[Federal Register Volume 65, Number 196 (Tuesday, October 10, 2000)]
[Notices]
[Pages 60227-60230]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25865]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24672; 812-12046]


Equity Managers Trust, et al.; Notice of Application

October 2, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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    Summary of Application: Applicants request an order to permit 
certain registered open-end management investment companies to invest 
uninvested cash and cash collateral in affiliated money market funds.
    Applicants: Equity Managers Trust, Global Managers Trust, Income 
Managers Trust (collectively, the ``Managers Trusts''), Neuberger 
Berman Equity Funds, Neuberger Berman Equity Trust, Neuberger Berman 
Equity Assets, Neuberger Berman Equity Series, Neuberger Berman Income 
Funds, Neuberger Berman Income Trust (collectively, with the Managers 
Trusts, the ``Trusts''), Neuberger Berman Management Inc. (``NBMI'') 
and Neuberger Berman, LLC (``Neuberger Berman'' together with NBMI, the 
``Adviser'').
    Filing Dates: The application was filed March 28, 2000 and amended 
on July 31, 2000 and September 5, 2000. Applicants have agreed to file 
an amendment during the notice period, the substance of which is 
reflected in this notice.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission'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 October 27, 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 Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549-0609; Applicants, NBMI and the 
Trusts, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180, Neuberger 
Berman, 605 Third Avenue, 21st Floor, New York, NY 10158-3698.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 942-0574 or Janet M. Grossnickle, Branch Chief, at (202) 942-
0564, (Division of Investment Management, Office of Investment Company 
Regulation).

[[Page 60228]]


SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. Each of Neuberger Berman Equity Funds, Neuberger Berman Equity 
Trust, Neuberger Berman Equity Assets, Neuberger Berman Equity Series, 
Neuberger Berman Income Funds, and Neuberger Berman Income Trust is a 
Delaware business trust registered under the Act as an open-end 
management investment company. Neuberger Berman Equity Funds currently 
has eleven series, Neuberger Berman Equity Trust has eleven series, 
Neuberger Berman Equity Assets has seven series, Neuberger Berman 
Equity Series has one series, Neuberger Berman Income Funds has seven 
series, and Neuberger Berman Income Trust has two series which are 
seeking the requested relief (collectively, the ``Funds''). Each of the 
Managers Trusts is a New York common law trust, registered under the 
Act as an open-end management investment company. Equity Managers Trust 
currently has ten series, Global Managers Trust has one series, and 
Income Managers Trust has seven series which are seeking the requested 
relief (collectively, the ``Portfolios''). NBMI is the investment 
manager of each Portfolio and administrator to each Fund. Neuberger 
Berman serves as the subadviser to each Portfolio. Both NBMI and 
Neuberger Berman are registered as investment advisers under the 
Investment Advisers Act of 1940.
    2. Each Fund is a ``feeder fund'' that seeks to achieve its 
investment objective by investing all of its net investable assets, in 
reliance on section 12(d)(1)(E) of the Act, in its corresponding 
Portfolio, which is a ``master fund''.\1\ Applicants also request 
relief for all other registered open-end investment companies or any 
series thereof that are advised by the Adviser or by any entity 
controlling, controlled by, or under common control (within the meaning 
of section 2(a)(9) of the Act) with the Adviser.\2\
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    \1\ Applicants also wish to have the flexibility to allow the 
Funds to engage directly in the transactions described in the 
application if, in the future, the Funds were to terminate their 
master-feeder structure and instead invest directly in investment 
securities as single-tier funds. To have this flexibility, 
applicants request relief to engage in the transactions described in 
the application on behalf of each Fund as well as each Portfolio. 
Applicants further acknowledge that if the Funds terminate their 
master-feeder structure, the Funds will rely on the requested relief 
only in accordance with all of the terms and conditions of the 
application.
    \2\ All existing investment companies that currently intend to 
rely on the requested relief have been named as applicants, and any 
entities that rely on the requested order in the future will do so 
only in accordance with the terms and conditions of the application.
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    3. Each Investing Portfolio (as defined below) has, or may be 
expected to have, cash that has not been invested in portfolio 
securities (``Uninvested Cash''). Uninvested Cash may result from a 
variety of sources, including dividends or interest received on 
portfolio securities, unsettled securities transactions, reserves held 
for investment strategy purposes, scheduled maturity of investments, 
liquidation of investment securities to meet anticipated redemptions or 
dividend payments, and new monies received from investors. Currently, 
the Investing Portfolios can invest Uninvested Cash directly in money 
market instruments. Certain of the Investing Portfolios also may 
participate in a securities lending program under which an Investing 
Portfolio may lend its portfolio securities to registered broker-
dealers or other institutional investors. The loans are continuously 
secured by collateral equal at all times to at least the market value 
of the securities loaned. Collateral for these loans may include cash 
(``Cash Collateral,'' and together with Uninvested Cash, ``Cash 
Balances'').
    4. Applicants request relief to the extent necessary to permit (a) 
the Portfolios to utilize Uninvested Cash to purchase shares of one or 
more existing or future registered open-end management investment 
companies advised by the Adviser that are money market funds (``Money 
Market Funds'') (a Portfolio that purchases shares of the Money Market 
Funds is referred to as an ``Investing Portfolio''); (b) each of the 
Investing Portfolios to utilize Cash Collateral received from borrowers 
of its portfolio securities in connection with the Investing 
Portfolio's securities lending activities to purchase shares of one or 
more of the Money Market Funds; (c) the Money Market Funds to sell 
their shares to, and to purchase such shares from, the Investing 
Portfolios; and (d) the Adviser to effect such purchases and sales. The 
Money Market Funds seek current income, liquidity and capital 
preservation by investing exclusively in short-term money market 
instruments that are valued at their amortized cost pursuant to the 
requirements of rule 2a-7 under the Act. Applicants submit that 
investing Cash Balances in shares of the Money Market Funds is in the 
best interest of the Funds, their shareholders, and each Fund's 
corresponding Investing Portfolios, because the Investing Portfolios 
expect to benefit from economies of scale that maximize investment 
opportunities, minimize credit and interest rate risk, facilitate 
management of liquidity, and minimize administrative costs.

Applicants' Legal Analysis

    1. Section 12(d)(1)(A) of the Act provides that no registered 
investment company may acquire securities of another investment company 
if such securities represent more than 3% of the acquired company's 
outstanding voting stock, more than 5% of the acquiring company's total 
assets, or if such securities, together with the securities of other 
acquired investment companies, represented more than 10% of the 
acquiring company's total assets. Section 12(d)(1)(B) of the Act 
provides that no registered open-end investment company sell its 
securities to another investment company if the sale will cause the 
acquiring company to own more than 3% of the acquired company's voting 
stock, or if the sale will cause more than 10% of the acquired 
company's voting stock to be owned by investment companies.
    2. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security or transaction (or classes thereof) from 
any provision of section 12(d)(1) if, and to the extent that, the 
exemption is consistent with the public interest and the protection of 
investors. Applicants request an exemption from the provisions of 
sections 12(d)(1)(A) and (B) to the extent necessary to permit each 
Investing Portfolio to invest Cash Balances in the Money Market Funds.
    3. Applicants state that the proposed arrangement would not result 
in the abuses that sections 12(d)(1)(A) and (B) were intended to 
prevent. Applicants state that because each Money Market Fund will 
maintain a highly liquid portfolio, an Investing Portfolio will not be 
in a position to gain undue influence over a Money Market Fund. 
Applicants represent that the proposed arrangement will not result in 
an inappropriate layering of fees because shares of the Money Market 
Funds sold to the Investing Portfolios will not be subject to a sales 
load, redemption fee, distribution fee under a plan adopted in 
accordance with rule 12b-1 or service fee (as defined in rule 
2830(b)(9) of the National Association of Securities Dealers, Inc. 
(``NASD'') Conduct Rules) or, if such shares are subject to any such 
fees in the future, the Adviser will waive its advisory fee for each 
Investing Portfolio in an amount that offsets the

[[Page 60229]]

amount of such fees incurred by the Investing Portfolio. Applicants 
state that if a Money Market Fund offers more than one class of shares, 
an Investing Portfolio will invest its Cash Balances only in the class 
with the lowest expense ratio (taking into account the expected impact 
of the Investing Portfolio's investment) at the time of the investment. 
In connection with approving any advisory contract, the boards of 
trustees of the Investing Portfolios (each a ``Board'' and together the 
``Boards''), including a majority of the trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act 
(``Independent Trustees'') will consider to what extent, if any, the 
advisory fees charged to each Investing Portfolio by the Adviser should 
be reduced to account for reduced services provided to the Investing 
Portfolio by the Adviser as a result of Uninvested Cash being invested 
in the Money Market Funds. Applicants represent that no Money Market 
Fund will acquire securities of any other investment company in excess 
of the limitations contained in section 12(d)(1)(A) of the Act, except 
to the extent permitted by section 12(d)(1)(E) of the Act.
    4. Section 17(a) of the Act makes it unlawful for any affiliated 
person of a registered investment company, acting as principal, to sell 
or purchase any security to or from the company. Section 2(a)(3) of the 
Act defines an ``affiliated person'' of an investment company to 
include the investment adviser, any person that owns 5% or more of the 
outstanding voting securities of that company, and any person directly 
or indirectly controlling, controlled by, or under common control with 
the investment company. Applicants state that as the investment adviser 
of the Funds and Portfolios, the Adviser is an affiliated person of 
each of these entities under section 2(a)(3) of the Act. Applicants 
state that the Portfolios share a common investment adviser and some 
Funds and Portfolios share common boards of trustees, the Funds and 
Portfolios may be considered affiliated persons of each other under 
section 2(a)(3) by virtue of being deemed to be under common control. 
In addition, applicants submit that an Investing Portfolio may own more 
than 5% of the outstanding shares of beneficial interest of one or more 
of the Money Market Funds. Therefore, applicants state that the 
Investing Portfolio and the Money Market Funds might be deemed 
affiliated persons (or affiliates of an affiliate) of each other. 
Accordingly, applicants state that the sale of shares of the Money 
Market Funds to the Investing Portfolios, and the redemption of such 
shares, would be prohibited under section 17(a).
    5. Section 17(b) of the Act authorizes the Commission to exempt a 
proposed transaction from section 17(a) of the Act if the terms of the 
proposed transaction, including the consideration to be paid or 
received, are fair and reasonable and do not involve overreaching on 
the part of any person concerned, the proposed transaction is 
consistent with the policies of each registered investment company 
involved, and with the general purposes of the Act. Section 6(c) of the 
Act provides, in part, that the Commission may exempt any person, 
security or transaction, or any class or classes of persons, securities 
or transactions, from any provision of the Act if, and to the extent 
that such exemption is necessary or appropriate in the public interest 
and is consistent with the protection of investors and the purposes 
fairly intended by the policy and provisions of the Act.
    6. Applicants submit that the request for relief satisfies the 
standards of sections 17(b) and 6(c) of the Act. Applicants state that 
the Investing Portfolios will purchase and sell shares on the same 
terms and on the same basis as shares are purchased and sold by all 
other shareholders of the Money Market Funds. In addition, under the 
proposed transactions, the Investing Portfolios will retain their 
ability to invest their Cash Balances directly in money market 
instruments as permitted by each Investing Portfolio's investment 
objectives and policies. Applicants state that each of the Money Market 
Funds reserves the right to discontinue selling shares to any of the 
Investing Portfolios if the Money Market Fund board of trustees 
determines that such sales would adversely affect its portfolio 
management and operations. Applicants further state that investment of 
Cash Balances in shares of the Money Market Funds will be made only if 
not prohibited by such Investing Portfolio's respective investment 
restrictions and the policies as set forth in the prospectuses and 
statements of additional information of its corresponding Funds.\3\
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    \3\ If the exemptive relief requested is granted, the current 
fundamental investment restrictions of any Investing Portfolio would 
not preclude the Investing Portfolio from investing Uninvested Cash 
in shares of the Money Market Funds.
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    7. Section (d) of the Act and rule 17d-1 under the Act 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, unless the Commission has issued an order authorizing the 
arrangement. Applicants state that the Investing Portfolios (by 
purchasing shares of the Money Market Funds), the Adviser (by managing 
the assets of the Investing Portfolios invested in the Money Market 
Funds), and the Money Market Funds (by selling shares to and redeeming 
them from the Investing Portfolios) could be deemed to be participants 
in a joint enterprise or other joint arrangement within the meaning of 
section 17(d) of the Act and rule 17d-1 thereunder.
    8. In determining whether to authorize a joint transaction, the 
Commission considers whether the proposed transaction is consistent 
with the provisions, policies, and purposes of the Act, and the extent 
to which the participation is on a basis different from or less 
advantageous than that of other participants. Applicants submit that 
the proposed transactions meet these standards because the investments 
by the Investing Portfolios in shares of the Money Market Funds would 
be indistinguishable from any other shareholder account maintained by 
the Money Market Funds and the transactions will be consistent with the 
Act.

Applicants' Conditions

    Applicants agree that the requested exemption will be subject to 
the following conditions:
    1. Investment of Cash Balances in shares of the Money Market Funds 
will be in accordance with each Investing Portfolio's respective 
investment restrictions, if any, and will be consistent with its 
corresponding Funds' policies as recited in such Funds' prospectuses 
and statements of additional information (and any supplements thereto). 
Investing Portfolios that are money market funds will not acquire 
shares of any Money Market Fund that does not comply with the 
requirements of rule 2a-7 under the Act.
    2. Shares of the Money Market Funds sold to and redeemed by the 
Investing Portfolios will not be subject to a sales load, redemption 
fee, distribution fee adopted in accordance with rule 12b-1 under the 
Act, or service fee (as defined in rule 2830(b)(9) of the NASD Conduct 
Rules), or if such shares are subject to any such fee, the Adviser will 
waive its advisory fee for each Investing Portfolio in an amount that 
offsets the amount of such fees incurred by the Investing Portfolio.
    3. Prior to reliance on the order by an Investing Portfolio, the 
Board of the

[[Page 60230]]

Managers Trust of which the Investing Portfolio is a series will hold a 
meeting for the purpose of voting on an advisory contract under section 
15 of the Act. Before approving any advisory contract for an Investing 
Portfolio, each such Board, including a majority of the Independent 
Trustees, taking into account all relevant factors, shall consider to 
what extent, if any, the advisory fee charged to the Investing 
Portfolio by the Adviser should be reduced to account for reduced 
services provided to the Investing Portfolio by the Adviser as a result 
of Uninvested Cash being invested in the Money Market Funds. In 
connection with this consideration, the Adviser to the Investing 
Portfolio will provide the Boards with specific information regarding 
the approximate cost to the Adviser of, or portion of the advisory fee 
under the existing advisory fee attributable to, managing the 
Uninvested Cash of the Investing Portfolio that can be expected to be 
invested in the Money Market Funds. The minute books of the Investing 
Portfolio will record fully the Boards' consideration in approving the 
advisory contract, including the considerations referred to above.
    4. Each Investing Portfolio will invest Uninvested Cash in, and 
hold shares of, the Money Market Funds only to the extent that the 
Investing Portfolio's aggregate investment of Uninvested Cash in all 
Money Market Funds does not exceed 25 percent of the Investing 
Portfolio's total assets. For purposes of this limitation, each 
Investing Portfolio will be treated as a separate investment company.
    5. Each Investing Portfolio, each Money Market Fund, and any future 
investment company that may rely on the order shall be part of the same 
group of investment companies as defined in section 12(d)(1)(G)(ii) of 
the Act and shall be advised, or provided the Adviser manages the Cash 
Balances, sub-advised by the Adviser, or a person controlling, 
controlled by, or under common control with the Adviser.
    6. No Money Market Fund in which an Investing Portfolio invests 
shall acquire securities of any other investment company in excess of 
the limits contained in section 12(d)(1)(A) of the Act, except as 
permitted by section 12(d)(1)(E) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-25865 Filed 10-6-00; 8:45 am]
BILLING CODE 8010-01-M