26746 Federal Register / Vol. 74, No. 105 / Wednesday, June 3, 2009 / Notices 

1Applicants request that the order also apply to 

any existing or future registered management 

investment company advised by Managers, or any 

entity controlling, controlled by, or under common 

control with Managers, that is in the same ‘‘group 

of investment companies’’ as the Trusts, as defined 

in section 12(d)(1)(G)(ii) of the Act (included in the 

term ‘‘Trusts’’). 

2Applicants request that the order also apply to 

any successor entity to Managers. The term 

‘‘successor entity’’ is limited to entities that result 

from a reorganization into another jurisdiction or a 

change in the type of business organization.’’ 

Secretary of the Board, Julie S. Moore, 

at (202) 268–4800. 

Julie S. Moore, 

Secretary. 

[FR Doc. E9–13063 Filed 6–1–09; 4:15 pm] 

BILLING CODE 7710–12–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

28748; File No. 812–13551] 

The Managers Funds, et al.; Notice of 

Application 

May 28, 2009. 

AGENCY: Securities and Exchange 

Commission (‘‘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), 17(a)(2) 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. 

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: The Managers Funds, 

Managers AMG Funds, Managers Trust 

I, and Managers Trust II (each, a 

‘‘Trust,’’ and collectively, the ‘‘Trusts’’), 

and Managers Investment Group LLC 

(‘‘Managers’’). 

Filing Dates: The application was 

filed on July 24, 2008, and amended on 

January 22, 2009, May 11, 2009, and 

May 27, 2009. 

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 June 22, 2009 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, 800 Connecticut 

Avenue, Norwalk, CT 06854–2325. 

FOR FURTHER INFORMATION CONTACT: 

Steven I. Amchan, Attorney Adviser, at 

(202) 551–6826, or, Julia Kim Gilmer, 

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 via the Commission’s 

website by searching for the file 

number, or an applicant using the 

Company name box, at http:// 

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Applicants’ Representations 

1. Each Trust is organized as a 

Massachusetts business trust and is 

registered under the Act as an open-end 

management investment company.1

Each Trust consists of one or more 

series (‘‘Funds’’). Managers, a Delaware 

limited liability company and an 

independently managed subsidiary of 

Affiliated Managers Group, Inc., is 

registered as an investment adviser 

under the Investment Advisers Act of 

1940, and serves as the investment 

adviser to, and administrator of, each 

Fund.2

2. At any particular time, while some 

Funds invest their cash balances in 

money market funds or purchase other 

short-term instruments, other Funds 

may need to rely on custodian 

overdrafts for temporary purposes to 

satisfy redemption requests, to cover 

unanticipated cash shortfalls such as a 

trade ‘‘fail’’ in which cash payment for 

a security sold by a Fund has been 

delayed, or for other temporary 

purposes. 

3. If a Fund were to incur an overdraft 

with the custodian bank, the Fund 

would pay interest on the loan at a rate 

that is significantly higher than the rate 

that is earned by other (non-borrowing) 

Funds on investments in money market 

funds, or if applicable, other short term 

instruments of the same maturity as the 

overdraft loan. Applicants state that this 

differential represents the profit earned 

by the lender by way of overdrafts and 

is not attributable to any material 

difference in the credit quality or risk of 

such transactions. 

4. Applicants request an order that 

would permit the Trusts to enter into 

master interfund lending agreements 

(‘‘Interfund Lending Agreements’’) with 

each other on behalf of the Funds that 

would permit each Fund to lend money 

directly to and borrow directly from 

other Funds through a credit facility for 

temporary purposes (‘‘Interfund Loan’’). 

Applicants state that the proposed 

credit facility would substantially 

reduce the Funds’ potential borrowing 

costs and enhance the ability of the 

lending Funds to earn higher rates of 

interest on their short-term lendings. 

Although the proposed credit facility 

would substantially reduce the Funds’ 

need to borrow through custodian 

overdrafts, the Funds would be free to 

establish committed lines of credit or 

other borrowing arrangements with 

unaffiliated banks. 

5. Applicants anticipate that the 

proposed credit facility would provide a 

borrowing Fund with significant savings 

at times when the cash position of the 

borrowing Fund is insufficient to meet 

temporary cash requirements. This 

situation could arise when shareholder 

redemptions exceed anticipated 

volumes and certain Funds have 

insufficient cash on hand to satisfy such 

redemptions. When the Funds liquidate 

portfolio securities to meet redemption 

requests, they often do not receive 

payment in settlement for up to three 

days (or longer for certain foreign 

transactions). However, redemption 

requests normally are effected 

immediately. The proposed credit 

facility would provide a source of 

immediate, short-term liquidity pending 

settlement of the sale of portfolio 

securities. 

6. Applicants also propose that a 

Fund could use the proposed credit 

facility when a sale of securities ‘‘fails’’ 

due to circumstances beyond the Fund’s 

control, such as a delay in the delivery 

of cash to the Fund’s custodian bank or 

improper delivery instructions by the 

broker effecting the transaction. ‘‘Sales 

fails’’ may present a cash shortfall if the 

Fund has undertaken to purchase a 

security using the proceeds from 

securities sold. Alternatively, the Fund 

could either ‘‘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 


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Federal Register / Vol. 74, No. 105 / Wednesday, June 3, 2009 / Notices 26747 

same-day settlement basis, earning a 

lower return on the investment. Use of 

the proposed credit facility under these 

circumstances would enable the Fund to 

have access to immediate short-term 

liquidity without the Fund incurring 

custodian overdraft or other charges. 

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 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 a 

money market Fund. Thus, the 

proposed credit facility would benefit 

both borrowing and lending Funds. 

8. The interest rate to be charged to 

the Funds on any Interfund Loan (the 

‘‘Interfund Loan Rate’’) would be the 

average of the ‘‘Repo Rate’’ and the 

‘‘Bank Loan Rate,’’ both as defined 

below. The Repo Rate for any day would 

be the highest or best (after giving effect 

to factors such as the credit quality of 

the issuer) rate available to a lending 

Fund from investment in overnight 

repurchase agreements. The Bank Loan 

Rate for any day would be calculated by 

Managers each day an Interfund Loan is 

made according to a formula established 

by each Trust’s board of trustees 

(‘‘Trustees’’) 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 200 basis points) and 

would vary with this rate so as to reflect 

changing bank loan rates. The initial 

formula and any subsequent 

modifications to the formula would be 

subject to the approval of each Trust’s 

Trustees. Each Trust’s Trustees would 

periodically review the continuing 

appropriateness of using the formula 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 it would subject to the 

approval of each Trust’s Trustees. 

9. The proposed credit facility would 

be administered by Managers’s fund 

administration department (the ‘‘Credit 

Facility Team’’), and no portfolio 

manager for any Fund would serve on 

the Credit Facility Team. Under the 

proposed credit facility, the portfolio 

managers for each participating Fund 

could provide standing instructions to 

participate daily as a borrower or 

lender. The Credit Facility Team on 

each business day would collect data on 

the uninvested cash and borrowing 

requirements of all participating Funds. 

Once it determined the aggregate 

amount of cash available for loans and 

borrowing demand, the Credit Facility 

Team would allocate loans among 

borrowing Funds without any further 

communication from the portfolio 

managers of the Funds. After the 

allocating cash for Interfund Loans, the 

Credit Facility Team would invest any 

remaining cash in accordance with the 

standing instructions of the portfolio 

managers or such remaining amounts 

will be invested directly by the portfolio 

managers of the Funds. 

10. The Credit Facility Team would 

allocate borrowing demand and cash 

available for lending among the Funds 

on what the Credit Facility Team 

believes to be an equitable basis, subject 

to certain administrative procedures 

applicable to all Funds, such as the time 

of filing requests to participate, 

minimum loan lot sizes and the need to 

minimize the number of transactions 

and associated administrative costs. To 

reduce transaction costs, each loan 

normally would be allocated in a 

manner intended to minimize the 

number of participants necessary to 

complete the loan transaction. The 

method of allocation and related 

administrative procedures would be 

approved by each Trust’s Trustees, 

including a majority of Trustees who are 

not ‘‘interested persons’’ of the Trust, as 

that term is defined in Section 2(a)(19) 

of the Act (‘‘Independent Trustees’’), to 

ensure that both borrowing and lending 

Funds participate on an equitable basis. 

11. Managers, through the Credit 

Facility Team, would administer the 

proposed credit facility as a 

disinterested fiduciary as part of its 

duties under the relevant management, 

advisory or administrative contract with 

each Fund and would receive no 

additional fee as compensation for its 

services in connection with the 

administration of the proposed credit 

facility. Managers would: (i) Monitor the 

Interfund Loan Rate and the other terms 

and conditions of the 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; and (iv) make 

quarterly reports to the Trustees 

concerning any transactions by the 

Funds under the proposed credit facility 

and the Interfund Loan Rate charged. 

12. No Fund may participate in the 

proposed credit facility unless: (i) The 

Fund has obtained shareholder approval 

for its participation, if such approval is 

required by law; (ii) the Fund has fully 

disclosed all material information 

concerning the credit facility in its 

prospectus and/or statement of 

additional information; and (iii) the 

Fund’s participation in the credit 

facility is consistent with its investment 

objectives, limitations and 

organizational documents. 

13. 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), 17(a)(2) 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) of the Act generally 

prohibits any registered management 

company from lending money or other 

property to any person, directly or 

indirectly, if that person controls or is 

under common control with that 

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, such 

other person. Section 2(a)(9) of the Act 

defines ‘‘control’’ as the ‘‘power to 

exercise a controlling influence over the 

management or policies of a company,’’ 

but excludes circumstances in which 

‘‘such power is solely the result of an 

official position with such company.’’ 

Applicants state that the Funds could be 

deemed to be under common control by 

virtue of having Managers as their 

common investment adviser and/or by 

reason of having common officers and 

Trustees. 

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

an exemptive order may be granted 

where an exemption is necessary or 

appropriate in the public interest and 

consistent with the protection of 

investors and the purposes fairly 

intended by the policy and provisions of 

the Act. Section 17(b) of the Act 

authorizes the Commission to exempt a 

proposed transaction from the 

provisions of section 17(a) of the Act 

provided that the terms of the 

transaction, including the consideration 

to be paid or received, are fair and 

reasonable and do not involve 

overreaching on the part of any person 

concerned, and the transaction is 


PWALKER on PROD1PC71 with NOTICES
26748 Federal Register / Vol. 74, No. 105 / Wednesday, June 3, 2009 / Notices 

consistent with the policy of the 

investment company as recited in its 

registration statement and with the 

general purposes of the Act. Applicants 

assert that the proposed arrangements 

satisfy these standards for the reasons 

discussed below. 

3. Applicants assert that sections 

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

prevent a person 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 person and that are 

detrimental to the best interests of the 

investment company and its 

shareholders. Applicants assert that the 

proposed credit facility transactions do 

not raise these concerns because: (a) 

Managers, through the Credit Facility 

Team, would administer the program as 

a disinterested fiduciary; (b) all 

Interfund Loans would consist only of 

uninvested cash reserves that a Fund 

otherwise would invest in short-term 

repurchase agreements or other shortterm instruments either directly or 

through a money market fund; (c) the 

Interfund Loans would not involve a 

significantly 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 

through custodian overdrafts and avoid 

the up-front commitment fees generally 

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 any affiliated person of a 

registered investment company, or any 

affiliated person of such a person, from 

selling securities or other property to 

the investment company. Section 

17(a)(2) of the Act generally prohibits an 

affiliated person of a registered 

investment company, or any affiliated 

person of such a person, from 

purchasing securities or other property 

from the investment 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. 

5. 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 also state that any pledge of 

assets in connection with an Interfund 

Loan could be construed as a purchase 

of those assets from the borrowing 

Fund, and therefore a purchase of the 

borrowing Fund’s securities or other 

property for the purposes of section 

17(a)(2) of the Act. 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 that 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. Applicants also state 

that the requested relief from section 

17(a)(2) of the Act meets the standards 

of section 6(c) and 17(b) because any 

collateral pledged to secure an Interfund 

Loan would be subject to the same 

conditions imposed by any other lender 

to a Fund that imposes conditions on 

the quality of or access to collateral for 

a borrowing (if the other lender is 

another Fund) or the same or better 

conditions (in any other circumstance). 

6. 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 

assert 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 

to the Funds’ shareholders and that 

Managers will receive no additional 

compensation for its services in 

administering the credit facility. 

Applicants also note that the purpose of 

the proposed credit facility is to provide 

economic benefits for all of the 

participating Funds. 

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

registered open-end investment 

companies from issuing any senior 

security except that a company is 

permitted to borrow from any bank, if 

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’’ generally 

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). 

8. Applicants assert that granting 

relief under section 6(c) of the Act is 

appropriate because the Funds would 

remain subject to the requirement of 

section 18(f)(1) of the Act that all 

borrowings of a Fund, including 

combined Interfund Loans and bank 

borrowings, have at least 300 per 

centum asset coverage. Based on the 

conditions and safeguards described in 

the application, applicants also assert 

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) 

of the Act. 

9. Section 17(d) and rule 17d–1 

generally prohibit any affiliated person 

of a registered investment company, or 

any affiliated person of an affiliated 

person, when acting as principal, from 

effecting any joint transaction 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. 

10. Applicants assert 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 of the 

Commission 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 Credit 

Facility Team will compare the Bank 


PWALKER on PROD1PC71 with NOTICES
Federal Register / Vol. 74, No. 105 / Wednesday, June 3, 2009 / Notices 26749 

3 If the dispute involves Funds with different 

Trustees, the respective Trustees of each Fund will 

select an independent arbitrator that is satisfactory 

to each Fund. 

Loan Rate with the Repo Rate and will 

make cash available for Interfund Loans 

only if the Interfund Loan Rate is: (i) 

More favorable to the lending Fund than 

the Repo Rate and, if applicable, the 

yield of any money market fund in 

which the lending Fund could 

otherwise invest; and (ii) more favorable 

to the borrowing Fund than the Bank 

Loan Rate. 

3. If a Fund has outstanding 

borrowings, 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 any event not over 

seven days); and (iv) 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 

other source if its total outstanding 

borrowings immediately after such 

borrowing would exceed the limits 

imposed by section 18 of the Act. 

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: (i) Repay all 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 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 

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 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. A 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 for the preceding seven 

calendar days or 102% of the Fund’s 

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 Credit Facility Team 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 portfolio 

manager of the Funds. The Credit 

Facility Team will not solicit cash for 

the proposed credit facility from any 

Fund or prospectively publish or 

disseminate loan demand data to 

portfolio managers. The Credit Facility 

Team will invest any amounts 

remaining after satisfaction of borrowing 

demand in accordance with the 

standing instructions of the portfolio 

managers or such remaining amounts 

will be invested directly by the portfolio 

managers of the Funds. 

13. Managers will monitor the 

Interfund Loan Rate and the other terms 

and conditions of the Interfund Loans 

and will make a quarterly report to the 

Trustees of each Trust 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. The Trustees of each Trust, 

including a majority of the Independent 

Trustees, will: (i) 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; (ii) 

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 (iii) 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, Managers 

will promptly refer such loan for 

arbitration to an independent arbitrator 

selected by the Trustees of each Fund 

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, 


PWALKER on PROD1PC71 with NOTICES
26750 Federal Register / Vol. 74, No. 105 / Wednesday, June 3, 2009 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59721 

(April 7, 2009), 74 FR 17245 (April 14, 2009) 

(‘‘Notice’’). 

4 15 U.S.C. 78s(b)(1). 

5 17 CFR 240.19b–4. 

6See Securities Exchange Act Release No. 59779 

(April 16, 2009), 74 FR 18600 (April 23, 2009) 

(‘‘Amendment Notice’’). 

at least annually, a written report to the 

Trustees 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, the yield 

of any money market fund in which the 

lending Fund could otherwise invest, 

and such other information presented to 

the Fund’s Trustees in connection with 

the review required by conditions 13 

and 14. 

17. Managers will prepare and submit 

to the Trustees 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, Managers will report on 

the operations of the proposed credit 

facility at the Trustees’ quarterly 

meetings. 

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 Managers’ 

assertion that it has established 

procedures reasonably designed to 

achieve compliance with the terms and 

conditions of the order. The report will 

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 Loan Rate will be higher 

than the Repo Rate, and, if applicable, 

the yield of the money market funds, 

but lower than the Bank Loan Rate; (ii) 

compliance with the collateral 

requirements as set forth in the 

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 Trustees; and (v) that the 

Interfund Loan Rate 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 examination 

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 statement of additional 

information all material facts about its 

intended participation. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–12917 Filed 6–2–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Thursday, June 4, 2009 at 2 p.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) 

and 17 CFR 200.402(a)(3), (5), (7), 9(ii) 

and (10), permit consideration of the 

scheduled matters at the Closed 

Meeting. 

Chairman Schapiro, as duty officer, 

voted to consider the items listed for the 

Closed Meeting in a closed session and 

determined that no earlier notice thereof 

was possible. 

The subject matter of the Closed 

Meeting scheduled for Thursday, June 4, 

2009 will be: 

Institution and settlement of injunctive 

actions; 

Institution and settlement of 

administrative proceedings; 

Consideration of amicus participation; 

and 

Other matters related to enforcement 

proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact: 

The Office of the Secretary at (202) 

551–5400. 

Dated: May 29, 2009. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–12914 Filed 6–2–09; 8:45 am] 

BILLING CODE P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59995; File No. SR–Phlx– 

2009–32] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc; Notice of 

Filing of Amendment No. 3 and Order 

Granting Accelerated Approval of 

Proposed Rule Change, as Modified by 

Amendment Nos. 1, 2, and 3 Thereto, 

Relating to the Exchange’s Enhanced 

Electronic Trading Platform for 

Options, Phlx XL II 

May 28, 2009. 

I. Introduction 

On April 3, 2009, NASDAQ OMX 

PHLX, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b-4 thereunder,2 a proposed rule 

change to implement several 

enhancements to its electronic options 

trading system, Phlx XL, the enhanced 

system being called Phlx XL II. The 

proposed rule change was published for 

comment in the Federal Register on 

April 14, 2009.3 On April 15, 2009, Phlx 

filed with the Commission, pursuant to 

Section 19(b)(1) of the Act 4 and Rule 

19b–4 thereunder,5 Amendment No. 1 

to the proposed rule change. 

Amendment No. 1 to the proposed rule 

change was published for comment in 

the Federal Register on April 23, 2009.6

The Commission received two comment 

letters on the proposed rule change and 


PWALKER on PROD1PC71 with NOTICES