[Federal Register Volume 59, Number 94 (Tuesday, May 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11885]
[[Page Unknown]]
[Federal Register: May 17, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20287; 812-8796]
Rembrandt FundsSM, et al.; Notice of Application
May 10, 1994.
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: Rembrandt FundsSM and LaSalle Street Capital
Management, Ltd. (``LaSalle''), on behalf of themselves and other
registered investment companies that are now or in the future advised
by LaSalle or an entity controlling, controlled by, or under common
control with LaSalle.\1\
\1\All existing investment companies that presently intend to
rely on the requested order are named as applicants.
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relevant act sections: Exemption requested under section 6(c) of the
Act for an exemption from section 12(d)(1)(A)(ii), under sections 6(c)
and 17(b) for an exemption from section 17(a), and under rule 17d-1 to
permit certain transactions in accordance with section 17(d) of the Act
and rule 17d-1.
summary of application: Applicants seek an order that would permit
certain money market funds to sell their shares to affiliated
investment companies.
filing date: The application was filed on January 26, 1994, and amended
on April 1, 1994 and April 29, 1994.
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
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 June 6, 1994,
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 may request
notification of a hearing by writing to the SEC's Secretary.
addresses: Secretary, SEC, 450 5th Street NW., Washington, DC 20549.
Applicants, 10 South LaSalle Street, suite 3701, Chicago, IL 60603.
for further information contact: James E. Anderson, Staff Attorney, at
(202) 942-0573, or C. David Messman, 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 at the
SEC's Public Reference Branch.
Applicants' Representations
1. Rembrandt FundsSM is an open-end management investment
company that currently offers 16 series (each a ``Fund''). Four of the
Funds are money market funds (the ``Money Market Funds'') and are
subject to the requirements of rule 2a-7 under the Act. The other
twelve Funds are non-money market funds (the ``Non-Money Market
Funds'').
2. LaSalle is the investment adviser for each of the Funds. ABN de
Neuflize International Investment Advisory Company B.V. serves as sub-
adviser for some of the Funds. (Collectively, LaSalle and the sub-
adviser are the ``Investment Advisers.'') SEI Financial Services
Company (the ``Distributor'') serves as the distributor for the Funds,
and SEI Financial Management Corporation is the manager, transfer
agent, and administrator for the Funds. CoreStates Bank, N.A. serves as
custodian to the Funds.
3. The Money Market Funds seek current income, liquidity, and
capital preservation by investing exclusively in short-term money
market instruments, such as U.S. government securities, bank
obligations, commercial paper, municipal obligations, or repurchase
agreements secured by government securities. These short-term debt
securities are valued at their amortized cost pursuant to the
requirements of rule 2a-7. The Non-Money Market Funds invest in a
variety of debt and/or equity securities in accordance with their
respective investment objectives and policies. Each of the Funds has,
or may be expected to have, uninvested cash in an account with the
custodian. This cash either may be invested directly in individual
short-term money market instruments or may not be otherwise invested in
any portfolio securities.
4. Applicants seek an order that would permit (a) the Funds to
utilize their cash reserves that have not been invested in portfolio
securities to purchase shares of the Money Market Funds (each Fund,
including Money Market Funds, purchasing shares of the Money Market
Funds is an ``Investing Fund'') and (b) the Money Market Funds to sell
or redeem their shares to or from each Investing Fund. By investing
cash balances in the Money Market Funds as proposed, applicants believe
that the Investing Funds will be able to combine their cash balances
and thereby reduce their transaction costs, create more liquidity,
enjoy greater returns, and further diversify their holdings. The
policies of the Funds permit the Funds to purchase money market
instruments, including shares of a money market fund.
5. The shareholders of the Investing Funds would not be subject to
the imposition of double management fees. Applicants would cause each
Investment Adviser and its respective affiliates to remit to the
respective Investing Funds, or waive, an amount equal to the investment
advisory fees these service providers earn as a result of the Investing
Funds' investments in the Money Market Funds to the extent the fees are
based upon the Investing Funds' assets invested in shares of the Money
Market Funds. Further, no sales charge, contingent deferred sales
charge, 13b-1 fee, or other underwriting or distribution fee would be
charged by the Money Market Funds with respect to the purchase or
redemption of their shares. If a Money Market Fund offers more than one
class of shares, each Investing Fund will invest only in the Class with
the lowest expense ratio at the time of the investment.
6. Several of the funds have voluntary expense cap arrangements
with LaSalle for the purpose of keeping each Fund's total expenses
below a certain predetermined percentage amount (``Expense Waiver'').
To the extent actual expenses of the Funds exceed these caps, LaSalle
waives or reimburses a Fund in the amount of the excess. Any applicable
Expense Waiver will not limit the advisory and administrative fee
waiver or remittance discussed above.
7. Applicants also request relief that would permit the Funds to
invest uninvested cash in a Money Market Fund in excess of the
percentage limitations set out in section 12(d)(A)(ii) of the Act.
Section 12(d)(A)(ii) prohibits a registered investment company from
acquiring the securities of another investment company if, immediately
thereafter, the acquiring company would have more than 5% of its total
assets invested in the securities of the selling company. Applicants
propose that each Fund be permitted to invest in shares of a Money
Market Fund so long as each Fund's aggregate investment in such Money
Market Fund does not exceed the greater of 5% of such Fund's total net
assets or $2.5 million. Applicants will comply with all other
provisions of section 12(d)(1).
Applicants' Legal Analysis
1. Sections 17(a) (1) and (2) of the Act make it unlawful for any
affiliated person of a registered investment company, or any affiliated
person of such affiliated person, acting as principal, to sell or
purchase any security to or from such investment company. Because each
Fund may be deemed to be under common control with the other Funds, it
may be an ``affiliated person,'' as defined in section 2(a)(3) of the
Act, of the other Funds, Accordingly, the sale of shares of the Money
Market Funds to the Investing Funds, and the redemption of such shares
from the Investing Funds, would be prohibited under section 17(a).
2. Section 17(b) of the Act authorizes the SEC to exempt a
transaction from section 17(a) if the terms of the proposed
transaction, including the consideration to be paid or received, are
reasonable and fair and do not involve overreaching on the part of any
person concerned, the proposed transaction is consistent with the
policy of each registered investment company concerned, and the
proposed transaction is consistent with the general policy of the Act.
Section 17(b) could be interpreted to exempt only a single transaction.
However, the SEC, under section 6(c) of the Act, may exempt a series of
transactions that otherwise would be prohibited by section 17(a).
3. The Investing Funds will retain their ability to invest their
cash balances directly into money market instruments if they believe
they can obtain a higher return. Each of the Money Market Funds has the
right to discontinue selling shares to any of the Investing Funds if
its board of trustees determines that such sales would aversely affect
the portfolio management and operations of such Money Market Fund.
Therefore, applicants believe that the proposal satisfies the standards
for relief.
4. Section 17(d) of the Act and rule 17d-1 thereunder 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. Each Investing Fund, by purchasing shares of the Money
Market Funds; each Investment Adviser of an Investing Fund, by managing
the assets of the Investing Funds invested in the Money Market Funds;
and each of the Money Market Funds, by selling shares to the Investing
Funds, could be participants in a joint enterprise or other joint
arrangement within the meaning of section 17(d)(1) and rule 17d-1.
5. Rule 17d-1 permits the SEC to approve a proposed joint
transaction covered by the terms of section 17(d). In determining
whether to approve a transaction, the SEC is to consider whether the
proposed transaction is consistent with the provisions, policies, and
purposes of the Act, and the extent to which the participation of the
investment companies is on a basis different from or less advantageous
than that of the other participants. Applicants believe that the
proposal satisfies these standards.
6. Section 12(d)(1), as noted above, sets certain limits on an
investment company's ability to invest in the shares of another
investment company. The perceived abuses section 12(d)(1) sought to
address include undue influence by an acquiring fund over the
management of an acquired fund, layering of fees, and complex
structures. Applicants believe that none of these concerns are
presented by the proposed transactions and that the proposed
transactions meet the section 6(c) standards for relief.
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions:
1. Shares of the Money Market Funds sold to and redeemed from the
Investing Funds will not be subject to a sales load, redemption fee, or
distribution fee under a plan adopted in accordance with rule 12b-1.
2. Applicants will cause the Investment Advisers and their
respective affiliates, in their capacities as service providers for the
Money Market Funds, to remit to the respective Investing Fund, or
waive, an amount equal to all investment advisory fees received by them
or their affiliates under their respective investment advisory
agreements with the Money Market Funds to the extent such fees are
based upon the Investing Fund's assets invested in shares of the Money
Market Funds. Any of these fees remitted or waived will not be subject
to recoupment by the Funds' Investment Advisers at a later date.
3. For the purpose of determining any amount to be waived and/or
expenses to be borne to comply with any Expense Waiver, the adjusted
fees for an Investing Fund (gross fees minus Expense Waiver) will be
calculated without reference to the amounts waived or remitted pursuant
to condition 2. Adjusted fees then will be reduced by the amount waived
pursuant to condition 2. If the amount waived pursuant to condition 2
exceeds adjusted fees, the Investing Fund's Investment Adviser also
will reimburse the Investing Fund in an amount equal to such excess.
4. Each of the Investing Funds will be permitted to invest
uninvested cash in, and hold shares of, a Money Market Fund only to the
extent that the Investing Fund's aggregate investment in such Money
Market Fund does not exceed the greater of 5% of the Investing Fund's
total net assets or $2.5 million.
5. Each Investing Fund will vote its shares of each Money Market
Fund in the same proportion as the votes of all other shareholders of
such Money Market Funds entitled to vote on the matter.
6. As shareholders of a Money Market Fund, the Investing Funds will
receive dividends and bear their proportionate share of expenses on the
same basis as other shareholders of such Money Market Funds. A separate
account will be established in the shareholder records of each of the
Money Market Funds for each of the acquiring Investing Funds.
For the SEC, by the Division of Investment Management, pursuant
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-11885 Filed 5-16-94; 8:45 am]
BILLING CODE 8010-01-M
