[Federal Register Volume 66, Number 146 (Monday, July 30, 2001)]
[Notices]
[Pages 39377-39381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-18941]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25078; 812-12254]


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

July 24, 2001.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940 (``Act'') for an exemption from sections 
2(a)(32), 5(a)(1), 22(d), and 22(e) 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 that would permit 
an open-end management investment company, whose portfolios will 
consist of the component securities of certain foreign equity 
securities indices, to issue shares of limited redeemability; permit 
secondary market transactions in the shares of the portfolios at 
negotiated prices on a national securities exchange, as defined in 
section 2(a)(26) of the Act (a ``Listing Exchange''); permit certain 
affiliated persons of the portfolios to deposit securities into, and 
receive securities from, the portfolios in connection with the purchase 
and redemption of aggregations of the portfolios' shares; and permit 
the portfolios to pay redemption proceeds more than seven days after 
the tender of shares of the portfolios for redemption under certain 
circumstances.
    Applicants: Barclays Global Fund Advisors (``Adviser''), iShares 
Trust (the ``Trust'') and SEI Investments Distribution Company 
(``Distributor'').
    Filing Dates:The application was filed on September 15, 2000. 
Applicants have agreed to file an amendment during the notice period, 
the substance of which is reflected in this notice.
    Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on August 14, 2001 and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing request should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons may request notification of a hearing by writing to 
the Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 5th Street, NW., Washington, DC 
20549-0609. iShares Trust, c/o Susan Mosher, Esq., Investors Bank & 
Trust Company, 200 Clarendon Street, Boston, MA 02116; Barclays Global 
Fund Advisors, c/o Joanne T. Medero, Esq., Barclays Global Investors, 
45 Fremont Street, San Francisco, CA 94105; and SEI Investments 
Distribution Company, One Freedom Valley Drive, Oaks, PA 19456, Attn: 
William Zittelli, Esq.

FOR FURTHER INFORMATION CONTACT: Mary Kay Frech, Branch Chief, at (202) 
942-0579 (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,

[[Page 39378]]

450 5th Street, NW., Washington, DC 20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. The Trust is an open-end management investment company 
registered under the Act and organized as a Delaware business trust. 
The Trust is organized as a series fund with multiple series.\1\ The 
Trust intends to offer sixteen new series of shares (each a ``New 
Fund''). The Adviser, an investment adviser registered under the 
Investment Advisers Act of 1940, will serve as investment adviser for 
each 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 and 
distributor of each New Fund's shares.
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    \1\ The Trust currently has seven series operating under the 
terms of a prior order. See Barclays Global Fund Advisors, 
Investment Company Act Release Nos. 24393 (April 17, 2000) (notice) 
and 24452 (May 12, 2000) (order).
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    2. Each New Fund will invest in a portfolio of securities 
(``Portfolio Securities'') generally consisting of the component 
securities of a specified equity securities index (each, an ``Subject 
Index'').\2\ In the future, applicants may offer additional series of 
the Trust (``Future Funds'') based on other foreign equity securities 
indices. Any Future Fund will (a) be advised by the Adviser or an 
entity controlled by or under common control with the Adviser and (b) 
comply with the terms and conditions of the order (references to ``New 
Funds'' include ``Future Funds''). No entity that creates, compiles, 
sponsors or maintains a Subject Index 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, any subadviser to a New 
Fund or the Distributor.
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    \2\ At least 90% of each New Fund's assets will be invested in 
the component securities of its Subject Index. A New Fund may also 
invest up to 10% of its assets in certain futures, option and swap 
contracts, cash and cash equivalents, as well as certain securities 
not included in the Subject Index under limited circumstances.
    The Subject Indices for the New Funds are the Standard & Poor's 
(``S&P'') Global Consumer Discretionary Index; the S&P Global 
Consumer Staples Index; the S&P Global Energy Index; the S&P Global 
Financials Index; the S&P Global Health Care index; the S&P Global 
Industries Index; the S&P Global Information Technology Index; the 
S&P Global Materials Index; the S&P Global Telecommunication 
Services Index; the S&P Global Utilities Index; the S&P TOPIX 150 
Index; the S&P Asia Pacific 100 Index; the S&P Latin America 40 
Index; the S&P the S&P Global 1200 Index; the S&P Global 700 Index; 
and the MSCI EAFE Index.
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    3. The investment objective of each New Fund will be to provide 
investmennt results that correspond generally to the price and yield 
performance of its relevant Subject Index. It is currently expected 
that intra-day values of each Subject Index will be disseminated every 
15 seconds throughout the trading day. A New Fund will utilize as an 
investment approach either a replication strategy or a representative 
sampling strategy. A New Fund utilizing a replication strategy 
generally will hold most of the component securities of the Subject 
Index, in the same approximate proportions as the Subject Index, but 
may not hold all of the underlying securities that comprise a Subject 
Index in certain instances. This may be the case when, for example, a 
potential component security is illiquid or when there are practical 
difficulties or substantial costs involved in holding every security in 
a Subject Index. A New Fund using a representative sampling strategy 
seeks to hold a representative sample of the component securities of 
the Subject Index and will invest in some but not all of the component 
securities of its Subject Index.\3\ Applicants anticipate that a New 
Fund that utilizes the representative samplying technique will not 
track its Subject Index with the same degree of accuracy as an 
investment vehicle that invested in every component security of the 
Subject Index with the same weighing as the Subject Index. Applicants 
expect that each New Fund will have a tracking error relative to the 
performance of its respective Subject Index of no more than 5 percent.
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    \3\ The stocks selected for inclusion in a New Fund by the 
Adviser will have aggregate investment characteristics (based on 
marker capitalization and industry weighings), fund characteristics 
(such as return variability, earnings valuation and yield) and 
liquidity measures similar to those of the Subject Index taken in 
its entirety.
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    4. Shares of a New Fund (``Shares'') will be sold in aggregations 
of 50,000 or more Shares (``Creation Units'') as specified in the 
relevant prospectus. The price of a Creation Unit will range from 
$3,000,000 to $25,000,000. Creation Units may be purchased only by or 
through a participant that has entered into a participant agreement 
with the Distributor (``Authorized Participant''). Authorized 
Participants must be either (a) broker-dealers or other participants in 
the continuous net settlement system of the National Securities 
Clearing Corporation, or (b) a Depository Trust Company (``DTC'') 
participant. Creation Units generally will be issued in exchange for an 
in-kind deposit of securities and cash. A new Fund also may sell 
Creation Units on a ``cash only'' basis on limit circumstances. An 
investor wishing to make an in-kind purchase of a Creation Unit from a 
New Fund will have to transfer to the Fund a ``Portfolio Deposit'' 
consisting of (a) a portfolio of securities that has been selected by 
the Adviser to correspond generally to the price and yield performance 
of the relevant Subject Index (``Deposit Securities''), and (b) a cash 
payment or credit to equalize any difference between (i) the total 
aggregate market value per Creation Unit of the Deposit Securities and 
(ii) the net asset value (``NAV'') per Creation Unit of the New Fund 
(the ``Balancing Amount'').\4\ An investor purchasing a Creation Unit 
from a New Fund will be charged a fee (``Transaction Fee'') to prevent 
the dilution of the interests of the remaining shareholders resulting 
from the New Fund incurring costs in connection with the purchase of 
Creation Units.\5\ Each New Fund will disclose the maximum Transaction 
Fees charged by the New Fund in its prospectus and the method of 
calculating the Transaction Fees in its statement of additional 
information (``SAI'').
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    \4\ On each business day, the Adviser will make available 
through the Distributor, immediately prior to the opening of trading 
on the listing Exchange, the list of the names and the required 
number of shares of each Deposit Security for each New Fund that 
offers in-kind purchases of Creation Units. The Portfolio Deposit 
will be applicable to purchases of Creation Units until a change in 
the Portfolio Deposit composition is next announced. In addition, 
each New Fund reserves the right to permit or require the 
substitution of an amount of cash to be added to the Balancing 
Amount to replace any Deposit Security that may be unavailable or 
unavailable in sufficient quantity for delivery to the Trust, or 
which may be ineligible for trading by an Authorized Participant or 
the investor on whose behalf the Authorized Participants is acting. 
In addition, the Listing Exchange will disseminate at regular 
intervals (currently expected to be every 15 seconds) throughout the 
trading day, via the facilities of the Consolidated Tape 
Association, an amount representing on a per Share basis, the sum of 
the Balancing Amount effective through and including the prior 
business day, plus the current value of the Deposit Securities.
    \5\ In situations where a New Fund permits a purchaser to 
substitute cash for Deposit Securities, the purchaser may be 
assessed an additional fee to offset the New Fund's brokerage and 
other transaction costs associated with using cash to purchase the 
requisite Deposit Securities.
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    5. Orders to purchase Creation Units will be placed with the 
Distributor who will be responsible for transmitting the orders to the 
Trust. The Distributor will issue confirmations of acceptance, issue 
delivery instructions to the Trust to implement the delivery of 
Creation Units, and maintain records of the orders and confirmations. 
The Distributor also will be responsible for delivering prospectuses to 
purchasers of Creation Units.
    6. Persons purchasing Creation Units from a New Fund may hold the 
Shares

[[Page 39379]]

or sell some or all of them in the secondary market. Shares will be 
listed on the Listing Exchange and traded in the secondary market in 
the same manner as other equity securities. It is expected that one or 
more Listing Exchange specialists will be assigned to make a market in 
Shares. The price of Shares traded on the Listing Exchange will be 
based on a current bid/offer market, and each Share is expected to have 
a market value of between $50 and $150. Transactions involving the sale 
of Shares in the secondary market will be subject to customary 
brokerage commissions and charges.
    7. Applicants expect that purchasers of Creation Units will include 
institutional investors and arbitrageurs (which could include 
institutional investors). The Listing Exchange specialist, in providing 
for a fair and orderly secondary market for Shares, also may purchase 
Shares for use in its market-making activities on the Listing Exchange. 
Applicants expect that secondary market purchasers of Shares will 
include both institutional and retail investors.\6\ Applicants believe 
that arbitrageurs and other institutional investors will purchase or 
redeem Creation Units to take advantage of discrepancies between the 
Shares' market price and the Shares' underlying NAV. Applicants expect 
that this arbitrage activity will provide a market ``discipline'' that 
will result in a close correspondence between the price at which the 
Shares trade and their NAV. In other words, applicants do not expect 
the Shares to trade at a significant premium or discount to their NAV.
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    \6\ Shares will be registered in book-entry form only. DTC or 
its nominee will be the registered owner of all outstanding Shares. 
Records reflecting the beneficial owners of Shares will be 
maintained by DTC or its participants.
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    8. Shares will not be individually redeemable. Shares will only be 
redeemable in Creation Unit-size aggregations through each New Fund. To 
redeem, an investor will have to accumulate enough Shares to constitute 
a Creation Unit. An investor redeeming a Creation Unit generally will 
receive (a) a portfolio of Portfolio Securities in effect on the date 
the request for redemption is made (``Redemption Securities''), which 
may not be identical to the Deposit Securities applicable to the 
purchase of Creation Units, and (b) a ``Cash Redemption Payment,'' 
consisting of an amount calculated in the same manner as the Balancing 
Amount, although the actual amounts may differ if the Redemption 
Securities are not identical to the Deposit Securities. An investor may 
receive the cash equivalent of a Redemption Security in certain 
circumstances, such as where a redeeming entity is restrained by 
regulation or policy from transacting in the Redemption Security. A New 
Fund may redeem Creation Units in cash in limited circumstances, such 
as when it is not possible to effect deliveries of Redemption 
Securities in the applicable jurisdiction.\7\ A redeeming investor will 
pay a Transaction Fee to offset the Fund's transaction costs, whether 
the redemption proceeds are in-kind or cash. An additional variable 
charge, expressed as a percentage of the redemption proceeds, will be 
made for cash redemptions.
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    \7\ Applicants note that certain holders of Shares of a 
particular New Fund may be subject to unfavorable tax treatment if 
they are entitled to receive in-kind redemption proceeds. The Trust 
may adopt a policy with respect to such New Fund that such holders 
of Shares may redeem Creation Unit Aggregations solely for cash.
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    9. Because each New Fund will redeem Creation Units in-kind, a New 
Fund will not have to maintain cash reserves for redemptions. This will 
allow the assets of each New Fund to be committed as fully as possible 
to tracking its Subject Index. Accordingly, applicants state that each 
New Fund will be able to track its Subject Index more closely than 
certain other investment products that must allocate a greater portion 
of their assets for cash redemptions.
    10. Applicants state that no New Fund will be marketed or otherwise 
held out as an ``open-end investment company'' or a ``mutual fund.'' 
Rather, the designation of the New Fund in all marketing materials will 
be limited to the terms ``exchange-traded fund,'' ``investment 
company,'' ``fund,'' or ``trust'' without reference to an ``open-end 
fund'' or ``mutual fund,'' except to contrast the New Funds with a 
conventional open-end investment company. Any marketing materials that 
describe the purchase or sale of Creation units, or refer to 
redeemability, will prominently disclose that Shares are not 
individually redeemable and that owners of Shares may tender Shares for 
redemption to the New Funds in Creation Unit aggregations only. The 
same type of disclosure will be provided in each New Fund's prospectus, 
SAI, and all reports to shareholders.\8\ The Fund will provide copies 
of its annual and semi-annual shareholder reports to DTC participants 
for distribution to beneficial holders of Shares.
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    \8\ Applicants state that persons purchasing Creation Units will 
be cautioned in the prospectus or SAI that some activities on their 
part may, depending on the circumstances, result in their being 
deemed statutory underwriters and subject them to the prospectus 
delivery and liability provisions of the Securities Act of 1933 
(``Securities Act''). For example, a broker-dealer firm or its 
client may be deemed a statutory underwriter if it takes Creation 
Units after placing an order with the Distributor, breaks them down 
into the constituent Shares, and sells Shares directly to its 
customers; or if it chooses to couple the creation of a supply of 
new Shares with an active selling effort involving solicitation of 
secondary market demand for Shares. The prospectus or SAI will state 
that whether a person is an underwriter depends upon all the facts 
and circumstances pertaining to that person's activities. The 
prospectus or SAI also will state that broker-dealer firms should 
also note that dealers who are not ``underwriters'' but are 
participating in a distribution (as contrasted to ordinary secondary 
trading transactions), and thus dealing with Shares that are part of 
an ``unsold allotment'' within the meaning of section 4(c)(C) of the 
Securities Act, would be unable to take advantage of the prospectus 
delivery exemption provided by section 4(3) of the Securities Act.
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Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act 
granting an exemption from sections 2(a)(32), 5(a)(1), 22(d), and 22(e) 
of the Act and rule 22c-1 under the Act; and under sections 6(c) and 
17(b) of the Act granting an exemption from sections 17(a)(1) and 
(a)(2) of the Act. Applicants request relief for the New Funds as well 
as any Future Funds. Any Future Funds relying on any order granted 
pursuant to this application will comply with the terms and conditions 
in the application.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction, or any class of persons, 
securities, or transactions, if and to the extent that such exemption 
is necessary or appropriate in the public interest and consistent with 
the protection of investors and the purposes fairly intended by the 
policy and provisions of the Act.

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

    3. Section 5(a)(1) of the Act defines an ``open-end company'' as a 
management investment company that is offering for sale or has 
outstanding any redeemable security of which it is the issuer. Section 
2(a)(32) of the Act defines a redeemable security as any security, 
other than short-term paper, under the terms of which the holder, upon 
its presentation to the issuer, is entitled to receive approximately 
his proportionate share of the issuer's current net assets, or the cash 
equivalent. Because Shares will not be individually redeemable, 
applicants request an order under section 6(c) of the Act that would 
permit the Trust to register each New Fund as a series of an open-end 
management investment company and issue Shares that are redeemable in 
Creation Units. Applicants state that investors may purchase shares in 
Creation units from

[[Page 39380]]

each New Fund and redeem Creation Units through each New Fund. 
Applicants further state that because the market price of Creation 
Units will be disciplined by arbitrage opportunities, investors 
generally should be able to sell Shares in the secondary market at 
approximately their NAV.

Section 22(d) of the Act and Rule 22c-1 Under the Act

    4. Section 22(d) of the Act, among other things, prohibits a dealer 
from selling a redeemable security that is being currently offered to 
the public by or through an underwriter, except at a current public 
offering price described in the prospectus. rule 22c-1 under the Act 
generally requires that a dealer selling, redeeming, or repurchasing a 
redeemable security do so only at a price based on its NAV. Applicants 
state that secondary market trading in Shares will take place at 
negotiated prices, not at a current offering price described in the 
prospectus, and not at a price based on NAV. Thus, purchases and sales 
of Shares in the secondary market will not comply with section 22(d) 
and rule 22c-1. Applicants request an exemption under section 6(c) of 
the Act from these provisions.
    5. Applicants assert that the concerns sought to be addressed by 
section 22(d) of the Act and rule 22c-1 under the Act with respect to 
pricing are equally satisfied by the proposed method of pricing Shares. 
Applicants maintain that while there is little legislative history 
regarding section 22(d), its provisions, as well as those of rule 22c-
1, appear to have been designed to (a) prevent dilution caused by 
certain riskless-trading schemes by principal underwriters and contract 
dealers, (b) preventun just discrimination or preferential treatment 
among buyers resulting from sales at different prices, and (c) assure 
an orderly distribution of investment company shares by eliminating 
price competition from dealers offering shares at less than the 
published sales price and repurchasing shares at more than the 
published redemption price.
    6. Applicants believe that none of these purposes will be thwarted 
by permitting Shares to trade in the secondary market at negotiated 
prices. Applicants state (a) that secondary market trading in Shares 
would not cause dilution for owners of Shares because such transactions 
do not directly involve New Fund assets, and (b) to the extent 
different prices exist during a given trading day, or from day to day, 
these variances will occur as a result of third-party market forces, 
such as supply and demand. Therefore, applicants assert that secondary 
market transactions in Shares will not lead to discrimination or 
preferential treatment among purchasers. Finally, applicants contend 
that the proposed distribution system will be orderly because arbitrage 
activity will ensure that the difference between the market price of 
Shares and their NAV remains narrow.

Section 22(e) of the Act

    7. Section 22(e) of the Act generally prohibits a registered 
investment company from suspending the right of redemption or 
postponing the date of payment of redemption proceeds for more than 
seven days after the tender of a security for redemption. Applicants 
state that local market delivery cycles for transferring Redemption 
Securities to redeeming investors, together with local market holiday 
schedules, will require a delivery process in excess of seven calendar 
days for certain New Funds in certain circumstances during the calendar 
year. Applicants request relief under section 6(c) from section 22(e) 
so that the New Funds may pay redemption proceeds up to eleven calendar 
days after the tender of Shares for redemption. Except as otherwise 
subsequently disclosed in the prospectus or SAI for the relevant New 
Fund, applicants expect, however, that these New Funds will be able to 
deliver redemption proceeds within seven days at all other times.\9\ 
With respect to Future Funds, applicants seek the same relief from 
section 22(e) only to the extent that circumstances exist similar to 
those described herein.
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    \9\ Applicants acknowledge that no relief obtained from the 
requirements of section 22(e) will affect any obligations applicants 
may otherwise have under rule 15c6-1 under the Exchange Act. Rule 
15c6-1 requires that most securities transactions be settled within 
three business days of the trade date. Release No. IC-23860, 1999 WL 
3621843 (S.E.C.).
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    8. The principal reasons for the requested exemption is that 
settlement of redemptions for the New Funds is contingent not only on 
the settlement cycle of the United States market but also on the 
currently practicable delivery cycles in the local markets for the 
underlying foreign securities of each New Fund. Applicants believe that 
the New Funds will be able to comply with the delivery requirements of 
section 22(e) except where the holiday schedule applicable to the 
specific foreign market will not permit delivery of redemption proceeds 
within seven calendar days.
    9. Applicants state that section 22(e) of the Act was designed to 
prevent unreasonable, undisclosed, and unforeseen delays in the payment 
of redemption proceeds. Applicants assert that their requested relief 
will not lead to the problems section 22(e) was designed to prevent. 
Delays in the payment of Shares redemption proceeds will occur 
principally due to local holidays. Applicants state that the SAI will 
disclose those local holidays (over the period of at least one year 
following the date of the SAI), if any, that are expected to prevent 
the delivery of redemption proceeds in seven calendar days and the 
maximum number of days needed to deliver the proceeds for each New 
Fund. Applicants state that the local holidays relevant to each New 
Fund as in effect in a given year will be listed in the series' 
prospectus or SAI or both, and these disclosure documents will identify 
instances in such year when, due to such holidays, more than seven days 
will be needed to deliver redemption proceeds.

Section 17(a) of the Act

    10. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such person, from selling any security to or purchasing any security 
from the company. Because purchases and redemptions of Creation Units 
may be ``in-kind'' rather than cash transactions, section 17(a) may 
prohibit affiliated persons of a New Fund from purchasing or redeeming 
Creation Units in-kind. Because the definition of ``affiliated person'' 
of another person in section 2(a)(3)(A) of the Act includes any person 
owning five percent or more of an issuer's outstanding voting 
securities, every purchaser of a Creation Unit will be affiliated with 
the New Fund so long as fewer than twenty Creation Units are in 
existence. In addition, any person owning more than 25% of the Shares 
of a New Fund may be deemed an affiliated person under section 
2(a)(3)(C) of the Act. Applicants request an exemption from section 
17(a) under sections 6(c) and 17(b), to permit these affiliated persons 
of the New Fund to purchase and redeem Creation Units.
    11. Section 17(b) authorizes the Commission to exempt a proposed 
transaction from section 17(a) if evidence establishes that the terms 
of the transaction, including the consideration to be paid or received, 
are reasonable and fair and do not involve overreaching, and the 
proposed transaction is consistent with the policies of the registered 
investment company and the general provisions of the Act. Applicants 
contend that no useful purpose would be served by prohibiting persons 
with the types of affiliations described above from purchasing or 
redeeming Creation Units. The deposit procedure for in-kind purchases 
and redemptions will be the

[[Page 39381]]

same for all purchases and redemptions, and Deposit Securities and 
Redemption Securities will be valued under the same objective standards 
applied to valuing Portfolio Securities. Therefore, applicants state 
that in-kind purchases and redemptions will afford no opportunity for 
an affiliated person of a New Fund to effect a transaction detrimental 
to the other holders of Shares. Applicants also believe that in-kind 
purchases and redemptions will not result in abusive self-dealing or 
overreaching by affiliated persons of the New Fund.

Applicants' Conditions

    Applicants agree that the order granting the requested relief will 
be subject to the following conditions:
    1. Applicants will not register a Future Fund by means of filing a 
post-effective amendment to the Trust's registration statement or by 
any other means, unless (a) applicants have requested and received with 
respect to such Future Fund, either exemptive relief from the 
Commission or a no-action letter from the Division of Investment 
Management of the Commission or (b) the Future Fund will be listed on a 
national securities exchange without the need for a filing pursuant to 
rule 19b-4 under the Exchange Act.
    2. Each New Fund's prospectus will clearly disclose that, for 
purposes of the Act, Shares are issued by the New Fund and that the 
acquisition of Shares by investment companies is subject to the 
restrictions of section 12(d)(1) of the Act.
    3. As long as each New Fund operates in reliance on the requested 
order, the Shares of such New Fund will be listed on a national 
securities exchange.
    4. Neither the Trust nor any New Fund will be advertised or 
marketed as an open-end fund or mutual fund. Each new New Fund's 
prospectus will prominently disclose that Shares are not individually 
redeemable shares and will disclose that the owners of Shares may 
acquire those Shares from the New Fund and tender those shares for 
redemption to the New Fund in Creation Units only. Any advertising 
material that describes the purchase or sale of Creation Units or 
refers to redeemability will prominently disclose that Shares are not 
individually redeemable and that owners of Shares may acquire those 
Shares from the New Fund and tender those Shares for redemption to the 
New Fund in Creation Units only.
    5. The web site for the Trust, which will be publicly accessible at 
no charge, will contain the following information on a per Share basis, 
for each New Fund: (a) The prior business day's NAV and the reported 
closing price, and a calculation of the premium or discount of such 
price against such NAV; and (b) data in chart format displaying the 
frequency distribution of discounts and premiums of the daily closing 
price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters.
    6. The prospectus and annual report for each Fund Fund will also 
include: (a) The information listed in condition 5(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 Share basis 
for one, five and ten year periods (or for the life of the New Fund), 
(i) the cumulative total return and the average annual total return 
based on NAV and market price, and (ii) the cumulative total return of 
the element Subject Index.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-18941 Filed 7-27-01; 8:45 am]
BILLING CODE 8010-01-M