[Federal Register Volume 65, Number 57 (Thursday, March 23, 2000)]
[Notices]
[Pages 15665-15667]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-7198]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-24341; 812-12028]


Bankers Trust Company, et al.; Notice of Application

March 17, 2000.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of an application to amend a prior order under section 
12(d)(1)(J) of the Investment Company Act of 1940 (the ``Act'') 
granting an exemption from section 12(d)(1) of the Act, sections 6(c) 
and 17(b) of the Act granting an exemption from sections 17(a) and 
17(c) of the Act, and under section 17(d) of the Act and rule 17d-1 
under the Act permitting certain joint transactions.

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SUMMARY OF APPLICATION: Applicants seek to amend a prior order that 
permits certain registered management investment companies to 
participate in a securities lending program and to pay, and Bankers 
Trust Company (``Bankers Trust'') as lending agent to accept, fees 
based on a share of the revenue generated from the securities lending 
transactions (``Pror Order'').\1\ The amended order (``Amended Order'') 
would permit Deutsche Bank, A.G., and any person controlling, 
controlled by, or under common control with Deutsche Bank, A.G. 
(``Deutsche Bank'') to rely on the Prior Order. The Amended Order also 
would modify a condition of the Prior Order.
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    \1\ Bankers Trust Company, Investment Company Act Release Nos. 
23370 (July 31, 1998) (notice) and 23401 (Aug. 26, 1998) (order).
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    Applicants: Bankers Trust, Deutsche Bank, BT Investment Portfolios 
and each of its subsequently created series (each a ``Portfolio''), and 
BT Institutional Funds (the ``Trust'') and each of its subsequently 
created series. The Trust, with respect to the Institutional Daily 
Assets Fund (the ``Money Fund''), a series of the Trust, and any 
subsequently established series of the Trust or other registered open-
end management investment companies advised or sub-advised by a BT 
Entity (as defined below) established in connection with the investment 
of cash collateral from securities lending transactions are referred to 
as the ``Investment Funds.'' All applicants, except Deutsche Bank, are 
the ``Original Applicants.''
    Filing Dates: The application was filed on March 14, 2000.
    Hearing or Notification of Hearing: An order granting the requested 
relief 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 pm on April 11, 
2000, 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 who wish to 
be notified of a hearing may request notification by writing to the 
SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, DC 20549-
0609; Applicants: Deutsche Bank, 31 West 52nd Street, New York, New 
York 10019; Original Applicants, c/o Bankers Trust, 130 Liberty Street, 
New York, New York 1006.

FOR FURTHER INFORMATION CONTACT: J. Amanda Machen, Senior Counsel (202) 
942-7120, or Mary Kay Frech, Branch Chief, (202) 942-0564 (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, 450 5th Street, NW, Washington, DC 
20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. Bankers Trust, a New York banking corporation, serves as 
investment adviser to investment companies registered under the Act. 
Bankers Trust also operates one of the largest securities lending 
programs (``Program'') in conjunction with providing institutional 
custody services. Deutsche Bank is a banking company organized under 
the laws of the Federal Republic of Germany. On June 4, 1999, Deutsche 
Bank acquired Bankers Trust. Deutsche Bank serves as securities lending 
agent to a wide variety of institutional clients.
    2. On August 26, 1998, the SEC issued the Prior Order to the 
Original Applicants under sections 6(c) and 17(b) of the Act granting 
an exemption from sections 17(a) and 17(e) of the Act, under section 
12(d)(1)(J) of the Act granting an exemption from section 12(d)(1) of 
the Act, and permitting, pursuant to rule 17d-1, certain joint 
transactions in accordance with section 17(d) of the Act and rule 17d-1 
under the Act. The Prior Order permits: (a) any registered investment 
company advised or sub-advised, or that invests substantially all of 
its assets in a registered investment company advised or sub-advised by 
Bankers Trust or an entity controlling, controlled by or under common 
control with Bankers Trust (a ``BT Entity'') (``Affiliated Lending 
Fund'') and (b) each other registered management investment company or 
series thereof that may participate from time to time as a lender in 
the Program (``Other Lending Fund'' and, together with Affiliated 
Lending Fund, ``Lending Funds'') to pay, and Bankers Trust to accept, 
fees based on a share of the revenue generated from securities lending 
transactions. The Prior Order also permits the Lending Funds to 
purchase and redeem from the Trust, and the Trust to sell to and to 
redeem for the Lending Funds, shares in the Investment Funds 
(``Shares'') in connection with the investment of cash collateral from 
securities lending transactions. Lastly, the Prior Order permits 
Bankers Trust or any BT Entity to receive fees or commissions from the 
Other Lending Funds for acting as broker or agent in connection with 
the purchase or sale of securities for the Other Lending Funds.
    3. Deutsche Bank seeks to extend the exemptive relief granted under 
the Prior

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Order to permit it to serve as lending agent for Affiliated Lending 
Funds and as sub-lending agent for Other Lending Funds. Deutsche Bank 
states that its personnel providing day-to-day lending agency services 
to Affiliated Lending Funds do not provide investment advisory services 
to those Funds, or participate in any way in the selection of portfolio 
securities or other aspects of the management of those Funds.
    4. Applicants represent that each Affiliated Lending Fund will 
adopt the following procedures to ensure that the proposed fee 
arrangement and the other terms governing the relationship with Bankers 
Trust and Deutsche Bank, as lending agents, will be fair:
    (a) In connection with the approval of Bankers Trust or Deutsche 
Bank as lending agent for an Affiliated Lending Fund and implementation 
of the proposed fee arrangement, a majority of the board of trustees of 
the Affiliated Lending Fund (``Board of Trustees'') (including a 
majority of the trustees who are not ``interested persons'' of the 
Affiliated Lending Fund within the meaning of the Act (the 
``Independent Trustees'')) will determine that: (i) The contract with 
Bankers Trust or Deutsche Bank is in the best interests of the 
Affiliated Lending Fund and its shareholders; (ii) the services to be 
performed by Bankers Trust or Deutsche Bank are appropriate for the 
Affiliated Lending Fund; (iii) the nature and quality of the services 
provided by Bankers Trust or Deutsche Bank are at least equal to those 
provided by others offering the same or similar services for similar 
compensation; and (iv) the fees for Bankers Trust's or Deutsche Bank's 
services are within the range of, but in any event no higher than, the 
fees charged by Bankers Trust or Deutsche Bank for services of the same 
nature and quality provided to unaffiliated parties.
    (b) Each Affiliated Lending Fund's contract with Bankers Trust or 
Deutsche Bank for lending agent services will be reviewed annually and 
will be approved for continuation only if a majority of the Board of 
Trustees (including a majority of the Independent Trustees) makes the 
findings referred to in paragraph (a) above.
    (c) In connection with the initial implementation of an arrangement 
whereby Bankers Trust or Deutsche Bank will be compensated as lending 
agent based on a percentage of the revenue generated by an Affiliated 
Lending Fund's participation in the Program, the Board of Trustees 
shall secure a certificate from Bankers Trust or Deutsche Bank 
attesting to the factual accuracy of clause (iv) in paragraph (a) 
above. In addition, the Board of Trustees will request and evaluate, 
and Bankers Trust or Deutsche Bank shall furnish, such information and 
materials as the Trustees, with and upon the advice of agents, 
consultants or counsel, determine to be appropriate in making the 
findings referred to in paragraph (a) above. Such information shall 
include, in any event, information concerning the fees charged by 
Bankers Trust or Deutsche Bank to other institutional investors for 
providing similar services.
    (d) The Board of Trustees, including a majority of the Independent 
Trustees, will (i) at each regular quarterly meeting determine, on the 
basis of reports submitted by Bankers Trust or Deutsche Bank, that the 
loan transactions during the prior quarter were conducted in compliance 
with the conditions and procedures set forth herein and (ii) will 
review no less frequently than annually the conditions and procedures 
set forth herein for continuing appropriateness.
    (e) Each Affiliated Lending Fund will (i) maintain and preserve 
permanently in an easily accessible place a written copy of the 
procedures and conditions (and modifications thereto) described herein 
or otherwise followed in connection with lending securities pursuant to 
the 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 pursuant to the 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 identify of the 
person on the other side of the loan transaction, and the terms of the 
loan transaction. In addition, each Affiliated Lending Fund will 
maintain all information or materials upon which a determination was 
made in accordance with the procedures set forth above and the 
conditions to the application.
    5. Deutsche Bank consents to the conditions set forth below and 
agrees to be bound by the terms and provisions of the Prior Order to 
the same extent as the Original Applicants.
    6. Condition 7 in the Prior Order provides that an Investment Fund 
will not acquire securities of any investment company in excess of the 
limits contained in section 12(d)(1)(A) of the Act. Applicants seek to 
modify condition 7 to permit an Investment Fund to be structured as a 
feeder fund in a master-feeder arrangement, so that an Investment Fund 
would acquire shares of a registered open-end management investment 
company advised by a BT entity in excess of the limits contained in 
section 12(d)(1)(A) of the Act, but only to the extent permitted by 
section 12(d)(1)(E) of the Act. Applicants represent that an Investment 
Fund organized in a master-feeder structure will comply with all of the 
provisions of section 12(d)(1)(E).

Applicants' Conditions

    Applicant(s) agree that the order granting the requested relief 
will be subject to the following conditions:
    1. The securities lending program of each Lending Fund will comply 
with present and future applicable SEC and staff positions regarding 
securities lending arrangements.
    2. The approval of the Affiliated Lending Fund's Board of Trustees, 
including a majority of the Independent Trustees, shall be required for 
the initial and subsequent approvals of Bankers Trust's or Deutsche 
Bank's service as lending agent for the Affiliated Lending Fund 
pursuant to the Program, for the institution of all procedures relating 
to the Program as it relates to the Affiliated Lending Fund, and for 
any periodic review of loan transactions for which Bankers Trust or 
Deutsche Bank acted as lending agent pursuant to the Program.
    3. A majority of the Board of Trustees of each Affiliated Lending 
Fund (including a majority of the Independent Trustees of such 
Affiliated Lending Fund) will initially and at least annually 
thereunder determine that the investment of securities lending cash 
collateral in Shares of the Trust is in the best interest of the 
shareholders of the Lending Fund.
    4. Investment in Shares of an Investment Fund by a particular 
Lending Fund will be consistent with such Lending Fund's objectives and 
policies. A Lending Fund that complies with rule 2a-7 under the Act 
will not invest in its cash collateral in an Investment Fund that does 
not comply with rule 2a-7.
    5. Investment in Shares of an Investment Fund by a particular 
Lending Fund will be in accordance with the guidelines regarding the 
investment of securities lending cash collateral specified by the 
Lending Fund in the securities lending agreement. A Lending Fund's cash 
collateral will be invested in a particular Investment Fund only if 
that Investment Fund has been approved for investment by the Lending 
Fund and if that Investment Fund invests in the types of instruments 
that the Lending Fund has authorized for the investment of its cash 
collateral.
    6. The Shares of an Investment Fund and any investment company in 
which an Investment Fund may invest pursuant to condition 7 below will 
not be subject to a sales load, redemption fee, any asset-based sales 
charge, or

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service fee (as defined in Rule 2830(b)(9) of the Conduct Rules of the 
National Association of Securities Dealers).
    7. An Investment Fund will not acquire securities of any investment 
company in excess of the limits contained in section 12(d)(1)(A) of the 
Act, except securities of a registered open-end management company 
advised by a BT Entity to the extent otherwise permitted by section 
12(d)(1)(E) of the Act.
    For the SEC, by the Division of Investment Management, under 
delegated authority.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-7198 Filed 3-22-00; 8:45 am]
BILLING CODE 8010-01-M