Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Notices 10599

1See First American Strategy Funds, Inc.,

Investment Company Release Nos. 22173 (Aug. 26,

1996) (notice) and 22245 (Sept. 24, 1996) (order).

2The term ‘‘First Bank’’ includes any other entity

controlling, controlled by or under common control

with First Bank that acts in the future as investment

adviser for the Companies or other investment

companies and intends to rely on any order issued

by the Commission in connection with the

application.

3See First American Investment Funds, Inc.,

Investment Company Act Release Nos. 21722 (Jan.

30, 1996) (notice) and 21784 (Feb. 27, 1996) (order).

5. On August 31, 1996, there were

132.93 shares of applicant outstanding,

with an aggregate net asset value of

$2,056.66 and a net asset value per

share of $15.47. On September 3, 1996,

applicant paid an income dividend in

cash to its shareholders in the amount

of $1,898.03, or approximately $17.37

per share. On September 23, 1996,

applicant’s two remaining shareholders

unanimously approved the dissolution

of applicant by written consent. All of

applicant’s shareholders voluntarily

redeemed their shares and final

redemption occurred on September 27,

1996. On this date, the net asset value

of applicant was $15.47 per share.

6. The expenses incurred and to be

incurred in connection with the

liquidation are estimated to be $14,500.

To the extent that these expenses and

other expenses of applicant resulted in

the expense ratio of applicant exceeding

2.80%, the expenses were paid by

Charter Capital Management, Inc.,

applicant’s investment adviser. Since

the expense ratio exceeded the foregoing

percentage during the liquidation

period, all present and future

liquidation expenses will be paid by

Charter Capital Management, Inc.

7. Applicant has no securityholders,

liabilities or assets. Applicant is not a

party to any litigation or administrative

proceeding. Applicant is not now

engaged, nor does it propose to engage,

in any business activities other than

those necessary for the winding up of its

affairs.

8. On September 27, 1996, applicant

filed Articles of Dissolution with the

State of Wisconsin.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–5674 Filed 3–6–97; 8:45 am]

BILLING CODE 8010–01–M

[Investment Company Act Release No.

22537; 812–10428]

First American Investment Funds, Inc.,

et al.; Notice of Application

March 3, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: First American Investment

Funds, Inc. (‘‘FAIF’’), First American

Funds, Inc. (‘‘FAF’’), First American

Strategy Funds, Inc. (‘‘FASF’’), each

existing and future series of FAIF, FAF,

FASF, and existing and future registered

investment companies or series thereof

that, now or in the future, are advised

by First Bank National Association

(collectively, the ‘‘Companies’’); and

First Bank National Association (‘‘First

Bank’’).

RELEVANT ACT SECTION: Order requested

under section 17(d) of the Act and rule

17d–1 thereunder.

SUMMARY OF THE APPLICATION:

Applicants request an order to permit

certain investment companies to deposit

their uninvested cash balances and their

cash collateral in one or more joint

accounts to be used to enter into shortterm investments.

FILING DATES: The application was filed

on November 15, 1996 and amended on

February 26, 1997. By letter dated

February 28, 1997, applicants have

agreed to file an additional amendment

during the notice period, the substance

of which is incorporated herein.

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

March 27, 1997, 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 SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Applicants c/o James D. Alt, esq.,

Dorsey & Whitney LLP, 220 South Sixth

Street, Minneapolis, Minnesota 55402.

FOR FURTHER INFORMATION CONTACT:

Kathleen L. Knisely, Staff Attorney, at

(202) 942–0517, or Mary Kay Frech,

Branch Chief, at (202) 942–0564 (Office

of Investment Company Regulation,

Division of Investment Management).

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. FAIF and FAF are registered under

the Act as open-end management

investment companies and are

incorporated under the laws of the

States of Maryland and Minnesota,

respectively. FAIF currently offers

twenty series with varying objectives

and policies. FAF currently offers three

series, each of which is a money market

fund subject to the requirements of rule

2a–7 under the Act.

2. FASF, organized under Minnesota

law, is registered under the Act as an

open-end management investment

company. FASF is comprised of four

series and operates as a ‘‘fund of funds,’’

the principal investments of which are

shares of certain series of FAIF and

FAF.1

3. First Bank,2 a national banking

association, serves as investment

adviser for each of the existing

Companies, subject to general oversight

of the boards of directors of the

Companies (each a ‘‘Board’’ and

collectively, the ‘‘Boards’’). First Bank is

a wholly owned subsidiary of First Bank

System, Inc. (‘‘FBS’’), a bank holding

company. First Bank has engaged a subadviser for FAIF’s International Fund,

Marvin & Palmer Associates, Inc., which

is not affiliated with First Bank or any

affiliates of First Bank.

4. All of the Funds are currently

authorized by their investment policies

and restrictions to invest at least a

portion of their uninvested cash

balances in short-term liquid assets

including repurchase agreements, rated

commercial paper, U.S. government

securities, and other short-term debt.

Each of the Funds also may invest cash

balances in those Funds which hold

themselves out as money market funds.3

5. Several of the Funds are authorized

to engage in securities lending

transactions. In connection with such

transactions, such Funds may receive

collateral in the form of either cash

(‘‘Cash Collateral’’) or securities. When

Cash Collateral is received, it is

expected to be invested in a manner

consistent with customary securities

lending practices.

6. First Trust National Association

(‘‘First Trust’’), a wholly-owned

subsidiary of FBS, serves as custodian

for the assets of each of the Funds. First

Trust also may act as securities lending

agent (‘‘Securities Lending Agent’’) for
10600 Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Notices

4See First American Investment Funds, Inc.,

Investment Company Act Release Nos. 21722 (Jan.

30, 1996) (notice) and 21784 (Feb. 27, 1996) (order).

5Repurchase agreements will be entered into on

a ‘‘hold-in-custody’’ basis (i.e., where the

counterparty or one of its affiliated persons may

have possession of, or control over, the collateral

subject to the agreement) only if cash is received

very late in the business day and otherwise would

be unavailable for investment.

the Fund’s securities lending

transactions.4

7. Applicants propose to deposit

uninvested: (a) Cash balances of the

Funds that remain at the end of the

trading day, (b) cash for investment

purposes, and/or (c) Cash Collateral into

one or more joint accounts (the ‘‘Joint

Accounts’’) established at the Funds’

custodian. The Funds that are eligible to

participate in a Joint Account and that

elect to participate in a Joint Account

are referred to herein collectively as

‘‘Participants.’’

8. The daily balance of the Joint

Accounts will be invested in the

following short-term investments: (a)

Repurchase agreements ‘‘collateralized

fully’’ as defined in rule 2a–7 under the

Act; (b) interest-bearing or discounted

commercial paper, including dollar

denominated commercial paper of

foreign issuers; and (c) any other shortterm taxable and tax-exempt money

market instruments, including variable

rate demand notes, that constitute

‘‘Eligible Securities’’ (as defined in rule

2a–7 under the Act) (collectively,

‘‘Short-Term Investments’’).

9. A Participant’s decision to use a

Joint Account would be based on the

same factors as its decision to make any

other short-term liquid investment. The

sole purpose of the Joint Accounts

would be to provide a convenient means

of aggregating what otherwise would be

one or more daily transactions for some

or all Participants necessary to manage

their respective daily account balances.

10. First Bank would be responsible

for investing funds held by the Joint

Accounts, establishing accounting and

control procedures, operating the Joint

Accounts in accordance with the

procedures discussed below, and

ensuring fair treatment of Participants.

First Bank would manage investments

in the Joint Accounts in essentially the

same manner as if it had invested in

such instruments on an individual basis

for each Participant. In addition, all

purchases through the Joint Accounts

will comply with all present and future

SEC staff positions relating to the

investment of cash collateral in

connection with securities lending

activities.

11. Any repurchase agreements

entered into through the Joint Accounts

will comply with the terms of the

Investment Company Act Release No.

13005 (February 2, 1983).5 Applicant’s

acknowledge that they have a

continuing obligation to monitor the

Commission’s published statements on

repurchase agreements, and represent

that repurchase agreement transactions

would comply with future positions of

the Commission to the extent that such

positions set forth different or

additional requirements regarding

repurchase agreements. In the event that

the Commission sets forth guidelines

with respect to other Short-term

Investments, all such investments made

through the Joint Accounts would

comply with those guidelines.

Applicants’ Legal Analysis

1. Section 17(d) and rule 17d–1

thereunder prohibit an affiliated person

of a registered investment company, or

an affiliated person of such a person,

from participating in any joint

enterprise or arrangement in which such

investment company is a participant,

without an SEC order. Applicants

believe that grating the requested order

is consistent with the provisions,

policies, and purposes of the Act, and

that the Funds would participate in the

Joint Accounts on a basis no different

from or less advantageous than that of

any other Participant.

2. The Participants, by participating

in the proposed Joint Accounts, and

First Bank, by managing the proposed

Joint Accounts, could be deemed to be

‘‘joint participants’’ in a transaction

within the meaning of section 17(d) of

the Act. In addition, the proposed Joint

Accounts could be deemed to be a ‘‘joint

enterprise or other joint arrangement’’

within the meaning of rule 17d–1 under

the Act.

3. Applicants state that the

Participants 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, it is generally

possible to negotiate a rate of return on

larger repurchase agreements and other

Short-Term Investments that is higher

than the rate available on smaller

repurchase agreements and other ShortTerm Investments. The Joint Accounts

also may increase the number of dealers

and issuers willing to enter into ShortTerm Investments with such

Participants.

4. Applicants assert that no

Participant would be in a less favorable

position as a result of participating in

the Joint Accounts. Applicants believe

that each Participant’s investment in a

Joint Account would not be subject to

the claims of creditors, whether brought

in bankruptcy, insolvency or other legal

proceeding, or any other Participant.

Each Participant’s liability on any ShortTerm Investment would be limited to its

interest in such investment; no

Participant would be jointly liable for

the investments of any other Participant.

5. Applicants state that the Joint

Accounts may result in certain

administrative efficiencies and a

reduction of the potential for errors by

reducing the number of trade tickets and

cash wires that must be processed by

the counterparties to the transactions

and the Participant’s custodian and

administrator.

6. Applicants represent that the

proposed operation of the Joint

Accounts would not result in any

conflicts of interest between any of the

Participants or First Bank. In making

investments for the Joint Accounts, First

Bank will be obligated to take into

account each Participant’s investment

objective, policies, and restrictions; its

obligation to fairly allocate investment

opportunities among Participants; the

need for diversification; and the time

that cash becomes available for

investment.

7. The Boards will have determined,

prior to participation by any Fund, that

the procedures for operating a Joint

Account are reasonably designed to

ensure: (a) That the Joint Account is not

inherently biased in favor of one

Participant over another and should

eliminate any bias due to size or lack

thereof in any transaction; and (b) that

the anticipated benefits to each

Participant would be within an

acceptable range of fairness.

8. For the reasons set forth above,

applicants believe that the Funds’

participation in the proposed Joint

Accounts is consistent with the

provisions, policies and purposes of the

Act, and that the granting of the

requested order would meet the criteria

set forth in rule 17d–1.

Applicants’ Conditions

Applicants would comply with the

following as conditions to any order

granted by the SEC:

1. The Joint Accounts would not be

distinguishable from any other accounts

maintained by Participants at their

custodian, except that monies from

Participants will be deposited in the

Joint Accounts on a commingled basis.

The Joint Accounts will not have a

separate existence and will not have

indicia of a separate legal entity. The

sole function of the Joint Accounts will

be to provide a convenient way of

aggregating individual transactions

which would otherwise require daily
Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Notices 10601

1 15 U.S.C. 78s(b)(1).

management of uninvested cash

balances.

2. Cash in the Joint Accounts would

be invested in one or more of the

following, as directed by First Bank (or,

in the case of Cash Collateral, the

Securities Lending Agent): (a)

Repurchase agreements ‘‘collateralized

fully’’ as defined in Rule 2a–7 under the

Act; (b) interest-bearing or discounted

commercial paper, including dollar

denominated commercial paper of

foreign issuers; and (c) any other shortterm taxable and tax-exempt money

market instruments, including variable

rate demand notes, that constitute

‘‘Eligible Securities’’ (as defined in rule

2a–7 under the Act). Short-Term

Investments that are repurchase

agreements would have a remaining

maturity of 60 days or less and other

Short-Term Investments would have a

remaining maturity of 90 days or less,

each as calculated in accordance with

rule 2a–7 under the Act. Cash Collateral

in a Joint Account would be invested in

Short-Term Investments which have a

remaining maturity of 397 days or less,

as calculated in accordance with rule

2a–7 under the Act.

3. All assets held in the Joint

Accounts would be valued on an

amortized cost basis to the extent

permitted by applicable SEC releases,

rules, or orders.

4. Each Participant valuing its net

assets in reliance on rule 2a–7 under the

Act will use the average maturity of the

instruments in the Joint Accounts in

which such Participant has an interest

(determined on a dollar weighted basis)

for the purpose of computing its average

portfolio maturity with respect to its

portion of the assets held in a Joint

Account on that day.

5. In order to assure that there will be

no opportunity for any Participant to

use any part of a balance of a Joint

Account credited to another Participant,

no Participant will be allowed to create

a negative balance in any Joint Account

for any reason, although each

Participant would be permitted to draw

down its entire balance at any time.

Each Participant’s decision to invest in

a Joint Account would be solely at its

option, and no Participant will be

obligated to invest in the Joint Account

or to maintain any minimum balance in

the Joint Account. In addition, each

Participant will retain the sole rights of

ownership to any of its assets invested

in the Joint Account, including interest

payable on such assets in the Joint

Account.

6. First Bank would administer the

investment of cash balances in and

operation of the Joint Accounts as part

of its general duties under its existing or

any future investment advisory or subadvisory agreements with Participants

and will not collect any additional or

separate fees for advising any Joint

Account.

7. The administration of the Joint

Accounts would be within the fidelity

bond coverage required by section 17(g)

of the Act and rule 17g–1 thereunder.

8. Each Board will adopt procedures

pursuant to which the Joint Accounts

will operate, which will be reasonably

designed to provide that the

requirements of the application will be

met. Each Board will make and approve

such changes as it deems necessary to

ensure that such procedures are

followed. In addition, each Board 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.

9. Any Short-Term Investments made

through the Joint Accounts will satisfy

the investment criteria of all

Participants in that investment.

10. First Bank and the custodian of

each Participant will maintain records

documenting, for any given day, each

Participant’s aggregate investment in a

Joint Account and each Participant’s pro

rata share of each investment made

through such Joint Account. The records

maintained for each Participant shall be

maintained in conformity with section

31 of the Act and the rules and

regulations thereunder.

11. Short-Term Investments held in a

Joint Account generally will not be sold

prior to maturity except if: (a) First Bank

believes the investment no longer

presents minimal credit risks; (b) the

investment no longer satisfies the

investment criteria of all Participants in

the investment because of downgrading

or otherwise; or (c) in the case of a

repurchase agreement, the counterpart

defaults. First Bank may, however, sell

any Short-Term Investment (or any

fractional portion thereof) on behalf of

some or all Participants prior to the

maturity of the investment if the cost of

such transactions will be borne solely

by the selling Participants and the

transaction will not adversely affect

other Participants participating in that

Joint Account. In no case would an early

termination by less than all Participants

be permitted if it would reduce the

principal amount or yield received by

other Participants in a particular Joint

Account or otherwise adversely affect

the other Participants. Each Participant

in a Joint Account will be deemed to

have consented to such sale and

partition of the investments in the Joint

Account.

12. Short-Term Investments held

through a Joint Account with a

remaining maturity of more than seven

days, as calculated pursuant to rule

2a–7 under the Act, would be

considered illiquid and would be

subject to the restriction that a Fund

may not invest more than 15% or, in the

case of a money market fund, more than

10% (or, in either such case, such other

percentage as set forth by the

Commission from time to time) of its net

assets in illiquid securities, if First Bank

cannot sell the instrument, or the

Fund’s fractional interest in such

instrument, pursuant to the preceding

condition.

13. Not every Participant participating

in the Joint Accounts will necessarily

have its cash invested in every Joint

Account. However, to the extent a

Participant’s cash is applied to a

particular Joint Account, the Participant

will participate in and own a

proportionate share of the investment in

such Joint Account, and the income

earned or accrued thereon, based upon

the percentage of such investment in

such Joint Account purchased with

monies contributed by the Participant.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–5675 Filed 3–6–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38350; File No. SR–NSCC–

96–20]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing of

Proposed Rule Change To Revise

Rules

February 27, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’)1, notice is hereby given that on

November 14, 1996, the National

Securities Clearing Corporation

(‘‘NSCC’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

the proposed rule change as described

in Items I, II, and III below, which items

have been prepared primarily by NSCC.

The Commission is publishing this

notice to solicit comments from

interested persons on the proposed rule

change.