

[Federal Register: May 24, 2006 (Volume 71, Number 100)]
[Notices]               
[Page 29995-30003]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24my06-137]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27324; 812-13280]

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

May 18, 2006.
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), 22(e), 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 17(a)(2) of the Act, and under 
section 12(d)(1)(J) for an

[[Page 29996]]

exemption from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act.

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Summary of Application: Applicants request an order granting relief 
(``ETF Relief'') to permit (a) open-end management investment 
companies, the series of which consist of the component securities of 
certain domestic and international equity securities indexes, to issue 
shares (``Shares'') that can be redeemed only in large aggregations 
(``Creation Units''), (b) secondary market transactions in Shares to 
occur at negotiated prices on a national securities exchange, as 
defined in section 2(a)(26) of the Act (``Exchange''), (c) dealers to 
sell Shares to purchasers in the secondary market unaccompanied by a 
prospectus when prospectus delivery is not required by the Securities 
Act of 1933 (``Securities Act''), (d) certain series to pay redemption 
proceeds, under certain circumstances, more than seven days after the 
tender of a Creation Unit for redemption, and (e) certain affiliated 
persons of the series to deposit securities into, and receive 
securities from, the series in connection with the purchase and 
redemption of Creation Units. Applicants request that the order also 
grant relief (``12(d)(1) Relief'') to permit certain registered 
management investment companies and unit investment trusts (``UITs'') 
outside of the same group of investment companies as the series to 
acquire Shares.

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

Filing Dates: The application was filed on April 19, 2006, and amended 
on May 8, 2006. Applicants have agreed to file an additional amendment 
during the notice period, the substance of which is reflected herein.

Hearing or Notification of Hearing: An order granting the application 
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 June 9, 2006, and should be accompanied by proof of service on 
applicants, in the form of an affidavit, or for lawyers, a certificate 
of service. Hearing requests should state the nature of the writer's 
interest, the reason for the request, and the issues contested. Persons 
who wish to be notified of a hearing may request notification by 
writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090; Applicants, 48 Wall Street, 
Suite 1100, New York, NY 10005.

FOR FURTHER INFORMATION CONTACT: Keith A. Gregory, Senior Counsel, at 
(202) 551-6815, or Stacy L. Fuller, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Public Reference Desk, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-0102 (telephone (202) 551-5850).

Applicants' Representations

    1. The Trust, a Delaware business trust, is registered under the 
Act as an open-end series management investment company. Applicants 
currently intend to introduce 20 series (``Initial Funds'') of the 
Trust and may establish additional series in the future (``Future 
Funds,'' and together with the Initial Funds, ``Funds'').\1\ The 
Advisor, a subsidiary of WTI, is registered as an investment adviser 
under the Investment Advisers Act of 1940 (``Advisers Act'') and will 
serve as the investment adviser to each Fund.\2\ Each Fund may also be 
subadvised by a separate investment adviser within the meaning of 
section 2(a)(20)(B) of the Act that is not otherwise an affiliated 
person of the Advisor or the Funds and is registered as an investment 
adviser under the Advisers Act (``Subadvisor'').\3\ ALPS Distributors, 
Inc., a broker-dealer registered under the Securities Exchange Act of 
1934 (``Exchange Act''), will serve as principal underwriter for the 
Funds (``Distributor'').
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    \1\ All parties that currently intend to rely on the requested 
order are named as applicants. Any other party that relies on the 
order in the future will comply with the terms and conditions of the 
application.
    \2\ Neither WTI or WTA nor any affiliated person of WTI or WTA 
is or will be a broker or dealer.
    \3\ BNY Investment Advisors will serve as Subadvisor to the 
Initial Funds.
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    2. Certain Funds (``Domestic Funds'') will invest in a portfolio of 
equity securities (``Portfolio Securities'') selected to correspond 
generally to the price and yield performance of a specified domestic 
equity securities index (``Domestic Index''), while other Funds 
(``International Funds'') will invest in Portfolio Securities selected 
to correspond generally to the price and yield performance of an 
international equity securities index (``International Index,'' and 
together with Domestic Indexes, ``Indexes'').\4\ The Indexes are based 
on a proprietary, rules-based methodology developed by WTI to define 
the dividend-paying segments of the domestic and international markets 
(``Methodology''). The Methodology, including the rules which govern 
the inclusion and weighting of securities in the Indexes, will be 
publicly available, including on the Funds' Web site (``Web site''), 
along with the identities and weightings of the component securities of 
each Index (``Component Securities'') and the Portfolio Securities of 
each Fund.\5\ While WTI may change the rules of the Methodology in the 
future, WTI does not intend to do so. Any change to the Methodology 
would not take effect until WTI had given the public at least 60 days 
advance notice of the change and had given reasonable notice of the 
change to the Calculation Agent. The ``Calculation Agent'' is the 
entity that, pursuant to an agreement with WTI, is solely responsible 
for all Index calculation, maintenance, dissemination and 
reconstitution activities.\6\ The Calculation Agent is not, and will 
not be, an affiliated person, or an affiliated person of an affiliated 
person, of the Funds, Advisor, Subadvisor, Distributor or promoter of 
the Funds.\7\
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    \4\ Sixteen of the Initial Funds are Domestic Funds. The other 
Initial Funds are International Funds.
    \5\ WTI will license the Indexes to the Advisor for use in 
connection with the Funds. The license will specifically state that 
the Advisor must provide the use of the Indexes to the Funds at no 
cost.
    \6\ The Calculation Agent will determine the number, type and 
weight of securities that comprise each Index and perform, or cause 
to be performed, all other calculations that are necessary to 
determine the proper constitution of each Index. The Calculation 
Agent will not disclose any information about any Index's 
constitution to WTI, WTA, the Subadvisor or Funds prior to the 
publication of such information on the Web site. However, an 
employee of WTI and/or WTA will monitor the Methodology and the 
Indexes (``Index Administrator''), and other employees of WTI and/or 
WTA may be appointed to assist the Index Administrator (``Index 
Staff,'' and together with the Index Administrator, ``Index 
Provider'').
    \7\ Bloomberg L.P. will serve as Calculation Agent for the 
Initial Funds.
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    3. Applicants state that the Index Provider will not have any 
responsibility for the management of the Funds. In addition, applicants 
have adopted policies and procedures that, among other things, are 
designed to limit or prohibit communications between the Index Provider 
and other employees of WTI and WTA (``Firewalls''). Among other things, 
the Firewalls prohibit the Index Provider from disseminating non-public 
information about the Indexes,

[[Page 29997]]

including potential changes to the Methodology, to, among others, the 
employees of WTA and the Subadvisor responsible for managing the Funds 
(``advisory personnel''). The Firewalls also prohibit WTA advisory 
personnel from sharing any non-public information about the Funds with 
the Index Provider. Further, WTA and the Subadvisor have, pursuant to 
rule 206(4)-7 under the Advisers Act, written policies and procedures 
designed to prevent violations of the Advisers Act and the rules under 
the Advisers Act. WTI, WTA, the Subadvisor and Distributor also have 
adopted or will adopt a Code of Ethics as required under rule 17j-1 
under the Act, which contains provisions reasonably necessary to 
prevent Access Persons (as defined in rule 17j-1) from engaging in any 
conduct prohibited in rule 17j-1. In addition, WTI, WTA and the 
Subadvisor have adopted or will adopt policies and procedures to detect 
and prevent insider trading as required under section 204A of the 
Advisers Act, which are reasonably designed taking into account the 
nature of their business, to prevent the misuse in violation of the 
Advisers Act, Exchange Act, or rules and regulations under the Advisers 
Act and Exchange Act, of material non-public information.
    4. Any Future Fund will be advised by the Advisor or an entity 
controlling, controlled by or under common control with the Advisor and 
be in the same ``group of investment companies,'' as defined in section 
12(d)(1)(G)(ii) of the Act, as the Initial Funds. Applicants will not 
offer a Future Fund unless either they have requested and received with 
respect to such Future Fund exemptive relief from the Commission or a 
no-action position from the staff of the Commission, or the Future 
Funds will be listed on an Exchange without the need for a filing under 
rule 19b-4 under the Exchange Act. In addition, any Future Fund that 
relies on any order granted pursuant to this application will comply 
with the terms and conditions of the application, including the 
following: (a) The Methodology will be publicly available, including on 
the Web site; (b) once the rules of the Methodology are established, 
applicants may change them only after giving the public at least 60 
days advance notice of any change on the Web site; (c) applicants have 
Firewalls; (d) the Calculation Agent will not be an affiliated person, 
or an affiliated person of an affiliated person, of the Funds, Advisor, 
Subadvisor, Distributor or promoter of the Funds; and (e) the Indexes 
will be reconstituted on a fixed periodic basis no more frequently than 
quarterly.
    5. The investment objective of each Fund will be to provide 
investment results that generally correspond, before fees and expenses, 
to the price and yield performance of the relevant Index. The intra-day 
value of each Index will be disseminated every 15 seconds throughout 
the trading day over the Consolidated Tape on each day that the Funds 
are open, which includes any day that the Funds are required by to be 
open under section 22(e) of the Act (``Business Day''). In seeking to 
achieve its investment objective, each Fund will utilize either a 
replication or a representative sampling strategy. A Fund using a 
replication strategy generally will invest in the Component Securities 
of the relevant Index in the same approximate proportions as in the 
relevant Index. In certain circumstances, such as when a Component 
Security is illiquid or there are practical difficulties or substantial 
costs involved in holding every security in an Index, a Fund may use a 
representative sampling strategy pursuant to which it will invest in 
some but not all of the Component Securities.\8\ Applicants anticipate 
that a Fund that utilizes a representative sampling strategy will not 
track the performance of its Index with the same degree of accuracy as 
an investment vehicle that invests in every Component Security in the 
same weighting as the Index. Applicants expect that each Fund will have 
a tracking error relative to the performance of its Index of no more 
than 5%.
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    \8\ Each Fund will invest at least 95% of its assets in 
Component Securities. Each Fund may invest up to 5% of its assets in 
securities, which are not Component Securities but which the Advisor 
or Subadvisor believes will help the Fund track its Underlying 
Index, including futures, options and swap contracts, cash and cash 
equivalents, and other investment companies, including other 
exchange-traded funds within the limits of section 12(d)(1) of the 
Act. International Funds will have no less than 90% of their assets 
in Component Securities and may invest up to 10% of their assets in 
securities that are not Component Securities. In order to reduce any 
potential for tracking error, the Advisor or Subadvisor will invest 
such assets in securities that have aggregate investment 
characteristics (such as market capitalization) and fundamental 
characteristics (such as return variability, earnings valuation and 
yield) similar to those of the relevant Index. None of the Indexes 
will include depository receipts (e.g., American Depository 
Receipts) as Component Securities. However, the Advisor or 
Subadvisor may include depository receipts on the list of Deposit 
Securities (as defined below) when holding the depository receipt 
will improve liquidity, tradability or settlement for an 
International Fund and may treat the depository receipt of a 
Component Security as a Component Security for purposes of 
applicants' representations related to the percentage of assets of 
an International Fund that will be invested in Component Securities.
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    6. Shares of the Funds will be sold at a price of between $25 and 
$250 per Share in Creation Units of between 25,000 and 200,000 Shares. 
All orders to purchase Creation Units must be placed with the 
Distributor by or through an ``Authorized Participant,'' an entity that 
has entered into an agreement with the Distributor and that is either 
(a) a participant in the continuous net settlement system of the 
National Securities Clearing Corporation, a clearing agency registered 
with the Commission or (b) a participant in the Depository Trust 
Company (``DTC,'' and such participant, ``DTC Participant''). Creation 
Units generally will be issued in exchange for an in-kind deposit of 
securities and cash, though a Fund may sell Creation Units on a cash-
only basis in limited circumstances. An investor wishing to purchase a 
Creation Unit from a Fund will have to transfer to the Fund a 
``Creation Deposit'' consisting of: (a) A portfolio of securities that 
has been selected by the Advisor or Subadvisor to correspond generally 
to the performance of the relevant Index (``Deposit Securities''), and 
(b) a cash payment to equalize any differences between the market value 
of the Deposit Securities per Creation Unit and the net asset value 
(``NAV'') per Creation Unit (``Cash Requirement'').\9\ An investor 
purchasing a Creation Unit from a Fund will be charged a fee 
(``Transaction Fee'') to prevent the dilution of the interests of the 
remaining shareholders resulting from the Fund incurring costs in 
connection with the purchase of the Creation Units.\10\ Each Fund will 
disclose the maximum Transaction Fee in its prospectus (``Prospectus'') 
and the method of calculating the Transaction Fee in its statement of 
additional information (``SAI''). None of the Funds will impose a sales 
load, sales charge or fee under rule 12b-1 under the Act.
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    \9\ On each Business Day, prior to the opening of trading on the 
Exchange where the Fund's Shares are listed (``Listing Exchange''), 
the Advisor or Subadvisor will make available the list of the names 
and the required number of shares of each Deposit Security required 
for the Creation Deposit for the Fund. That Creation Deposit will 
apply to all purchases of Creation Units until a new Creation 
Deposit for the Fund is announced. Each Fund reserves the right to 
permit or require the substitution of an amount of cash in lieu of 
depositing some or all of the Deposit Securities. The Listing 
Exchange will disseminate every 15 seconds throughout the trading 
day over the Consolidated Tape an amount representing, on a per 
Share basis, the sum of the current value of the Deposit Securities 
and the estimated Cash Requirement.
    \10\ When a Fund permits a purchaser to substitute cash for 
Deposit Securities, the purchaser may be assessed a higher 
Transaction Fee to offset the brokerage and other transaction costs 
incurred by the Fund to purchase the requisite Deposit Securities.

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[[Page 29998]]

    7. Orders to purchase Creation Units of a Fund will be placed with 
the Distributor who will be responsible for transmitting orders to the 
Funds. The Distributor will maintain a record of Creation Unit 
purchases. The Distributor will be responsible for issuing 
confirmations of acceptance and furnishing Prospectuses to purchasers 
of Creation Units.
    8. Persons purchasing Creation Units from a Fund may hold the 
Shares or sell some or all of them in the secondary market. Shares of 
the Funds will be listed on a Listing Exchange, such as the American 
Stock Exchange LLC, New York Stock Exchange and Nasdaq Stock Market, 
Inc. (``Nasdaq''), and traded in the secondary market in the same 
manner as other equity securities. It is expected that one or more 
members of the Listing Exchange will act, with respect to Nasdaq,\11\ 
as a market maker (``Market Maker'') or, with respect to any other 
Exchange, as a specialist (``Specialist''), and maintain a market on 
the Exchange for the Shares. The price of Shares traded on an Exchange 
will be based on a current bid/offer market. Purchases and sales of 
Shares in the secondary market will be subject to customary brokerage 
commissions and charges.
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    \11\ The listing requirements established by Nasdaq require that 
at least two Market Makers be registered in Shares in order for the 
Shares to maintain a listing on Nasdaq. Registered Market Makers 
must make a continuous two-sided market in a listing or face 
regulatory sanctions.
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    9. Applicants expect that purchasers of Creation Units will include 
institutional investors and arbitrageurs. The Market Maker or 
Specialist, in providing for a fair and orderly secondary market for 
Shares, also may purchase Creation Units for use in its market-making 
activities. Applicants expect that secondary market purchasers of 
Shares will include both institutional and retail investors.\12\ 
Applicants expect that the price at which the Shares trade will be 
disciplined by arbitrage opportunities created by the ability to 
continually purchase or redeem Creation Units at their NAV, which 
should ensure that the Shares will not trade at a material discount or 
premium in relation to their NAV.
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    \12\ Shares will be registered in book-entry form only. DTC or 
its nominee will be the registered owner of all outstanding Shares. 
DTC or DTC Participants will maintain records reflecting the 
beneficial owners of Shares.
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    10. Shares will not be individually redeemable. Shares will only be 
redeemable in Creation Units from a Fund. To redeem, an investor will 
have to accumulate enough Shares to constitute a Creation Unit. 
Redemption orders must be placed by or through an Authorized 
Participant. An investor redeeming a Creation Unit generally will 
receive (a) a portfolio of securities designated to be delivered for 
Creation Unit redemptions on the date that the request for redemption 
is submitted (``Redemption Securities''), which may not be identical to 
the Deposit Securities required to purchase Creation Units on that 
date, and (b) a ``Cash Redemption Payment,'' consisting of an amount 
calculated in the same manner as the Cash Requirement. An investor may 
receive the cash equivalent of a Redemption Security in certain 
circumstances, such as if the investor is constrained from effecting 
transactions in the security by regulation or policy. A redeeming 
investor will pay a Transaction Fee, which is calculated in the same 
manner as a Transaction Fee payable in connection with purchases of 
Creation Units.
    11. Applicants state that neither the Trust nor any Fund will be 
marketed or otherwise held out as a traditional open-end investment 
company or mutual fund. Rather, applicants state that each Fund will be 
marketed as an ``exchange-traded fund,'' ``investment company,'' 
``fund'' and ``trust.'' All marketing materials that refer to 
redeemability or describe the method of obtaining, buying or selling 
Shares will prominently disclose that Shares are not individually 
redeemable and that Shares may be acquired or redeemed from the Fund in 
Creation Units only. The same type of disclosure will be provided in 
the Prospectus, SAI, shareholder reports and investor educational 
materials issued or circulated in connection with Shares. The Funds 
will provide copies of their annual and semi-annual shareholder reports 
to DTC Participants for distribution to beneficial owners of Shares.

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), 22(e), 
and 24(d) of the Act and rule 22c-1 under the Act, under section 
12(d)(1)(J) granting an exemption from sections 12(d)(1)(A) and 
12(d)(1)(B) of the Act, and under sections 6(c) and 17(b) of the Act 
granting an exemption from sections 17(a)(1) and 17(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. 
Section 12(d)(1)(J) of the Act provides that the Commission may exempt 
any person, security or transaction, or any class or classes thereof, 
from any of the provisions of section 12(d)(1) if the exemption is 
consistent with the public interest and the protection of investors. 
Section 17(b) of the Act 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 on the part of 
any person concerned, and the proposed transaction is consistent with 
the policies of the registered investment company and the general 
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 that would permit the Trust to register as 
an open-end management investment company and issue Shares that are 
redeemable in Creation Units only. Applicants state that investors may 
purchase Shares in Creation Units and redeem Creation Units from each 
Fund. Applicants further state that because the market price of Shares 
will be disciplined by arbitrage opportunities, investors should be 
able to sell Shares in the secondary market at prices that do not vary 
substantially from 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, which 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 Shares will take 
place at

[[Page 29999]]

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) of 
the Act and rule 22c-1 under the Act. Applicants request an exemption 
under section 6(c) 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 the provisions of section 22(d), 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, and (c) ensure 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 that (a) secondary market trading in Shares 
does not involve the Funds as parties and cannot result in dilution of 
an investment in Shares, and (b) to the extent different prices exist 
during a given trading day, or from day to day, such variances 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) 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. The principal reason for the 
requested exemption is that settlement of redemptions for the 
International Funds is contingent not only on the settlement cycle of 
the United States market, but also on currently practicable delivery 
cycles in local markets for underlying foreign securities held by the 
International Funds. Applicants state that local market delivery cycles 
for transferring certain foreign securities to investors redeeming 
Creation Units, together with local market holiday schedules, will 
under certain circumstances require a delivery process in excess of 
seven calendar days for the International Funds. Applicants request 
relief under section 6(c) of the Act from section 22(e) to allow the 
International Funds to pay redemption proceeds up to 12 calendar days 
after the tender of a Creation Unit for redemption. At all other times 
and except as disclosed in the relevant Prospectus and/or SAI, 
applicants expect that each International Fund will be able to deliver 
redemption proceeds within seven days.\13\ With respect to Future Funds 
based on an International Index, applicants seek the same relief from 
section 22(e) only to the extent that circumstances similar to those 
described in the application exist.
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    \13\ Rule 15c6-1 under the Exchange Act requires that most 
securities transactions be settled within three business days of the 
trade. Applicants acknowledge that no relief obtained from the 
requirements of section 22(e) will affect any obligations applicants 
may have under rule 15c6-1.
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    8. Applicants state that section 22(e) was designed to prevent 
unreasonable, undisclosed and unforeseen delays in the payment of 
redemption proceeds. Applicants assert that the requested relief will 
not lead to the problems that section 22(e) was designed to prevent. 
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 the relevant International Fund.

Section 24(d) of the Act

    9. 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 Shares to rely on the prospectus delivery exemption provided by 
section 4(3) of the Securities Act.\14\
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    \14\ Applicants state that they do not seek relief from the 
prospectus delivery requirement for non-secondary market 
transactions, such as purchases of Shares from the Funds or an 
underwriter. Applicants state that the Prospectus will caution 
persons purchasing Creation Units that some activities on their 
part, depending on the circumstances, may 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 Units after placing an 
order with the Distributor, breaks them down into the constituent 
Shares and sells them directly to its customers, or if it chooses to 
couple the creation of new Shares with an active selling effort 
involving solicitation of secondary market demand for Shares. The 
Prospectus will state that whether a person is an underwriter 
depends upon all the facts and circumstances pertaining to that 
person's activities. The 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 Shares 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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    10. Applicants state that Shares will be listed on a Listing 
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. Applicants contend that Shares, 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 Shares will be exchange-
listed, prospective investors will have access to several types of 
market information about Shares. Applicants state that information 
regarding market price and volume will be continually available on a 
real-time basis throughout the day on computer screens of brokers and 
other electronic services. The previous day's closing price and volume 
information for Shares also will be published daily in the financial 
section of newspapers. In addition, the Web site will include, for each 
Fund, the prior Business Day's NAV, the reported closing price of a 
Share, and a calculation of the premium or discount of the closing 
price against such NAV, as well as data in chart format displaying the 
frequency distribution of discounts and premiums of the closing price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters.
    11. Investors also will receive a short product description 
(``Product Description''), describing a Fund and its Shares. Applicants 
state that, while not intended as a substitute for a Prospectus, the 
Product Description will contain information about Shares that is 
tailored to meet the needs of investors purchasing Shares in the 
secondary market. The Product Description will prominently disclose 
that the Indexes are created and sponsored by an affiliated person of 
the Advisor.

[[Page 30000]]

Section 12(d)(1) of the Act

    12. Section 12(d)(1)(A) of the Act prohibits a registered 
investment company from acquiring securities of an investment company 
if such securities represent more than 3% of the total outstanding 
voting stock of the acquired company, more than 5% of the total assets 
of the acquiring company, or, together with the securities of any other 
investment companies, more than 10% of the total assets of the 
acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter or 
any broker or dealer (``Broker'') that is registered under the Exchange 
Act from knowingly selling the investment company's shares to another 
investment company if the sale will cause the acquiring company to own 
more than 3% of the acquired company's voting stock, or if the sale 
will cause more than 10% of the acquired company's voting stock to be 
owned by investment companies generally.
    13. Applicants request an exemption to permit registered management 
investment companies (``Acquiring Management Companies'') and unit 
investment trusts (``Acquiring Trusts,'' and together with the 
Acquiring Management Companies, ``Acquiring Funds'') that are not 
advised or sponsored by the Advisor or an entity controlling, 
controlled by or under common control with the Advisor, and not part of 
the same ``group of investment companies,'' as defined in section 
12(d)(1)(G)(ii), as the Funds, to acquire Shares beyond the limits of 
section 12(d)(1)(A). Acquiring Funds exclude registered investment 
companies that are, or in the future may be, part of the same group of 
investment companies within the meaning of section 12(d)(1)(G)(ii) of 
the Act as the Funds. The requested exemption would also permit the 
Funds, their principal underwriters and any Broker knowingly to sell 
shares of the Funds to an Acquiring Fund in excess of the limits of 
section 12(d)(1)(B). Applicants request that the relief sought apply to 
(a) each Fund, (b) each Acquiring Fund that enters into a written 
agreement with a Fund (``Acquiring Fund Agreement''), and (c) any 
Broker.\15\
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    \15\ An Acquiring Fund may rely on the requested order only to 
invest in the Funds and not in any other investment company.
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    14. Each Acquiring Management Company will be advised by an 
investment adviser within the meaning of section 2(a)(20)(A) of the Act 
(the ``Acquiring Fund Advisor'') and may be advised by one or more 
investment advisers within the meaning of section 2(a)(20)(B) of the 
Act (each, an ``Acquiring Fund Subadvisor''). Any investment adviser to 
an Acquiring Fund will be registered or exempt from registration under 
the Advisers Act. Each Acquiring Trust will be sponsored by a sponsor 
(``Sponsor'').
    15. Applicants submit that the proposed conditions to the requested 
relief adequately address the concerns underlying the limits in section 
12(d)(1), which include concerns about undue influence, excessive 
layering of fees and overly complex structures. Applicants believe that 
the requested exemption is consistent with the public interest and the 
protection of investors.
    16. Applicants believe that neither the Acquiring Funds nor an 
Acquiring Fund Affiliate would be able to exert undue influence over 
the Funds.\16\ To limit the control that an Acquiring Fund may have 
over a Fund, applicants propose a condition prohibiting the Acquiring 
Fund Advisor, Sponsor, any person controlling, controlled by or under 
common control with the Acquiring Fund Advisor or Sponsor, and any 
investment company or issuer that would be an investment company but 
for section 3(c)(1) or 3(c)(7) of the Act that is advised or sponsored 
by the Acquiring Fund Advisor, Sponsor, or any person controlling, 
controlled by or under common control with an Acquiring Fund Advisor or 
Sponsor (``Acquiring Fund's Advisory Group'') from controlling 
(individually or in the aggregate) a Fund within the meaning of section 
2(a)(9) of the Act. The same prohibition would apply to any Acquiring 
Fund Subadvisor, any person controlling, controlled by or under common 
control with the Acquiring Fund Subadvisor, and any investment company 
or issuer that would be an investment company but for section 3(c)(1) 
or 3(c)(7) of the Act (or portion of such investment company or issuer) 
advised or sponsored by the Acquiring Fund Subadvisor or any person 
controlling, controlled by or under common control with the Acquiring 
Fund Subadvisor (``Acquiring Fund's Subadvisory Group'').
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    \16\ The ``Acquiring Fund Affiliates'' are the Acquiring Fund 
Advisor, Acquiring Fund Subadvisor(s), Sponsor, promoter or 
principal underwriter of an Acquiring Fund, and any person 
controlling, controlled by or under common control with any of these 
entities.
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    17. Applicants also propose conditions 9-14, stated below, to limit 
the potential for undue influence by an Acquiring Fund over a Fund. 
Condition 9 precludes an Acquiring Fund and Acquiring Fund Affiliates 
from causing any potential investment by the Acquiring Fund in a Fund 
to influence the terms of any services or transactions between the 
Acquiring Fund or an Acquiring Fund Affiliate and the Fund or a Fund 
Affiliate.\17\ Condition 12 precludes an Acquiring Fund or Acquiring 
Fund Affiliate (except to the extent it is acting in its capacity as an 
investment adviser to a Fund) from causing a Fund to purchase a 
security in any offering of securities during the existence of any 
underwriting or selling syndicate of which a principal underwriter is 
an Underwriting Affiliate (``Affiliated Underwriting'').\18\
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    \17\ The ``Fund Affiliates'' are the Advisor, Subadvisor(s), 
promoter and principal underwriter of a Fund, and any person 
controlling, controlled by or under common control with any of these 
entities.
    \18\ An ``Underwriting Affiliate'' is a principal underwriter in 
any underwriting or selling syndicate that is an officer, director, 
member of an advisory board, Acquiring Fund Advisor, Acquiring Fund 
Subadvisor, Sponsor, or employee of the Acquiring Fund, or a person 
which any such officer, director, member of an advisory board, 
Acquiring Fund Advisor, Acquiring Fund Subadvisor, Sponsor, or 
employee is an affiliated person, except any person whose 
relationship to the Fund is covered by section 10(f) of the Act is 
not an Underwriting Affiliate.
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    18. Applicants represent that as an additional assurance that 
Acquiring Funds understand the implications of an investment in a Fund 
under the requested order, any Acquiring Fund that intends to invest in 
a Fund in reliance on the requested order will be required to enter 
into an Acquiring Fund Agreement with the Fund. The Acquiring Fund 
Agreement will ensure that the Acquiring Fund understands and agrees to 
comply with the terms and conditions of the requested order. The 
Acquiring Fund Agreement also will include an acknowledgement from the 
Acquiring Fund that it may rely on the order only to invest in the 
Funds and not in any other investment company. Applicants note that a 
Fund may choose to reject any direct purchase of Creation Units by an 
Acquiring Fund.\19\
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    \19\ A Fund would retain its right to reject any initial 
investment by an Acquiring Fund in excess of the limit in section 
12(d)(1)(A)(i) by declining to execute the Acquiring Fund Agreement 
with the Acquiring Fund.
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    19. Applicants do not believe the proposed arrangement will involve 
excessive layering of fees. The board of directors or trustees of any 
Acquiring Management Company, including a majority of the disinterested 
directors or trustees, will find that the advisory fees charged to the 
Acquiring Management Company are based on services provided that will 
be in addition to, rather than duplicative of, services provided under 
the advisory contract(s) of any Fund in which the Acquiring Management 
Company may invest. In

[[Page 30001]]

addition, an Acquiring Fund Advisor or a Sponsor or trustee of an 
Acquiring Trust (``Trustee'') will waive fees otherwise payable to it 
by the Acquiring Fund in an amount at least equal to any compensation 
(including fees received pursuant to any plan adopted by a Fund under 
rule 12b-1 under the Act) received from the Fund by the Acquiring Fund 
Advisor, Sponsor or Trustee or an affiliated person of the Acquiring 
Fund Advisor, Sponsor or Trustee, in connection with the investment by 
the Acquiring Fund in the Fund (other than advisory fees). Applicants 
state that any sales charges or service fees charged with respect to 
shares of an Acquiring Fund will not exceed the limits applicable to a 
fund of funds set forth in Conduct Rule 2830 of the NASD (``Rule 
2830'').
    20. Applicants submit that the proposed arrangement will not create 
an overly complex structure. Applicants note that no Fund may acquire 
securities of any investment company or company relying on section 
3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in 
section 12(d)(1)(A). Applicants also represent that the Acquiring Fund 
Agreement will require any Acquiring Fund that exceeds the 5% or 10% 
limitations in section 12(d)(1)(A)(ii) and (iii) to disclose in its 
prospectus that it may invest in Funds, and to disclose in ``plain 
English'' in its prospectus the unique characteristics of the Acquiring 
Funds investing in Funds, including but not limited to the expense 
structure and any additional expenses of investing in the Funds.

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

    21. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such a person, from selling any security to or purchasing any security 
from the 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, any person 5% or more of whose 
outstanding voting securities are directly or indirectly owned, 
controlled or held with the power to vote by 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 
request two exemptions under sections 6(c) and 17(b) from section 
17(a).
    22. First, applicants request an exemption from 17(a) to permit (a) 
persons who are affiliated persons of a Fund solely by virtue of 
holding with the power to vote 5% or more, or more than 25%, of a 
Fund's, or two or more Funds', Shares (``First-Tier Affiliates'') and 
(b) affiliated persons of First-Tier Affiliates who are not otherwise 
affiliated with the Fund, and persons who are affiliated persons of a 
Fund solely by virtue of holding with the power to vote 5% or more, or 
more than 25%, of the outstanding voting securities of other registered 
investment companies (or series thereof), which are not Funds, advised 
by the Advisor (``Second-Tier Affiliates'') to purchase and redeem 
Creation Units through in-kind transactions. Applicants contend that no 
useful purpose would be served by prohibiting the First- and Second-
Tier Affiliates from purchasing or redeeming Creation Units through in-
kind transactions. 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 in the same manner as the Portfolio Securities. 
Therefore, applicants state, the in-kind purchases and redemptions for 
which relief is requested will afford no opportunity for the affiliated 
persons of a Fund, or the affiliated persons of such affiliated 
persons, described above, to effect a transaction detrimental to other 
holders of Shares. Applicants also believe that these in-kind purchases 
and redemptions will not result in self-dealing or overreaching of the 
Fund.
    23. Second, applicants request an exemption from section 17(a) to 
permit a Fund, which is an affiliated person of an Acquiring Fund 
because the Acquiring Fund holds 5% or more of the Fund's Shares, to 
sell its Shares to, and redeem its Shares from, the Acquiring Fund.\20\ 
Applicants state that any consideration paid for Shares in transactions 
with a Fund will be based on the Fund's NAV. Applicants also state that 
any transactions directly between the Funds and the Acquiring Funds 
will be consistent with the policies of each Acquiring Fund. Applicants 
further state that the purchase of Creation Units by an Acquiring Fund 
will be accomplished in accordance with the investment restrictions of 
the Acquiring Fund and will be consistent with the investment policies 
set forth in the Acquiring Fund's registration statement. Applicants 
note that the Acquiring Fund Agreement will require each Acquiring Fund 
to represent that any purchase of Creation Units will be accomplished 
in compliance with the investment restrictions of the Acquiring Fund 
and will be consistent with the investment policies set forth in the 
Acquiring Fund's registration statement.
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    \20\ Applicants expect that most Acquiring Funds will purchase 
Shares in the secondary market and will not transact in Creation 
Units with a Fund.
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Applicants' Conditions

    Applicants agree that any order granting the ETF 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 either (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 
an Exchange without the need for a filing pursuant to rule 19b-4 under 
the Exchange Act.
    2. As long as the Trust operates in reliance on the requested 
order, the Shares will be listed on a Listing Exchange.
    3. Neither the Trust (with respect to any Fund) nor any Fund will 
be advertised or marketed as an open-end investment company or a mutual 
fund. Each 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 a Fund and tender those Shares for 
redemption to a 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 a Fund and tender those Shares for redemption to a Fund in 
Creation Units only.
    4. The Web site for each Fund, which will be publicly accessible at 
no charge, will contain the following information, on a per Share 
basis, for each 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. In addition, the Product Description for 
each Fund will state that the Web site for the Fund has information 
about the premiums and

[[Page 30002]]

discounts at which the Fund's Shares 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 Share 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 closing price, and (ii) the cumulative total return of the 
relevant Index.
    6. Before a Fund may rely on the order, the Commission will have 
approved, pursuant to rule 19b-4 under the Exchange Act, a Listing 
Exchange rule requiring Listing Exchange members and member 
organizations effecting transactions in Shares to deliver a Product 
Description to purchasers of Shares.
    7. Each Fund's Prospectus and Product Description will clearly 
disclose that, for purposes of the Act, Shares are issued by the Funds 
and that the acquisition of Shares 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 registered investment companies to 
invest in a Fund beyond the limits of section 12(d)(1), subject to 
certain terms and conditions, including that the registered investment 
company enter into an agreement with the Fund regarding the terms of 
the investment.
    Applicants agree that any order of the Commission granting the 
12(d)(1) Relief will be subject to the following conditions:
    8. The members of an Acquiring Fund's Advisory Group will not 
control (individually or in the aggregate) a Fund within the meaning of 
section 2(a)(9) of the Act. The members of an Acquiring Fund's 
Subadvisory Group will not control (individually or in the aggregate) a 
Fund within the meaning of section 2(a)(9) of the Act. If, as a result 
of a decrease in the outstanding Shares of a Fund, an Acquiring Fund's 
Advisory Group or an Acquiring Fund's Subadvisory Group, each in the 
aggregate, becomes a holder of more than 25% of the outstanding Shares 
of the Fund, it will vote its Shares in the same proportion as the vote 
of all other Shareholders of the Fund's Shares. This condition will not 
apply to the Acquiring Fund's Subadvisory Group with respect to a Fund 
for which the Acquiring Fund Subadvisor or a person controlling, 
controlled by or under common control with the Acquiring Fund 
Subadvisor acts as the investment adviser within the meaning of section 
2(a)(20)(A) of the Act.
    9. No Acquiring Fund or Acquiring Fund Affiliate will cause any 
existing or potential investment by the Acquiring Fund in a Fund to 
influence the terms of any services or transactions between the 
Acquiring Fund or an Acquiring Fund Affiliate and the Fund or a Fund 
Affiliate.
    10. The board of directors or trustees of an Acquiring Management 
Company, including a majority of the independent directors or trustees, 
will adopt procedures reasonably designed to assure that the Acquiring 
Fund Advisor and any Acquiring Fund Subadvisor are conducting the 
investment program of the Acquiring Management Company without taking 
into account any consideration received by the Acquiring Management 
Company or an Acquiring Fund Affiliate from a Fund or a Fund Affiliate 
in connection with any services or transactions.
    11. Once an investment by an Acquiring Fund in the securities of a 
Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, the board 
of trustees of the Funds (``Board''), including a majority of the 
independent trustees, will determine that any consideration paid by the 
Fund to the Acquiring Fund or an Acquiring Fund Affiliate in connection 
with any services or transactions: (a) Is fair and reasonable in 
relation to the nature and quality of the services and benefits 
received by the Fund; (b) is within the range of consideration that the 
Fund would be required to pay to another unaffiliated entity in 
connection with the same services or transactions; and (c) does not 
involve overreaching on the part of any person concerned. This 
condition does not apply with respect to any services or transactions 
between a Fund and its investment adviser(s), or any person 
controlling, controlled by or under common control with such investment 
adviser(s).
    12. No Acquiring Fund or Acquiring Fund Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to a Fund) 
will cause a Fund to purchase a security in any Affiliated 
Underwriting.
    13. The Board, including a majority of the independent trustees, 
will adopt procedures reasonably designed to monitor any purchases of 
securities by the Fund in an Affiliated Underwriting once an investment 
by an Acquiring Fund in the securities of the Fund exceeds the limit of 
section 12(d)(1)(A)(i) of the Act, including any purchases made 
directly from an Underwriting Affiliate. The Board will review these 
purchases periodically, but no less frequently than annually, to 
determine whether the purchases were influenced by the investment by 
the Acquiring Fund in the Fund. The Board will consider, among other 
things: (a) Whether the purchases were consistent with the investment 
objectives and policies of the Fund; (b) how the performance of 
securities purchased in an Affiliated Underwriting compares to the 
performance of comparable securities purchased during a comparable 
period of time in underwritings other than Affiliated Underwritings or 
to a benchmark such as a comparable market index; and (c) whether the 
amount of securities purchased by the Fund in Affiliated Underwritings 
and the amount purchased directly from an Underwriting Affiliate have 
changed significantly from prior years. The Board will take any 
appropriate actions based on its review, including, if appropriate, the 
institution of procedures designed to assure that purchases of 
securities in Affiliated Underwritings are in the best interests of the 
Fund's shareholders.
    14. The Fund will maintain and preserve permanently in an easily 
accessible place a written copy of the procedures described in the 
preceding condition, and any modifications to such procedures, and will 
maintain and preserve for a period of not less than six years from the 
end of the fiscal year in which any purchase in an Affiliated 
Underwriting occurred, the first two years in an easily accessible 
place, a written record of each purchase of securities in Affiliated 
Underwritings once an investment by an Acquiring Fund in the securities 
of the Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, 
setting forth from whom the securities were acquired, the identity of 
the underwriting syndicate's members, the terms of the purchase, and 
the information or materials upon which the determinations of the Board 
were made.
    15. Before investing in a Fund in excess of the limits in section 
12(d)(1)(A), each Acquiring Fund and the Fund will execute an Acquiring 
Fund Agreement stating, without limitation, that their boards of 
directors or trustees and their investment advisers, or Sponsor and 
Trustee, as applicable, understand the terms and conditions of the 
order, and agree to fulfill their responsibilities under the order. At 
the time of its investment in Shares of a Fund in excess of the limit

[[Page 30003]]

in section 12(d)(1)(A)(i), an Acquiring Fund will notify the Fund of 
the investment. At such time, the Acquiring Fund will also transmit to 
the Fund a list of the names of each Acquiring Fund Affiliate and 
Underwriting Affiliate. The Acquiring Fund will notify the Fund of any 
changes to the list of the names as soon as reasonably practicable 
after a change occurs. The Fund and the Acquiring Fund will maintain 
and preserve a copy of the order, the agreement, and the list with any 
updated information for the duration of the investment and for a period 
of not less than six years thereafter, the first two years in an easily 
accessible place.
    16. The Acquiring Fund Advisor, Sponsor or Trustee, as applicable, 
will waive fees otherwise payable to it by the Acquiring Fund in an 
amount at least equal to any compensation (including fees received 
pursuant to any plan adopted by a Fund under rule 12b-1 under the Act) 
received from a Fund by the Acquiring Fund Advisor, Sponsor or Trustee, 
or an affiliated person of the Acquiring Fund Advisor, Sponsor or 
Trustee, other than any advisory fees paid to the Acquiring Fund 
Advisor, Sponsor or Trustee, or its affiliated person by the Fund, in 
connection with the investment by the Acquiring Fund in the Fund. Any 
Acquiring Fund Subadvisor will waive fees otherwise payable to the 
Acquiring Fund Subadvisor, directly or indirectly, by the Acquiring 
Management Company in an amount at least equal to any compensation 
received from a Fund by the Acquiring Fund Subadvisor, or an affiliated 
person of the Acquiring Fund Subadvisor, other than any advisory fees 
paid to the Acquiring Fund Subadvisor or its affiliated person by the 
Fund, in connection with the investment by the Acquiring Management 
Company in the Fund made at the direction of the Acquiring Fund 
Subadvisor. In the event that the Acquiring Fund Subadvisor waives 
fees, the benefit of the waiver will be passed through to the Acquiring 
Management Company.
    17. Any sales charges and/or service fees charged with respect to 
shares of an Acquiring Fund will not exceed the limits applicable to a 
fund of funds as set forth in Rule 2830.
    18. No Fund will acquire securities of any investment company or 
company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of 
the limits contained in section 12(d)(1)(A) of the Act.
    19. Before approving any investment advisory contract under section 
15 of the Act, the board of directors or trustees of each Acquiring 
Management Company, including a majority of the independent directors 
or trustees, will find that the advisory fees charged under the 
advisory contract are based on services provided that will be in 
addition to, rather than duplicative of, services provided under the 
advisory contract(s) of any Fund in which the Acquiring Management 
Company may invest. These findings and the basis upon which they are 
made will be recorded fully in the minute books of the appropriate 
Acquiring Management Company.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Nancy M. Morris,
Secretary.
 [FR Doc. E6-7912 Filed 5-23-06; 8:45 am]

BILLING CODE 8010-01-P
