[Federal Register Volume 65, Number 91 (Wednesday, May 10, 2000)]
[Notices]
[Pages 30141-30144]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-11681]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-24441; 812-11842]


Warburg, Pincus Balanced Fund, Inc., et al.; Notice of 
Application

May 4, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 17(d) of the 
Investment Company Act of 1940 (``Act'') and rule 17d-1 under the Act.

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APPLICANTS: Warburg, Pincus Balanced Fund, Inc., Warburg, Pincus 
Capital Appreciation Fund, Warburg, Pincus Cash Reserve Fund, Inc., 
Warburg, Pincus Central & Eastern Europe Fund, Inc., Warburg, Pincus 
Emerging Growth Fund, Inc., Warburg, Pincus Emerging Markets II Fund, 
Inc., Warburg, Pincus European Equity Fund, Inc., Warburg, Pincus Fixed 
Income Fund, Warburg, Pincus Focus Fund, Inc., Warburg, Pincus Global 
Fixed Income Fund, Inc., Warburg, Pincus Global Post-Venture Capital 
Fund, Inc., Warburg, Pincus,

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Global Telecommunications Fund, Inc., Warburg, Pincus Growth & Income 
Fund, Inc., Warburg, Pincus Health Sciences Fund, Inc., Warburg, Pincus 
High Yield Fund, Inc., Warburg, Pincus Institutional Fund, Inc., 
Warburg, Pincus Intermediate Maturity Government Fund, Inc., Warburg, 
Pincus International Equity Fund, Inc., Warburg, Pincus International 
Growth Fund, Inc., Warburg, Pincus International Small Company Fund, 
Inc., Warburg, Pincus Japan Growth Fund, Inc., Warburg, Pincus Japan 
Small Company Fund, Inc., Warburg, Pincus Long Short Market Neutral 
Fund, Inc., Warburg, Pincus Major Foreign Markets Fund, Inc., Warburg, 
Pincus Municipal Bond Fund, Inc., Warburg, Pincus New York Intermediate 
Municipal Fund, Warburg, Pincus New York Tax Exempt Fund, Inc., 
Warburg, Pincus Small Company Growth Fund, Inc., Warburg, Pincus Small 
Company Value Fund, Inc., Warburg, Pincus Strategic Global Fixed Income 
Fund, Inc., Warburg, Pincus Trust, Warburg, Pincus Trust II, Warburg, 
Pincus U.S. Core Equity Fund, Inc., Warburg, Pincus U.S. Core Fixed 
Income Fund, Inc., Warburg, Pincus WorldPerks Money Market Fund, Inc., 
Warburg Pincus WorldPerks Tax Free Money Market Fund, Inc. 
(collectively, the ``Warburg Pincus Funds'') all existing and future 
series thereof, and Credit Suisse Asset Management, LLC (``CSAM'').

SUMMARY OF APPLICATION: Applicants request an order to permit certain 
registered management investment companies to deposit their uninvested 
cash balances in one or more joint accounts to be used to enter into 
repurchase agreements.

FILING DATE: The application was filed on November 4, 1999. 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 May 25, 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, Commission, 450 Fifth Street, NW, Washington, DC 
20549-0609. Applicants, Warburg Pincus Funds, 466 Lexington Avenue, New 
York, New York 10017; CSAM, One Citicorp Center, 153 East 53rd Street, 
New York, New York 10022.

FOR FURTHER INFORMATION CONTACT: Sara P. Crovitz,Seniro Counsel, at 
(202) 942-0667, or Michael W. Mundt, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0101, (202) 942-8090.

Applicants' Representations

    1. The Warburg Pincus Funds are open-end management investment 
companies registered under the Act. CSAM, a Delaware limited liability 
company registered as an investment adviser under the Investment 
Advisers Act of 1940 (the ``Advisers Act''), serves as the investment 
adviser to the Warburg Pincus Funds.\1\ Applicants request that any 
relief granted pursuant to the application also apply to any other 
registered management investment company that now or in the future is 
advised or subadvised by CSAM (together with Warburg Pincus Funds, the 
``Funds'').\2\
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    \1\ CSAM includes, in addition to the company itself, any other 
entity controlling, controlled by, or under common control with CSAM 
that acts in the future as an investment adviser for the Funds (as 
defined below).
    \2\ Each Fund that currently intends to rely on the requested 
order is named as an applicant. Any Fund that relies on the 
requested order in the future will do so only in compliance with the 
terms and conditions of the application. The requested relief would 
apply to Funds subadvised by CSAM to the extent that CSAM manages 
the uninvested cash of those Funds.
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    2. At the end of each trading day, applicants expect that some or 
all of the Funds will have uninvested cash balances in their respective 
custodian banks that would not otherwise be invested in portfolio 
securities. All of the Funds currently are authorized to invest at 
least a portion of their uninvested cash balances in short-term 
repurchase agreements.
    3. Applicants propose to deposit some or all of the uninvested cash 
balances of the Funds remaining at the end of each trading day into one 
or more joint accounts (``Joint Accounts'').\3\ The daily balance of 
the Joint Accounts would be invested in short-term repurchase 
agreements (``Repurchase Agreements''), provided that: (a) the maximum 
maturity for Repurchase Agreements purchased through the Joint Accounts 
will not exceed 30 days; and (b) the Repurchase Agreements are 
``collateralized fully'' as defined in Rule 2a-7 under the Act. A Fund 
would invest through a Joint Account only in Repurchase Agreements that 
are consistent with the Fund's investment objectives, policies and 
restrictions. A Fund's decision to use the Joint Accounts will be based 
on the same factors as a Fund's decision to make any other short-term 
liquid investment.
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    \3\ Certain Funds currently invest in Joint Accounts in reliance 
on a previous order. Warburg, Pincus Balanced Fund, et al., 
Investment Company Act Release Nos. 22683 (May 27, 1997) (notice) 
and 22724 (June 23, 1997) (order). The requested order would 
supersede the previous order.
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    4. CSAM will not participate as an investor in the Joint Accounts 
and will collect no additional fee for its management of the Joint 
Accounts. CSAM will be responsible for investing amounts in the Joint 
Accounts, establishing accounting and control procedures, and ensuring 
fair and equitable treatment of the participating Funds.
    5. Any Repurchase Agreements entered into through the Joint 
Accounts will comply with the standards and guidelines set forth in any 
existing and future positions of the Commission or its staff regarding 
repurchase agreement transactions. The Funds will not enter into 
``hold-in-custody'' repurchase agreements (i.e., repurchase agreements 
where the counterparty or one of its affiliated persons may have 
possession of, or control over, the collateral subject to the 
agreement).

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibits 
an affiliated person of a registered investment company, or an 
affiliated person of such person, acting as principal, from 
participating in any joint enterprise or arrangement in which that 
investment company is a participant, unless the Commission has issued 
an order authorizing the arrangement. In passing on these applications, 
the Commission considers whether the participation of the registered 
investment company in the proposed joint arrangement is consistent with 
the provisions, policies and purposes of the Act and the extent to 
which participation is on a basis different from or less advantageous 
than that of other participants.
    2. Section 2(a)(3) of the Act defines an ``affiliated person'' of 
another person to

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include any person directly or indirectly controlling, controlled by, 
or under common control with, the other person. Applicants state that 
each Fund may be considered an ``affiliated person'' of each other Fund 
if CSAM, as investment adviser, is deemed to control each Fund. 
Applicants state that each Fund, by participating in the Joint 
Accounts, and CSAM, by managing the Joint Accounts, could be deemed to 
be ``joint participants'' in a ``transaction'' within the meaning of 
section 17(d) of the Act. In addition, applicants state that each Joint 
Account could be deemed to be a ``joint enterprise or other joint 
arrangement'' within the meaning of rule 17d-1.
    3. Applicants submit that the proposed Joint Accounts meet the 
criteria of rule 17b-1 for issuance of an order. Applicants assert that 
no Fund will be in a less favorable position as a result of the Joint 
Accounts. Applicants state that each Fund's liability on any Repurchase 
Agreement will be limited to its interest in the investment. Applicants 
also assert that the proposed operation of the Joint Accounts will not 
result in any conflicts of interest among any of the Funds and CSAM.
    4. Applicants state that the operation of the Joint Accounts could 
result in certain benefits to the Funds. Applicants state that the 
Funds may earn a higher rate of return on investments through the Joint 
Accounts relative to the returns they could earn individually. Under 
most market conditions, applicants assert, it is possible to negotiate 
a rate of return on larger investments that is higher than the rate of 
return available on smaller investments. In addition, applicants state 
that the enhanced purchasing power available through Joint Accounts may 
increase the number of dealers willing to enter into Repurchase 
Agreements with smaller Funds and may reduce the possibility that the 
Funds' cash balances remain uninvested. Applicants state that the Joint 
Accounts may result in certain administrative efficiencies and may 
lessen the potential for error by reducing the number of trade tickets 
and cash wires that must be processed by the sellers of Repurchase 
Agreements and by the Funds' custodians and accountants.

Applicants' Conditions

    Applicants will comply with the following as conditions to any 
order granted by the Commission in connection with this application:
    1. The Joint Accounts will consist of one or more separate cash 
accounts established at a custodian bank. A Joint Account may be 
established at more than one custodian bank and more than one Joint 
Account may be established at any custodian bank. A Fund may transfer a 
portion of its daily cash balances to more than one Joint Account. 
After the calculation of its daily cash balance and at the direction of 
CSAM, each Fund will transfer into one or more Joint Accounts the cash 
it intends to invest through the Joint Accounts. Each Fund whose 
regular custodian is a custodian other than the bank at which a 
proposed Joint Account will be maintained and that wishes to 
participate in the Joint Account will appoint the latter bank as a sub-
custodian for the limited purposes of: (a) Receiving and disbursing 
cash; (b) holding any Repurchase Agreements; and (c) holding collateral 
received from a transaction effected through the Joint Account. All 
Funds that appoint such sub-custodians will have taken all necessary 
actions to authorize such bank as their legal custodian, including all 
actions required under the Act.
    2. The Joint Accounts will not be distinguishable from any other 
accounts maintained by the Funds at their custodians except that monies 
from the Funds will be deposited in the Joint Accounts on a commingled 
basis. The Joint Accounts will not have a separate existence and will 
not have any indicia of a separate legal entity. The Joint Accounts 
will only be used to aggregate individual transactions necessary for 
the management of each Fund's daily uninvested cash balance.
    3. Cash in the Joint Accounts will be invested in one or more 
Repurchase Agreements provided that: (a) The maximum maturity for 
Repurchase Agreements purchased through the Joint Accounts will not 
exceed 30 days; and (b) the Repurchase Agreements are ``collateralized 
fully'' as defined in Rule 2a-7 under the Act and satisfy the uniform 
standards set by the Funds for such investments. The securities subject 
to the Repurchase Agreements will be transferred to a Joint Account, 
and they will not be held by the Fund's repurchase counterparty or by 
an affiliated person of that counterparty.
    4. Each Fund will participate in a Joint Account on the same basis 
as every other Fund in conformity with its respective investment 
objective or objectives, policies and restrictions. Any further Funds 
that participate in a Joint Account will be required to do so on the 
same terms and conditions as the existing Funds.
    5. Each Fund, through its investment adviser and/or custodian, will 
maintain records (in conformity with Section 31 of the Act and the 
rules thereunder) documenting for any given day its aggregate 
investment in a Joint Account and its pro rata share of each Repurchase 
Agreement made through such Joint Account.
    6. All assets held by a Joint Account will be valued on an 
amortized cost basis to extent permitted by applicable Commission 
releases, rules, letters or orders.
    7. Each Fund valuing its net assets based on amortized cost in 
reliance upon rule 2a-7 under the Act will use the average maturity of 
the instrument(s) in the Joint Accounts in which such Fund has an 
interest (determined on a dollar-weighted basis) for the purpose of 
computing its average portfolio maturity with respect to the portion of 
its assets held in a Joint Account on that day.
    8. Not every Fund participating in the Joint Accounts will 
necessarily have its cash invested in every Repurchase Agreement. 
However, to the extent a Fund's cash is applied to a particular 
Repurchase Agreement, the Fund will participate in and own its 
proportionate share of such Repurchase Agreement, and any income earned 
or accrued thereon, based upon the percentage of such investment 
purchased with amounts contributed by such Fund.
    9. To ensure that there will be no opportunity for one Fund to use 
any part of a balance of a Joint Account credited to another Fund, no 
Fund will be allowed to create a negative balance in any Joint Account 
for any reason. Each Fund will be permitted to draw down its entire 
balance at any time. Each Fund's decision to invest in a Joint Account 
will be solely at its option, and no Fund will be obligated either to 
invest in the Joint Accounts or to maintain any minimum balance in the 
Joint Accounts. In addition, each Fund will retain the sole rights of 
ownership of any of its assets, including interest payable on such 
assets, invested in the Joint Accounts.
    10. CSAM will administer, manage and invest the cash balance in the 
Joint Accounts in accordance with and as part of its duties under the 
existing or any future investment advisory contracts with each Fund. 
CSAM will not collect any additional or separate fee for advising or 
managing any Joint Account.
    11. The administration of the Joint Accounts will be within the 
fidelity bond coverage maintained for the Funds as required by section 
17(g) of the Act and rule 17g-1 thereunder.
    12. The boards of directors or trustees of the Funds participating 
in the Joint Accounts will adopt procedures pursuant to which the Joint 
Accounts

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will operate and which will be reasonably designed to provide that the 
requirements set forth in the application are met. The directors or 
trustees will make and approve such changes that they deem necessary to 
ensure that such procedures are followed. In addition, the directors or 
trustees will determine, no less frequently than annually, that the 
Joint Accounts have been operated in accordance with the proposed 
procedures, and will permit a Fund to continue to participate therein 
only if it determines that there is a reasonable likelihood that the 
Fund and its shareholders will benefit from the Fund's continued 
participation.
    13. Investments held in a Joint Account generally will not be sold 
prior to maturity except: (a) If CSAM believes that the investment no 
longer presents minimal credit risk; (b) if, as a result of a credit 
downgrading or otherwise, the investment no longer satisfies the 
investment criteria of all Funds participating in the investment; or 
(c) if the counterparty defaults. A Fund may, however, sell its 
fractional portion of an investment in a Joint Account prior to the 
maturity of the investment in such Joint Account if the cost of such 
transaction will be borne solely by the selling Fund and the 
transaction will not adversely affect the other Funds participating in 
that Joint Account. In no case will an early termination by less than 
all participating Funds be permitted if it will reduce the principal 
amount or yield received by other Funds participating in a particular 
Joint Account or otherwise adversely affect the other participating 
Funds. Each Fund participating in such Joint Account will be deemed to 
have consented to such sale and partition of the investment in such 
Joint Account.
    14. Repurchase Agreements held through a Joint Account with a 
remaining maturity of more than seven days, as calculated pursuant to 
rule 2a-7 under the Act, will be considered illiquid and will be 
subject to the restriction that a Fund may not invest more than 10%, in 
the case of a money market fund, or 15%, in the case of a non-money 
market fund (or such other percentages as set forth by the Commission 
from time to time) if its net assets in illiquid securities, and any 
similar restriction set forth in the Fund's investment restrictions and 
policies, if CSAM cannot sell the instrument, or the Fund's fractional 
interest in such instrument, pursuant to the preceding condition.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-11681 Filed 5-9-00; 8:45 am]
BILLING CODE 8010-01-M