Securities and Exchange Commission (“Commission”).
Notice of an application to amend a prior order under section 6(c) of the Investment Company Act of 1940 (“Act”) granting an exemption from sections 2(a)(32), 5(a)(1), and 22(d) of the Act and rule 22c-1 under the Act, and under sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1) and (a)(2) of the Act.
Summary of Application:
Applicants request an order to amend a prior order that permits: (a) An open-end management investment company that includes series based on certain fixed-income securities indices to issue shares of limited redeemability; (b) secondary market transactions in the shares of the series to occur at negotiated prices; and (c) affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of aggregations of the series' shares (“Prior Order”). Applicants seek to amend the Prior Order in order to offer two additional series based on fixed-income securities indices (each series, a “New Fund”).
Barclays Global Fund Advisors (“Adviser”), iShares Trust (“Trust”) and SEI Investments Distribution Co. (“Distributor”).
Filing Dates: The application was filed on April 20, 2006 and amended on May 24, 2006.
Hearing or Notification of Hearing:
An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on June 22, 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 may request notification of a hearing by writing to the Commission's Secretary.
Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. Applicants: Ira Shapiro, Barclays Global Fund Advisors, c/o Barclays Global Investors, N.A., 45 Fremont Street, San Francisco, CA 94105; Peter Kronberg, iShares Trust, c/o Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116; and John Munch, SEI Investments Distribution Co., One Freedom Valley Drive, Oaks, PA 19456.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Laura J. Riegel, Senior Counsel, at (202) 551-6873, or Michael W. Mundt, Senior Special Counsel, at (202) 551-6821 (Division of Investment Management).End Further Info End Preamble Start Supplemental Information
The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, 100 F Street, NE., Washington, DC 20549-0102 (tel. 202-551-5850).
1. The Trust is an open-end management investment company registered under the Act and established in the state of Delaware. The Trust is organized as a series fund with multiple series. The Adviser, an investment Start Printed Page 33007adviser registered under the Investment Advisers Act of 1940, serves as investment adviser to each New Fund. The Distributor, a broker-dealer unaffiliated with the Adviser and registered under the Securities Exchange Act of 1934, serves as the principal underwriter for the Trust.
2. The Trust is currently permitted to offer several series based on fixed-income securities indices in reliance on the Prior Order. Applicants seek to amend the Prior Order to permit the Trust to offer the two New Funds, each of which, except as described in the application, would operate in a manner identical to the existing series of the Trust that are subject to the Prior Order.
3. Each New Fund will invest in a portfolio of securities generally consisting of the component securities of a specified U.S. bond index (each, an “Underlying Index”). No 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 the Trust, the Adviser, the Distributor, or a promoter of a New Fund.
4. Each Underlying Index contains fixed-income securities that are eligible for inclusion in the underlying index for an existing series of the Trust that is subject to the Prior Order  The 1-3 Year Credit Index represents that portion of the Aggregate Index consisting of U.S. investment grade bonds that have a remaining maturity of 1 to 3 years. The MBS Index represents that portion of the Aggregate Index consisting of U.S. agency mortgage pass-through securities. As with the Aggregate Bond Fund, the New Fund that would be based on the MBS Index (“MBS Fund”) intends to use “to-be-announced” (“TBA”) transactions and, in some cases, invest directly in U.S. agency mortgage pass-through securities, to track the performance of U.S. agency mortgage pass-through securities.
5. The investment objective of each New Fund will be to provide investment results that correspond generally to the price and yield performance of its relevant Underlying Index. Each New Fund will utilize as an investment approach a representative sampling strategy where each New Fund will seek to hold a representative sample of the component securities of the Underlying Index. The New Fund that would track the 1-3 Year Credit Index will invest at least 90% of its assets in the component securities of its Underlying Index and may invest the remainder of its assets in certain futures, options, and swap contracts, cash and cash equivalents, and in bonds not included in its Underlying Index which the Adviser believes will help the New Fund track its Underlying Index. The MBS Fund will have at least 90% of its assets invested in: (a) Component securities of its Underlying Index and (b) investments that have economic characteristics that are substantially identical to the economic characteristics of the component securities of its Underlying Index (i.e., the TBAs, as discussed above). The MBS Fund may invest the remainder of its assets in certain futures, options, and swap contracts, cash and cash equivalents, and in bonds not included in its Underlying Index which the Adviser believes will help the New Fund track its Underlying Index. Applicants expect that each New Fund will have a tracking error relative to the performance of its respective Underlying Index of no more than 5 percent.
6. Applicants state that all discussions contained in the application for the Prior Order are equally applicable to the New Funds, except as specifically noted by applicants (as summarized above). Applicants agree that the amended order will subject applicants to the same conditions as imposed by the Prior Order. Applicants believe that the requested relief continues to meet the necessary exemptive standards.Start Signature
For the Commission, by the Division of Investment Management, pursuant to delegated authority.
J. Lynn Taylor,
1. Barclays Global Fund Advisors, et al., Investment Company Act Release No. Release No. (June 25, 2002), as subsequently amended by iShares Trust, et al., Investment Company Act Release No. 26006 (April 15, 2003) and Barclays Global Fund Advisors, et al., Investment Company Act Release No. 26175 (September 8, 2003).Back to Citation
2. If the amended order is granted, the New Funds would also be able to rely on an exemptive order granting certain relief from section 24(d) of the Act to the existing series of the Trust that are subject to the Prior Order. See iShares, Inc., et al., Investment Company Act Release No. 25623 (June 25, 2002) (order).Back to Citation
3. The Underlying Indices for the New Funds are Lehman Brothers 1-3 Year U.S. Credit Index (“1-3 Year Credit Index”) and Lehman Brothers U.S. MBS Fixed Rate Index (“MBS Index”).Back to Citation
4. The Lehman Brothers U.S. Aggregate Index (“Aggregate Index”) is the underlying index of iShares U.S. Aggregate Bond Fund (“Aggregate Fund”).Back to Citation
5. “TBA” refers to a mechanism for the forward settlement of United States agency mortgage-pass through securities that permits the United States agency mortgage-pass through securities to be traded interchangeably pursuant to commonly observed settlement and delivery requirements. Applicants state that the use of TBA transactions permits investors to obtain exposure to U.S. agency mortgage pass-through securities, while promoting liquidity and price transparency.Back to Citation
6. As with the process used by the Aggregate Fund, the MBS Fund may accept delivery of a specified amount of “cash-in-lieu” of delivery of the designated U.S. agency mortgage pass-through securities or TBAs. This practice could result in cash-only creations and redemptions. Applicants do not believe that the acceptance of “cash-in-lieu” of U.S. agency mortgage pass-through securities or TBAs on a regular basis by the MBS Fund presents any material or unforeseen operation issues or will otherwise have a negative impact on the operation of the MBS Fund or the secondary market trading of shares of the MBS Fund.Back to Citation
[FR Doc. E6-8803 Filed 6-6-06; 8:45 am]
BILLING CODE 8010-01-P