Document ID: SEC-2006-1705-0001
Agency: sec
Document Type: Notice
Title: Barclays Global Fund Advisors, et al.; Notice of Application
Posted Date: 2006-12-28T05:00Z

[Federal Register: December 28, 2006 (Volume 71, Number 249)]
[Notices]               
[Page 78235-78237]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28de06-123]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27608; 812-13208]

 
Barclays Global Fund Advisors, et al.; Notice of Application

December 21, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application to amend certain prior orders under 
section 6(c) of the Investment Company Act of 1940 (``Act'') for an 
exemption from sections 2(a)(32), 5(a)(1)and 22(d) of the Act and rule 
22c-1 under the Act, and under sections 6(c) and 17(b) of the Act for 
an exemption from sections 17(a)(1) and (a)(2) of the Act.

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Summary of Application: Applicants request an order to amend a prior 
order that permits: (a) An open-end management investment company, 
whose series are based on certain fixed income securities indices, to 
issue shares of limited redeemability; (b) secondary market 
transactions in the shares of the series to occur at negotiated prices; 
and (c) affiliated persons of the series to deposit securities into, 
and receive securities from, the series in connection with the purchase 
and redemption of aggregations of the series' shares (the ``Prior Fixed 
Income Order'').\1\ Applicants seek to amend the Prior Fixed Income 
Order in order to offer an additional series based on a specified high-
yield bond index (the ``New Fund''). In addition, the order would 
delete a condition related to future relief

[[Page 78236]]

in the Prior Fixed Income Order and in certain prior orders relating to 
other exchange-traded funds offered by iShares Trust (the ``Trust'') 
and iShares, Inc. (the ``Corporation,'' together with the Trust, the 
``Companies'') (the ``Prior Equity Orders'', together with the Prior 
Fixed Income Order, the ``Prior Orders'').\2\
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    \1\ Barclays Global Fund Advisors, et al., Investment Company 
Act Release No. 25622 (June 25, 2002), as subsequently amended by 
iShares Trust, et al., Investment Company Act Release No. 26006 
(Apr. 15, 2003), Barclays Global Fund Advisors, et al., Investment 
Company Act Release No. 26175 (Sept. 8, 2003), and Barclays Global 
Fund Advisors, et al., Investment Company Act Release No. 27417 
(June 23, 2006).
    \2\ Barclays Global Fund Advisors, et al., Investment Company 
Act Rel. No. 24452 (May 12, 2000), iShares Trust, et al., Investment 
Company Act Rel. No. 25111 (Aug. 15, 2001) and iShares, Inc., et 
al., Investment Company Act Rel. No. 25215 (Oct. 18, 2001), each as 
amended by iShares, Inc., et al., Investment Company Act Rel. No. 
25623 (June 25, 2002), iShares Trust, et al., Investment Company Act 
Rel. No. 26006 (April 15, 2003) and Barclays Global Fund Advisors, 
Investment Company Act Rel. No. 26626 (Oct. 5, 2004). Barclays 
Global Fund Advisors, et al., Investment Company Act Rel. No. 24451 
(May 12, 2000), as amended by iShares, Inc., et al., Investment 
Company Act Rel. No. 25623 (June 25, 2002) and iShares Trust, et 
al., Investment Company Act Rel. No. 26006 (April 15, 2003).

Applicants: Barclays Global Fund Advisors (the ``Adviser''), the 
Corporation, the Trust, and SEI Investments Distribution Co. (the 
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``Distributor'').

Filing Dates: The application was filed on June 30, 2005 and amended on 
April 20, 2006 and November 22, 2006.

Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on January 16, 2007, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants: Ira Shapiro, 
Barclays Global Fund Advisors, c/o Barclays Global Investors, N.A., 45 
Fremont Street, San Francisco, CA 94105; Peter Kronberg, iShares, Inc. 
and iShares Trust, c/o Investors Bank & Trust Company, 200 Clarendon 
Street, Boston, MA 02116; John Munch, SEI Investments Distribution Co., 
One Freedom Valley Drive, Oaks, PA 19456; and W. John McGuire, Morgan, 
Lewis & Bockius LLP, 1111 Pennsylvania Avenue, NW., Washington, DC 
20004.

FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202) 
551-6870, or Michael W. Mundt, Senior Special Counsel, at (202) 551-
6821 (Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Branch, 100 F Street, NE, Washington, DC 
20549-0102 (tel. 202-551-5850).

Applicants' Representations

    1. The Trust is an open-end management investment company 
registered under the Act and organized as a Delaware business trust. 
The Corporation is an open-end management investment company registered 
under the Act and organized as a Maryland corporation. The Trust and 
Corporation are organized as series funds with multiple series. The 
Adviser, an investment adviser registered under the Investment Advisers 
Act of 1940, will serve as investment adviser to the New Fund. The 
Distributor, a broker-dealer unaffiliated with the Adviser and 
registered under the Securities Exchange Act of 1934 (``Exchange 
Act''), will serve as the principal underwriter of the New Fund's 
shares.
    2. The Trust is currently permitted to offer several series based 
on fixed income securities indices in reliance on the Prior Fixed 
Income Order. Applicants seek to amend the Prior Fixed Income Order to 
permit the Trust to offer the New Fund that, except as described in the 
application, would operate in a manner identical to the existing series 
of the Trust that are subject to the Prior Fixed Income Order.\3\
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    \3\ If the amended order is granted, the New Fund would also be 
able to rely on an exemptive order granting certain relief from 
section 24(d) of the Act to the existing series of the Trust that 
are subject to the Prior Orders. See iShares, Inc., et al., 
Investment Company Act Release No. 25595 25623 (June 25, 2002) as 
amended by iShares Trust, et al, Investment Company Act Release No. 
26006 (Apr. 15, 2003) (``Prospectus Delivery Order'').
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    3. The New Fund will invest in a portfolio of securities generally 
consisting of the component securities of the iBoxx $ Liquid High Yield 
Index (formerly the GS $ HYTop TM Index and the GS $ 
InvesTop High-Yield Bond Index) (the ``Underlying Index''). The 
Underlying Index is a rules-based index designed to reflect the 50 most 
liquid and tradable U.S. dollar-denominated high-yield corporate bonds 
registered for sale in the U.S. or exempt from registration. No entity 
that creates, compiles, sponsors, or maintains the Underlying Index is 
or will be an affiliated person, as defined in section 2(a)(3) of the 
Act, or an affiliated person of an affiliated person, of the Trust, the 
Adviser, the Distributor, or a promoter of the New Fund.
    4. The investment objective of the New Fund will be to provide 
investment results that correspond generally to the price and yield 
performance of the Underlying Index. The New Fund will utilize as an 
investment approach a representative sampling strategy where the New 
Fund will seek to hold a representative sample of the component 
securities of the Underlying Index. The New Fund generally will invest 
at least 90% of its assets in the component securities of the 
Underlying Index, but at times may invest up to 20% of its assets in 
certain futures, options, and swap contracts, cash and cash 
equivalents, and in bonds not included in its Underlying Index which 
the Adviser believes will help the New Fund track the Underlying Index. 
Applicants state that such high-yield corporate bonds will have pricing 
and liquidity characteristics similar to the component securities of 
the Underlying Index. Applicants expect that the New Fund will have a 
tracking error relative to the performance of its respective Underlying 
Index of no more than 5 percent.
    5. Applicants state that the New Fund will comply with the federal 
securities laws in accepting a deposit of a portfolio of securities 
designed by the Adviser to correspond generally to the price and yield 
of the New Fund's Underlying Index (``Deposit Securities'') and 
satisfying redemptions with portfolio securities of the New Fund 
(``Fund Securities''), including that the Deposit Securities and Fund 
Securities are sold in transactions that would be exempt from 
registration under the Securities Act of 1933 (the ``Securities 
Act'').\4\
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    \4\ In accepting Deposit Securities and satisfying redemptions 
with Fund Securities that are restricted securities eligible for 
resale pursuant to rule 144A under the Securities Act, the New Fund 
will comply with the conditions of rule 144A, including in 
satisfying redemptions with such rule 144A eligible restricted Fund 
Securities. The prospectus for the New Fund will also state that an 
authorized participant that is not a ``Qualified Institutional 
Buyer'' as defined in rule 144A(a)(1) will not be able to receive 
Fund Securities for redemption that are restricted securities 
eligible for resale under rule 144A.
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    6. Applicants state that all discussions contained in the 
application for the Prior Fixed Income Order are equally applicable to 
the New Fund, except as specifically noted by applicants (and 
summarized in this notice). Applicants believe that the requested 
relief

[[Page 78237]]

continues to meet the necessary exemptive standards.

Future Relief

    7. Applicants also seek to amend the Prior Orders to modify the 
terms under which the Companies may offer additional series in the 
future based on other securities indices (``Future Funds''). The Prior 
Fixed Income Order is currently subject to a condition that does not 
permit applicants to register any Future Fund by means of filing a 
post-effective amendment to a Fund's registration statement or by any 
other means, unless applicants have requested and received with respect 
to such Future Fund, either exemptive relief from the Commission or a 
no-action letter from the Division of Investment Management of the 
Commission. The Prior Equity Orders are currently subject to a similar 
condition related to future relief, although the condition to the Prior 
Equity Orders permits Future Funds to register with the Commission by 
means of filing a post-effective amendment to the Trust's or 
Corporation's registration statement if the Future Fund could be listed 
on a national securities exchange (``Exchange'') without the need for a 
filing pursuant to rule 19b-4 under the Exchange Act.
    8. The order would amend the Prior Orders to delete these 
conditions. Any Future Funds will (a) be advised by the Adviser or an 
entity controlled by or under common control with the Adviser; (b) 
track Underlying Indices that are created, compiled, sponsored or 
maintained by an entity that is not an affiliated person, as defined in 
section 2(a)(3) of the Act, or an affiliated person of an affiliated 
person, of the Adviser, the Distributor, the Trust or any subadviser or 
promoter of a Future Fund, and (c) comply with the respective terms and 
conditions of the Prior Orders, as amended by the present application.
    9. Applicants believe that the modification of the future relief 
available under the Prior Orders would be consistent with sections 6(c) 
and 17(b) of the Act and that granting the requested relief will 
facilitate the timely creation of Future Funds and the commencement of 
secondary market trading of such Future Funds by removing the need to 
seek additional exemptive relief. Applicants submit that the terms and 
conditions of the Prior Orders have been appropriate for the exchange-
traded funds advised by the Adviser (``Funds'') and would remain 
appropriate for Future Funds. Applicants also submit that tying 
exemptive relief under the Act to the ability of a Future Fund to be 
listed on an Exchange without the need for a rule 19b-4 filing under 
the Exchange Act is not necessary to meet the standards under sections 
6(c) and 17(b) of the Act.

Applicants' Conditions

    Applicants agree that the Prior Orders will be subject to the 
following conditions:
    1. Each Fund's prospectus (``Prospectus'') and product description 
(``Product Description'') will clearly disclose that, for purposes of 
the Act, the shares of each Fund (``iShares'') are issued by the Fund, 
which is an investment company, and that the acquisition of iShares by 
investment companies is subject to the restrictions of section 12(d)(1) 
of the Act, except as permitted by an exemptive order that permits 
investment companies to invest in a Fund beyond the limits in section 
12(d)(1), subject to certain terms and conditions, including that the 
investment company enter into an agreement with the Fund regarding the 
terms of the investment.
    2. As long as a Fund operates in reliance on the requested order, 
the iShares will be listed on an Exchange.
    3. Neither the Trust, the Corporation, nor any Fund will be 
advertised or marketed as an open-end fund or a mutual fund. Each 
Fund's Prospectus will prominently disclose that iShares are not 
individually redeemable shares and will disclose that the owners of 
iShares may acquire those iShares from the Fund and tender those 
iShares for redemption to the Fund in Creation Unit Aggregations \5\ 
only. Any advertising material that describes the purchase or sale of 
Creation Unit Aggregations or refers to redeemability will prominently 
disclose that iShares are not individually redeemable and that owners 
of iShares may acquire those iShares from the Fund and tender those 
iShares for redemption to the Fund in Creation Unit Aggregations only.
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    \5\ A ``Creation Unit Aggregation'' is a group of 50,000 or more 
iShares.
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    4. The Web site(s) for the Trust and the Corporation, which will be 
publicly accessible at no charge, will contain the following 
information, on a per iShare basis, for each Fund: (a) The prior 
business day's net asset value (``NAV'') and the midpoint of the bid-
ask spread at the time of calculation of such NAV (``Bid/Ask Price''), 
and a calculation of the premium or discount of such Bid/Ask Price 
against such NAV; and (b) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. In addition, the Product Description for 
each Fund will state that the Web site for the Trust or the 
Corporation, as applicable, has information about the premiums and 
discounts at which that Fund's iShares have traded.
    5. The Prospectus and annual report for each Fund will also 
include: (a) The information listed in condition 4(b), (i) in the case 
of the Prospectus, for the most recently completed year (and the most 
recently completed quarter or quarters, as applicable) and (ii) in the 
case of the annual report, for the immediately preceding five years, as 
applicable; and (b) the following data, calculated on a per iShare 
basis for one, five and ten year periods (or life of the Fund), (i) the 
cumulative total return and the average annual total return based on 
NAV and Bid/Ask Price, and (ii) the cumulative total return of the 
relevant Underlying Index.
    6. Before a Fund may rely on the Prospectus Delivery Order, the 
Commission will have approved, pursuant to rule 19b-4 under the 
Exchange Act, an Exchange rule requiring Exchange members and member 
organizations effecting transactions in iShares of such Fund to deliver 
a Product Description to purchasers of iShares.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6-22262 Filed 12-27-06; 8:45 am]

BILLING CODE 8011-01-P