Federal Register / Vol. 70, No. 229 / Wednesday, November 30, 2005 / Notices 71867 

1All existing Funds that presently intend to rely 

on the order are named as Applicants. Any existing 

or future Fund that subsequently relies on the order 

will comply with the terms and conditions in the 

Application. 

collection of information to the Office of 

Management and Budget for review and 

approval. 

Summary of Proposal(s): 

(1) Collection title: Request to NonRailroad Employer for Information 

About Annuitant’s Work and Earnings. 

(2) Form(s) submitted: RL–231–F. 

(3) OMB Number: 3220–0107. 

(4) Expiration date of current OMB 

clearance: 02/28/2006. 

(5) Type of request: Extension of a 

currently approved collection. 

(6) Respondents: Business or other 

for-profit. 

(7) Estimated annual number of 

respondents: 300. 

(8) Total annual responses: 300. 

(9) Total annual reporting hours: 150. 

(10) Collection description: Under the 

Railroad Retirement Act (RRA), benefits 

are not payable if an annuitant works for 

an employer covered under the RRA or 

last non-railroad employer. The 

collection obtains information regarding 

an annuitant’s work and earnings from 

a non-railroad employer. The 

information will be used for 

determining whether benefits should be 

withheld. 

Additional Information or Comments: 

Copies of the forms and supporting 

documents can be obtained from 

Charles Mierzwa, the agency clearance 

officer (312–751–3363) or 

Charles.Mierzwa@rrb.gov. 

Comments regarding the information 

collection should be addressed to 

Ronald J. Hodapp, Railroad Retirement 

Board, 844 North Rush Street, Chicago, 

Illinois 60611–2092 or 

Ronald.Hodapp@rrb.gov and to the 

OMB Desk Officer for the RRB, at the 

Office of Management and Budget, 

Room 10230, New Executive Office 

Building, Washington, DC 20503. 

Charles Mierzwa, 

Clearance Officer. 

[FR Doc. 05–23475 Filed 11–29–05; 8:45 am] 

BILLING CODE 7905–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

27166; 812–12909] 

AEW Real Estate Income Fund, et al.; 

Notice of Application 

Date: November 23, 2005. 

AGENCY: Securities and Exchange 

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

ACTION: Notice of application for an 

order under section 12(d)(1)(J) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) for an exemption from section 

12(d)(1) of the Act, under sections 6(c) 

and 17(b) of the Act for an exemption 

from section 17(a) of the Act, under 

section 6(c) of the Act for an exemption 

from sections 18(f) and 21(b) of the Act, 

and under section 17(d) of the Act and 

Rule 17d–1 under the Act to permit 

certain joint arrangements. 

Summary of Application: Applicants 

request an order that would permit 

certain registered management 

investment companies to invest cash 

balances in affiliated money market 

funds and to participate in a joint 

lending and borrowing facility. 

Applicants: AEW Real Estate Income 

Fund, IXIS Advisor Funds Trust I 

(formerly CDC Nvest Funds Trust I), 

IXIS Advisor Funds Trust II (formerly 

CDC Nvest Funds Trust II), IXIS Advisor 

Funds Trust III (formerly CDC Nvest 

Funds Trust III), IXIS Advisor Funds 

Trusts IV (formerly CDC Nvest 

Companies Trust I), IXIS Advisor Cash 

Management Trust (formerly CDC Nvest 

Cash Management Trust), Harris 

Associates Investment Trust, Loomis 

Sayles Funds I (formerly Loomis Sayles 

Investment Trust), Loomis Sayles Funds 

II (formerly Loomis Sayles Funds), 

Delafield Fund, Inc., Institutional Daily 

Income Fund, Cortland Trust, Inc., and 

Short Term Income Fund, Inc. (each, a 

‘‘Trust,’’ and each Trust on behalf of 

itself and its existing series, an ‘‘Existing 

Fund’’); AEW Management and 

Advisers, L.P., IXIS Asset Management 

Advisors, L.P. (formerly CDC IXIS Asset 

Management Advisers, L.P.), Harris 

Associates L.P., Loomis, Sayles & 

Company, L.P., and Reich & Tang Asset 

Management, LLC (each, an ‘‘Applicant 

Adviser’’). 

Filing Dates: The application was 

filed on December 12, 2002, and 

amended on November 2, 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 December 20, 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. 

ADDRESSES: Secretary, SEC, 100 F Street, 

NE., Washington, DC 20549–9303; 

Applicants, c/o Coleen Downs Dinneen, 

Esq., IXIS Asset Advisors, L.P., 399 

Boylston Street, Boston, MA 02116. 

FOR FURTHER INFORMATION CONTACT: 

Deepak T. Pai, Senior Counsel, at (202) 

551–6876, or Stacy L. Fuller, 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 SEC’s 

Public Reference Branch, 100 F Street, 

NE., Washington, DC 20549–0102 at 

telephone (202) 551–5850. 

Applicants’ Representations 

1. Each of the Existing Funds is a 

management investment company 

registered under the Act, and is 

organized as a Massachusetts business 

trust or a Maryland corporation. All but 

one of the Existing Funds are open-end 

investment companies (‘‘open-end 

Funds’’); the AEW Real Estate Income 

Fund is a closed-end investment 

company (‘‘closed-end Fund’’). Certain 

of the open-end Funds are money 

market funds subject to the 

requirements of Rule 2a–7 under the Act 

(each, a ‘‘Central Fund’’). Any Funds 

that are not Central Funds are referred 

to herein as ‘‘Participating Funds.’’

2. Applicants request that any relief 

granted pursuant to the Application also 

apply to any future series of the Trusts 

and to any other existing or future 

registered management investment 

companies, or series thereof, for which 

an Applicant Adviser, or a company 

controlling, controlled by, or under 

common control with an Applicant 

Adviser (together with the Applicant 

Advisers, the ‘‘Advisers’’), acts as 

investment adviser or sub-adviser 

(‘‘Future Funds’’ and together with the 

Existing Funds, the ‘‘Funds’’).1 Each 

Applicant Adviser is registered as an 

investment adviser under the 

Investment Advisers Act of 1940, and is 

an investment adviser to one or more of 

the Existing Funds. Each Applicant 

Adviser is an indirect wholly-owned 

subsidiary of IXIS Asset Management 

North America, L.P. Each Adviser, as 

the primary investment adviser or as 

subadviser to a Participating Fund is, 

and will be, responsible for the 

investment of Cash Balances, as defined 

below. 

71868 Federal Register / Vol. 70, No. 229 / Wednesday, November 30, 2005 / Notices 

2The Central Funds and closed-end Funds will 

participate in the Credit Facility only as lenders. 

A. Investment of Cash Balances in the 

Central Funds 

1. Each Participating Fund has, or 

may be expected to have, cash reserves 

that have not been invested in portfolio 

securities (‘‘Uninvested Cash’’) held by 

its custodian. Uninvested Cash may 

result from a wide variety of sources, 

including dividends or interest received 

on portfolio securities, unsettled 

securities transactions, strategic 

reserves, matured investments, 

liquidations of investment securities, 

and new investor monies. In addition, 

certain of the Participating Funds also 

may participate in a securities lending 

program (‘‘Securities Lending Program’’) 

under which the Participating Funds 

lend their securities to registered brokerdealers or other institutional investors. 

These loans are continuously secured by 

collateral equal at all times to at least 

the market value of the securities 

loaned. Collateral for these loans may 

include cash (‘‘Cash Collateral,’’ and 

together with Uninvested Cash, ‘‘Cash 

Balances’’). Any Securities Lending 

Program, including any investment of 

Cash Collateral will comply with all 

present and future Commission and staff 

positions regarding securities lending 

arrangements. 

2. Applicants request an order to 

permit each Participating Fund to use 

its Cash Balances to purchase shares of 

one or more of the Central Funds that 

are in the same group of investment 

companies (as defined in section 

12(d)(1)(G) of the Act) as the 

Participating Fund, and each Central 

Fund to sell its shares to, and redeem its 

shares from, Participating Funds that are 

in the same group of investment 

companies as the Central Fund (‘‘Cash 

Sweep’’). Investment by a Participating 

Fund of Cash Balances in shares of the 

Central Funds will be in accordance 

with each Participating Fund’s 

investment restrictions and will be 

consistent with each Participating 

Fund’s policies as set forth in its 

prospectus or statement of additional 

information (‘‘SAI’’). Applicants believe 

that by investing Cash Balances in the 

Central Funds, Participating Funds may 

reduce their transaction costs, create 

more liquidity, increase returns, and 

diversify holdings. 

3. In connection with the proposed 

Cash Sweep transactions, applicants 

request an order under (i) section 

12(d)(1)(J) of the Act granting relief from 

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

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

granting relief from section 17(a) of the 

Act; (iii) section 17(d) of the Act and 

Rule 17d–1 under the Act to permit 

certain joint arrangements. 

B. Interfund Lending Program 

1. Under current arrangements, the 

Funds may lend money to banks, 

brokers or other entities by entering into 

repurchase agreements or purchasing 

other short-term instruments. In 

addition, the open-end Funds may 

borrow money from the same or other 

banks for temporary or emergency 

purposes to satisfy redemption requests 

or to cover unanticipated cash 

shortfalls, such as trade ‘‘fails’’ in which 

cash payments for a portfolio security 

sold by a Fund have been delayed. The 

open-end Funds may have credit 

arrangements with their custodians 

under which a custodian may, but is not 

obligated to, lend money to the Funds 

to meet their temporary or emergency 

cash needs. The open-end Funds may 

also borrow money from banks, brokers 

and other entities by entering into 

reverse repurchase agreements and 

economically similar transactions. 

2. If an open-end Fund borrows 

money from any bank under its current 

arrangements or under other 

arrangements, the Fund will pay interest 

on the borrowed cash at a significantly 

higher rate than the rate that would be 

earned by other (non-borrowing) Funds 

on repurchase agreements and other 

short-term instruments of the same 

maturity as the bank loan. Applicants 

believe this differential represents the 

bank’s profit for serving as a middleman 

between a borrower and lender. Other 

bank loan arrangements, such as 

committed lines of credit, may require 

a borrowing Fund to pay substantial 

commitment fees in addition to the 

interest rate to be paid by the Fund on 

outstanding loans. 

3. Applicants request an order that 

would permit Funds that are in the 

same group of investment companies to 

enter into lending agreements 

(‘‘Interfund Lending Agreements’’) to 

lend and borrow money for temporary 

purposes directly to and from each other 

through a credit facility (‘‘Interfund 

Loans’’).2 Applicants believe that the 

proposed credit facility (‘‘Credit 

Facility’’) would both substantially 

reduce the borrowing costs of an openend Fund that sought to borrow money 

for temporary or emergency purposes 

and enhance the ability of a lending 

Fund to earn higher rates of interest on 

its short-term loans than it might 

otherwise earn on high quality, shortterm, interest-bearing investments. 

Although the Credit Facility would 

substantially reduce an open-end 

Fund’s reliance on bank credit 

arrangements, the Funds may continue 

to maintain bank loan facilities. 

4. Applicants state that the Credit 

Facility would likely provide a 

borrowing Fund with significant savings 

when its cash position is insufficient to 

meet temporary cash requirements. This 

situation could arise when redemptions 

exceed anticipated volumes and the 

borrowing Fund has insufficient cash on 

hand to satisfy such redemptions. When 

the Funds liquidate portfolio securities 

to meet redemption requests, which 

normally are effected immediately, 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, short-term 

liquidity pending settlement of the sale 

of portfolio securities. 

5. Applicants also propose using the 

Credit Facility when a sale of securities 

fails due to circumstances beyond a 

Fund’s control, such as delay in the 

delivery of cash to the Fund’s custodian 

or improper delivery instructions by the 

broker effecting the transaction (‘‘sales 

fails’’). 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 

would enable the Funds to have access 

to immediate short-term liquidity 

without incurring overdraft or other 

charges. 

6. While bank borrowings generally 

could supply needed cash to cover 

unanticipated redemptions and sales 

fails, under the Credit Facility a 

borrowing Fund would pay lower 

interest rates than those that would be 

payable under short-term loans offered 

by banks. 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 

Central Funds. Thus, Applicants assert 

that the Credit Facility would benefit 

both borrowing and lending Funds. 

7. The interest rate to be charged on 

Interfund Loans (the ‘‘Interfund Rate’’) 

would be determined daily and would 

be the average of (i) the higher of (x) the 

‘‘OTD Rate,’’ as defined below, and (y) 

the ‘‘Repo Rate,’’ as defined below, and 

(ii) the ‘‘Bank Loan Rate,’’ as defined 

below. The OTD Rate on any day would 

be the highest rate available to the 

lending Funds from investments in 

Federal Register / Vol. 70, No. 229 / Wednesday, November 30, 2005 / Notices 71869 

overnight time deposits. The Repo Rate 

on any day would be the highest interest 

rate available to the lending Funds from 

investments in overnight repurchase 

agreements. The Bank Loan Rate for any 

day would be calculated by the 

Interfund Lending Team, as defined 

below, according to a formula 

established by the board of trustees of 

each Fund (‘‘Board’’), intended to 

approximate the lowest interest rate at 

which short-term bank loans are 

available to the Funds. The formula 

would be based upon a publicly 

available rate (e.g., Federal funds rate 

plus 25 basis points) and would vary 

with that rate to reflect changing bank 

loan rates. The initial formula and any 

subsequent modification thereto would 

be subject to the approval of the Board 

of each Fund. In addition, each Fund’s 

Board periodically would review the 

continuing appropriateness of reliance 

on the publicly available rate used to 

determine the Bank Loan Rate, as well 

as the relationship between the Bank 

Loan Rate and current bank loan rates 

available to the Funds. 

8. The Credit Facility would be 

administered by personnel at Reich & 

Tang Asset Management, LLC (‘‘Reich & 

Tang’’) who have accounting 

experience, are members of its mutual 

fund administration group or the 

financial analysis department, and who 

are not portfolio managers of a Fund 

(‘‘Interfund Lending Team’’). No 

portfolio manager from any Fund would 

participate in the administration of the 

Credit Facility. Under the Credit 

Facility, the portfolio managers for each 

Fund could provide standing 

instructions to participate daily as a 

borrower or lender. On each business 

day the Interfund Lending Team would 

collect data on the uninvested cash and 

borrowing requirements of the Funds 

from each Fund’s custodian, portfolio 

managers and/or administrators. Once it 

had determined the aggregate amount of 

cash available for loans and borrowing 

demand, the Interfund Lending Team 

would allocate loans among borrowing 

Funds without any further 

communication from portfolio 

managers. Applicants expect there to be 

far more available cash each day than 

borrowing demand. After allocating 

cash for Interfund Loans, the Interfund 

Lending Team would invest any 

remaining cash in accordance with the 

standing instructions of the relevant 

Fund’s portfolio managers or return 

remaining amounts for investment 

directly by the portfolio manager of the 

Fund. 

9. The Interfund Lending Team would 

allocate borrowing demand and cash 

available for lending among the Funds 

on what the Interfund Lending Team 

believed to be an equitable basis, subject 

to certain administrative requirements 

applicable to all Funds, such as the time 

of filing requests to participate, 

minimum loan sizes, and the need to 

minimize the number of transactions 

and associated administrative costs. To 

reduce transaction costs, each Interfund 

Loan may be allocated to minimize the 

number of participants necessary to 

complete that Interfund Loan 

transaction. The Interfund Lending 

Team would not solicit cash for loans 

from any Funds or publish or 

disseminate the amount of current 

borrowing demand to portfolio 

managers. 

10. The Interfund Lending Team 

would (i) monitor the interest rates 

charged and the other terms and 

conditions of the Interfund Loans, (ii) 

limit the borrowings and loans entered 

into by each Fund to ensure that they 

comply with the Fund’s investment 

policies and limitations, (iii) ensure 

equitable treatment of each Fund under 

the Credit Facility, and (iv) make 

quarterly reports to the Funds’ Boards 

concerning any transactions by the 

Funds under the Credit Facility and the 

Interfund Rates. The method of 

allocation and related administrative 

procedures would be approved by each 

Fund’s Board, including a majority of 

trustees who are not interested persons 

of the Fund, as defined in section 

2(a)(19) of the Act (‘‘Independent 

Trustees’’), to ensure that both 

borrowing Funds and lending Funds 

participate in the Credit Facility on an 

equitable basis. 

11. Reich & Tang would administer 

the Credit Facility pursuant to a form of 

Interfund Lending Agreement (to which 

Reich & Tang and each Fund 

participating in the Credit Facility 

would be a party). Reich & Tang would 

not receive any fees in connection with 

its administration of the Credit Facility. 

12. No Fund would participate in the 

Credit Facility unless (i) it had fully 

disclosed all material information 

concerning the Credit Facility in its 

prospectus or SAI, or, in the case of a 

closed-end Fund, in its registration 

statement or shareholder reports, (ii) it 

had obtained shareholder approval to 

participate in the Credit Facility, if 

shareholder approval were required by 

the Fund’s fundamental investment 

policies, and (iii) the Fund’s 

participation in the Credit Facility was 

consistent with its investment policies 

and restrictions and its organizational 

documents. 

13. In connection with the Credit 

Facility, Applicants request an order 

under (i) section 6(c) granting relief 

from sections 18(f) and 21(b) of the Act; 

(ii) section 12(d)(1)(J) granting relief 

from sections 12(d)(1)(A) and (B) of the 

Act; (iii) sections 6(c) and 17(b) granting 

relief from sections 17(a) and (iv) 

section 17(d) and Rule 17d–1 to permit 

certain joint arrangements. 

Applicants’ Legal Analysis 

A. Investment of Cash Balances in the 

Central Funds 

1. Section 12(d)(1)(A) provides that no 

registered investment company may 

acquire securities of another investment 

company representing more than 3% of 

the acquired company’s outstanding 

voting stock, more than 5% of the 

acquiring company’s total assets, or, 

together with the securities of other 

investment companies, more than 10% 

of the acquiring company’s total assets. 

Section 12(d)(1)(B) provides that no 

registered open-end investment 

company, its principal underwriter or 

any broker or dealer, may sell the 

company’s securities to another 

investment company if the sale will 

cause the acquiring company to own 

more than 3% of the acquired 

company’s voting stock, or if the sale 

will cause more than 10% of the 

acquired company’s voting stock to be 

owned by investment companies. 

2. Section 12(d)(1)(J) provides that the 

Commission may exempt any person, 

security, or transaction, or classes of 

persons, securities or transactions, from 

any provision of section 12(d)(1) if and 

to the extent that the exemption is 

consistent with the public interest and 

the protection of investors. Applicants 

request relief under section 12(d)(1)(J) 

from the limitations of sections 

12(d)(1)(A) and (B) to permit each 

Participating Fund to invest its Cash 

Balances in the Central Funds that are 

in the same group of investment 

companies as the Participating Fund; 

under the requested order, the 

Participating Fund’s aggregate 

investment of Uninvested Cash in the 

Central Funds would not exceed the 

greater of 25% of such Participating 

Fund’s total assets or $10 million. 

3. Applicants state that the proposed 

investment of Cash Balances in the 

Central Funds will not result in the 

abuses meant to be addressed by section 

12(d)(1), including undue influence, 

layering of fees and complexity. 

Applicants state that because each 

Central Fund will maintain a highly 

liquid portfolio and both the 

Participating Fund and the Central Fund 

are in the same group of investment 

companies, there should not be a 

concern about undue influence by a 

Participating Fund over a Central Fund. 

71870 Federal Register / Vol. 70, No. 229 / Wednesday, November 30, 2005 / Notices 

With respect to layering of fees, 

Applicants note that shares of the 

Central Funds sold to the Participating 

Funds will not be subject to a sales load, 

redemption fee, distribution fee under a 

plan adopted in accordance with Rule 

12b–1 under the Act, or service fee (as 

defined in Rule 2830(b)(9) of the 

National Association of Securities 

Dealers, Inc. Conduct Rules (‘‘NASD 

Conduct Rules’’)). Applicants state that 

if a Central Fund offers more than one 

class of shares, a Participating Fund will 

invest its Cash Balances only in the 

class with the lowest expense ratio at 

the time of the investment. In addition, 

before the next meeting of the Board of 

a Participating Fund is held for the 

purpose of voting on any investment 

advisory contract, the investment 

adviser will provide the Board with 

information on the approximate cost to 

the adviser of, or portion of the advisory 

fee under the existing contract 

attributable to, managing the 

Participating Fund’s Uninvested Cash 

that may be invested in the Central 

Funds. Further, before approving any 

investment advisory contract for a 

Participating Fund, the Board of the 

Participating Fund, including a majority 

of the Independent Trustees, will 

consider to what extent, if any, the 

investment advisory fees charged to the 

Participating Fund should be reduced to 

account for the reduced services 

provided to the Participating Fund as a 

result of Uninvested Cash being 

invested in the Central Funds. With 

regard to complexity, Applicants 

include a condition that the Central 

Funds will not acquire shares of any 

other investment company or company 

relying on sections 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A), except as 

permitted by a Commission order 

governing interfund loans. 

4. Section 17(a) makes it unlawful for 

any affiliated person of a registered 

investment company, or any affiliated 

person of the affiliated person (‘‘Second 

Tier Affiliate’’), acting as principal, 

knowingly to sell any security to or 

purchase any security from the 

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

the Act defines an ‘‘affiliated person’’ to 

include 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; any person directly or 

indirectly controlling, controlled by, or 

under common control with the other 

person; and, in the case of an 

investment company, its investment 

adviser. Applicants state that because 

the Funds share a common Adviser or 

have Advisers that are under common 

control, the Funds may be deemed to be 

under common control and, thus, 

affiliated persons of each other. In 

addition, applicants state that a 

Participating Fund may acquire more 

than 5% of a Central Fund’s outstanding 

voting securities and, as a result, the 

Participating Fund and the Central Fund 

may be deemed to be affiliated persons 

of each other. The sale of shares by the 

Central Funds to the Participating 

Funds and the redemption of such 

shares would thus be prohibited under 

section 17(a). 

5. Section 17(b) authorizes the 

Commission to exempt a transaction 

from section 17(a) if the terms of the 

proposed transaction, including the 

consideration to be paid or received, are 

reasonable and fair and do not involve 

overreaching on the part of any person 

concerned, and the proposed 

transaction is consistent with the policy 

of each registered investment company 

concerned and with the general 

purposes of the Act. Section 6(c) 

authorizes the Commission to exempt 

any person or transaction from any 

provision of the Act if the 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. 

6. Applicants submit that the request 

for relief to permit the purchase and 

redemption of shares of the Central 

Funds by the Participating Funds 

satisfies the standards in sections 6(c) 

and 17(b). Applicants note that shares of 

the Central Funds will be purchased 

and redeemed at their net asset value, 

the same consideration paid and 

received for these shares by any other 

shareholder. In addition, Applicants 

state that the Participating Funds will 

retain their ability to invest Cash 

Balances directly in money market or 

other instruments as authorized by their 

respective investment objectives and 

policies if they believe they can obtain 

a higher rate of return or for any other 

reason. Each Central Fund reserves the 

right to discontinue selling shares to any 

of the Participating Funds if its Board 

determines that the sale will adversely 

affect its portfolio management and 

operations. 

7. Section 17(d) and Rule 17d–1 

prohibit any affiliated person of a 

registered investment company, acting 

as principal, from participating in or 

effecting any transaction in connection 

with any joint enterprise or joint 

arrangement in which the investment 

company participates. Applicants state 

that each Participating Fund (by 

purchasing shares of the Central Funds), 

the Advisers (by managing the assets of 

the Participating Funds and the Central 

Funds, including the Participating 

Funds’ investments in the Central 

Funds), and each Central Fund (by 

selling shares to the Participating 

Funds) could be deemed to be 

participants in a ‘‘joint enterprise or 

other joint arrangement’’ within the 

meaning of section 17(d) and Rule 17d–

1. 

8. Rule 17d–1 permits the 

Commission to approve a joint 

arrangement covered by the terms of 

section 17(d). In determining whether to 

approve a transaction, the Commission 

considers whether the investment 

company’s participation in the joint 

enterprise is consistent with the 

provisions, policies, and purposes of the 

Act, and the extent to which the 

participation is on a basis different from 

or less advantageous than that of other 

participants. Applicants submit that 

investments by the Participating Funds 

will be at net asset value and will be 

indistinguishable from any other 

shareholder account maintained by the 

Central Funds, and that the transactions 

will be consistent with the Act. 

Applicants further submit that the 

arrangement is not intended to increase 

the fees earned by the Advisers. Thus, 

applicants contend that the proposed 

transactions meet the standards for 

relief under Rule 17d–1. 

B. Interfund Lending Program 

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

prohibits any affiliated person or 

Second-Tier Affiliate from borrowing 

money or other property from a 

registered investment company. Section 

21(b) generally prohibits any registered 

management company from lending 

money or other property to any person 

if that person controls or is under 

common control with the company. As 

discussed above, Applicants believe that 

the Funds may be deemed to be under 

common control and, as a result, 

prohibited from participating in the 

Credit Facility because of sections 

17(a)(3) and 21(b). 

2. Applicants submit that sections 

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

prevent a party with potential adverse 

interests to, 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 benefit that party and that are 

detrimental to the best interests of the 

investment company and its 

shareholders. Applicants assert that the 

proposed transactions do not raise such 

concerns for the following reasons: (i) 

Reich & Tang would receive no 

Federal Register / Vol. 70, No. 229 / Wednesday, November 30, 2005 / Notices 71871 

compensation for administering the 

Credit Facility; (ii) all Interfund Loans 

would consist only of uninvested cash 

reserves that the Fund otherwise would 

invest in short-term repurchase 

agreements or other short-term 

investments; (iii) the Interfund Loans 

would not involve a greater risk than 

such other investments; (iv) the lending 

Fund would earn interest on Interfund 

Loans at a rate higher than it could 

obtain through such other investments; 

and (v) the borrowing Fund would pay 

interest at a rate lower than otherwise 

available to it under bank loan 

agreements and avoid commitment fees 

associated with committed lines of 

credit. Moreover, Applicants believe 

that the other conditions proposed 

would effectively preclude the 

possibility of any Fund obtaining undue 

advantage over any other Fund. 

3. Applicants also seek exemptions 

from section 17(a)(1) under sections 6(c) 

and 17(b) and from section 12(d)(1) 

under section 12(d)(1)(J) with respect to 

the Credit Facility. 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). Applicants contend that the 

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

12(d)(1)(J), as stated above, are satisfied 

for all the reasons set forth in the two 

preceding paragraphs in support of their 

request for relief from sections 17(a)(3) 

and 21(b) and for the reasons set forth 

below. 

4. As discussed above, Applicants 

state that section 12(d)(1) was intended 

to prevent the pyramiding of investment 

companies in order to avoid, among 

other things, duplicative costs and fees 

that are generated by multiple layers of 

investment companies. Applicants 

submit that the Credit Facility does not 

involve these types of abuses. Regarding 

duplicative costs, Applicants state that 

Reich & Tang would administer the 

Credit Facility pursuant to an Interfund 

Lending Agreement between it and the 

relevant Fund and would not receive 

any compensation for its services. 

Applicants further state that the purpose 

of the Credit Facility is to provide 

economic benefits for all participating 

Funds. 

5. Section 18(f)(1) prohibits open-end 

investment companies from issuing any 

senior security, except that a company 

may borrow from any bank so long as 

immediately after the borrowing there is 

asset coverage of at least 300% 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). 

6. Applicants believe that granting 

relief under section 6(c) is appropriate. 

Based on the conditions and safeguards 

described in the Application, 

Applicants also submit that to allow the 

Funds to borrow from other Funds 

under the Credit Facility is consistent 

with the purposes and policies of 

section 18(f)(1). 

7. Applicants also request an order 

under Rule 17d–1 with respect to the 

Credit Facility. Applicants state that the 

Credit Facility could be deemed to be a 

‘‘joint enterprise or other joint 

arrangement’’ within the meaning of 

section 17(d) and Rule 17d–1. 

Applicants submit that the proposed 

transactions meet the standards of Rule 

17d–1 because the Credit Facility offers 

both reduced borrowing costs to 

borrowing Funds and enhanced returns 

on loaned funds to lending Funds. 

Applicants note that each Fund would 

have an equal opportunity to borrow 

and lend on equal terms consistent with 

its investments policies and 

fundamental investment limitations and 

that Reich & Tang would not receive any 

compensation for administering the 

Credit Facility. Applicants therefore 

believe that each Fund’s participation in 

the Credit Facility would be on terms 

that are no different from or less 

advantageous than those of other 

participants. 

Applicants’ Conditions 

Applicants agree that any order of the 

Commission granting the requested 

relief will be subject to the following 

conditions: 

A. Investment of Cash Balances in the 

Central Funds 

1. The shares of the Central Funds 

sold to and redeemed by the 

Participating Funds will not be subject 

to a sales load, redemption fee, 

distribution fee under a plan adopted in 

accordance with Rule 12b–1 under the 

Act, or service fee (as defined in NASD 

Conduct Rule 2830(b)(9)). 

2. No Central Fund will acquire 

securities of any other investment 

company or company relying on section 

3(c)(1) or 3(c)(7) of the Act in excess of 

the limits contained in section 

12(d)(1)(A) of the Act, except as 

permitted by an SEC order governing 

interfund loans. 

3. Before the next meeting of the 

Board of a Participating Fund is held for 

the purpose of voting on an investment 

advisory contract of the Participating 

Fund under section 15 of the Act, the 

investment adviser to the Participating 

Fund will provide the Board with 

specific information regarding the 

approximate cost to the investment 

adviser of, or the portion of the 

investment advisory fee under the 

existing investment advisory agreement 

attributable to, managing the 

Uninvested Cash of the Participating 

Fund that may be invested in the 

Central Funds. Before approving any 

investment advisory contract for a 

Participating Fund, the Board of the 

Participating Fund, including a majority 

of the Independent Trustees, shall 

consider to what extent, if any, the 

investment advisory fees charged to the 

Participating Fund should be reduced to 

account for reduced services provided 

to the Participating Fund as a result of 

Uninvested Cash being invested in the 

Central Funds. The minute books of the 

Participating Fund will record fully the 

Board’s consideration in approving the 

investment advisory contract, including 

the considerations relating to the fees 

referred to above. 

4. A Participating Fund may invest 

Uninvested Cash in, and hold shares of, 

the Central Funds only to the extent that 

such Participating Fund’s aggregate 

investment of Uninvested Cash in the 

Central Funds does not exceed the 

greater of 25% of the Participating 

Fund’s total assets or $10 million. 

5. Each Participating Fund and 

Central Fund shall be advised by an 

Adviser. Each Participating Fund may 

only invest in Central Funds that are in 

the same group of investment 

companies, as defined in section 

12(d)(1)(G) of the Act, as the 

Participating Fund. A Participating 

Fund that is subadvised by an Adviser 

may rely on the order provided that the 

Adviser manages Cash Balances. 

6. Investment of Cash Balances by a 

Participating Fund in shares of the 

Central Funds will be consistent with 

each Participating Fund’s respective 

investment restrictions and policies as 

set forth in its prospectus and SAI or, in 

the case of a closed-end Fund, in its 

registration statement or shareholder 

reports. 

7. Before a Participating Fund may 

participate in a Securities Lending 

Program, a majority of the Board, 

including a majority of the Independent 

Trustees, will approve the Participating 

Fund’s participation in the Securities 

Lending Program. The Board also will 

evaluate the Securities Lending Program 

and its results no less frequently than 

annually and determine that any 

investment of Cash Collateral in the 

Central Funds is in the best interest of 

the shareholders of the Participating 

Fund. 

71872 Federal Register / Vol. 70, No. 229 / Wednesday, November 30, 2005 / Notices 

8. The Board of any Participating 

Fund will satisfy the fund governance 

standards as defined in rule 0–1(a)(7) 

under the Act by the compliance date 

for the rule. 

B. Interfund Lending Under the Credit 

Facility 

1. The interest rate to be charge to the 

Funds under the Credit Facility will be 

the average of (i) the higher of (x) the 

OTD Rate and (y) the Repo Rate and (ii) 

the Bank Loan Rate. 

2. The Interfund Lending Team on 

each business day will compare the 

Bank Loan Rate with the Repo Rate and 

the OTD Rate and will make cash 

available for Interfund Loans only if the 

Interfund Rate is (i) more favorable to 

the lending Fund than both the Repo 

Rate and the OTD Rate and (ii) more 

favorable to the borrowing Fund than 

the Bank Loan Rate. 

3. If a Fund has outstanding 

borrowings, then any Interfund Loans to 

the Fund (i) will be at an interest rate 

equal to or lower than any outstanding 

bank loan, (ii) 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, (iii) will have a 

maturity no longer than any outstanding 

bank loan (and in no event more than 

seven days) and (iv) will provide that if 

an event of default occurs under any 

agreement evidencing an outstanding 

bank loan to the Fund, that 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. 

This event of default will entitle the 

lending Fund to call the Interfund Loan 

and exercise all rights with respect to 

the collateral, if any. Such call will be 

made if a lending bank or banks exercise 

their rights to call their loan under an 

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 only on a secured basis. A Fund 

may not borrow through the Credit 

Facility or from any other source if its 

total outstanding borrowings 

immediately after the interfund 

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% of 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 shareholder redemptions), 

the Fund will within one business day 

thereafter (i) repay all of its outstanding 

Interfund Loans, (ii) reduce its 

outstanding indebtedness to 10% or less 

of its total assets or (iii) secure each 

outstanding Interfund Loan by a 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) will no 

longer be required. Until each Interfund 

Loan that is outstanding any time that 

a Fund’s total outstanding borrowings 

exceed 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 the 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 

Interfund Loan. 

6. No Fund may loan funds through 

the Credit Facility if the loan would 

cause its aggregate outstanding loans 

through the Credit Facility to exceed 

15% of its net assets at the time of the 

loan. 

7. A Fund’s Interfund Loans to any 

one Fund shall 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 (8). 

9. Unless the Fund has a policy that 

prevents it from borrowing for other 

than temporary or emergency purposes, 

its borrowing through the Credit 

Facility, as measured on the day the 

most recent Interfund Loan was made to 

it, 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 the 

lending Fund and may be repaid on any 

day by the 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 Interfund Lending Team will 

calculate total Fund borrowing and 

lending demand through the Credit 

Facility, and allocate Interfund Loans on 

an equitable basis among Funds, 

without the intervention of any portfolio 

manager of any Fund. The Interfund 

Lending Team will not solicit cash for 

the Credit Facility from any Fund or 

prospectively publish or disseminate 

loan demand data to portfolio managers. 

The Interfund Lending Team will invest 

amounts remaining after satisfaction of 

borrowing demand in accordance with 

standing instructions from portfolio 

managers or return remaining amounts 

for investment directly by the relevant 

Fund’s portfolio managers. 

13. The Interfund Lending Team will 

monitor the interest rates charged and 

the other terms and conditions of the 

Interfund Loans and will make a 

quarterly report to each Fund’s Board 

concerning the participation of the Fund 

in the Credit Facility and the terms and 

other conditions of any extensions of 

credit under the Credit Facility. 

14. Each Fund’s Board, including a 

majority of the Independent Trustees: (i) 

Will review no less frequently than 

quarterly the Fund’s participation in the 

Credit Facility during the preceding 

quarter for compliance with the 

conditions of any order permitting such 

transactions; (ii) will 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 such 

Bank Loan Rate formula; and (iii) will 

review no less frequently than annually 

the continuing appropriateness of the 

Fund’s participation in the Credit 

Facility. 

15. If an Interfund Loan is not paid 

according to its terms and such 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 

Interfund Lending Team promptly will 

refer such loan for arbitration to an 

independent arbitrator who has been 

selected by the Board of any Fund 

involved in the loan who will serve as 

Federal Register / Vol. 70, No. 229 / Wednesday, November 30, 2005 / Notices 71873 

3 If the dispute involves Funds with separate 

Boards, the Board of each Fund will select an 

independent arbitrator that is satisfactory to each 

Fund. 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(ii). 

4 17 CFR 240.19b–4(f)(2). 

5The proposed rule change applies only to NASD 

member firms. 

6The ‘‘Browse/Query’’ function is also provided 

in Nasdaq Workstation II (NWII) and application 

protocol interface (API) services. NWII and API 

services, however, will be retired as of November 

30, 2005 and December 31, 2005 respectively. 

arbitrator of disputes concerning 

Interfund Loans.3 The arbitrator will 

resolve 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 the Funds involved in any 

such dispute 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 Interfund Loan occurred, the 

first two years in an easily accessible 

place, a written record 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 OTD 

Rate, the rate of interest available at the 

time on overnight repurchase 

agreements and bank borrowings, and 

such other information presented to the 

Fund’s Board in connection with the 

review required by conditions (13) and 

(14). 

17. The Interfund Lending 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 Funds 

are treated fairly. After the Credit 

Facility commences operations, the 

Interfund Lending Team will report to 

the Board quarterly on the operations of 

the Credit Facility. 

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 

Interfund Lending 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: (i) That the 

Interfund Rate will be higher than both 

the Repo Rate and the OTD Rate but 

lower than the Bank Loan Rate; (ii) 

compliance with the collateral 

requirements described in this 

application; (iii) compliance with the 

percentage limitations on interfund 

borrowing and lending; (iv) allocation of 

interfund borrowing and lending 

demand in an equitable manner and in 

accordance with procedures established 

by the Board: and (v) 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 

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 unless it has fully 

disclosed in its prospectus or SAI or, in 

the case of a closed-end Fund in its 

registration statement or shareholder 

reports, all material facts about its 

intended participation. 

19. The Board of each borrowing and 

lending Fund will satisfy the fund 

governance standards as defined 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, under delegated 

authority. 

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–23492 Filed 11–29–05; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–52825; File No. SR–NASD–

2005–127] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Modify NASD Rule 

7010 To Change the Fee Structure for 

the ‘‘Browse/Query’’ Function in the 

Trade Reporting Service of the Nasdaq 

Market Center 

November 22, 2005. 

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 November 

1, 2005, the National Association of 

Securities Dealers, Inc. (‘‘NASD’’), 

through its subsidiary, The Nasdaq 

Stock Market, Inc. (‘‘Nasdaq’’), filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II and III below, which Items 

have been prepared by Nasdaq. Nasdaq 

has designated this proposal as one 

establishing or changing a due, fee or 

other charge imposed by Nasdaq under 

Section 19(b)(3)(A)(ii) of the Act,3 and 

Rule 19b–4(f)(2) thereunder,4 which 

renders the proposal effective upon 

filing with the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Nasdaq proposes to modify the fee 

structure for the ‘‘Browse/Query’’

function in the trade reporting service of 

the Nasdaq Market Center.5 Nasdaq will 

implement the proposed rule change on 

November 1, 2005. 

The text of the proposed rule change 

is available on the NASD’s Web site at 

http://www.nasd.com, Office of the 

Secretary, NASD, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Nasdaq included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. Nasdaq 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 

Nasdaq customers using the trade 

reporting service of the Nasdaq Market 

Center can view a summary of their 

trade reporting activity by using the 

‘‘Browse/Query’’ function of the Nasdaq 

Workstation.6 The legacy ‘‘Browse/ 

Query’’ function would only display 18 

records per request. In order to view the 

next 18 records, Nasdaq customers 

would have to use the ‘‘More’’ function.