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###### Securities and Exchange Commission

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

# 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.

# 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,                               ( print page 30142)                            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] 

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.                

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                           ( print page 30143)                        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                           ( print page 30144)                        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.

Margaret H. McFarland,

Deputy Secretary.

# Footnotes

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).                    
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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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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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[FR Doc. 00-11681 Filed 5-9-00; 8:45 am]

BILLING CODE 8010-01-M