[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 

[[Page 6048]]
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 

[[Page 6050]]
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