[Federal Register Volume 63, Number 61 (Tuesday, March 31, 1998)]
[Notices]
[Pages 15466-15467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8319]
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SECURITES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23076; 812-10768]
Barr Rosenberg Series Trust and Rosenberg Institutional Equity
Management; Notice of Application
March 25, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order under section 12(d)(1)(J) of
the Investment Company Act of 1940 (the ``Act'') for an exemption from
section 12(d)(1)(G)(i)(II).
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SUMMARY OF THE APPLICATION: Applicants seek an order that would permit
a fund of funds relying on section 12(d)(1)(G) of the Act to invest
directly in securities and other instruments.
APPLICANTS: Barr Rosenberg Series Trust (the ``Trust'') and Rosenberg
Institutional Equity Management (``RIEM''). The requested order also
would extend to any existing or future open-end management investment
company or series thereof advised by RIEM (an ``Upper Tier Fund'') that
wishes to invest in another registered open-end management investment
company or series thereof that is advised by RIEM and is part of the
same ``group of investment companies'' (as defined in section
12(d)(1)(G)(ii) of the Act) (together with the series of the Trust
excluding the Barr Rosenberg Double Alpha Market Fund, the ``Underlying
Funds'') as the investing Upper Tier Fund.\1\
\1\ All existing entities that currently intend to rely on the
order are listed as applicants and any Upper Tier Fund that may rely
on this order in the future will do so only in accordance with the
terms and conditions of the application.
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FILING DATES: The application was filed on September 2, 1997, and
amended on December 24, 1997. Applicants have agreed to file an
additional amendment, the substance of which is incorporated in this
notice, during the notice period.
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 the
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 April 20, 1998,
and should be accompanied by proof of service on the 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 contest. Persons may request
notification by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W, Washington, DC 20549.
Applicants, 4 Orinda Way, Building E, Orinda, CA 94563.
FOR FURTHER INFORMATION CONTACT: Annmarie J. Zell, Staff Attorney, at
(202) 942-0532, or Mary Kay Frech, 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, 450 Fifth Street, N.W, Washington,
DC 20549 (telephone (202) 942-8090).
Applicants' Representations
1. The Trust, a registered open-end management investment company
organized as a Massachusetts business trust, currently consists of five
series (collectively, the ``Funds'').\2\ RIEM, an investment adviser
registered under the Investment Advisers Act of 1940, is the investment
adviser for the Funds.
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\2\ Barr Rosenberg Double Alpha Market Fund, Barr Rosenberg
Market Neutral Fund, U.S. Small Capitalization, Japan Series and
International Small Capitalization Series.
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2. The Barr Rosenberg Double Alpha Market Fund (the ``Double Alpha
Fund''), a series of the Trust, will seek a total return greater than
that of the Standard & Poor's 500 Composite Stock Price Index (the ``S
& P 500 Index'') by investing in shares of the Barr Rosenberg Market
Neutral Fund (the ``Market Neutral Fund''), while also investing in S &
P 500 Index Futures, options on S & P 500 Index Futures, and equity
swap contracts (collectively, ``S & P Instruments''). The Market
Neutral Fund seeks long-term capital appreciation while maintaining
minimal exposure to general equity market risk by taking long positions
in stocks principally traded in the markets of the United States the
RIEM has identified as undervalued and short positions that RIEM has
identified as overvalued. By investing in shares of the Market Neutral
Fund, the Double Alpha Fund seeks to capture the return generated by
the ``market neutral strategy'' of the Market Neutral Fund. The Double
Alpha Fund and the Upper Tier Funds would also like to retain the
flexibility to invest in other securities and financial instruments,
including financial futures, swaps, reverse repurchase agreements,
options on currencies and precious metals.
3. RIEM currently reduces and expects to reduce its management fees
and bear certain expenses to the extent that each Fund's total annual
operating expenses (excluding nonrecurring account fees and
extraordinary expenses) exceed a specified percentage of net assets
(the ``Voluntary Expense Limit''). Any advisory fee that RIEM charges
to the Double Alpha Fund will be for services that are addition to,
rather than duplicative of, services provided to the Underlying Funds.
Shareholders of the Double Alpha Fund will also pay a proportionate
share of the advisory fees and expenses paid by shareholders of the
Underlying Funds. Neither the Double Alpha Fund nor the Underlying
Funds shares are subject to a sales charge and the Double Alpha Fund
intends to invest only in shares of the Underlying Funds that are not
subject to distribution or shareholder servicing fees. Applicants
believe that the proposed operation of the Double Alpha Fund will
benefit investors by lowering transaction and operational costs and
providing them with a unique investment alternative.
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
investment companies, represent more than 10% of the acquiring
company's total assets. Section 12(d)(1)(B) provides that no registered
open-end investment company may sell it securities to another
investment company if the sale will cause the
[[Page 15467]]
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)(G) of the Act provides that section 12(d)(1)
will not apply to securities of an acquired company purchased by an
acquiring company if: (a) the acquiring company and the acquired
company are part of the same group of investment companies; (b) the
acquiring company holds only securities of acquired companies that are
part of the same group of investment companies, government securities,
and short-term paper; (c) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not
excessive under rules adopted pursuant to section 22(b) or section
22(c) by a securities association registered under section 15A of the
Securities Exchange Act of 1934, or the Commission; and (d) the
acquired company has a policy that prohibits it from acquiring
securities of registered open-end investment companies or registered
unit investment trusts in reliance on section 12(d)(1)(F) or (G).
3. Applicants state that the proposed arrangement would comply with
the provisions of section 12(d)(1)(G), but for the fact that the Double
Alpha Funds' investment policies contemplate that it will invest in S &
P 500 Instruments and other securities and financial instruments.
4. Section 12(d)(1)(J) provides that the SEC may exempt persons or
transactions from any provision of section 12(d)(1) if and to the
extent the exemption is consistent with the public interest and the
protection of investors. Applicants believe that permitting the Double
Alpha Fund or other Upper Tier Funds to invest in securities as
described in the application would not raise any of the concerns that
the requirements of section 12(d)(1)(G) were designed to address.
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions:
1. Before approving any advisory contract under section 15 of the
Act, the board of trustees of the Double Alpha Fund or Upper Tier Fund,
including a majority of the trustees who are not ``interested persons''
as defined in section 2(a)(19) of the Act, will find that advisory
fees, if any, charged under such contract are based on services
provided that are in addition to, rather than duplicative of, services
provided pursuant to any Underlying Fund's advisory contract. The
finding, and the basis upon which the finding was made, will be
recorded fully in the minute books of the Double Alpha Fund or Upper
Tier Fund.
2. Applicants will comply with all provisions of section
12(d)(1)(G) of the Act, except for section 12(d)(1)(G)(i)(II) to the
extent that it restricts the Double Alpha Fund or Upper Tier Fund from
investing in securities as described in the application.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-8319 Filed 3-30-98; 8:45 am]
BILLING CODE 8010-01-M
