54590 Federal Register / Vol. 70, No. 178 / Thursday, September 15, 2005 / Notices 

appropriate arrangements can be made. 

Electronic recordings will be permitted. 

Further information regarding this 

meeting can be obtained by contacting 

the Designated Federal Official between 

7:30 a.m. and 4:15 p.m. (ET). Persons 

planning to attend this meeting are 

urged to contact the above named 

individual at least two working days 

prior to the meeting to be advised of any 

potential changes to the agenda. 

Dated: September 8, 2005. 

Michael L. Scott, 

Branch Chief, ACRS/ACNW. 

[FR Doc. E5–5021 Filed 9–14–05; 8:45 am] 

BILLING CODE 7590–01–P 

PENSION BENEFIT GUARANTY 

CORPORATION 

Required Interest Rate Assumption for 

Determining Variable-Rate Premium; 

Interest Assumptions for 

Multiemployer Plan Valuations 

Following Mass Withdrawal 

AGENCY: Pension Benefit Guaranty 

Corporation. 

ACTION: Notice of interest rates and 

assumptions. 

SUMMARY: This notice informs the public 

of the interest rates and assumptions to 

be used under certain Pension Benefit 

Guaranty Corporation regulations. These 

rates and assumptions are published 

elsewhere (or can be derived from rates 

published elsewhere), but are collected 

and published in this notice for the 

convenience of the public. Interest rates 

are also published on the PBGC’s Web 

site (http://www.pbgc.gov). 

DATES: The required interest rate for 

determining the variable-rate premium 

under part 4006 applies to premium 

payment years beginning in September 

2005. The interest assumptions for 

performing multiemployer plan 

valuations following mass withdrawal 

under part 4281 apply to valuation dates 

occurring in October 2005. 

FOR FURTHER INFORMATION CONTACT: 

Catherine B. Klion, Attorney, Legislative 

and Regulatory Department, Pension 

Benefit Guaranty Corporation, 1200 K 

Street, NW., Washington, DC 20005, 

202–326–4024. (TTY/TDD users may 

call the Federal relay service toll-free at 

1–800–877–8339 and ask to be 

connected to 202–326–4024.) 

SUPPLEMENTARY INFORMATION:

Variable-Rate Premiums 

Section 4006(a)(3)(E)(iii)(II) of the 

Employee Retirement Income Security 

Act of 1974 (ERISA) and § 4006.4(b)(1) 

of the PBGC’s regulation on Premium 

Rates (29 CFR part 4006) prescribe use 

of an assumed interest rate (the 

‘‘required interest rate’’) in determining 

a single-employer plan’s variable-rate 

premium. Pursuant to the Pension 

Funding Equity Act of 2004, for 

premium payment years beginning in 

2004 or 2005, the required interest rate 

is the ‘‘applicable percentage’’

(currently 85 percent) of the annual rate 

of interest determined by the Secretary 

of the Treasury on amounts invested 

conservatively in long-term investment 

grade corporate bonds for the month 

preceding the beginning of the plan year 

for which premiums are being paid. 

Thus, the required interest rate to be 

used in determining variable-rate 

premiums for premium payment years 

beginning in September 2005 is 4.61 

percent (i.e., 85 percent of the 5.42 

percent composite corporate bond rate 

for August 2005 as determined by the 

Treasury). 

The following table lists the required 

interest rates to be used in determining 

variable-rate premiums for premium 

payment years beginning between 

October 2004 and September 2005. 

For premium payment years 

beginning in: 

The interest 

rate is: 

October 2004 ........................ 4.79 

November 2004 .................... 4.73 

December 2004 .................... 4.75 

January 2005 ........................ 4.73 

February 2005 ...................... 4.66 

March 2005 ........................... 4.56 

April 2005 ............................. 4.78 

May 2005 .............................. 4.72 

June 2005 ............................. 4.60 

July 2005 .............................. 4.47 

August 2005 ......................... 4.56 

September 2005 ................... 4.61 

Multiemployer Plan Valuations 

Following Mass Withdrawal 

The PBGC’s regulation on Duties of 

Plan Sponsor Following Mass 

Withdrawal (29 CFR part 4281) 

prescribes the use of interest 

assumptions under the PBGC’s 

regulation on Allocation of Assets in 

Single-Employer Plans (29 CFR part 

4044). The interest assumptions 

applicable to valuation dates in October 

2005 under part 4044 are contained in 

an amendment to part 4044 published 

elsewhere in today’s Federal Register. 

Tables showing the assumptions 

applicable to prior periods are codified 

in appendix B to 29 CFR part 4044. 

Issued in Washington, DC, on this 9th day 

of September 2005. 

Vincent K. Snowbarger, 

Deputy Executive Director, Pension Benefit 

Guaranty Corporation. 

[FR Doc. 05–18327 Filed 9–14–05; 8:45 am] 

BILLING CODE 7708–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

27060; 812–13134] 

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

Application 

September 8, 2005. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of application for an 

order under the Investment Company 

Act of 1940 (the ‘‘Act’’) under: (i) 

Section 6(c) of the Act granting an 

exemption from sections 18(f) and 21(b) 

of the Act; (ii) section 12(d)(1)(J) of the 

Act granting an exemption from sections 

12(d)(1)(A) and (B) of the Act; (iii) 

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

granting an exemption from sections 

17(a)(1) and 17(a)(3) of the Act; and (iv) 

section 17(d) of the Act and rule 17d-1 

under the Act to permit certain joint 

transactions. 

Summary of Application: Applicants 

request an order that would permit 

certain registered open-end management 

investment companies to participate in 

a joint lending and borrowing facility. 

Applicants: Marshall Funds, Inc., M&I 

Investment Management Corp. (‘‘M&I 

Investment Management’’), and 

Marshall & Ilsley Trust Company, N.A. 

(‘‘M&I Trust’’). 

Filing Dates: The application was 

filed on November 3, 2004, and 

amended on September 8, 2005. 

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 October 4, 2005, and 

should be accompanied by proof of 

service on the 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. 

Federal Register / Vol. 70, No. 178 / Thursday, September 15, 2005 / Notices 54591 

1Applicants request that the relief also apply to 

any other existing or future registered open-end 

management investment company or series thereof 

that is advised by M&I Investment Management or 

any person controlling, controlled by, or under 

common control with M&I Investment Management 

or its successors (‘‘Future Funds,’’ included in the 

term ‘‘Funds’’). ‘‘Successor’’ is limited to any entity 

or entities that result from a reorganization into 

another jurisdiction or a change in the type of 

business organization. All entities that currently 

intend to rely on the requested order have been 

named as applicants. Any future entity that relies 

on the requested relief will do so only in 

accordance with the terms and conditions of the 

application. 

2Marshall Funds, Inc. has received an order that 

permits the Funds to purchase shares of Money 

Market Funds for cash management purposes. 

Investment Company Act Release Nos. 22313 

(November 4, 1996) (notice) and 22362 (December 

2, 1996) (order). 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F 

Street, NE., Washington, DC 20549–

9303; Applicants, c/o Pamela M. Krill, 

Esq., Godfrey & Kahn, S.C., One East 

Main Street, Madison, WI 53703. 

FOR FURTHER INFORMATION CONTACT: 

Marc R. Ponchione, Senior Counsel, at 

(202) 551–6874 or Mary Kay Frech, 

Branch Chief, at (202) 551–6821 

(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 

Commission’s Public Reference Branch, 

100 F Street, NE., Washington, DC 

20549–0102 (tel. 202–551–5850). 

Applicants’ Representations 

1. Marshall Funds, Inc. is registered 

under the Act as an open-end 

management investment company and 

is organized as a Wisconsin corporation. 

Marshall Funds, Inc. currently consists 

of thirteen series (each, a ‘‘Fund’’ and 

together, the ‘‘Funds’’), three of which 

comply with rule 2a-7 under the Act 

and hold themselves out as money 

market funds (the ‘‘Money Market 

Funds’’). M&I Investment Management, 

a wholly-owned subsidiary of Marshall 

and Ilsley Corporation, is registered as 

an investment adviser under the 

Investment Advisers Act of 1940 and 

serves as investment adviser to the 

Funds.1 M&I Trust, a wholly-owned 

subsidiary of Marshall and Ilsley 

Corporation, serves as custodian and 

administrator to the Funds. 

2. Some Funds may enter into 

repurchase agreements or purchase 

other short-term instruments issued by 

banks or other entities. Other funds may 

need to borrow money from the same or 

similar banks for temporary purposes to 

satisfy redemption requests, to cover 

unanticipated cash shortfalls such as a 

trade ‘‘fail’’ in which cash payment for 

a security sold by a Fund has been 

delayed, or for other temporary 

purposes. Currently, Marshall Funds, 

Inc. has a $25 million standby line of 

credit with State Street Bank. 

3. If the funds were to borrow money 

through their line of credit, the Funds 

would pay interest on the borrowed 

cash at a rate which would be 

significantly higher than the rate that 

would be earned by other (nonborrowing) Funds on investments in 

repurchase agreements and other shortterm instruments of the same maturity 

as the bank loan. Applicants state that 

this differential represents the profit the 

bank would earn for serving as a 

middleman between a borrower and a 

lender and is not attributable to any 

material difference in the credit quality 

or risk in such transactions. In addition, 

while bank borrowings generally could 

supply needed cash to cover 

unanticipated redemptions and sales 

fails, the borrowing Funds would incur 

commitment fees and/or other charges 

involved in obtaining a bank loan. 

4. Applicants request an order that 

would permit the funds to enter into 

master interfund lending agreements 

(‘‘Interfund Lending Agreements’’) that 

would permit each Fund to lend money 

directly to and borrow directly from 

other funds for temporary purposes (an 

‘‘Interfund Loan’’). Applicants believe 

that the proposed credit facility would 

both reduce the Funds’ potential 

borrowing costs and enhance the ability 

of the lending Funds to earn higher rates 

of interest on their short-term loans. 

Although the proposed credit facility 

would reduce the Funds’ need to 

borrow from banks, the Funds would be 

free to establish and/or continue 

standby lines of credit or other 

borrowing arrangements with banks. 

5. Applicants anticipate that the 

credit facility will provide a borrowing 

Fund with significant savings when the 

cash position of the Fund is insufficient 

to meet temporary cash requirements. 

This situation could arise when 

shareholder redemptions exceed 

anticipated volumes and certain Funds 

have insufficient cash on hand to satisfy 

such redemptions. When the Funds 

liquidate portfolio securities to meet 

redemption requests, they often do not 

receive payment in settlement for up to 

three days (or longer for certain foreign 

transactions). The credit facility would 

provide a source of immediate, shortterm liquidity pending settlement of the 

sale of portfolio securities. 

6. Applicants also propose using the 

credit facility when a sale of portfolio 

securities fails due to circumstances 

beyond the Fund’s control, such as a 

delay in the delivery of cash to the 

Fund’s custodian or improper delivery 

instructions by the broker effecting the 

transaction. Sales fails may present a 

cash shortfall if the Fund has 

undertaken to purchase a security with 

the proceeds from securities sold. Under 

such circumstances, the Fund could fail 

on its intended purchase due to lack of 

funds from the previous sale, resulting 

in additional costs to the Fund, or sell 

a security on a same day settlement 

basis, earning a lower return on the 

investment. Use of the credit facility 

under these circumstances would give 

the Fund access to immediate shortterm liquidity without incurring 

custodian overdraft or other charges. 

7. While bank borrowings could 

generally supply needed cash to cover 

unanticipated redemptions and sales 

fails, under the credit facility, a 

borrowing Fund would pay lower 

interest rates than those offered by 

banks on short-term loans. In addition, 

Funds making short-term cash loans 

directly to other Funds would earn 

interest at a rate higher than they 

otherwise could obtain from investing 

their cash in repurchase agreements or 

purchasing shares of a Money Market 

Fund.2 Thus, applicants believe that the 

credit facility would benefit both 

borrowing and lending Funds. 

8. The interest rate charged to the 

Funds on any loans (the ‘‘Interfund 

Loan Rate’’) would be determined daily 

and would be the average of the Repo 

Rate and the Bank Loan Rate, both as 

defined below. The Repo Rate on any 

day would be the highest rate available 

to the Funds from investments in 

overnight repurchase agreements. The 

Bank Loan Rate for any day would be 

calculated by the Credit Facility Team, 

as defined below, each day an Interfund 

Loan is made according to a formula 

established by each Fund’s board of 

directors (‘‘Board’’) designed to 

approximate the lowest interest rate at 

which short-term bank loans would be 

available to the Funds. The formula 

would be based upon a publicly 

available rate (e.g., Federal funds plus 

25 basis points) and would vary with 

this rate so as to reflect changing bank 

loan rates. The Board of each Fund 

periodically would review the 

continuing appropriateness of using the 

publicly available rate to determine the 

Bank Loan Rate, as well as the 

relationship between the Bank Loan 

Rate and current bank loan rates that 

would be available to the Fund. The 

initial formula and any subsequent 

modifications to the formula would be 

54592 Federal Register / Vol. 70, No. 178 / Thursday, September 15, 2005 / Notices 

subject to the approval of each Fund’s 

Board. 

9. The Fund’s president, treasurer, 

and compliance officer and an 

investment professional within M&I 

Investment Management (who is also an 

employee of M&I Trust) who serves as 

a portfolio manager for the Money 

Market Funds (the ‘‘Money Market 

Manager’’) (collectively, the ‘‘Credit 

Facility Team’’) would administer the 

credit facility. Under the credit facility, 

the portfolio managers for each 

participating Fund could provide 

standing instructions to participate 

daily as a borrower or lender. On each 

business day, M&I Trust, as the Fund’s 

custodian, would prove the Credit 

Facility Team with data on the 

uninvested cash and borrowing 

requirements of all participating Funds. 

Once it had determined the aggregate 

amount of cash available for loans and 

borrowing demand, the Credit Facility 

Team would allocate loans among 

borrowing Funds without any further 

communication from portfolio managers 

(other than the Money Market Manager 

in his or her capacity as the Credit 

Facility Team member). It is expected 

that there typically will be far more 

available uninvested cash each day than 

borrowing demand. After the Credit 

Facility Team has allocated cash for 

Interfund Loans, the Credit Facility 

Team will invest any remaining cash in 

accordance with the standing 

instructions of portfolio managers or 

return remaining amounts to the Funds. 

10. The Credit Facility Team would 

allocate borrowing demand and cash 

available for lending among the Funds 

on what the Credit Facility Team 

believes to be an equitable basis, subject 

to certain administrative procedures 

applicable to all Funds, such as the time 

of filing requests to participate, 

minimum loan lot sizes, and the need to 

minimize the number of transactions 

and associated administrative costs. To 

reduce transaction costs, each loan 

normally would be allocated in a 

manner intended to minimize the 

number of participants necessary to 

complete the loan transaction. The 

method of allocation and related 

administrative procedures would be 

approved by the Board of each Fund, 

including a majority of the members of 

the Board who are not ‘‘interested 

persons’’ of the Fund, as defined in 

section 2(a)(19) of the Act 

(‘‘Independent Directors’’), to ensure 

that both borrowing and lending Funds 

participate on an equitable basis. 

11. The Credit Facility Team would: 

(a) Monitor the interest rates charged 

and the other terms and conditions of 

the loans; (b) limit the borrowings and 

loans entered into by each Fund to 

ensure that they comply with the Fund’s 

investment policies and limitations; (c) 

ensure equitable treatment of each 

Fund; and (d) make quarterly reports to 

the Board of each fund concerning any 

transactions by the Fund under the 

credit facility and the interest rates 

charged. 

12. M&I Investment Management and 

M&I Trust, through the Credit Facility 

Team, would administer the credit 

facility as a disinterested fiduciary and 

a disinterested party, respectively. 

Neither M&I Investment Management 

nor M&I Trust would receive any 

compensation in connection with the 

administration of the proposed credit 

facility. 

13. No Fund may participate in the 

credit facility unless: (a) The Fund has 

obtained shareholder approval for its 

participation, if such approval is 

required by law, or provides notice to 

shareholders of its intention to 

participate in the proposed credit 

facility; (b) the Fund has fully disclosed 

all material information concerning the 

credit facility in its prospectus and/or 

SAI; and (c) the Fund’s participation in 

the credit facility is consistent with its 

investment objectives, limitation, and 

organizational documents. 

14. In connection with the proposed 

credit facility, applicants request an 

order under: (a) Section 6(c) of the Act 

granting relief from sections 18(f) and 

21(b) of the Act; (b) section 12(d)(1)(J) of 

the Act granting relief from sections 

12(d)(1)(A) and 12(d)(1)(B) of the Act; 

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

granting relief from sections 17(a)(1) and 

17(a)(3) of the Act; and (d) section 17(d) 

of the Act and rule 12d–1 under the Act 

permit certain joint arrangements. 

Applicants’ Legal Analysis 

1. Section 17(a)(3) of the Act generally 

prohibits any affiliated person, or 

affiliated person of a affiliated person, 

from borrowing money or other property 

from a registered investment company. 

Section 21(b) of the Act generally 

prohibits any registered management 

investment company from lending 

money or other property to any person 

if that person controls or is under 

common control with the company. 

Section 2(a)(3)(C) of the act defines 

‘‘affiliated person’’ of another person, in 

part, to be any person directly or 

indirectly controlling, controlled by, or 

under common control with, such other 

person. Applicants state that the Funds 

may be under common control by virtue 

of having M&I Investment Management 

as their common investment adviser 

and/or reason of having common 

officers, directors, and/or trustees. 

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

an exemptive order may be granted 

where an 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. Section 17(b) authorizes the 

Commission to exempt a proposed 

transaction from section 17(a) of the Act 

provided that the terms of the 

transaction, including the consideration 

to be paid or received, are fair and 

reasonable and do not involve 

overreaching on the part of any person 

concerned, and the transaction is 

consistent with the policy of the 

investment company as recited in its 

registration statement and with the 

general purposes of the Act. Applicants 

believe that the proposed arrangements 

satisfy these standards for the reasons 

discussed below. 

3. Applicants submit that sections 

17(a)(3) and 21(b) were intended to 

prevent a party with strong potential 

adverse interests and some influence 

over the investment decisions of a 

registered investment company from 

causing or inducing the investment 

company to engage in lending 

transactions that unfairly inure to the 

benefit of that person and that are 

detrimental to the best interests of the 

investment company and its 

shareholders. Applicants assert that the 

proposed credit facility transactions do 

not raise these concerns because: (a) 

M&I Investment Management and M&I 

Trust, through the Credit Facility Team, 

would administer the program as a 

disinterested fiduciary and disinterested 

party, respectively; (b) all Interfund 

Loans would consist only of uninvested 

cash reserves that the Funds otherwise 

would invest in short-term repurchase 

agreements or other short-term 

instruments either directly or through a 

Money Market Fund; (c) the Interfund 

Loans would not involve a greater risk 

than such other investments; (d) a 

lending Fund would receive interest at 

a rate higher than it could obtain 

through such other investments; and (e) 

a borrowing Fund would pay interest at 

a rate lower than otherwise available to 

it under its bank loan agreements and 

avoid the up-front commitment fees 

associated with committed lines of 

credit. Moreover, applicants believe that 

the other conditions in the application 

would effectively preclude the 

possibility of any Fund obtaining an 

undue advantage over any other Fund. 

4. Section 17(a)(1) of the Act generally 

prohibits an affiliated person of a 

registered investment company, or an 

affiliated person of an affiliated person, 

from selling any securities or other 

Federal Register / Vol. 70, No. 178 / Thursday, September 15, 2005 / Notices 54593 

property to the company. Section 

12(d)(1) of the Act generally makes it 

unlawful for a registered investment 

company to purchase or otherwise 

acquire any security issued by any other 

investment company except in 

accordance with the limitations set forth 

in that section. Applicants state that the 

obligation of a borrowing Fund to repay 

an Interfund Loan may constitute a 

security under sections 17(a)(1) and 

12(d)(1). Section 12(d)(1)(J) provides 

that an exemptive order may be granted 

by the Commission from any provision 

of section 12(d)(1) if and to the extent 

such exemption is consistent with the 

public interest and the protection of 

investors. Applicants contend that the 

standards under sections 6(c), 17(b) and 

12(d)(1)(J) are satisfied for all the 

reasons set forth above in support of 

their request for relief from sections 

17(a)(3) and 21(b) and for the reasons 

discussed below. 

5. Applicants state that section 

12(d)(1) was intended to prevent the 

pyramiding of investment companies in 

order to avoid duplicative costs and fees 

attendant upon multiple layers of 

investment companies. Applicants 

submit that the proposed credit facility 

does not involve these abuses. 

Applicants note that there would be no 

duplicative costs or fees to the Funds or 

shareholders, and that M&I Investment 

Management and M&I Trust, through 

the Credit Facility Team, would 

administer the credit facility as a 

disinterested fiduciary and a 

disinterested party, respectively, and 

would not receive any compensation for 

its services. Applicants also note that 

the purpose of the proposed credit 

facility is to provide economic benefits 

for all the participating Funds and their 

shareholders. 

6. Section 18(f)(1) of the Act prohibits 

open-end investment companies from 

issuing any senior security except that 

a company is permitted to borrow from 

any bank, provided that, immediately 

after the borrowing, there is an asset 

coverage of at least 300 per centum for 

all borrowings of the company. Under 

section 18(g) of the Act, the term ‘‘senior 

security’’ includes any bond, debenture, 

note, or similar obligation or instrument 

constituting a security and evidencing 

indebtedness. Applicants request 

exemptive relief from section 18(f)(1) to 

the limited extent necessary to 

implement the credit facility (because 

the lending Funds are not banks). 

7. Applicants believe that granting the 

relief under section 6(c) is appropriate 

because the borrowing Funds would 

remain subject to the requirement of 

section 18(f)(1) that all borrowings of 

the Fund, including combined interfund 

and bank borrowings, have at least 

300% asset coverage. Based on the 

conditions and safeguards described in 

the application, applicants also submit 

that to allow the Funds to borrow from 

other Funds pursuant to the proposed 

credit facility is consistent with the 

purposes and policies of section 18(f)(1). 

8. Section 17(d) of the Act and rule 

17d–1 thereunder generally prohibit any 

affiliated person of a registered 

investment company, or affiliated 

persons of an affiliated person, when 

acting as principal, from effecting any 

joint transaction unless the transaction 

is approved by the Commission. Rule 

17d–1(b) under the Act provides that in 

passing upon applications from 

exemptive relief, the Commission will 

consider whether the participation of a 

registered investment company in a 

joint enterprise on the basis proposed is 

consistent with the provisions, policies 

and purposes of the Act and the extent 

to which the company’s participation is 

on a basis different from or less 

advantageous than that of other 

participants. 

9. Applicants submit that the purpose 

of section 17(d) is to avoid overreaching 

by and unfair advantage to investment 

company insiders. Applicants believe 

that the credit facility is consistent with 

the provisions, policies and purposes of 

the Act in that it offers both reduced 

borrowing costs and enhanced returns 

on loaned funds to all participating 

Funds and their shareholders. 

Applicants note that each Fund would 

have an equal opportunity to borrow 

and lend on equal terms consistent with 

its investment policies and limitations. 

Applicants therefore believe that each 

Fund’s participation in the credit 

facility would be on terms which are no 

different from or less advantageous than 

that of other participating Funds. 

Applicants’ Conditions 

Applicants agree that any order of the 

Commission granting the request relief 

will be subject to the following 

conditions: 

1. The Interfund Loan Rate to be 

charged to the Funds under the credit 

facility will be the average of the Repo 

Rate and the Bank Loan Rate. 

2. On each business day, the Credit 

Facility Team will compare the Bank 

Loan Rate with the Repo Rate and will 

make cash available for Interfund Loans 

only if the Interfund Loan Rate is: (a) 

More favorable to the lending Fund than 

the Repo Rate, and, if applicable, the 

yield of the highest yielding Money 

Market Fund in which the lending Fund 

could otherwise invest; and (b) more 

favorable to the borrowing Fund than 

the Bank Loan Rate. 

3. If a Fund has outstanding 

borrowings, any Interfund Loans to the 

Fund: (a) Will be at an interest rate 

equal to or lower than any outstanding 

bank loan; (b) will be secured at least on 

an equal priority basis with at least an 

equivalent percentage of collateral to 

loan value as any outstanding bank loan 

that requires collateral; (c) will have a 

maturity no longer than any outstanding 

bank loan (an in any event not over 

seven days); and (d) will provide that, 

if an event of default occurs under any 

agreement evidencing an outstanding 

bank loan to the Fund, the event of 

default will automatically (without need 

for action or notice by the lending Fund) 

constitute an immediate event of default 

under the Interfund Lending Agreement, 

entitling the lending Fund to call the 

Interfund Loan (and exercise all rights 

with respect to any collateral) and that 

such call will be made if the lending 

bank exercises its right to call its loan 

under its agreement with the borrowing 

Fund. 

4. A Fund may make an unsecured 

borrowing through the credit facility if 

its outstanding borrowings from all 

sources immediately after the interfund 

borrowing total 10% or less of its total 

assets, provided that if the Fund has a 

secured loan outstanding from any other 

lender, including but not limited to 

another Fund, the Fund’s interfund 

borrowing will be secured on at least an 

equal priority basis with at least an 

equivalent percentage of collateral to 

loan value as any outstanding loan that 

requires collateral. If a Fund’s total 

outstanding borrowings immediately 

after an interfund borrowing would be 

greater than 10% of its total assets, the 

Fund may borrow through the credit 

facility on a secured basis only. A Fund 

may not borrow through the credit 

facility or from any other source it its 

total outstanding borrowings 

immediately after such borrowing 

would be more than 331⁄3 of its total 

assets. 

5. Before any Fund that has 

outstanding interfund borrowings may, 

through additional borrowings, cause its 

outstanding borrowings from all sources 

to exceed 10% or its total assets, the 

Fund must first secure each outstanding 

Interfund Loan by the pledge of 

segregated collateral with a market 

value at least equal to 102% of the 

outstanding principal value of the loan. 

If the total outstanding borrowings of a 

Fund with outstanding Interfund Loans 

exceed 10% of its total assets for any 

other reason (such as a decline in net 

asset value or because of shareholder 

redemptions), the Fund will within one 

business day thereafter: (a) Repay all of 

its outstanding Interfund Loans; (b) 

54594 Federal Register / Vol. 70, No. 178 / Thursday, September 15, 2005 / Notices 

3 If a dispute involves Funds with different 

Boards, the Board of each Fund will select an 

independent arbitrator that is satisfactory to each 

Fund. 

reduce its outstanding indebtedness to 

10% or less of its total assets; or (c) 

secure each outstanding Interfund Loan 

by the pledge of segregated collateral 

with a market value at least equal to 

102% of the outstanding principal value 

of the loan until the Fund’s total 

outstanding borrowings cease to exceed 

10% of its total assets, at which time the 

collateral called for by this condition 5 

shall no longer be required. Until each 

Interfund Loan that is outstanding at 

any time that a Fund’s total outstanding 

borrowings exceeds 10% is repaid, or 

the Fund’s total outstanding borrowings 

cease to exceed 10% of its total assets, 

the Fund will mark the value of 

collateral to market each day and will 

pledge such additional collateral as is 

necessary to maintain the market value 

of the collateral that secures each 

outstanding Interfund Loan at least 

equal to 102% of the outstanding 

principal value of the loan. 

6. No Fund may lend to another Fund 

through the credit facility if the loan 

would cause its aggregate outstanding 

loans through the credit facility to 

exceed 15% of the lending Fund’s 

current net assets at the time of the loan. 

7. A Fund’s Interfund Loans to any 

one Fund will not exceed 5% of the 

lending Fund’s net assets. 

8. The duration of Interfund Loans 

will be limited to the time required to 

receive payment for securities sold, but 

in no event more than seven days. Loans 

effected within seven days of each other 

will be treated as separate loan 

transactions for purposes of this 

condition. 

9. A Fund’s borrowings through the 

credit facility, as measured on the day 

when the most recent loan was made, 

will not exceed the greater of 125% of 

the Fund’s total net cash redemptions or 

102% of sales fails for the preceding 

seven calendar days. 

10. Each Interfund Loan may be called 

on one business day’s notice by a 

lending Fund and may be repaid on any 

day by a borrowing Fund. 

11. A Fund’s participation in the 

credit facility must be consistent with 

its investment policies and limitations 

and organizational documents. 

12. The Credit Facility Team will 

calculate total Fund borrowing and 

lending demand through the credit 

facility, and allocate loans on an 

equitable basis among the Funds 

without the intervention of any portfolio 

manager of the Funds (other than the 

Money Market Manager acting in his or 

her capacity as a member of the Credit 

Facility Team). All allocations will 

require approval of at least one member 

of the Credit Facility Team who is not 

the Money Market Manager. The Credit 

Facility team will not solicit cash for the 

credit facility from any Fund or 

prospectively publish or disseminate 

loan demand data to portfolio managers 

(except to the extent that the Money 

Market Manager has access to loan 

demand data). The Credit Facility Team 

will invest any amounts remaining after 

satisfaction of borrowing demand in 

accordance with the standing 

instructions from portfolio managers or 

return remaining amounts for 

investment directly by the Funds. 

13. The Credit Facility Team will 

monitor the interest rates charged and 

the other terms and conditions of the 

Interfund Loans and will make a 

quarterly report to the Board of each 

Fund concerning the participation of the 

Fund in the credit facility and the terms 

and other conditions of any extensions 

of credit under the facility. 

14. The Board of each Fund, 

including a majority of the Independent 

Directors, will: (a) Review no less 

frequently than quarterly each Fund’s 

participation in the credit facility during 

the preceding quarter for compliance 

with the conditions of any order 

permitting the transactions; (b) establish 

the Bank Loan Rate formula used to 

determine the interest rate on Interfund 

Loans, and review no less frequently 

than annually the continuing 

appropriateness of the Bank Loan Rate 

formula; and (c) review no less 

frequently than annually the continuing 

appropriateness of each Fund’s 

participation in the credit facility. 

15. In the event an Interfund Loan is 

not paid according to its terms and the 

default is not cured within two business 

days from its maturity or from the time 

the lending Fund makes a demand for 

payment under the provisions of the 

Interfund Lending Agreement, the 

Credit Facility Team will promptly refer 

the loan for arbitration to an 

independent arbitrator, selected by the 

Board of each Fund involved in the 

loan, who will serve as arbitrator of 

disputes concerning Interfund Loans.3

The arbitrator will resolved any problem 

promptly, and the arbitrator’s decision 

will be binding on both Funds. The 

arbitrator will submit at least annually 

a written report to the Board of each 

Fund setting forth a description of the 

nature of any dispute and the actions 

taken by the Funds to resolve the 

dispute. 

16. Each Fund will maintain and 

preserve for a period of not less than six 

years from the end of the fiscal year in 

which any transaction under the credit 

facility occurred, the first two years in 

an easily accessible place, written 

records of all such transactions, setting 

forth a description of the terms of the 

transaction, including the amount, the 

maturity and the rate of interest on the 

loan, the rate of interest available at the 

time on overnight repurchase 

agreements and bank borrowings, the 

yield of any Money Market Fund in 

which the lending Fund could 

otherwise invest and such other 

information presented to the Fund’s 

Board in connection with the review 

required by conditions 13 and 14. 

17. The Credit Facility Team will 

prepare and submit to the Board of each 

Fund for review an initial report 

describing the operations of the credit 

facility and the procedures to be 

implemented to ensure that all the 

Funds are treated fairly. After the 

commencement of the operations of the 

credit facility, the Credit Facility Team 

will report on the operations of the 

credit facility at the quarterly meetings 

of each Fund’s Board. 

In addition, for two years following 

the commencement of the credit facility, 

the independent public accountant for 

each Fund shall prepare an annual 

report that evaluates the Credit Facility 

Team’s assertion that it has established 

procedures reasonably designed to 

achieve compliance with the conditions 

of the order. The report shall be 

prepared in accordance with the 

Statements on Standards for Attestation 

Engagements No. 10 and it shall be filed 

pursuant to item 77Q3 of Form N–SAR, 

as such Statements or Form may be 

revised, amended, or superseded from 

time to time. In particular, the report 

shall address procedures designed to 

achieve the following objectives: (a) 

That the Interfund Loan Rate will be 

higher than the Repo Rate and, if 

applicable, the yield of the highest 

yielding Money Market Funds, but 

lower than the Bank Loan Rate; (b) 

compliance with the collateral 

requirements as set forth in the 

application; (c) compliance with the 

percentage limitations on interfund 

borrowing and lending; (d) allocation of 

interfund borrowing and lending 

demand in an equitable manner and in 

accordance with procedures established 

by the Board of each Fund; and (e) that 

the interest rate on any Interfund Loan 

does not exceed the interest rate on any 

third party borrowings of a borrowing 

Fund at the time of the Interfund Loan. 

After the final report is filed, the 

Fund’s external auditors, in connection 

with their Fund audit examinations, 

will continue to review the operation of 

the credit facility for compliance with 

Federal Register / Vol. 70, No. 178 / Thursday, September 15, 2005 / Notices 54595 

the conditions of the application and 

their review will form the basis, in part, 

of the auditor’s report on internal 

accounting controls in Form N–SAR. 

18. No Fund will participate in the 

credit facility upon receipt of requisite 

regulatory approval unless it has fully 

disclosed in its SAI all material facts 

about its intended participation. 

19. Each Fund will satisfy the fund 

governance standards set forth in rule 

0–1(a)(7) under the Act by the 

compliance date for the rule. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–18311 Filed 9–14–05; 8:45 am] 

BILLING CODE 8010–01–M 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. IC–27061; 811–3934] 

Tuxis Corporation; Notice of 

Application 

September 9, 2005. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of application for 

deregistration under section 8(f) of the 

Investment Company Act of 1940 (the 

‘‘Act’’). 

Summary of Application: Tuxis 

Corporation requests an order declaring 

that it has ceased to be an investment 

company. 

Applicant: Tuxis Corporation. 

Filing Dates: The application was 

filed on May 3, 2004 and amended on 

September 8, 2005. 

Hearing or Notification of Hearing: An 

order granting the requested relief will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicant with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on October 4, 2005 and 

should be accompanied by proof of 

service on applicant, 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, U.S. Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–9303. 

Applicant, c/o Stephanie A. Djinis, Law 

Offices of Stephanie A. Djinis, 1749 Old 

Meadow Road, Suite 310, McLean, VA 

22102. 

FOR FURTHER INFORMATION CONTACT: Jaea 

F. Hahn, Senior Counsel, at (202) 551–

6870, or Todd F. Kuehl, Branch Chief, 

at (202) 551–6821 (Office of Investment 

Company Regulation, Division of 

Investment Management). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained for a fee at the 

Commission’s Public Reference Branch, 

100 F Street NE., Washington, DC 

20549–0102 (telephone (202) 551–5850). 

Applicant’s Representations 

1. Applicant was incorporated under 

the laws of the State of Maryland as Bull 

& Bear Tax-Free Income Fund, a series 

of Bull & Bear Municipal Securities, 

Inc., an open-end management 

investment company registered under 

the Act on December 8, 1983. On 

November 8, 1996, applicant registered 

under the Act as a closed-end 

management investment company. 

Applicant changed its name to Tuxis 

Corporation in 1998. In October 2001, 

applicant’s stockholders approved a 

proposal to change the nature of 

applicant’s business so as to cease to be 

an investment company and become an 

operating company. Shareholders 

approved the termination of the 

investment management agreement 

between applicant and its investment 

adviser, and applicant’s board of 

directors terminated its management 

contract with the outside investment 

adviser effective November 30, 2001, 

and authorized applicant’s officers to 

manage applicant’s business affairs. 

2. Applicant’s management 

commenced a business review, 

development and acquisition program 

with respect to the real estate and real 

estate services industries upon approval 

of the proposal, and formed five whollyowned subsidiaries: Tuxis Real Estate I 

LLC (‘‘TRE–I’’), Tuxis Operations LLC 

(‘‘TOP’’), Tuxis Real Estate II LLC 

(‘‘TRE–II’’), Tuxis Real Estate Brokerage 

LLC (‘‘TEB’’), and Winmark Properties I 

LLC (‘‘Winmark I’’). Applicant states 

that none of these subsidiaries are 

investment companies as defined in 

section 3(a) of the Act. The business of 

TRE–I, TRE–II, and Winmark I consists 

of holding title to real estate. TOP 

operates and manages TRE–I’s, TRE–II’s 

and Winmark I’s properties. TEB is 

expected to act as agent in the purchase, 

sale and lease of real estate. Applicant 

states that it intends to renovate the 

properties held by TRE–I, TRE–II and 

Winmark I and then engage in an active 

leasing program, operating the sites for 

multiple tenants in retail and other 

businesses. In addition, applicant states 

that it intends to further expand its real 

estate property holdings. 

3. Applicant states that its whollyowned subsidiaries represent 

approximately 35.3% of applicant’s 

total assets on an unconsolidated basis. 

Applicant further states that its holding 

of money market fund shares represent 

approximately 64.2% of applicant’s 

total assets on an unconsolidated basis. 

4. For the last four fiscal quarters 

ended March 31, 2005 combined, 

applicant has had net losses from its 

real estate operations but has derived 

income from its holdings of Government 

securities and money market fund 

shares. During that same time period, 

applicant received interest and 

dividends of $95,915 from its holdings 

of Government securities and money 

market fund shares and $20,750 from its 

real estate operations. Applicant states 

that it expects its revenues from its real 

estate operations to increase and its 

revenues from money market fund 

shares to decrease as its current real 

estate holdings are developed and 

leased and as it makes additional real 

estate acquisitions, thereby reducing its 

money market fund holdings. Further, 

applicant states that management is 

actively reviewing a number of other 

real estate acquisition candidates and 

anticipates additional transactions. 

Applicant’s Legal Analysis 

1. Section 8(f) of the Act provides that 

whenever the Commission, upon 

application or its own motion, finds that 

a registered investment company has 

ceased to be an investment company, 

the Commission shall so declare by 

order and upon the taking effect of such 

order, the registration of such company 

shall cease to be in effect. 

2. Section 3(a)(1)(A) of the Act defines 

an investment company as any issuer 

which ‘‘is or holds itself out as being 

engaged primarily, or proposes to 

engage primarily, in the business of 

investing, reinvesting, or trading in 

securities.’’ Section 3(a)(1)(C) of the Act 

defines an investment company as any 

issuer which ‘‘is engaged or proposes to 

engage in the business of investing, 

reinvesting, owning, holding, or trading 

in securities, and owns or proposes to 

acquire investment securities having a 

value exceeding 40 per centum of the 

value of such issuer’s total assets 

(exclusive of Government securities and 

cash items) on an unconsolidated 

basis.’’ Section 3(a)(2) of the Act defines 

investment securities as ‘‘all securities 

except (A) Government securities, (B)