed exchangetraded fund.’’ All marketing materials 

that describe the method of obtaining, 

buying or selling Shares, or refer to 

redeemability, will prominently 

disclose that Shares are not individually 

redeemable and that the owners of 

Shares may purchase or redeem Shares 

from a Fund in Creation Units only. The 

same approach will be followed in the 

statement of additional information, 

shareholder reports and investor 

educational materials issued or 

circulated in connection with the 

Shares. The Funds will provide copies 

of their annual and semi-annual 

shareholder reports to DTC Participants 

for distribution to beneficial owners of 

Shares. 

11. The Funds’ Web site, which will 

be publicly available at no charge, will 

include the Prospectus and other 

information about the Funds that is 

updated on a daily basis, including the 

mid-point of the bid-ask spread at the 

time of the calculation of NAV (‘‘Bid/ 

Ask Price’’). On each Business Day, 

before the commencement of trading in 

Shares on the Exchange, each Fund will 

disclose the identities and quantities of 

the money market securities and other 

assets held by the Fund that will form 

the basis for the Fund’s calculation of 

NAV at the end of the Business Day.5

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) 

and 22(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 


rwilkins on PROD1PC63 with NOTICES
7778 Federal Register / Vol. 73, No. 28 / Monday, February 11, 2008 / Notices 

(a)(2) of the Act; and under section 

12(d)(1)(J) for an exemption from 

sections 12(d)(1)(A) and (B) of the Act. 

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

the Commission may exempt any 

person, security or transaction, or any 

class of persons, securities or 

transactions, from any provision of the 

Act, if and to the extent that such 

exemption is necessary or appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. Section 17(b) 

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. Section 12(d)(1)(J) of the Act 

provides that the Commission may 

exempt any person, security, or 

transaction, or any class or classes of 

persons, securities or transactions, from 

any provision of section 12(d)(1) if the 

exemption is consistent with the public 

interest and the protection of investors. 

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

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

‘‘open-end company’’ as a management 

investment company that is offering for 

sale or has outstanding any redeemable 

security of which it is the issuer. 

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

redeemable security as any security, 

other than short-term paper, under the 

terms of which the holder, upon its 

presentation to the issuer, is entitled to 

receive approximately his proportionate 

share of the issuer’s current net assets, 

or the cash equivalent. Because Shares 

will not be individually redeemable, 

applicants request an order that would 

permit each Fund, as a series of an 

open-end management investment 

company, to issue Shares that are 

redeemable in Creation Units only. 

Applicants state that investors may 

purchase Shares in Creation Units from 

each Fund and redeem Creation Units 

from each Fund. Applicants further 

state that because the market price of 

Shares will be disciplined by arbitrage 

opportunities, investors should be able 

to sell 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 Shares will take place at 

negotiated prices, not at a current 

offering price described in the 

prospectus, and not at a price based on 

NAV. Thus, purchases and sales of 

Shares in the secondary market will not 

comply with section 22(d) of the Act 

and rule 22c–1 under the Act. 

Applicants request an exemption under 

section 6(c) from these provisions. 

5. Applicants assert that the concerns 

sought to be addressed by section 22(d) 

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

with respect to pricing are equally 

satisfied by the proposed method of 

pricing Shares. Applicants maintain that 

while there is little legislative history 

regarding section 22(d), its provisions, 

as well as those of rule 22c–1, appear to 

have been designed to (a) prevent 

dilution caused by certain risklesstrading 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 Shares to trade in the 

secondary market at negotiated prices. 

Applicants state that (a) secondary 

market trading in Shares does not 

involve the Funds as parties and cannot 

result in dilution of an investment in 

Shares, and (b) to the extent different 

prices exist during a given trading day, 

or from day to day, such variances occur 

as a result of third-party market forces, 

such as supply and demand. Therefore, 

applicants assert that secondary market 

transactions in Shares will not lead to 

discrimination or preferential treatment 

among purchasers. Finally, applicants 

contend that the proposed distribution 

system will be orderly because arbitrage 

activity will ensure that the difference 

between the market price of Shares and 

their NAV remains narrow. 

Section 12(d)(1) of the Act 

7. Section 12(d)(1)(A) of the Act 

prohibits a registered investment 

company from acquiring shares of an 

investment company if the securities 

represent more than 3% of the total 

outstanding voting stock of the acquired 

company, more than 5% of the total 

assets of the acquiring company, or, 

together with the securities of any other 

investment companies, more than 10% 

of the total assets of the acquiring 

company. Section 12(d)(1)(B) of the Act 

prohibits a registered open-end 

investment company, its principal 

underwriter, or any other broker or 

dealer from selling its shares to another 

investment company if the sale will 

cause the acquiring company to own 

more than 3% of the acquired 

company’s voting stock, or if the sale 

will cause more than 10% of the 

acquired company’s voting stock to be 

owned by investment companies 

generally. 

8. Applicants request that the order 

permit certain investment companies 

registered under the Act to acquire 

Shares beyond the limitations in section 

12(d)(1)(A) and permit the Funds, any 

principal underwriter for the Funds, 

and any broker or dealer registered 

under the Exchange Act (‘‘Brokers’’), to 

sell Shares beyond the limitations in 

section 12(d)(1)(B). Applicants request 

that these exemptions apply to: (a) Any 

Fund that is currently or subsequently 

part of the same ‘‘group of investment 

companies’’ as the initial Funds within 

the meaning of section 12(d)(1)(G)(ii) of 

the Act, as well as any principal 

underwriter for the Funds and any 

Brokers selling Shares of a Fund to an 

Investing Fund (as defined below); and 

(b) each management investment 

company or unit investment trust 

registered under the Act that is not part 

of the same ‘‘group of investment 

companies’’ as the Funds within the 

meaning of section 12(d)(1)(G)(ii) of the 

Act and that enters into a FOF 

Participation Agreement (as defined 

below) with a Fund (such management 

investment companies are referred to 

herein as ‘‘Investing Management 

Companies,’’ such unit investment 

trusts are referred to herein as 

‘‘Investing Trusts,’’ and Investing 

Management Companies and Investing 

Trusts are ‘‘Investing Funds’’). Investing 

Funds do not include the Funds. Each 

Investing Trust will have a sponsor 

(‘‘Sponsor’’) and each Investing 

Management Company will have an 

investment adviser within the meaning 

of section 2(a)(20)(A) of the Act 


rwilkins on PROD1PC63 with NOTICES
Federal Register / Vol. 73, No. 28 / Monday, February 11, 2008 / Notices 7779 

6An ‘‘Investing Fund Affiliate’’ is an Investing 

Fund Adviser, Subadviser, Sponsor, promoter, and 

principal underwriter of an Investing Fund, and any 

person controlling, controlled by, or under common 

control with any of those entities. A ‘‘Fund 

Affiliate’’ is an investment adviser, promoter and 

principal underwriter of a Fund, and any person 

controlling, controlled by, or under common 

control with any of those entities. 

(‘‘Investing Fund Adviser’’) that does 

not control, is not controlled by or 

under common control with the 

Adviser. Each Investing Management 

Company may also have one or more 

investment advisers within the meaning 

of section 2(a)(20)(B) of the Act (each, a 

‘‘Subadviser’’). 

9. Applicants assert that the proposed 

transactions will not lead to any of the 

abuses that section 12(d)(1) was 

designed to prevent. Applicants submit 

that the proposed conditions to the 

requested relief address the concerns 

underlying the limits in section 12(d)(1), 

which include concerns about undue 

influence, excessive layering of fees and 

overly complex structures. 

10. Applicants believe that neither the 

Investing Funds nor an Investing Fund 

Affiliate would be able to exert undue 

influence over the Funds.6 Applicants 

propose a condition prohibiting the 

Investing Fund Adviser or Sponsor; any 

person controlling, controlled by, or 

under common with the Investing Fund 

Adviser or Sponsor; and any investment 

company or issuer that would be an 

investment company but for sections 

3(c)(1) or 3(c)(7) of the Act that is 

advised or sponsored by the Investing 

Fund Adviser or advised or sponsored 

by the Sponsor, or any person 

controlling, controlled by, or under 

common control with the Investing 

Fund Adviser or Sponsor (‘‘Investing 

Fund’s Advisory Group’’) from 

controlling (individually or in the 

aggregate) a Fund within the meaning of 

section 2(a)(9) of the Act. The same 

prohibition would apply to any 

Subadviser; any person controlling, 

controlled by, or under common control 

with the Subadviser; and any 

investment company or issuer that 

would be an investment company but 

for section 3(c)(1) or 3(c)(7) of the Act 

(or portion of such investment company 

or issuer) advised or sponsored by the 

Subadviser or any person controlling, 

controlled by, or under common control 

with the Subadviser (‘‘Investing Fund’s 

Subadvisory Group’’). 

11. Applicants propose other 

conditions to limit the potential for 

undue influence over the Funds, 

including that no Investing Fund or 

Investing Fund Affiliate (except to the 

extent it is acting in its capacity as an 

investment adviser to a Fund) will cause 

a Fund to purchase a security in any 

offering of securities during the 

existence of any underwriting or selling 

syndicate of which a principal 

underwriter is an Underwriting Affiliate 

(‘‘Affiliated Underwriting’’). An 

‘‘Underwriting Affiliate’’ is a principal 

underwriter in any underwriting or 

selling syndicate that is an officer, 

director, member of an advisory board, 

Investing Fund Adviser, Subadviser, 

employee or Sponsor of an Investing 

Fund, or a person of which any such 

officer, director, member of an advisory 

board, Investing Fund Adviser, 

Subadviser, employee, or Sponsor is an 

affiliated person (except any person 

whose relationship to the Fund is 

covered by section 10(f) of the Act is not 

an Underwriting Affiliate). 

12. Applicants do not believe that the 

proposed arrangement will involve 

excessive layering of fees. The board of 

directors or trustees of each Investing 

Management Company, including a 

majority of the disinterested directors or 

trustees, before approving any advisory 

contract under section 15 of the Act, 

will be required to determine that the 

advisory fees charged to the Investing 

Management Company are based on 

services provided that will be in 

addition to, rather than duplicative of, 

the services provided under the 

advisory contract(s) of any Fund in 

which the Investing Management 

Company may invest. In addition, the 

Investing Fund Adviser, trustee of an 

Investing Trust (‘‘Trustee’’) or Sponsor, 

as applicable, will waive fees otherwise 

payable to it by the Investing Fund in 

an amount at least equal to any 

compensation received from a Fund by 

the Investing Fund Adviser, Trustee or 

Sponsor, or an affiliated person of the 

Investing Fund Adviser, Trustee or 

Sponsor (other than any advisory fees), 

in connection with the investment by 

the Investing Fund in the Funds. 

Applicants also state that any sales 

charges and/or service fees charged with 

respect to shares of an Investing Fund 

will not exceed the limits applicable to 

a fund of funds set forth in NASD 

Conduct Rule 2830 (‘‘Rule 2830’’). 

13. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that a Fund will be 

prohibited from acquiring securities of 

any investment company, or of any 

company relying on section 3(c)(1) or 

3(c)(7) of the Act, in excess of the limits 

contained in section 12(d)(1)(A) of the 

Act. 

14. To ensure that Investing Funds are 

aware of the terms and conditions of the 

requested order, the Investing Funds 

must enter into an agreement with the 

respective Funds (‘‘FOF Participation 

Agreement’’). The FOF Participation 

Agreement will include an 

acknowledgment from the Investing 

Fund that it may rely on the order only 

to invest in the Funds and not in any 

other investment company. The FOF 

Participation Agreement will further 

require any Investing Fund that exceeds 

the 5% or 10% limitations in section 

12(d)(1)(A)(ii) and (iii) to disclose in its 

Prospectus that it may invest in 

exchange-traded funds and disclose, in 

‘‘plain English,’’ in its Prospectus the 

unique characteristics of the Investing 

Funds investing in investment 

companies, including but not limited to 

the expense structure and any 

additional expenses of investing in 

investment companies. 

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

15. 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. 

16. Applicants seek an exemption 

from section 17(a) to allow persons who 

hold (a) 5% or more, or in excess of 

25%, of all of the Shares of the Trust or 

of one or more Funds (or affiliated 

persons of such affiliated persons that 

are not otherwise affiliated with the 

Trust or Funds), or (b) 5% or more, or 

in excess of 25% of the shares of any 

other registered investment company (or 

series) advised by the Adviser, to effect 

purchases and redemptions through 

foreign currency and in-kind 

transactions with a Fund. Applicants 

also request relief from section 17(a) in 

order to permit each Fund to sell Shares 

to and redeem Shares from, and engage 

in the in-kind transactions that would 

accompany such sales and redemptions 

with, any Investing Fund of which it is 

an affiliated person or a second-tier 

affiliate because (a) the Investing Fund 

holds 5% or more of the Shares of one 

or more Funds, or (b) an Investing Fund 


rwilkins on PROD1PC63 with NOTICES
7780 Federal Register / Vol. 73, No. 28 / Monday, February 11, 2008 / Notices 

7Although applicants expect that most Investing 

Funds will purchase Shares in the secondary 

market and will not transact in Creation Units with 

a Fund, an Investing Fund could seek to transact 

in Shares directly with a Fund. 

described in (a) is an affiliated person of 

the Investing Fund.7

17. Applicants contend that no useful 

purpose would be served by prohibiting 

the specified affiliated persons from 

purchasing or redeeming Creation Units 

with foreign currency and in-kind 

securities transactions. The deposit 

procedures for purchases and the 

redemption procedures for redemptions 

of Creation Units will be the same for 

all purchases and redemptions. The 

Portfolio Deposit and the Redemption 

Payment will be valued in the same 

manner as the portfolio securities. 

Therefore, applicants state the foreign 

currency and in-kind purchases and 

redemptions for which relief is 

requested will afford no opportunity for 

the affiliated persons of a Fund, or the 

affiliated persons of such affiliated 

persons, described above, to effect a 

transaction detrimental to other holders 

of Shares. Applicants also believe that 

these purchases and redemptions will 

not result in self-dealing or overreaching 

of the Fund. 

18. Applicants state that any 

consideration paid for Shares in 

transactions with a Fund will be based 

on the Fund’s NAV. Applicants also 

state that any transactions directly 

between the Funds and the Investing 

Fund will be consistent with the 

policies of each Investing Fund. 

Applicants note that the FOF 

Participation Agreement will require 

each Investing Fund to represent that 

any purchase of Creation Units will be 

accomplished in compliance with the 

investment restrictions of the Investing 

Fund and will be consistent with the 

investment policies set forth in the 

Investing Fund’s registration statement. 

Applicants’ Conditions 

The applicants agree that any order of 

the Commission granting the requested 

relief will be subject to the following 

conditions: 

A. Actively-Managed Exchange-Traded 

Fund Relief 

1. Each Fund’s Prospectus will clearly 

disclose that, for purposes of the Act, 

Fund Shares are issued by the Fund and 

that the acquisition of Shares by 

investment companies and companies 

relying on sections 3(c)(1) or 3(c)(7) of 

the Act 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 Fund beyond 

the limits of section 12(d)(1), subject to 

certain terms and conditions, including 

that the registered investment company 

enter into a Participation Agreement 

with the Trust regarding the terms of the 

investment. 

2. As long as the Trust operates in 

reliance on the requested order, the 

Shares will be listed on an Exchange. 

3. Neither the Trust nor any Fund will 

be advertised or marketed as an openend investment company or a mutual 

fund. Each Fund’s Prospectus will 

prominently disclose that the Fund is an 

actively managed exchange traded fund. 

Each Prospectus also will prominently 

disclose that Shares are not individually 

redeemable and will disclose that the 

owners of Shares may acquire those 

Shares from the Fund and tender those 

Shares for redemption to the 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 Shares are not individually 

redeemable and that owners of Shares 

may acquire those Shares from the Fund 

and tender those Shares for redemption 

to the Fund in Creation Units only. 

4. The Web site maintained for the 

Trust, which is and will be publicly 

accessible at no charge, will contain the 

following information, on a per Share 

basis, for each 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. 

5. The Prospectus and annual report 

for each Fund will also include: (a) The 

information listed in condition A.4.(b), 

(i) in the case of the Fund’s 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 Share basis for one, 

five and ten year periods (or life of the 

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 

relevant foreign currency or currencies 

against the U.S. dollar if applicable. 

6. On each Business Day, before the 

commencement of trading in Shares on 

the Fund’s listing Exchange, the Fund 

will disclose on its Web site the 

identities and quantities of the money 

market securities and other assets held 

by the Fund that will form the basis for 

the Fund’s calculation of NAV at the 

end of the Business Day. 

7. The Adviser or Fund Subadviser, 

directly or indirectly, will not cause any 

Authorized Participant (or any investor 

on whose behalf an Authorized 

Participant may transact with the Fund) 

to acquire any Deposit Security for a 

Fund through a transaction in which the 

Fund could not engage directly. 

8. The requested order will expire on 

the effective date of any Commission 

rule under the Act that provides relief 

permitting the operation of activelymanaged exchange-traded funds. 

B. Section 12(d)(1) Relief 

1. The members of an Investing 

Fund’s Advisory Group will not control 

(individually or in the aggregate) a Fund 

within the meaning of section 2(a)(9) of 

the Act. The members of the Investing 

Fund’s Subadvisory Group will not 

control (individually or in the aggregate) 

a Fund within the meaning of section 

2(a)(9) of the Act. If, as a result of a 

decrease in the outstanding voting 

securities of a Fund, an Investing Fund’s 

Advisory Group or Investing Fund’s 

Subadvisory Group, each in the 

aggregate, becomes a holder of more 

than 25% of the outstanding voting 

securities of a Fund, it will vote its 

Shares in the same proportion as the 

vote of all other holders of the Fund’s 

Shares. This condition does not apply to 

the Investing Fund’s Subadvisory Group 

with respect to a Fund for which the 

Subadviser or a person controlling, 

controlled by, or under common control 

with the Subadviser acts as the 

investment adviser within the meaning 

of section 2(a)(20)(A) of the Act. 

2. No Investing Fund or Investing 

Fund Affiliate will cause any existing or 

potential investment by the Investing 

Fund in a Fund to influence the terms 

of any services or transactions between 

the Investing Fund or Investing Fund 

Affiliate and the Fund or Fund Affiliate. 

3. The board of directors or trustees of 

an Investing Management Company, 

including a majority of the disinterested 

directors or trustees, will adopt 

procedures reasonably designed to 

assure that the Investing Fund Adviser 

and any Subadviser are conducting the 

investment program of the Investing 

Management Company without taking 

into account any consideration received 

by the Investing Management Company 

or an Investing Fund Affiliate from a 

Fund or a Fund Affiliate in connection 

with any services or transactions. 

4. Once an investment by an Investing 

Fund in the securities of a Fund exceeds 

the limit in section 12(d)(1)(A)(i) of the 

Act, the board of directors/trustees of 


rwilkins on PROD1PC63 with NOTICES
Federal Register / Vol. 73, No. 28 / Monday, February 11, 2008 / Notices 7781 

the Fund (‘‘Board’’), including a 

majority of the disinterested Board 

members, will determine that any 

consideration paid by the Fund to the 

Investing Fund or an Investing Fund 

Affiliate in connection with any services 

or transactions: (a) Is fair and reasonable 

in relation to the nature and quality of 

the services and benefits received by the 

Fund; (b) is within the range of 

consideration that the Fund would be 

required to pay to another unaffiliated 

entity in connection with the same 

services or transactions; and (c) does not 

involve overreaching on the part of any 

person concerned. This condition does 

not apply with respect to any services 

or transactions between a Fund and its 

investment adviser(s), or any person 

controlling, controlled by, or under 

common control with such investment 

adviser(s). 

5. An Investing Fund Adviser or a 

trustee or Sponsor of an Investing Trust 

will waive fees otherwise payable to it 

by the Investing Management Company 

or Investing Trust in an amount at least 

equal to any compensation (including 

fees received pursuant to any plan 

adopted by a Fund under rule 12b–1 

under the Act) received from a Fund by 

the Investing Fund Adviser or trustee or 

Sponsor to the Investing Trust or an 

affiliated person of the Investing Fund 

Adviser, trustee or sponsor, other than 

any advisory fees paid to the Investing 

Fund Adviser or trustee or Sponsor, or 

an affiliated person of the Investing 

Fund Adviser, trustee or Sponsor by the 

Fund, in connection with the 

investment by the Investing 

Management Company or Investing 

Trust in the Fund. Any Subadviser will 

waive fees otherwise payable to the 

Subadviser, directly or indirectly, by the 

Investing Management Company in an 

amount at least equal to any 

compensation received from a Fund by 

the Subadviser, or an affiliated person of 

the Subadviser, other than any advisory 

fees paid to the Subadviser or its 

affiliated person by the Fund, in 

connection with the investment by the 

Investing Management Company in the 

Fund made at the direction of the 

Subadviser. In the event that the 

Subadviser waives fees, the benefit of 

the waiver will be passed through to the 

Investing Management Company. 

6. No Investing Fund or Investing 

Fund Affiliate (except to the extent it is 

acting in its capacity as an investment 

adviser to a Fund) will cause a Fund to 

purchase a security in any Affiliated 

Underwriting. 

7. The Board, including a majority of 

the disinterested Board members, will 

adopt procedures reasonably designed 

to monitor any purchases of securities 

by a Fund in an Affiliated Underwriting 

once an investment by the Investing 

Fund in the securities of the Fund 

exceeds the limit of section 

12(d)(1)(A)(i) of the Act, including any 

purchases made directly from an 

Underwriting Affiliate. The Board will 

review these purchases periodically, but 

no less frequently than annually, to 

determine whether the purchases were 

influenced by the investment by the 

Investing Fund in the Fund. The Board 

will consider, among other things: (a) 

whether the purchases were consistent 

with the investment objectives and 

policies of the Fund; (b) how the 

performance of securities purchased in 

an Affiliated Underwriting compares to 

the performance of comparable 

securities purchased during a 

comparable period of time in 

underwritings other than Affiliated 

Underwritings or to a benchmark such 

as a comparable market index; and (c) 

whether the amount of securities 

purchased by the Fund in Affiliated 

Underwritings and the amount 

purchased directly from an 

Underwriting Affiliate have changed 

significantly from prior years. The 

Board will take any appropriate actions 

based on its review, including, if 

appropriate, the institution of 

procedures designed to assure that 

purchases of securities in Affiliated 

Underwritings are in the best interests 

of shareholders. 

8. Each Fund will maintain and 

preserve permanently in an easily 

accessible place a written copy of the 

procedures described in the preceding 

condition, and any modifications to 

such procedures, and will maintain and 

preserve for a period not less than six 

years from the end of the fiscal year in 

which any purchase in an Affiliated 

Underwriting occurred, the first two 

years in an easily accessible place, a 

written record of each purchase of 

securities in Affiliated Underwritings 

once an investment by an Investing 

Fund in the securities of the Fund 

exceeds the limits of section 

12(d)(1)(A)(i) of the Act, setting forth 

from whom the securities were 

acquired, the identity of the 

underwriting syndicate’s members, the 

terms of the purchase, and the 

information or materials upon which 

the Board’s determinations were made. 

9. Before investing in a Fund in 

excess of the limits in section 

12(d)(1)(A), the Investing Fund and the 

Fund will execute a FOF Participation 

Agreement stating, without limitation, 

that their boards of directors or trustees 

and their investment advisers, and the 

trustee and Sponsor of an Investing 

Trust, as applicable, understand the 

terms and conditions of the order, and 

agree to fulfill their responsibilities 

under the order. At the time of its 

investment in shares of a Fund in excess 

of the limit in section 12(d)(1)(A)(i), an 

Investing Fund will notify the Fund of 

the investment. At such time, the 

Investing Fund will also transmit to the 

Fund a list of names of each Investing 

Fund Affiliate and Underwriting 

Affiliate. The Investing Fund will notify 

the Fund of any changes to the list of 

names as soon as reasonably practicable 

after a change occurs. The Fund and the 

Investing Fund will maintain and 

preserve a copy of the order, the 

agreement, and the list with any 

updated information for the duration of 

the investment and for a period of not 

less than six years thereafter, the first 

two years in an easily accessible place. 

10. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Investing Management Company, 

including a majority of the disinterested 

directors or trustees, will find that the 

advisory fees charged under such 

advisory contract are based on services 

provided that will be in addition to, 

rather than duplicative of, the services 

provided under the advisory contract(s) 

of any Fund in which the Investing 

Management Company may invest. 

These findings and their basis will be 

recorded fully in the minute books of 

the appropriate Investing Management 

Company. 

11. Any sales charges and/or service 

fees charged with respect to shares of an 

Investing Fund will not exceed the 

limits applicable to a fund of funds as 

set forth in Rule 2830. 

12. No Fund will acquire securities of 

any investment company or company 

relying on sections 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act, except 

to the extent permitted by exemptive 

relief from the Commission permitting 

the Fund to purchase shares of an 

affiliated money market fund for shortterm cash management purposes. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E8–2450 Filed 2–8–08; 8:45 am] 

BILLING CODE 8011–01–P 


rwilkins on PROD1PC63 with NOTICES