[Federal Register Volume 64, Number 79 (Monday, April 26, 1999)]
[Notices]
[Pages 20341-20345]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10309]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23791; 812-11028]
American AAdvantage Funds, et al.; Notice of Application
April 19, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application under section 12(b)(1)(J) of the
Investment Company Act of 1940 (``Act'') exempting applicants from
section 12(d)(1) of the Act, sections 6(c) and 17(b) of the Act
exempting applicants from section 17(a) of the Act, and section 17(d)
of the Act and rule 17d-1 under the Act permitting certain joint
transactions.
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Summary of Application: The order would permit certain registered
open-end investment companies to use their cash reserves (``Uninvested
Cash'') to purchase shares of affiliated money market funds and to use
cash collateral from securities lending transactions (``Cash
Collateral'') to purchase shares of affiliated money market funds or
affiliated private investment funds. The order also would permit
certain registered investment companies to pay fees based on a share of
the revenue generated from securities lending transactions to an
affiliated lending agent. The order would supersede a prior order
(``Prior Order'').\1\
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\1\ American AAdvantage Funds, Investment Company Act Release
Nos. 22336 (Nov. 15, 1996) (notice) and 22390 (Dec. 11, 1996)
(order).
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Applicants: American AAdvantage Funds (the ``AAdvantage Trust''),
American AAdvantage Mileage Funds (the ``Mileage Trust'' and, together
with the AAdvantage Trust, the ``American Trusts''), AMR Investment
Service Trust (the ``AMR Trust'' and, together with the American
Trusts, the ``Trusts''), AMR Investments Strategic Cash Business Trust
(the ``Strategic Cash Trust''), AMR Investments Enhanced Yield Business
Trust (the ``Enhanced Yield Trust'' and, together with Strategic Cash
Trust, the ``Private Funds''), and AMR Investment Services, Inc. (the
``Adviser'').
Filing Dates: The application was filed on February 25, 1998.
Applicants have agreed to file an amendment during the notice period,
the substance of which is reflected in this notice.
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 applicants 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 13,
1999, 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 may request
notification of a hearing by writing to the SEC's Secretary.
[[Page 20342]]
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549-0609. Applicants, 4333 Amon Carter Boulevard, MD 5645, Fort
Worth, Texas 76155.
FOR FURTHER INFORMATION CONTACT:
J. Amanda Machen, Senior Counsel, at (202) 942-7120, or Christine Y.
Greenlees, Branch Chief, at (202) 942-0564 (Division of Investment
Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C.
20549-0102 (tel. 202-942-8090).
Applicants' Representations
1. The AAdvantage Trust and the Mileage Trust are Massachusetts
business trusts registered under the Act as open-end management
investment companies. The AAdvantage Trust and the Mileage Trust each
have nine series (each series, individually, a ``Fund'' and,
collectively, ``Funds''). Under a master-feeder operating structure,
each Fund, with one exception, invests its investable assets in a
corresponding series (``Portfolio'') of the AMR Trust, a New York
common law trust registered under the Act as an open-end management
investment company.\2\ The AMR Trust currently consists of eight
Portfolios. The AMR Trust sells its shares to the AAdvantage Trust, the
Mileage Trust, and other institutions pursuant to section 4(2) of the
Securities Act of 1993. State Street Bank and Trust Company (``State
Street'') serves as custodian (``Custodian'') for the assets for each
Trust, and each Trust has the same board of trustees (``Board'').
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\2\ The American AAdvantage S&P Index Fund invests all of its
investable assets in the Equity 500 Index Portfolio, a registered
open-end investment company advised by Bankers Trust Company.
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2. The Private Funds, both organized as Massachusetts business
trusts, are private investment companies relying on section 3(c)(1) of
the Act. The Private Funds offer daily redemption of their shares. The
Strategic Cash Trust values its portfolio using the amortized cost
method and complies with the requirements of rule 2a-7 under the Act.
The Enhanced Yield Trust seeks to achieve its objective by investing in
high quality money market instruments and variable rate obligations and
maintains a maximum average maturity of its portfolio of not more than
one year.
3. The adviser, a wholly-owned subsidiary of AMR Corporation, the
parent corporation of American Airlines, Inc., is registered as an
investment adviser under the Investment Advisers Act of 1940. The
Adviser serves as investment adviser and provides administrative
services to the AMR Trust, and provide administrative services to the
American Trusts.\3\ The Adviser also serves as sole trustee to the
Private Funds.
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\3\ Applicants request relief for the Trusts, and all
subsequently registered open-end investment companies that are
advised by the Adviser or any entity controlling, controlled by, or
under common control (within the meaning of section 2(a)(9) of the
Act) with the Adviser. All existing investment companies that
currently intend to rely on the order have been named as applicants.
Any entities that rely on the requested order in the future will do
so in accordance with the terms and conditions in the application.
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4. Each of the Portfolios has, or may be expected to have,
Uninvested Cash held by its Custodian. Uninvested Cash may result from
a variety of sources, including dividends or interest received on
portfolio securities, unsettled securities transactions, reserves held
for investment strategy purposes, scheduled maturity of investments,
liquidation of investment securities to meet anticipated redemptions,
dividend payments, or new monies received from investors.
5. Applicants propose that the Portfolios use Uninvested Cash to
purchase shares of one or more existing or future money market series
of AMR Trust, or any other money market fund advised by the Adviser
(``Money Market Portfolios'') (each Portfolio, including a Money Market
Portfolio, that purchases shares of the Money Market Portfolios, an
``Investing Portfolio''). An Investing Portfolio's aggregate investment
of Uninvested Cash in Money Market Portfolios will not exceed 25% of
the Investing Portfolio's total assets and will be in accordance with
the Investing Portfolio's investment restrictions and policies
described in its prospectus and statement of additional information.
6. Each Fund, through its corresponding Portfolio, has the ability
to increase its income by lending portfolio securities to registered
broker-dealers or other institutional investors deemed by the Adviser
to be of good standing (``Borrowers''). Under the Prior Order, the
Trusts may invest Cash Collateral received from Borrowers in Private
Funds. Applicants now seek an order that would supersede the Prior
Order and permit the Investing Portfolios to invest Cash Collateral in
shares of the Money Market Portfolios or the Private Funds or any
future private fund advised by the Adviser (together, the ``Underlying
Funds''). No Money Market Portfolio that is an Investing Portfolio will
be an Underlying Fund.
7. Pursuant to a securities lending agreement (``Securities Lending
Agreement''), State Street, which currently is not affiliated with the
Adviser or any affiliate of the Adviser, acts as the securities lending
agent for each Portfolio (``Securities Lending Program''). A majority
of the Board of each Trust (including a majority of the trustees who
are not ``interested persons'' within the meaning of the Act)
(``Independent Trustees'') approved the participation of the Portfolios
in the Securities Lending Program and will review the program annually.
8. As collateral for the securities loaned, State Street is
authorized to accept cash and, upon consent of the Portfolio, may
accept other types of instruments such as U.S. Government securities or
irrevocable letters of credit. Under the Securities Lending Agreement,
Cash Collateral may be invested in shares of registered or unregistered
investment companies that are approved by the Board and are consistent
with the investment restrictions and guidelines of the participating
Portfolios (except as the investment may be limited by section 12(d)(1)
of the Act).
9. The Adviser provides certain services in connection with the
Securities Lending Program and ensures compliance with applicable
regulatory and investment guidelines. The Adviser determines which
securities are available for loan and has the discretion and power to
prevent any loan from being made or to terminate any loan. The Adviser
also monitors State Street to ensure that securities loans are effected
in accordance with its instructions and within the procedures adopted
by the Board of the AMR Trust.
10. Each Portfolio earns interest and dividend income from the
investment of Cash Collateral (``Cash Collateral Income''), from which
it pays the Borrower an agreed-upon fee. The Portfolio then splits the
remaining Cash Collateral Income with State Street and the Adviser.\4\
When the collateral is not cash, the Borrower pays the Portfolio a loan
fee equal to a percentage of the market value of the loaned securities
and State Street receives a portion of the loan fee as compensation for
its services in connection with the Securities Lending Program.
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\4\ Applicants state that this compensation to the Adviser is
for services provided in connection with the Securities Lending
Program pursuant to a supplement to the investment advisory
agreement for each Trust approved in accordance with section 15 of
the Act.
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[[Page 20343]]
11. State Street also acts as securities lending agent for other
institutions that loan their portfolio securities. State Street may
purchase shares of the Underlying Funds on behalf of, and with Cash
Collateral from, these institutions. As a result, State Street may hold
directly or through a nominee more than 5% of the outstanding shares of
an Underlying Fund and thus could be an affiliated person (or an
affiliated person to an affiliated person) of the Portfolios.
Accordingly, applicants request relief to permit the Portfolios to pay
fees based on a share of the revenue generated from securities lending
transactions to State Street when it becomes an affiliated person
solely by holding more than 55 of the shares of an Underlying Fund.
Applicant's Legal Analysis
A. Investment of Uninvested Cash and Cash Collateral in Money Market
Portfolios and Private Funds
1. Section 12(d)(1)(A) of the Act provides that no registered
investment company may acquire securities of another investment company
representing more than 3% of the acquired company's outstanding voting
stock, more than 5% of the acquiring company's total assets, or,
together with the securities of other investment companies, more than
10% of the acquiring company's total assets. Section 12(d)(1)(B)
provides that no registered open-end investment company may sell its
securities to another investment company if the sale will cause the
acquiring company to own more than 3% of the acquired company's voting
stock, or if the sale will cause more than 10% of the acquired
company's voting stock to be owned by investment companies.
2. Section 12(d)(1)(J) of the Act provides that the SEC many exempt
any person or transaction from any provision of section 12(d)(1) if and
to the extent that the exemption is consistent with the public interest
and the protection of investors.
3. Applicants request an exemption under section 12(d)(1)(J) to
permit each Investing Portfolio to use Uninvested Cash and Cash
Collateral to acquire shares of a Money Market Portfolio in excess of
the limits imposed by section 12(d)(1)(A) of the Act, so long as the
Investing Portfolio's aggregate investment of Uninvested Cash in shares
of Money Market Portfolios does not exceed 25% of the Investing
Portfolio's total assets at any time. Applicants' proposal also would
permit the Money Market Portfolios to sell their securities to an
Investing Portfolio in excess of the percentage limitations in section
12(d)(1)(B). Applicants represent that no Money Market Portfolio which
is an Underlying Fund will acquire securities of any other investment
company in excess of the limits contained in section 12(d)(1)(A) of the
Act.
4. Applicants state that none of the abuses meant to be addressed
by section 12(d)(1) of the Act is created by the proposed investment of
Uninvested Cash and Cash Collateral in Money Market Portfolios.
Applicants further state that access to the Money Market Portfolios and
Private funds will enhance each Investing Portfolio's ability to manage
and invest Uninvested Cash and Cash Collateral. Applicants represent
that the proposed arrangement will not result in an inappropriate
layering of fees because the Money Market Portfolios and Private Funds
will not charge a sales load, redemption fee, distribution fee adopted
in accordance with rule 12b-1 under the Act, or service fee (as defined
in rule 2830(b)(9) of the National Association of Securities Dealers,
Inc. (``NASD'') conduct Rules). In addition, in connection with
approving any advisory contract, the Investing Portfolio's Board,
including a majority of the Independent Trustees, will consider to what
extent, if any, the advisory fees charged to the Investing Portfolio by
the Adviser should be reduced to account for reduced services provided
when Uninvested Cash is invested in Money Market Portfolios.
5. Sections 17(a)(1) and 17(a)(2) of the Act prohibit an affiliated
person of a registered investment company, or any affiliated person of
the affiliated person (''Second Tier Affiliate''), acting as principal,
from selling any security to, or purchasing any security from the
registered investment company. Section 2(a)(3) of the Act defines an
``affiliated person'' of another person to include: any person directly
or indirectly owning, controlling, or holding with power to vote 5% or
more of the outstanding voting securities of the other person; any
person directly or indirectly controlling, controlled by, or under
common control with, the other person; and, in the case of an
investment company, its investment adviser.
6. Applicants state that the Adviser, by serving as investment
adviser to the Funds, Portfolios, and Private Funds, is an affiliated
person of each of these entities and that, by virtue of having the same
Adviser, the Funds, Portfolios, and Private Funds may be considered
affiliated persons of each other under section 2(a)(3) of the Act. As a
result, the sale of shares of Money Market Portfolios and Private Funds
to the Investing Portfolios and the redemption of the shares would be
prohibited under section 17(a) of the Act.
7. Section 17(b) of the Act authorizes the SEC to exempt a
transaction from section 17(a) of the Act if the terms of the proposed
transaction, including the consideration to be paid or received, are
reasonable and fair and do not involve overreaching on the part of any
person concerned, and the proposed transaction is consistent with the
policy of each registered investment company concerned and with the
general purposes of the Act.
8. Section 6(c) of the Act authorizes the SEC to exempt any person
or transaction from any provision of the Act if the 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.
9. Applicants request an order under sections 6(c) and 17(b) of the
Act to permit the Investing Portfolios to use their Invested Cash to
purchase shares of the Money Market Portfolios and to use their Cash
Collateral to purchase shares of the Underlying Funds and to permit the
redemption of the shares. Applicants maintain that the terms of the
proposed transactions are reasonable and fair because the Investing
Portfolios will be treated like any other investors in the Money Market
Portfolios and Private Funds, and will purchase and sell shares on the
same terms and on the same basis as shares are purchased and sold by
all other shareholders of the Money Market Portfolios and Private
Funds. Applicants assert that the proposed transactions comply with
each Portfolio's investment restrictions and policies. Applicants state
that Cash Collateral of an Investing Portfolio that is a Money Market
Portfolio will not be used to acquire shares of any Private Fund that
does not comply with rule 2a-7 under the Act. Applicants further state
that the investment of Cash Collateral will comply with all present and
future SEC and staff positions concerning securities lending.
Applicants also state that the Private Funds will comply with the major
substantive provisions of the Act, including the prohibitions against
affiliated transactions, leveraging and issuing senior securities, and
rights of redemption.
10. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
any affiliated person or principal underwriter for a registered
investment company, or a Second Tier Affiliate,
[[Page 20344]]
acting as principal, from effecting any transaction in connection with
any joint enterprise or other joint arrangement or profit sharing plan
in which the investment company participates, without an order of the
SEC.
11. Applicants state that, upon acquiring 5% or more of an
Underlying Fund, State Street could become an affiliated person or a
Second Tier Affiliate of the Portfolio. Applicants also state that the
Investing Portfolios (by purchasing shares of the Money Market
Portfolios and Private Funds), the Adviser (by managing the assets of
the Investing Portfolios invested in the Money Market Portfolios and
Private Funds), and the Money Market Portfolios and Private Funds (by
selling shares to and redeeming them from the Investing Portfolios)
could be deemed to be participants in a joint enterprise or other joint
arrangement within the meaning of section 17(d) of the Act and rule
17d-1 under the Act. Applicants request an order in accordance with
section 17(d) and rule 17d-1 to permit certain transactions incident to
investment in the Money Market Portfolios and the Private Funds.
12. Under rule 17d-1, in passing on applications for orders under
section 17(d), the SEC considers whether the company's participation in
the joint enterprise is consistent with the provisions, policies, and
purposes of the Act, and the extent to which the participation is on a
basis different from or less advantageous than that of other
participants. Applicants submit that the proposed transactions meet
these standards.
13. Applicants state the investment by the Investing Portfolios in
shares of Money Market Portfolios and Private Funds will be on the same
basis and will be indistinguishable from any other shareholder account
maintained by the Money Market Portfolios and Private Funds. Applicants
also maintain that, to the extent any of the Investing Portfolios
invests in the Money Market Portfolios and Private Funds as proposed,
each Investing Portfolio will participate on a fair and reasonable
basis in the returns and expenses of the Money Market Portfolios and
Private Funds.
B. Payment of Lending Agent Fees to State Street
1. As noted above, section 17(d) and rule 17d-1 generally prohibit
joint transactions involving registered investment companies and
certain of their affiliates unless the SEC has approved the
transaction. Applicants state that State Street may hold with power to
vote 5% or more of an Underlying Fund's shares and, thus, may be an
affiliated person or a Second Tier Affiliate of the Portfolios.
Applicants further state that a lending agent agreement between the
Portfolios and State Street, under which compensation is based on a
share of the revenue generated by State Street's lending agent
activities, may be a joint enterprise or other joint arrangement or
profit sharing plan within the meaning of section 17(d) and rule 17d-1.
Consequently, applicants request an order to permit State Street, if it
becomes an affiliated person of the Portfolios solely by holding over
5% of the shares of an Underlying Fund, to receive a portion of the
revenue generated by the Investing Portfolios' securities lending
activities.
2. Applicants represent that in no event will the Investing
Portfolios' lending fee arrangement with State Street be influenced by
State Street's investment of its client's Cash Collateral in the
Underlying Funds. Each Portfolio that has entered into the Securities
Lending Program (``Lending Portfolio'') also has adopted the following
procedures to ensure that the proposed fee arrangement and other terms
governing the relationship with State Street, as lending agent, met the
standards of rule 17d-1:
(a) In connection with the approval of State Street as lending
agent for a Lending Portfolio and implementation of the arrangement
whereby State Street would be compensated as lending agent based on a
percentage of the revenue generated by a Lending Portfolio's
participation in the Securities Lending Program, a majority of the
Board (including a majority of the Independent Trustees) determined
that (i) the contract with State Street was in the best interests of
the Lending Portfolio and its shareholders; (ii) the services to be
performed by State Street were appropriate for the Lending Portfolio;
(iii) the nature and quality of the services provided by State Street
were at least equal to those provided by others offering the same or
similar services for similar compensation; and (iv) the fees for State
Street's services were fair and reasonable in light of the usual and
customary charges imposed by others for services of the same nature and
quality.
(b) Each Lending Portfolio's contract with State Street for lending
agent services will be reviewed annually by the Board and will be
approved for continuation only if a majority of the Board (including a
majority of the Independent Trustees) makes the findings referred to in
paragraph (a) above.
(c) In connection with the initial implementation of the agreement
whereby State Street would be compensated as lending agent based on a
percentage of the revenue generated by a Lending Portfolio's
participation in the Securities Lending Program, the Adviser obtained
price quotes from at least three independent lending agents and
presented the Board with summary information regarding the proposed
securities lending arrangements and related price quotes to assist the
Board in making the findings referred to in paragraph (a) above. All of
the information provided to the Adviser, including each price quote,
was available to the Board. The findings and the basis upon which the
findings were made are set forth in the amended minutes of the meeting
held to consider the arrangement with State Street and will be
maintained as part of the books and records described in paragraph (e)
below.
(d) The Board, including a majority of the Independent Trustees,
will: (i) at each regular quarterly meeting determine that the loan
transactions during the prior quarter were conducted in compliance with
the conditions and procedures set forth in the application, and (ii)
review no less frequently than annually the conditions and procedures
set forth in the application for continuing appropriateness.
(e) Each Lending Portfolio will: (i) Maintain and preserve
permanently in an easily accessible place a written copy of the
procedures and conditions (and modifications thereto) described in the
application or otherwise followed in connection with lending securities
under the Securities Lending Program, and (ii) maintain and preserve
for a period of not less than six years from the end of the fiscal year
in which any loan transaction under the Securities Lending Program
occurred, the first two years in an easily accessible place, a written
record of each loan transaction setting forth a description of the
security loaned, the identity of the person on the other side of the
loan transaction, and the terms of the loan transaction. In addition,
each Lending Portfolio will maintain all information or materials upon
which a determination was made that each loan was made in accordance
with the procedures set forth above and the conditions to the
application.
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions.
[[Page 20345]]
Securities Lending Program
1. Before a Portfolio may participate in the Securities Lending
Program, a majority of the Board, including a majority of the
Independent Trustees, will approve of the Portfolio's participation in
the Securities Lending Program. Such trustees also will evaluate the
securities lending arrangement and its results no less frequently than
annually and determine that any investment of Cash Collateral in the
Underlying Funds is in the best interest of the shareholders of the
Funds and their corresponding Portfolios.
2. Cash Collateral of the Money Market Portfolios will not be used
to acquire shares of any Private Fund that does not comply with the
requirements of rule 2a-7 under the Act.
3. The approval of an Investing Portfolio's Board, including a
majority of the Independent Trustees, will be required for the initial
and subsequent approvals of State Street's service as lending agent for
the Investing Portfolios under the Securities Lending Program, for the
institution of all procedures relating to the Securities Lending
Program as it relates to the Investing Portfolios, and for any period
review of loan transactions for which State Street acts as lending
agent under the Securities Lending Program.
4. The Securities Lending Program of each Portfolio will comply
with all present and future applicable SEC and staff positions
regarding securities lending arrangements.
Private Funds
5. The Private Funds will comply with the requirements of sections
17(a), (d), (e), and 18 of the Act as if the Private Funds were
registered open-end investment companies. With respect to all
redemption requests made by a Lending Portfolio, the Private Funds will
comply with section 22(e) of the Act. The Adviser, as sole trustee of
the Private Funds, will adopt procedures designed to ensure that the
Private Funds comply with sections 17(a), (d), (e), 18 and 22(e) of the
Act. The Adviser will periodically review and periodically update as
appropriate such procedures and will maintain books and records
describing such procedures, and maintain the records required by rules
31a-1(b)(1), 31a-1(b)(2)(ii) and 31a-1(b)(9) under the Act. All books
and records required to be made pursuant to this condition will be
maintained and preserved for a period of not less than six years from
the end of the fiscal year in which any transaction occurred, the first
two years in an easily accessible place, and will be subject to
examination by the SEC and its staff.
6. The Strategic Cash Trust, which will use the ``amortized cost
method'' of valuation as defined in rule 2a-7 under the Act, will
comply with rule 2a-7. With respect to the Strategic Cash Trust, the
Adviser will adopt and monitor the procedures described in rule 2a-
7(c)(7) under the Act and will take such other actions as are required
to be taken under those procedures. The Investing Portfolios may only
purchase shares of the Strategic Cash Trust using the amortized cost
method of valuation if the Adviser determines on an ongoing basis that
the Strategic Cash Trust is in compliance with rule 2a-7. The Adviser
will preserve for a period of not less than six years from the date of
determination, the first two years in an easily accessible place, a
record of the determination and the basis upon which the determination
was made. This record will be subject to examination by the SEC and its
staff.
7. Each Lending Portfolio will purchase and redeem shares of the
Private Funds as of the same time and at the same price, and will
receive dividends and bear its proportionate share of expenses on the
same basis, as other shareholders of the Private Funds. A separate
account will be established in the shareholder records of each Private
Fund for the account of each Lending Portfolio.
8. The net asset value per share with respect to shares of the
Private Funds will be determined separately for each Private Fund by
dividing the value of the assets belonging to that Private Fund, less
the liabilities of that Private Fund, by the number of shares
outstanding with respect to that Private Fund.
Other Conditions
9. Investment of Uninvested Cash in the Money Market Portfolios and
Cash Collateral in the Underlying Funds will be in accordance with each
Portfolio's respective investment restriction, if any, and will be
consistent with its corresponding Fund's policies as recited in such
Fund's prospectuses and statements of additional information.
10. Shares of the Money Market Portfolios and Private Funds will
not be subject to a sales load, redemption fee, distribution fee
adopted in accordance with rule 12b-1 under the Act, or service fee (as
defined in rule 2830(b)(9) of the NASD Conduct Rules).
11. Before the next meeting of the Board of an Investing Portfolio
is held for the purpose of voting on an advisory contract under section
15 of the Act, the Adviser will provide the Board with specific
information regarding the approximate cost to the Adviser of, or
portion of the advisory fee under the existing advisory fee
attributable to, managing the Uninvested Cash of the Investing
Portfolio that can be expected to be invested in the Money Market
Portfolio. In connection with approving any advisory contract for an
Investing Portfolio, the Board of the Investing Portfolio, including a
majority of the Independent Trustees, will consider to what extent, if
any, the advisory fees charged to the Investing Portfolio by the
Adviser should be reduced to account for reduced services provided to
the Investing Portfolio by the Adviser as a result of Uninvested Cash
being invested in the Money Market Portfolio. The minute books of the
Investing Portfolio will record fully the Board's consideration in
approving the advisory contract, including the considerations referred
to above.
12. Each Investing Portfolio will invest Uninvested Cash in, and
hold shares of, the Money Market Portfolios only to the extent that the
Investing Portfolio's aggregate investment in the Money Market
Portfolios does not exceed 25% of the Investing Portfolio's total
assets.
13. Each Investing Portfolio, each Money Market Portfolio, and any
future Portfolio that may rely on the order will be advised by the
Adviser, or a person controlling, controlled by, or under common
control with the Adviser.
14. No Money Market Portfolio or Private Fund that is an Underlying
Fund will acquire securities of any other investment company in excess
of the limits contained in section 12(d)(1)A) of the Act.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-10309 Filed 4-23-99; 8:45 am]
BILLING CODE 8010-01-M