[Federal Register Volume 59, Number 108 (Tuesday, June 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13741]
[[Page Unknown]]
[Federal Register: June 7, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 20327; 812-8962]
Williamsburg Investment Trust, et al.; Application
June 1, 1994.
AGENCY: Securities and Exchange Commission (``SEC'' or the
``Commission'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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applicants: Williamsburg Investment Trust (the ``Trust''); Lowe,
Brockenbrough, Tierney & Tattersall, Inc. (``LBT&T''); Flippin, Bruce &
Porter, Inc. (``FBP''); and T. Leavell & Associates, Inc. (``T.
Leavell'').
relevant act sections: Exemption requested under sections 6(c) and
17(d) and rule 17d-1.
summary of application: Applicants seek a conditional order permitting
series of the Trust to deposit their daily uninvested cash balances
into a single joint account to be used to enter into repurchase
agreements. Applicants request that the order also apply to all future
registered investment companies and series thereof (``Future Funds,''
and collectively with the Trust, the ``Funds'') for which LBT&T, FBP,
or T. Leavell (collectively, the ``Advisors''), or any entity
controlling, controlled by, or under common control with one or more of
the Advisors serves as investment adviser.
filing DATE: The application was filed on 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 27, 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 who wish to be
notified of a hearing may request such notification by writing to the
SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street NW., Washington, DC 20549.
Applicants, c/o John F. Splain, Esq., MGF Service Corp., 312 Walnut
Street, 21st Floor, Cincinnati, Ohio 45202.
FOR FURTHER INFORMATION CONTACT:John V. O'Hanlon, Senior Attorney, at
(202) 942-0578, 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 from
the SEC's Public Reference Branch.
Applicants' Representations
1. The Trust is a registered open-end investment company that
offers ten series: The Jamestown Balanced Fund, The Jamestown Equity
Fund, The Jamestown Bond Fund, The Jamestown Short Term Bond Fund, The
Jamestown Tax Exempt Virginia Fund, FBP Contrarian Balanced Fund, FBP
Contrarian Equity Fund, the Alabama Tax Free Bond Fund, The Government
Street Bond Fund, and the Government Street Equity Fund.
2. The Advisors are investment advisers registered under the
Investment Advisers Act of 1940. Each Fund is advised by one of the
Advisors. One or more of the Advisors (or a successor entity) will
serve as the investment adviser to the Future Funds.
3. Each series of the Trust is authorized, and the Future Funds
will be authorized, by their investment policies to invest in
repurchase agreements.
4. Each Fund has or may be expected to have uninvested cash
balances with its custodian bank which otherwise would not be invested
in portfolio securities by its Advisor at the end of each trading day.
In the normal course of business, such assets are or would be invested
in overnight repurchase agreements with a bank or major brokerage house
collateralized by U.S. Government securities in order to earn
additional income. Every morning each Advisor, on behalf of the Funds
it serves, begins negotiating the interest rate for repurchase
agreements for that day and lining up securities required as
collateral. Generally, some portion of the assets in the respective
account of each Fund is received too late, or is too small, to be
invested effectively in a separate transaction. Further, because each
Fund must separately pursue, secure, and implement such investments,
there is a duplication of effort that results in certain inefficiencies
and may limit the return which some or all Funds can achieve.
5. Applicants seek a conditional order permitting the Funds to
deposit their daily uninvested cash balances into a single joint
account, the daily balance of which would be used to enter into one or
more overnight (or weekend or holiday) repurchase agreements. The
requested order will maximize the return by minimizing economic and
administrative efficiencies by allowing the Funds to enter into large
repurchase agreements.
6. Each repurchase agreement will be made by calling a government
securities dealer and indicating the rate of interest and size of the
desired repurchase agreement. Particular securities to be held as
collateral will then be identified and the Fund's custodian bank will
be notified. The securities will be wired to the account of the
custodian bank at the proper Federal Reserve Bank, transferred to a
sub-custodian account of the Funds at another qualified bank, or
redesignated and segregated on the records of the custodian bank if the
custodian bank is already the record holder of the collateral for the
repurchase agreement. The Funds will not enter into repurchase
agreements with the custodian bank, except where cash is received very
late in the business day and otherwise would be unavailable for
investment at all.
7. Each of the Funds has established the same systems and
standards, including quality standards for issuers of repurchase
agreements and for collateral, and requirements that the repurchase
agreements will be ``collateralized fully,'' as that term is defined in
rule 2a-7 under the Act. Identical systems and standards will be
adopted by any Future Funds which invest in the proposed joint account.
Applicants' Legal Analysis
1. Section 17(d) makes it unlawful for any affiliated person of a
registered investment company, or any affiliated person of such person,
acting as principal, to effect any transaction in which such registered
investment company is a joint or a joint and several participant with
such person in contravention of rules and regulations which the
Commission prescribes for the purpose of preventing participation by
such company on a basis different from or less advantageous than that
of other participants.
2. Rule 17d-1 provide that no affiliated person of a registered
investment company, or any affiliated person of such person, acting as
principal, shall participate in, or effect any transaction in
connection with, any joint enterprise or other joint arrangement in
which such registered investment company is a participant unless an
application regarding such joint arrangement has been filed with the
Commission and has been granted an order. In passing upon such
applications, the Commission will consider whether the investment
company's participation in the proposed joint enterprise or arrangement
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 other participants.
3. Each Fund might be deemed an affiliated person of each other
Fund under section 2(a)(3) of the Act. Each Fund, by participating in
the proposed account, and the Advisors, by managing the proposed
account, could be deemed to be a ``joint participant'' in a
``transaction'' within the meaning of section 17(d), and the proposed
account could be deemed to be a ``joint enterprise or other joint
series issue arrangement'' within the meaning of rule 17d-1.
4. The proposed account will not be distinguished from any other
account maintained by the Funds with their custodian bank except that
monies from the Funds could be deposited in the proposed account on a
commingled basis. The sole function of this account will be to provide
a convenient way of aggregating what otherwise would be the individual
daily transactions for each Fund necessary to manage the daily
uninvested cash balances of each Fund. Each Fund will participate in
the account on the same basis as every other Fund. The Adviser will
have no monetary participation in the account, but will be responsible
for investing amounts in the account, establishing control procedures,
and ensuring the equal treatment of each Fund. The proposed method of
operating the account will not result in any conflicts of interest
between any of the Funds, or between a Fund and its Advisor.
5. The Funds will benefit from the proposed arrangement because, on
any given day and under most market conditions, it is possible to
negotiate a rate of return on large repurchase agreements which is
greater than the rate of return available for smaller repurchase
agreements. In addition, by reducing the number of trade tickets,
repurchase transactions will be simplified and the opportunity for
errors will be reduced. Each Fund will also benefit from the fact that
an institution entering into a very large repurchase agreement is
almost always able and willing to increase the amount covered by such
agreement near the end of the day, which possibility may not exist with
smaller repurchase agreements. Moreover, without a joint account, some
Funds may find that they will be unable to invest in repurchase
agreements because their respective daily cash balances would not meet
the minimum investment requirement for a repurchase agreement.
6. Applicants assert that granting the requested relief is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the
policies and provisions of the Act. Applicants further assert that
participation in the proposed joint account by each Fund would not be
on a basis different from or less advantageous that of any other Fund
participant and that the participation by the Advisors will be
ministerial only.
Applicant's Conditions
As express conditions to the granting of the requested relief,
applicants agree that the joint repurchase account will operate as
follows:
1. A separate custodian cash account will be established into which
each Fund will cause its uninvested net cash balances to be deposited
daily. The joint account will not be distinguished from any other
accounts maintained by a Fund with its custodian bank except that
monies from a Fund will be deposited on a commingled basis. The account
will not have any separate existence or have any indicia of a separate
legal entity. The sole function of the account will be to provide a
convenient way to aggregating individual transactions which would
otherwise require daily management by each Fund of its uninvested cash
balance.
2. Cash in the account will be invested solely in repurchase
agreements with a duration not to exceed one business day and
collateralized by suitable U.S. Government securities (i.e.,
obligations issued or guaranteed as to principal and interest by the
government of the United States or by any of its agencies or
instrumentalities) and satisfying the uniform standards set by the
Funds for such investments.
3. All securities held by the joint account will be valued on an
amortized cost basis.
4. Each Fund relying upon rule 2a-7 under the Act for valuation of
its net assets on the basis of amortized cost will use the average
maturity of the repurchase agreements purchased by the Funds
participating in the account for the purpose of computing the Fund's
average portfolio maturity with respect to the portion of its assets
held in such account on that day.
5. In order to assure that there will be no opportunity for one
Fund to use any part of a balance of the account credited to another
Fund, no Fund will be allowed to create a negative balance in the
account for any reason, although a Fund will be permitted to draw down
its entire balance at any time; each Fund shall retain the sole rights
of ownership of any of its assets, including interest payable on the
assets invested in the account.
6. Each Fund will participate in the net income earned or accrued
in the account on the basis of the percentage of the total amount in
the account on any day represented by its share of the account.
7. Each Advisor will administer the investment of the cash balance
in and the operation of the account as part of its duties under its
existing or any future investment advisory contract with each Fund and
will not collect any additional fees for management of the account. The
Advisors will collect their fees based upon the assets of each separate
Fund as provided in each respective investment advisory agreement.
8. Each Fund's decision to invest in the account shall be solely at
the Fund's option and no Fund shall be obligated to invest or to
maintain any minimum amount in the account.
9. Each Fund's investment in the account shall be documented daily
on the books of each Fund as well as on the books of the Fund's
custodian bank.
10. All repurchase agreements will have an overnight, over-the-
weekend, or over-a-holiday duration.
11. The Funds will enter into an agreement with each other to
govern the arrangements in accordance with the foregoing principles.
12. The administration of the account will be within the fidelity
bond coverage required by section 17(g) of the Act and rule 17g-1
thereunder.
13. The trustees of the Trust and the boards of directors of any
Future Funds participating in the joint account shall evaluate the
joint account arrangement annually, and shall continue the account only
if they determine that there is a reasonable likelihood that the
account will benefit the Funds and their shareholders.
14. All joint repurchase agreement transactions will be effected in
accordance with Investment Company Act Release No. 13005 (Feb. 2, 1983)
and with other existing and future positions taken by the Commission or
its staff by rule, interpretive release, no-action letter, any release
adopting any new rule, or any release adopting any amendments to any
existing rule.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-13741 Filed 6-6-94; 8:45 am]
BILLING CODE 8010-01-M
