Federal Register / Vol. 74, No. 139 / Wednesday, July 22, 2009 / Notices 36277 

1Applicants request that the relief also apply to 

any other registered management investment 

company that currently, or in the future, is part of 

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’’). All entities that 

currently intend to rely on the requested order have 

been named as applicants. Any other entity that 

relies on the requested order in the future will 

comply with the terms and conditions set forth in 

the application. 

2Each of Alger LargeCap Growth Fund, Alger 

SmallCap Growth Institutional Fund, Alger MidCap 

Growth Institutional Fund, Alger LargeCap Growth 

Institutional Fund and Alger Capital Appreciation 

Institutional Fund is prohibited from ‘‘making loans 

to others, except through purchasing qualified debt 

obligations, lending portfolio securities or entering 

into repurchase agreements.’’ 

interests of the general public in these 

proceedings. 

4. The Secretary shall arrange for 

publication of this order in the Federal 

Register. 

Issued: July 16, 2009. 

By the Commission. 

Judith M. Grady, 

Acting Secretary. 

[FR Doc. E9–17496 Filed 7–21–09; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

28819; File No. 812–13578] 

The Alger Funds, et al.; Notice of 

Application 

July 16, 2009. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order pursuant to (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 Alger Funds, The 

Alger American Fund, The Alger 

Institutional Funds, The Alger Funds II 

(formerly, The Spectra Funds), and 

Alger China-U.S. Growth Fund 

(formerly, The China-U.S. Growth Fund) 

(each, a ‘‘Trust’’ and collectively, the 

‘‘Trusts’’), and Fred Alger Management, 

Inc. (‘‘FAM’’). 

Filing Dates: The application was 

filed on September 25, 2008 and 

amended on March 12, 2009, June 24, 

2009 and July 14, 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 August 10, 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, 111 Fifth Avenue, 

New York, New York 10003. 

FOR FURTHER INFORMATION CONTACT: Jill 

Ehrlich, Attorney Adviser, at (202) 551– 

6819 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 via the Commission’s 

Web site 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. Each 

Trust consists of one or more series 

(‘‘Funds’’). FAM, a New York 

corporation and an indirect whollyowned subsidiary of Alger Associates, 

Inc., is registered as an investment 

adviser under the Investment Advisers 

Act of 1940 and serves as the 

investment adviser and administrator of 

each Fund.1

2. Some Funds may make short-term 

loans to banks or other entities by 

purchasing bank time deposits. Other 

Funds may need to borrow money from 

the same or similar banks for temporary 

purposes to satisfy redemption requests, 

to cover unanticipated cash shortfalls 

such as a trade ‘‘fail’’ in which cash 

payment for a security sold by a Fund 

has been delayed, or for other temporary 

purposes. Currently, certain Funds have 

access to uncommitted bank loans from 

their custodian bank for temporary 

borrowing purposes. 

3. If Funds borrow from their 

custodian, they pay interest on the loan 

at a rate that is significantly higher than 

the rate that is earned by other (nonborrowing) Funds on investments in 

bank time deposits. Applicants assert 

that this differential represents the 

profit earned by the lender on loans 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. The Trusts seek 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 (an ‘‘Interfund 

Loan’’). Applicants believe that the 

proposed credit facility would both 

substantially reduce the Funds’ 

potential borrowing costs and enhance 

the ability of the lending Funds to earn 

higher rates of interest on their shortterm lendings. Although the proposed 

credit facility would substantially 

reduce the Funds’ need to borrow from 

banks, the Funds would be free to 

establish and maintain committed lines 

of credit or other borrowing 

arrangements with unaffiliated banks. 

Alger Money Market Fund, a series of 

The Alger Funds, will not participate as 

a borrower in the proposed credit 

facility. Additionally, a number of 

Funds are barred by their fundamental 

policies from participating as lenders in 

the proposed credit facility.2

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 


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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 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 ‘‘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 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 overnight 

bank time deposits. Thus, applicants 

believe that 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 ‘‘Time Deposit Rate’’ and 

the ‘‘Bank Loan Rate,’’ both as defined 

below. The Time Deposit 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 bank time deposits. The Bank 

Loan Rate for any day would be 

calculated by FAM each day an 

Interfund Loan is made according to a 

formula established by each Trust’s 

board of trustees (the ‘‘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 50 basis points) and would 

vary with this rate so as to reflect 

changing bank loan rates. In addition, 

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 the formula would be 

subject to the approval of each Trust’s 

Trustees. 

9. The proposed credit facility would 

be administered by FAM’s fund 

administration department and a 

compliance professional within FAM 

(collectively, the ‘‘Credit Facility 

Team’’). No portfolio manager of any 

Fund will serve as a member of 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 had determined the aggregate 

amount of cash available for loans and 

borrowing demand, the Credit Facility 

Team would allocate loans among 

borrowing Funds without any further 

communication from the portfolio 

managers of the Funds. Applicants 

anticipate that there typically will be far 

more available uninvested cash each 

day than borrowing demand. Therefore, 

after the Credit Facility Team has 

allocated cash for Interfund Loans, the 

Credit Facility Team will invest any 

remaining cash in accordance with the 

standing instructions of 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. FAM 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 the Trustees 

concerning any transactions by the 

Funds under the proposed credit facility 

and the Interfund Loan Rate charged. 

12. FAM, 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. FAM may 

collect standard pricing, record keeping, 

bookkeeping and accounting fees 

associated with the transfer of cash and/ 

or securities in connection with bank 

time deposit and lending transactions 

generally, including transactions 

effected through the proposed credit 

facility. Such fees would be no higher 

than those applicable for comparable 

bank loan transactions. 

13. No Fund may participate in the 

proposed 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 information; and (c) the 

Fund’s participation in the credit 

facility is consistent with its investment 

objectives, limitations and 

organizational documents. 

14. In connection with the credit 

facility, applicants request an order 

under section 6(c) of the Act exempting 

them, to the extent described herein, 

from the provisions of sections 18(f) and 

21(b) of the Act; under section 

12(d)(1)(J) of the Act exempting them 

from section 12(d)(1) of the Act; under 

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

exempting them from sections 17(a)(1), 

17(a)(2), and 17(a)(3) of the Act; and 

under section 17(d) of the Act and rule 

17d–1 under the Act, to permit certain 

joint arrangements and to allow them to 

participate in the proposed credit 

facility. 

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 


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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. Applicants state that the 

Funds may be under common control by 

virtue of having FAM as their common 

investment adviser and/or by having 

common Trustees 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) 

FAM, through the Credit Facility Team, 

would administer the program as a 

disinterested fiduciary as part of its 

duties under the relevant management, 

advisory or administrative contract with 

each Fund; (b) all Interfund Loans 

would consist only of uninvested cash 

reserves that the lending Fund 

otherwise would invest in bank time 

deposits; (c) the Interfund Loans would 

not involve a significantly greater risk 

than bank time deposits; (d) the lending 

Fund would receive interest at a rate 

higher than it could otherwise obtain 

through bank time deposits; 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 that 

applicants propose also 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 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 prohibits a 

registered investment company from 

purchasing or otherwise acquiring 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 could be deemed to 

constitute a security for the purposes of 

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 the borrowing Fund’s securities or 

other property for 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 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 

investments. 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 

FAM will receive no additional 

compensation for its services in 

administering the credit facility. 

Applicants also note that the entire 

purpose of the proposed credit facility 

is to provide economic benefits for all 

the participating Funds and their 

shareholders. 

7. 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 

exemptive relief under section 6(c) from 

section 18(f)(1) to the limited extent 

necessary to implement the proposed 

credit facility (because the lending 

Funds are not banks). 

8. 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). 

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

17d–1 under the Act generally prohibit 

an affiliated person of a registered 

investment company, or any affiliated 

person of such a person, when acting as 

principal, from effecting any joint 

transaction in which the investment 

company participates, unless, upon 

application, the transaction has been 

approved by the Commission. Rule 17d– 

1(b) under the Act provides that in 

passing upon an application filed under 

the rule, the Commission will consider 

whether the participation of the 

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 such participation is on a basis 

different from or less advantageous than 

that of the other participants. 


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10. Applicants submit that the 

purpose of section 17(d) is to avoid 

overreaching by and unfair advantage to 

insiders. Applicants believe that the 

proposed 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 

proposed credit facility would be on 

terms which are no different from or 

less advantageous than that of other 

participating Funds. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 

1. The Interfund Loan Rate will be the 

average of the Time Deposit Rate and 

the Bank Loan Rate. 

2. On each business day, the Credit 

Facility Team will compare the Bank 

Loan Rate with the Time Deposit 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 Time Deposit 

Rate; and (b) more favorable to the 

borrowing Fund than the Bank Loan 

Rate. 

3. If a Fund has outstanding bank 

borrowings, any Interfund Loans to the 

Fund: (a) Will be at an interest rate 

equal to or lower than the interest rate 

of 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 

other source if its total outstanding 

borrowings immediately after such 

borrowing would be more than 331⁄3% 

of its total assets. 

5. Before any Fund that has 

outstanding interfund borrowings may, 

through additional borrowings, cause its 

outstanding borrowings from all sources 

to exceed 10% of its total assets, the 

Fund must first secure each outstanding 

lnterfund Loan by the pledge of 

segregated collateral with a market 

value at least equal to 102% of the 

outstanding principal value of the loan. 

If the total outstanding borrowings of a 

Fund with outstanding Interfund Loans 

exceed 10% of its total assets for any 

other reason (such as a decline in net 

asset value or because of shareholder 

redemptions), the Fund will within one 

business day thereafter: (a) Repay all of 

its outstanding Interfund Loans; (b) 

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 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 lnterfund 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. FAM 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: 

(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; 


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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. 

(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, FAM 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, 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 each 

Interfund Loan is made on overnight 

bank time deposits and such other 

information presented to the Fund’s 

Trustees in connection with the review 

required by conditions 13 and 14. 

17. FAM 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, FAM 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 FAM’s 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: 

(a) That the Interfund Loan Rate will 

be higher than the Time Deposit 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 Trustees; 

and 

(e) 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 Funds, 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 NSAR. 

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. E9–17355 Filed 7–21–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meetings 

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 Closed Meetings 

on Thursday, July 23, 2009 at 2 p.m. and 

on Friday, July 24, 2009 at 8 a.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meetings. 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 

Meetings. 

Commissioner Casey, as duty officer, 

voted to consider the items listed for the 

Closed Meetings in a closed session, and 

determined that no earlier notice thereof 

was possible. 

The subject matter of the Closed 

Meeting scheduled for Thursday, July 

23, 2009 will be: 

institution and settlement of injunctive 

actions; institution and settlement of 

administrative proceedings; and other 

matters relating to enforcement proceedings. 

The subject matter of the Closed 

Meeting scheduled for Friday, July 24, 

2009 will be: 

consideration of amici consideration; and 

litigation matters. 

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: July 17, 2009. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–17488 Filed 7–20–09; 11:15 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. PA–39; File No. S7–14–09] 

Privacy Act of 1974: Systems of 

Records 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Notice to establish systems of 

records. 

SUMMARY: In accordance with the 

requirements of the Privacy Act of 1974, 

as amended, 5 U.S.C. 552a, the 

Securities and Exchange Commission 

(‘‘Commission’’ or ‘‘SEC’’) gives notice 

of proposing to establish the following 

five new Privacy Act systems of records: 


jlentini on DSKJ8SOYB1PROD with NOTICES