# SECURITIES AND EXCHANGE COMMISSION

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## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

..
-.-:-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,

D.C.

20549

"

.
) DIVISION OF
:. .iRKET REGULATION

January 22, 2007

Domenick Pugliese, Esq.
Paul, Hastings, Janofsky and Walker LLP
75 E. 55th Street
New York, NY 10022

Re:

Hea,[thShare.s Emerging Cancer Exchange.,.Traded Fund and HealthShares
Cardlo Devices Exchange-Traded Fund
FileNo. TP 07-31

Dear Mr. Pugliese:
In your lett.er dated January 17, 20071, as supplemented by conversations with the staff of
the Division of Market Regulation ("Staff'), HealthShares, Inc. (the "Company") on behalf of
itself, the HealthShares Emerging Cancer Exchange-Traded Fund and HealthShares Cardio
Devices Exchange-Traded Fund ("the Funds"), the New York Stock Exchange, and any other
. Exchange on which the HealthShares may subsequently trade, and persons or entities engaging
intransaetiorui in the HealthShares,requests exemptive,.interpretive, or no-action advice
regarding Rules lOa-I, 10b-17, 14e-5 under the Exchange Act, Rules 101 and lOiofRegulatio!1 .
M,and Rule 200(g) of Regulation SHO, in connection with secondary market transactions in
HealthShares on the New York Stock Exchange or on any other Exchange on which the
HealthShares may subsequently trade, and the creation and redemption of Creation Units of the
Funds.
HealthShares, Inc. is an open-end managerrient investment cOnipany that was organized
.
as a Maryland corporation on February 8, 2006. HealthShares, Inc. has filed aregistration
statement for the .Foods with the Commission, which was declared effective by the Commission
2
011 January 12,2007. Each Fund will invest at least 90% of its assets ill the common stocks of
companies in the Underlying Index· (orin American Depositary Receipts or Global Depositary
Receipts based on securities of intematiomil companies in the Underlying Index). Each Fund
will attempt to replicate the Underlying Index by matching the weighting of securities in its
portfolio with such securities' weightings in the Underlying Index. The investrnentobjective of

We have enclosed a photocopy of your letter. Each defined term in this letter has the same meaning as .
defmed in your letter, unless we note otherwise.
2

File Nos. 333-131842 and 811-21855.

Domenick Pugliese, Esq.
Paul, Hastings, Janofsky and Walker LLP
January 22, 2007
Page 2 of6

)

each Fund is to provide investment results that, before expenses, correspond generally to the total
return of the relevant Index. 3
Response:
Rule 10a-1
Rule 200 of Regulation SHO defines "short sale" and Rule 10a-1 under the Exchange Act
governs short sales generally. Paragraph (a) of Rule 10a-1 covers transactions in any security
registered on a national securities exchange, if trades in such security are reported in the
consolidated transaction reporting system, and prohibits short sales with respect to these
securities unless such sales occur on a "plus tick," (that is, a price above the price at which the
immediately preceding sale was effected), or "zero-plus tick," (that is, at the last sale price if it
was higher than the last different price). Rule 1Oa-1 is designed to prevent the market price of a
stock or other "reported security," as defmed in Rule 11Aa3-1(a)(4) under the Exchange Act,
from being manipulated downward by unrestricted short selling.
On the basis of your representations and the facts presented, in particular the composite
and derivative nature of HealthShares, it would not appear that trading in HealthShares would be
susceptible to the practices that Rule 10a-1 is designed to prevent. In particular, :the Company
anticipates that the market value of HealthShares will rise or fall based on changes in the net
asset value of the component securities of the Underlying Indices and supply and demand.
Accordingly, the Commission hereby grants an exemption from Rule 10a-1 to permit sales of
HealthShares without regard to the "tick" requirements ofRule lOa-I.
We note that the exemption from Rule 1Oa-1 would not apply to secondary market
portfolio sales ofcomponent securities made in connection with the redemption ofthe
HealthShares. In addition, this exemption is contingent upon the Funds maintaining at least 20
component stocks.
Rule 200(g) of Regulation SHO
Rule 200(g) ofRegulation SHO provides that a broker-dealer must mark all sell orders of
any equity security as "long," "short," or "short exempt." Rule 200(g)(2) requires that a ,short
. sale order must be marked "short exempt" if the seller is relying on an exception from the tick
test of Rule 10a-1 ofthe Exchange Act or any short sale price test of any exchange or national
securities association.
Accordingly, in conjunction with the exemption granted above to permit sales of
HealthShares without regard to the "tick" requirements of Rule lOa-I, on the basis of your
representations and the facts presented, and without necessarily concurring in your analysis, the
3

The HealthShares™ Emerging Cancer Exchange-Traded Fund tracks the performance of the
HealthShares™ Emerging Cancer Index and the HealthShares™ Cardio Devices Exchange-Traded Fund tracks the
performance of the HealthShares™ Cardio Devices Index.

Domenick Pugliese, Esq.
Paul,. Hastings, Janofsky and Walker LLP
January 22, 2007
Page 3 of6
Staff will not recommend to the Commission enforcement action under Rule 200(g) of
Regulation SHO if a broker-dealer marks. "short," rather than "short exempt," a short sale that is
effected in HealthShares, subject to the following conditions:
1.

11.

111..
IV..

For each exempt short sale, the various. market centers that execute such sales have.
instituted procedures to "mask". the short sale character of the transaction so that they are
executed as. short exempt~
Such market centers monitor on a regular basis to confirm that any such product or
transaction continues to meet the conditions for the exemptive relief and re-institute the
price test for any product or transaction that fails to satisfy such conditions;
A broker-dealer executing exempt short sales will mark such sales as. "short,". and in no
event will such sales be marked "long;".and
The market centers will maintain an audit trail of all such trade executions,. which is
capable ofbeing produced and subject to review upon request by the Commission and
other appropriate. regulatory authorities.

Regulation M
Redeemable securities issued by an open-end management investment company are
excepted from the.provisionsofRule 101 and 102. ofRegulation M .. The Commission granted
.the Company exemptions from certain provisions of the Investment Company Act of 1940 in
order to permit the Company to register as. an open-end investment company and to issue shares
that are redeemable only in CreationUnit size aggregations ofHealthShares.
Rule 101 ofRegulation M
Generally, Rule 101 of RegulationM is an anti-manipulation regulation that, subject to
'certain exemptions, prohibits any "distribution participant". and its "affiliated purchasers" from
bidding for, purchasing, or attempting to induce any person to bid for or purchase any security
which is the. subject of a distribution until after the. applicable restricted period except as
specifically permitted in the. Regulation. 4 . The provisions ofRule 101 of Regulation M apply to
'underwriters,. prospective. underwriters,. brokers,. dealers,. or other persons who have agreed to
participate or are. participating in a distribution of securities..
On the. basis of your representations and the. facts presented, particularly that the
Company is a registered open-end management investment company that will continuously
redeem at net asset value Creation Unit size aggregations of HealthShares; and the secondary
market price of the HealthShares. should not vary substantially from the net asset value of such
HealthShares, which is based on the value of the component securities in the underlying Index
and will be computed on a daily basis, the Staffhereby confirms that the Company is. excepted
under paragraph (c)(4) of Rule 101 ofRegulationM,. thus. permitting persons who may be
4

17 CFR 242.101.

Domenick Pugliese, Esq.
Paul, Hastings, Janofsky and Walker LLP
January 22, 2007
Page 4 of6

"I

deemed to be participating in a distribution of HealthShares to bid for or purchase HealthShares
during their participation in such distribution. 5
The Staff also confirms. the interpretation of Rule 101 of Regulation M that a redemption
of Creation Unit size aggregations of HealthShares and the. receipt of component securities in
exchange therefor by a participant in a distribution of HealthShares would not constitute. an
"attempt to induce any person to bid for or purchase a covered security, during the applicable
restricted period" within the meaning of Regulation M, and therefore would not violate
Regulation M.
Rule. 102 of Regulation M
Rule 102 of Regulation M prohibits issuers, selling security holders, or any affiliated
purchaser of such person from bidding for, purchasing, or attempting to induce any person to bid
for or purchase a covered security during the applicable restricted period in connection with a
distribution of securities effected by or on behalf of an issuer or selling security holder. Rule. 100
ofRegulation M defines. "distribution" to mean any offering of securities that is distinguished
from ordinary trading transactions by the magnitude ofthe offering and the presence ofspecial
selling efforts and selling methods.
On the basis. of your representations and the facts presented, particularly that the
Company is a registered. open"':end management investment company that will redeem at net asset
value. Creation Units of HealthShares, the Staffhereby confirms that the Company is excepted
under paragraph (d)(4) ofRule. 102 ofRegulationM, thus permitting the Funds to redeem .
HealthShares during the continuous offering of HealthShares.
Rule.14e-5
Rule 14e-5under the Exchange Act, among other things, prohibits a person making a
tender offer or exchange offer for any equity security from directly or indirectly, purchasing or
arranging to purchase any subject orrelated securities except as part ofthe offer, from the time.
the offer is publicly announced. until its expiration.

5

We note that Regulation M does not prohibit a distribution participant and its affiliated purchasers from
bidding for and purchasing component stocks in accordance with the exceptions contained in paragraphs (b)(6) and
(c)(l) of Rule 101. Rule 101(b)(6)(i) excepts basket transactions in which bids or purchases are made in the
ordinary course ofbusiness in connection with a basket of 20 or more securities in which a covered security does not
comprise more that 5% of the value of the basket purchased. Rule 101(b)(6)(ii) excepts adjustments to such a basket
made in the ordinary course of business as a result of a change in the composition of a standardized index. Also,
Rule 101 (c)(l) excepts transactions in actively-traded securities, that is, securities that have an average daily trading
volume value of at least $ 1 million and are issued by an issuer whose common equity securities have a public float
value of at least $150 million; provided however, that such securities are not issued by the distribution participant or
an affiliate of the distribution participant.

Domenick Pugliese~ Esq.
Paul, Hastings~ Janofsky and Walker LLP .
January 22, 2007
Page 5 of6
Rule 14e-5 explicitly includes dealer-managers within the rule's definition of "covered
person." Accordingly~ while acting as dealer-manager of a tender offer for a component stock, a
dealer-manager is prohibited from purchasing or arranging to purchase that component stock
until the expiration of the. offer.
On the basis of your representations and the facts presented~ particularly that purchases or
redemptions of HealthShares would not appear to result in the abuses at which Rule 14e-5 is
directed, and that any bids. or purchases by dealer-managers would not be effected for the.
purpose of facilitating a tender offer, the Commission hereby grants an exemption from Rule
14e-5 to permit any person acting as dealer-manager ofa tender offer for a component stock to:
(I) redeem HealthShares. in Creation Unit size aggregations to the. Company for component
stocks that may include. a security subject to the tender offer; and (2) purchase HealthShares
.
during such offer. 6
Rule lOb-I?
Rule I Ob-17, with certain exceptions, requires an issuer of a class of publicly traded .
securities to give notice of certain specified actions (for example~ a dividend distribution, stock
split,orrights offering) rehlting to such class of securities. in accordance with Rule I Ob-17(b).
On the basis of your representations and the. facts presented~ particularly that the
:Commission has determined togrant an exemption from the InvestmentCompany Actor 1940 to
register the Trust as an open-end management investment company notwithstanding the fact that
. it issues HealthShares with limited redeemability, the Commission hereby grants an exemption
.from the requirements of Rule lOb-I? to the Trust with respect to transactions in HealthShares. 7
The foregoing exemptions from Rules I Oa-l, 1Ob-17, 14e-5 under the Exchange Act,
interpretations of RulesTO1 and 102 of Regulation M, and no-action positions taken under
Regulation SHO are based solely on your representations and the facts presented to Staff, and are
strictly limited to the application of those rules to transactions involving the HealthShares under
the. circumstances described above. and in your letter.. Such transactions. should be discontinued,
pending presentationofthe facts for our consideration, in the event that any material change
occurs. with respect to: any of those facts or representations. Moreover, the. foregoing exemptions
from Rules. lOa-I, I Ob-17, and 14e-5 under the Exchange Act,. interpretations Rules 101 and 102
ofRegulationM and no-action positionS taken under Regulation SHO are subject to the.
6

The. Staff also confirms its no-action position under Rule 14e-5 when a broker-dealer (including a member
or member organization of the. AmEx or other national securities exchange), acting as a dealer-manager of a tender
.offer for a component stock, purchases such component stock in the secondary market for the. purpose of tendering
them to purchase a Creation Unit size aggregation of Shares,. if such transactions are effected as adjustments to such
a basket in the ordinary course. of business as a result of a change in the composition of the. relevant index.
7

We also note that compliance with Rule. IOb-17 would be impractical in light of the. nature of the Funds.
This is because it is not possible. for the Trust to accurately project ten days in advance what dividend, if any, would
be. paid on a particular record date.

Domenick Pugliese, Esq..
Paul, Hastings, Janofsky and Walker LLP
January 22, 2007
Page 6.of6
condition that such transactions in HealthShares, any component security, or any related
securities are not made for the purpose. of creating actual, or apparent, active trading in or raising
or otherWise affecting the price of such securities..
These exemptions, interpretations, and no-action positions are subject to modification or
revocation if at any time the Commission or Staff determin~s that such action is necessary or
appropriate in furtherance ofthe. purposes. ofthe Exchange Act. In addition, persons relying on
these exemptions, interpretations,. and no-action positions are directed to the anti-fraud and antimanipulation provisions of the Exchange Act, particularly Sections 9(a), 1O(b), and Rule 10b-5
thereunder. Responsibility for compliance with these and other provisions of the federal or state
securities laws must rest with persons. relying on these exemptions, interpretations, and no-action
positions.. The Staff expresses no view with respect to other questions that the proposed
transactions may raise, including, but not limited to, the adequacy of disclosure concerning, and
the. applicability of other federal and state. laws to, the proposed transactions.

For the Commission, by the Division of Market
Regulation, pursuant to delegated authority,

~~
~es A.. Brigagliano
Associate Director

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Underlying Index, or in Amei"ican Depositary Receipts ("ADRsf') or Glohal Depbsitaty'

Receipts ("GDRs") based on, secutities ofintetna~orial companies in the Underlying In~
clex. Becatis.e each Underlying Index is comprised o111y of stocks asindita:ted by its, name
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)
."

a4visgryagt:ee1l1e!lthetweell t&eAd~iis(;'lta,t1d the'Spb-AqYi~ot~~heStl:b-Adviso.t\Villhe'

PaulllQstings

'A~

..

NIt. ]atnle$ A.l)rigagliaoJJ
]al1uat;r 17.. 2007
Bage: ll
l:e~P9n:>~bleJq1:tllet:lay-"t9",daYh)al1~g,j~~ter~dirltO!~11,~g~e~ ..
l}1~l1twlth.~eGotnpanyputsuant to \Vhichit.willdistriput~f.pothQt:ders .• phtc:ed.with.it~11dspeCtus, the FtU1dsare·
I~~t~~d,t1l~~gxi~~l:o~§~~ .• ~ pas§tve, ()till4~~~t~~p~~~!hjg.r#~~gingJhe FUlldstotrJ,tck
th~~tilirQrman¢efJDe£()te.f~~anae~pel1$¢$',Qtthel.Jildtt!~~IndeX¢~~.?Jnl~em@y~u-.
liJ.l31lf9~q~,;th~· F'gJ:la.s\~~qt§~e}{ t99tl,l:p~tfo~~p.yp~tlPl1~w~~~~.§~g17il:~tt.·Willt1Pt
assUtriete1iipotarydet~nsiv¢.pQsitibns·\\ihen:ltUttket$·•. ae9Ift1e••.QJ:apl'eat••·PY'¢walu¢d.

~ltel:eyt~rpl:~c;tic;aBl~,. each.F'-U1tf\\7lllteplic~te .itsJJnd~r~Yin~ltl.dex'.'.1l1earui1g.thatit will
hold.the satnesecurities·as'thdse··illtlieUl1detlyio.g-nsIthel)ec\1titie§.9W1J.e4
eaC4FllAda7el~e+e~fter.r~fetredto. as "Pun.dSec;utities"), Each.Fun:dmaya1so,sample.itsUllde~yin~,lridexbYhoidirigseCuritiesthat,;'inthe
'~ggre~~e, ~e·,·intellded"Joap:pr~x!mateth~.JJtl,(:I~yixl& Ind~~U1 t~p11~og.~ey.chatacteJ,"il)-.
Ucsrsttch asprice/eatningstatioj€atriirtgsgtowth1and dividend }>ield Typically, ·aFund

wiU1lse as~plin~s!Lrat~if J;e~atQ~-yconsttai.nt9ioto1:het c;Qn.s~getatiqgspteyent it
Itom feplitatirigifsUnde1':lying Index.

Paull-lastin§s

.!lTI'OIlI@'

Mr. Ja1n~s1\. Btig~li'ano

Januaty'17,2007
l'age 12
11.

Proposal

A.

Reason fbr'ThkRequest

It•.•i$•• Cttrr~n:t1y·~~pec;t~4.th~t~1~.Fl.lll~wi1lissJle . .~1)dted~~I::Iealtl1SblU:~$JMq*+yit1.~g~
~regatimls"of lQO~;OOOHealtljShare$TM ormUltiplestheteof(':'CteatiOll Urrit·:A:gg1:¢gn~

• ti~~~)),·~Jt~:'tha.fp.\l+AAa~~q£q~p~tigg PIlit ~~~~RJ:l§,~h~.,able.·t? sepata,te.;~e
Cte~tidllUnit.i\ggtegatiortsofth¢ FU11dSinto'100,OOQit1dividualH¢altliShares~rM~ .

'I'he

'o11lllbetqf' Ii.e,~tJ,tSI1aJ:e~'J.?i1~a-Cr~}:ttil;}plJ1litA;ggte~rion.will·pot (;~~geX~(;eptil1the

eyentofastock split ots1tl1llMrevalwition),.

.

The COlnpapy\viUlistiI-lealtl1$~'U:estM~£the FllnFurtds \ViththeCotfu:.llissionptttsua.I1tto
a'1:e~str~tion;s,tatemeflt9~~oX111.IN~t.t\ . toper~tt:he/C()1npat1Yio • 9ffetat1(.lseA.rte~th~
Shaies™ofthe Ftiilds12 tinderthe 1940 Actatfd the$ecurities1\ct. 'I'lievatiousdisdoslJ+I'htlqSll.111ep:ts~drp:~ttet:ingm'fFle~th$haf~§~M('~el),~£,i~!~Qwl1ets~J~will

t¢¢eiv~ • ilJlpfthe.s~t~mehtSj .•not1ces~andt¢p'i)ttSi;eqJlfred .•unde!the.1940··1\"ct.andorhetappH~~ble" htWs 1:'l1ey
,yillI~c;#ve).fo.rie~~mpl~ . 'lllfl1l~·,··~q,q.~~~~aI:lnuw . reP9rts.~"tittel,l $~t~mellf~ a~~o.mp~f~'
ihgdividend pa}rnie11t~} Pfo~!Statementsl. annuaL1l6tificatlonsdetaiHngtlie' taxstams.of
dis1:tib1ltio.tl~, .• ~S~r~~1~Q9-IJIMs,etc; .. lleqfl1ls~tl1~p9m.l?at~i~feqy.·~e.:pW;¢ha~er.t9~e~el:·.!:itha'ge-'
p(}sitQf.,~.sp~91fiedc~~hpa~1llelltq~§ctibed1ll9re fully .helo~ .•. Theill-kiriadeposit WiJl

CbiislslQfa bask¢tQ£;se¢\Uid¢§i(the··"edabovein ,·PattI.E).·

The identiticsaud-ai'P.ounts:·.Qfth:e Pepos.itS~!1rici¢s ,v.iU.. l:>eaet~.edhy-tb.e,;Advisor

a~t1'll1adepllblic1Y aY~lJle 011 the-N~tiollaIS~qllritiesCle~g.Gorporiti~n
r'NSeC'~)

bulletitl.hom.•. By tequirillg tliatl'Utchase~ndted¢mptiQll'ttansactiQnsinYQl~g
fl~~t1J~Jrate~TN1 hie.. ·i.n-,kiqp,.·.~~t1J~11.· .• t1l~J,1i:t;t"·c"l~4,.~e. tEohlpanY···8~f:i·.winitrijze.p()ttf()lio

hilihover,br6kerage expense's,•• and·oth¢rtianslJ.ctiOll(jY:i'?th~t E':CFs._areliliteda~d . !~~ed9n
t1l.elXYSEalfdotflet Exchanges as well•. This is thel11ethodby:\vh1dltne,'shates of
dose~-et1d'inv~stmentr~~acti()1111l\1st be followea,.in0tcleE for tbe purchasert()re~

cehie·the NAVdetei:ltii'ned,onthe 'I'r.'lnsmittalDate; The DistcibutorwillmIDntllina recordofCteatipo UfutJ\ggtegationp1,11!chases.

The Distl'ibufot WllltmnsmitaIlptitchase ordetsfothe Funds; Auyoraet that/isllotin
~l;()p~ fpPJ:twilll->erel~tea.."Aftel:the JtUtls4; bav:ea:~epte9acP1ltcpas~Qrclerand te- .'
ceivetldelivety ofthe neposit•. Seeuritiesandanyaccompanyingcashpaymen~DTCwill
instr\ictit to ini~'lte "de~vety"ofe1le ~ppr()ptiaten~bef(}fCteati()n Ullit~ggr~gatiol1s
ofHealthShatestM to tbebaok'tclli:t}caccouiltspecified by the purchaser. The Distributor
,\Yiltftt~b apr~sp:~«;~aIlqa~oJ:).fu;roa#gl1to,tho~epl~c:i11gpp.r~pa§eOfc:1:~r~.

Rayment fot Ct.eatibfi UWt Ag~egatibris,.

Persons purCihasibg Cf:eatibn unit Aggtegiti'onsfrbro the FMds gen:.enill.Y'fil.$tinake~n
in~kind deposit ofDeposit SccuritiestAtn6ulie~)arid ~the Transaction Fee (together with the~:Ba1ant.tll$'
Ii '1'hePtospettliS;ahdSA.I [oithe Funds

'\vID pxoyidecomplete cllsclostiteabbuttl1e

'ftansactl?nftee.....j\llaQ9it1()l1alclt~gtrofll,~ to•• fiye>(5J·titn¢s.. ·thefixedTfM1s~ttiq~1.Fee
(exptesse'dasa percentage ofthe value of the DepositSecuridcs) maybe impbs~afol'(i)
c~eatiqllse~fe(!ted'OJ.lt~ide theCle~g~J:()ges~;and le fbrtl~tCqsts qftr~sf~rritlg the
secutities constituting the DepositSecuritiesto the accountof the Company.

LEGAL..JJS...iZ # 708~7570·lIl

tJt
PaulHastin.•.':p-.
ATTORNElJ; ...•.

. .

~(t. James it Br$gagli'c1:Q:Q
J~fiu.aty17, 2007
}Jage 1$

1\tn;Q9Q:.t,th(l'~S~~hG()tlefitC()1­
lectively areiefetreClto ilsthe "Fund.I>eposit.)1 .As fi6ted.aOov-e, th7Pel1'o$it;~eeurities
re,pUca~· • (9r.. satnple).th~Ft1n~;gelZtlritie.s;q£·lli.eI+~llds ..,•. '1b~ Ba1ancingi:\.l:nQ~t • ~~.•.acash
paymenulesigIled toeposit (notincludin~the'JJJ:ansa~>tjyllie Fundtothepurchaset ineasch.

.

The..AdY:i$olWill.tnak¢:jlV~bl¢th.tQJ;lg}jNSC.CQl1 ~a:chlru$ine$$JJ.~Yi' P#9+ t(}th~QP~nt
ilig,oftp\djng~ntheNYSE(a1i~f(jfthefiaines ~h~.theieqtiliedriti111berdftihifs.oftea1¢,o~ad~ilyba$is.theinfol:11lati?!lab()utJhe • f>revi()l.ls.c1ay~$,Bala1ilcihg:AtnQunt; .]0 aclelitiQnltlie·£ono'\Vinginforttm;tiQn'will.be~senrin~t¢a:. (i)•• qqntinJ.lQ1J$lY•• thtdugh:p,\1t,the··.l;l;a~

ilt~d~Xtl1l;~l!gh.tl1ef.aCilitie,s.'.Qfthe,FQIl.§Qlia~ted ~1?e,i.tlie,·ttJ+lrketpriceofaHealth~
Share™} arid(i1j everY't5secondS tl1.tQu~ho!lt1:hettadio.£; &aYias cakubitedh~r
BloQ11lbeJ:~.the est.i!:ngtedNAVQf a He,althS.l1~eT~f(\vlUph estiinat~ isexpestedt(}l~ea.c­
cfuiate to\vithma'fe\vbasispomts).Cbmparihgthese t'\Vofigutes allo\Vs:an investortQ
a¢t~(FwI1l1ther.·a!lq tQ Wha.texte,nt, He~th$haresnl.()fth~ Funqsate selling at a premittihof·ll.cllscdlin:tto··N.AV,
In :MSirc~f~*ce~.,~e·¥g~ilmny'us~tl11$«f;rtshifu.lieU".afubWtto~c""
,p~tlse,.?t"tJ1eF~1d., !;iQ\\,ever.the.i;\.d~~is9r~.!)t1bj~ttQthe.approYaJqfthe BQll1:clQ£r:>ire.¢t01:~ffuayadjustthe
'I'tansattionFee (des.cribed below) toprotect·e~tin~sh'cl:relidlder$fto.1lltbis ..exp,ense.

l.fThe .ideritityatido.:Uilibet of.urtits ··ofthe]J)eposit seciltities,tequ.i:tedf()r.~FUfidnep(jsit·,
may.cha~g¢i •. t9refle9t~~p}tlancing~4jJ.l~tmet1ts and. hyaFt1Q:(.i,.or .in te'sponse toaajustfuentstbllieweightirtg.oi:.tOriipositionof the cdmpol1entstocks'oftb:e

IJi1d¢t1yinghl(1¢;."{,
15

It IS rate· that'asecili:ity likdyl0 'be a Deposlt Security isiheligible for transfer.

F'auIHast;h::1'n$

..~

rY[r;JamesA. Brigagl.iano
Jat1tl~ 17,2007

Ija.get6

Ju~t as•• HealthShates™ • cllttbceJ;llfchdsedffofu.·.the;Furic1s 6nlyihCieit1on Unitsizea~te~

.~tio11s,stlGbshares ot\Ulit$. sjm1lafl)'tnarh~ tf?a't'ctJJe40tl1yift~mleott any
tlayo'nwhich .the NYSEdsopenroe>;change. ft:lt abask¢tofsecw:ities(~'Red¢lt)pti9n.Se'­

9urj~e§;').andaca.sh_paY1l1ent.•;l1le..•.~e.denlption.Securities;.1:en,
thatsuch·~lt~xnatiyeis:warra11ted, rQJ,'(Anl11plc, thi~ c()1.dd happen ifthered,eemWginvestor is unable,byll1\vot.policy, too\vh:tpatttctilai Redempt16rtSec1.1.nty.
Aswithptii¢hase~; t¢de1nptiOtis.ofHeatthShat'f~$.TMihCtea:ti()h

lJttitAggtegatiIJ,$will

iJrgJuclt:a'fj:.;tflsaction•• Fee.
E.

DiVidendReinvesttnciif Setvice

1'~'¢ • G~~lilPly'\v~nQtlllake'·~¢.Dtt .• bt)Q.k~~~~~Ili\'ia~ngR'ei.nv,e.~~~nv~~~.~ijx~.

"S~~i5~;~) av~ble fd"1l~e15.yBei1¢fi¢ial0wnetsfor\reinvestfi1eiit O£the1t,c~~fttJ~aceeaSj

bP7¢¢rt~Qt7()k¢~~~~"~1,1'1~ttnalte th.¢.;S¢H~¢~'\*~il~hl¢ tQtb~ircliellt!l,. 'l'li,~q~~,.
PMy~s'dis¢losure. doc9Ule~t$'Yillitrf(jrinfu~esto/1::softhi&fact.and dihidiriferested.ihvestQ1:S,tocPtjtilcts.:QchinY¢$torfs.htQkeJ:to:ascettain·th~ay~i1abiiit:Y~d"a 4¢~ctip.t.ion ()£th~
$e1:Vice·thro~g~,&\+c~blokct, . TheColA~a1fY~$·discl0sUted()ctlm~tit$\villalsO.dhlti()nili­

te£estedJ3:eneficialOwnetsthatther$l1()uldnot¢that~hht()ke1:mayxeq\lit:·fuve~to£s. .to
ad4~r~t()I;peqfJcpr()cedptes~n3rimqtables
(}1;deJ:t(}Pw:ticip~tein the 8erviceand stich
i1iY'estorssh6uld.~s'certnin.fJ:OIDtll¢itbrok¢t.S~Chihecess~:t;y.detajls, HealJ1lSh~e$J'Ma~"

in

q~qd:Pt1!liua!'lfto ~eiSetvicewil1be heldbyt1'leBelle~.n· offlea.lihShal!~$TJ:\1.atc.:utl!ent NAV. 13r(jkerage,cotn.11iissiorl.s,i£ @y? inqUj;red in pm-

Nrt.JlltnesA. Jlrig~gliano
Jantlaty ·17;>2001
Page 17
ch~sihg~~~lth~lw,e$,TM with ·thecash fl:~1'Il.the9iSPllPuti6ns'wilLhean,expense,bdt11eby

fue:Seneucial.• Ownets partici.patingirr:remvest11ient'tl:IroJIgl} the'S¢1C\~ce.

e tli~'.lfespousibility·.oft:hebtbk¢l:,.deru.ets

to.. ensurethitaEl:bspectUsQr ~roduct QesQtiprioll{i£the~ppli¢ation. is~a1l.teyth.eCQ11:utlis$j()tl'totheotherEl'F$tlo't: tel~tedto theCpn1pallYP'

III.

Requestsfb!ReLief

A.

Rulel0ilA

.

Rule 1()a-l(~)(1)(i) ptovides··dlat.a$ho!t.saleot"auExchange--ti;adeds€:curitYtn.'lynothe
effecteCibelow the l~streguhlr.\Vay sale price.. 'or .atsuchptice, unlcss:suchpriteisabove
lliElle~tPtececling.tJri¢€:at'\~hi~h.a!)!d.ew~ste~otted'1'heC01URally.. pe~~Ye$t~3.tte#~f
grS~~Pt10n isconditiQne?9nanunde~1lting
thatmv'estotsputchasmg HealthSbaresTMfto.t1lott1ltoughc1ealets in th:e's,ec(mdf.lty)1:i:\.~­
ketWill1:epeive•• llshort·"p.ro,~p¢§~t\ygl:~··.~·.'.tP.~.!$~c.glldatrt:ra9fu.g"Jn~1\~tf9f·E-~~th~1l,te.,.

ov:er; Ii-C;a.lthSh'afes:t:¥ffiCteacidn unit Aggtega,tiQns~X)tfuultiple$"thereof.may;,b:e::te~
deemed, on,::al);yausii.less'D~y; Unde~ tlws~n;irq.tm~~n~es~it wowel appear,to'beeco-:- ,

~r!;~;:~r=i~=:iE=~~~r>re!M

;:rat~!:.~~~=~~~~~~1i!l!~ .

rliPlllatiY~1nt~nt Jl1u$E,~pen.d,a~J~st$4 foteve~$1 o,f~et ~p~ct. The:ecQnohlkifu-,
'ptacti~aiity'of sucl1astmlegy is·iipp-arent.MoJ¢'ovet,;atatiba:s f:lYd~tl>le,tQ;th¢ •. p()"@1,tjai:

m~l1!pulat()l: as4;1:wR~1~f theEcUnds'wQ~a be'aay¢ts~I¥~~itegt¢drf
RWe.,t~.:~. ·qpefated;"tQP;ft~v~l)Jaea~t;r~'o~ t:4e;~R~Sl~Ii~tJt()m malc,ingsli()ff§:W~~ .p.t~dutWg\¢~:n~ ~,eqi.fi~d:l~~rig(.{s.

~~e~~~:~:tr~~~~jjC:~than~:~~;~:'~~j;:!::s~:~~~~s~~~~~&~s~~~ b*
'~:():o~eilldt~~~~:i::~k:~~:~~::tk'~~:;~~~:~~~~h::~;~:t:r:~~~~:;:t~
.~~:;~::t::~~ritt=J~~~,~:~.~r~e~{!:t:~~p.·m·ETF~·th{it nia.b'eengramett'ari.
Jft\l~GOIJm1jss!ongrap.t~ theteqUfst.~(treljef'v1tlI.re~pecr 'tQ J.\uie lQa':!, tb~GpmpatJ.Y

her.ebyteqiicsts.iliai:1:he:St~ffilotiecotfuriehd tf.mFthe Co1'.ll.iriission ~ke¢f1'f()tde1llentac,..
tip.~ gn~~rR111e 2Q(J~QfRe~tion$H() j.f~b+Qker~deale.r~~ll;ks."shO,rt:'r:t4erthan

'~shottekem.p~/"a;shor.tsa1ethat.is.-effeCted in the' funds inthe'sa:ii1¢mabnetas those
E'{F$ .li~t¢dirll\ppentlix Aqft4~·;;$lA. Lettet':tll,kth}tt ~e-J;~~g.gtail~$d.to~l,lCll :B~Fs,m
the SIA Letter be exteIide,ho cb:verttfiiisatttons:inthe HealthSharesiM. .'The requestea,
f¢lfeU$ ~u'b)~c:t;t9:.t:J1ef()UQ\~g qqpPitiqnsl
".

----

----

--

-.

.

'safe§:ha~1nsti~~~~;~~~:~tt~~~~Z!::~:~~:~;~eC~~:~f:=:::~:~~:h .
'th~t·:th~y;~tc;·¢~c~~~.li·:#S.~hQit,~xerq.p:ti.

r:~~:l;;:~~~i::i;~i:~~!.s~
~l.ii}

h, kir:9k(}J"Q:eal~!e~~)l~g ~x~P:t.$.gP!t'~#~$~f11 ~'tt~ sJ,lchs;t!es;:a s

«shott~" :ahd-in no evenc;':Wi11si.1chSiles beina±ked"longtand

l~ S:~~fo~t!1(),t~4;s!tpr(l)Xet.ter £tQm, Ir,aaatl1111~rtrl~n; to) ~es A.;~~gag1i'UlQ.;,Dl~siQn()f.

Market R~lation~datedJantiat}1 3,.2005;

Mt;;JamesA.BrigagliitllQ
l?n,:qa:ry ,17~,2007 '
Pl\~21J:

CRule 101 ofReguIati0rilvI
.Gen¢tauy~ •. :R.illel0t·Q£R.eg1JlatfQ~Mis;al1 ~nti"m.'\nip~6Pl1 .• t¢gqi}),tipff·t:lia~ •• SQ1:li¢l:ttQ'
l:eJ;t~in~){empt!oPslpJ;()mbits.,a~ytpk¢t"q¢!Uetsc6.p}doe.deetn:¢dto;be, "undit.'Wtlt't1ts·' br"ldiStributioriljarttdpaiits~\,aS
dlose term,s :Q:e d¢'fi1l,e,d in Rule tOQ(b),
,
..,'
The.Col~p~~yrespectfuUy .teq\le.1jt~,tha~ .tl1r;." C91l1ll1iss.i()11.grap.t ~ll .• e~~tnption ftojI}.

Rule to'l",:asdiscussedbe1Q"v,t'b/p¢rmitpetsle.t~tti5te(1periq~'
fot tlle~ptiifi:dse'SofRU1l}>;101;". Redeii1ptfonentausilu,sepatate:bid foranyb'filie'Ftind
S'ecurities.• Absent q~US\lalnir~\1tUs~es,thti F;l.111d:;WllLt1Qtpw:~h~e F~d$e~ties.l.ri
'the seeOl1~1.)tmatket to friIfill ~ tedeml'tio!1 request. Tlierefoie,redelnpnonsof Hemrlt·
Shar¢$TM f:;aPtlQt ge¢),,-pec'ted to~£f~I ,o.tFl1Jj4SeClJfities istiflt1ecess~~

andmapptoptiate:,and CQulctutulel:e$sarlIy hinder .btoker~dealersQrothetper$orts,in;theit
c~e,;ttion' al1d5edelllIJcg(>na9~vities>,jlltheiigay-to-dayordin.~tybusil1essofb~yittga:nd

sellitig se¢urities;a:nd:H~lthShares,TM"andthU:Suiidetn1ine thepQtehtia:l' hene:fidal"marke:t
e£fe~fofHe::d!pS,hates'f~ tradWg.

D.

'

Rule 102ofRegpla:tion 1\1:

TheCornpany also tequeststhatdle COlmrUssion confirm that,:as, a Ieswtq£ ,registration
of the Company as an qpeii-endmanagemenfirivestment company and theteikemable
nature of Hea:lthShares™ in Creatioil Unit Aggre&1tibils"JQnhe reasons pxeviPus!y staU~d '
under the t'eq~e.$t with resped:to relieruhder RuJi101 (F)(4).,transadiollsiil Health..
Shates'rM Qfthe FJ:lildnvewd be exetlipted fro-tn, Rule1Q2ou, the ba~i~ of the e~ceptiort
contained inpatagtaph (d)(4) of such rule. Application of Rule 102 in thisconte:rtwotdd
'tiotfutth:etthe ailti..inanipulathi e pl.1fPQses underlyitlg: the tule~
Th~~qrp9seBtJlqle1q2~stq ,pj;'7r~ntp~1:sQ~S .(rom.,W~piJ?1JI~.tipg,the,ptice:tl'sofRul¢ 1021:0al).o'\V tJle Fund.s to redeem Healtl:lShares™ in Creation Un,it:i\:ggtegat19tl~e;J*ri#:gtli~q()ritjh;\t9ti$()£f~gofH~-mthShm;es'ft.f.
' ,

Fbf,;the;;'teaspQ.s d¢s;cifbetl ib,cQnnectiQn::\vitiitl1e.t'e'iue$t~a,au1(f"tQ1;:t¢ne£;,t({d¢m.t1t'iQQ.
tlanS~q~01Js.an~ • s~CqntL'ltY'.;1n~et'fj:a~s~ctiQtl~1ti·tlleJFtW.?$r.HealtbSha,t~s.I~'are*Ptvi­

ablem.eansto'manil?ulliteth:~fl'rice Qfa FundS'e¢utitYaul.'in~Jfd1$tributi'dn,()f:sJic'h,sec:U7
,.t1~. 'rheC9gtp,~l1ywmJ:~d¢~tptheG~ea,~rq1JJXWf+¥ggteg~t,i(msqfJ-Iealt4ShatesT~afthe
NAY ofthe HealthShates1M .l\lthttiugh BealthShat~s"fMatettaded'Qn·the secondary mat~~>f1~~1!p$4are$IM,maY only b~, te4eemedm Sreati(:wpnit4ggregatiq~.T4tJs,the

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3A611240bb37658b50. Public record. Not legal advice.