Document ID: SEC-2007-1343-0001
Agency: sec
Document Type: Notice
Title: WisdomTree Investments, Inc., et al.; Notice of Application
Posted Date: 2007-09-28T04:00Z

[Federal Register: September 28, 2007 (Volume 72, Number 188)]
[Notices]               
[Page 55255-55257]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28se07-129]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27976; 812-13417]

 
WisdomTree Investments, Inc., et al.; Notice of Application

September 21, 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, under sections 6(c) and 17(b) of the Act for an 
exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under 
section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and 
12(d)(1)(B) of the Act.

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Summary of Application: Applicants request an order (``Order'') to 
amend a prior order that permits: (a) An open-end management investment 
company, whose series track the performance of certain domestic and 
international equity securities indexes developed by the parent company 
of the series' investment adviser, to issue shares (``Shares'') 
redeemable only in large aggregations; (b) secondary market 
transactions in Shares 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; (e) under certain circumstances, the series that 
track certain foreign equity securities indexes to pay redemption 
proceeds more than seven days after the tender of Shares; and (f) 
certain management investment companies and unit investment trusts 
outside of the same group of investment companies as the series to 
acquire Shares (the ``Prior Order'').\1\ Applicants seek to amend the 
Prior Order in order to offer additional series based on certain fixed 
income securities indexes (the ``New Funds''). In addition, the Order 
would delete a condition related to future relief in the Prior Order.
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    \1\ WisdomTree Investments, Inc., et al., Investment Company Act 
Release Nos. 27324 (May 18, 2006) (notice) and 27391 (June 12, 2006) 
(order).

Applicants: WisdomTree Investments, Inc. (``WTI''), WisdomTree Asset 
Management, Inc. (the ``Advisor''), and WisdomTree Trust (the 
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``Trust'').

Filing Dates: The application was filed on August 13, 2007 and amended 
on September 19, 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 October 16, 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: 48 Wall Street, 
Suite 1100, New York, NY 10005.

[[Page 55256]]

FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel, 
at (202) 551-6812, 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. The Trust, a Delaware statutory trust registered under the Act 
as an open-end management investment company, is organized as a series 
fund with multiple series (the ``Equity Funds''). WTI, a Delaware 
corporation with its principal offices in New York City, is the sole 
shareholder of the Advisor. WTI has developed and maintains the 
proprietary indexes that serve or will serve as the basis for the 
Equity Funds and the New Funds. The Advisor is a Delaware corporation 
that is registered as an investment adviser under the Investment 
Advisers Act of 1940 (``Advisers Act''). The Advisor serves as 
investment adviser to the Equity Funds, and the Advisor, or an entity 
controlled by or under common control with the Advisor, will serve as 
investment adviser to the New Funds and any future series of the Trust 
(``Future Funds''). The Advisor and the Trust intend to hire one or 
more subadvisers (``Subadvisers'') for the New Funds, each of which 
will be registered as an investment adviser under the Advisers Act and 
will not otherwise be an affiliated person, or an affiliated person of 
an affiliated person, of the Trust, the Advisor, or WTI. ALPS 
Distributors, Inc. (``Distributor''), a broker-dealer registered under 
the Securities Exchange Act of 1934 (``Exchange Act''), acts as 
distributor and principal underwriter of the Equity Funds and may 
perform such services for the New Funds and any Future Funds.
    2. The Trust is currently permitted to offer the Equity Funds, 
which track equity securities indexes developed by WTI, in reliance on 
the Prior Order. Applicants seek to amend the Prior Order to permit the 
Trust to offer the New Funds, as well as Future Funds (together with 
the Equity Funds and the New Funds, the ``Funds'') that are advised by 
the Advisor or an entity controlled by or under common control with the 
Advisor and that comply with the terms and conditions of the Prior 
Order, as modified by the requested relief.
    3. The investment objective of each New Fund will be to provide 
investment results that correspond generally to the price and yield 
performance of its underlying index (``Underlying Index'') by investing 
in a portfolio of securities generally consisting of the component 
securities (``Component Securities'') of the Underlying Index.\2\ The 
Underlying Index for each New Fund tracks fixed income securities and 
will be rebalanced monthly.\3\ The Underlying Indexes for the New 
Funds, as well as the Underlying Indexes for the Equity Funds, have 
been created by WTI, an affiliated person, as defined in section 
2(a)(3) of the Act, of the Advisor and the Trust. Future Funds may be 
based on Underlying Indexes created, compiled, sponsored, or maintained 
by WTI or another index provider that is controlled by or under common 
control with WTI (a ``WTI Index Provider'') or on Underlying Indexes 
created, compiled, sponsored, or maintained by an entity that is not an 
affiliated person, or an affiliated person of an affiliated person, of 
the Fund, the Advisor, the Distributor, promoter, or any Subadviser to 
a Fund (a ``Non-Affiliated Index Provider''). Because Funds based on 
Underlying Indexes created by a WTI Index Provider could introduce 
potential conflicts of interest, the Prior Order contains certain 
representations and undertakings relating to the transparency of the 
methodology for those Underlying Indexes, and the establishment of 
certain policies and procedures to limit communication between index 
personnel and employees of the Advisor and any Subadviser. Applicants 
believe that these conflicts of interest do not exist where the index 
creator is a Non-Affiliated Index Provider. Applicants therefore seek 
to amend the Prior Order to provide that the relevant representations 
and undertakings in the application for the Prior Order should not 
apply to a Fund based on an Underlying Index created by a Non-
Affiliated Index Provider.
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    \2\ The Underlying Indexes for the New Funds are the WisdomTree 
International Government ex Japan Bond Index and the WisdomTree 
Government Strategies Index.
    \3\ The application for the Prior Order specified that 
Underlying Indexes created, compiled, sponsored, or maintained by a 
WTI Index Provider (as defined below) would be reconstituted no more 
frequently than quarterly. Applicants seek to amend the Prior Order 
to allow such Underlying Indexes to be reconstituted as frequently 
as monthly, which applicants indicate is a common methodology for 
fixed income indexes.
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    4. The applicants state that the Component Securities of the 
WisdomTree International Government ex Japan Bond Index include liquid 
investment grade government bonds denominated in developed market 
currencies other than the U.S. dollar and the Japanese yen, with a 
primary focus on fixed-rate coupon bonds in developed markets maturing 
between 3 and 10 years, and exclude securities with embedded options, 
floating-rate coupons, and zero coupons. The Component Securities of 
the WisdomTree Government Strategies Index include U.S. Treasury 
securities, obligations of U.S. government agencies and quasi-
government corporations, and U.S. mortgage-backed securities.\4\ Each 
New Fund may fully replicate its Underlying Index, but each New Fund 
currently intends to use a ``representative sampling'' strategy. Under 
a representative sampling strategy, a New Fund will hold a basket of 
the Component Securities of its Underlying Index, but may not hold all 
of the Component Securities of its Underlying Index. Each New Fund 
generally will invest at least 80% of its total assets in the Component 
Securities of the relevant Underlying Index. However, a New Fund may 
also at times invest up to 20 percent of its total assets in certain 
futures, options and swap contracts, and cash and cash equivalents, 
including money market funds, as well as securities not included in its 
Underlying Index, but which the Advisor believes will help the New Fund 
to track its Underlying Index. At all times, a New Fund and any Future 
Fund will hold in the aggregate at least 80% of its total assets in 
Component Securities and investments that have economic characteristics 
that are substantially identical to the economic characteristics of the 
Component Securities of its Underlying Index.\5\ Applicants expect that 
each New Fund will have a tracking error relative to the performance of 
its respective

[[Page 55257]]

Underlying Index of no more than 5 percent.
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    \4\ The Trust intends to substitute a cash-in-lieu amount to 
replace any Deposit Security or Fund Security (each as defined 
below) that is a ``to-be-announced transaction'' or ``TBA 
Transaction.'' A TBA Transaction is a method of trading mortgage-
backed securities where the buyer and seller agree upon general 
trade parameters such as agency, settlement date, par amount, and 
price. The actual pools delivered are determined two days prior to 
settlement date. The amount of substituted cash in the case of TBA 
Transactions will be equivalent to the value of the TBA Transaction 
listed as a Deposit Security or Fund Security.
    \5\ Applicants anticipate that investments that have economic 
characteristics substantially identical to those of the Component 
Securities of an Underlying Index will encompass securities such as 
depository receipts based on Component Securities and TBA 
Transactions.
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    5. Applicants state that the New Funds will comply with the federal 
securities laws in accepting a deposit of a portfolio of securities 
designated by the Advisor to correspond generally to the price and 
yield performance of the New Fund's Underlying Index (``Deposit 
Securities'') and satisfying redemptions with portfolio securities of 
the New Funds (``Fund Securities''), including that the Deposit 
Securities and Fund Securities are sold in transactions that would be 
exempt from registration under the Securities Act.\6\
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    \6\ 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, the New Funds 
will comply with 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,'' as defined in rule 144A under the Securities Act, will not 
be able to receive, as part of a redemption, restricted securities 
eligible for resale under rule 144A.
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    6. Applicants state that the New Funds will operate in a manner 
identical to the operation of the Equity Funds under the Prior Order, 
except as specifically noted by applicants (and summarized in this 
notice), and will comply with all of the terms, provisions and 
conditions of the Prior Order, as amended by the present application. 
Applicants believe that the requested relief continues to meet the 
necessary exemptive standards.

Future Relief

    7. Applicants also seek to amend the Prior Order to modify the 
terms under which the Trust may offer Future Funds. The Prior Order is 
currently subject to a condition that does not permit applicants to 
register the shares of any Future Fund by means of filing a post-
effective amendment to the Trust's registration statement or by any 
other means, unless applicants have requested and received with respect 
to such Future Fund, either exemptive relief from the Commission or a 
no-action letter from the Division of Investment Management of the 
Commission, or if the Future Fund could be listed on a national 
securities exchange (``Exchange'') without the need for a filing 
pursuant to rule 19b-4 under the Exchange Act.
    8. The order would amend the Prior Order to delete this condition. 
Any Future Fund will (a) be advised by the Advisor or an entity 
controlled by or under common control with the Advisor; (b) track 
Underlying Indexes that are created, compiled, sponsored or maintained 
by a WTI Index Provider or a Non-Affiliated Index Provider; and (c) 
comply with the respective terms and conditions of the Prior Order, as 
amended by the present application.
    9. Applicants believe that the modification of the future relief 
available under the Prior Order would be consistent with sections 6(c) 
and 17(b) of the Act and that granting the requested relief will 
facilitate the timely creation of Future Funds and the commencement of 
secondary market trading of such Future 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 existing 
series of the Trust and would remain appropriate for Future Funds. 
Applicants also submit that tying exemptive relief under the Act to the 
ability of a Future 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 sections 6(c) and 17(b) of the Act.

Applicants' Conditions

    Applicants agree that any Order granting the requested relief will 
be subject to the same conditions as those imposed by the Prior Order, 
except for condition 1 to the Prior Order, which will be deleted.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-19148 Filed 9-27-07; 8:45 am]

BILLING CODE 8010-01-P