Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices 67421

3 In the Application, Applicants state that the

relief they request extends to in-kind distributions

of securities only if, at the time of the distribution,

the securities continue to be traded on a national

securities exchange or the NASDAQ NMS.

for compensation based upon ‘‘a share

of capital gains upon or capital

appreciation of the funds or any portion

of the funds of the client,’’ commonly

referred to as a ‘‘performance fee.’’

2. Section 205(b)(3) provides, in

pertinent part, that the performance fee

proscriptions of section 205(a)(1) are not

applicable to advisory contracts

between an investment adviser and a

BDC if, among other things, ‘‘the

compensation provided for in such

contract does not exceed 20 per centum

of the realized capital gains upon the

funds of [the BDC] over a specified

period or as of definite dates, computed

net of all realized capital losses and

unrealized capital depreciation.’’ Thus,

Applicants assert, section 205(b)(3)

recognizes the appropriateness of a

performance fee as compensation for

investment advisers to BDCs in light of

the special nature of BDCs.

3. Section 205(b)(3) permits a

performance fee with respect to realized

gains only and does not contemplate the

procedures set forth in the Partnership

Agreement whereby unrealized gains or

losses are ‘‘deemed’’ realized under

certain conditions for purposes of the

compensation formula.

4. Section 206A of the Advisers Act

authorizes the Commission, by order

upon application, to exempt any person

or transaction from any provision of the

Advisers Act ‘‘if and to the extent that

such exemption is necessary or

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

[the Advisers Act].’’

5. Applicants request exemptive relief

from section 205(a)(1) to permit the

Partnership to make in-kind

distributions of shares of common stock

that ML Oklahoma holds in one of its

two remaining investments. Upon

distribution, the Partnership would

deem realized any unrealized gains or

losses on the securities being

distributed. Applicants submit that the

performance fee received by the

Managing General Partner from the inkind distribution may be prohibited

under section 205(a)(1) of the Advisers

Act and it is not included within the

exemption from that prohibition

provided in section 205(b)(3).

6. Applicants state that the exemption

sought is consistent with the standards

set out in Advisers Act section 206A.

Congress has found it appropriate to

permit a performance fee in the case of

an investment adviser to a BDC.

Applicants argue that to the extent

section 205(b)(3) requires a performance

fee to be based on realized capital gains,

their proposal is consistent with the

statutory purpose. Once the in-kind

distribution is made, the Managing

General Partner will no longer have any

control over the investment in the

subject securities; investors in ML

Oklahoma will have the exclusive

ability to liquidate such investments.

Furthermore, Applicants state that,

under the terms of their proposal, the

proper valuation of the securities upon

which the performance fee is based

would be easily determinable.

Applicants request exemptive relief

only with respect to in-kind

distributions of securities that

Applicants represent are traded on the

NASDAQ NMS and for which market

quotations are readily available.3 Thus,

applicants assert, the issues that would

be raised if ML Oklahoma paid a

performance fee based on the valuation

of securities of private companies are

not present.

7. Applicants submit that it is in the

best interests of the Partners,

particularly the Limited Partners, and in

the public interest for ML Oklahoma to

have the authority to make in-kind

distributions of the subject portfolio

securities. First, Applicants represent

that the distributed securities will be

freely transferable, and the Partners will

be able to determine whether to hold or

sell them. Applicants assert that as a

venture capital fund, ML Oklahoma has

no experience or expertise with respect

to publicly traded securities, and

therefore the Partners do not lose the

benefits of expert, professional

management by receiving in-kind

distributions. Second, Applicants assert

that the distributions of portfolio

securities will not constitute a taxable

event with respect to the Partnership or

the Partners, so that Partners will, in

determining whether to hold or sell the

securities, control the timing of

realization of capital gains. Third, to the

extent that ML Oklahoma holds a

significant percentage of the subject

company’s shares, Applicants expect

that the market could more easily absorb

sales by those Partners desiring to sell

over a more extended time period than

if ML Oklahoma sold its position

directly over a shorter period of time.

Finally, Applicants assert that in-kind

distributions on termination are an

efficient way of winding up the

Partnership’s affairs and avoiding

premature dispositions of portfolio

investments.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–28793 Filed 11–8–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. IC–24725; File No. 812–12136]

Principal Life Insurance Company, et

al., Notice of Application

November 2, 2000.

AGENCY: Securities and Exchange

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

ACTION: Notice of Application for an

order pursuant to Section 6(c) of the

Investment Company Act of 1940 (the

‘‘1940 Act’’) granting exemptions from

the provisions of Sections 2(a)(32),

22(c), and 27(i)(2)(A) of the 1940 Act

and Rule 22c–1 thereunder to permit the

recapture of credits applied to purchase

payments made under certain variable

annuity contracts.

Summary of Application: Applicants

Principal Life Insurance Company

(‘‘Principal Life’’), Principal Life

Insurance Company Separate Account B

(the ‘‘Account’’), and Princor Financial

Services Corporation (‘‘Princor’’) seek

an order to permit, under specified

circumstances, the recovery of certain

credits previously applied to purchase

payments made under: (i) Certain

deferred variable annuity contracts that

Principal Life issues through the

Account (the contracts, including

certain data pages and endorsements,

are collectively referred to herein as the

‘‘Contracts’’), and (ii) contracts that

Principal Life may issue in the future

through the Account, any of its other

separate accounts, or any separate

accounts that it may establish in the

future(‘‘Future Accounts’’) which

contracts are substantially similar in all

material respects to the Contracts

(‘‘Future Contracts’’). Applicants also

request that the order extend to any

other National Association of Securities

Dealers, Inc. (‘‘NASD’’) member brokerdealer controlling, controlled by, or

under common control with Principal

Life, whether existing or created in the

future, that serves as a distributor or

principal underwriter of the Contracts

or any Future Contracts offered through

the Account or any Future Accounts

(collectively ‘‘Affiliated BrokerDealers’’).

Applicants: Principal Life, the

Account, Princor, and any of Principal

Life’s Future Accounts established to

67422 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices

support Future Contracts issued by

Principal Life (collectively,

‘‘Applicants’’).

Filing Date: The Application was filed

on June 22, 2000 and amended on

October 30, 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 on

November 27, 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 5th

Street, NW, Washington, DC 20549.

Applicants, c/o J. Sumner Jones, Jones &

Blouch, L.L.P., 1025 Thomas Jefferson

Street, NW., Washington, DC 20007–

0805.

FOR FURTHER INFORMATION CONTACT:

Rebecca A. Marquigny, Senior Counsel,

or Keith Carpenter, Branch Chief, Office

of Insurance Products, Division of

Investment Management, at (202) 942–

0670.

SUPPLEMENTARY INFORMATION: Following

is a summary of the Application; the

complete Application is available for a

fee from the SEC’s Public Reference

Branch, 450 Fifth Street, NW.,

Washington, DC 20549–0102 (telephone

(202) 942–8090).

Applicants’ Representations

1. Principal Life is a stock life

insurance company organized under the

laws of Iowa in 1879 as Bankers Life

Association. It changed its name to

Bankers Life Company in 1911, to

Principal Mutual Life Insurance

Company in 1986, and then to Principal

Life Insurance Company in 1998. The

name change to Principal Life Insurance

Company was made in connection with

the reorganization into a mutual holding

company structure in 1998. Principal

Life’s principal business is offering life

insurance and annuity contracts in 50

states and the District of Columbia.

Principal Mutual Holding company is

the holding company of Principal Life,

its affiliates and subsidiaries,

collectively known as Principal

Financial Group.

2. The Account was established in

1970 by Principal Life as a separate

account under Iowa law and is

registered with the Commission as a

unit investment trust under the Act. The

Account funds the benefits available

under the Contracts and other variable

annuity contracts issued by Principal

Life. The offering of the Contracts by

Principal Life is registered under the

Securities Act of 1933. That portion of

the assets of the Account that is equal

to the reserves and other contract

liabilities with respect to the Account is

not chargeable with liabilities arising

out of any other business of Principal

Life. Any income, gains or losses,

realized or unrealized, from assets

allocated to the Account are, in

accordance with the various contracts,

credited to or charged against the

Account without regard to other

income, gains or losses of Principal Life.

3. Princor is an Iowa corporation

controlled by Principal Financial

Services, Inc. and is the principal

underwriter of the Contracts. Princor is

registered as a broker-dealer under the

Securities Exchange Act of 1934 and is

a member of the NASD. Sales of the

Contracts are made by registered

representatives of broker-dealers

authorized by Princor to sell the

Contracts. Such registered

representatives are also licensed

insurance agents or brokers of Principal

Life.

4. The Contracts are flexible purchase

payment individual deferred

combination fixed and variable annuity

contracts. The Contracts may be issued

under a qualified contract or as a nonqualified contract.

5. The minimum initial purchase

payment for a Contract is $2,500 for

non-qualified retirement programs and

$1,000 for a qualified Contract. The

minimum subsequent purchase

payment is $100. Principal Life may

limit total Contract purchase payments

to $2,000,000.

6. At the time of issuance, a Contract

owner may elect to purchase the

Purchase Payment Credit Rider. If the

Rider is elected, Principal Life will add

a 5% payment enhancement or credit to

the owner’s Contract (the ‘‘Credit’’)

upon receipt of a purchase payment

from the Contract owner during the first

contract year. After the first contract

year, additional purchase payments will

not receive a Credit. Principal Life will

fund Credits from its general account

assets and will allocate Credits among

investment options (excluding certain

fixed benefit options used for dollar cost

averaging (the DCA Plus accounts)) in

the same proportion as the applicable

purchase payment.

7. Principal Life will recover any

Credit applied if the Contract owner

returns the Contract for a refund during

the 10-day ‘‘free look’’ period. The free

look period is the 10-day period (or a

longer period in states where required)

during which a Contract owner may

return a Contract after it has been

delivered. Upon such return, the

Contract owner generally will receive a

full refund of the Contract value, less

any Credit, and no withdrawal charge

will apply to the refund. The Contract

owner will retain any earnings

attributable to the Credit allocated to his

or her account value or, if there has

been a decline in the value of

accumulation units for an investment to

which a Credit has been allocated, will

bear the loss from such decline. The

refund amount may thus be more or less

than the Contract owner’s purchase

payment. Where applicable state law

requires that the full amount of the

purchase payment be refunded, the

Contract owner will receive that

amount, and Principal Life will retain

any earnings, or bear any loss,

attributable to the Credit as well as to

the purchase payment. The recovery of

Credits from the sub-accounts will be

effected by canceling accumulation

units equal in value to the full amounts

to be recovered, the number of such

units to be calculated at the

accumulation unit value next

determined. Amounts recovered will be

withdrawn from each investment option

in the same proportion that the value of

the investment account of each

investment option bears to the Contract

value.

8. Contract owners may allocate their

purchase payments among a fixed

account, two different DCA Plus fixed

options (which will not be available to

Contract owners who elect the Purchase

Payment (Credit Rider), and a number of

sub-accounts of the Account. Each subaccount invests in shares of a

corresponding portfolio of certain

underlying investment companies

(‘‘Underlying Funds’’). Principal Life

may, subject to compliance with

applicable law, add other sub-accounts,

eliminate or combine existing subaccounts or transfer assets in one subaccount to another sub-account

established by Principal Life or an

affiliated company.

9. The Contracts provide for the

following charges: (i) A withdrawal or

contingent deferred sales charge

(‘‘CDSC’’) as a percentage of amounts

withdrawn attributable to purchase

payments that have been in the Contract

less than seven complete years, with the

applicable percentage charge declining

from a maximum of 6% in years zero,

one and two to 0.0% in year seven and

thereafter; (ii) an annual contract fee

Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices 67423

that is the lesser of $30 or 2% of the

accumulated value (which may be

waived under certain circumstances);

(iii) a daily mortality and expense risks

charge in an amount equal on an annual

basis to 1.25% of the value of each

variable investment account, deducted

from each sub-account; and (iv) any

applicable state or local premium taxes

up to 3.5%, depending on the Contract

owner’s state of residence or the state in

which the Contract was sold. In

addition, the Underlying Funds also

impose a management and

administrative fee which varies

depending upon which Funds are

selected.

10. If the Purchase Payment Credit

Rider is elected, the Contracts will

provide for the following charges: (i) A

withdrawal or contingent deferred sales

charge (‘‘CDSC’’) as a percentage of

amounts withdrawn attributable to

purchase payments that have been in

the Contract less than nine complete

years, with the applicable percentage

charge declining from a maximum of

8% in years zero, one, two and three to

0.0% in year nine and thereafter; (ii) an

annual contract fee that is the lesser of

$30 or 2% of the accumulated value

(which may be waived under certain

circumstances); (iii) a daily mortality

and expense risks charge in an amount

equal on an annual basis to 1.25% of the

value of each variable investment

account, deducted from each subaccount; (vi) a Purchase Payment Credit

Rider charge payable for the first 8

contract years, in an amount equal on an

annual basis to .60% of the value of

each variable investment account,

deducted from each sub-account; and

(v) any applicable state or local

premium taxes up to 3.5%, depending

on the Contract owner’s state of

residence or the state in which the

Contract was sold. In addition, the

Underlying Funds also impose a

management and administrative fee

which varies depending upon which

Funds are selected.

11. Because of the higher charges

applicable to a Contract with the

Purchase Payment Credit Rider, the

prospectus description of the Rider will

include a statement to the effect that

expenses of a Contract with the Rider

may be higher than expenses of a

Contract without the Rider and the

amount of the Credits may be more than

offset by the fees and charges associated

with the Credits. The prospectus will

also state that there may be

circumstances in which a Contract

owner may be worse off for having the

Rider because of the higher charges.

Applicants’ Legal Analysis

1. Section 6(c) of the Act authorizes

the Commission to exempt any person,

security or transaction, or any class or

classes of persons, securities or

transactions from the provisions of the

Act and the rules promulgated

thereunder if and to the extent that such

exemption is necessary or appropriate

in the public interest and consistent

with the protection of investors and the

purposes fairly intended by the policy

and provisions of the Act. Applicants

request that the Commission, pursuant

to Section 6(c) of the Act, grant the

exemptions requested below with

respect to the Contracts, and any Future

Contracts funded by the Account or

Future Accounts, that are issued by

Principal Life and underwritten or

distributed by Princor or Affiliated

Broker-Dealers. Applicants undertake

that Future Contracts will be

substantially similar in all material

respects to the Contracts. Applicants

believe that the requested exemptions

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 Act.

2. Applicants seek exemption

pursuant to Section 6(c) from Sections

2(a)(32), 22(c), and 27(i)(2)(A) of the Act

and Rule 22c–1 thereunder to the

extend deemed necessary to permit

Principal Life to recover any Credit

previously applied to purchase

payments under certain Contracts or

Future Contracts if a Contract owner

returns the Contracts or Future

Contracts for a refund during the free

look period.

3. Applicants represent that it is not

administratively feasible to track assetbased charges against Credits in the

Account after the Credits have been

applied. Accordingly, the asset-based

charges applicable to the Account will

be assessed against the entire amounts

held in the Account, including Credits,

during the free look period. As a result,

during such period, the aggregate assetbased charges assessed against a

Contract owner’s annuity account value

will be higher than they would have

been if the owner’s annuity account

value did not include any Credits.

4. Subsection (i) of Section 27 of the

Act provides that Section 27 does not

apply to any registered separate account

funding variable insurance contracts, or

to the sponsoring insurance company

and principal underwriter of such

account, except as provided in

paragraph (2) of the subsection.

Paragraph (2) provides that it shall be

unlawful for such a separate account or

sponsoring insurance company to sell a

contract funded by the registered

separate account unless such contract is

a redeemable security. Section 2(a)(32)

defines a ‘‘redeemable security’’ as any

security, other than short-term paper,

under the terms of which the holder,

upon representation to the issuer, is

entitled to receive approximately his or

her proportionate share of the issuer’s

current net asserts, or the cash

equivalent thereof.

5. Applicants submit that the recovery

of Credits in the circumstances set forth

in the Application does not deprive a

Contract owner of his or her

proportionate share of the issuer’s

current net assets. A Contract owner’s

interest in the Credit allocated to his or

her annuity account value is not vested

until the applicable free look period has

expired without return of the Contract.

Until the right to recovery has expired

and any Credit has vested, Principal Life

retains the right and interest therein.

Thus, when Principal Life recovers any

Credit, it is merely retrieving its own

assets. The Contract owner is not

deprived of a proportionate share of the

Account’s assets because the Contract

owner’s interest in such Credit has not

vested. Moreover, Principal Life does

not recover any earnings attributable to

Credits allocated to a Contract owner’s

account value prior to exercise of the

free look return.

6. Applicants further submit that

permitting a Contract owner to retain a

Credit upon the exercise of the free look

return provisions would be unfair and

would deny Principal Life a reasonable

measure of protection against antiselection. The anti-selection risk here is

that, rather than spreading purchase

payments over a number of years, a

Contract owner might seek to

manipulate Contracts provisions in a

manner that leaves Principal Life little

time to recover the cost of the Credits.

For example, permitting a Contract

owner to retain a Credit upon the

exercise of the free look return would

encourage the purchase of Contracts for

a quick profit upon return rather than

with the intention of making a long-term

investment. As stated above, the

amounts recovered will equal the

Credits provided by Principal Life from

general account assets, and any gains

attributable to such Credits will remain

a part of the Contract owner’s Contract

value. For the foregoing reasons,

Applicants submit that the provisions

for recovery of Credits under the

Contracts do not violate Section 2(a)(32)

and 27(i)(2)(A) of the Act.

7. Applicants believe, moreover, that

the exemptive relief requested is

consistent with and serves the stated

67424 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices

purpose of the National Securities

Markets Improvement Act of 1996

(‘‘NSMIA’’) in amending the Act to

‘‘provide more effective and less

burdensome regulation.’’ Sections 26(e)

and 27(i) were added to the Act to

implement the purposes of NSMIA and

Congressional intent. The application of

Credits to purchase payments under the

Contracts should not raise any questions

as to Principal Life’s compliance with

the provisions of Section 27(i).

However, to avoid any uncertainty as to

full compliance with the Act,

Applicants request an exemption from

Sections 2(a)(32) and 27(i)(2)(A), to the

extent deemed necessary, to permit the

recovery of Credits under the

circumstances described in the

Application with respect to Contracts

and Future Contracts, without the loss

of relief from Section 27 provided by

Section 27(i).

8. Section 22(c) of the Act authorizes

the Commission to make rules and

regulations applicable to registered

investment companies and to principal

underwriters of, and dealers in, the

redeemable securities of any registered

investment company to accomplish the

same purposes as contemplated by

Section 22(a). Rule 22c–1 thereunder

prohibits a registered investment

company issuing any redeemable

security, a person designated in such

issuer’s prospectus as authorized to

consummate transactions in any such

security, and a principal underwriter of,

or dealer in, such security, from selling,

redeeming, or repurchasing any such

security except at a price based on the

current net asset value of such security

which is next computed after receipt of

a tender of such security for redemption

or of an order to purchase or sell such

security. Principal Life’s recovery of

Credits as described in the Application

might arguably be viewed as involving

the redemption of redeemable securities

for a price other than one based on the

current net asset value of the Account.

9. Applicants believe that the

recovery of the Credits does not violate

Section 22c–1 and Rule 22c–1. Such

recovery does not involve either of the

harms that Rule 22c–1 was intended to

eliminate or reduce, namely: (i) The

dilution of the value of outstanding

redeemable securities of registered

investment companies through their

sale at a price below net asset value or

repurchase at a price above it, and (ii)

other unfair results, including

speculative trading practices. These

harms resulted from the practice of

basing the price of a mutual fund share

on the net asset value per share

determined as of the close of the market

on the previous day. Such backward

pricing allowed investors to take

advantage of increases or decreases in

net asset value that were not yet

reflected in the price, thereby diluting

the value of outstanding fund shares.

10. Applicants submit that the

recovery of Credits as described in the

Application does not pose such a threat

of dilution. In effecting recoveries,

Principal Life will redeem interests in a

Contract owner’s Contract at a price

determined on the basis of the current

net asset value of the sub-account(s) to

which the owner’s Contract value is

allocated. The amounts recovered will

equal the Credits that Principal Life has

paid out of general account assets.

Except where state law requires that the

full amount of the purchase payment be

refunded, the Contract owners will be

entitled to retain any investment gains

attributable to the Credits, and the

amounts of such gains will be

determined on the basis of the current

net asset values of the applicable subaccounts. Under these circumstances, in

Applicants’ view, the recovery of the

Credits does not involve dilution.

Applicants further submit that the

second harm that Rule 22c–1 was

designed to address, namely speculative

trading practices calculated to take

advantage of backward pricing, will not

occur as a result of the recovery of

Credits.

11. Applicants contend that, because

neither of the harms that Rule 22c–1

was meant to address are found in the

recovery of Credits, Rule 22c–1 and

Section 22(c) should not be construed as

applicable thereto. However, to avoid

any uncertainty in this regard,

Applicants request an exemption from

the provisions of Section 22(c) and Rule

22c–1 to the extent deemed necessary to

permit them to recover Credits under

the Contracts and Future Contracts as

described in the Application.

12. Applicants submit that their

request for an order that applies to

Future Accounts and Future Contracts

that are substantially similar in all

material respects to the Contracts and

underwritten or distributed by Princor

or Affiliated Broker-Dealers is

appropriate in the public interest. Such

an order would promote

competitiveness in the variable annuity

market by eliminating the need to file

redundant exemptive applications,

thereby reducing administrative

expenses and maximizing the efficient

use of Applicants’ resources. Investors

will not receive any benefit or

additional protection if Applicants are

required repeatedly to seek exemptive

relief presenting no issue under the Act

that has not already been addressed in

the Application. Having Applicants file

additional applications would impair

Applicants’ ability to effectively take

advantage of business opportunities as

they arise. Applicants undertake that

Future Contracts funded by the Account

or by Future Accounts which seek to

rely on the order issued pursuant to this

Application will be substantially similar

in all material respects to the Contracts.

Conclusion

Section 6(c) of the Act, in pertinent

part, provides that the Commission, by

order upon application, may

conditionally or unconditionally

exempt any persons, security or

transaction, or any class or classes of

persons, securities or transactions, from

any provision or provisions of the Act,

or any rule or regulation thereunder, to

the extent that such exemption is

necessary or appropriate in the public

interest and consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the Act. Applicants submit

that, for the reasons stated in the

Application, their exemptive requests

meet the standards set out in Section

6(c) and that an order should, therefore,

be granted.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 00–28750 Filed 11–8–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

24727; 812–12244]

Firstar Funds, Inc., et al.; Notice of

Application

November 3, 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

certain series of Firstar Funds, Inc.

(‘‘Firstar’’) to acquire all of the assets

and liabilities of all of the series of

Firstar Stellar Funds (‘‘Stellar’’),

Mercantile Mutual Funds, Inc.

(‘‘Mercantile’’), and Firstar Select Funds

(‘‘Select’’) (the ‘‘Reorganizations’’).

Because of certain affiliations,

applicants may not rely on rule 17a–8

under the Act.