67008 Federal Register / Vol. 60, No. 248 / Wednesday, December 27, 1995 / Notices

3 15 U.S.C 78f(b)(5). 1 17 C.F.R. 200.30–3(a)(12)

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

Currently, the PSE’s Arbitration

Department responds to numerous

requests for additional, but late,

discovery that arise from the exchange

of documents intended to be used by the

parties at the hearing. Accordingly, the

Exchange is proposing to amend PSE

Rule 12.14(c) to increase the amount of

time before a hearing where the parties

are required to exchange documents

from ten (10) days to twenty (20) days.

By increasing the time for exchanging

prehearing memoranda, the proposed

rule change is intended to reduce the

burden on the Arbitration Department

and the arbitrators in responding to last

minute discovery requests. The

Securities Industry Conference on

Arbitration approved the proposed rule

change as an amendment to the Uniform

Code of Arbitration at its meeting on

October 21, 1994.

2. Statutory Basis

The PSE believes the proposed rule

change is consistent with the provisions

of Section 6(b)(5) 3 of the Act because it

is designed to facilitate the arbitration

process by providing a more reasonable

time frame in which to address last

minute discovery requests and alleviate

the burdens on the forum staff and

arbitrators in dealing with such

requests.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes the proposed

rule change will not impose any burden

on competition that is not necessary or

appropriate in furtherance of purposes

of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

The Exchange has neither solicited

nor received written comments.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal Register or

within such other period (i) as the

Commission may designate up to 90

days of such date if it finds such longer

period to be appropriate and publishes

its reasons for so finding or (ii) as to

which the self-regulatory organization

consents, the Commission will;

(A) by order approve the proposed

rule change, or

(B) institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying at

the Commission’s Public Reference

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of the Pacific Stock Exchange. All

submissions should refer to File No.

SR–PSE–95–31 and should be submitted

by January 17, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–31305 Filed 12–26–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21610; No. 812–9740]

Pruco Life Insurance Company, et al.

December 19, 1995.

AGENCY: Securities and Exchange

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

ACTION: Notice of application for an

order under the Investment Company

Act of 1940 (‘‘1940 Act’’).

APPLICANTS: Pruco Life Insurance

Company (‘‘Pruco Life’’), Pruco Life

Insurance Company Insurance Company

of New Jersey (‘‘Pruco Life of New

Jersey’’), The Prudential Insurance

Company of America (‘‘Prudential’’),

Pruco Life Flexible Premium Annuity

Account (‘‘Separate Account’’), and

Pruco Securities Corporation

(‘‘Securities’’).

RELEVANT 1940 ACT SECTIONS: Order

requested under Section 6(c) of the 1940

Act granting exemptions from the

provisions of Sections 22(d), 26(a)(2)(C),

and 27(c)(2) of the 1940 Act.

SUMMARY OF APPLICATION: Applicants

seek an order to permit: (1) The

deduction of a mortality and expense

risk charge from the assets of the

Separate Account or any other separate

account (‘‘Other Accounts’’) established

by Pruco Life, Pruco Life of New Jersey,

or Prudential to support individual

flexible premium annuity contracts

(‘‘Contracts’’) as well as other variable

annuity contracts that are substantially

similar in all material respects to the

Contracts (‘‘Future Contracts’’) (2) a

waiver of the withdrawal charge for

Contracts or Future Contracts issued in

connection with the waiver of

withdrawal charges endorsement

(‘‘Critical Care Access’’) and (3) a

reduction of the withdrawal charge to

Contract and Future Contract owners

age 84 or older to insure compliance

with state non-forfeiture laws.

FILING DATE: The application was filed

on August 25, 1995, and an amended

and restated application was filed on

December 4, 1995. In addition,

Applicants have represented that they

will file an amendment during the

notice period to make the

representations contained herein.

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 SEC’s

Secretary and serving Applicants with a

copy of the request, personally or by

mail. Hearing requests should be

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

January 15, 1996, and should be

accompanied by proof of service on

Applicants in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the requestor’s interest, the reason for

the request, and the issues contested.

Persons may request notification of a

hearing by writing to the Secretary of

the SEC.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 5th Street,

N.W., Washington, D.C. 20549.

Applicants, Clifford E. Kirsch, Esq., The

Prudential Insurance Company of

America, Prudential Plaza, Newark,

New Jerey 07102.

FOR FURTHER INFORMATION CONTACT:

Pamela K. Ellis, Senior Counsel, or

Wendy Finck Friedlander, Deputy

Chief, both at (202) 942–0670, Office of

Insurance Products (Division of

Investment Management).
Federal Register / Vol. 60, No. 248 / Wednesday, December 27, 1995 / Notices 67009

SUPPLEMENTARY INFORMATION: Following

is a summary of the application; the

complete application is available for a

fee from the SEC’s Public Reference

Branch.

Applicant’s Representations

1. Pruco Life, a stock life insurance

company, is organized in Arizona, and

licensed to do business in the District of

Columbia and all states of the United

States except New York. Pruco Life is a

wholly-owned subsidiary of Prudential.

2. Pruco Life of New Jersey, a stock

life insurance company, is organized in

New Jersey. Pruco Life of New Jersey is

a wholly-owned subsidiary of Pruco

Life.

3. Prudential, a mutual life insurance

company, is organized in New Jersey.

4. Securities will serve as the

principal underwriter of the Contracts.

Securities, an indirect wholly-owned

subsidiary of prudential, is registered

under the Securities Act of 1934 (‘‘1934

Act’’) as a broker-dealer, and is a

member of the National Association of

Securities Dealers. The Contracts will be

sold by registered representatives of

Securities. Securities also may enter

into agreements with other brokers

registered under the 1934 Act who

qualify to sell the Contracts.

5. The Separate Account is a separate

account established by Pruco Life to

fund the Contracts. The Separate

Account is registered with the

Commission as a unit investment trust

under the 1940 Act, and interests in the

Contracts are registered as securities

under the Securities Act of 1933.

6. Pruco Life has established for each

investment option offered under the

Contracts a Separate Account

subaccount (‘‘Subaccount’’), which will

invest solely in a specific corresponding

portfolio of certain designated

investment companies (‘‘Funds’’). The

Funds will be registered under the 1940

Act as opened management investment

companies. Each portfolio of the Funds

will have separate investment objectives

and policies.

7. The Contracts also provide for a

fixed-rate option which guarantees a

stipulated rate of interest for a one-year

period, and a market-value adjustment

option which guarantees a stipulated

rate of interest if held for a seven year

period.

8. The Contracts are individual

flexible premium annuity contracts. The

Contracts may be purchased with an

initial purchase payment of $10,000 or

more. The minimum subsequent

purchase payment for the Contracts is

$1000. Net purchase payments may be

allocated to one or more of the Separate

Account Subaccounts, the fixed-rate

option, or to the market-value

adjustment option.

9. The Contracts provide for a series

of annuity payments beginning on the

annuity date. The Contract owner may

select from several annuity payout

options.

10. The Contracts provide for a death

benefit if the annuity or the survivor of

two co-annuitants dies during the

accumulation period. The death benefit

is the greater of: (1) The accumulated

value under the Contract fund as

determined on the date of receipt due

proof of death by Pruco Life; (2) 100%

of all premium payments made by the

Contract owner under the Contract

reduced by the amount of any partial

withdrawals (including withdrawal

charges) ; or (3) the greatest of the

Contract fund values calculated on

every third Contract anniversary,

reduced by all subsequent withdrawals

and withdrawal charges.

11. Certain charges and fees are

assessed under the Contracts. Pruco Life

will deduct an administration charge

from a Contract owner’s account value

to reimburse it for expenses relating to

the administration and maintenance of

the Contract. The administrative

expense charge is deducted daily from

the assets in each of the Subaccounts,

and is equivalent to an effective annual

rate .15%. Although there is no current

intention to do so, Pruco Life reserves

the right to impose an additional charge

of up to $25 annually and upon

surrender on Contracts with less than

$50,000.

12. Applicants represent that the

administration charges will not increase

during the life of the Contracts. In

addition, Applicants represent that

these charges are made with no

anticipation of profit, and that the

administrative charges comply with

Rule 26a–1.

13. A withdrawal charge may be made

upon full or partial withdrawals under

the Contract. The withdrawal charge

will be imposed for expenses related to

the sales and distribution of the

Contracts. The amount of the

withdrawal charge decreases annually

from 7% to 0% over 8 Contract years.

For the purposes of determining the

withdrawal charge, withdrawals will be

allocated to purchase payments on a

first-in, first-out basis so that all

withdrawals are allocated to purchase

payments to which the lowest (if any)

withdrawal charge applies. In addition,

a portion of the purchase payments may

be withdrawn without the imposition of

any charge (‘‘Charge Free Amount’’).

This Charge Free Amount is equal to

10% of all purchase payments less all

withdrawals of the purchase payments

previously made plus the Charge Free

Amount available in the immediately

preceding Contract year not withdrawn

in that year.

14. No withdrawal charge is assessed

if withdrawals are used to effect an

annuity based on the life of an

annuitant. Contracts issued to

annuitants age 84 and older are subject

to a reduced withdrawal charge.

15. In those states which have

approved a Critical Care Access

endorsement, all or part of any

withdrawal and annual administrative

charges associated with a full or partial

withdrawal, or any annuitization or

withdrawal charge due on the annuity

date, will be waived following the

receipt of due proof that the annuitant

or co-annuitant (if applicable) has been

confined to an eligible nursing home or

hospital for a period of at least 3

months, or a physician has certified that

the annuitant or co-annuitant has 6

months or less to live.

16. Pruco Life proposes to deduct a

daily mortality and expense risk charge.

Pruco Life represents that this charge is

equal to an effective annual rate of

1.25% of the net asset value of the

Separate Account, and that it will not

increase. Of this amount, approximately

.80% is for mortality risks and .45% is

for expense risks.

17. Pruco Life assumes the mortality

risk that the life expectancy of the

annuitant will be greater than that

assumed in the guaranteed annuity

purchase rates, thus requiring Pruco Life

to pay out more in annuity income than

it had planned. In addition, Pruco Life

is contractually obligated to provide a

death benefit prior to the annuity date.

Thus, Pruco Life assumes the risk that

the owner may die at a time when the

amount of the death benefit payable

exceeds the then net surrender value of

the Contracts. The expense risk assumed

by Proco Life is that the Contract

administration charge will be

insufficient to cover the cost of

administering the Contracts.

18. In the event the mortality and

expense risk charges are more than

sufficient to cover Pruco Life’s costs and

expenses, any excess will be a profit to

Pruco Life.

19. A charge may be deducted for

premium taxes and any taxes

attributable to purchase payments. This

may include any state or local premium

taxes, any federal premium taxes, and

any federal, state, or local income,

excise, business or any other type of tax

(or component thereof) measured by, or

based upon, the amount of purchase

payment received by Pruco Life.

Applicants represent that premium

taxes currently range from 1% to 5%.
67010 Federal Register / Vol. 60, No. 248 / Wednesday, December 27, 1995 / Notices

Furthermore, Pruco Life reserves the

right to impose a charge of up to a

maximum of .3% for federal income

taxes measured by premiums upon each

purchase payment received under the

Contact, in those states where approval

has been obtained. At present, no such

charge is being made in any state.

20. No transfer fee will be charged for

the first 12 transactions (excluding

dollar cost averaging transfers) effecting

transfers in any contract year.

Subsequent transfers within a Contract,

year, however, will be assessed a fee of

$25 per transfer.

21. A market-value adjustment

(‘‘MVA’’) will be made if a Contract

owner withdraws or transfers money

before its maturity date from a division

of a fixed-rate investment option that is

being credited with an unique

guaranteed interest rate (‘‘interest cell’’).

The MVA may increase or decrease

either the amount transferred or the

amount remaining in an interest cell

after a partial withdrawal.

Applicants’ Legal Analysis

1. Section 6(c) of the 1940 Act

authorizes the Commission, by order

upon application, to conditionally or

unconditionally grant an exemption

from any provision, rule, or regulation

of the 1940 Act to the extent that 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 1940 Act.

2. Sections 26(a)(2)(C) and 27(c)(2) of

the 1940, in relevant part, prohibit a

registered unit investment trust, its

depositor or principal underwriter, from

selling periodic payment plan

certificates unless the proceeds of all

payments, other than sales loads, are

deposited with a qualified bank, and

held under arrangements which prohibit

any payment to the depositor or

principal underwriter except a

reasonable fee, as the Commission may

prescribe, for performing bookkeeping

and other administrative duties

normally performed by the bank itself.

3. Applicants request exemptions

from Sections 26(a)(2)(C) and 27(c)(2) of

the 1940 Act to the extent necessary to

permit the deduction from the net assets

of the Separate Account and the Other

Accounts in connection with the

Contracts and Future Contracts of the

1.25% charge for the assumption of

mortality and expense risks.

4. Applicants represent that the

1.25% per annum mortality and

expense risk charge is within the range

of industry practice for comparable

annuity contracts. This representation is

based upon an analysis of publicly

available information about similar

industry products, taking into

consideration such factors as the current

charge levels, the existence of expense

charge guarantees, and guaranteed

annuity rates. Pruco Life will maintain

at its principal offices, available to the

Commission, a memorandum setting

forth in detail the products analyzed in

the course of, and the methodology and

results of, Applicants’ comparative

review. In addition, Applicants will

keep, and make available to the

Commission, a memorandum setting

forth the basis for the same

representations, and that the mortality

and expense risk charges are reasonable,

with respect to the Future Contracts

offered by the Separate Account of

Other Accounts.

5. Pruco Life has concluded that there

is a reasonable likelihood that the

Separate Account’s and Other Accounts’

proposed distribution financing

arrangements will benefit the Separate

Accounts and their investors. Pruco Life

represents that it will maintain and

make available to the Commission upon

request a memorandum setting forth the

basis of such conclusion. In addition,

Applicants will keep, and make

available to the Commission, a

memorandum setting forth the basis for

the same representations with respect to

the Future Contracts offered by the

Separate Account or Other Accounts.

6. The Separate Account and Other

Accounts will be invested only in

management investment companies that

undertake, in the event the company

should adopt a plan for financing

distribution expenses pursuant to Rule

12b–1 under the 1940 Act, to have such

plan formulated and approved by the

company’s board members, the majority

of whom are not ‘‘interested persons’’ of

the management investment company

within the meaning of Section 2(a)(19)

of the 1940 Act.

7. Section 22(d) of the 1940 Act

prohibits a registered investment

company, its principal underwriter, or a

dealer in its securities from selling any

redeemable security issued by such

registered investment company to any

person except at a current offering price

described in the prospectus.

8. Applicants request that the

Commission issue an order under

Section 6(c) of the 1940 Act exempting

them from the provisions of Section

22(d) to the extent necessary to permit

Applicants to reduce the withdrawal

charge for annuitants 84 or older, and to

waive the withdrawal charge for Critical

Care Access.

9. Applicants submit that the

proposed reduction and waiver are

consistent with the policies of Section

22(d) and the rules promulgated

thereunder. One of the purposes of

Section 22(d) is to prevent an

investment company from

discriminating among investors by

charging different prices to different

investors. Eligibility for the reduction of

fees will be based on advanced age to

comply with state non-forfeiture laws,

and eligibility for the Critical Care

Access fee waiver will be based on the

Contract or Future Contract owner

experiencing the defined medically

related contingencies. Therefore, these

benefits will not unfairly discriminate

among Contract and Future Contract

owners. Applicants submit that the

reduction in fees and fee waiver is

advantageous to Contract and Future

Contract owners by permitting them,

upon experiencing such contingencies,

to make withdrawals from the Contract

or Future Contract with the imposition

of either a reduced fee or no fee,

respectively. Applicants represent that

the reduction in charges and waiver will

not result in dilution of the interests of

any other Contract and Future Contract

owners. Applicants also submit that

reducing and waiving the withdrawal

fee under such circumstances will not

result in the occurrence of any of the

abuses that Section 22(d) is designed to

prevent.

10. Applicants represent that the

reduction and waiver of the withdrawal

charge will be uniformly available to all

eligible Contract and Future Contract

owners, except where prohibited by

state law, and that these provisions will

be adequately described in the

prospectus of the Contracts and Future

Contracts.

11. Applicants assert that the terms of

the relief requested with respect to any

Future Contracts funded by the Separate

Account or Other Accounts are

consistent with the standards

enumerated in Section 6(c) of the 1940

Act. Without the requested relief,

Applicants would have to request and

obtain exemptive relief for each new

Other Account it establishes to fund any

Future Contract. Applicants submit that

any such additional request for

exemption would present no issues

under the 1940 Act that have not

already been addressed in this

application, and that investors would

not receive any benefit or additional

protections thereby.

Applicants submit that the requested

relief is appropriate in the public

interest because it would promote

competitiveness in the variable annuity

contract market by eliminating the need

for Applicants to file redundant

exemptive applications, thereby

reducing their administrative expenses
Federal Register / Vol. 60, No. 248 / Wednesday, December 27, 1995 / Notices 67011

and maximizing the efficient use of their

resources. The delay and expense

involved in having repeatedly to seek

exemptive relief would reduce

Applicants’ ability effectively to take

advantage of business opportunities as

they arise.

Applicants further submit that the

requested relief is consistent with the

purposes of the 1940 Act and the

protection of investors for the same

reasons. Applicants thus assert that the

requested exemptions are appropriate in

the public interest and consistent with

the protection of investors and the

purposes fairly intended by the policy

and provisions of the 1940 Act.

Conclusion

For the reasons set forth above,

Applicants represent that the

exemptions requested are necessary and

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. NcFarland,

Deputy Secretary.

[FR Doc. 95–31264 Filed 12–26–95; 8:45 am]

BILLING CODE 8010–01–M

[Investment Company Act Release No.

21609; 812–9686]

Stein Roe Income Trust, et al.; Notice

of Application

December 19, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: Stein Roe Income Trust,

Stein Roe Investment Trust, Stein Roe

Municipal Trust, and SR&F Base Trust

(collectively, the ‘‘Trusts’’), and Stein

Roe & Farnhman Incorporated (the

‘‘Adviser’’).

RELEVANT ACT SECTIONS: Order under

section 6(c) of the Act for an exemption

from sections 12(d)(1), 18(f), and 21(b)

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

for an exemption from sections 17(a)(1)

and 17(a)(3) of the Act, and under

section 17(d) of the Act and rule 17d–

1 thereunder to permit certain joint

arrangements.

SUMMARY OF APPLICATION: Applicants

request an order that would permit the

Trusts to borrow money from each other

through a credit facility.

FILING DATES: The application was filed

on July 25, 1995 and amended on

November 8, 1995.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

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

January 16, 1996, and should be

accompanied by proof of service on the

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 may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Applicants: One South Wacker Drive,

Chicago, IL 60606.

FOR FURTHER INFORMATION CONTACT:

Marianne H. Khawly, Staff Attorney, at

(202) 942–0562, or Robert A. Robertson,

Branch Chief, at (202) 942–0564

(Division of Investment Management,

Office of Investment Company

Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee from the SEC’s

Public Reference Branch.

Applicants’ Representations

1. Stein Roe Income Trust, Stein Roe

Investment Trust, and Stein Roe

Municipal Trust are organized as

Massachusetts business trusts. SR&F

Base Trust is organized as a

Massachusetts common law trust. Each

Trust has multiple series. Each Trust

has entered into an investment advisory

agreement with the Adviser with respect

to each existing series. The Adviser is a

wholly-owned indirect subsidiary of

Liberty Financial Companies, Inc.,

which is a majority owned indirect

subsidiary of Liberty Mutual Insurance

Company. Applicants request that any

relief also apply to any registered openend investment companies established

or acquired in the future, for which the

Adviser or a company controlling,

controlled by, or under common control

with the Adviser, acts as investment

adviser, (the ‘‘Future Funds,’’ and

together with the existing series, the

‘‘Funds’’).

2. The Trusts have entered into a loan

agreement with their custodian, State

Street Bank and Trust Company (‘‘State

Street’’) under which State Street may,

but is not obligated to, lend money to

the Trusts for temporary or emergency

purposes. The maximum aggregate

credit available under the agreement is

$75 million. The Trusts seek to reduce

the middleman function of banks by

entering into a master loan agreement

with each other (the ‘‘Credit Facility’’)

that would permit the Funds to lend

money directly to, and to borrow from,

each other to meet the temporary

borrowing needs of the borrowing

Funds (the ‘‘Interfund Loans’’). The

form of master loan agreement attached

to the application is referred to as the

‘‘Interfund Loan Agreement.’’

3. The Credit Facility is intended to

reduce substantially the Funds’

borrowing costs and to enhance the

ability of the Funds to earn higher rates

of interest on their short-term lendings.

Although the Credit Facility would

substantially reduce the Funds’ reliance

on bank credit arrangements, the Trusts

would continue to maintain existing

loan agreements and to borrow money

from banks. The terms and conditions of

the loan agreement with State Street

would serve as a guideline for making

Interfund Loans.

4. The Credit Facility is likely to

provide the Funds with significant

savings at times when the cash position

of a Fund is insufficient to meet

temporary cash requirements. This

situation generally arises when

shareholder redemptions exceed

anticipated volumes and the 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 seven

days. However, shareholder redemption

requests are normally effected

immediately. Therefore, the Funds need

a source of immediate, short-term

liquidity pending settlement of the sale

of portfolio securities.

5. While bank borrowings will

continue to be available to supply such

liquidity, the rates charged under the

Credit Facility would be below those

offered by State Street on short-terms

loans. Likewise, Funds making cash

loans to other Funds would earn interest

at a rate higher than they otherwise

could obtain from investing their cash

in short-term repurchase agreements.

Thus, the Credit Facility would benefit

both those Funds that are borrowers and

those Funds that are lenders.

6. The interest rate to be charged on

Interfund Loans (the ‘‘Interfund Rate’’)

would be determined daily and would

be the mean of (a) the ‘‘Repro Rate,’’ as

defined below, and (b) the ‘‘Bank Loan

Rate,’’ as defined below. The Repro Rate

on any day would be the highest interest