Federal Register / Vol. 65, No. 206 / Tuesday, October 24, 2000 / Notices 63653

applicable law and governing Plan

documents.

7. Each of the Investment Companies

will comply with all provisions of the

1940 Act requiring voting by

shareholders (which for these purposes

shall be the persons having a voting

interest in the shares of the respective

Funds or portfolio of Future Investment

Companies) and, in particular, will

either provide for annual meetings

(except insofar as the Commission

interprets or may interpret section 16 of

the 1940 Act not to require such

meetings) or comply with section 16(c)

of the 1940 Act (although the

Investment Companies are not trusts of

the type described in section 16(c)), as

well as with section 16(a) of the 1940

Act and, if and when applicable, section

16(b) of the 1940 Act. In addition each

of the Investment Companies will act in

accordance with the Commission’s

interpretation of the requirements of

section 16(a) with respect to periodic

elections of directors and with such

rules as the Commission may

promulgate with respect thereto.

8. Each of the Investment Companies

will notify all Participants that it may be

appropriate to include in Separate

Account or Plan prospectuses or other

disclosure documents disclosure

regarding potential risks of mixed and

shared funding. Each of the Investment

Companies will disclose in its

prospectus that: (a) Shares of such

investment company may be offered to

insurance company separate accounts of

both variable annuity and variable life

insurance contracts and, if applicable, to

Qualified Plans; (b) due to differences in

tax treatment and other considerations,

the interests of various contract owners

participating in such investment

company and the interests of Qualified

Plans investing in such investment

company, if applicable, may conflict;

and (c) its Board will monitor events in

order to identify the existence of any

material irreconcilable conflicts and to

determine what action, if any, should be

taken in response to any conflict.

9. If and to the extent that Rules 6e–

2 and 6e–3(T) under the 1940 Act are

amended, or proposed Rule 6e–3 under

the 1940 Act is adopted, to provide

exemptive relief from any provision of

the 1940 Act or the rules promulgated

thereunder with respect to mixed or

shared funding, on terms and

conditions, materially different from

any exemptions granted in the order

requested in this Application, then the

Investment Companies and/or

Participating Insurance Companies and

Participating Qualified Plans, as

appropriate, shall take such steps as

may be necessary to comply with Rules

6e–2 and 6e–3(T), or Rule 6e–3, as such

rules are applicable.

10. The Participants, at least annually,

will submit to each relevant Board such

reports, materials, or data as such Board

reasonably may request so that the

directors may fully carry out the

obligations imposed upon the Board by

the conditions set forth in the

Application, and said reports, materials,

and data will be submitted more

frequently if deemed appropriate by

such Board. The obligations of

Participating Insurance Companies and

Participating Qualified Plans to provide

these reports, materials, and data to a

Board, when it so reasonably requests,

will be a contractual obligation under

the Participation Agreements.

11. All reports of potential or existing

conflicts received by a Board, and all

Board action with regard to determining

the existence of a conflict, notifying

Participants of a conflict, and

determining whether any proposed

action adequately remedies a conflict,

will be properly recorded in the minutes

of the Board or other appropriate

records, and such minutes or other

records shall be made available to the

Commission upon request.

12. None of the Investment

Companies will accept a purchase order

from a Qualified Plan if such purchase

would make such Plan an owner of 10

percent or more of the assets of one of

the Funds or the portfolios of Future

Investment Companies unless such Plan

executes a Participation Agreement with

the relevant Investment Company that

includes the conditions set forth in the

Application to the extent applicable. A

Plan will execute an application

containing an acknowledgment of this

condition at the time of its initial

purchase of shares of any such Fund or

portfolio.

Conclusion

For the reasons summarized above,

Applicants believe that the requested

exemptions, in accordance with the

standards of section 6(c), are

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–27217 Filed 10–23–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–24695; 812–11746]

Provident Institutional Funds, et al.;

Notice of Application

October 18, 2000.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’).

ACTION: Notice of application under

sections 6(c) and 17(b) of the Investment

Company Act of 1940 (the ‘‘Act’’) for an

exemption from section 17(a) of the Act.

SUMMARY OF APPLICATION: Applicants

seek an order that would permit a

registered open-end management

investment company to enter into

repurchase agreements with an affiliated

person.

Applicants: Provident Institutional

Funds (the ‘‘Fund’’), the PNC Financial

Services Group, Inc. (‘‘PNC’’), and

blackRock Advisors, Inc. (‘‘BlackRock’’).

FILING DATES: The application was filed

on August 12, 1999, and amended on

October 18, 2000.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicants with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

November 8, 2000, 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 SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW., Washington, DC 20549–

0609. Applicants, c/o BlackRock

Financial Management, 345 Park

Avenue, New York, New York 10154.

FOR FURTHER INFORMATION CONTACT:

Elaine M. Boggs, Special Counsel, at

(202) 942–0572, or Christine Y.

Greenlees, Branch Chief, at (202) 942–

0564 (Division of Investment

Management, Office of Investment

Company Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch, 450 5th Street,

NW., Washington, DC 20549–0102 (tel.

(202) 942–8090).

63654 Federal Register / Vol. 65, No. 206 / Tuesday, October 24, 2000 / Notices

1Applicants represent that every Advisor will be

registered under the Advisers Act, and any PNC

Company that serves as an investment adviser to

any Series will be registered or exempt from

registration under the Advisers Act. 2Any future entity that relies on the requested

order will do so only in accordance with the terms

and conditions of the application. Each entity that

currently intends to rely on the requested order has

been named as an applicant. 3 In accordance with the standing instructions of

the customers of the PNC Companies, the computer

program also provides for the automatic redemption

of Fund shares held in an account as of the next

determined net asset value if the cash balance in the

account is less than the minimum balance specified

by the customer.

Applicants’ Representations

1. The Fund is an open-end,

diversified management investment

company consisting of ten series (each,

a ‘‘Series’’). Each Series is a money

market fund that complies with rule 2a–

7 under the Act.

2. BlackRock, an investment adviser

registered under the Investment

Advisers Act of 1940 (‘‘Advisers Act’’),

is the investment adviser for each

Series. BlackRock is a direct whollyowned subsidiary of BlackRock, Inc.,

which, in turn, is a majority-owned

subsidiary of PNC Bank, N.A. (‘‘PNC

Bank’’). PNC Bank is a wholly-owned

subsidiary of PNC. PNC is a bank

holding company that operates

subsidiary banks and other subsidiaries

engaged in financial businesses. PFPC

Trust company, an indirect whollyowned subsidiary of PNC, is the Fund’s

custodian.

3. Applicants request that relief be

extended to (a) any other investment

adviser registered under the Advisers

Act that controls, is controlled by, or is

under common control with BlackRock

(collectively, the ‘‘Advisors’’), and (b)

any entity that controls, is controlled by,

or is under common control with PNC

(collectively, the ‘‘PNC Companies’’). 1

Applicants also request that the relief be

extended to future Series of the Fund

and to such other registered open-end

management investment companies and

their series that in the future: (a) are

advised by the Advisors or the PNC

Companies, (b) are taxable money

market funds under rule 2a–7 under the

Act, and (c) effect purchases and sales

through PNC’s ‘‘sweep’’ program

(collectively, such future companies and

the Fund are the ‘‘Funds’’). 2

4. The Fund’s shares are purchased by

customers of the PNC Companies,

including qualified deposit, custody,

agency, and trust accounts, through

their accounts with the PNC Companies.

The Fund’s shares may be purchased

through automatic investment

transactions. In these transactions, one

of PNC’s subsidiary banks, as agent,

follows the standing instructions of the

customer and automatically invests

excess cash balances in the customer’s

accounts in shares of one or more Series

(‘‘sweep program’’). 3 Each of the

participating Series currently declares

dividends daily to shareholders of

record as of 4 p.m. on that day and

accepts orders at the next net asset value

determined after the order is received.

Net asset value is determined as of 12

noon and 5:30 p.m. Orders are executed

when good funds are received, which is

normally after the dividend is declared

for the day on which the order is

received. Accordingly, in the sweep

program, customers do not earn a

dividend in the Fund for the day on

which the customers’ banking

transactions occurred. This would

normally result in the customers losing

a day’s worth of income on such funds.

5. To permit BlackRock, as the Fund’s

investment adviser, to invest anticipated

new assets attributable to the sweep

program on the same day that they are

available for investment (despite the fact

that the exact amount will not be known

until after the time for investment that

day), applicants propose that the PNC

Companies enter into overnight

repurchase agreements with each Series.

The assets would be invested in fund

shares as of the time the relevant Series

determined its net asset value on the

same day the sweep occurs (the ‘‘Sweep

Time’’). The Fund proposes to enter into

a master repurchase agreement with the

PNC Companies, which is substantially

the same as the industry standard

master repurchase agreement

promulgated by the Public Securities

Association, covering all repurchase

agreement transactions (the ‘‘Master

Repurchase Agreement’’).

6. In order to enable each Series to

handle sweep transactions that result in

net redemptions as well as net

investments, BlackRock would plan

each day’s portfolio transactions for

each Series to include an overnight

repurchase agreement transaction with

the PNC Companies in a specified

standing base amount (‘‘Base Amount’’).

The Base Amount would represent the

greatest amount of net redemptions

likely to be experienced by a Series as

a result of the sweep program on any

given day and would be approximately

2% to 5% of the aggregate net asset

value of each Series and would be the

amount that a Series otherwise would

have in uninvested cash to meet

redemptions expected from the sweep

program. The Base Amount as to any

particular Series on any particular day

will not exceed 5% of that Series’ net

assets prior to giving effect to the sweep

for that day, or such lower amount as

the Fund’s board of trustees (‘‘Board’’),

including a majority of the trustees who

are not ‘‘interested persons,’’ as defined

by section 2(a)(19) of the Act, of the

PNC Companies, the Advisors, or the

Fund (‘‘Independent Trustees’’), may

determine. The purpose of a repurchase

agreement in the Base Amount would be

to enable a Series to adjust its earning

assets downward after normal trading

hours in response to a net redemption

being required by the sweep program for

that Series on a particular day. Thus, the

Base Amount for each Series would be

the amount of the purchase agreement

that would be in effect overnight with

the PNC Companies if the sweep

program produces no net investment or

net redemption, giving the Series an

opportunity to reduce the repurchase

agreement (and thus its assets) if there

are net redemptions on that day. If the

operation of the sweep program

produces net investment into a Series

on a given day, the Fund will invest the

net amount swept into that Series by

increasing the Base Amount of the

overnight repurchase agreement

transaction with the PNC Companies by

the net amount being swept into the

Series. If the operation of the sweep

program produces net redemptions from

a Series on a given day, the amount of

the overnight repurchase agreement

transaction for that Series will be

reduced from the Base Amount by the

net amount being redeemed.

7. Applicants intend to limit the

amount of each Series’ net assets that

may be invested pursuant to the

requested order with the PNC

Companies to a percentage upon which

applicants from time to time may agree

(the ‘‘Maximum Purchase Amount’’).

The Maximum Purchase Amount may

fluctuate but will not exceed 15% of the

net assets of a Series after giving effect

to the sweep for that day.

8. To facilitate the repurchase

transaction where the exact amount of

the overnight repurchase agreement

and, consequently, the amount of the

required collateral is not known until

PNC’s computer processing is

completed during the night (the

‘‘Completion Time’’), the PNC

Companies, at no cost to the Fund, will

maintain at all times in a segregated

subcustodian account in the name of the

Fund, for the benefit of the applicable

Series, collateral having a value when

added to the value of the collateral

collateralizing any overnight repurchase

agreements with the PNC Companies

outstanding at the time, at least equal to

the amount (the ‘‘Required Collateral

Amount’’) necessary to collateralize

fully (within the meaning of rule 2a–7

under Act) repurchase agreements with

Federal Register / Vol. 65, No. 206 / Tuesday, October 24, 2000 / Notices 63655

4The subcustodian account may be maintained

with PNC Bank’s Trust Department or a nominee

qualified to act as a custodian pursuant to section

17(f) of the Act, and references in this notice to PNC

Bank’s Trust Department mean either entity.

5 Investment Company Act Release No. 24050

(Sept. 23, 1999) (proposing rule 5b–3).

the Fund on behalf of each applicable

Series in an amount equal to the

Maximum Purchase Amount. BlackRock

will notify the Fund’s custodian and

PNC of any change in the Maximum

Purchase Amount, and the PNC

Companies will adjust the amount of

collateral maintained in the segregated

account as often as necessary so that it

at least equal the aggregate Required

Collateral Amount for the applicable

Series. The relevant Series will have a

perfect security interest in the

repurchase agreement collateral held in

the account.

9. PNC Bank’s Trust Department will

act as the Fund’s subcustodian pursuant

to a subcustodian agreement approved

by the Board, including a majority of the

Independent Trustees.4 The Fund’s

assets held by PNC Bank’s Trust

Department would be maintained in a

segregated custodian account

established on behalf of the Fund in

accordance with the rules and standards

of the Comptroller of the Currency and

the Act. PNC Bank’s Trust Department

would receive the eligible securities

transferred to it in its capacity as

subcustodian for the Fund and hold

them in a manner complying with the

requirements of section 17(f) of the Act.

After the Completion Time that night,

the records maintained by PNC Bank’s

Trust Department in its capacity as the

Funds’ subcustodian would show:

(a) For each customer account

participating in the sweep program, a

cash entry for the number of shares of

the applicable Series’ shares purchased

or redeemed and a corresponding subentry for the number of shares

purchased or redeemed as of the Sweep

Time through operation of the computer

sweep program; and

(b) For the Fund’s subcustodian

account, all purchase and sales

transactions (which, where a PNC

Company is a trustee, nominee, or the

equivalent, may be a single net purchase

or redemption transaction for a number

of subaccounts maintained by that PNC

Company) and the net cash proceeds, if

any, received by the Fund for each

applicable Series through the operation

of the sweep (or, conversely, the net

redemption proceeds paid or payable by

the Fund for each applicable Series if

there were net redemptions). In

addition, the Fund’s subcustodian

account would reflect the specific

amount in fact invested in an overnight

repurchase agreement for each

applicable Series (including the

ownership of the securities securing the

repurchase agreement). If the sweep

resulted in net redemptions for any

Series, the subcustodian account would

reflect this fact and show reduced or no

ownership of securities held in the

subcustodian account to secure

repurchase transactions with the PNC

Companies, since (contrary to

expectations) none of the Fund’s assets

had been used to purchase such

securities. To the extent that securities

transferred to secure the repurchase

agreements exceeded the amount of

collateral actually required for that day’s

repurchase agreements (as shown by the

results of the day’s computer

processing), the appropriate PNC

Company would be shown to be the

owner of the excess securities.

10. After the Completion Time, PNC

would transmit to the Funds’ transfer

agent records relating to the automatic

investment transaction. The transfer

agent’s records would then show an

entry to each of the corresponding

shareholder accounts for the number of

each relevant Series’ shares

automatically purchased or redeemed as

of the Sweep Time through operation of

the sweep.

11. Each Series will purchase only

securities in which it may invest as

described in its prospectus and

statement of additional information and

as limited by rule 2a–7. The Master

Repurchase Agreement will be

collateralized only by securities that are,

except as to maturity, ‘‘first-tier

securities’’ as defined by rule 2a–

7(a)(12) under the Act (‘‘First-Tier

Securities’’) and that are eligible

collateral for the applicable Series under

the Series’ prospectuses and statement

of additional information and rule 2a–

7 under the Act. The transactions will

comply with the guidelines set forth in

Investment Company Act Release No.

13005 (February 2, 1983) and will be

collateralized fully as that term is

defined in rule 2a–7. Any repurchase

agreement entered into by a Fund will

satisfy the requirements of proposed

rule 5b–3,5 if and when the rule is

adopted and becomes effective. The

Master Repurchase Agreement will be

subject to annual approval with respect

to each Series by the Board, including

a majority of the Independent Trustees.

12. The transactions would be

‘‘repurchase agreements’’ for purposes

of Chapter 11 of the United States

Bankruptcy Code and the Financial

Institutions Reform, Recovery and

Enforcement Act of 1989. These statutes

provide that, if the bankruptcy of the

counterparty occurs, the repurchase

agreement can be liquidated without

being subject to the potential delay

associated with the automatic stay or

similar provision of those statutes.

Applicants’ Legal Analysis

1. Section 17(a) of the Act makes it

unlawful for any affiliated person of a

registered investment company, or any

affiliated person of such affiliated

person, acting as principal, to sell or

purchase any security to or from such

investment company. Section 2(a)(3) of

the Act defines an affiliated person to

include any investment adviser of a

registered investment company and a

person that controls, is controlled by, or

is under common control with another

person. Each Advisor, as the Funds’

investment adviser, is affiliated with the

Funds. In addition, since each Advisor

will be controlled by PNC and will be

under common control with each of the

other PNC Companies, PNC and each of

the other PNC Companies would be an

affiliated person of an affiliated person

(Advisor) of the Funds. Accordingly, the

Advisors and the PNC Companies are

subject to the prohibitions contained in

section 17(a) with respect to the Funds.

2. Section 17(b) of the Act authorizes

the SEC to exempt a transaction from

section 17(a) if the terms of the

proposed 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, the proposed transaction is

consistent with the policy of each

registered investment company

concerned, and the proposed

transaction is consistent with the

general policy of the Act.

3. Section 6(c) of the Act provides that

the Commission may exempt any

person, security, or transaction or any

class or classes of persons, securities, or

transactions from any provision of the

Act, or from any rule thereunder, if 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. Applicants

request relief under sections 17(b) and

6(c) of the Act from section 17(a) of the

Act to permit the Funds to engage in

overnight repurchase agreements with

the PNC Companies. Applicants submit

that the requested relief satisfies the

standards for relief in sections 6(c) and

17(b) for the reasons discussed below.

4. Applicants submit that the

requested relief is appropriate and in

the public interest because it will permit

the applicable States to invest at a

favorable yield incremental net assets

attributable to the ‘‘sweep’’ program on

63656 Federal Register / Vol. 65, No. 206 / Tuesday, October 24, 2000 / Notices

the same day that such assets are

available for investment. Applicants

believe that a more attractive ‘‘sweep’’

program of this type would result in

increased assets for the applicable

Series and the Fund. Applicants submit

that a larger asset base for a particular

Series would benefit that Series’

shareholders by spreading expenses

over a larger asset base.

5. Applicants contend that the

proposed exemption is necessary to

enable the Fund to earn market rates of

return on assets obtained on a particular

day through the sweep program.

Applicants state that they have been

unable to local any unaffiliated issuer

willing to engage in the transactions on

a basis as favorable to the Fund as the

proposed amendments.

6. Applicants state that PNC and its

affiliates are aware of the potential

conflicts of interest inherent in the

operation of the sweep program if the

proposed relief is granted. Applicants

state that, therefore, PNC and BlackRock

have established procedures and

conditions to be followed by their

employees and agents to prevent any

overreaching on the part of any person

that could act to the detriment of the

Fund and to ensure that each

transaction is effected on a reasonable

and fair basis.

7. Applicants submit that the

proposed transactions will not reduce

any of the applicable Series’ yields. If

the operation of the proposed sweep

program shortens the Funds’ average

daily portfolio maturity, the effect of the

reduction would be minimal because:

(a) each Series currently maintains a

relatively short average daily portfolio

maturity; (b) upon receipt of assets, the

Series historically have invested the

assets in overnight or very short-term

obligations with the investment

occurring one day later; and (c) yields

on overnight instruments are often very

similar to or even higher than rates on

comparable credit quality instruments

with maturities of 30 to 40 days. Thus,

applicants believe that any effect on

yield as a result of the proposed sweep

program would be negligible. In

addition, operations pursuant to the

independent pricing mechanism set

forth in condition (9) below should

provide yields from sweep investments

that are no lower than similar nonsweep investments.

Applicants’ Conditions

Applicants agree that any order of the

SEC granting the requested relief will be

subject to the following conditions:

1. No sweep account customer of any

of the PNC Companies will be permitted

to effect a sweep transaction for any

participating Series of any Fund after

the Sweep Time for the Series and the

Series’ net asset value has been

computed for that day.

2. The Board of each Fund, including

a majority of the Independent Trustees,

will: (a) Adopt procedures that are

reasonably designed to provide that the

conditions set forth below and the

requirements of Investment Company

Act Release No. 13005 (Feb. 2, 1983)

have been complied with; (b) make and

approve changes to the procedures as

deemed necessary; (c) determine no less

frequently than quarterly that the

transactions made pursuant to the order

during the preceding quarter were

effected in compliance with the

procedures; and (d) approve the Master

Repurchase Agreement annually. The

Advisor of each Fund may implement

these procedures, subject to the

direction and control of the Board of

each Fund.

3. The legal or compliance

department of, and internal and outside

auditors for, the PNC Companies

(‘‘Compliance Personnel’’) will prepare

guidelines for the Advisors and the PNC

Companies to ensure that the

transactions described in the

application comply with the conditions

of the application and that the integrity

of the program is maintained. The

Funds’ independent public accountants

will verify assets held in each

subcustodian account in accordance

with rule 17f–2 under the Act. The

Compliance Personnel will periodically

monitor the activities of the Advisors

and the PNC Companies in connection

with the operation of the sweep program

to ensure that the conditions set forth in

the application are adhered to.

4. The terms of the relief will be

disclosed fully in each Fund’s

prospectus and statement of additional

information. A schedule of all

transactions with the PNC Companies

will be filed with each semi-annual

report filed by the Funds with the

Commission pursuant to sections 30(a)

and 30(b)(1) of the Act. The relevant

Advisor will provide each Fund’s Board

with a full report of the transactions

under the sweep program, as described

in the application, no less frequently

than quarterly. The relevant Advisor

also will provide each Fund’s Board

with a statement that, as the Fund’s

investment adviser, it determined the

repurchase transactions to be necessary

and appropriate under the

circumstances.

5. The Funds, the PNC Companies,

and the Advisors will maintain records

with respect to those transactions

conducted pursuant to the requested

exemption as may be necessary to

confirm compliance with the conditions

to the requested relief. In this regard,

each Fund will maintain an itemized

daily record of repurchase agreement

transactions entered into pursuant to the

exemption, showing for each

transaction: That it has entered into the

transaction; the entity with which it has

entered into the transaction; the

purchase and repurchase prices; the

time and date of the transaction; the

type and amount of collateral; and the

date fixed for termination of the

transaction, which will always be the

next business day. For each transaction,

the records also shall document the

quotations received from other dealers

in accordance with condition (9),

including: The names of the dealers; the

prices quoted; and the times and dates

the quotations were received. The

records required by this condition will

be maintained and preserved in the

same manner as records required under

rule 31a–1(b)(1) under the Act.

6. The Maximum Purchase Amount

will be the amount stipulated by the

PNC Companies from time to time but

will not exceed 15% of the sum of the

net assets of the applicable Series after

giving effect to the sweep for any

particular day. The Base Amount as to

any particular Series on any particular

day will not exceed 5% of that Series’

net assets prior to giving effect to the

sweep for that day, or such lower

amount as the Board of the Funds,

including a majority of the Independent

Trustees, may determine. With respect

to a particular Series on a particular

day, the amount invested pursuant to

the requested exemption will not exceed

the lesser of the sum of the Base

Amount for that Series plus the amount

swept into that Series on that day or

15% of the next assets of that Series

after giving effect to the sweep for that

day.

7. All records pertaining to the sweep

program will be preserved for a period

of not less than six years, the first two

years in an easily accessible place, from

the end of the fiscal year in which any

sweep transaction occurred.

8. In connection with overnight

repurchase agreement transactions

pursuant to the Master Repurchase

Agreement, the PNC Companies will

maintain at all times during operation of

the sweep program in a segregated

subcustodian account in the name of the

relevant Fund for the benefit of the

applicable Series’ collateral comprised

only of securities that are, except for

their maturity, First-Tier Securities

valued at an amount equal to the

Required Collateral Amount. In

addition, the PNC Companies will

transfer the collateral through the book

Federal Register / Vol. 65, No. 206 / Tuesday, October 24, 2000 / Notices 63657

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3Exercise limits will continue to correspond to

position limits, so that investors may exercise the

number of contracts set forth as the position limit,

during any five consecutive business day period.

4The Exchange recently listed and traded options

based on a value of 1⁄10 the current value of the

Nasdaq 100 Index and made related changes to

position and exercise limits for that option class.

See Securities Exchange Act Release No. 43000

(June 30, 2000), 65 FR 42409 (July 10, 2000).

entry system of the Federal Reserve, the

Depository Trust Company, or another

book entry system approved by the

Independent Trustees (each, an

‘‘approved book entry system’’) and, in

connection with the transfer, each

Fund’s subcustodian account with PNC

Bank’s Trust Department will be

designated through an approved book

entry system as the recipient of the

securities and the PNC Companies’

internal records and written

confirmation will indicate that the

collateral is being held on behalf of and

in the relevant Fund’s name for the

benefit of the applicable Series. Each

Fund thereby will acquire a security

interest in the collateral for the benefit

of the applicable Series. Any repurchase

agreements entered into by a Fund will

satisfy the requirements of proposed

rule 5b–3 under the Act, if and when

the rule is adopted and becomes

effective.

9. Before any transaction may be

conducted pursuant to the requested

exemption, the relevant Advisor must

obtain the information as it deems

necessary to determine that the price

test below has been satisfied. Before any

repurchase agreement is entered into

pursuant to the requested exemption,

the relevant Advisor must obtain and

document competitive quotations from

at least two other dealers with respect

to repurchase agreements comparable to

the type of repurchase agreement

involved (including size, which would

equal the Maximum Purchase Amount

for the particular Series in question,

maturity, and collateral), except that if

quotations are unavailable from two

dealers only one other competitive

quotation is required. In addition, the

repurchase transactions for which

quotations are sought must be

conventional overnight repurchase

agreements in which the funds would

be transferred by the relevant Fund on

behalf of the participating Series as of

the same day that the transaction is

entered into, and then returned by the

counterparty on the following business

day. Before entering into a transaction

pursuant to the requested exemption, a

determination will be required in each

instance, based upon the information

available to the relevant Advisor, that

the income to be earned from the

repurchase agreement to be entered into

with any PNC Company is at least equal

to that available from the repurchase

agreements with respect to which

quotes were obtained.

10. No less frequently than quarterly,

the Board of each Fund, including a

majority of the Independent Trustees,

on behalf of each Series of that Fund,

will review the Base Amounts that have

been established for the Series during

the preceding quarter to determine

whether the Base Amounts

appropriately reflected the amounts of

the Series’ net assets that would have

remained uninvested at the Fund’s

custodian in order to meet potential

redemptions from the sweep program if

the Base Amounts were not available.

To assist the Board in this review, the

Advisors will provide the Board with all

relevant information. The Board,

including a majority of the Independent

Trustees, will take such steps as it

deems necessary to assure that the Base

Amounts for each Series appropriately

reflect the amounts of the Series’ net

assets that would remain uninvested at

the Fund’s custodian in order to meet

potential redemptions from the sweep

program if the Base Amounts are not

available.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–27234 Filed 10–23–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43456; File No. SR–CBOE–

00–14]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. Relating to an Increase in the

Position Limits for Nasdaq 100 Stock

Index Options

October 17, 2000.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on April 10,

2000, the Chicago Board Options

Exchange, Inc. (‘‘CBOE’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared by the Exchange.

The Commission is publishing this

notice to solicit comments on the

proposed rule change from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to amend

Exchange Rule 24.4—Position Limits for

Broad Based Index Options, to increase

the standard position and exercise

limits for the NASDAQ 100 Index

(‘‘NDX’’) option class, expand the index

hedge exemption, and eliminate the

near term position limit restriction. The

text of the proposed rule change is

available at the CBOE and at the

Commission’s Public Reference Room.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

CBOE included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. The CBOE has

prepared summaries, set forth in

Sections A, B, and C below, of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The CBOE proposes to amend

Exchange Rule 24.4 by increasing the

broad based index option position limit

for the NDX, eliminating the restriction

on near term NDX option positions, and

increasing the NDX index hedge

exemption. Specifically, the Exchange

proposes to increase the overall position

limit from 25,000 contracts to 75,000

contracts—a tripling of the current

limit.3 The Exchange also proposes to

eliminate the 15,000 contract near term

limit. Lastly, the Exchange proposes to

raise the index hedge exemption from

75,000 option contracts, which is in

addition to the standard limit, to

150,000 option contracts.4

The CBOE believes that an increase in

position and exercise limits for NDX

options is appropriate for several

reasons. The current limit of 25,000

contracts, with no more than 15,000

contracts in the near term series, has

been in place since the inception of

trading in the NDX option class on

February 7, 1994. The CBOE notes that

the Commission recently approved rule

filings increasing position and exercise

limits for standardized equity option