Federal Register / Vol. 65, No. 27 / Wednesday, February 9, 2000 / Notices 6423

‘‘interested persons,’’ as defined in

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

consider to what extent, if any, the

advisory fees charged to the Registered

Participating Fund by SKI should be

reduced to account for the reduced

services provided to the Registered

Participating Fund by SKI as result of

Uninvested Cash being invested in the

Central Fund. The minute books of the

Registered Participating Fund will fully

record the Board’s consideration in

approving the advisory contract,

including the fees referred to above.

3. Each of the Participating Funds will

invest Uninvested Cash in, and hold

shares of, the Central Funds only to the

extent that the Participating Fund’s

aggregate investment in the Central

Funds does not exceed 25% of the

Participating Fund’s total assets. For

purposes of this limitation, each

Participating Fund or series thereof will

be treated as a separate investment

company.

4. Investment in shares of the Central

Funds will be in accordance with each

Registered Participating Fund’s policies

as set forth in its prospectus and

statement of additional information.

5. Each Fund that may rely on the

order shall be advised by SKI or will

have SKI as its trustee.

6. No Central Fund shall acquire

securities of any other investment

company in excess of the limits

contained in section 12(d)(1)(A) of the

1940 Act.

7. The Private Central Funds will

comply with the requirements of

sections 17(a), (d), and (e), and 18 of the

Act as if the Private Central Funds were

registered open-end investment

companies. With respect to all

redemption requests made by a

Participating Fund, the Private Central

Funds will comply with section 22(e) of

the Act. SKI as sole trustee of each

Private Central Fund has or will adopt

procedures designed to ensure that each

Private Central Fund complies with

sections 17(a), (d), and (e), 18, and 22(e)

of the Act. SKI will also periodically

review and update as appropriate such

procedures and maintain books and

records describing the procedures, and

maintain the records required by rules

31a–1(b)(1), 31a–1(b)(2)(ii), and 31a–

1(b)(9) under the Act. All books and

records required to be made pursuant to

this condition will be maintained and

preserved for a period of not less than

six years from the end of the fiscal year

in which any transaction occurred, the

first two years in an easily accessible

place, and will be subject to

examination by the Commission and its

staff.

8. Each Private Central Fund will

comply with rule 2a–7 under the Act.

With respect to such Private Central

Fund, SKI will adopt and monitor the

procedures described in rule 2a–7(c)(7)

and will take such other actions as are

required to be taken under those

procedures. A Participating Fund may

only purchase shares of a Private

Central Fund if SKI determines on an

ongoing basis that the Fund is in

compliance with rule 2a–7. SKI will

preserve for a period not less than six

years from the date of determination,

the first two years in an easily accessible

place, a record of such determination

and the basis upon which the

determination was made. This record

will be subject to examination by the

Commission and its staff.

9. Each Participating Fund will

purchase and redeem shares of any

Private Central Fund as of the same time

and at the same price, and will receive

dividends and bear its proportionate

share of expenses on the same basis, as

other shareholders of such Private

Central Fund. A separate account will

be established in the shareholder

records of each Private Central Fund for

the account of each Participating Fund

that invests in such Private Central

Fund.

10. To engage in Interfund

Transactions, the Funds will comply

with rule 17a–7 under the Act in all

respects other than the requirement that

the parties to the transaction be

affiliated persons (or affiliated persons

of affiliated persons) of each other solely

by reason of having a common

investment adviser or investment

advisers which are affiliated persons of

each other, common officers, and/or

common directors solely because a

Participating Fund and a Central Fund

might become affiliated persons within

the meaning of section 2(a)(3)(A) and (B)

of the Act.

11. The net asset value per share with

respect to shares of a Private Central

Fund will be determined separately for

each Private Central Fund by dividing

the value of the assets belonging to that

Private Central Fund, less the liabilities

of that Private Central Fund, by the

number of shares outstanding with

respect to that Private Central Fund.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–2965 Filed 2–8–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

24275; 812–11680]

Ark Funds, et al.; Notice of Application

February 2, 2000.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’).

ACTION: Notice of an application under

section 17(b) of the Investment

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

exemption from section 17(a) of the Act.

SUMMARY OF THE APPLICATION:

Applicants request an order to permit a

pension plan to transfer its assets to

certain registered open-end management

investment companies in exchange for

shares of the companies.

APPLICANTS: ARK Funds, Allfirst

Financial Inc. Pension Plan (‘‘Allfirst

Plan’’), Allied Investment Advisers, Inc.

(‘‘AIA’’), Allfirst Trust Company, N.A.

(‘‘Allfirst Trust’’) and Allfirst Financial

Inc.

FILING DATES: The application was filed

on July 1, 1999. Applicants have agreed

to file an amendment to the application

during the notice period, the substance

of which is reflected in this notice.

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 February 24, 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

Commission’s Secretary.

ADDRESSES: Secretary, Commission, 450

Fifth Street, NW, Washington, DC

20549–0609. Applicants, c/o Alan C.

Porter, Esq., Piper Marbury Rudnick &

Wolfe LLP, 1200 Nineteenth Street, NW,

Washington, DC 20036–2412.

FOR FURTHER INFORMATION CONTACT:

Emerson S. Davis, Sr., Senior Counsel,

at (202) 942–0714, or George J. Zornada,

Branch Chief, at (202) 942–0564

(Division of Investment Management,

Office of Investment Company

Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

6424 Federal Register / Vol. 65, No. 27 / Wednesday, February 9, 2000 / Notices

application. The complete application

may be obtained for a fee from the

Commission’s Public Reference Branch,

450 Fifth Street, NW, Washington, DC

20549–0102 (telephone (202) 942–8090).

Applicants’ Representations

1. ARK Funds, a Massachusetts

business trust, is registered under the

Act as an open-end management

investment company and offers twenty

series (the ‘‘ARK Portfolios’’). AIA is an

investment adviser registered under the

Investment Advisers Act of 1940 and

serves as investment adviser to each

ARK Portfolio. Allfirst Trust acts as

custodian and sub-administrator for the

ARK Portfolios. AIA and Allfirst Trust

are wholly-owned subsidiaries of

Allfirst Bank, which is a wholly-owned

subsidiary of Allfirst Financial Inc., a

bank holding company (Allfirst

Financial Inc. and its direct and indirect

subsidiaries, collectively ‘‘Allfirst’’).

2. The Allfirst Plan is a defined

benefit pension plan qualified under

section 401 of the Internal Revenue

Code of 1986, as amended. The Allfirst

Plan is maintained for the benefit of

employees of Allfirst and is exempt

from the definition of ‘‘investment

company’’ under section 3(c)(11) of the

Act. Allfirst Trust is trustee of and AIA

is investment adviser to the Allfirst

Plan.

3. Currently, the Allfirst Plan has

approximately 36.8% of its assets

invested in the ARK Portfolios, with the

remainder invested directly in

individual securities. The Allfirst Plan

holds more than 5% of the outstanding

voting securities of four of the ARK

Portfolios. Applicants propose to

transfer in-kind of the assets of the

Allfirst Plan, other than shares of the

ARK Portfolios, to various ARK

Portfolios for which the securities are

appropriate investments, in exchange

for Institutional Class shares of the

respective ARK Portfolios having an

aggregate net asset value equal to that of

the securities transferred (the ‘‘Proposed

Exchange’’). Pursuant to procedures

adopted by each ARK Portfolio’s board

of directors (‘‘Board’’), AIA has

determined that the individual

securities held by the Allfirst Plan are

appropriate investments for the

participating ARK Portfolios. The

securities of the Allfirst Plan to be

transferred will be valued in accordance

with the provisions of rule 17a–7(b)

under the Act. Institutional Class shares

of the ARK Portfolios do not have a

front-end or deferred sales charge,

redemption fee, or distribution fee.

Allfirst will pay any expenses incurred

in connection with the Proposed

Exchange. Applicants request relief to

effect the Proposed Exchange.

Applicants’ Legal Analysis

1. Section 17(a) of the Act, in relevant

part, prohibits an affiliated persons of a

registered investment company, or an

affiliated person of such a person, acting

as principal, from selling any security

to, or purchasing any security from, the

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

the Act, in relevant part, defines an

‘‘affiliated person’’ of another person to

include (a) 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; (b) any person directly

or indirectly controlling, controlled by,

or under common control with, the

other person; and (c) if the other person

is an investment company, any

investment adviser of that company.

Applicants state that, because the

Allfirst Plan may be viewed as acting as

principal in the Proposed Exchange and

because the Allfirst Plan and the ARK

Portfolios may be viewed as being under

the common control of Allfirst, within

the meaning of section 2(a)(3)(C) of the

Act, the Proposed Exchange may be

subject to the prohibitions of section

17(a) of the Act.

2. Rule 17a–7 under the Act exempts

from the prohibitions of section 17(a)

certain purchase and sale transactions if

an affiliation exists solely by reason of

having a common investment adviser,

common directors, and/or common

officers, provided, among other

requirements, that the transaction

involves a cash payment against prompt

delivery of the securities. Applicants

state that rule 17a–7 may not be

available for the Proposed Exchange

because the Allfirst Plan owns 5% or

more of the outstanding voting shares of

certain ARK Portfolios and Allfirst has

an indirect pecuniary interest in the

performance of the assets held by the

Allfirst Plan. As a result, the affiliation

between the Allfirst Plan and the ARK

Portfolios is not solely by reason of

having a common investment adviser,

common directors, and/or common

officers. In addition, applicants state

that the Proposed Exchange is to be

effected as an in-kind transfer, rather

than in cash.

3. Rule 17a–8 under the Act exempts

certain mergers, consolidations, and

sales of assets of registered investment

companies from the provisions of

section 17(a) of the Act if an affiliation

exists solely by reason of having a

common investment adviser, common

directors, and/or common officers,

provided, among other requirements,

that the board of directors of each

investment company makes certain

determinations. Applicants state that

rule 17a–8 is not available for the

Proposed Exchange because Allfirst is

not transferring ‘‘substantially all’’ of its

assets to the ARK Portfolios, because the

Allfirst Plan is not a registered

investment company and because the

Allfirst Plan and the ARK Portfolios are

affiliated other than solely by reason of

having a common investment adviser,

common director and/or common

officers.

4. Section 17(b) of the Act provides

that the Commission may exempt a

proposed transaction from the

provisions of section 17(a) if evidence

establishes that: (a) The terms of the

proposed transaction, including the

consideration to be paid, are reasonable

and fair and do not involve

overreaching on the part of any person

concerned; (b) the proposed transaction

is consistent with the policy of each

registered investment company

concerned; and (c) the proposed

transaction is consistent with the

general purposes of the Act.

5. Applicants request an order under

section 17(b) of the Act to permit the

Proposed Exchange. Applicants submit

that the Proposed Exchange satisfies the

standards for relief under section 17(b)

of the Act. Applicants state that the

securities to be acquired from the

Allfirst Plan are consistent with the

investment objectives, policies and

restrictions of the participating ARK

Portfolios. Applicants also state that the

Proposed Exchange will meet all of the

conditions of rules 17a–8 (with respect

to the ARK Funds) and that the

Proposed Exchange will occur in

accordance with procedures

respectively adopted by the Board,

pursuant to rule 17a–7(e), and that the

provisions of rule 17a–7(b), (c), (d) and

(f) will be satisfied. Applicants state that

the Proposed Exchange will take place

as an in-kind transfer from the Allfirst

Plan to the ARK Portfolios, rather than

on the basis of cash as required by rule

17a–7(a). The Proposed Exchange will

not occur unless and until the Board

(including a majority of the Independent

Trustees) finds that participation by the

ARK Portfolios in the Proposed

Exchange is in the best interests of each

ARK Portfolio and that the interests of

existing shareholders of the ARK

Portfolio will not be diluted as a result

of the transaction.

Applicants’ Conditions

Applicants agree that any order

granting the requested relief will be

subject to the following conditions:

Federal Register / Vol. 65, No. 27 / Wednesday, February 9, 2000 / Notices 6425

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

2 17 CFR 240.19b–4.

3 In Amendment No. 1, the CHX requested that

the Commission approve extension of the pilot

program through May 1, 2000 instead of December

31, 2000 as initially proposed. Amendment No. 1

also removed proposed rule language that is

currently being considered in another Exchange

filing (SR–CHX–99–27). See letter from Kathleen M.

Boege, Associate General Counsel, CHX, to

Katherine A. England, Assistant Director, Division

of Market Regulation, Commission, dated January

28, 2000.

4See Amendment No. 1, supra note 3.

5See Securities Exchange Act Release No. 24424

(May 4, 1987), 52 FR 17868 (May 12, 1987) (order

approving File No. SR–MSE–87–2); see also,

Securities Exchange Act Release Nos. 28146 (June

26, 1990), 55 FR 27917 (July 6, 1990) (order

expending the number of eligible securities to 100);

36102 (August 14, 1995), 60 FR 43626 (August 22,

1995) (order expanding the number of eligible

securities to 500); 41392 (May 12, 1999), 64 FR

27839 (May 21, 1999) (order expanding the number

of eligible securities to 1,000).

6The MAX system may be used to provide an

automated delivery and execution facility for orders

that are eligible for execution under the Exchange’s

BEST Rule and certain other orders. See CHX Rules,

Art. XX, Rule 37(b). A MAX order that fits within

the BEST parameters is executed pursuant to the

BEST Rule via the MAX system. If an order is

outside the BEST parameters, the BEST rule does

not apply, by MAX system handling rules remain

applicable.

7See Securities Exchange Act Release No. 38119

(January 3, 1997), 62 FR 1788 (January 13, 1997).

8See Securities Exchange Act Release No. 39512

(December 31, 1997), 63 FR 1517 (January 9, 1998).

9See Securities Exchange Act Release No. 39823

(March 31, 1998), 63 FR 17246 (April 8, 1998).

10See Securities Exchange Act Release No. 40150

(July 1, 1998), 63 FR 36983 (July 8, 1998).

1. The Proposed Exchange will

comply with the terms of rule 17a–7(b)

through (f).

2. The Proposed Exchange will not

occur unless and until the Board

(including a majority of the Independent

Trustees) finds that participation by the

ARK Portfolios in the Proposed

Exchange is in the best interests of each

ARK Portfolio and that the interests of

existing shareholders of the ARK

Portfolio will not be diluted as a result

of the transaction. These findings, and

the basis upon which they are made,

will be recorded fully in the minute

books of ARK Funds.

3. The Proposed Exchange will not

occur unless and until AIA, as

investment manager and fiduciary of the

Allfirst Plan, has determined in

accordance with its fiduciary duties that

the Proposed Exchange is in the best

interests of the Allfirst Plan.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–2879 Filed 2–8–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42372; File No. SR–CHX–

99–27]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Chicago Stock

Exchange, Incorporated Relating to the

Trading of Nasdaq/NM Securities on

the CHX

January 31, 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 December

27, 1999, the Chicago Stock Exchange,

Incorporated (‘‘CHX’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I and II below, which Items have

been prepared by the Exchange. On

January 31, 2000, the CHX submitted to

the Commission Amendment No. 1 to

the proposed rule change.3 The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons and to

grant accelerated approval of the

proposed rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange has requested a threemonth extension of the pilot program

relating to the trading of Nasdaq/NM

securities on the Exchange. Specifically,

the pilot program proposes to amend

Article XX, Rule 37 and Article XX,

Rule 43 of the Exchange’s rules. The

current pilot expires on January 31,

2000. The Exchange proposes to extend

the rules governing trading of Nasdaq/

NM securities on the Exchange through

May 1, 2000.4

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

Exchange included statements

concerning the purpose of and basis for

the proposed rule change and discussed

any comments it received regarding the

proposed rule change. The text of these

statements may be examined at the

places specified in Item III below. The

Exchange 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

On May 4, 1987, the Commission

approved certain Exchange rules and

procedures relating to the trading of

Nasdaq/NM securities on the

Exchange.5 Among other things, these

rules rendered the Exchange’s BEST

Rule guarantee (Article XX, Rule 37(a))

applicable to Nasdaq/NM securities and

made Nasdaq/NM securities eligible for

the automatic execution feature of the

Exchange’s Midwest Automated

Execution System (the ‘‘MAX’’ system).6

On January 3, 1997, the Commission

approved,7 on a one year pilot basis, a

program that eliminated the

requirement that CHX specialists

automatically execute orders for

Nasdaq/NM securities when the

specialist is not quoting at the national

best bid or best offer disseminated

pursuant to Exchange Act Rule 11Ac1–

1 (the ‘‘NBBO’’). When the Commission

approved the program on a pilot basis,

it requested that the Exchange submit a

report to the Commission describing the

Exchange’s experience with the pilot

program. The Commission stated that

the report should include at least six

months of trading data. Due to

programming issues, the pilot program

was not implemented until April 1997.

Six months of trading data did not

become available until November 1997.

As a result, the Exchange requested an

additional three-month extension to

collect the data and prepare the report

for the Commission.

On December 31, 1997, the

Commission extended the pilot program

for an additional three months, until

March 31, 1998, to give the Exchange

additional time to prepare and submit

the report and to give the Commission

adequate time to review the report prior

to approving the pilot on a permanent

basis.8 The Exchange submitted the

report to the Commission on January 30,

1998. Subsequently, the Exchange

requested another three-month

extension, to give the Commission

adequate time to approve the pilot

program on a permanent basis.

On March 31, 1998, the Commission

approved the pilot for an additional

three-month period, until June 30,

1998.9 On July 1, 1998, the Commission

approved the pilot for an additional sixmonth period, until December 31,

1998.10 On December 31, 1998, the

Commission approved the pilot for an

additional six-month period, until June