[Federal Register Volume 61, Number 32 (Thursday, February 15, 1996)]
[Notices]
[Pages 6047-6050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3358]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21739; 812-9840]
UAM Funds, Inc., et al.; Notice of Application
February 9, 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. (``Fund I''), UAM Funds Trust (``Fund
II''), and
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any future investment company for which any investment adviser named
below or any investment adviser controlling, controlled by, or under
common control with United Asset Management Corporation (``UAM''),
serves as investment adviser and which are in the same ``group of
investment companies'' as the UAM Funds as defined in rule 11a-3 under
the Act (``Future Funds''); and 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., 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., Tom
Johnson Investment Management, Inc. and any investment adviser which is
controlling, controlled by, or under common control with UAM that, in
the future, serves as an investment adviser to the UAM Funds or a
Future Fund (the ``Investment Advisers'').
RELEVANT ACT SECTIONS: Exemption requested under section 6(c) of the
Act that would grant an exemption from section 12(d)(1)(A)(ii), under
sections 6(c) and 17(b) that would grant an exemption from section
17(a) and under rule 17d-1 to permit certain transactions in accordance
with section 17(d) of the Act and rule 17d-1.
SUMMARY OF APPLICATION: Applicants seek an order that would permit
certain money market funds to sell their shares to affiliated
investment companies.
FILING DATES: The application was filed on November 13, 1995, and
amended on January 18, 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
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 March 5, 1996,
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 5th Street NW., Washington, DC 20549.
Applicants, One International Place, 44th Floor, Boston, MA 02110.
FOR FURTHER INFORMATION CONTACT:
Elaine M. Boggs, Staff Attorney, at (202) 942-0572, or Robert A.
Robertson, 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.
Applicants' Representations
1. Fund I and Fund II are open-end management investment companies.
Fund I currently offer 39 series, one of which is a money market fund
subject to the requirements of the rule 2a-7 under the Act, and Fund II
offers 10 series, none of which are money market funds.\1\ Existing and
future series of Fund I and Fund II and the Future Funds are
collectively referred to as the ``Portfolios.'' Portfolios that hold
themselves out as money market funds are collectively referred to as
the ``Money Market Portfolios.''
\1\ Fund II formerly was known as Regis Fund II.
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2. 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., 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., Tom Johnson Investment Management, Inc. are the
investment advisers for the Portfolios. The current Investment
Advisers, except Aldrich, Eastman & Waltch, L.P., are wholly-owned
subsidiaries of UAM, which is a holding company incorporated in
Delaware for the purpose of acquiring and owning firms engaged
primarily in institutional investment management. UAM is the sole
limited partner of Aldrich, Eastman & Waltch, L.P. UAM Distributors,
Inc. (the ``Distributor'') serves as the distributor for the
Portfolios, and is a wholly-owned subsidiary of UAM.\2\ Chase Global
Fund Services Company (``Chase Global'') is the administrator for the
Portfolios \3\ and Morgan Guaranty Trust Company of New York serves as
custodian to the Portfolios.
\2\ The Distributor was formerly known as Regis Retirement Plan
Services, Inc.
\3\ Chase Global was formerly known as Mutual Funds Service
Company.
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3. The Money Market Portfolios seek current income, liquidity, and
capital preservation by investing in short-term money market
instruments issued or guaranteed by financial institutions,
nonfinancial corporation, and the U.S. government, as well as
repurchase agreements secured by government securities. These short-
term debt securities are valued at their amortized cost pursuant to the
requirements of rule 2a-7. The non-money market Portfolios invest in a
variety of debt and/or equity securities in accordance with their
respective investment objectives and policies. Each of the Portfolios
has, or may be expected to have, uninvested cash in an account with the
custodian. This cash either may be invested directly in individual
short-term money market instruments or may not be otherwise invested in
any portfolio securities.
4. Applicants seek an order that would permit (a) the Portfolios to
utilize their cash reserves that have not been invested in portfolio
securities to purchase shares of the Money Market Portfolios (each
Portfolio, including Money Market Portfolios, purchasing shares of the
Money Market Portfolios is an ``Investing Portfolio'') and (b) the
Money Market Portfolios to sell or redeem their shares to or from each
Investing Portfolio. By investing cash balances in the Money Market
Portfolios as proposed, applicants believe that the Investing
Portfolios will be able to combine their cash balances and thereby
reduce their transaction costs, create more liquidity, enjoy greater
returns, and further diversify their holdings.
5. The shareholders of the Investing Portfolios would not be
subject to the imposition of double management fees. Applicants would
cause each Investment Adviser and its respective affiliates to remit to
the respective Investing Portfolios or waive investment advisory fees
these service providers earn as a result of the Investing Portfolios'
investments in the Money
[[Page 6049]]
Market Portfolios to the extent the fees are based upon the Investing
Portfolios' assets invested in shares of the Money Market Portfolios.
Further, no sales charge, contingent deferred sales charge, rule 12b-1
fee, or other underwriting or distribution fee would be charged by the
Money Market Portfolios, or by any underwriter, with respect to the
purchase or redemption of their shares. If a Money Market Portfolio
offers more than one class of shares, each Investing Portfolio will
invest only in the class with the lowest expense ratio at the time of
the investment.
6. Some of the Portfolios may have voluntary expense cap
arrangements with the Investment Advisers for the purpose of keeping
each Portfolio's total expenses below a certain predetermined
percentage amount (``Expense Waiver''). To the extent actual expenses
of the Portfolios exceed these caps, the Investment Advisers will
reimburse a Portfolio in the amount of the excess. Any applicable
Expense Waiver will not limit the advisory and administrative fee
waiver or remittance discussed above.
7. Applicants also request relief that would permit the Portfolios
to invest uninvested cash in a Money Market Portfolio in excess of the
percentage limitations set out in section 12(d)(A)(ii) of the Act.\4\
Applicants propose that each Portfolio be permitted to invest in shares
of a single Money Market Portfolio so long as each Portfolio's
aggregate investment in such Money Market Portfolio does not exceed the
greater of 5% of such Portfolio's total net assets or $2.5 million.
Applicants will comply with all other provisions of section 12(d)(1).
\4\ Section 12(d)(A)(ii) prohibits a registered investment
company from acquiring the securities of another investment company
if, immediately thereafter, the acquiring company would have more
than 5% of its total assets invested in the securities of the
selling company.
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Applicants' Legal Analysis
1. Section 6(c) of the Act provides that the SEC may exempt any
person, security, or transaction, or any class or classes of persons,
securities, or transactions, from any provisions of the Act, if and to
the extent 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 12(d)(1), as noted above, sets certain limits on an
investment company's ability to invest in the shares of another
investment company. The perceived abuses section 12(d)(1) sought to
address include undue influence by an acquiring fund over the
management of an acquired fund, layering of fees, and complex
structures. Applicants believe that none of these concerns are
presented by the proposed transactions and that the proposed
transactions meet the section 6(c) standards for relief.
3. Sections 17(a) (1) and (2) of the Act make it unlawful for any
affiliated person of a registered investment company, or any affiliated
person of such affiliated person, acting as principal, to sell or
purchase any security to or from such investment company. Because each
Portfolio may be deemed to be under common control with the other
Portfolios, it may be an ``affiliated person,'' as defined in section
2(a)(3) of the Act, of the other Portfolios. Accordingly, the sale of
shares of the Money Market Portfolios to the Investing Portfolios, and
the redemption of such shares from the Investing Portfolios, would be
prohibited under section 17(a).
4. Section 17(b) of the Act authorizes the Commission to exempt a
transaction from section 17(a) 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, the proposed transaction is consistent with the
policy of each registered investment company concerned, and the
proposed transaction is consistent with the general policy of the Act.
Section 17(b) could be interpreted to exempt only a single transaction.
However, the Commission, under section 6(c) of the Act, may exempt a
series of transactions that otherwise would prohibited by section
17(a).
5. The Investing Portfolios will retain their ability to invest
their cash balances directly into money market instruments if they
believe they can obtain a higher return. Each of the Money Market
Portfolios has the right to discontinue selling shares to any of the
Investing Portfolios if its board of trustees determines that such
sales would adversely affect the portfolio management and operations of
such Money Market Portfolio. In addition, the investment policies of
each Portfolio permit the Portfolios to purchase money market
instruments, and the registration statements to not prohibit the
Portfolios from purchasing shares of other investment companies. The
investment policies and registration statements of the Portfolios will
be revised, as required, to state that the Portfolios may purchase
shares of other investment companies. Therefore, applicants believe
that the proposal satisfies the standards for relief as set forth in
sections 6(c) and 17(b).
6. Section 17(d) of the Act and rule 17d-1 thereunder prohibit an
affiliated person of an investment company, acting as principal, from
participating in or effecting any transaction in connection with any
joint enterprise or joint arrangement in which the investment company
participates. Each Investing Portfolio, by purchasing shares of the
Money Market Portfolios; each Investment Adviser of an Investing
Portfolio, by managing the assets of the Investing Portfolios invested
in the Money Market Portfolios; and each of the Money Market
Portfolios, by selling shares to the Investing Portfolios, could be
participants in a joint enterprise or other joint arrangement within
the meaning of section 17(d)(1) and rule 17d-1.
7. Rule 17d-1 permits the Commission to approve a proposed joint
transaction covered by the terms of section 17(d). In determining
whether to approve a transaction, the Commission is to consider whether
the proposed transaction is consistent with the provisions, policies,
and purposes of the Act, and the extent to which the participation of
the investment companies is on a basis different from or less
advantageous than that of the other participants. Applicants believe
that the proposal satisfies these standards.
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions:
1. Shares of the Money Market Portfolios sold to and redeemed from
the Investing Portfolios will not be subject to a sales load,
redemption fee, or distribution fee under a plan adopted in accordance
with rule 12b-1.
2. Applicants will cause the Investment Advisers and their
affiliated persons to remit to the respective Investing Portfolio or
waive the investment advisory and other fees such service provider
earns as a result of the Investing Portfolio's investments in the
Market Portfolios to the extent such fees are based upon the Investing
Portfolio's assets invested in shares of the Money Market Portfolios.
Any of these fees remitted or waived will not be subject to recoupment
by the Investment Advisers or their affiliated persons from any
Portfolio at a later date.
3. For the purpose of determining any amount to be waived and/or
expenses to be borne to comply with any Expense Waiver, the adjusted
fees for an Investing Portfolio (gross fees minus Expense Waiver) will
be calculated
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without reference to the amounts waived or remitted pursuant to
condition 2. Adjusted fees then will be reduced by the amount waived
pursuant to condition 2. If the amount waived pursuant to condition 2
exceeds adjusted fees, the Investment Advisers also will reimburse the
Investing Portfolio in an amount equal to such excess.
4. Each of the Investing Portfolios will invest uninvested cash in,
and hold shares of, a Money Market Portfolio only to the extent that
the Investing Portfolio's aggregate investment in such Money Market
Portfolio does not exceed the greater of 5% of the Investing
Portfolio's total net assets or $2.5 million.
5. Each Investing Portfolio will vote its shares of each Money
Market Portfolio in the same proportion as the votes of all other
shareholders in such Money Market Portfolios entitled to vote on the
matter.
6. As shareholders of a Money Market Portfolio, the Investing
Portfolios will receive dividends and bear their proportionate shares
of expenses on the same basis as other shareholders of such Money
Market Portfolios. A separate account will be established in the
shareholder records of each of the Money Market Portfolios for each of
the Investing Portfolios.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-3358 Filed 2-14-96; 8:45 am]
BILLING CODE 8010-01-M