Document ID: SEC-2006-1686-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-12-27T05:00Z

[Federal Register: December 27, 2006 (Volume 71, Number 248)]
[Notices]               
[Page 77823-77834]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27de06-110]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54961; File No. SR-Amex-2006-101]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of a Proposed Rule Change and Amendments No. 1 and 2 
Thereto Relating to the Listing and Trading of Shares of Funds of the 
ProShares Trust

December 18, 2006.

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 24, 2006, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by the 
Exchange. On November 22, 2006, Amex submitted Amendment No. 1 to the 
proposed rule change.\3\ On December 8, 2006, Amex submitted Amendment 
No. 2 to the proposed rule change.\4\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, Amex proposed to list and trade the 
shares of twenty-four (24) additional funds of the Trust (as defined 
herein) and made certain clarifying changes with respect to the 
trading of the Shares (as defined herein). Amendment No. 1 replaced 
the original filing in its entirety.
    \4\ In Amendment No. 2, Amex made additional changes to clarify 
certain defined terms, the creation and redemption of the Shares, 
and the criteria for continued listing of the Shares. Amendment No. 
2 replaced Amendment No. 1 in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the shares (the ``Shares'') 
of eighty-one (81) funds of the ProShares Trust (the ``Trust'') based 
on numerous underlying securities indexes. The text of the proposal is 
available on Amex's Internet Web site (http://www.amex.com), at Amex's 

principal

[[Page 77824]]

office, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change, as 
amended. The text of these statements may be examined at the places 
specified in Item IV below. The Exchange has prepared summaries, set 
forth in Sections A, B, and C below, of the most significant aspects of 
such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Amex Rules 1000A et seq. provide standards for the listing of Index 
Fund Shares, which are securities issued by an open-end management 
investment company for exchange trading. These securities are 
registered under the Investment Company Act of 1940 (``1940 Act''), as 
well as under the Act. Index Fund Shares are defined in Amex Rule 
1000A(b)(1) as securities based on a portfolio of stocks or fixed 
income securities that seek to provide investment results that 
correspond generally to the price and yield of a specified foreign or 
domestic stock index or fixed income securities index.
    Recent amendments adopting Amex Rule 1000A(b)(2) now permit the 
Exchange to list and trade Index Fund Shares that seek to provide 
investment results that exceed the performance of an underlying 
securities index by a specified multiple or that seek to provide 
investment results that correspond to a specified multiple of the 
inverse or opposite of the index's performance.
    The Exchange proposes to list under amended Amex Rule 1000A the 
Shares of eighty-one (81) new funds of the Trust that are designated as 
Ultra Funds, Short Funds, and UltraShort Funds (the ``Funds''). Each of 
the Funds will have a distinct investment objective. Each Fund will 
attempt, on a daily basis, to achieve its investment objective by 
corresponding to a specified multiple of the performance, or the 
inverse performance, of a particular equity securities index as briefly 
described below. The Funds are based on the following benchmark 
indexes: \5\ (1) S&P Small Cap 600 Index, (2) S&P500/Citigroup Value 
Index, (3) S&P500/Citigroup Growth Index, (4) S&P MidCap 400/Citigroup 
Value Index, (5) S&P MidCap 400/Citigroup Growth Index, (6) S&P 
SmallCap 600/Citigroup Value Index, (7) S&P SmallCap 600/Citigroup 
Growth Index, (8) Dow Jones U.S. Basic Materials Index, (9) Dow Jones 
U.S. Consumer Services Index, (10) Dow Jones U.S. Consumer Goods Index, 
(11) Dow Jones U.S. Oil and Gas Index, (12) Dow Jones U.S. Financials 
Index, (13) Dow Jones U.S. Health Care Index, (14) Dow Jones U.S. 
Industrials Index, (15) Dow Jones U.S. Real Estate Index, (16) Dow 
Jones U.S. Semiconductor Index (17) Dow Jones U.S. Technology Index, 
(18) Dow Jones U.S. Utilities Index (19) Russell 2000[supreg] Index, 
(20) Russell Midcap[supreg] Index, (21) Russell Midcap[supreg] Growth 
Index, (22) Russell Midcap[supreg] Value Index, (23) Russell 
1000[supreg] Index, (24) Russell 1000[supreg] Growth Index, (25) 
Russell 1000[supreg] Value Index, (26) Russell 2000[supreg] Growth 
Index, and (27) Russell 2000[supreg] Value Index (each index 
individually referred to as the ``Underlying Index,'' and all 
Underlying Indexes collectively referred to as the ``Underlying 
Indexes'').\6\ Certain Funds (the ``Ultra Funds'' or ``Bullish Funds'') 
seek daily investment results, before fees and expenses that correspond 
to twice (200%) the daily performance of the Underlying Indexes. The 
net asset value (``NAV'') of the Shares of each of these Ultra Funds, 
if successful in meeting its objective, should increase, on a 
percentage basis, approximately twice as much as the respective Fund's 
Underlying Index gains when the prices of the securities in such 
Underlying Index increase on a given day, and should decrease 
approximately twice as much as the respective Underlying Index loses 
when such prices decline on a given day.
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    \5\ A complete list of the Funds is set forth in Exhibit A to 
Amendment No. 2, which is available on Amex's Internet Web site 
(http://www.amex.com).

    \6\ The Statement of Additional Information (``SAI'') for the 
Funds discloses that each Fund reserves the right to substitute a 
different Underlying Index. Substitutions can occur if an Underlying 
Index becomes unavailable, no longer serves the investment needs of 
shareholders, the Fund experiences difficulty in achieving 
investment results that correspond to the applicable Underlying 
Index, or for any other reason determined in good faith by the Board 
(as defined herein). In such instance, the substitute index will 
attempt to measure the same general market as the current Underlying 
Index. Shareholders will be notified (either directly or through 
their intermediary) if a Fund's current Underlying Index is 
replaced. In the event a Fund substitutes an Underlying Index with 
another, different index, the Exchange will file with the Commission 
a Form 19b-4, which the Commission would have to approve to permit 
continued trading of the product based on the substitute index. See 
infra note 63 and accompanying text.
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    In addition, the Exchange proposes to list and trade Shares of 
certain Funds (the ``Short Funds'') that seek daily investment results, 
before fees and expenses, that correspond to the inverse or opposite of 
the daily performance (-100%) of the Underlying Indexes. If each of 
these Short Funds is successful in meeting its objective, the NAV of 
the Shares of each Short Fund should increase approximately as much, on 
a percentage basis, as the respective Underlying Index loses when the 
prices of the securities in the Underlying Index decline on a given 
day, or should decrease approximately as much as the respective 
Underlying Index gains when the prices of the securities in the 
Underlying Index rise on a given day.
    Finally, the Exchange proposes to list and trade Shares of certain 
Funds (the ``UltraShort Funds'') that seek daily investment results, 
before fees and expenses, that correspond to twice the inverse (-200%) 
of the daily performance of the Underlying Indexes. If each of these 
UltraShort Funds is successful in meeting its objective, the NAV of the 
Shares of each UltraShort Fund should increase approximately twice as 
much, on a percentage basis, as the respective Underlying Index loses 
when the prices of the securities in the Underlying Index decline on a 
given day, or should decrease approximately twice as much as the 
respective Underlying Index gains when the prices of the securities in 
the Underlying Index rise on a given day. The Short Funds and 
UltraShort Funds each have investment objectives that seek investment 
results corresponding to an inverse performance of the Underlying 
Indexes and are collectively referred to as the ``Bearish Funds.''
    The Commission recently approved the listing and trading of certain 
Ultra Funds, Short Funds, and UltraShort Funds based on the S&P 500 
Index, Nasdaq-100 Index, Dow Jones Industrial Average Index, and S&P 
MidCap 400 Index.\7\ Each of the existing Ultra Funds is expected to 
gain, on a percentage basis, approximately twice as much as the 
benchmark Underlying Index and should lose approximately twice as much 
as the Underlying Index when such prices decline. Each of the existing 
Short Funds is expected to achieve investment results, before fees and

[[Page 77825]]

expenses, that correspond to the inverse or opposite of the daily 
performance (-100%) of an Underlying Index. In addition, each of the 
existing UltraShort Funds is expected to achieve investment results, 
before fees and expenses, that correspond to twice the inverse or 
opposite of the daily performance (-200%) of an Underlying Index.
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    \7\ See Securities Exchange Act Release No. 52553 (October 3, 
2005), 70 FR 59100 (October 11, 2005). See also Securities Exchange 
Act Release No. 54040 (June 23, 3006), 71 FR 37629 (June 30, 2006) 
(approving Amex's proposal to list and trade shares of funds of the 
Trust based on certain other benchmark indexes).
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    ProShare Advisors LLC is the investment advisor (the ``Advisor'') 
to each Fund. The Advisor is registered under the Investment Advisers 
Act of 1940.\8\ While the Advisor will manage each Fund, the Trust's 
Board of Trustees (the ``Board'') will have overall responsibility for 
the Funds'' operations. The composition of the Board is, and will be, 
in compliance with the requirements of Section 10 of the 1940 Act.
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    \8\ The Trust, Advisor, and Distributor (``Applicants'') have 
filed with the Commission an Amended Application for an Order under 
Sections 6(c) and 17(b) of the 1940 Act (the ``Application'') for 
the purpose of exempting the Funds of the Trust from various 
provisions of the 1940 Act (File No. 812-12354).
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    SEI Investments Distribution Company (the ``Distributor''), a 
broker-dealer registered under the Act, will act as the distributor and 
principal underwriter of the Shares. JPMorgan Chase Bank, N.A. will act 
as the index receipt agent (``Index Receipt Agent'') for which it will 
receive fees. The Index Receipt Agent will be responsible for 
transmitting the Deposit List (as defined herein) to the National 
Securities Clearing Corporation (``NSCC'') and for the processing, 
clearance, and settlement of purchase and redemption orders through the 
facilities of the Depository Trust Company (``DTC'') and NSCC on behalf 
of the Trust. The Index Receipt Agent will also be responsible for the 
coordination and transmission of files and purchase and redemption 
orders between the Distributor and the NSCC.
    Shares of the Funds issued by the Trust will be a class of 
exchange-traded securities that represent an interest in the portfolio 
of a particular Fund.\9\ The Shares will be registered in book-entry 
form only, and the Trust will not issue individual share certificates. 
The DTC or its nominee will be the record or registered owner of all 
outstanding Shares. Beneficial ownership of Shares will be shown on the 
records of DTC or DTC participants.
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    \9\ The Trust is registered as a business trust under the 
Delaware Corporate Code.
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Underlying Indexes
    The Exchange represents that the Underlying Index components comply 
with the generic listing standards set forth in Commentary .02 to Amex 
Rule 1000A.
    S&P SmallCap 600 Index. The S&P SmallCap 600 Index is a measure of 
small-cap company U.S. stock market performance. It is a float-
adjusted, market capitalization-weighted index of 600 U.S. operating 
companies. Securities are selected for inclusion in the index by a 
committee of Standard & Poor's through a non-mechanical process that 
factors criteria such as liquidity, price, market capitalization, 
financial viability, and public float. This Underlying Index \10\ has 
been approved for options trading and is also the basis for an exchange 
traded fund (``ETF'').\11\
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    \10\ The shares of the iShares S&P SmallCap 600 Index Fund are 
traded on the Exchange.
    \11\ See Securities Exchange Act Release No. 35532 (March 24, 
1995), 60 FR 16518 (March 30, 1995).
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    S&P 500/Citigroup Value Index. The S&P 500/Citigroup Value Index is 
designed to provide a comprehensive measure of large-cap U.S. equity 
``value'' performance. It is an unmanaged, float-adjusted, and market 
capitalization-weighted index comprised of stocks representing 
approximately half the market capitalization of the S&P 500 Index that 
have been identified as being on the value end of the growth-value 
spectrum. This Underlying Index \12\ is the basis for an ETF.
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    \12\ 12 The shares of the iShares S&P 500 Value Index Fund are 
traded on the Exchange.
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    S&P 500/Citigroup Growth Index. The S&P 500/Citigroup Growth Index 
is designed to provide a comprehensive measure of large-cap U.S. equity 
``growth'' performance. It is an unmanaged, float-adjusted, and market 
capitalization-weighted index comprised of stocks representing 
approximately half the market capitalization of the S&P 500 Index that 
have been identified as being on the growth end of the growth-value 
spectrum. This Underlying Index \13\ is the basis for an ETF.
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    \13\ The shares of the iShares S&P 500 Growth Index Fund are 
traded on the Exchange.
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    S&P MidCap 400/Citigroup Value Index. The S&P MidCap 400/Citigroup 
Value Index is designed to provide a comprehensive measure of mid-cap 
U.S. equity ``value'' performance. It is an unmanaged, float-adjusted, 
and market capitalization-weighted index comprised of stocks 
representing approximately half the market capitalization of the S&P 
MidCap 400 Index that have been identified as being on the value end of 
the growth-value spectrum. This Underlying Index \14\ has been approved 
for options trading and is also the basis for an ETF.\15\
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    \14\ The shares of the iShares S&P MidCap 400 Value Index Fund 
are traded on the Exchange.
    \15\ See Securities Exchange Act Release 30290 (January 27, 
1992), 57 FR 4072 (February 3, 1992).
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    S&P MidCap 400/Citigroup Growth Index. The S&P MidCap 400/Citigroup 
Growth Index is designed to provide a comprehensive measure of mid-cap 
U.S. equity ``growth'' performance. It is an unmanaged, float-adjusted, 
and market capitalization-weighted index comprised of stocks 
representing approximately half the market capitalization of the S&P 
MidCap 400 Index that have been identified as being on the growth end 
of the growth-value spectrum. This Underlying Index \16\ has been 
approved for options trading and is also the basis for an ETF.\17\
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    \16\ The shares of the iShares S&P MidCap 400 Growth Index Fund 
are traded on the Exchange.
    \17\ See supra note 15.
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    S&P Small Cap 600/Citigroup Value Index. The S&P SmallCap 600/
Citigroup Value Index is designed to provide a comprehensive measure of 
small-cap U.S. equity ``value'' performance. It is an unmanaged, float-
adjusted, and market capitalization-weighted index comprised of stocks 
representing approximately half the market capitalization of the S&P 
SmallCap 600 Index that have been identified as being on the value end 
of the growth-value spectrum. This Underlying Index \18\ has been 
approved for options trading and is also the basis for an ETF.\19\
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    \18\ The shares of the iShares S&P SmallCap 600 Value Index Fund 
are traded on the Exchange.
    \19\ See supra note 11.
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    S&P SmallCap 600/Citigroup Growth Index. The S&P SmallCap 600/
Citigroup Growth Index is designed to provide a comprehensive measure 
of small-cap U.S. equity ``growth'' performance. It is an unmanaged, 
float-adjusted, and market capitalization-weighted index comprised of 
stocks representing approximately half the market capitalization of the 
S&P SmallCap 600 Index that have been identified as being on the growth 
end of the growth-value spectrum. This Underlying Index \20\has been 
approved for options trading and is also the basis for an exchange-
traded fund ETF.\21\
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    \20\ The shares of the iShares S&P SmallCap 600 Growth Index 
Fund are traded on the Exchange.
    \21\ See supra note 11.
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    Dow Jones U.S. Basic Materials Index. The Dow Jones U.S. Basic 
Materials Index measures the performance of the basic materials 
industry of the U.S. equity market. Component companies are involved in 
the production of aluminum, steel, non ferrous metals, commodity 
chemicals, specialty chemicals, forest products, paper products, as 
well as the mining of

[[Page 77826]]

precious metals and coal. This Underlying Index \22\ has been approved 
for options trading and is also the basis for an ETF.
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    \22\ The shares of the iShares Dow Jones U.S. Basic Materials 
Sector Index Fund are traded on the Exchange.
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    Dow Jones U.S. Consumer Goods Index. The Dow Jones U.S. Consumer 
Goods Index measures the performance of consumer spending in the goods 
industry of the U.S. equity market. Component companies include 
manufacturers of automobiles and automobile parts and tires, brewers 
and distillers, farming and fishing operations, durable and non-durable 
household product manufacturers, cosmetic companies, and companies 
related to food and tobacco products, clothing, accessories, and 
footwear. This Underlying Index \23\ is the basis for an ETF.
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    \23\ The shares of the iShares Dow Jones U.S. Consumer Goods 
Sector Index Fund are traded on the Exchange.
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    Dow Jones U.S. Consumer Services Index. The Dow Jones U.S. Consumer 
Services Index measures the performance of consumer spending in the 
services industry of the U.S. equity market. Component companies 
include airlines, broadcasting and entertainment companies, apparel and 
broadline retailers, food and drug retailers, media agencies, 
publishing companies, gambling companies, hotels, restaurants and bars, 
and travel and tourism companies. This Underlying Index \24\ is the 
basis for an ETF.
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    \24\ The shares of the iShares Dow Jones U.S. Consumer Services 
Sector Index Fund are traded on the Exchange.
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    Dow Jones U.S. Financials Index. The Dow Jones U.S. Financials 
Index measures the performance of the financial services industry of 
the U.S. equity market. Component companies include regional banks, 
major U.S. domiciled international banks, full line, life, and property 
and casualty insurance companies, companies that invest, directly or 
indirectly, in real estate, diversified financial companies such as 
Fannie Mae, credit card issuers, check cashing companies, mortgage 
lenders, and investment advisers, securities brokers and dealers, 
including investment banks, merchant banks, and online brokers, and 
publicly traded stock exchanges. This Underlying Index \25\ is the 
basis for an ETF.
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    \25\ The shares of the iShares Dow Jones U.S. Financial Services 
Index Fund are traded on the Exchange.
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    Dow Jones U.S. Health Care Index. The Dow Jones U.S. Health Care 
Index measures the performance of the healthcare industry of the U.S. 
equity market. Component companies include health care providers, 
biotechnology companies, medical supply companies, and companies 
related to advanced medical devices and pharmaceuticals. This 
Underlying Index \26\ is the basis for an ETF.
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    \26\ The shares of the iShares Dow Jones U.S. Healthcare Sector 
Index Fund are traded on the Exchange.
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    Dow Jones U.S. Industrials Index. The Dow Jones U.S. Industrials 
Index measures the performance of the industrial industry of the U.S. 
equity market. This Underlying Index includes component companies in 
sectors related to building materials, heavy construction, factory 
equipment, heavy machinery, industrial services, pollution control, 
containers and packaging, industrial diversified, air freight, marine 
transportation, railroads, trucking, land-transportation equipment, 
shipbuilding, transportation services, advanced industrial equipment, 
electronic components and equipment, and aerospace. This Underlying 
Index \27\ is the basis for an ETF.
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    \27\ The shares of the iShares Dow Jones U.S. Industrial Sector 
Index Fund are traded on the Exchange.
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    Dow Jones U.S. Oil & Gas Index. The Dow Jones U.S. Oil & Gas Index 
measures the performance of the oil and gas industry of the U.S. equity 
market. Component companies include oil drilling equipment and service 
companies, oil companies-major, oil companies-secondary, pipeline 
companies, liquid, solid, or gaseous fossil fuel producers, and related 
service companies. This Underlying Index \28\ is the basis for an ETF.
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    \28\ The shares of the iShares Dow Jones U.S. Energy Sector 
Index Fund are listed and traded on the Exchange.
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    Dow Jones U.S. Real Estate Index. The Dow Jones U.S. Real Estate 
Index measures the performance of the real estate sector of the U.S. 
equity market. Component companies include those that invest directly 
or indirectly in the development, management, or ownership of shopping 
malls, apartment buildings and housing developments, and real estate 
investment trusts (``REITs''), which invest in apartments and office 
and retail properties. REITs are passive investment vehicles that 
invest primarily in income-producing real estate or real estate related 
loans or interests. This Underlying Index \29\ has been approved for 
options trading and is also the basis for an ETF.
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    \29\ The shares of the iShares Dow Jones U.S. Real Estate Index 
Fund are listed and traded on the Exchange.
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    Dow Jones U.S. Semiconductor Index. The Dow Jones U.S. 
Semiconductor Index measures the performance of the semiconductor sub-
sector of the U.S. equity market. Component companies are engaged in 
the production of semiconductors and other integrated chips, as well as 
other related products such as semiconductor capital equipment and 
mother-boards.\30\
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    \30\ Amex represents that the Dow Jones U.S. Semiconductor Index 
meets the Exchange's generic standards under Amex Rule 1000A, 
Commentary .02.
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    Dow Jones U.S. Technology Index. The Dow Jones U.S. Technology 
Index measures the performance of the technology industry of the U.S. 
equity market. Component companies include those involved in computers 
and office equipment, software, communications technology, 
semiconductors, diversified technology services, and Internet services. 
This Underlying Index \31\ is the basis for an ETF.
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    \31\ The shares of the iShares Dow Jones U.S. Technology Sector 
Index Fund are listed and traded on the Exchange.
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    Dow Jones U.S. Utilities Index. The Dow Jones U.S. Utilities Index 
measures the performance of the utilities industry of the U.S. equity 
market. Component companies include electric utilities, gas utilities, 
and water utilities. This Underlying Index \32\ is the basis for an 
ETF.
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    \32\ The shares of the iShares Dow Jones U.S. Utilities Sector 
Index Fund are traded on the Exchange.
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    Russell 2000[reg] Index. The Russell 2000[reg] Index is a measure 
of small-cap U.S. stock market performance. It is an adjusted, market 
capitalization-weighted index containing approximately 2,000 of the 
smallest companies in the Russell 3000[reg] Index or approximately 8% 
of the total market capitalization of the Russell 3000[reg] Index, 
which in turn represents approximately 98% of the investable U.S. 
equity market. All U.S. companies listed on the New York Stock Exchange 
(``NYSE''), Amex, or The Nasdaq Stock Market meeting an initial minimum 
($1) price are considered for inclusion. Reconstitution occurs 
annually. Securities are not replaced if they leave the index; however, 
new issue securities meeting other membership requirements may be added 
on a quarterly basis. This Underlying Index \33\ has been approved for 
options trading and is also the basis for an ETF.
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    \33\ The shares of the iShares Russell 2000 Index Fund are 
traded on the Exchange.
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    Russell Midcap[reg] Index. The Russell Midcap[reg] Index measures 
the performance of the 800 smallest companies in the Russell 1000[reg] 
Index, which represent approximately 30% of the total market 
capitalization of the Russell 1000[reg] Index. As of the latest 
reconstitution, the average market

[[Page 77827]]

capitalization was approximately $5.2 billion; the median market 
capitalization was approximately $3.9 billion. The largest company in 
the index had an approximate market capitalization of $14.8 billion. 
This Underlying Index is the basis for an ETF.\34\
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    \34\ The shares of the iShares Russell Midcap Index Fund are 
traded on the Exchange.
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    Russell Midcap[reg] Growth Index. The Russell Midcap[reg] Growth 
Index measures the performance of those Russell Midcap companies with 
higher price-to-book ratios and higher forecasted growth values. The 
stocks are also members of the Russell 1000[reg] Growth Index. This 
Underlying Index \35\ is the basis for an ETF .
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    \35\ The shares of the iShares Russell Midcap Growth Index Fund 
are traded on the Exchange.
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    Russell Midcap[reg] Value Index. The Russell Midcap[reg] Value 
Index measures the performance of those Russell Midcap companies with 
lower price-to-book ratios and lower forecasted growth values. The 
stocks are also members of the Russell 1000[reg] Value Index. This 
Underlying Index \36\ is the basis for an ETF .
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    \36\ The shares of the iShares Russell Midcap Value Index Fund 
are traded on the Exchange.
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    Russell 1000[reg] Index. The Russell 1000[reg] Index measures the 
performance of the 1,000 largest companies in the Russell 3000[reg] 
Index, which represents approximately 92% of the total market 
capitalization of the Russell 3000[reg] Index. As of the latest 
reconstitution, the average market capitalization was approximately 
$13.8 billion; the median market capitalization was approximately $4.9 
billion. The smallest company in the index had an approximate market 
capitalization of $1.9 billion. This Underlying Index \37\ is the basis 
for an ETF .
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    \37\ The shares of the iShares Russell 1000 Index Fund are 
traded on the Exchange.
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    Russell 1000[reg] Growth Index. The Russell 1000[reg] Growth Index 
measures the performance of those Russell 1000 companies with higher 
price-to-book ratios and higher forecasted growth values. This 
Underlying Index \38\ is the basis for an ETF .
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    \38\ The shares of the iShares Russell 1000 Growth Index Fund 
are traded on the Exchange.
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    Russell 1000[reg] Value Index. The Russell 1000[reg] Value Index 
measures the performance of those Russell 1000 companies with lower 
price-to-book ratios and lower forecasted growth values. This 
Underlying Index \39\ is the basis for an ETF .
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    \39\ The shares of the iShares Russell 1000 Value Index Fund are 
traded on the Exchange.
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    Russell 2000[reg] Growth Index. The Russell 2000[reg] Growth Index 
measures the performance of those Russell 2000 companies with higher 
price-to-book ratios and higher forecasted growth values. This 
Underlying Index \40\ is the basis for an ETF .
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    \40\ The shares of the iShares Russell 2000 Growth Index Fund 
are traded on the Exchange.
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    Russell 2000[reg] Value Index. The Russell 2000[reg] Value Index 
measures the performance of those Russell 2000 companies with lower 
price-to-book ratios and lower forecasted growth values. This 
Underlying Index \41\ is the basis for an ETF .
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    \41\ The shares of the iShares Russell 2000 Value Index Fund are 
traded on the Exchange.
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Investment Objective of the Funds
    Each Bullish Fund will seek investment results that correspond, 
before fees and expenses, to twice (200%) the daily performance of an 
Underlying Index and will invest its assets based upon the same 
strategies as conventional index funds. Rather than holding positions 
in equity securities and certain financial instruments intended to 
create exposure to 100% of the daily performance of an Underlying 
Index, these Funds will hold positions in equity securities and certain 
financial instruments designed to create exposure equal to twice 
(200%), before fees and expenses, the daily performance of an 
Underlying Index. These Bullish Funds generally will hold at least 85% 
of their assets in the component equity securities of the relevant 
Underlying Index. The remainder of assets will be devoted to certain 
financial instruments \42\ and money market instruments \43\ that are 
intended to create the additional needed exposure to such Underlying 
Index necessary to pursue its investment objective.
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    \42\ The financial instruments to be held by any of the Funds 
may include stock index futures contracts, options on futures 
contracts, options on securities and indices, equity caps, collars 
and floors, as well as swap agreements, forward contracts, 
repurchase agreements, and reverse repurchase agreements (the 
``Financial Instruments'').
    \43\ Money market instruments include U.S. government securities 
and repurchase agreements (the ``Money Market Instruments''). 
Repurchase agreements held by the Funds will be consistent with Rule 
2a-7 of the 1940 Act, i.e., remaining maturities of 397 days or less 
and rated investment-grade.
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    The Bearish Funds will seek daily investment results, before fees 
and expenses, of the inverse or opposite (-100%) of the Underlying 
Index, in the case of the Short Funds, or twice the inverse or opposite 
(-200%) of the daily performance of the Underlying Index, in the case 
of the UltraShort Funds. Each of these Bearish Funds will not invest 
directly in the component securities of the relevant Underlying Index, 
but instead, will create short exposure to such Underlying Index. Each 
Bearish Fund will rely on establishing positions in Financial 
Instruments that provide, on a daily basis, the inverse or opposite of, 
or twice the inverse or opposite of, as the case may be, the 
performance of the relevant Underlying Index. Normally, 100% of the 
value of the portfolios of each Bearish Fund will be devoted to 
Financial Instruments and Money Market Instruments.
    While the Advisor will attempt to minimize any ``tracking error'' 
between the investment results of a particular Fund and the performance 
(and specified multiple thereof) or the inverse performance (and 
specified multiple thereof) of its Underlying Index, certain factors 
may tend to cause the investment results of a Fund to vary from such 
relevant Underlying Index or specified multiple thereof.\44\ The 
Bullish Funds are expected to be highly correlated to each respective 
Underlying Index and investment objective (0.95 or greater). The 
Bearish Funds are expected to be highly inversely correlated to each 
respective Underlying Index and investment objective (-0.95 or 
greater).\45\ In each case, the Funds are expected to have a daily 
tracking error of less than 5% (500 basis points) relative to the 
specified multiple or inverse multiple of the performance of the 
relevant Underlying Index.
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    \44\ Several factors may cause a Fund to vary from the relevant 
Underlying Index and investment objective including: (1) A Fund's 
expenses, including brokerage fees (which may be increased by high 
portfolio turnover) and the cost of the investment techniques 
employed by that Fund; (2) less than all of the securities in the 
benchmark index being held by a Fund and securities not included in 
the benchmark index being held by a Fund; (3) an imperfect 
correlation between the performance of instruments held by a Fund, 
such as futures contracts, and the performance of the underlying 
securities in the cash market; (4) bid-ask spreads (the effect of 
which may be increased by portfolio turnover); (5) holding 
instruments traded in a market that has become illiquid or 
disrupted; (6) a Fund's share prices being rounded to the nearest 
cent; (7) changes to the benchmark Underlying Index that are not 
disseminated in advance; (8) the need to conform a Fund's portfolio 
holdings to comply with investment restrictions or policies or 
regulatory or tax law requirements; and (9) early and unanticipated 
closings of the markets on which the holdings of a Fund trade, 
resulting in the inability of the Fund to execute intended portfolio 
transactions.
    \45\ Correlation is the strength of the relationship between (1) 
the change in a Fund's NAV and (2) the change in the benchmark 
Underlying Index (investment objective). The statistical measure of 
correlation is known as the ``correlation coefficient.'' A 
correlation coefficient of +1 indicates a perfect positive 
correlation while a value of -1 indicates a perfect negative 
(inverse) correlation. A value of zero would mean that there is no 
correlation between the two variables.

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[[Page 77828]]

The Portfolio Investment Methodology
    The Advisor will seek to establish an investment exposure in each 
portfolio corresponding to each Fund's investment objective based on 
its ``Portfolio Investment Methodology,'' as described below. The 
Exchange states that the Portfolio Investment Methodology is a 
mathematical model based on well-established principles of finance that 
are widely used by investment practitioners, including conventional 
index fund managers.
    As set forth in the Application, the Portfolio Investment 
Methodology was designed to determine for each Fund the portfolio 
investments needed to achieve its stated investment objectives. The 
Portfolio Investment Methodology takes into account a variety of 
specified criteria and data, the most important of which are: (1) Net 
assets (taking into account creations and redemptions) in each Fund's 
portfolio at the end of each trading day, (2) the amount of required 
exposure to the Underlying Index, and (3) the positions in equity 
securities, Financial Instruments, and/or Money Market Instruments at 
the beginning of each trading day. The Advisor pursuant to the 
methodology will then mathematically determine the end-of-day positions 
to establish the required amount of exposure to the Underlying Index 
(the ``Solution''), which will consist of equity securities, Financial 
Instruments, and/or Money Market Instruments. The difference between 
the start-of-day positions and the required end-of-day positions is the 
actual amount of equity securities, Financial Instruments, and/or Money 
Market Instruments that must be bought or sold for the day. The 
Solution represents the required exposure and, when necessary, is 
converted into an order or orders to be filled that same day.
    Generally, portfolio trades effected pursuant to the Solution are 
reflected in the NAV on the first business day (T+1) after the date the 
relevant trade is made. Therefore, the NAV calculated for a Fund on a 
given day should reflect the trades executed pursuant to the prior 
day's Solution. For example, trades pursuant to the Solution calculated 
on a Monday afternoon are executed on behalf of the Fund in question on 
that day. These trades will then be reflected in the NAV for that Fund 
that is calculated as of 4 p.m. Eastern Time (``ET'') on Tuesday.
    The timeline for the Portfolio Investment Methodology is as 
follows. Authorized Participants (``APs'' or ``Authorized 
Participants'') \46\ have a 3 p.m. ET cut-off for orders submitted by 
telephone, facsimile, and other electronic means of communication and a 
4 p.m. ET cut-off for orders received via mail. AP orders by mail are 
exceedingly rare. Orders are received by the Distributor and relayed to 
the Advisor within ten (10) minutes. The Advisor will know by 3:10 p.m. 
ET the number of creation/redemption orders by APs for that day. Orders 
are then placed at approximately 3:40 p.m. ET as market-on-close 
orders. At 4 p.m. ET, the Advisor will again look at the exposure to 
make sure that the orders placed are consistent with the Solution, and 
as described above, the Advisor will execute any other transactions in 
Financial Instruments to assure that the Fund's exposure is consistent 
with the Solution.
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    \46\ An Authorized Participant is either (1) a broker-dealer or 
other participant in the continuous net settlement system of the 
NSCC or (2) a DTC participant who has entered into a participant 
agreement with the Distributor.
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Description of Investment Techniques
    In attempting to achieve its individual investment objectives, a 
Fund may invest its assets in equity securities, Financial Instruments, 
and Money Market Instruments. The Bullish Funds will hold between 85-
100% of their total assets in the equity securities contained in the 
relevant Underlying Index. The remainder of assets, if any, will be 
devoted to Financial Instruments and Money Market Instruments that are 
intended to create additional needed exposure to such Underlying Index 
necessary to pursue the Bullish Funds' investment objectives. The 
Bearish Funds generally will not invest in equity securities related to 
the applicable Underlying Index, but rather will hold only Financial 
Instruments and Money Market Instruments. To the extent, applicable, 
each Fund will comply with the requirements of the 1940 Act with 
respect to ``cover'' for Financial Instruments and thus may hold a 
significant portion of its assets in liquid instruments in segregated 
accounts.
    Each Fund may engage in transactions in futures contracts on 
designated contract markets where such contracts trade and will only 
purchase and sell futures contracts traded on a U.S. futures exchange 
or board of trade. Each Fund will comply with the requirements of Rule 
4.5 of the regulations promulgated by the Commodity Futures Trading 
Commission (the ``CFTC'').\47\
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    \47\ The CFTC Rule 4.5 provides an exclusion for investment 
companies registered under the 1940 Act from the definition of the 
term ``commodity pool operator'' upon the filing of a notice of 
eligibility with the National Futures Association.
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    Each Fund may enter into swap agreements and/or forward contracts 
for the purposes of attempting to gain exposure to the equity 
securities of its Underlying Index without actually transacting such 
securities. The Exchange states that the counterparties to the swap 
agreements and/or forward contracts will be major broker-dealers and 
banks. The creditworthiness of each potential counterparty is assessed 
by the Advisor's credit committee pursuant to guidelines approved by 
the Board. Existing counterparties are reviewed periodically by the 
Board. Each Fund may also enter into repurchase and reverse repurchase 
agreements with terms of less than one year and will only enter into 
such agreements with (i) members of the Federal Reserve System, (ii) 
primary dealers in U.S. government securities, or (iii) major broker-
dealers. Each Fund may also invest in Money Market Instruments, in 
pursuit of its investment objectives, as ``cover'' for Financial 
Instruments, as described above, or to earn interest.
    The Trust will adopt certain fundamental policies consistent with 
the 1940 Act, and each Fund will be classified as ``non-diversified'' 
under the 1940 Act. Each Fund, however, intends to maintain the 
required level of diversification and otherwise conduct its operations 
so as to qualify as a ``regulated investment company'' or ``RIC'' for 
purposes of the Internal Revenue Code (the ``Code''), in order to 
relieve the Trust and the Funds of any liability for Federal income tax 
to the extent that its earnings are distributed to shareholders.\48\
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    \48\ In order for a Fund to qualify for tax treatment as a RIC, 
it must meet several requirements under the Code. Among these is the 
requirement that, at the close of each quarter of the Fund's taxable 
year, (i) at least 50% of the market value of the Fund's total 
assets must be represented by cash items, U.S. government 
securities, securities of other RICs, and other securities, with 
such other securities limited for purposes of this calculation in 
respect of any one issuer to an amount not greater than 5% of the 
value of the Fund's assets and not greater than 10% of the 
outstanding voting securities of such issuer, and (ii) not more than 
25% of the value of its total assets may be invested in the 
securities of any one issuer, or two or more issuers that are 
controlled by the Fund (within the meaning of Section 851 (b)(4)(B) 
of the Code) and that are engaged in the same or similar trades or 
businesses or related trades or businesses (other than U.S. 
government securities or the securities of other RICs).
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Availability of Information about the Shares and Underlying Indexes
    The Trust's Internet Web site (http://www.proshares.com), which is 

and will be publicly accessible at no charge, will contain the 
following information for each Fund's Shares: (a) The prior business 
day's closing NAV, the reported closing price, and a calculation

[[Page 77829]]

of the premium or discount of such price in relation to the closing 
NAV; (b) data for a period covering at least the four previous calendar 
quarters (or the life of a Fund, if shorter) indicating how frequently 
each Fund's Shares traded at a premium or discount to NAV based on the 
daily closing price and the closing NAV, and the magnitude of such 
premiums and discounts, (c) its prospectus and product description, and 
(d) other quantitative information, such as daily trading volume. The 
prospectus and/or product description for each Fund will inform 
investors that the Trust's Internet Web site has information about the 
premiums and discounts at which the Fund's Shares have traded.\49 \
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    \49\ The Application requests relief from Section 24(d) of the 
1940 Act, which would permit dealers to sell Shares in the secondary 
market unaccompanied by a statutory prospectus when prospectus 
delivery is not required by the Securities Act of 1933. 
Additionally, if a product description is being provided in lieu of 
a prospectus, Commentary .03 of Amex Rule 1000A requires that Amex 
members and member organizations provide to all purchasers of a 
series of Index Fund Shares a written description of the terms and 
characteristics of such securities, in a form prepared by the open-
end management investment company issuing such securities, not later 
than the time of confirmation of the first transaction in such 
series is delivered to such purchaser. Furthermore, any sales 
material will reference the availability of such circular and the 
prospectus.
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    The Amex will disseminate for each Fund on a daily basis by means 
of the Consolidated Tape Association (``CT'') and CQ High Speed Lines 
information with respect to an Indicative Intra-Day Value (the ``IIV'') 
(as defined and discussed herein), recent NAV, shares outstanding, and 
the estimated cash amount and total cash amount per Creation Unit. The 
Exchange will make available on its Internet Web site at http://www.amex.com
 daily trading volume, the closing price, the NAV, and the 

final dividend amounts to be paid for each Fund.
    Each Fund's total portfolio composition will be disclosed on the 
Internet Web site of the Trust (http://www.proshares.com or another 

relevant Internet Web site as determined by the Trust) and/or the 
Exchange (http://www.amex.com). The Trust expects that Internet Web 

site disclosure of portfolio holdings will be made daily and will 
include, as applicable, the names and number of shares held of each 
specific equity security, the specific types of Financial Instruments 
and characteristics of such Financial Instruments, and the cash 
equivalents and amount of cash held in the portfolio of each Fund. This 
public Internet Web site disclosure of the portfolio composition of 
each Fund will coincide with the disclosure by the Advisor of the ``IIV 
File'' (as described below) and the portfolio composition file or 
``PCF'' (as described below). Therefore, the same portfolio information 
(including accrued expenses and dividends) will be provided on the 
public Internet Web site as well as in the IIV File and PCF provided to 
Authorized Participants. The format of the public Internet Web site 
disclosure and the IIV File and PCF will differ because the public 
Internet Web site will list all portfolio holdings, while the IIV File 
and PCF will similarly provide the portfolio holdings, but in a format 
appropriate for Authorized Participants, i.e., the exact components of 
a Creation Unit.\50\ Accordingly, each investor will have access to the 
current portfolio composition of each Fund through the Trust's Internet 
Web site, at http://www.proshares.com, and/or at the Exchange's Internet Web site at http://www.amex.com.

---------------------------------------------------------------------------

    \50\ The composition will be used to calculate the NAV later 
that day.
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    Beneficial owners of Shares (``Beneficial Owners'') will receive 
all of the statements, notices, and reports required under the 1940 Act 
and other applicable laws. They will receive, for example, annual and 
semi-annual Fund reports, written statements accompanying dividend 
payments, proxy statements, annual notifications detailing the tax 
status of Fund distributions, and Form 1099-DIVs. Some of these 
documents will be provided to Beneficial Owners by their brokers, while 
others will be provided by the Fund through the brokers.
    The daily closing index value and the percentage change in the 
daily closing index value for each Underlying Index will be publicly 
available on various Internet Web sites, such as at http://www.bloomberg.com.
 Data regarding each Underlying Index is also 

available from the respective Underlying Index provider to subscribers. 
Several independent data vendors also package and disseminate 
Underlying Index data in various value-added formats (including vendors 
displaying both securities and index levels and vendors displaying 
index levels only). The value of each Underlying Index will be updated 
intra-day on a real time basis as its individual component securities 
change in price. These intra-day values of each Underlying Index will 
be disseminated at least every 15 seconds throughout the trading day by 
Amex or another organization authorized by the relevant Underlying 
Index provider in accordance with Commentary .02(c) to Amex Rule 1000A.
Creation and Redemption of Shares
    Each Fund will issue and redeem Shares only in aggregations of at 
least 50,000 (``Creation Units''). Purchasers of Creation Units will be 
able to separate the Creation Units into individual Shares. Once the 
number of Shares in a Creation Unit is determined, it will not change 
thereafter (except in the event of a stock split or similar 
revaluation). The initial value of a Share for each of the Bullish 
Funds and Bearish Funds is expected to be in the range of $50-$250.
    At the end of each business day, the Trust will prepare the list of 
names and the required number of shares of each Deposit Security (as 
defined herein) to be included in the next trading day's Creation Unit 
for each Bullish Fund (the ``Deposit List''). The Trust will then add 
to the Deposit List the cash information effective as of the close of 
business on that business day and create a PCF for each Fund, which it 
will transmit to NSCC before the open of business the next business 
day. The information in the PCF will be available to all participants 
in the NSCC system.
    Because the NSCC's system for the receipt and dissemination to its 
participants of the PCF is not currently capable of processing 
information with respect to Financial Instruments, the Advisor has 
developed an ``IIV File,'' which it will use to disclose the Funds'' 
holdings of Financial Instruments.\51\ The IIV File will contain, for 
each Bullish Fund (to the extent that it holds Financial Instruments) 
and Bearish Fund, information sufficient by itself or in connection 
with the PCF and other available information for market participants to 
calculate a Fund's IIV and effectively arbitrage such Fund.
---------------------------------------------------------------------------

    \51\ The Trust or the Advisor will post the IIV File to a 
password-protected Internet Web site before the opening of business 
on each business day, and all Authorized Participants and the 
Exchange will have access to a password and the Internet Web site 
containing the IIV File. The Funds, however, will disclose each 
business day to the public identical information, but in a format 
appropriate to public investors, at the same time the Funds disclose 
the IIV File and PCF, as applicable, to industry participants.
---------------------------------------------------------------------------

    For example, the following information would be provided in the IIV 
File for a Bullish Fund holding equity securities and Financial 
Instruments such as swaps and futures contracts and a Bearish Fund 
holding swaps and futures contracts: (A) The total value of the equity 
securities held by the Bullish Fund, (B) the notional value of the 
swaps held by such Funds (together with an indication of the Underlying 
Index on which such swap is based and whether the Funds' position is 
long or short), (C) the most

[[Page 77830]]

recent valuation of the swaps held by the Funds, (D) the notional value 
of any futures contracts (together with an indication of the Underlying 
Index on which such contract is based, whether the Funds' position is 
long or short and the contract's expiration date) held by the Funds, 
(E) the number of futures contracts held by the Funds (together with an 
indication of the Underlying Index on which such contract is based, 
whether the Funds' position is long or short and the contract's 
expiration date), (F) the most recent valuation of the futures 
contracts held by the Funds, (G) the total assets and total shares 
outstanding of each Fund, and (H) a ``net other assets'' figure 
reflecting expenses and income of the Funds to be accrued during and 
through the following business day and accumulated gains or losses on 
the Funds' Financial Instruments through the end of the business day 
immediately preceding the publication of the IIV File. To the extent 
that any Bullish or Bearish Fund holds cash or cash equivalents about 
which information is not available in a PCF, information regarding such 
Fund's cash and cash equivalent positions will be disclosed in the IIV 
File for such Fund.
    The information in the IIV File will be sufficient for participants 
in the NSCC system to calculate the IIV for Bearish Funds and, together 
with the information on equity securities contained in the PCF, will be 
sufficient for calculation of the IIV for Bullish Funds, during such 
next business day. The IIV File, together with the applicable 
information in the PCF in the case of Bullish Funds, will also be the 
basis for the next business day's NAV calculation.
    Under normal circumstances, the Bullish Funds will be created and 
redeemed either entirely for cash and/or for a deposit basket of equity 
securities (``Deposit Securities''), plus a Balancing Amount (as 
defined herein), as described below. Under normal circumstances, the 
Bearish Funds will be created and redeemed entirely for cash. The IIV 
File published before the open of business on a business day will, 
however, permit NSCC participants to calculate (by means of calculating 
the IIV) the amount of cash required to create a Creation Unit , and 
the amount of cash that will be paid upon redemption of a Creation 
Unit, for each Bearish Fund for that business day.
    For the Bullish Funds, the PCF will be prepared by the Trust after 
4 p.m. ET and transmitted by the Index Receipt Agent to the NSCC by 
6:30 p.m. ET. All Authorized Participants and the Exchange will have 
access to the Internet Web site containing the IIV File. The IIV File 
will reflect the trades made on behalf of a Bullish Fund that business 
day and the creation/redemption orders for that business day. 
Accordingly, by 6:30 p.m. ET, Authorized Participants will know the 
composition of the Bullish Fund's portfolio for the next trading day.
    Creation of the Bullish Funds. Typically, persons \52\ purchasing 
Creation Units from a Bullish Fund must make an in-kind deposit of a 
basket of Deposit Securities consisting of the securities selected by 
the Advisor from among those securities contained in the Fund's 
portfolio, together with an amount of cash specified by the Advisor 
(the ``Balancing Amount''), plus the applicable transaction fee (the 
``Transaction Fee''). The Deposit Securities and the Balancing Amount 
collectively are referred to as the ``Creation Deposit.'' The Balancing 
Amount is a cash payment designed to ensure that the value of a 
Creation Deposit is identical to the value of the Creation Unit. The 
Balancing Amount is an amount equal to the difference between the NAV 
of a Creation Unit and the market value of the Deposit Securities.\53\
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    \52\ Authorized Participants are the only persons who may place 
orders to create and redeem Creation Units. Authorized Participants 
must be registered broker-dealers or other securities market 
participants, such as banks and other financial institutions, that 
are exempt from registration as broker-dealers to engage in 
securities transactions and who are participants in DTC. See supra 
note 46.
    \53\ While not typical, if the market value of the Deposit 
Securities is greater than the NAV of a Creation Unit, then the 
Balancing Amount will be a negative number, in which case the 
Balancing Amount will be paid by the Bullish Fund to the purchaser, 
rather than vice-versa.
---------------------------------------------------------------------------

    The Balancing Amount will be determined shortly after 4 p.m. ET 
each business day. Although the Balancing Amount for most exchange-
traded funds is a small amount reflecting accrued dividends and other 
distributions, for the Bullish Funds it is expected to be larger due to 
changes in the value of the Financial Instruments, i.e., daily mark-to-
market. For example, assuming a basket of Deposit Securities is valued 
at $5 million for a Bullish Fund, if the market increases 10%, such 
basket of Deposit Securities would be equal to $5.5 million at 4 p.m. 
ET. The value of the Bullish Fund shares would increase by 20% or $1 
million to equal $6 million total. With such basket of Deposit 
Securities valued at $5.5 million, the Balancing Amount would be 
$500,000. The values of the next day's basket of Deposit Securities and 
Balancing Amount are announced between 5:30 p.m. ET and 6 p.m. ET each 
business day.
    The Balancing Amount may, at times, represent a significant portion 
of the aggregate purchase price (or in the case of redemptions, the 
redemption proceeds). This may occur because the mark-to-market value 
of the Financial Instruments held by the Bullish Funds, if any, is 
included in the Balancing Amount. The Transaction Fee is a fee imposed 
by the Bullish Funds on investors purchasing (or redeeming) Creation 
Units.
    The Trust will make available through the DTC or the Distributor on 
each business day, prior to the opening of trading on the Exchange, the 
Deposit List indicating the Deposit Securities to be included in the 
Creation Deposit for each Bullish Fund.\54\ The Trust also will make 
available on a daily basis information about the previous day's 
Balancing Amount.
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    \54\ In accordance with the Advisor's Code of Ethics, personnel 
of the Advisor with knowledge about the composition of a Creation 
Deposit will be prohibited from disclosing such information to any 
other person, except as authorized in the course of their 
employment, until such information is made public.
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    The Bullish Funds reserve the right to permit or require an 
Authorized Participant to substitute an amount of cash and/or a 
different security to replace any prescribed Deposit Security.\55\ 
Substitutions might be permitted or required, for example, because one 
or more Deposit Securities may be unavailable, or may not be available 
in the quantity needed to make a Creation Deposit. Brokerage 
commissions incurred by a Fund to acquire any Deposit Security not part 
of a Creation Deposit are expected to be immaterial, and in any event, 
the Adviser may adjust the relevant Transaction Fee to ensure that the 
Fund collects the extra expense from the purchaser. Orders to create or 
redeem Shares of the Bullish Funds must be placed through an Authorized 
Participant.
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    \55\ In certain limited instances, a Bullish Fund may require a 
purchasing investor to purchase a Creation Unit entirely for cash. 
For example, on days when a substantial rebalancing of a Fund's 
portfolio is required, the Advisor might prefer to receive cash 
rather than in-kind stocks so that it has liquid resources on hand 
to make the necessary purchases.
---------------------------------------------------------------------------

    As noted below, the Exchange will disseminate through the 
facilities of the CT, at least every 15 seconds during the Exchange's 
regular trading hours, the IIV on a per Fund Share basis. The Exchange 
states that the Funds will not be involved in, or responsible for, the 
calculation or dissemination of any such amount and will make no 
warranty as to its accuracy.

[[Page 77831]]

    Redemption of the Bullish Funds. Bullish Fund Shares in Creation 
Unit-size aggregations will be redeemable on any day on which the NYSE 
is open in exchange for a basket of securities (``Redemption 
Securities''). As it does for Deposit Securities, the Trust will make 
available to Authorized Participants on each business day prior to the 
opening of trading a list of the names and number of shares of 
Redemption Securities for each Fund. The Redemption Securities given to 
redeeming investors in most cases will be the same as the Deposit 
Securities required of investors purchasing Creation Units on the same 
day.\56\ Depending on whether the NAV of a Creation Unit is higher or 
lower than the market value of the Redemption Securities, the redeemer 
of a Creation Unit will either receive from or pay to the Bullish Fund 
a cash amount equal to the difference (the ``Redemption Balancing 
Amount''). In the typical situation where the Redemption Securities are 
the same as the Deposit Securities, this cash amount will be equal to 
the Balancing Amount described above in the creation process involving 
Deposit Securities. The redeeming investor also must pay to the Bullish 
Fund a transaction fee (``Redemption Transaction Fee'') to cover 
transaction costs.\57\
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    \56\ There may be circumstances, however, where the Deposit 
Securities and Redemption Securities could differ. For example, if 
ABC stock were replacing XYZ stock in a Fund's Underlying Index at 
the close of a day's trading session, the day's prescribed Deposit 
Securities might include ABC, but not XYZ, while the day's 
prescribed Redemption Securities might include XYZ but not ABC.
    \57\ Redemptions in which cash is substituted for one or more 
Redemption Securities may be assessed a higher Redemption 
Transaction Fee to offset the transaction cost to the Fund of 
selling those particular Redemption Securities. This Redemption 
Transaction Fee is expected to be between $500 and $1,000.
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    A Bullish Fund has the right to make redemption payments in cash, 
in kind, or a combination of each, provided that the value of its 
redemption payments equals the NAV of the Shares tendered at the time 
of tender, and the Redemption Balancing Amount. The Adviser currently 
contemplates that Creation Units of each Bullish Fund will be redeemed 
principally in kind with respect to the Redemption Securities and the 
Redemption Balancing Amount in cash largely resulting from the value of 
the Financial Instruments included in the Bullish Fund.
    In order to facilitate delivery of Redemption Securities, each 
redeeming Authorized Participant, acting on behalf of a Beneficial 
Owner or a DTC participant, must have arrangements with a broker-
dealer, bank, or other custody provider in each jurisdiction in which 
any of the Redemption Securities are customarily traded. If neither the 
redeeming Beneficial Owner nor the Authorized Participant has such 
arrangements, and it is not otherwise possible to make other 
arrangements, the Bullish Fund may, in its discretion, redeem the 
Bullish Fund Shares for cash.
    Creation and Redemption of the Bearish Funds. The Bearish Funds 
will be purchased and redeemed entirely for cash (``All-Cash 
Payments''). The use of an All-Cash Payment for the purchase and 
redemption of Creation Unit aggregations of the Bearish Funds is due to 
the limited transferability of Financial Instruments.
    The Exchange believes that Shares will not trade at a material 
discount or premium to the underlying securities held by a Fund based 
on potential arbitrage opportunities. The arbitrage process, which 
provides the opportunity to profit from differences in prices of the 
same or similar securities, increases the efficiency of the markets and 
serves to prevent potentially manipulative efforts. If the price of a 
Share deviates enough from the Creation Unit, on a per share basis, to 
create a material discount or premium, an arbitrage opportunity is 
created allowing the arbitrageur to either buy Shares at a discount, 
immediately cancel them in exchange for the Creation Unit, and sell the 
underlying securities in the cash market at a profit, or sell Shares 
short at a premium and buy the Creation Unit in exchange for the Shares 
to deliver against the short position. In both instances the 
arbitrageur locks in a profit and the markets move back into line.\58\
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    \58\ In their 1940 Act Application, the Applicants stated that 
they do not believe that All-Cash Payments will affect arbitrage 
efficiency. This is because the Applicants believe it makes little 
difference to an arbitrageur whether Creation Unit aggregations are 
purchased in exchange for a basket of securities or cash. The 
important function of the arbitrageur is to bid the share price of 
any Fund up or down until it converges with the NAV. Applicants note 
that this can occur regardless of whether the arbitrageur is allowed 
to create in cash or with a basket of Deposit Securities. In either 
case, the arbitrageur can effectively hedge a position in a Fund in 
a variety of ways, including the use of market-on-close contracts to 
buy or sell the Financial Instruments.
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    Placement of Creation Unit Purchases and Redemption Orders. 
Creation Unit aggregations of the Funds will be purchased at NAV, plus 
a Transaction Fee. For the Bearish Funds, the purchaser will make a 
cash payment by 12 p.m. ET on the third business day following the date 
on which the request was made (T+3). For the Bullish Funds, the 
purchaser will make an in-kind payment and/or all cash payment 
generally on the third business day following the date on which the 
request was made (T+3). Purchasers of either Fund in Creation Unit 
aggregations must satisfy certain creditworthiness criteria established 
by the Advisor and approved by the Board, as provided in the 
participation agreement (``Participation Agreement'') between the Trust 
and Authorized Participants.
    Creation Unit aggregations of the Bullish Funds will be redeemable 
either in-kind or all in cash equal to the NAV, less the Redemption 
Transaction Fee. Creation Unit aggregations of the Bearish Funds will 
be redeemable for an All-Cash Payment equal to the NAV, less the 
Redemption Transaction Fee. A Bullish Fund has the right to make 
redemption payments in cash, in kind, or a combination of each, 
provided that the value of its redemption payments equals the NAV of 
the Shares tendered for redemption at the time of tender.\59\
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    \59\ The Exchange states that, in the event an Authorized 
Participant has submitted a redemption request in good order and is 
unable to transfer all or part of a Creation Unit aggregation for 
redemption, a Fund may nonetheless accept the redemption request in 
reliance on the Authorized Participant's undertaking to deliver the 
missing Fund Shares as soon as possible, which undertaking shall be 
secured by the Authorized Participant's delivery and maintenance of 
collateral. The Authorized Participant's Participation Agreement 
will permit the Fund to buy the missing Shares at any time and will 
subject the Authorized Participant to liability for any shortfall 
between the cost to the Fund of purchasing the Shares and the value 
of the collateral.
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Dividends
    Dividends, if any, from net investment income will be declared and 
paid at least annually by each Fund in the same manner as by other 
open-end investment companies. Certain Funds may pay dividends on a 
semi-annual or more frequent basis. Distributions of realized 
securities gains, if any, generally will be declared and paid once a 
year.
    Dividends and other distributions on the Shares of each Fund will 
be distributed, on a pro rata basis to Beneficial Owners of such 
Shares. Dividend payments will be made through the DTC and the DTC 
participants to Beneficial Owners then of record with proceeds received 
from each Fund.
    The Trust will not make the DTC book-entry Dividend Reinvestment 
Service (the ``Dividend Reinvestment Service'') available for use by 
Beneficial Owners for reinvestment of their cash proceeds, but certain 
individual brokers may make a Dividend Reinvestment Service available 
to Beneficial Owners.

[[Page 77832]]

The SAI will inform investors of this fact and direct interested 
investors to contact such investor's broker to ascertain the 
availability and a description of such a service through such broker. 
The SAI will also caution interested Beneficial Owners that they should 
note that each broker may require investors to adhere to specific 
procedures and timetables in order to participate in the service, and 
such investors should ascertain from their broker such necessary 
details. Shares acquired pursuant to such service will be held by the 
Beneficial Owners in the same manner and subject to the same terms and 
conditions as for original ownership of Shares. Brokerage commissions, 
charges, and other costs, if any, incurred in purchasing Shares in the 
secondary market with the cash from the distributions generally will be 
an expense borne by the individual Beneficial Owners participating in 
reinvestment through such service.
Dissemination of Indicative Intra-Day Value (IIV)
    In order to provide updated information relating to each Fund for 
use by investors, professionals, and persons wishing to create or 
redeem Shares, the Exchange will disseminate through the facilities of 
the CT: (i) Continuously throughout the trading day, the market value 
of a Share, and (ii) at least every 15 seconds throughout the trading 
day, a calculation of the Indicative Intra-Day Value or ``IIV'' \60\ as 
calculated by the Exchange (the ``IIV Calculator''). \61\ Comparing 
these two figures helps an investor to determine whether, and to what 
extent, the Shares may be selling at a premium or a discount to NAV.
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    \60\ The IIV is also referred to by other issuers as an 
``Estimated NAV,'' ``Underlying Trading Value,'' ``Indicative 
Optimized Portfolio Value (IOPV),'' and ``Intraday Value'' in 
various places such as the prospectus and marketing materials for 
different exchange-traded funds.
    \61\ The Exchange will calculate the IIV for each Fund.
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    The IIV Calculator (the Exchange) will calculate an IIV for each 
Fund in the manner discussed below. The IIV is designed to provide 
investors with a reference value that can be used in connection with 
other related market information. The IIV does not necessarily reflect 
the precise composition of the current portfolio held by each Fund at a 
particular point in time. Therefore, the IIV on a per Share basis 
disseminated during Amex trading hours should not be viewed as a real 
time update of the NAV of a particular Fund, which is calculated only 
once a day. While the IIV that will be disseminated by Amex is expected 
to be close to the most recently calculated Fund NAV on a per share 
basis, it is possible that the value of the portfolio held by a Fund 
may diverge from the IIV during any trading day. In such case, the IIV 
will not precisely reflect the value of the Fund portfolio.
    IIV Calculation for the Bullish Funds. The IIV Calculator (the 
Exchange) will disseminate the IIV throughout the trading day for the 
Bullish Funds holding equity securities and Financial Instruments, if 
any. The IIV Calculator (the Exchange) will determine such IIV by: (i) 
Calculating the estimated current value of equity securities held by 
such Fund by (a) calculating the percentage change in the value of the 
Deposit Securities indicated on the Deposit List (as provided by the 
Trust) and applying that percentage value to the total value of the 
equity securities in the Fund as of the close of trading on the prior 
trading day (as provided by the Trust) or (b) calculating the current 
value of all of the equity securities held by the Fund (as provided by 
the Trust); (ii) calculating the mark-to-market gains or losses from 
the Fund's total return equity swap exposure based on the percentage 
change to the Underlying Index and the previous day's notional values 
of the swap contracts, if any, held by such Fund (which previous day's 
notional value will be provided by the Trust); (iii) calculating the 
mark-to-market gains or losses from futures, options, and other 
Financial Instrument positions by taking the difference between the 
current value of those positions held by the Fund, if any (as provided 
by the Trust), and the previous day's value of such positions; (iv) 
adding the values from (i), (ii), and (iii) above to an estimated cash 
amount provided by the Trust (which cash amount will include the swap 
costs), to arrive at a value; and (v) dividing that value by the total 
shares outstanding (as provided by the Trust) to obtain current IIV.
    IIV Calculation for the Bearish Funds. The IIV Calculator (the 
Exchange) will disseminate the IIV throughout the trading day for the 
Bearish Funds. The IIV Calculator (the Exchange) will determine such 
IIV by: (i) Calculating the mark-to-market gains or losses from the 
Fund's total return equity swap exposure based on the percentage change 
to the Underlying Index and the previous day's notional values of the 
swap contracts, if any, held by such Fund (which previous day's 
notional value will be provided by the Trust); (ii) calculating the 
mark-to-market gains or losses from futures, options, and other 
Financial Instrument positions by taking the difference between the 
current value of those positions held by the Fund, if any (as provided 
by the Trust), and the previous day's value of such positions; (iii) 
adding the values from (i) and (ii) above to an estimated cash amount 
provided by the Trust (which cash amount will include the swap costs), 
to arrive at a value; and (iv) dividing that value by the total shares 
outstanding (as provided by the Trust) to obtain current IIV.
Criteria for Initial and Continued Listing
    The Shares are subject to the criteria for initial and continued 
listing of Index Fund Shares under Amex Rule 1002A. A minimum of two 
Creation Units (at least 100,000 Shares) will be required to be 
outstanding at the start of trading. This minimum number of Shares 
required to be outstanding at the start of trading will be comparable 
to requirements that have been applied to previously listed series of 
Portfolio Depositary Receipts and Index Fund Shares. The Exchange 
believes that the proposed minimum number of Shares outstanding at the 
start of trading is sufficient to provide market liquidity. The 
Exchange, pursuant to Amex Rule 1002A(a)(ii), will obtain a 
representation from the Trust (for each Fund), prior to listing, that 
the NAV per share for each Fund will be calculated daily and made 
available to all market participants at the same time.
    The continued listing criteria provides for the delisting or 
removal from listing of the Shares under any of the following 
circumstances:
     If, following the initial twelve-month period after 
commencement of trading on the Exchange of a series of Index Fund 
Shares, there are fewer than 50 beneficial holders of the series of 
Index Fund Shares for 30 or more consecutive trading days; or
     If the value of the applicable Underlying Index or 
portfolio is no longer calculated or available on at least a 15-second 
delayed basis through one or more major market data vendors during the 
time the Shares trade on the Exchange; or
     The IIV is no longer made available on at least a 15-
second delayed basis;\62\ or
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    \62\ In the event an IIV is no longer calculated or disseminated 
by one or more major market data vendors, the Exchange will 
immediately contact the Commission.
---------------------------------------------------------------------------

     If such other event shall occur or condition exists which, 
in the opinion of the Exchange, makes further dealings on the Exchange 
inadvisable.
    Additionally, the Exchange will file a proposed rule change 
pursuant to Rule

[[Page 77833]]

19b-4 under the Act seeking approval to continue trading the Shares of 
a Fund and, unless approved, the Exchange will commence delisting the 
Shares of such Fund if:
     The Underlying Index provider substantially changes either 
the Underlying Index component selection methodology or the weighting 
methodology; or
     A successor or substitute index is used in connection with 
the Shares.\63 \
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    \63\ If the Trust uses a successor or substitute index, the 
Exchange's filing will address, among other things, the listing and 
trading characteristics of the successor or substitute index and the 
Exchange's surveillance procedures applicable thereto.
---------------------------------------------------------------------------

    Furthermore, Amex Rule 1002A(b)(ii) establishes that, if the IIV or 
the Underling Index value applicable to that series of Index Fund 
Shares is not being disseminated as required, the Exchange may halt 
trading during the day in which the interruption to the dissemination 
of the IIV or the Underlying Index value occurs. If the interruption to 
the dissemination of the IIV or the Underlying Index value persists 
past the trading day in which it occurred, the Exchange will halt 
trading no later than the beginning of the trading day following the 
interruption.
    The Exchange represents the Trust is required to comply with Rule 
10A-3 under the Act for the initial and continued listing of the 
Shares.
Original and Annual Listing Fees
    The Amex original listing fee applicable to the listing of the 
Funds is $5,000 for each Fund. In addition, the annual listing fee 
applicable to the Funds under Section 141 of the Amex Company Guide 
will be based upon the year-end aggregate number of outstanding shares 
in all Funds of the Trust listed on the Exchange.
Amex Trading Rules
    The Shares are equity securities subject to Amex rules governing 
the trading of equity securities, including, among others, rules 
governing priority, parity and precedence of orders, specialist 
responsibilities, and account opening and customer suitability (Amex 
Rule 411). \64\
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    \64\ Telephone conversation between Jeffrey P. Burns, Associate 
General Counsel, Amex, Nyieri Nazarian, Assistant General Counsel, 
Amex, and Edward Cho, Special Counsel, Division of Market 
Regulation, Commission, on December 14, 2006 (clarifying Amex 
trading rules applicable to the Shares).
---------------------------------------------------------------------------

    Stop and Stop Limit Orders. Amex Rule 154, Commentary .04(c), 
provides that stop and stop limit orders to buy or sell a security 
(other than an option, which is covered by Amex Rule 950(f) and 
Commentary thereto) the price of which is derivatively priced based 
upon another security or index of securities, may, with the prior 
approval of a floor official, be elected by a quotation, as set forth 
in Commentary .04(c)(i)-(v). The Exchange has designated Index Fund 
Shares, including the Shares, as eligible for this treatment.\65\
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    \65\ See Securities Exchange Act Release No. 29063 (April 10, 
1991), 56 FR 15652 (April 17, 1991) at note 9, regarding the 
Exchange's designation of equity derivative securities as eligible 
for such treatment under Amex Rule 154, Commentary .04(c).
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    Amex Rule 190. Amex Rule 190, Commentary .04, applies to Index Fund 
Shares listed on the Exchange, including the Shares. Commentary .04 
states that nothing in Rule 190(a) should be construed to restrict a 
specialist registered in a security issued by an investment company 
from purchasing and redeeming the listed security or securities that 
can be subdivided or converted into the listed security from the issuer 
as appropriate to facilitate the maintenance of a fair and orderly 
market.
Prospectus Delivery
    The Exchange, in an Information Circular to Exchange members and 
member organizations, prior to the commencement of trading, will inform 
members and member organizations of the application of Commentary .03 
of Amex Rule 1000A to the Funds. The Circular will further inform 
members and member organizations of the prospectus and/or product 
description delivery requirements that apply to the Funds. The 
Application included a request that the exemptive order also grant 
relief from Section 24(d) of the 1940 Act. Any product description used 
in reliance on Section 24(d) exemptive relief will comply with all 
representations and conditions set forth in the Application.\66 \
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    \66\ See supra note 49 and accompanying text.
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Trading Halts
    In addition to other factors that may be relevant, the Exchange may 
consider factors such as those set forth in Amex Rule 918C(b) in 
exercising its discretion to halt or suspend trading in Index Fund 
Shares. These factors include, but are not limited to, (1) the extent 
to which trading is not occurring in securities comprising an 
Underlying Index and/or the Financial Instruments of a Fund; or (2) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. In the case of 
the Financial Instruments held by a Fund, the Exchange represents that 
a notification procedure will be implemented so that timely notice from 
the Advisor is received by the Exchange when a particular Financial 
Instrument is in default or shortly to be in default. Notification from 
the Advisor will be made by phone, facsimile, or e-mail. The Exchange 
would then determine on a case-by-case basis whether a default of a 
particular Financial Instrument justifies a trading halt of the Shares. 
Trading in shares of the Funds will also be halted if the circuit 
breaker parameters under Amex Rule 117 have been reached.
    As noted above, Amex Rule 1002A(b)(ii) sets forth the trading halt 
parameters with respect to Index Fund Shares. If the IIV or the 
Underlying Index value applicable to that series of Index Fund Shares 
is not being disseminated as required, the Exchange may halt trading 
during the day in which the interruption to the dissemination of the 
IIV or the Underlying Index value occurs. If the interruption to the 
dissemination of the IIV or the Underlying Index value persists past 
the trading day in which it occurred, the Exchange will halt trading no 
later than the beginning of the trading day following the interruption.
Suitability and Information Circular
    Prior to commencement of trading, the Exchange will issue an 
Information Circular to its members and member organizations providing 
guidance with regard to member firm compliance responsibilities 
(including suitability obligations) when effecting transactions in the 
Shares and highlighting the special risks and characteristics of the 
Funds and Shares as well as applicable Exchange rules.
    This Information Circular will set forth the requirements relating 
to Commentary .05 to Amex Rule 411 (Duty to Know and Approve 
Customers). Specifically, the Information Circular will remind members 
of their obligations in recommending transactions in the Shares so that 
members have a reasonable basis to believe that (1) the recommendation 
is suitable for a customer given reasonable inquiry concerning the 
customer's investment objectives, financial situation, needs, and any 
other information known by such member, and (2) that the customer can 
evaluate the special characteristics, and is able to bear the financial 
risks, of such investment. In connection with the suitability 
obligation, the Information Circular will also provide that members 
make reasonable efforts to obtain the following information: (a) The 
customer's financial status; (b) the customer's tax status; (c) the 
customer's

[[Page 77834]]

investment objectives; and (d) such other information used or 
considered to be reasonable by such member or registered representative 
in making recommendations to the customer.
Purchases and Redemptions in Creation Unit Size
    In the Information Circular referenced above, Amex members and 
member organizations will be informed that procedures for purchases and 
redemptions of Shares in Creation Units are described in each Fund's 
prospectus and SAI, and that Shares are not individually redeemable, 
but are redeemable only in Creation Unit aggregations or multiples 
thereof.
Surveillance
    The Exchange represents that its surveillance procedures are 
adequate to properly monitor the trading of the Shares. Specifically, 
Amex will rely on its existing surveillance procedures governing Index 
Fund Shares, which have been deemed adequate under the Act. In 
addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Hours of Trading/Minimum Price Variation
    The Funds will trade on the Exchange until 4:15 p.m. ET each 
business day. Shares will trade with a minimum price variation of $.01.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\67\ in general, and furthers the 
objectives of Section 6(b)(5),\68\ in particular, in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transaction in securities, and, in general, to protect investors and 
the public interest.
---------------------------------------------------------------------------

    \67\ 15 U.S.C. 78f(b).
    \68\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed rule change, as amended, will 
impose no burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange did not receive any written comments on the proposed 
rule change, as amended.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which Amex consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The Commission is considering granting accelerated approval of the 
proposed rule change, as amended, at the end of a 15-day comment 
period.\69\
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    \69\ Amex has requested accelerated approval of this proposed 
rule change, as amended, prior to the 30th day after the date of 
publication of the notice of the filing thereof, following the 
conclusion of a 15-day comment period.
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-Amex-2006-101 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-Amex-2006-101. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, 

all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the 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. 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-Amex-2006-101 and should be submitted on or before 
January 11, 2007.
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    \70\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\70\
Nancy M. Morris,
Secretary.
 [FR Doc. E6-22093 Filed 12-26-06; 8:45 am]

BILLING CODE 8011-01-P