57688 Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices 

contacting the NRC’s Public Document 

Room at 1–800–397–4209. 

The draft GEIS and related documents 

may also be found at the following 

public libraries: 

Albuquerque Main Library, 501 Copper 

NW., Albuquerque, New Mexico 

87102, 505–768–5141; 

Mother Whiteside Memorial Library, 

525 West High Street, Grants, New 

Mexico 87020, 505–287–4793; 

Octavia Fellin Public Library, 115 W 

Hill Avenue, Gallup, New Mexico 

87301, 505–863–1291; 

Natrona County Public Library, 307 East 

Second Street, Casper, Wyoming 

82601, 307–332–5194; 

Carbon County Public Library, 215 W 

Buffalo Street, Rawlins, Wyoming 

82301, 307–328–2618; 

Campbell County Public Library, 2101 

South 4J Road, Gillette, Wyoming 

82718, 307–687–0009; 

Weston County Library, 23 West Main 

Street, Newcastle, Wyoming 82701, 

307–746–2206; 

Chadron Public Library, 507 Bordeaux 

Street, Chadron, Nebraska 69337, 

308–432–0531; 

Rapid City Public Library, 610 Quincy 

Street, Rapid City, South Dakota 

57701, 605–394–4171. 

Dated at Rockville, Maryland, this 29th day 

of September, 2008. 

For the U.S. Nuclear Regulatory 

Commission. 

Patrice M. Bubar, 

Deputy Director, Environmental Protection 

and Performance Assessment Directorate, 

Division of Waste Management and 

Environmental Protection, Office of Federal 

and State Materials and Environmental 

Management Programs. 

[FR Doc. E8–23341 Filed 10–2–08; 8:45 am] 

BILLING CODE 7590–01–P 

NUCLEAR REGULATORY 

COMMISSION 

Advisory Committee on Reactor 

Safeguards (ACRS) Subcommittee 

Meeting on Materials, Metallurgy & 

Reactor Fuels; Notice of Meeting 

The ACRS Subcommittee on 

Materials, Metallurgy & Reactor Fuels 

will hold a meeting on Friday, October 

24, 2008, at 11545 Rockville Pike, 

Rockville, Maryland, Room T–2B3. 

The meeting will be open to public 

attendance. 

The agenda for the subject meeting 

shall be as follows: 

Friday, October 24, 2008,—8:30 a.m.– 

12:30 p.m. 

The Subcommittee will receive an 

update on the technical basis supporting 

changes to the fuel design criteria 

within 10 CFR 50.46 (b). The 

Subcommittee will hear presentations 

by and hold discussions with 

representatives of the NRC. The 

Subcommittee will gather information, 

analyze relevant issues and facts, and 

formulate proposed positions and 

actions, as appropriate, for deliberation 

by the full Committee. 

Members of the public desiring to 

provide oral statements and/or written 

comments should notify the Designated 

Federal Officer, Mr. Christopher L. 

Brown (Telephone: 301–415–7111) 5 

days prior to the meeting, if possible, so 

that appropriate arrangements can be 

made. Electronic recordings will be 

permitted only during those portions of 

the meeting that are open to the public. 

Detailed procedures for the conduct of 

and participation in ACRS meetings 

were published in the Federal Register 

on September 26, 2007, (72 FR 54695). 

Further information regarding this 

meeting can be obtained by contacting 

the Designated Federal Official between 

8:45 a.m. and 5:30 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 24, 2008. 

Cayetano Santos, 

Chief, Reactor Safety Branch A, ACRS. 

[FR Doc. E8–23347 Filed 10–2–08; 8:45 am] 

BILLING CODE 7590–01–P 

NUCLEAR REGULATORY 

COMMISSION 

Advisory Committee on Reactor 

Safeguards (ACRS); Meeting of the 

ACRS Subcommittee on Economic 

Simplified Boiling Water Reactor 

(ESBWR); Notice of Meeting 

The ACRS Subcommittee on the 

ESBWR will hold a meeting on October 

21–22, 2008, Room T–2B3, 11545 

Rockville Pike, Rockville, Maryland. 

The meeting will be open to public 

attendance, with the exception of a 

portion that may be closed to protect 

information that is proprietary to 

General Electric-Hitachi (GEH) Nuclear 

Energy and its contractors pursuant to 5 

U.S.C. 552b(c)(4). 

The agenda for the subject meeting 

shall be as follows: 

Tuesday, October 21, 2008,—8:30 a.m.– 

5 p.m. 

Wednesday, October 22, 2008,—8:30 

a.m.–5 p.m. 

The Subcommittee will review 

Chapters 7 and 14 of the Safety 

Evaluation Report with Open Items 

associated with the ESBWR Design 

Certification Application. The 

Subcommittee will hear presentations 

by and hold discussions with 

representatives of the NRC staff, GEH, 

and other interested persons regarding 

this matter. The Subcommittee will 

gather information, analyze relevant 

issues and facts, and formulate 

proposed positions and actions, as 

appropriate, for deliberation by the full 

Committee. 

Members of the public desiring to 

provide oral statements and/or written 

comments should notify the Designated 

Federal Official, Dr. Harold J. 

Vandermolen, (Telephone: 301–415– 

6236) five days prior to the meeting, if 

possible, so that appropriate 

arrangements can be made. Electronic 

recordings will be permitted. Detailed 

procedures for the conduct of and 

participation in ACRS meetings were 

published in the Federal Register on 

September 26, 2007, (72 FR 54695). 

Further information regarding this 

meeting can be obtained by contacting 

the Designated Federal Official between 

8:30 a.m. and 5 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 23, 2008. 

Cayetano Santos, 

Branch Chief. 

[FR Doc. E8–23391 Filed 10–2–08; 8:45 am] 

BILLING CODE 7590–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

28409; 812–13480] 

Dodge & Cox Funds and Dodge & Cox 

Incorporated; Notice of Application 

September 29, 2008. 

AGENCY: Securities and Exchange Com 

mission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under (a) section 6(c) of the 

Investment Company Act of 1940 

(‘‘Act’’) granting an exemption from 

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

section 12(d)(1)(J) of the Act granting an 

exemption from section 12(d)(1) of the 

Act; (c) 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 (d) 

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

1 under the Act to permit certain joint 

arrangements. 

mstockstill on PROD1PC66 with NOTICES

Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices 57689 

1Applicants request that the relief apply to (a) 

any Fund of the Trust, (b) any successor entity to 

Dodge & Cox, (c) any other registered open-end 

management investment company or its series 

advised by Dodge & Cox or a person controlling, 

controlled by, or under common control (within the 

meaning of section 2(a)(9) of the Act) with Dodge 

& Cox (each, also a ‘‘Fund’’). The term ‘‘successor’’ 

is limited to 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 relief 

are named as applicants. Any other existing or 

future Funds that subsequently rely on the order 

will comply with the terms and conditions in the 

application. 

SUMMARY OF THE 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: Dodge & Cox Funds (the 

‘‘Trust’’) and Dodge & Cox Inc orporated 

(‘‘Dodge & Cox’’). 

FILING DATES: The application was filed 

on January 18, 2008 and amended on 

April 16, 2008. Applicants have agreed 

to file an amendment during the notice 

period, the substance of which is 

reflected in the notice. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the application will be 

issued unless the Commission orders a 

hearing. Interested persons may request 

a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on October 24, 2008, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F 

Street, NE., Washington, DC 20549– 

1090. Applicants, 555 California Street, 

40th Floor, San Francisco, California 

94104. 

FOR FURTHER INFORMATION CONTACT: 

Laura J. Riegel, Senior Counsel, at (202) 

551–6873 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 Room, 

100 F Street, NE., Washington, DC 

20549–1520 (tel. (202) 551–5850). 

Applicants’ Representations 

1. The Trust is organized as a 

Delaware statutory trust and is 

registered under the Act as an open-end 

management investment company. The 

Trust consists of five series and may 

offer addit ional series in the future 

(‘‘Funds’’). Dodge & Cox, a California 

corporation, is registered as an 

investment adviser under the 

Investment Advisers Act of 1940, and 

serves as the investment adviser to each 

Fund.1

2. Some Funds may lend money to 

banks or other entities by entering into 

repurchase agreements or purchasing 

other short-term investments. Other 

Funds may borrow money from the 

same or similar banks for temporary 

purposes to satisfy redemption requests 

or 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, the Trust has an 

overdraft facility with its custodian 

bank and a committed line of credit 

with a bank. 

3. If a Fund were to borrow money 

under the committed line of credit or 

incur an overdraft with the custodian 

bank, the Fund would pay interest on 

the borrowed cash at a rate which 

would be higher than the rate that 

would earned by other (non-borrowing) 

Funds on investments in repurchase 

agreements and other short-term 

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 

lender and is not attributable to any 

material difference in the credit quality 

or risk of 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 agre ements 

(‘‘Interfund Lending Agreements’’) 

under which the Funds would lend and 

borrow money for temporary purposes 

directly to and from each other through 

a credit facility (‘‘Interfund Loan’’). 

Applicants believe that the proposed 

credit facility would reduce the Funds’ 

borrowing costs and enhance their 

ability to earn higher interest rates on 

short-term investments. Although the 

proposed credit facility would reduce 

the Funds’ need to borrow from banks, 

the Funds would be free to establish 

committed lines of credit or other 

borrowing arrangements with 

unaffiliated banks. 

5. Applicants anticipate that the 

credit facility would 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 redemptions exceed anticipated 

volumes and certain Funds have 

insufficient cash on hand to satisfy such 

redemptions. When a Fund liquidates 

portfolio securities to meet redemption 

requests which normally are effected 

immediately, it often does 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 securities 

‘‘fails’’ due to circumstances such as a 

delay in the delivery of cash to a Fund’s 

custodian or improper delivery 

instructions by the broker effecting the 

transaction. Sales fails may present a 

cash shortfall if a Fund has undertaken 

to purchase securities using the 

proceeds from the securities sold. 

Alternatively, the Fund could fail on its 

intended purchase due to lack of funds 

from the previous sale, resulting in 

additional cost 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 

enable the Fund to have access to 

immediate short-term liquidity. 

7. While bank borrowings generally 

could supply needed cash to cover 

unanticipated redemptions and sales 

fails, under the proposed 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. 

Thus, applicants believe that the 

proposed credit facility would benefit 

both borrowing and lending Funds. 

8. The interest rate charged to a Fund 

on any Interfund Loan (‘‘Interfund Loan 

Rate’’) 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 a lending Fund from 

investing in overnight repurchase 

agreements. The Bank Loan Rate on any 

day would be calculated by the 

‘‘Interfund Lending Committee’’ (as 

mstockstill on PROD1PC66 with NOTICES

57690 Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices 

2Each Fund’s investments are managed solely by 

the members of an Investment Policy Committee, 

which consists of a team of portfolio managers. 

defined below) each day an Interfund 

Loan is made according to a formula 

established by a Fund’s board of 

directors or trustees (‘‘Fund Board’’) 

intended to approximate the lowest 

interest rate at which bank short-term 

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. Each Fund 

Board would periodically 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 Funds. The 

initial formula and any subsequent 

modifications to the formula would be 

subject to the approval of each Fund 

Board. 

9. The credit facility would be 

administered by investment 

professionals and administrative 

personnel from Dodge & Cox (the 

‘‘Interfund Lending Committee’’). No 

member of Dodge & Cox’s investment 

policy committee (‘‘Investment Policy 

Committee’’) for any Fund will serve as 

a member of the Interfund Lending 

Committee.2 Under the proposed credit 

facility, the Investment Policy 

Committee for each participating Fund 

could provide standing instructions to 

participate daily as a borrower or 

lender. The Interfund Lending 

Committee on each business day would 

collect data on the uninvested cash and 

borrowing requirements of all 

participating Funds from the Funds’ 

custodian. Once it determined the 

aggregate amount of cash available for 

loans and borrowing demand, the 

Interfund Lending Committee would 

allocate loans among borrowing Funds 

without any further communication 

from a Fund’s Investment Policy 

Committee. Applicants expect far more 

available uninvested cash each day than 

borrowing demand. After the Interfund 

Lending Committee has allocated cash 

for Interfund Loans, the Interfund 

Lending Committee would invest any 

remaining cash in accordance with the 

standing instructions of the Investment 

Policy Committee or return remaining 

amounts for investment directly by a 

Fund’s Investment Policy Committee. 

10. The Interfund Lending Committee 

would allocate borrowing demand and 

cash available for lending among the 

Funds on what the Interfund Lending 

Committee believes to be an equitable 

basis, subject to certain administrative 

considerations 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 Interfund 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 each Fund Board, 

including a majority of directors or 

trustees who are not ‘‘interested 

persons’’ of the Fund, as defined in 

section 2(a)(19) of the Act 

(‘‘Independent Fund Board Members’’), 

to ensure that both borrowing and 

lending Funds participate on an 

equitable basis. 

11. The Interfund Lending Committee 

would (a) monitor the Interfund Loan 

Rate 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 

each Fund Board concerning any 

transactions by the Funds under the 

credit facility and the Interfund Loan 

Rate charged. 

12. Dodge & Cox, through the 

Interfund Lending Committee, would 

administer the credit facility under the 

investment management contract with 

each Fund and would receive no 

additional compensation for its services. 

Dodge & Cox may in the future collect 

standard pricing, recordkeeping, 

bookkeeping, and accounting fees in 

connection with repurchase and lending 

transactions generally, including 

transactions through the credit facility. 

These fees would be no higher than 

those applicable for comparable bank 

loan transactions. 

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; (b) the Fund has fully 

disclosed all material information 

concerning the credit facility in its 

prospectus and/or statement of 

additional infor mation (‘‘SAI’’); and (c) 

the Fund’s participation in the credit 

facility is consistent with its investment 

objectives, limitations and 

organizational documents. In 

connection with the 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 section 12(d)(1) 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) under section 

17(d) of the Act and rule 17d–1 under 

the Act to permit certain joint 

arrangements. 

Applicants’ Legal Analysis 

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

prohibits any affiliated person, or 

affiliated person of an affiliated person, 

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. Section 2(a)(3)(C) of the Act 

defines an ‘‘affiliated person’’ of another 

person, in part, to be any person directly 

or indirectly controlling, controlled by, 

or under common control with, the 

other person. Applicants state that the 

Funds may be under common control by 

virtue of having Dodge & Cox as their 

common investment adviser and/or by 

having a common Fund Board and 

officers. 

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) of the Act 

authorizes the Commission to exempt a 

proposed transaction from section 17(a) 

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) of the Act were 

intended to prevent a party with strong 

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 inure to the 

benefit of such party 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) 

Dodge & Cox, through the Interfund 

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Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices 57691 

Lending Committee, would administer 

the program as a disinterested fiduciary; 

(b) all Interfund Loans would consist 

only of uninvested cash reserves that 

the lending Fund otherwise would 

invest in short-term repurchase 

agreements or other short-term 

instruments; (c) the Interfund Loans 

would not involve a greater risk than 

such other investments; (d) the lending 

Fund would receive interest at a rate 

higher than it could otherwise obtain 

through such other investments; and (e) 

the 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 terms and 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 

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 for the purposes of sections 

17(a)(1) and 12(d)(1). Section 12(d)(1)(J) 

of the Act provides that the Commission 

may exempt persons or transactions 

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 imposing on investors 

additional and 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 will be no 

duplicative costs or fees to the Funds or 

shareholders, and that Dodge & Cox will 

receive no additional compensation for 

its services in administering the credit 

facility through the Interfund Lending 

Committee. Applicants also note that 

the purpose of the proposed credit 

facility is to provide economic benefits 

for all of 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 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 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 

relief under section 6(c) is appropriate 

because the Funds would remain 

subject to the requirement of section 

18(f)(1) that all borrowings of a 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 under the Act 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 transactions in which the company 

participates unless the transaction is 

approved by the Commission. Rule 17d– 

1(b) provides that in passing upon 

applications filed under the rule, 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 fundamental 

investment limitations. Applicants 

therefore believe that each Fund’s 

participation in the credit facility will 

be on terms that are no different from 

or less advantageous than that of other 

participating Funds. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 

1. The Interfund Loan Rate will be the 

average of the Repo Rate and the Bank 

Loan Rate. 

2. On each business day, the Interfund 

Lending Committee 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 (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 (and in any event not over 

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

if an event of default by the Fund 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 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 proposed 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 proposed 

credit facility only on a secured basis. 

A Fund may not borrow through the 

proposed credit facility or from any 

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57692 Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices 

3 If the dispute involves Funds with different 

Fund Boards, the respective Fund Boards will select 

an independent arbitrator that is satisfactory to each 

Fund. 

other source if its total outstanding 

borrowings immediately after such 

borrowing would be more than 33 1/3% 

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 because of shareholder 

redemptions), the Fund will within one 

business day thereafter: (a) Repay all its 

outstanding Interfund Loans; (b) 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 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 lend to another Fund 

through the proposed credit facility if 

the loan would cause its aggregate 

outstanding loans through the proposed 

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 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. 

9. The Fund’s borrowings through the 

proposed 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 

proposed credit facility must be 

consistent with its investment 

objectives, and limitations and 

organizational documents. 

12. The Interfund Lending Committee 

will calculate total Fund borrowing and 

lending demand through the proposed 

credit facility, and allocate loans on an 

equitable basis among the Funds, 

without the intervention of any member 

of a Fund’s Investment Policy 

Committee. The Interfund Lending 

Committee will not solicit cash for the 

proposed credit facility from any Fund 

or prospectively publish or disseminate 

loan demand data to any member of the 

Investment Policy Committee. The 

Interfund Lending Committee Team will 

invest any amounts remaining after 

satisfaction of borrowing demand in 

accordance with the standing 

instructions of the Investment Policy 

Committee or return remaining amounts 

for investment directly by a Fund’s 

Investment Policy Committee. 

13. The Interfund Lending Committee 

will monitor the Interfund Loan Rates 

charged and the other terms and 

conditions of the Interfund Loans and 

will make a quarterly report to each 

Fund Board concerning the 

participation of the Funds in the 

proposed credit facility and the terms 

and other conditions of any extensions 

of credit under the credit facility. 

14. Each Fund Board, including a 

majority of the Independent Fund Board 

Members, will: 

(a) Review, no less frequently than 

quarterly, each Fund’s participation in 

the proposed credit facility during the 

preceding quarter for compliance with 

the conditions of any order permitting 

such 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 proposed credit 

facility. 

15. In the event 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, Dodge & 

Cox will promptly refer such loan for 

arbitration to an independent arbitrator 

selected by each Fund Board involved 

in the loan who will serve as 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 each Fund 

Board 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 by it under the 

proposed 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 transactions, 

including the amount, the maturity and 

the Interfund Loan Rate, the rate of 

interest available at the time on 

overnight repurchase agreements and 

commercial bank borrowings, and such 

other information presented to the Fund 

Board in connection with the review 

required by conditions 13 and 14. 

17. The Interfund Lending Committee 

will prepare and submit to the Fund 

Board for review an initial report 

describing the operations of the 

proposed credit facility and the 

procedures to be implemented to ensure 

that all Funds are treated fairly. After 

the commencement of the proposed 

credit facility, the Interfund Lending 

Committee will report on the operations 

of the proposed credit facility at the 

Fund Board’s quarterly meetings. 

In addition, for two years following 

the commencement of the proposed 

credit facility, the independent auditors 

for each Fund shall prepare an annual 

report that evaluates the Interfund 

Lending Committee’s assertion that it 

has established procedures reasonably 

designed to achieve compliance with 

the terms and 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: 

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Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices 57693 

1 Forward Funds, et al., Investment Company Act 

Release Nos. 27777 (April 5, 2007) (notice) and 

27814 (May 1, 2007) (order). 

2All existing entities that currently intend to rely 

on the order are named as applicants. Any entity 

that relies on the order in the future will do so only 

in accordance with the terms and conditions of the 

application. If the name of any Sub-Advised Fund 

contains the name of a Sub-Adviser (as defined 

below), the name of the Manager that serves as the 

primary adviser to the Sub-Advised Fund will 

precede the name of the Sub-Adviser. 

3A successor in interest is limited to entities that 

result from a reorganization into another 

jurisdiction or a change in the type of business 

organization. 

(a) That the Interfund Loan Rate will 

be higher than the Repo Rate, 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 Fund 

Board; 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, each 

Fund’s independent auditors, in 

connection with their audit 

examinations of the Fund, will continue 

to review the operation of the proposed 

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 

proposed credit facility upon receipt of 

requisite regulatory approval unless it 

has fully disclosed in its prospectus 

and/or SAI all material facts about its 

intended participation. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23343 Filed 10–2–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

28420; 812–13533] 

Forward Funds and Forward 

Management, LLC; Notice of 

Application 

September 29, 2008. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application under 

section 6(c) of the Investment Company 

Act of 1940 (‘‘Act’’) for an exemption 

from section 15(a) of the Act and rule 

18f–2 under the Act. 

SUMMARY OF APPLICATION: Applicants 

request an order that would supersede 

an existing order that permits them to 

enter into and materially amend 

subadvisory agreements without 

shareholder approval (‘‘Existing 

Order’’).1

APPLICANTS: Forward Funds (the 

‘‘Trust’’) and Forward Management, LLC 

(‘‘Forward Management’’). 

DATES: Filing Dates: The application was 

filed on May 19, 2008 and amended on 

September 25, 2008. 

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 24, 2008, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F St., 

NE., Washington, DC 20549–1090; 

Applicants, 433 California Street, 11th 

Floor, San Francisco, CA 94104. 

FOR FURTHER INFORMATION CONTACT: 

Mary Kay Frech, Branch Chief, or 

Michael W. Mundt, Assistant Director, 

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 Desk, 

100 F St., NE., Washington, DC 20549– 

1520 (telephone (202) 551–5850). 

Applicants’ Representations 

1. The Trust is organized as a 

Delaware statutory trust and is 

registered under the Act as an open-end 

management investment company. The 

Trust currently offers sixteen series (the 

‘‘Funds’’), each with its own investment 

objectives, policies, and restrictions. 

Applicants request that the order apply 

to: (a) The Funds; and (b) any future 

series of the Trust and any other 

registered open-end management 

investment companies or series thereof 

that (1) use the ‘‘manager-of-managers’’ 

arrangement described in the 

application, (2) comply with the terms 

and conditions of the application, and 

(3) are advised by a Manager (as defined 

below) (the investment companies and 

their series, as well as the Funds, the 

‘‘Sub-Advised Funds’’).2

2. Forward Management is registered 

as an investment adviser under the 

Investment Advisers Act of 1940 (the 

‘‘Advisers Act’’) and serves as 

investment adviser to the Funds 

pursuant to an investment advisory 

agreement with the Trust, on behalf of 

the Funds (‘‘Advisory Agreement’’). The 

Advisory Agreement has been approved 

by the Trust’s board of trustees 

(‘‘Board’’), including a majority of the 

trustees who are not ‘‘interested 

persons,’’ as defined in section 2(a)(19) 

of the Act, of the Trust (the 

‘‘Independent Trustees’’), as well as by 

the shareholders of the Funds. The term 

‘‘Manager’’ refers to Forward 

Management and any existing or future 

entity controlling, controlled by, or 

under common control with Forward 

Management that is an investment 

adviser registered under the Advisers 

Act and any successor in interest 

thereto.3

3. Under the terms of the Advisory 

Agreement, the Manager provides 

investment advisory services to each 

Sub-Advised Fund and has the 

authority, subject to Board approval, to 

enter into investment subadvisory 

agreements (‘‘Sub-Advisory 

Agreements’’) with one or more 

subadvisers (‘‘Sub-Advisers’’). Each 

Sub-Adviser is registered under the 

Advisers Act. The Manager will monitor 

and evaluate the Sub-Advisers and 

recommend to the Board their hiring, 

retention or termination. Sub-Advisers 

recommended to the Board by the 

Manager are selected and approved by 

the Board, including a majority of the 

Independent Trustees. Each SubAdviser has discretionary authority to 

invest the assets or a portion of the 

assets of the relevant Sub-Advised 

Fund. For its services, the Manager 

receives a fee from the Sub-Advised 

Fund computed as a percentage of the 

Sub-Advised Fund’s net assets. 

4. Applicants request an order that 

would permit the Manager to hire SubAdvisers and materially amend SubAdvisory Agreements without obtaining 

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