[Federal Register Volume 61, Number 75 (Wednesday, April 17, 1996)]
[Notices]
[Pages 16816-16819]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9401]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21885; 812-9972]
UAM Funds, Inc., et al.; Notice of Application
April 10, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption Under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: UAM Funds, Inc., UAM Funds Trust, AEW Commercial Mortgage
Securities Fund, Inc., (``AEW'') (collectively, the ``Existing
Funds''); Acadian Asset Management, Inc., Aldrich, Eastman & Waltch,
L.P., Barrow, Hanley, Mewhinney & Strauss, Inc., C.S. McKee & Company,
Inc., Cambiar Investors, Inc., Chicago Asset Management Company, Cooke
& Bieler, Inc., Dewey Square Investors Corp.,
[[Page 16817]]
Dwight Asset Management Company, Fiduciary Management Associates, Inc.,
Hanson Investment Management Company, Investment Counselors of
Maryland, Inc., Investment Research Company, Murray Johnstone
International Ltd., Newbold's Asset Management, Inc., NWQ Investment
Management Company, Rice, Hall, James & Associates, Sirach Capital
Management, Inc., Spectrum Asset Management, Inc., Sterling Capital
Management Company, Thompson, Siegel & Walmsley, Inc., and Tom Johnson
Investment management, Inc. (collectively, the ``Advisers'').
RELEVANT ACT SECTION: Order requested under section 17(d) of the Act
and rule 17d-1 thereunder.
SUMMARY OF APPLICATION: Applicants request an order to permit certain
investment companies to deposit their uninvested cash balances in one
or more joint accounts to be used to enter into short-term investments.
FILING DATES: The application was filed on January 29, 1996 and amended
on April 9, 1996.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on May 6, 1996, and
should be accompanied by proof of service on applicant in the form of
an affidavit or, for lawyers, a certificate of service. hearing
requests should state the nature of the writer's interest, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the SEC's
Secretary.
ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, D.C.
20549. Applicants, c/o Audrey C. Talley, Esq., Stradley, Ronon, Stevens
& Young, 2600 One Commerce Square, Philadelphia, PA 19103-7098.
FOR FURTHER INFORMATION CONTACT:
Marianne H. Khawly, Staff Attorney, at (202) 942-0562, or Robert A.
Robertson, Branch Chief, (202) 942-0564 (Office of Investment Company
Regulation, Division of Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch.
Applicants' Representations
1. UAM Fund, Inc., a Maryland corporation, and UAM Funds Trust, a
Delaware business trust, are open-end management investment companies
comprised of multiple series of shares. AEW, a Maryland corporation, is
a closed-end investment company. Each of the Advisers, except Aldrich,
Eastman & Waltch, L.P. (``Aldrich, Eastman''), is a wholly-owned
subsidiary of United Asset Management Corporation (``United'').
Aldrich, Eastman is a limited partnership of which United is the sole
limited partner. United is a holding company incorporated for the
purpose of acquiring and owning investment management firms.\1\
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\1\ United does not engage in any investment activities that
would require it to be registered as an investment adviser or
investment company. See, United Asset Management Corp., SEC No-
Action Letter (pub. avail. Nov. 2, 1981).
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2. Applicants request that any relief granted pursuant to the
application also apply to any future registered investment companies
that are advised by an Adviser, or any entity controlling, controlled
by, or under common control with an Adviser and that are in the same
``group of investment companies,'' as defined in rule 11a-3 under the
Act, as the Existing Funds (together with the Existing Funds, the
``Portfolios''). In addition, applicants request that any relief
granted also apply to any entity controlling, controlled by, or under
common control with an Adviser that serves as investment adviser to any
of the Portfolios. All Portfolios that currently intend to rely on the
requested order are named as applicants.
3. The Existing Funds have each entered into an administration
agreement with Chase Global Fund Services Company, formerly, Mutual
Fund Services Company (the ``Administrator'') pursuant to which the
Administrator provides transfer agent, accounting and administrative
services. Morgan Guaranty Trust Company of New York (``Morgan
Guaranty'') serves as the Existing Funds' custodian. Bank of New York
serves as the Existing Funds' custodian. The distributor of the open-
end Existing Funds, UAM Fund Distributors, Inc., formerly Regis
Retirement Plan Services, is a wholly-owned subsidiary of United.
4. At the end of each trading day, the Portfolios have uninvested
cash balances in their accounts at their custodian bank that would not
otherwise be invested in Portfolio securities by their respective
Adviser. Generally such cash balances are invested in short-term liquid
assets such as commercial paper or U.S. Treasury bills. Cash balances
may also be invested in shares of the money market Portfolios.\2\
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\2\ UAM Funds, Investment Company Act Release Nos. 21739 (Feb.
9, 1996) (notice) and 21809 (March 6, 1996) (order).
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5. Applicants propose to deposit uninvested cash balances of the
Portfolios that remain at the end of the trading day, as well as cash
for investment purposes, into one or more joint accounts (the ``Joint
Accounts'') and to invest the daily balance of the Joint Accounts in:
(a) repurchase agreements collateralized by U.S. government securities
(as defined in the Act) or by First Tier Securities (as defined in rule
2a-7 under the Act); (b) interest-bearing or discounted commercial
paper, including dollar denominated commercial paper of foreign
issuers; and (c) any other short-term money market instruments,
including variable rate demand notes and other tax-exempt money market
instruments, that constitute ``Eligible Securities'' (as defined in
rule 2a-7 under the Act) (collectively, ``Short-Term Investments'').
6. Applicants proposes to enter into hold-in-custody repurchase
agreements, i.e., repurchase agreements where the counterparty or one
of its affiliated persons may have possession of, or control over, the
collateral subject to the agreement, only where cash is received very
late in the business day and otherwise would be unavailable for
investment.
7. A Portfolio's decision to use a Joint Account would be based on
the same factors as its decision to make any other short-term liquid
investment. The sole purpose of the Joint Accounts would be to provide
a convenient means of aggregating what otherwise would be one or more
daily transactions for some or all Portfolios necessary to manage their
respective daily account balances.
8. The Advisers will be responsible for investing funds held by the
Joint Accounts, establishing accounting and control procedures, and
ensuring fair treatment of the Portfolios. The Advisers will manage
investments in the Joint Accounts in essentially the same manner as if
it had invested in such instruments on an individual basis for each
Portfolio.
9. Any repurchase agreements entered into through the joint account
will comply with the terms of Investment Company Act Release No. 13005
(February 2, 1983). Applicants acknowledge that they have a continuing
obligation to monitor the SEC's published statements on repurchase
agreements, and represent that repurchase agreement transactions
[[Page 16818]]
will comply with future positions of the SEC to the extent that such
positions set forth different or additional requirements regarding
repurchase agreements. In the event that the SEC sets forth guidelines
with respect to other Short-Term Investments, all such investments made
through the Joint Account will comply with those guidelines.
Applicants' Legal Analysis
1. Section 17(d) of the Act and rule 17d-1 thereunder prohibit an
affiliated person of a registered investment company from participating
in any joint enterprise or arrangement in which such investment company
is a participant, without an SEC order.
2. The Portfolios, by participating in the proposed Joint Account,
and the Advisers, by managing the proposed Joint Account, could be
deemed to be ``joint participants'' in a transaction within the meaning
or section 17(d). In addition, the proposed Joint Account could be
deemed to be a ``joint enterprise or other joint arrangement'' within
the meaning of rule 17d-1.
3. Although the Advisers will realize some benefits through
administrative convenience and some possible reduction in clerical
costs, the Portfolios will be the primary beneficiaries of the Joint
Accounts because the account may result in higher returns and would be
a more efficient means of administering daily cash investments.
4. Applicants believe that no Portfolio will be in a less favorable
position as a result of the Joint Accounts. Each Portfolio's investment
in a Joint Account would not be subject to the claims of creditors,
whether brought in bankruptcy, insolvency, or other legal proceeding,
of any other Portfolio. Each Portfolio's liability on any Short-Term
Investment will be limited to its interest in such investment; no
Portfolio will be jointly liable for the investments of any other
Portfolio.
5. Portfolios may earn a higher rate of return on investments
through the Joint Accounts relative to the returns they could earn
individually. Under most market conditions, it is generally possible to
negotiate a rate of return on larger repurchase agreements and other
Short-Term Investments that is higher than the rate available on
smaller repurchase agreements and other Short-Term Investments.
6. The Joint Accounts may result in certain administrative
efficiencies and a reduction of the potential for errors by reducing
the number of trade tickets and cash wires that must be processed by
the sellers of Short-Term Investments, the Portfolios' custodian and
the Advisers's accounting and trading departments. For the reasons set
forth above, applicants believe that granting the requested order is
consistent with the provisions, policies, and purposes of the Act and
the intention of rule 19d-1.
Applicants' Conditions
Applicants will comply with the following procedures as conditions
to any SEC order:
1. The Joint Accounts will not be distinguishable from any other
accounts maintained by the Portfolios at their custodian except that
monies from the Portfolios will be deposited in the Joint Account on a
commingled basis. The Joint Accounts will not have a separate existence
and will not have indicia of a separate legal entity. The sole function
of the Joint Accounts will be to provide a convenient way of
aggregating individual transactions which would otherwise require daily
management by the Advisers of uninvested cash balances.
2. Cash in the Joint Accounts will be invested in one or more of
the following, as directed by the Advisers: (a) repurchase agreements
collateralized fully as defined in rule 2a-7 under the act by: (i) U.S.
Government obligations; (ii) obligations issued or guaranteed as to
principal and interest or otherwise backed by any of the agencies or
instrumentalities of the U.S. Government; (iii) certain obligations of
the U.S. Government in the form of separately traded principal and
interest components of securities issued or guaranteed by the U.S.
Treasury; and (iv) certain U.S. government agency securities such as
mortgage-backed certificates issued by the Government National Mortgage
Association, the Federal National Mortgage Association, and the Federal
Home Loan Mortgage Corporation, representing ownership interests in
mortgage pools; (b) interest bearing or discounted commercial paper,
including dollar denominated commercial paper of foreign issuers; and
(c) in any other short-term money market instruments, including tax-
exempt money market instruments, that constitute ``Eligible
Securities'' within the meaning of rule 2a-7 under the Act. No
Portfolio would be permitted to invest in a Joint Account unless the
Investments in such Joint Account satisfied the investment policies and
guidelines of that Portfolio. Investments that are joint repurchase
transactions would have a remaining maturity or deemed maturity of 60
days or less and other Investments would have a remaining maturity of
90 days or less, each as determined pursuant to rule 2a-7 under the
Act.
3. All assets held in the Joint Accounts would be valued on an
amortized cost basis to the extent permitted by applicable SEC
releases, rules, or orders.
4. Each Portfolio, in reliance on rule 2a-7 under the Act, will use
the average maturity of the instruments in the Joint Account in which
such Portfolio has an interest (determined on a dollar weighted basis)
for the purpose of computing its average portfolio maturity with
respect to its portion of the assets held in a Joint Account on that
day.
5. In order to assure that there will be no opportunity for any
Portfolio to use any part of a balance of a Joint Account credited to
another Portfolio, no Portfolio will be allowed to create a negative
balance in any Joint Account for any reason, although each Portfolio
would be permitted to draw down its entire balance at any time. Each
Portfolio's decision to invest in a Joint Account would be solely at
its option, and no Portfolio will be obligated to invest in the Joint
Account or to maintain any minimum balance in the Joint Account. In
addition, each Portfolio will retain the sole rights of ownership to
any of its assets invested in the Joint Account, including interest
payable on such assets invested in the Joint Account.
6. The Advisers will administer the investment of cash balances in
and operation of the Joint Accounts as part of its general duties under
its advisory agreements with Portfolios and will not collect any
additional or separate fees for advising any Joint Account.
7. The administration of the Joint Accounts would be within the
fidelity bond coverage required by section 17(g) of the Act and rule
17g-1 thereunder.
8. The directors and trustees of the Portfolios will adopt
procedures pursuant to which the Joint Accounts will operate, which
will be reasonably designed to provide that the requirements of the
application will be met. The respective directors and trustees will
make and approve such changes as they deem necessary to ensure that
such procedures are followed. In addition, the directors and trustees
will determine, no less frequently than annually, that the Joint
Accounts have been operated in accordance with the proposed procedures
and will only permit a Portfolio to continue to participate therein if
it determines that there is a reasonable likelihood that the Portfolio
and its shareholders (or beneficiaries, as applicable) will benefit
from the Portfolio's continued participation.
[[Page 16819]]
9. Any Short-Term Investments made through the Joint Accounts will
satisfy the investment criteria of all Portfolios in that investment.
10. The Advisers and the custodian of each Portfolio will maintain
records documenting, for any given day, each Portfolio's aggregate
investment in a Joint Account and each Portfolio's pro rata share of
each Investment made through such Joint Account. The records maintained
for each Portfolio that is a Fund or an investment portfolio thereof
shall be maintained in conformity with section 31 of the Act and the
rules and regulations thereunder.
11. Every Portfolio in the Joint Accounts will not necessarily have
its cash invested in every Short-Term Investment. However, to the
extent that a Portfolio's cash is applied to a particular Short-Term
Investment, the Portfolio will participate in an own its proportionate
share of such Short-Term Investment, and any income earned or accrued
thereon, based upon the percentage of such investment purchased with
monies contributed by the Portfolio.
12. Short-Term Investment held in a Joint Account generally will
not be sold prior to maturity except if: (a) the Advisers believe the
investment no longer presents minimal credit risks; (b) the investment
no longer satisfies the investment criteria of all Portfolios in the
investment because of a downgrading or otherwise; or (c) in the case of
a repurchase agreement, the counterparty defaults. The Advisers may,
however, sell any Short-Term Investment (or any fractional portion
thereof) on behalf of some or all Portfolios prior to the maturity of
the investment if the cost of such transactions will be borne solely by
the selling Portfolios and the transaction will not adversely affect
other Portfolios. In no case would an early termination by less than
all participating Portfolios be permitted if it would reduce the
principal amount or yield received by other Portfolios participating in
a particular Joint Account or otherwise adversely affect the other
participating Portfolios. Each Portfolio will be deemed to have
consented to such sale and partition of the investments in the Joint
Account.
13. Short-Term Investments held through a Joint Account with a
remaining maturity of more than seven days, as calculated pursuant to
rule 2a-7 under the Act, will be considered illiquid and, for any
Portfolio that is an open-end investment company registered under the
Act, subject to the restriction that the Portfolio may not invest more
than 15% (or such other percentage as set forth by the SEC from time to
time) of its net assets in illiquid securities, if the Advisers cannot
sell the instrument, or the Portfolio's fractional interest in such
instrument, pursuant to the preceding condition.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-9401 Filed 4-16-96; 8:45 am]
BILLING CODE 8010-01-M