[Federal Register Volume 61, Number 162 (Tuesday, August 20, 1996)]
[Notices]
[Pages 43100-43102]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21111]


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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 22134; 812-10076]


Transamerica Investors, Inc. and Transamerica Investment 
Services, Inc.; Notice of Application

August 13, 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: Transamerica Investors, Inc. and Transamerica Investment 
Services, Inc.

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 repurchase agreements.

FILING DATE: The application was filed on April 5, 1996 and amended on 
July 17, 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 September 9, 
1996, and should be accompanied by proof of service on the 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

[[Page 43101]]

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, N.W., Washington, D.C. 
20549. Applicants, Transamerica Center, 1150 South Olive, Los Angeles, 
CA 90015-2211.

FOR FURTHER INFORMATION CONTACT: Mary T. Geffroy, Staff Attorney, at 
(202) 942-0553, or Mercer E. Bullard, 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 from 
the SEC's Public Reference Branch.

Applicant's Representations

    1. Transamerica Investors, Inc. (``TII''), a Maryland corporation, 
is registered under the Act as an open-end management investment 
company of the series type. TII currently consists of six series. 
Transamerica Investment Services, Inc. (``TIS''), the investment 
adviser to each series of TII, is a Delaware corporation and is 
registered with the Commission as an investment adviser under the 
Investment Advisers Act of 1940. TIS is a wholly-owned subsidiary of 
Transamerica Corporation. State Street Bank & Trust Company provides 
custodial services for TII, and Transamerica Occidental Life Insurance 
Company acts as TII's administrator.
    2. Applicants request that any relief granted pursuant to the 
application apply to any existing or future series of TII, and any 
other registered investment companies or series thereof that now or in 
the future are advised or subadvised by TIS or any entity controlling, 
controlled by, or under common control with TIS (collectively with TII, 
the ``Funds''). All Funds that currently intend to rely upon the 
requested order are named as applicants. Three additional registered 
investment companies, Transamerica Income Shares, Inc. and Transamerica 
Occidental's Separate Account Funds B and C, that currently do not 
intend to rely upon the requested relief, in the future, may rely upon 
the order in accordance with the terms and conditions contained in the 
application.
    3. At the end of each trading day, applicants expect that some or 
all of the Funds will have uninvested cash balances in their respective 
custodian banks that would not otherwise be invested in portfolio 
securities by TIS. Currently, such cash balances may be invested in 
repurchase agreements separately on behalf of each Fund.
    4. Applicants propose to deposit some or all of the uninvested cash 
balances of the Funds remaining at the end of each trading day into one 
or more joint accounts (``Joint Accounts'') and to invest the daily 
balance of the Joint Accounts in repurchase agreements having 
maturities of 7 days or less that are collateralized fully as defined 
in rule 2a-7 under the Act (``Short-Term Repurchase Agreements''), as 
authorized by the investment policies of the Funds.
    5. A Fund's decision to use a Joint Account will be based upon the 
same factors as its decision to make any other short-term liquid 
investment. The Joint Accounts would only be used to aggregate what 
otherwise would be one or more daily individual transactions necessary 
for the management of each of the Funds' daily uninvested cash balance.
    6. TIS will not participate as an investor in the Joint Account. 
TIS will be responsible for investing funds held by the Joint Accounts, 
establishing accounting and control procedures, and ensuring the fair 
and equitable treatment of the Funds.
    7. Any repurchase agreements entered into through the Joint 
Accounts will comply with the terms of Investment Company Act Release 
No. 13005 (February 2, 1983) and any other existing and future 
positions taken by the Commission or its staff by rule, release, 
letter, or otherwise, relating to repurchase agreement transactions. 
Applicants acknowledge that they have a continuing obligation to 
monitor the SEC's published statements on repurchase agreements, and 
represent that repurchase agreement transactions will comply with 
future positions of the SEC to the extent that such positions set forth 
different or additional requirements regarding repurchase agreements.

Applicants' Legal Analysis

    1. Section 17(d) of the Act makes it unlawful for an affiliated 
person of a registered investment company, acting as principal, to 
effect any transaction in which the registered investment company is a 
joint or a joint and several participant with such person in 
contravention of rules and regulations proscribed by the SEC. Rule 17d-
1(a) under the Act provides that an affiliated person of a registered 
investment company, acting as principal, shall not participate in, or 
effect any transaction in connection with, any joint enterprise or 
other joint arrangement in which the registered investment company is a 
participant unless the SEC has issued an order approving the 
arrangement.
    2. The Funds, by participating in the Joint Accounts, and TIS, by 
managing the Joint Accounts, could be deemed to be ``joint 
participants'' in a transaction within the meaning of section 17(d). In 
addition, the proposed Joint Accounts could be deemed to be a ``joint 
enterprise or other joint arrangement'' within the meaning of rule 17d-
1.
    3. Applicants believe that no Fund will be in a less favorable 
position as a result of the Joint Accounts. Applicants believe that a 
Fund's investment in the Joint Account will not be subject to the 
claims of creditors, whether brought in bankruptcy, insolvency or other 
legal proceedings, or of any other participant Fund in the Joint 
Account. Applicants further believe that each Fund's liability on any 
Short-Term Repurchase Agreement will be limited to its interest in such 
investment; no Fund will be jointly liable for the investments of any 
other Fund.
    4. Applicants believe that the Joint Accounts could result in 
certain benefits to the Funds. For example, the Funds 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 possible to negotiate a rate of return on larger repurchase 
agreements that is higher than the rate on smaller repurchase 
agreements.
    5. The Joint Accounts also may reduce the potential for errors by 
reducing the number of trade tickets and cash wires that must be 
processed by the sellers of Short-Term Repurchase Agreements and by the 
Funds' custodians and accountants.
    6. For the reasons set forth above, applicants believe that 
granting the requested order is consistent with the protection of 
investors and the purposes fairly intended by the policies and 
provisions of the Act and the finding required by rule 17d-1.

Applicants' Conditions

    Applicants will comply with the following procedures as conditions 
to any SEC order:
    1. The Joint Accounts would consist of one or more separate cash 
accounts established at a custodian bank. A Joint Account may be 
established at more than one custodian bank and more than one Joint 
Account may be established at any custodian bank. A Fund may transfer a 
portion of its daily cash balances to more than one Joint Account. 
After the calculation of its daily cash balance and at the direction of 
TIS, each Fund would transfer into one or more Joint Accounts the cash 
it

[[Page 43102]]

intends to invest through the Joint Accounts. Each Fund whose regular 
custodian is a custodian other than the bank at which a proposed Joint 
Account would be maintained and that wishes to participate in the Joint 
Account would appoint the latter bank as a sub-custodian for the 
limited purposes of: (1) receiving and disbursing cash; (2) holding any 
Short-Term Repurchase Agreements; and (3) holding any collateral 
received from a transaction effected through the Joint Account. All 
Funds that appoint such sub-custodians will have taken all necessary 
actions to authorize such bank as their legal custodian, including all 
actions required under the Act.
    2. The Joint Accounts will not be distinguishable from any other 
accounts maintained by the Funds at their custodians except that monies 
from the Funds will be deposited in the Joint Account on a commingled 
basis. The Joint Accounts will not have a separate existence and will 
not have any indicia of a separate legal entity. The Joint Accounts 
will only be used to aggregate individual transactions necessary for 
the management of each Fund's daily uninvested cash balance.
    3. Cash in the Joint Accounts will be invested in one or more 
repurchase agreements with maturities of 7 days or less that are 
collateralized fully as defined in rule 2a-7 under the Act, and that 
satisfy the uniform standards set by the Funds for such investments. 
The securities subject to the repurchase agreement will be transferred 
to a Joint Account and they will not be held by the Fund's repurchase 
counterparty or by an affiliated person of that counterparty.
    4. Each Fund would participate in a Joint Account on the same basis 
as every other Fund in conformity with its respective fundamental 
investment objectives, policies, and restrictions. Any future Funds 
that participate in the Joint Account would be required to do so on the 
same terms and conditions as the existing Funds.
    5. Each Fund's investment in a Joint Account will be documented 
daily on the books of each Fund and the books of its custodian. Each 
Fund, through its investment adviser and/or custodian, will maintain 
records (in conformity with Section 31 of the Act and rules thereunder) 
documenting for any given day, the Fund's aggregate investment in a 
Joint Account and its pro rata share of each Short-Term Repurchase 
Agreement made through such Joint Account.
    6. All assets held by a Joint Account would be valued on an 
amortized cost basis to the extent permitted by applicable Commission 
releases, rules, letters, or orders.
    7. Each Fund valuing its net assets based on amortized cost in 
reliance upon rule 2a-7 under the Act will use the average maturity of 
the instrument(s) in the Joint Accounts in which such Fund has an 
interest (determined on a dollar-weighted basis) for the purpose of 
computing its average portfolio maturity with respect to the portion of 
its assets held in a Joint Account on that day.
    8. Not every Fund participating in the Joint Accounts will 
necessarily have its cash invested in every Short-Term Repurchase 
Agreement. However, to the extent a Fund's cash is applied to a 
particular Short-Term Repurchase Agreement, the Fund will participate 
in and own its proportionate share of such Short-Term Repurchase 
Agreement, and any income earned or accrued thereon, based upon the 
percentage of such investment purchased with amounts contributed by 
such Fund.
    9. To assure that there will be no opportunity for one Fund to use 
any part of a balance of a Joint Account credited to another Fund, no 
Fund will be allowed to create a negative balance in any Joint Account 
for any reason. Each Fund would be permitted to draw down its entire 
balance at any time, provided TIS determines that such draw down would 
have no significant adverse impact on any other Fund participating in 
the Joint Account. Each Fund's decision to invest in a Joint Account 
would be solely at its option, and no Fund will be obligated either to 
invest in the Joint Accounts or to maintain any minimum balance in the 
Joint Accounts. In addition, each Fund will retain the sole rights of 
ownership of any of its assets, including interest payable on such 
assets, invested in the Joint Accounts.
    10. TIS will administer, manage, and invest the cash balance in the 
Joint Accounts in accordance with and as part of its duties under 
existing, or any future, investment advisory contracts or subadvisory 
contracts with each Fund. TIS will not collect any additional or 
separate fee for advising or managing any Joint Account.
    11. The administration of the Joint Accounts will be within the 
fidelity bond coverage maintained for the Funds as required by section 
17(g) of the Act and rule 17g-1 thereunder.
    12. The Board of Directors of the Funds participating in the Joint 
Account will adopt procedures pursuant to which the Joint Accounts will 
operate and which will be reasonably designed to provide that the 
requirements set forth in the application are met. The Board will make 
and approve such changes that they deem necessary to ensure that such 
procedures are followed. In addition, the Board will determine, no less 
frequently than annually, that the Joint Accounts have been operated in 
accordance with the proposed procedures, and will permit a Fund to 
continue to participate therein only if it determines that there is a 
reasonable likelihood that the Fund and its shareholders will benefit 
from the Fund's continued participation.
    13. Investments held in a Joint Account generally will not be sold 
prior to maturity except: (a) if the adviser believes that the 
investment no longer presents minimal credit risk; (b) if, as a result 
of a credit downgrading or otherwise, the investment no longer 
satisfies the investment criteria of all Funds participating in the 
investment; or (c) if the counterparty defaults. A fund may, however, 
sell its fractional portion of an investment in a Joint Account prior 
to the maturity of the investment in such Joint Account if the cost of 
such transaction will be borne solely by the selling Fund and the 
transaction would not adversely affect the other Funds participating in 
that Joint Account. In no case would an early termination by less than 
all participating Funds be permitted if it would reduce the principal 
amount or yield received by other Funds participating in a particular 
Joint Account or otherwise adversely affect the other participating 
Funds. Each Fund participating in such Joint Account will be deemed to 
have consented to such sale and partition of the investment in such 
Joint Account.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-21111 Filed 8-19-96; 8:45 am]
BILLING CODE 8010-01-M