No-Action Letter under:
Investment Company Act of 1940 -
Section 17(d); Rule 17d-1

U.S. Bancorp Asset Management, Inc., et al.

December 11, 2001

RESPONSE OF THE OFFICE OF INVESTMENT COMPANY REGULATION DIVISION OF INVESTMENT MANAGEMENT

Our Ref. No. 2001-7-ICR U.S. Bancorp Asset Management, Inc. et al.

Your letter of December 10, 2001 requests our assurance that we would not recommend that the Securities and Exchange Commission (the "Commission") take any enforcement action under the Investment Company Act of 1940 (the "Act") if U.S. Bancorp Asset Management, Inc. ("USBAM"), U.S. Bank National Association ("U.S. Bank"), and certain registered investment companies ("Funds") continue to rely upon an order under rule 17d-1 under the Act (the "Existing Order")¹.

You state that the Existing Order permitted the Funds to pay fees to U.S. Bank Trust National Association ("USB Trust") for acting as securities lending agent with respect to securities lending transactions by the Funds, subject to specific conditions. In connection with the 1998 transfer of USB Trust's securities lending agency business to U.S. Bank, USB Trust, U.S. Bank and the Funds sought and received assurance from the staff of the Division of Investment Management (the "Division") that it would not recommend enforcement action to the Commission if U.S. Bank were to act as securities lending agent for the Funds, provided that the Funds and U.S. Bank continue to comply with all of the terms and conditions of the Existing Order.² U.S. Bank now proposes to transfer its securities lending agency business to USBAM. Following this transfer, USBAM will act as securities lending agent for the Funds.

You state that in transferring the securities lending agency operations of U.S. Bank to USBAM, the fee structure of, and the scope and nature of services provided by, USBAM will be consistent in all respects with that of U.S. Bank's current securities lending agency operation, and that the performance by USBAM of the securities lending operations will not result in any changes in the nature of the services rendered by, or the calculation of the associated fees payable to, U.S. Bank, and USBAM will assume all the duties and obligations imposed on U.S. Bank by the Existing Order (as supplemented by the 1998 No-Action Letter) and the existing securities lending agency agreements.

In order to effect this transfer of securities lending operations, all personnel rendering securities lending agency services on behalf of U.S. Bank will transfer to USBAM and henceforth provide these services solely on behalf of USBAM (their status as employees of U.S. Bank will continue until January 1, 2002 solely for purposes of benefit plans in which they participate). These employees will continue to perform the same securities lending agency functions for USBAM that they performed for U.S. Bank. The resources and facilities available to these employees at USBAM will be the same as or comparable to those available to them at U.S. Bank, and they will operate under essentially identical managerial and operational systems as currently utilized by U.S. Bank in its securities lending agency operations.

You state that as is the situation within U.S. Bank, the securities lending operations of USBAM will be separate and distinct from its portfolio management operations. The individual who is in charge of U.S. Bank's securities lending agency operations will be in charge of the comparable operations at USBAM, and neither he nor the persons who report to him have had or will have any responsibility for or involvement in portfolio management for the Funds or any other investment advisory client of USBAM. You also state that the ultimate responsibility for determining which securities are available to be loaned and to whom the securities may be loaned will reside with the portfolio management personnel of USBAM who have responsibility for the Funds, subject to parameters set forth in procedures approved by the Funds' boards of directors ("Boards"), and not with employees of USBAM's securities lending operations.

You state that prior to USBAM's serving as lending agent for the Funds, the Boards of the Funds, including a majority of the directors who are not "interested persons" of the Funds, will determine that (i) the contract with USBAM is in the best interests of the Funds and their shareholders; (ii) the services to be performed by USBAM are required by the Funds; (iii) the nature and quality of the services provided by USBAM are at least equal to those provided by others offering the same or similar services; and (iv) the fees for USBAM's services are fair and reasonable in light of the usual and customary charges imposed by others for services of the same nature and quality. You further state that the Boards of the Funds, USBAM and the Funds also will comply with all of the other terms and conditions of the Existing Order (as supplemented by the 1998 No-Action Letter).

Based on the facts and representations made in your letter, we would not recommend enforcement action to the Commission if USBAM acts as securities lending agent for the Funds, provided that the Funds and USBAM continue to comply with the terms and conditions of the Existing Order. This response expresses the Division's position on enforcement action only, and does not purport to express any legal conclusions concerning the issues presented. Facts or representations different from those presented in your letter might require a different conclusion.

Jaea F. Hahn
Senior Counsel
Office of Investment Company Regulation

Footnotes

Incoming Letter:

Faegre & Benson llp
2200 Wells Fargo Center, 90 South Seventh Street
Minneapolis, Minnesota 55402-3901
TELEPHONE 612.766.7000
FACSIMILE 612.766.1600

John A. Haveman
jhaveman@faegre.com
612.766.8432

1940 Act/Section 17(d)

December 10, 2001

Office of Investment Company Regulation
Division of Investment Management
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0506
Attn: Jaea Hahn, Senior Counsel

Re: U.S. Bancorp Asset Management, Inc. et al.

Ladies and Gentlemen:

This letter is being submitted in order to seek assurance from the staff of the Division of Investment Management (the "Staff") that it will not recommend that the Securities and Exchange Commission (the "Commission") take enforcement action under the Investment Company Act of 1940 (the "Act") if, under the circumstances described below, U.S. Bancorp Asset Management, Inc. ("USBAM")¹, U.S. Bank National Association ("U.S. Bank")² and certain registered investment companies ("Funds") continue to rely upon an order under Rule 17d-1 under the Act granted in Release No. IC-22245, dated September 24, 1996 (Notice of Application contained in Release No. IC-22181, dated August 28, 1996, File No. 812-10216) (the "Existing Order").

Specifically, USBAM proposes to assume the responsibilities of U.S. Bank as securities lending agent for its clients, including the Funds, under the same terms and conditions that U.S. Bank and its predecessor lending agent, U.S. Bank Trust National Association ("USB Trust")³, have been authorized to act under the Existing Order. USB Trust and U.S. Bank are both wholly-owned subsidiaries of U.S. Bancorp⁴, a publicly traded bank holding company.

Background Information

USBAM is a wholly-owned subsidiary of U.S. Bank and is registered as an investment adviser under the Investment Advisers Act of 1940. USBAM was formed in 2001 in connection with the internal reorganization of the investment advisory activities formerly carried out by the First American Asset Management ("FAAM") group within U.S. Bank and by Firstar Investment Research & Management Company ("Firmco"), a wholly-owned subsidiary of U.S. Bank's parent company U.S. Bancorp. Prior to this internal reorganization, FAAM acted as investment adviser to certain of the Funds and Firmco acted as investment adviser to the other Funds. Effective May 1, 2001, FAAM and Firmco, which shared common officers and a common operating committee, transferred these investment advisory activities, together with their common officers and operating committee and their portfolio managers, to USBAM, which then commenced functioning as investment adviser to the Funds.

The Existing Order permitted the Funds to pay fees to USB Trust for acting as securities lending agent with respect to securities lending transactions by the Funds, subject to specified conditions. In connection with the 1998 transfer of USB Trust's securities lending agency business to U.S. Bank, USB Trust, U.S. Bank and the Funds sought and received assurance from the Staff that it would not recommend enforcement action to the Commission if U.S. Bank were to act as securities lending agent for the Funds, provided that the Funds and U.S. Bank continue to comply with the terms and conditions of the Existing Order (First American Investment Funds, Inc., et al.; Ref. No. 98-3-ICR; publicly available April 6, 1998) (the "1998 No-Action Letter").

We have been advised that U.S. Bank now proposes to transfer its securities lending agency business to USBAM. This securities lending agency business includes acting as securities lending agent to the Funds. Following this transfer, USBAM would act as securities lending agent as well as investment adviser for the Funds. USBAM will not act as custodian for the assets of the Funds.

In transferring the securities lending agency operations of U.S. Bank to USBAM, the fee structure of, and the scope and nature of services provided by, USBAM will be consistent in all respects with that of U.S. Bank's current securities lending agency operation. Thus, the performance by USBAM of the securities lending operations will not result in any changes in the nature of the services rendered by, or the calculation of the associated fees payable to, U.S. Bank, and USBAM will assume all the duties and obligations imposed on U.S. Bank by the Existing Order (as supplemented by the 1998 No-Action Letter) and the existing securities lending agency agreements.

In order to effect this transfer of securities lending agency operations, all personnel rendering securities lending agency services on behalf of U.S. Bank will transfer to USBAM and henceforth provide these services solely on behalf of USBAM (their status as employees of U.S. Bank will continue until January 1, 2002 solely for purposes of benefit plans in which they participate). These employees will continue to perform the same securities lending agency functions for USBAM that they performed for U.S. Bank. The resources and facilities available to these employees at USBAM will be the same as or comparable to those available to them at U.S. Bank, and they will operate under essentially identical managerial and operational systems as currently utilized by U.S. Bank in its securities lending agency operations.

As is the situation within U.S. Bank, we are advised that the securities lending agency operations of USBAM will be separate and distinct from its portfolio management operations. The individual who is in charge of U.S. Bank's securities lending agency operations (the "Securities Lending Manager") will be in charge of the comparable operations at USBAM, and neither he nor the persons who report to him have had or will have any responsibility for or involvement in portfolio management for the Funds or any other investment advisory client of USBAM. From the portfolio management side, the Funds' securities lending activities will be directed and monitored on behalf of the Funds by an oversight committee of USBAM's asset management group. This committee is composed of investment professionals, compliance personnel and others and will exercise its oversight function with respect to the Funds' securities lending activities on a group basis.

The ultimate responsibility for determining which securities are available to be loaned and to whom the securities may be loaned resides with the portfolio management personnel of USBAM who have responsibility for the Funds, subject to parameters set forth in procedures approved by the Funds' boards of directors ("Boards"), and not with employees of USBAM's securities lending agency operations.

Prior to USBAM's serving as lending agent for the Funds, the Boards of the Funds, including a majority of the directors who are not "interested persons" of the Funds, will determine that (i) the contract with USBAM is in the best interests of the Fund and its shareholders; (ii) the services to be performed by USBAM are required by the Funds; (iii) the nature and quality of the services provided by USBAM are at least equal to those provided by others offering the same or similar services; and (iv) the fees for USBAM's services are fair and reasonable in light of the usual and customary charges imposed by others for services of the same nature and quality. The Boards of the Funds, USBAM and the Funds also will comply with all of the other terms and conditions of the Existing Order (as supplemented by the 1998 No-Action Letter).

Conclusion

Accordingly, since the relevant facts upon which the Existing Order was granted will not change and the terms and conditions of the Existing Order will be met, we submit that the granting of this no-action letter, like the granting of the Existing Order and the 1998 No-Action Letter, is in the public interest and consistent with the protection of investors.

Should you have any questions or wish additional information regarding this request, please call the undersigned at 612-766-8432 or Chris Smith at 612-973-1550.

Very truly yours,

John A. Haveman

cc: Christopher Smith
Christopher Petersen
Emil Busse
Joseph Ulrey

Footnotes

http://www.sec.gov/divisions/investment/noaction/usbam121101.htm