[Federal Register Volume 67, Number 175 (Tuesday, September 10, 2002)]
[Notices]
[Pages 57464-57468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-22888]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-25725; 812-12843]


ETF Advisors Trust, et al.; Notice of Application

September 3, 2002.
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 (the ``Act'') for an exemption from 
sections 2(a)(32), 5(a)(1), 22(d) and 24(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 that would permit 
(a) an open-end management investment company, whose series will be 
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; (c) dealers to sell shares 
of the series of the Trust to purchasers in the secondary market 
unaccompanied by a prospectus, when prospectus delivery is not required 
by the Securities Act of 1933 (the ``Securities Act''); and (d) 
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.

Applicants: ETF Advisors Trust (``Trust''), ETF Advisors, LP 
(``Advisor''), and ALPS Distributors, Inc. (``Distributor'').

Filing Dates: The application was filed on July 2, 2002, and amended on 
August 22, 2002.

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 September 26, 2002, 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, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicants: Trust and Advisor, 153 East 53rd Street, 49th 
Floor, New York, New York 10022; Distributor, 370 17th Street, Suite 
3100, Denver, Colorado 80202.

FOR FURTHER INFORMATION, CONTACT: Laura J. Riegel, Senior Counsel, at 
202-942-0567, or Michael W. Mundt, Senior Special Counsel, at 202-942-
0564 (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, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (telephone 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 intends to offer four series (each, an ``Index Fund''). The 
Advisor is registered as an investment adviser under the Investment 
Advisers Act of 1940 and will serve as the investment adviser for the 
Index Funds. The Distributor, a broker-dealer registered under the 
Securities Exchange Act of 1934 (the ``Exchange Act''), will serve as 
the principal underwriter for each Index Fund.
    2. Each Index Fund will invest in a portfolio of securities 
(``Portfolio Securities'') to provide investment results that seek to 
match, before fees and expenses, the total return of an underlying 
fixed income security index (each, an ``Underlying Index'' and 
together, the ``Underlying Indices'').\1\ No

[[Page 57465]]

entity that creates, compiles, sponsors or maintains an 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 
any of the Trust, an investment adviser to any Index Fund, the 
Distributor, or a promoter of an Index Fund.
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    \1\ An Index Fund will invest at least 90% of its total assets 
in investment grade debt securities issued or guaranteed by the U.S. 
Treasury (``Treasury Securities''), or by an agency or 
instrumentality of the U.S. government, or by a government-sponsored 
entity such as the Government National Mortgage Association, the 
Federal Home Loan Mortgage Corporation and Fannie Mae, formerly the 
Federal National Mortgage Corporation. Each Index Fund will invest 
at least 80% of its total assets in Treasury Securities. An Index 
Fund may also invest up to 10% of its total assets in repurchase 
agreements, futures contracts, options and other derivative 
instruments only in furtherance of the objective of seeking to 
closely match the total return, before fees and expenses, of that 
Index Fund's Underlying Index.
    The Underlying Indices for the Index Funds are the Ryan 1 Year 
Adjusted Treasury Index, Ryan 2 Year Treasury Index, Ryan 5 Year 
Treasury Index and Ryan 10 Year Treasury Index. The Underlying 
Indices consist of the most recently auctioned Treasury Securities 
for various maturities.
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    3. The Advisor will seek to achieve each Index Fund's investment 
objective by constructing the portfolio of an Index Fund to provide a 
duration and cash flow profile similar to that of the Underlying Index. 
Intra-day values of each Underlying Index will be disseminated every 15 
seconds throughout the trading day by the American Stock Exchange, LLC 
(``AMEX''). Applicants expect that each Index Fund will have an annual 
tracking error relative to the performance of its respective Underlying 
Index of less than 1 percent.
    4. Shares of the Index Funds (``FITRs'') will be issued in 
aggregations of 50,000 FITRs (such aggregations, ``Creation Unit 
Aggregations''), as specified in the relevant prospectus (the 
``Prospectus''). The price of a Creation Unit Aggregation will range 
from $2,500,000 to $10,000,000. Creation Unit Aggregations may be 
purchased only by or through a party that has entered into an agreement 
with the administrator of an Index Fund and the Distributor regarding 
creations and redemptions of Creation Unit Aggregations (an 
``Authorized Participant''). An Authorized Participant must be a 
participant in The Depository Trust Company (``DTC''). Creation Unit 
Aggregations generally will be issued in exchange for an in-kind 
deposit of securities and cash. An Index Fund also may sell Creation 
Unit Aggregations on a cash-only basis in limited circumstances. An 
investor wishing to make an in-kind purchase of a Creation Unit 
Aggregation from an Index Fund will have to transfer to the Index Fund 
a ``Portfolio Deposit'' consisting of: (a) A portfolio of securities 
that has been selected by the Advisor to closely match the total return 
of the relevant Underlying Index (``Deposit Securities''), and (b) a 
cash payment to equalize any difference between the total aggregate 
market value per Creation Unit Aggregation of the Deposit Securities 
and the net asset value (``NAV'') per Creation Unit Aggregation of the 
Index Fund (the ``Balancing Amount'').\2\ An investor purchasing a 
Creation Unit Aggregation from an Index Fund will be charged a fee 
(``Transaction Fee'') to defray transaction expenses and prevent 
dilution of the interests of the remaining shareholders resulting from 
the Index Fund incurring costs in connection with the purchase of the 
Creation Unit Aggregation.\3\ Each Index Fund will disclose in its 
Prospectus the maximum Transaction Fee charged by the Index Fund. Each 
Index Fund will also disclose the method of calculating the Transaction 
Fee in its statement of additional information (``SAI'').
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    \2\ On each business day, prior to the opening of trading on the 
Exchange (as defined below), the custodian for each Index Fund will 
make available a list of the names and the required number of shares 
of each Deposit Security required for the Portfolio Deposit for each 
Index Fund. That Portfolio Deposit will apply to all purchases of 
Creation Unit Aggregations until a new Portfolio Deposit for an 
Index Fund is announced. Each Index 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. The AMEX 
will disseminate every 15 seconds throughout the trading day via the 
facilities of the Consolidated Tape Association an amount 
representing the sum of the Balancing Amount and the current value 
of the Deposit Securities on a per FITR basis.
    \3\ When an Index Fund permits a purchaser to substitute cash 
for Deposit Securities, the purchaser may be assessed an additional 
fee to offset the brokerage and other transaction costs associated 
with using cash to purchase the requisite Deposit Securities.
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    5. Orders to purchase Creation Unit Aggregations will be placed 
with the Distributor, who will be responsible for transmitting orders 
to each Index Fund. The Distributor will issue, and maintain records 
of, confirmations of acceptance to purchasers of Creation Unit 
Aggregations and delivery instructions to the relevant Index Fund (to 
implement the delivery of Creation Unit Aggregations). The Distributor 
also will be responsible for delivering Prospectuses to purchasers of 
Creation Unit Aggregations. 6.Persons purchasing Creation Unit 
Aggregations from an Index Fund may hold the FITRs or sell some or all 
of them in the secondary market. FITRs of the Index Funds will be 
listed on the AMEX or on another national securities exchange as 
defined in section 2(a)(26) of the Act (each, including AMEX, an 
``Exchange'') and traded in the secondary market in the same manner as 
equity securities. One or more member firms of the AMEX 
(``Specialists'') will maintain a market on the AMEX for the FITRs. The 
price of FITRs traded on an Exchange will be based on a current bid/
offer market. Each FITR is expected to have a market value of between 
$50 and $200. Transactions involving the sale of FITRs in the secondary 
market will be subject to customary brokerage commissions and charges.
    7. Applicants expect that purchasers of Creation Unit Aggregations 
will include institutional investors and arbitrageurs (which could 
include institutional investors). In providing for a fair and orderly 
secondary market for FITRs on the Exchange, the Specialist also may 
purchase Creation Unit Aggregations. Applicants expect that secondary 
market purchasers of FITRs will include both institutional and retail 
investors.\4\ Applicants believe that arbitrageurs and other 
institutional investors will purchase or redeem Creation Unit 
Aggregations to take advantage of discrepancies between the FITRs' 
market price and the FITRs' underlying NAV. Applicants expect that this 
arbitrage activity will provide a pricing ``discipline'' that will 
result in a close correspondence between the price at which FITRs trade 
and their NAV. In other words, applicants do not expect the FITRs to 
trade at a significant premium or discount to their NAV.
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    \4\ FITRs will be registered in book-entry form only. DTC or its 
nominee will be the registered owner of all outstanding FITRs. DTC 
or its participants will maintain records reflecting the beneficial 
ownership of FITRs.
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    8. Applicants will make available a FITRs product description 
(``Product Description'') for distribution in accordance with an AMEX 
rule requiring AMEX members and member organizations effecting 
transactions in FITRs to deliver a Product Description to investors 
purchasing FITRs. Applicants state that any other Exchange that applies 
for unlisted trading privileges in FITRs will have to adopt similar 
rules.\5\ The Product Description for an Index Fund will provide a 
straightforward overview of the Index Fund, including its investment 
objective and strategies and the material risks and potential rewards 
of owning FITRs. The Product Description also will provide a clear, 
brief description of the essential features of the Index Fund's FITRs. 
The Product Description will clearly indicate that a Prospectus and the 
Index Fund's SAI may be obtained, without charge, from the Distributor, 
the investor's broker, or the Trust's website. The Product Description 
also will provide the website address of the Trust, and of the

[[Page 57466]]

Index Provider for the Underlying Index, so that investors who wish to 
learn more about FITRs and/or the Underlying Index may do so.
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    \5\ Applicants expect that the number of purchases of FITRs in 
which an investor will not receive a Product Description will not 
constitute a significant portion of the market activity in FITRs.
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    9. FITRs will not be individually redeemable. FITRs will only be 
redeemable in Creation Unit Aggregations through each Index Fund. To 
redeem, investors will have to accumulate enough FITRs to constitute a 
Creation Unit Aggregation. An investor redeeming a Creation Unit 
Aggregation generally will receive (a) the Portfolio Securities 
designated to be delivered for Creation Unit Aggregation redemptions 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 Unit Aggregations, and (b) a 
``Cash Redemption Payment,'' consisting of an amount calculated in the 
same manner as the Balancing Amount, although the actual amount of the 
Cash Redemption Payment may differ from the Balancing Amount if the 
Redemption Securities are not identical to the Deposit Securities on a 
given day. An investor may receive the cash equivalent of a Redemption 
Security in certain circumstances. A redeeming investor will pay a 
Transaction Fee to offset transaction costs, whether the redemption 
proceeds are in kind or cash. When an investor redeems for cash rather 
than in kind, the investor may pay a higher Transaction Fee.
    10. Applicants state that neither the Trust nor any Index Fund will 
be marketed or otherwise held out as an ``open-end investment company'' 
or a ``mutual fund.'' Rather, the designation of the Trust and the 
Index Funds in all marketing materials will be limited to the terms 
``exchange-traded fund,'' ``investment company,'' ``fund'' and 
``trust'' without reference to an ``open-end fund'' or ``mutual fund,'' 
except to compare and contrast the Trust and the Index Funds with 
traditional mutual funds. Any marketing materials that describe the 
purchase or sale of Creation Unit Aggregations, or refer to 
redeemability, will prominently disclose that FITRs are not 
individually redeemable and that owners of FITRs may tender FITRs for 
redemption to the Index Fund in Creation Unit Aggregations only. The 
same type of disclosure will be provided in each Index Fund's 
Prospectus, SAI and all reports to shareholders. The Trust will provide 
copies of its annual and semi-annual shareholder reports to DTC 
participants for distribution to beneficial holders of FITRs.

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 24(d) 
of the Act and rule 22c-1 under the Act; and under sections 6(c) and 
17(b) of the Act granting an exemption from sections 17(a)(1) and 
(a)(2) of the Act.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction, or any class of persons, 
securities or transactions, from any provision of the Act, if and to 
the extent that such exemption is necessary or appropriate in the 
public interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act.

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 company which 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 a proportionate 
share of the issuer's current net assets, or the cash equivalent. 
Because FITRs will not be individually redeemable, applicants request 
an order under section 6(c) of the Act that would permit the Trust to 
register as an open-end management investment company and issue FITRs 
that are redeemable in Creation Unit Aggregations only. Applicants 
state that investors may purchase Creation Unit Aggregations from each 
Index Fund and redeem Creation Unit Aggregations through each Index 
Fund. Applicants believe that because the market price of Creation Unit 
Aggregations will be disciplined by arbitrage opportunities, investors 
generally should be able to sell FITRs in the secondary market at 
approximately NAV.

Section 22(d) 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 currently being offered to 
the public by or through a principal underwriter, except at a current 
public offering price described in the prospectus. Rule 22c-1 under the 
Act generally requires that a dealer selling, redeeming, or 
repurchasing a redeemable security do so only at a price based on its 
NAV. Applicants state that secondary market trading in FITRs 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 FITRs in the secondary market will not comply with section 
22(d) of the Act and rule 22c-1 under the Act. Applicants request an 
exemption under section 6(c) 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 FITRs. 
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) prevent unjust discrimination or preferential treatment 
among buyers resulting from sales at different prices, and (c) ensure 
an orderly distribution of investment company shares by eliminating 
price competition from non-contract 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 FITRs to trade in the secondary market at negotiated 
prices. Applicants state that (a) secondary market trading in FITRs 
would not cause dilution for owners of FITRs because such transactions 
do not directly involve Index Fund assets, and (b) to the extent 
different prices exist during a given trading day, or from day to day, 
such variances will occur as a result of third-party market forces, 
such as supply and demand. Therefore, applicants assert that secondary 
market transactions in FITRs 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 
FITRs and their NAV remains narrow.

Section 24(d) of the Act

    7. Section 24(d) of the Act provides, in relevant part, that the 
prospectus delivery exemption provided to dealer transactions by 
section 4(3) of the Securities Act does not apply to any transaction in 
a redeemable security issued by an open-end investment company. 
Applicants request an exemption from section 24(d) to permit dealers 
selling FITRs to rely on the

[[Page 57467]]

prospectus delivery exemption provided by section 4(3) of the 
Securities Act.\6\
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    \6\ Applicants do not seek relief from the prospectus delivery 
requirement for non-secondary market transactions, including 
purchases of Creation Unit Aggregations or those involving an 
underwriter. Applicants state that persons purchasing Creation Unit 
Aggregations will be cautioned in an Index Fund's Prospectus 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. For example, a broker-dealer firm and/or its client 
may be deemed a statutory underwriter if it takes Creation Unit 
Aggregations after placing an order with the Distributor, breaks 
them down into the constituent FITRs, and sells FITRs directly to 
its customers; or if it chooses to couple the purchase of a supply 
of new FITRs with an active selling effort involving solicitation of 
secondary market demand for FITRs. An Index Fund's Prospectus will 
state that whether a person is an underwriter depends upon all the 
facts and circumstances pertaining to that person's activities. An 
Index Fund's Prospectus also will state that dealers who are not 
``underwriters'' but are participating in a distribution (as 
contrasted to ordinary secondary market trading transactions), and 
thus dealing with FITRs that are part of an ``unsold allotment'' 
within the meaning of section 4(3)(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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    8. Applicants state that FITRs will be listed on an Exchange and 
will be traded in a manner similar to other equity securities, 
including the shares of closed-end investment companies. Applicants 
note that dealers selling shares of closed-end investment companies in 
the secondary market generally are not required to deliver a prospectus 
to the purchaser.
    9. Applicants contend that FITRs, as a listed security, merit a 
reduction in the compliance costs and regulatory burdens resulting from 
the imposition of prospectus delivery obligations in the secondary 
market. Because FITRs will be exchange-listed, prospective investors 
will have access to several types of market information about FITRs. 
Applicants state that information regarding market price and volume 
will be continually available on a real-time basis throughout the day. 
The previous day's closing price and volume information for FITRs also 
will be published daily in the financial sections of many newspapers. 
In addition, the Trust's website will also include for each Index Fund, 
the previous business day's NAV and the bid price at the time of 
calculation of such NAV (the ``Bid Price'') and data in chart format 
displaying the frequency distribution of discounts and premiums of the 
daily Bid Price against the NAV, within appropriate ranges, for each of 
the four previous calendar quarters.\7\
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    \7\ The Bid Price per FITR of an Index Fund is determined using 
the highest bid price on the Exchange on which the FITRs of such 
Index Fund are listed for trading.
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    10. Investors also will receive a Product Description describing 
the Index Fund and its FITRs. Applicants state that, while not intended 
as a substitute for a Prospectus, the Product Description will contain 
information about FITRs that is tailored to meet the needs of investors 
purchasing FITRs in the secondary market.

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

    11. Section 17(a) of the Act makes it unlawful, except under 
certain circumstances, for any affiliated person of a registered 
investment company, or any affiliated person of such a person, acting 
as principal, to sell any security to, or purchase any security from, 
such registered investment company. Section 2(a)(3) of the Act defines 
``affiliated person'' to include any person directly or indirectly 
owning, controlling, or holding with power to vote 5% or more of the 
outstanding voting securities of the other person and any person 
directly or indirectly controlling, controlled by, or under common 
control with, the other person. Section 2(a)(9) of the Act provides 
that a control relationship will be presumed where one person owns more 
than 25% of another person's voting securities. Applicants state that 
because the definition of ``affiliated person'' includes any person 
owning 5% or more of an issuer's outstanding voting securities, every 
purchaser of a Creation Unit Aggregation will be affiliated with the 
Index Fund so long as twenty or fewer Creation Unit Aggregations are in 
existence, and any purchaser that owns more than 25% of an Index Funds' 
outstanding FITRs will be affiliated with the Index Fund. Applicants 
assert that, from time to time, one or more holders of FITRs, including 
the Specialist, may accumulate 5% or more or more than 25% of an Index 
Fund's outstanding FITRs. Applicants state that section 17(a) may 
prohibit such affiliated persons of an Index Fund (and affiliated 
persons of affiliated persons that are not otherwise affiliated with 
the Trust or the Index Fund) from purchasing or redeeming Creation Unit 
Aggregations in kind. Applicants request an exemption from section 
17(a) under sections 6(c) and 17(b) to permit these affiliated persons 
of the Index Fund (and affiliated persons of these affiliated persons 
that are not otherwise affiliated with the Trust or the Index Fund) to 
effect such transactions in Creation Unit Aggregations.
    12. Section 17(b) of the Act authorizes the Commission to exempt a 
proposed transaction from section 17(a) of the Act if evidence 
establishes that the terms of the transaction, including the 
consideration to be paid or received, are reasonable and fair and do 
not involve overreaching on the part of any person concerned, and the 
proposed transaction is consistent with the policy of each registered 
investment company concerned 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 Unit Aggregations. The deposit 
procedure for in-kind purchases and the redemption procedure for in-
kind redemptions will be the same for all purchases and redemptions. 
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 the affiliated persons, and the affiliated 
persons of the affiliated persons, described above, of an Index Fund to 
effect a transaction detrimental to the other holders of FITRs. 
Applicants also believe that in-kind purchases and redemptions will not 
result in abusive self-dealing or overreaching by these persons of the 
Index Fund.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Applicants will not register a future portfolio of the Trust, by 
means of filing a post-effective amendment to the Trust's registration 
statement or by another means, unless Applicants have requested and 
received with respect to such future portfolio, either (a) exemptive 
relief from the Commission or (b) a no-action letter from the Division 
of Investment Management of the Commission.
    2. Each Index Fund's Prospectus and Product Description will 
clearly disclose that, for purposes of the Act, FITRs are issued by 
each Index Fund and that the acquisition of FITRs by investment 
companies is subject to the restrictions of section 12(d)(1) of the 
Act.
    3. As long as the Trust operates in reliance on the requested 
order, the FITRs will be listed on an Exchange.
    4. Neither the Trust nor any Index Fund will be advertised or 
marketed as an open-end fund or a mutual fund. Each Index Fund's 
Prospectus will prominently disclose that FITRs are not individually 
redeemable shares and will disclose that the owners of FITRs may

[[Page 57468]]

acquire those FITRs from the Index Fund and tender those FITRs for 
redemption to the Index Fund in Creation Unit Aggregations only. Any 
advertising material that describes the purchase or sale of Creation 
Unit Aggregations or refers to redeemability will prominently disclose 
that FITRs are not individually redeemable and that owners of FITRs may 
acquire those FITRs from the Index Fund and tender those FITRs for 
redemption to the Index Fund in Creation Unit Aggregations only.
    5. Before an Index Fund may rely on the 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 FITRs to deliver a Product Description to 
purchasers of FITRs.
    6. The website for the Trust, which will be publicly accessible at 
no charge, will contain the following information, on a per FITR basis, 
for each Index Fund: (a) The prior business day's NAV and Bid Price, 
and a calculation of the premium or discount of such Bid Price against 
such NAV; and (b) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid Price against 
the NAV, within appropriate ranges, for each of the four previous 
calendar quarters. In addition, the Product Description for each Index 
Fund will state that the website of the Trust has information about the 
premiums and discounts at which the Index Fund's FITRs have traded.
    7. The Prospectus and the annual report for each Index Fund will 
also include: (a) The information listed in condition 6(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 
FITR basis for one, five and ten year periods (or life of the Index 
Fund), (i) the cumulative total return and the average annual total 
return based on NAV and Bid Price, and (ii) the cumulative total return 
of the relevant Underlying Index.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-22888 Filed 9-9-02; 8:45 am]
BILLING CODE 8010-01-P