[Federal Register Volume 81, Number 195 (Friday, October 7, 2016)]
[Notices]
[Pages 69884-69885]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24285]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 32-300; File No. 812-14583]
Legg Mason Global Asset Management Trust, et al.; Notice of
Application
October 3, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order pursuant to: (a) Section
6(c) of the Investment Company Act of 1940 (``Act'') granting an
exemption from sections 18(f) and 21(b) of the Act; (b) section
12(d)(1)(J) of the Act granting an exemption from section 12(d)(1) of
the Act; (c) sections 6(c) and 17(b) of the Act granting an exemption
from sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Act; and (d)
section 17(d) of the Act and rule 17d-1 under the Act to permit certain
joint arrangements and transactions. Applicants request an order that
would permit certain registered open-end management investment
companies to participate in a joint lending and borrowing facility.
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APPLICANTS: Legg Mason Global Asset Management Trust, Legg Mason
Global Asset Management Variable Trust, Legg Mason Partners Income
Trust, Legg Mason Partners Institutional Trust, Legg Mason Partners
Money Market Trust, Legg Mason Partners Premium Money Market Trust,
Legg Mason Partners Variable Income Trust, Master Portfolio Trust, and
Western Asset Funds, Inc., registered under the Act as open-end
management investment companies with one or more series, and Legg Mason
Partners Fund Advisor, LLC (the ``Adviser''), registered as an
investment adviser under the Investment Advisers Act of 1940.
FILING DATES: The application was filed on November 27, 2015, and
amended on May 5, 2016.
HEARING OR NOTIFICATION OF HEARING: An order granting the requested
relief 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 28, 2016 and should be accompanied by proof of
service on the applicants, in the form of an affidavit, or, for
lawyers, a certificate of service. Pursuant to Rule 0-5 under the Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, 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, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants, c/o: Bryan
Chegwidden, Esq., Rope & Gray LLP, 1211 Avenue of the Americas, New
York, NY 10036, and Robert I. Frenkel, Legg Mason & Co., LLC, 100 First
Stamford Place, Stamford, CT 06902.
FOR FURTHER INFORMATION CONTACT: Judy T. Lee, Senior Special Counsel,
at (202) 551-6259 or Sara Crovitz, Assistant Chief Counsel, at (202)
551-6720 (Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Summary of the Application
1. Applicants request an order that would permit the applicants to
participate in an interfund lending facility where each Fund could lend
money directly to and borrow money directly from other Funds to cover
unanticipated cash shortfalls, such as unanticipated redemptions or
trade fails.\1\ The Funds will not borrow under the facility for
leverage purposes and the loans' duration will be no more than 7
days.\2\
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\1\ Applicants request that the order apply to the applicants
and to any existing or future registered open-end management
investment company or series thereof for which the Adviser or any
successor thereto or an investment adviser controlling, controlled
by, or under common control with the Adviser or any successor
thereto serves as investment adviser (each a ``Fund'' and
collectively the ``Funds'' and each such investment adviser an
``Adviser''). For purposes of the requested order, ``successor'' is
limited to any entity that results from a reorganization into
another jurisdiction or a change in the type of a business
organization.
\2\ Any Fund, however, will be able to call a loan on one
business day's notice.
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2. Applicants anticipate that the proposed facility would provide a
borrowing Fund with a source of
[[Page 69885]]
liquidity at a rate lower than the bank borrowing rate at times when
the cash position of the Fund is insufficient to meet temporary cash
requirements. In addition, Funds making short-term cash loans directly
to other Funds would earn interest at a rate higher than they otherwise
could obtain from investing their cash in repurchase agreements or
certain other short term money market instruments. Thus, applicants
assert that the facility would benefit both borrowing and lending
Funds.
3. Applicants agree that any order granting the requested relief
will be subject to the terms and conditions stated in the Application.
Among others, the Adviser, through a designated committee, would
administer the facility as a disinterested fiduciary as part of its
duties under the investment management and administrative agreements
with the Funds and would receive no additional fee as compensation for
its services in connection with the administration of the facility. The
facility would be subject to oversight and certain approvals by the
Funds' Board, including, among others, approval of the interest rate
formula and of the method for allocating loans across Funds, as well as
review of the process in place to evaluate the liquidity implications
for the Funds. A Fund's aggregate outstanding interfund loans will not
exceed 15% of its net assets, and the Fund's loan to any one Fund will
not exceed 5% of the lending Fund's net assets.\3\
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\3\ Under certain circumstances, a borrowing Fund will be
required to pledge collateral to secure the loan.
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4. Applicants assert that the facility does not raise the concerns
underlying section 12(d)(1) of the Act given that the Funds are part of
the same group of investment companies and there will be no duplicative
costs or fees to the Funds.\4\ Applicants also assert that the proposed
transactions do not raise the concerns underlying sections 17(a)(1),
17(a)(3), 17(d) and 21(b) of the Act as the Funds would not engage in
lending transactions that unfairly benefit insiders or are detrimental
to the Funds. Applicants state that the facility will offer both
reduced borrowing costs and enhanced returns on loaned funds to all
participating Funds and each Fund would have an equal opportunity to
borrow and lend on equal terms based on an interest rate formula that
is objective and verifiable. With respect to the relief from section
17(a)(2) of the Act, applicants note that any collateral pledged to
secure an interfund loan would be subject to the same conditions
imposed by any other lender to a Fund that imposes conditions on the
quality of or access to collateral for a borrowing (if the lender is
another Fund) or the same or better conditions (in any other
circumstance).\5\
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\4\ Applicants state that the obligation to repay an interfund
loan could be deemed to constitute a security for the purposes of
sections 17(a)(1) and 12(d)(1) of the Act.
\5\ Applicants state that any pledge of securities to secure an
interfund loan could constitute a purchase of securities for
purposes of section 17(a)(2) of the Act.
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5. Applicants also believe that the limited relief from section
18(f)(1) of the Act that is necessary to implement the facility
(because the lending Funds are not banks) is appropriate in light of
the conditions and safeguards described in the application and because
the Funds would remain subject to the requirement of section 18(f)(1)
that all borrowings of a Fund, including combined interfund loans and
bank borrowings, have at least 300% asset coverage.
6. Section 6(c) of the Act permits the Commission to exempt any
persons or transactions from any provision of the Act if 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. Section 12(d)(1)(J) of the Act
provides that the Commission may exempt any person, security, or
transaction, or any class or classes of persons, securities, or
transactions, from any provision of section 12(d)(1) if the exemption
is consistent with the public interest and the protection of investors.
Section 17(b) of the Act authorizes the Commission to grant an order
permitting a transaction otherwise prohibited by section 17(a) if it
finds that (a) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (b) the proposed transaction is consistent with the policies
of each registered investment company involved; and (c) the proposed
transaction is consistent with the general purposes of the Act. Rule
17d-1(b) under the Act provides that in passing upon an application
filed under the rule, the Commission will consider whether the
participation of the registered investment company in a joint
enterprise, joint arrangement or profit sharing plan on the basis
proposed is consistent with the provisions, policies and purposes of
the Act and the extent to which such participation is on a basis
different from or less advantageous than that of the other
participants.
For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-24285 Filed 10-6-16; 8:45 am]
BILLING CODE 8011-01-P