PIMCO Funds, et al., 49882-49884 [2017-23369]
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Federal Register / Vol. 82, No. 207 / Friday, October 27, 2017 / Notices
asabaliauskas on DSKBBXCHB2PROD with NOTICES
Applicants’ Legal Analysis
1. Section 6(c) of the Act provides that
the Commission may exempt any
person, security, or transaction, or any
class or classes of persons, securities, or
transactions, from any provision of the
Act or rule thereunder, if and to the
extent that such 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.
2. Section 23(c) of the Act provides in
relevant part that no registered closedend investment company shall purchase
any securities of any class of which it
is the issuer except: (a) On a securities
exchange or other open market; (b)
pursuant to tenders, after reasonable
opportunity to submit tenders given to
all holders of securities of the class to
be purchased; or (c) under such other
circumstances as the Commission may
permit by rules and regulations or
orders for the protection of investors.
3. Rule 23c–3 under the Act permits
a registered closed-end investment
company to make repurchase offers for
its common stock at net asset value at
periodic intervals pursuant to a
fundamental policy of the investment
company. ‘‘Periodic interval’’ is defined
in rule 23c–3(a)(1) as an interval of
three, six, or twelve months. Rule 23c–
3(b)(4) requires that notification of each
repurchase offer be sent to shareholders
no less than 21 calendar days and no
more than 42 calendar days before the
repurchase request deadline.
4. Applicants request an order
pursuant to sections 6(c) and 23(c) of
the Act exempting them from rule 23c–
3(a)(1) to the extent necessary to permit
the Funds to make monthly repurchase
offers. Applicants also request an
exemption from the notice provisions of
rule 23c–3(b)(4) to the extent necessary
to permit each Fund to send notification
of an upcoming repurchase offer to
shareholders at least seven days but no
more than fourteen calendar days in
advance of the repurchase request
deadline.
5. Applicants contend that monthly
repurchase offers are in the
shareholders’ best interests and
consistent with the policies underlying
rule 23c–3. Applicants assert that
monthly repurchase offers will provide
investors with more liquidity than
quarterly repurchase offers. Applicants
assert that shareholders will be better
able to manage their investments and
plan transactions, because if they decide
to forego a repurchase offer, they will
only need to wait one month for the
next offer. Applicants also contend that
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the portfolio of each Fund will be
managed to provide ample liquidity for
monthly repurchase offers. Applicants
do not believe that a change to monthly
repurchases would necessitate any
change in portfolio management
practices of any of the Funds in order
to satisfy rule 23c–3. In fact, applicants
expect limited or no impact on overall
portfolio management or performance of
such Funds upon converting to monthly
offers and believe that it may be easier
to manage the cash of the portfolio for
the smaller monthly offers compared to
the larger quarterly ones.
6. Applicants propose to send
notification to shareholders at least
seven days, but no more than fourteen
calendar days, in advance of a
repurchase request deadline. Applicants
assert that, because BGFREI (and any
Future Fund) currently intends to make
payment on the next business day
following the pricing date, the entire
procedure can be completed before the
next notification is sent out to
shareholders; thus avoiding any overlap.
Applicants believe that these
procedures will eliminate any
possibility of investor confusion.
Applicants also state that monthly
repurchase offers will be a fundamental
feature of the Funds, and their
prospectuses will provide a clear
explanation of the repurchase program.
7. Applicants submit that for the
reasons given above the requested relief
is appropriate in the public interest and
is consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief shall be
subject to the following conditions:
1. BGFREI (and any Future Fund
relying on this relief) will make a
repurchase offer pursuant to rule 23c–
3(b) for a repurchase offer amount of not
less than 5% in any one-month period.
In addition, the repurchase offer amount
for the then-current monthly period,
plus the repurchase offer amounts for
the two monthly periods immediately
preceding the then-current monthly
period, will not exceed 25% of
BGFREI’s (or Future Fund’s, as
applicable) outstanding common shares.
BGFREI (and any Future Fund relying
on this relief) may repurchase
additional tendered shares pursuant to
rule 23c–3(b)(5) only to the extent the
percentage of additional shares so
repurchased does not exceed 2% in any
three-month period.
2. Payment for repurchased shares
will occur at least five business days
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before notification of the next
repurchase offer is sent to shareholders
of BGFREI (or Future Fund relying on
this relief).
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–23368 Filed 10–26–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32867; File No. 812–14756]
PIMCO Funds, et al.
October 23, 2017.
Securities and Exchange
Commission (‘‘Commission’’).
AGENCY:
ACTION:
Notice.
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 and transactions.
Applicants request an order that would
permit certain registered open-end
management investment companies to
participate in a joint lending and
borrowing facility.
PIMCO Funds, PIMCO
Variable Insurance Trust, PIMCO ETF
Trust, PIMCO Equity Series, PIMCO
Equity Series VIT, PIMCO Managed
Accounts Trust, each an investment
company organized as a Delaware
statutory trust or a Massachusetts
business trust and registered under the
Act as an open-end management
investment company, on behalf of all
existing series,1 and Pacific Investment
Management Company LLC (the
‘‘Adviser’’), a Delaware limited liability
company registered as an investment
APPLICANTS:
1 Currently, one series of the Funds (as defined
below) is a money market fund that complies with
Rule 2a–7 of the Act, and applicants request that
the order also apply to any future Fund that is a
money market fund that complies with rule 2a–7 of
the Act (each a ‘‘Money Market Fund’’). Money
Market Funds typically will not participate as
borrowers under the interfund lending facility
because they rarely need to borrow cash to meet
redemptions.
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Federal Register / Vol. 82, No. 207 / Friday, October 27, 2017 / Notices
asabaliauskas on DSKBBXCHB2PROD with NOTICES
adviser under the Investment Advisers
Act of 1940.
FILING DATES: The application was filed
on March 17, 2017 and amended on
June 28, 2017 and October 16, 2017.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief 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 November 17, 2017 and
should be accompanied by proof of
service on the applicants, in the form of
an affidavit, or, for lawyers, a certificate
of service. Pursuant to Rule 0–5 under
the Act, hearing requests should state
the nature of the writer’s interest, any
facts bearing upon the desirability of a
hearing on the matter, 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: Joshua Ratner, Pacific
Investment Management Company LLC,
1633 Broadway, New York, New York
10019 and Robert W. Helm, Brendan C.
Fox, Dechert LLP, 1900 K Street NW.,
Washington, DC 20006.
FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Senior Counsel, at (202)
551–6876 or Robert H. Shapiro, Branch
Chief, at (202) 551–6821 (Division of
Investment Management, Chief
Counsel’s Office).
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 https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Summary of the Application
1. Applicants request an order that
would permit the applicants to
participate in an interfund lending
facility where each Fund could lend
money directly to and borrow money
directly from other Funds to cover
unanticipated cash shortfalls, such as
unanticipated redemptions or trade
fails.2 The Funds will not borrow under
2 Applicants request that the order apply to the
applicants and to any existing or future registered
open-end management investment company or
series thereof for which the Adviser or any
successor thereto or an investment adviser
controlling, controlled by, or under common
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the facility for leverage purposes and
the loans’ duration will be no more than
7 days.3
2. Applicants anticipate that the
proposed facility would provide a
borrowing Fund with a source of
liquidity at a rate lower than the bank
borrowing rate at times when the cash
position of the Fund is insufficient to
meet temporary cash requirements. 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
certain other short term money market
instruments. Thus, applicants assert that
the facility would benefit both
borrowing and lending Funds.
3. Applicants agree that any order
granting the requested relief will be
subject to the terms and conditions
stated in the application. Among others,
the Adviser, through a designated
committee, would administer the
facility as a disinterested fiduciary as
part of its duties under the investment
management and administrative
agreements with the Funds and would
receive no additional fee as
compensation for its services in
connection with the administration of
the facility.4 The facility would be
subject to oversight and certain
approvals by the Funds’ Board,
including, among others, approval of the
interest rate formula and of the method
for allocating loans across Funds, as
well as review of the process in place to
evaluate the liquidity implications for
the Funds. A Fund’s aggregate
outstanding interfund loans will not
exceed 15% of its net assets, and the
Fund’s loans to any one Fund will not
exceed 5% of the lending Fund’s net
assets.5
4. Applicants assert that the facility
does not raise the concerns underlying
section 12(d)(1) of the Act given that the
Funds are part of the same group of
investment companies and there will be
no duplicative costs or fees to the
control with the Adviser or any successor thereto
serves as investment adviser (each a ‘‘Fund’’ and
collectively the ‘‘Funds’’ and each such investment
adviser an ‘‘Adviser’’). For purposes of the
requested order, ‘‘successor’’ is limited to any entity
that results from a reorganization into another
jurisdiction or a change in the type of a business
organization.
3 Any Fund, however, will be able to call a loan
on one business day’s notice.
4 Members of the designated committee may
include one or more investment professionals,
including individuals involved in making
investment decisions regarding short-term
investments.
5 Under certain circumstances, a borrowing Fund
will be required to pledge collateral to secure the
loan.
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49883
Funds.6 Applicants also assert that the
proposed transactions do not raise the
concerns underlying sections 17(a)(1),
17(a)(3), 17(d) and 21(b) of the Act as
the Funds would not engage in lending
transactions that unfairly benefit
insiders or are detrimental to the Funds.
Applicants state that the facility will
offer both reduced borrowing costs and
enhanced returns on loaned funds to all
participating Funds and each Fund
would have an equal opportunity to
borrow and lend on equal terms based
on an interest rate formula that is
objective and verifiable. With respect to
the relief from section 17(a)(2) of the
Act, applicants note that 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).7
5. Applicants also believe that the
limited relief from section 18(f)(1) of the
Act that is necessary to implement the
facility (because the lending Funds are
not banks) is appropriate in light of the
conditions and safeguards described in
the application and because the openend Funds would remain subject to the
requirement of section 18(f)(1) that all
borrowings of the open-end Fund,
including combined interfund loans and
bank borrowings, have at least 300%
asset coverage.
6. Section 6(c) of the Act permits the
Commission to exempt any persons or
transactions from any provision of the
Act if such 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 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities, or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
6 Applicants state that the obligation to repay an
interfund loan could be deemed to constitute a
security for the purposes of sections 17(a)(1) and
12(d)(1) of the Act.
7 Applicants state that any pledge of securities to
secure an interfund loan could constitute a
purchase of securities for purposes of section
17(a)(2) of the Act.
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Federal Register / Vol. 82, No. 207 / Friday, October 27, 2017 / Notices
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
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, joint arrangement or
profit sharing plan 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.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–23369 Filed 10–26–17; 8:45 am]
received any comments on the proposed
rule change. This order approves the
proposed rule change, as modified by
Amendment No. 1.
II. The Description of the Proposed
Rule Change, as Modified by
Amendment No. 1 5
The Exchange proposes to list and
trade shares (‘‘Shares’’) of The Gold
Trust (‘‘Trust’’), a series of the World
Currency Gold Trust (‘‘WCGT’’),6 under
NYSE Arca Rule 8.201–E.7 NYSE Arca
Rule 8.201–E governs the listing and
trading, or trading pursuant to unlisted
trading privileges, of Commodity-Based
Trust Shares on the Exchange.8
The investment objective of the Trust
is for the Shares to reflect the
performance of the price of gold bullion,
less the expenses of the Trust’s
operations. The Trust will not trade in
gold futures, options, or swap contracts
on any futures exchange or over the
counter. The Trust will not hold or trade
in commodity futures contracts,
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81918; File No. SR–
NYSEArca–2017–98]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Approving a
Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, To List and
Trade Shares of The Gold Trust Under
NYSE Arca Rule 8.201–E
October 23, 2017.
I. Introduction
asabaliauskas on DSKBBXCHB2PROD with NOTICES
On August 30, 2017, NYSE Arca, Inc.
(‘‘NYSE Arca’’ 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 list and trade shares of The
Gold Trust under NYSE Arca Rule
8.201–E. The proposed rule change was
published for comment in the Federal
Register on September 15, 2017.3 On
September 28, 2017, the Exchange filed
Amendment No. 1 to the proposed rule
change.4 The Commission has not
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 81568
(Sep. 11, 2017), 82 FR 43417.
4 Amendment No. 1 to the proposed rule change
replaces and supersedes the original filing in its
entirety. In Amendment No. 1, the Exchange: (1)
Provided additional information regarding the
futures exchanges that trade in gold futures
contracts and which of those exchanges are
members of the Intermarket Surveillance Group
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17:54 Oct 26, 2017
Jkt 244001
(‘‘ISG’’); (2) stated that the net asset value (‘‘NAV’’)
of the Trust will be published by the Sponsor (as
defined herein) by 5:30 p.m., Eastern time on each
day that the NYSE Arca is open for regular trading
and will be posted on the Trust’s Web site; (3)
clarified that the intraday indicative value (‘‘IIV’’)
per Share for the Shares will be widely
disseminated by one or more major market data
vendors at least every 15 seconds during the
Exchange’s Core Trading Session (as defined in the
Exchange’s rules; and (4) stated that the Web site
for the Trust will provide the two most recent
reports to stockholders. Amendment No. 1 also
made non-substantive, technical amendments.
Amendment No. 1 is available at: https://
www.sec.gov/comments/sr-nysearca-2017-98/
nysearca201798-2614707-161129.pdf. Amendment
No. 1 is not subject to notice and comment because
it is a technical amendment that does not materially
alter the substance of the proposed rule change or
raise any novel regulatory issues.
5 A more detailed description of the Trust and the
Shares, as well as investment risks, creation and
redemption procedures, NAV calculation,
availability of information and fees, among other
things, is included in the Registration Statement,
infra note 7, and in Amendment No. 1, supra note
4.
6 According to the Exchange, WCGT is a Delaware
statutory trust consisting of multiple series, each of
which issues common units of beneficial interest,
which represent units of fractional undivided
beneficial interest in and ownership of such series.
The term of WCGT and each series will be
perpetual (unless terminated earlier in certain
circumstances).
7 On August 29, 2017, WCGT submitted to the
Commission its draft registration statement on Form
S–1 with respect to the Trust (‘‘Registration
Statement’’) under the Securities Act of 1933 (‘‘1933
Act’’).
8 A ‘‘Commodity-Based Trust Share’’ is a security
(a) that is issued by a trust that holds a specified
commodity deposited with the trust; (b) that is
issued by such trust in a specified aggregate
minimum number in return for a deposit of a
quantity of the underlying commodity; and (c) that,
when aggregated in the same specified minimum
number, may be redeemed at a holder’s request by
such trust which will deliver to the redeeming
holder the quantity of the underlying commodity.
See NYSE Arca Rule 8.201–E(c)(1).
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Frm 00104
Fmt 4703
Sfmt 4703
commodity interests, or any other
instruments regulated by the
Commodity Exchange Act. The Trust
will take delivery of physical gold that
complies with the London Bullion
Market Association (‘‘LBMA’’) gold
delivery rules. According to the
Exchange, the Shares, which are
Commodity Based Trust Shares, will
represent investors’ discrete identifiable
and undivided beneficial ownership
interest in the commodities deposited
into the Trust.
The sponsor of the Trust is WGC USA
Asset Management Company, LLC
(‘‘Sponsor’’). The sole trustee of WCGT
is Delaware Trust Company. BNY
Mellon Asset Servicing, a division of
The Bank of New York Mellon
(‘‘BNYM’’), will be the Trust’s
administrator and transfer agent. BNYM
will serve as the custodian of the Trust’s
cash, if any. A bank will serve as the
custodian of the Trust’s gold.
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the Exchange’s proposed rule
change, as modified by Amendment No.
1, to list and trade the Shares is
consistent with the Act and the rules
and regulations thereunder applicable to
a national securities exchange.9 In
particular, the Commission finds that
the proposal, as modified by
Amendment No. 1, is consistent with
Section 11A(a)(1)(C)(iii) of the Act,10
which sets forth Congress’ finding that
it is in the public interest and
appropriate for the protection of
investors and the maintenance of fair
and orderly markets to assure the
availability to brokers, dealers, and
investors of information with respect to
quotations for and transactions in
securities. The last-sale price for the
Shares will be disseminated over the
Consolidated Tape. According to the
Exchange, there is a considerable
amount of information about gold and
gold markets available on public Web
sites and through professional and
subscription services. Investors may
obtain gold pricing information on a 24hour basis based on the spot price for an
ounce of gold from various financial
information service providers.11
9 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
10 15 U.S.C. 78k–1(a)(1)(C)(iii).
11 The Exchange states that Reuters and
Bloomberg, for example, provide at no charge on
their Web sites delayed information regarding the
spot price of gold and last sale prices of gold
futures, as well as information about news and
developments in the gold market. Reuters and
Bloomberg also offer a professional service to
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]]>Agencies
[Federal Register Volume 82, Number 207 (Friday, October 27, 2017)]
[Notices]
[Pages 49882-49884]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-23369]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 32867; File No. 812-14756]
PIMCO Funds, et al.
October 23, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
-----------------------------------------------------------------------
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 and transactions. Applicants request an order that would
permit certain registered open-end management investment companies to
participate in a joint lending and borrowing facility.
APPLICANTS: PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF
Trust, PIMCO Equity Series, PIMCO Equity Series VIT, PIMCO Managed
Accounts Trust, each an investment company organized as a Delaware
statutory trust or a Massachusetts business trust and registered under
the Act as an open-end management investment company, on behalf of all
existing series,\1\ and Pacific Investment Management Company LLC (the
``Adviser''), a Delaware limited liability company registered as an
investment
[[Page 49883]]
adviser under the Investment Advisers Act of 1940.
---------------------------------------------------------------------------
\1\ Currently, one series of the Funds (as defined below) is a
money market fund that complies with Rule 2a-7 of the Act, and
applicants request that the order also apply to any future Fund that
is a money market fund that complies with rule 2a-7 of the Act (each
a ``Money Market Fund''). Money Market Funds typically will not
participate as borrowers under the interfund lending facility
because they rarely need to borrow cash to meet redemptions.
FILING DATES: The application was filed on March 17, 2017 and amended
---------------------------------------------------------------------------
on June 28, 2017 and October 16, 2017.
HEARING OR NOTIFICATION OF HEARING: An order granting the requested
relief 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 November 17, 2017 and should be accompanied by proof of
service on the applicants, in the form of an affidavit, or, for
lawyers, a certificate of service. Pursuant to Rule 0-5 under the Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, 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: Joshua Ratner,
Pacific Investment Management Company LLC, 1633 Broadway, New York, New
York 10019 and Robert W. Helm, Brendan C. Fox, Dechert LLP, 1900 K
Street NW., Washington, DC 20006.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 551-6876 or Robert H. Shapiro, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
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 https://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Summary of the Application
1. Applicants request an order that would permit the applicants to
participate in an interfund lending facility where each Fund could lend
money directly to and borrow money directly from other Funds to cover
unanticipated cash shortfalls, such as unanticipated redemptions or
trade fails.\2\ The Funds will not borrow under the facility for
leverage purposes and the loans' duration will be no more than 7
days.\3\
---------------------------------------------------------------------------
\2\ Applicants request that the order apply to the applicants
and to any existing or future registered open-end management
investment company or series thereof for which the Adviser or any
successor thereto or an investment adviser controlling, controlled
by, or under common control with the Adviser or any successor
thereto serves as investment adviser (each a ``Fund'' and
collectively the ``Funds'' and each such investment adviser an
``Adviser''). For purposes of the requested order, ``successor'' is
limited to any entity that results from a reorganization into
another jurisdiction or a change in the type of a business
organization.
\3\ Any Fund, however, will be able to call a loan on one
business day's notice.
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2. Applicants anticipate that the proposed facility would provide a
borrowing Fund with a source of liquidity at a rate lower than the bank
borrowing rate at times when the cash position of the Fund is
insufficient to meet temporary cash requirements. 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 certain other short
term money market instruments. Thus, applicants assert that the
facility would benefit both borrowing and lending Funds.
3. Applicants agree that any order granting the requested relief
will be subject to the terms and conditions stated in the application.
Among others, the Adviser, through a designated committee, would
administer the facility as a disinterested fiduciary as part of its
duties under the investment management and administrative agreements
with the Funds and would receive no additional fee as compensation for
its services in connection with the administration of the facility.\4\
The facility would be subject to oversight and certain approvals by the
Funds' Board, including, among others, approval of the interest rate
formula and of the method for allocating loans across Funds, as well as
review of the process in place to evaluate the liquidity implications
for the Funds. A Fund's aggregate outstanding interfund loans will not
exceed 15% of its net assets, and the Fund's loans to any one Fund will
not exceed 5% of the lending Fund's net assets.\5\
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\4\ Members of the designated committee may include one or more
investment professionals, including individuals involved in making
investment decisions regarding short-term investments.
\5\ Under certain circumstances, a borrowing Fund will be
required to pledge collateral to secure the loan.
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4. Applicants assert that the facility does not raise the concerns
underlying section 12(d)(1) of the Act given that the Funds are part of
the same group of investment companies and there will be no duplicative
costs or fees to the Funds.\6\ Applicants also assert that the proposed
transactions do not raise the concerns underlying sections 17(a)(1),
17(a)(3), 17(d) and 21(b) of the Act as the Funds would not engage in
lending transactions that unfairly benefit insiders or are detrimental
to the Funds. Applicants state that the facility will offer both
reduced borrowing costs and enhanced returns on loaned funds to all
participating Funds and each Fund would have an equal opportunity to
borrow and lend on equal terms based on an interest rate formula that
is objective and verifiable. With respect to the relief from section
17(a)(2) of the Act, applicants note that 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).\7\
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\6\ Applicants state that the obligation to repay an interfund
loan could be deemed to constitute a security for the purposes of
sections 17(a)(1) and 12(d)(1) of the Act.
\7\ Applicants state that any pledge of securities to secure an
interfund loan could constitute a purchase of securities for
purposes of section 17(a)(2) of the Act.
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5. Applicants also believe that the limited relief from section
18(f)(1) of the Act that is necessary to implement the facility
(because the lending Funds are not banks) is appropriate in light of
the conditions and safeguards described in the application and because
the open-end Funds would remain subject to the requirement of section
18(f)(1) that all borrowings of the open-end Fund, including combined
interfund loans and bank borrowings, have at least 300% asset coverage.
6. Section 6(c) of the Act permits the Commission to exempt any
persons or transactions from any provision of the Act if such 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 12(d)(1)(J) of the Act
provides that the Commission may exempt any person, security, or
transaction, or any class or classes of persons, securities, or
transactions, from any provision of section 12(d)(1) if the exemption
is consistent with the public interest and the protection of investors.
Section 17(b) of the Act authorizes the Commission to grant an order
permitting a transaction otherwise prohibited by section 17(a) if it
finds that (a) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part
[[Page 49884]]
of any person concerned; (b) the proposed transaction is consistent
with the policies of each registered investment company involved; and
(c) the proposed transaction is consistent with the general purposes of
the Act. 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, joint arrangement or profit sharing plan 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.
For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-23369 Filed 10-26-17; 8:45 am]
BILLING CODE 8011-01-P
