[Federal Register Volume 59, Number 67 (Thursday, April 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8286]


[[Page Unknown]]

[Federal Register: April 7, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20183; 812-8738]

 

Regis Fund, Inc., et al.; Application

March 31, 1994.

AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application for exemption under the Investment 
Company Act of 1940 (the ``Act'').

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APPLICANTS: The Regis Fund, Inc. (the ``Fund''); United Asset 
Management Corporation (``UAM''); Acadian Asset Management, Inc., Cooke 
& Bieler, Inc., Dewey Square Investors Corp., Fiduciary Management 
Associates, Inc., Investment Counselors of Maryland, Inc., Sirach 
Capital Management, Inc., Spectrum Asset Management, Inc., Sterling 
Capital Management Company, Thompson, Siegel & Walmsley, Inc., any 
future investment adviser or subadviser to the Fund or a future Fund 
(as defined below) which is directly or indirectly controlling, 
controlled by or under common control with UAM (the ``Investment 
Advisers''); Regis Retirement Plan Services, Inc., any future 
distributor of the Fund or a future Fund (as defined below) which is 
directly or indirectly controlling, controlled by or under common 
control with UAM (the ``Distributor''); and any other future investment 
company advised by the Investment Advisers, or whose principal 
underwriter is the Distributor, and that are in the same ``group of 
investment companies'' as defined in rule 11a-3 under the Act (``future 
Funds`').

RELEVANT ACT SECTIONS: Exemption requested pursuant to section 6(c) 
from sections 18(f), 18(g), and 18(i).

SUMMARY OF APPLICATION: Applicants seek an order to permit the Funds to 
issue and sell multiple classes of securities representing interests in 
the same investment portfolio.

FILING DATE: The application was filed on December 21, 1993. By letters 
dated February 8, 1994 and March 28, 1994, applicants' counsel stated 
that an amendment, the substance of which is incorporated herein, will 
be filed during the notice period.

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 Commission by 5:30 p.m., on April 
25, 1994 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.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549. 
Applicants, One International Place, 44th Floor, Boston, MA 02110.

FOR FURTHER INFORMATION CONTACT:
James M. Curtis, Senior Counsel, at (202) 504-2406, or Barry D. Miller, 
Senior Special Counsel, at (202) 272-3018 (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. The Fund is a Maryland corporation registered as an open-end 
management investment company. The Fund currently consists of twenty-
five series of shares (each, together with any series subsequently 
established or otherwise acquired is referred to as the ``Portfolio''). 
Each of the existing Investment Advisers is a wholly-owned subsidiary 
of UAM, which is a holding company incorporated in Delaware for the 
purpose of acquiring and owning firms engaged primarily in 
institutional investment management. The Fund's shares are distributed 
through the RFI Distributors division of the Distributor. The 
Distributor of the Fund is a wholly-owned subsidiary of UAM.
    2. Existing shares of each Portfolio (``Existing Shares'') are no 
load, are not offered in connection with a rule 12b-1 distribution 
plan, and are designed primarily for investment by high net worth 
individuals and tax-exempt fiduciary investors who are entrusted with 
the responsibility of investing assets held for the benefit of others.
    3. Applicants propose that the Fund issue additional, separate 
classes of shares (``New Shares'') designed for a particular market. 
Each class of New Shares would be identical in all respects to the 
Existing Shares except for its class designation, the allocation of 
certain expenses, voting rights, and exchange privileges.\1\
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    \1\The Fund may institute a sales charge or a contingent 
deferred sales charge in the future with respect to the New Shares. 
Prior to the implementation of any CDSL, applicants will obtain a 
Commission order allowing the imposition of the CDSL, unless the 
Commission has adopted a rule allowing its imposition.
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    4. In addition to the current class of Existing Shares, the Fund 
may offer several classes of New Shares: (1) In connection with a 
distribution plan adopted pursuant to rule 12b-1 (a ``Distribution 
Plan'') and/or (2) in connection with a non-rule 12b-1 shareholder 
services plan (``Shareholder Services Plan''). Shares offered subject 
to the Distribution Plan are referred to as the ``Distribution 
Shares.'' The Distribution Plan and the Shareholder Services Plan are 
collectively referred to herein as ``Plans.'' The Fund may offer an 
unlimited number of classes of shares, either in connection with a 
Plan, with more than one Plan, or without any of the Plans. All classes 
of shares issued by the Fund in connection with any order granted in 
response to the application will comply with all representations and 
conditions contained herein.
    5. Under each of the Distribution Plan and the Shareholder Services 
Plan, either the Fund or the Distributor enters into servicing 
agreements (``Service Agreements'') with banks, broker-dealers, or 
other institutions, including the Distributor if the Fund so elects 
(``Service Organizations''), concerning the provision of certain 
account administration services to the customers (``Customers'') of the 
Service Organizations. Service Agreements under the Distribution Plan 
also contemplate an asset-based sales charge to compensate Service 
Organizations for the distribution of Distribution Shares and the 
provision of certain additional shareholder liaison services to 
Customers, which services arguably could be considered to be 
distribution-related. The Shareholder Services Plan would be used with 
respect to Service Organizations authorized to provide only personal 
and account maintenance services under a Shareholder Services Plan, and 
the Distribution Plan would be used with respect to the Service 
Organizations authorized to provide the distribution and distribution-
related and liaison services under the Distribution Plan.
    6. Under each Plan, depending on whether either the Fund or the 
Distributor was a party to a Service Agreement with a Service 
Organization, the Fund or the Distributor (which would be reimbursed by 
the Fund) would pay a Service Organization for its services and 
assistance in accordance with the terms of the relevant Plan and the 
particular Service Agreement (``Service Payments''). Service Payments 
with respect to a Shareholder Services Plan are ``service fees,'' and 
Service Payments with respect to a Distribution Plan are ``service 
fees'' or ``asset-based sales charges'' or both, as defined in Article 
III, section 26 of the National Association of Securities Dealers, Inc. 
Rules of Fair Practice.\2\
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    \2\Any front-end load, asset-based sales charge, service fee, or 
contingent deferred sales load will comply with section 26(d), 
Article III of the Rules of Fair Practice of the NASD.
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    7. In the event that a Distribution Plan and a Shareholder Services 
Plan are adopted with respect to a single class of shares, the 
Directors will apply the analysis required under rule 12b-1(d) to the 
aggregate amount paid under such Plans in order to assure that, to the 
extent that the Plans may be deemed to overlap in some respects, 
compensation shall not be duplicative as a result of the use of both 
Plans.
    8. Under the proposed arrangement, each New Share or Existing Share 
in a particular Portfolio, regardless of class, would represent an 
interest in the same portfolio of investments and would have identical 
voting, dividend, liquidation and other rights, preferences, powers, 
restrictions, limitations, qualifications, designations and terms and 
conditions, except that: (a) Each class of New Shares would have a 
different class designation; (b) each class of New Shares offered in 
connection with a Plan (or Plans) would bear the expense of the Service 
Payments that would be made under the Service Agreements that are 
entered into with respect to such class; (c) each class of shares could 
also bear certain expenses described in condition 1 below (the ``Class 
Expenses'') that are directly attributable only to the class; (d) only 
the holders of the shares of the class or classes involved would be 
entitled to vote on matters pertaining to a Plan and any related 
agreements relating to such class or classes (for example, the 
adoption, amendment or termination of a Plan in accordance with the 
provisions of rule 12b-1 or the terms of the Plan); and (e) each class 
would have different exchange privileges.
    9. Certain expenses may be attributable to a particular Portfolio, 
but not a particular class. All such expenses will be allocated to each 
class of shares in a Portfolio on the basis of the relative net asset 
values of the classes of that Portfolio.
    10. Except as noted below, each class of shares may be exchanged 
only for shares of the same class in another Portfolio and in all 
events will be limited to within the same ``group of investment 
companies'' as that term is defined in rule 11a-3 of the Act. Exchanges 
will be permitted among classes should a shareholder cease to be 
eligible to purchase shares of the original class by reason of a change 
in the shareholder's status. Exchanges among classes may be made when a 
shareholder of a class becomes eligible to purchase shares of another 
class and ineligible to purchase shares of the class originally held. 
This situation might occur, for example, when an investor who 
beneficially owned shares held by an institution becomes the holder of 
legal title by reason of a distribution from the institutional account. 
Such distributions may be occasioned by a termination of a trust and 
distribution of the corpus of the trust to beneficiaries. An individual 
would become the holder of shares designed for institutions, and the 
individual may desire the services offered by Service Organizations in 
substitution of the services formerly provided by the trustee of such 
trust. In such a case, an exchange may occur upon the request of the 
shareholder.

Applicants' Legal Analysis

    1. The proposed issuance and sale of certain classes of securities 
representing interests in the Fund's or future Funds' investment 
portfolios, including the allocation of voting rights thereto and the 
payment of dividends thereon in the manner described below, might be 
deemed to result in a ``senior security'' within the meaning of Section 
18(g) and to be prohibited by section 18(f)(1) and also to violate the 
requirement in Section 18(i) that every share of stock issued by a 
registered management investment company shall have equal voting rights 
with every other share of outstanding voting stock.
    2. Applicants believe that the proposed allocation of expenses and 
voting rights relating to the Plans in the manner described is 
equitable and would not discriminate against any group of shareholders. 
Although investors purchasing shares offered in connection with a Plan 
would bear the costs associated with the related services, they would 
also enjoy the benefits of those services and, in the case of 
Distribution Shares, exclusive shareholder voting rights with respect 
to matters affecting such Plans. Conversely, investors purchasing 
shares that are not covered by a Plan would not be burdened with such 
expenses or enjoy such voting rights. Moreover, because with respect to 
any Portfolio the rights and privileges of shares would be 
substantially identical, the possibility that the interests of the 
various classes of shareholders would ever conflict would be remote. 
The interests of each class of shareholders would be adequately 
protected since the Plan, the Service Agreements and the Service 
Payments would conform to the requirements of rule 12b-1 or the 
protection described in the application, including the requirement that 
they be approved by the Board of Directors of the Fund.
    3. The abuses that section 18 of the Act are intended to redress 
are set forth in section 1(b) of the Act which declares that the 
interests of investors are adversely affected when investment companies 
by excessive borrowing and the issuance of excessive amounts of senior 
securities increase the speculative character of the other securities, 
or when investment companies operate without adequate reserves. The 
proposed arrangement does not involve borrowings and does not affect 
the Fund's existing assets or reserves. Nor will the proposed 
arrangement increase the speculative character of the shares in a 
Portfolio, since each class of shares in a Portfolio will participate 
in all of such Portfolio's appreciation (if any), income and expenses 
(with the exception of the proposed Service Payments and Class 
Expenses) on the basis of the applicable net assets of such class.

Applicants' Conditions

    Applicants agree that the order of the Commission granting the 
requested relief shall be subject to the following conditions.
    1. Each class of shares of a Portfolio will represent interests in 
the same portfolio of investments and be identical in all respects, 
except as set forth below. The only differences among the classes of 
shares of a Portfolio will relate solely to one or more of the 
following: (a) The differences in certain Class Expenses, which are 
limited to any or all of the following: (i) Transfer agent fees 
identified by applicants as being attributable to a specific class of 
shares; (ii) printing and postage expenses related to preparing and 
distributing materials such as shareholder reports, prospectuses and 
proxy statements to current shareholders of a specific class; (iii) 
Commission and Blue Sky registration fees incurred by a class of 
shares; (iv) the expense of administrative personnel and services as 
required to support the shareholders of a specific class; (v) 
Directors' fees or expenses incurred as a result of issues relating to 
one class of shares; (vi) accounting expenses relating solely to one 
class of shares; and (vii) legal expenses relating to a specific class 
of shares; (b) expenses assessed to a class pursuant to a Shareholder 
Services Plan and/or 12b-1 Plan with respect to such class; (c) the 
fact that the classes will vote separately with respect to the Fund's 
Shareholder Services Plan and/or any 12b-1 Plan; (d) the different 
exchange privileges of the classes of shares; and (e) the designation 
of each class of shares of the Fund. Any additional incremental 
expenses not specifically identified above which are subsequently 
identified and determined to be properly allocated to one class of 
shares shall not be so allocated unless and until approved by the 
Commission pursuant to an amended order.
    2. The Directors of the Fund, including a majority of the 
independent Directors, who are not interested persons as defined in 
section 2(a)(19) of the Act (``Independent Directors''), will approve 
the offering of additional classes of New Shares (the ``Multi-Class 
System''). The minutes of the meetings of the Directors regarding the 
deliberations of the directors with respect to the approvals necessary 
to implement the Multi-Class System will reflect in detail the reasons 
for the Directors' determination that the proposed Multi-Class System 
is in the best interest of both the Fund and its shareholders.
    3. The initial determination of the Class Expenses that will be 
allocated to a particular class and any subsequent changes thereto will 
be reviewed and approved by a vote of the Board of Directors including 
a majority of the Independent Directors. Any person authorized to 
direct the allocation and disposition of monies paid or payable by the 
Fund to meet Class Expenses shall provide to the Board of Directors, 
and the Directors shall review, at least quarterly, a written report of 
the amounts so expended and the purposes for which such expenditures 
were made.
    4. On an ongoing basis, the Directors of the Fund, pursuant to 
their fiduciary responsibilities under the Act and otherwise, will 
monitor the Fund for the existence of any material conflicts among the 
interests of the classes of shares. The Directors, including a majority 
of the Independent Directors, shall take such action as is reasonably 
necessary to eliminate any such conflicts that may develop. The 
distributor and the investment advisers will be responsible for 
reporting any potential or existing conflicts to the Directors. If a 
conflict arises, the distributor and the investment advisers, at their 
own cost, will remedy such conflict up to and including establishing a 
new registered management investment company.
    5. The Distributor will adopt compliance standards as to when each 
class of shares may be sold to particular investors. Applicants will 
require all persons selling shares of the Fund to agree to conform to 
such standards.
    6. The Shareholder Services Plans will be adopted and operated in 
accordance with the procedures set forth in rule 12b-1 (b) through (f) 
as if the expenditures made thereunder were subject to rule 12b-1, 
except that shareholders need not enjoy the voting rights specified in 
rule 12b-1.
    7. The Directors will receive quarterly and annual statements 
concerning the amounts expended under the Shareholder Services Plans 
and any Distribution Plans complying with paragraph (b)(3)(ii) of rule 
12b-1, as it may be amended from time to time. In the statements, only 
expenditures properly attributable to the sale or servicing of a 
particular class of shares will be used to justify any distribution or 
servicing fee charged to that class. Expenditures not related to the 
sale or servicing of a particular class will not be presented to the 
Directors to justify any fee attributable to that class. The 
statements, including the allocations upon which they are based, will 
be subject to the review and approval of the Independent Directors in 
the exercise of their fiduciary duties.
    8. Dividends paid by the Fund with respect to each class of its 
shares, to the extent any dividends are paid, will be calculated in the 
same manner, at the same time, on the same day, and will be in the same 
amount per outstanding share, except that Service Payments made by a 
class under a Plan and any Class Expenses will be borne exclusively by 
that class.
    9. The methodology and procedures for calculating the net asset 
value and dividends and distributions of the classes and the proper 
allocation of expenses among the classes have been reviewed by an 
expert (the ``Expert'') who has rendered a report to the Applicants, 
which has been provided to the Commission, that such methodology and 
procedures are adequate to ensure that such calculations and 
allocations would be made in an appropriate manner. On an ongoing 
basis, the Expert, or an appropriate substitute Expert, will monitor 
the manner in which the calculations and allocations are being made 
and, based upon such review, will render at least annually a report to 
the Fund that the calculations and allocations are being made properly. 
The reports of the Expert will be filed as part of the periodic reports 
filed with the Commission pursuant to sections 30(a) and 30(b)(1) of 
the Act. The work papers of the Expert with respect to such reports, 
following request by the Fund (which the Fund agrees to provide), will 
be available for inspection by the Commission staff upon written 
request to the Fund for such work papers by a senior member of the 
Division of Investment Management or a regional officer of the 
Commission. Authorized staff members would be limited to the Director, 
an Associate Director, the Chief Accountant, the Chief Financial 
Analyst, an Assistant Director, and any Regional Administrator or 
Associate or Assistant Administrators. The initial report of the Expert 
is a report on policies and procedures placed in operation, and the 
ongoing reports will be ``reports on policies and procedures placed in 
operation and tests of operating effectiveness'' as defined and 
described in SAS No. 70 of the AICPA, as it may be amended from time to 
time, or in similar auditing standards as may be adopted by the AICPA 
from time to time.
    10. The Applicants have adequate facilities in place to ensure 
implementation of the methodology and procedures for calculating the 
net asset value and dividends and distributions of the classes of 
shares and the proper allocation of expenses among the classes of 
shares and this representation has been concurred with by the Expert in 
the initial report referred to in condition (9) above and will be 
concurred with by the Expert, or an appropriate substitute Expert, on 
an ongoing basis at least annually in the ongoing reports referred to 
in condition (9) above. Applicants will take immediate corrective 
action if this representation is not concurred in by the Expert or 
appropriate substitute Expert.
    11. The prospectuses of each class of shares will contain a 
statement to the effect that a salesperson and any other person 
entitled to receive different compensation for selling or servicing 
Fund Shares may receive different compensation with respect to one 
particular class of shares over another in the Fund.
    12. The conditions pursuant to which the exemptive order is granted 
and the duties and responsibilities of the Directors with respect to 
the Multi-Class System will be set forth in guidelines which will be 
furnished to the Directors.
    13. The Fund will disclose the respective expenses, performance 
data, distribution arrangements, services, fees, sales loads, deferred 
sales loads, and exchange privileges applicable to each class of shares 
in every prospectus, regardless of whether all classes of shares are 
offered through each prospectus. The Fund will disclose the respective 
expenses and performance data applicable to all classes of shares in 
every shareholder report. The shareholder reports will contain, in the 
statement of assets and liabilities and statement of operations, 
information related to the Fund as a whole generally and not on a per 
class basis. Each Fund's per share data, however, will be prepared on a 
per class basis with respect to all classes of shares of such Fund. To 
the extent that any advertisement or sales literature describes the 
expenses or performance data applicable to any class of shares of a 
Portfolio, it will also disclose the respective expenses and/or 
performance data applicable to all classes of shares of such Portfolio. 
The information provided by Applicants for publication in any newspaper 
or similar listing of the Fund's net asset value or public offering 
price will present each class of shares separately.
    14. Applicants acknowledge that the grant of the exemptive order 
requested by the application will not imply Commission approval, 
authorization of or acquiescence in any particular level of payments 
that the Fund may make pursuant to its Distribution Plan or Shareholder 
Services Plan in reliance on the exemptive order.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-8286 filed 4-6-94; 8:45 am]
BILLING CODE 8010-01-M