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F ed er a l R ese r v e Ba n k DALLAS. TEXAS of D allas 7 52 2 2 C ircular No. 80-70 April 7, 1980 TO THE CHIEF EXECUTIVE OFFICER OF ALL BANKS HAVING TRUST POWERS: As you know, President Carter recen tly announced a broad program designed to m oderate and reduce inflationary forces in the United S tates econom y. In addition to fisca l, energy, and other measures, the President, under term s o f the Credit Control A ct of 1969, provided the Federal Reserve with the authority to ex ercise special restraints on the growth o f certain types o f credit. Among the kinds of credit that are covered by the Board's actions to restrain credit growth is that extended by short-term financial inter m ediaries, such as money market mutual funds, and by short-term investm ent funds of com m ercial banks. Records indicate that your bank has trust powers, therefore, we have enclosed the regulation, forms, and instructions for maintaining the required special deposit against increases in covered credit o f any short-term investm ent funds that your bank may operate. Please note that c o llectiv e investm ent funds o f banks are not covered. If your bank maintains a short-term investm ent fund containing no agency money and no other non-exem pt funds, you are not required to com p lete either the base or weekly reports. If your fund includes any non-exem pt monies, you must file such reports with this bank. We recognize that you may be unable to return the base report by the date specified. Please return it as soon as possible thereafter. If you have any questions, please call Bill Green in our S tatistical D epartm ent, Ext. 6394. Sincerely yours, Robert H. Boykin First Vice President Enclosures Banks and others are encouraged to use the following incoming W AT S numbers in contacting this Bank: 1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the extensio n referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) TITLE 12— BANKS AND BANKING CHAPTER II--FEDERAL RESERVE SYSTEM SUBCHAPTER A— BOARD OP GOVERNORS OF THE FEDERAL RESERVE SYSTEM (Docket No. R-0281) PART 229— CREDIT RESTRAINT [Subpart B] Short Term Financial Intermediaries AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final rule. SUMMARY: On March 14, 1980 the Board adopted this Subpart pursuant to the Credit Control Act (12 U.S.C. § 1901-1909) as implemented by Executive Order 12201 to restrain the expansion of short term credit through money market funds and similar creditors. The Board now amends the Subpart to reflect comments it has received. The effect of the amendments is to: — exclude from coverage the assets of money market funds representing shares or units held by banks and other fiduciaries investing funds that would be eligible for collective investment by a bank. — exempt from coverage the tax exempt assets of money market funds that invest at least 80 per cent of their assets in obligations the income from which is exempt from federal income taxation. — exeirpt from coverage unit investment trusts whose units are held by unit holders of expiring trusts that were in existence on March 14, 1980, and their successors. — provide that in calculating its base, a covered creditor in existence on March 14, 1980, can use the amount of its covered credit or $100 million whichever is greater. — revise the reporting and deposit maintenance schedule to weekly rather than monthly. -2 - — allow covered funds and similar creditors until April 8, 1980, to file a base report. EFFECTIVE DATE: March 28, 1980. FOR FURTHER INFORMATION CONTACT: Gilbert T. Schwartz, Assistant General Counsel (202/452-3625), C. Baird Brown, Attorney (202/452-3265), or Daniel L. Rhoads, Attorney (202/452-3711), Legal Division, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. SUPPLEMENTARY INFORMATION: On March 14, 1980, the Board adopted this Subpart pursuant to the Credit Control Act (12 U.S.C. § 1901-1909) as implemented by Executive Order 12201 to restrain the expansion of short term credit through money market funds and similar creditors (45 F.R. 17930) The Board has received a variety of comments on the Subpart and on the basis of those comments has made several revisions. The various comments are discussed below together with changes made to the Subpart or interpretive positions that the Board has taken in response to those comments. TRUST ASSETS Hie original Subpart exeirpted moneys contributed to coranon trust funds of banks provided they were held by the bank incidentally to the management of other trust assets. Also exempt were bank collective investment funds for pension, retirement, profit sharing and other tax exempt trusts. Comnenters pointed out that such moneys were also managed for banks, pension plan trustees, and similar fiduciaries by money market funds. In order to place banks, other fiduciaries, and money market funds on an equal footing in managing such moneys, and to permit small banks to avail themselves of the services of money market funds as an alternative to internal operation of a short term investment fund, the Subpart has been revised to reduce the amount of covered credit by the proportion of moneys from these sources. Thus, a money market fund that had 30 per cent of its outstanding shares held by bank trust departments would reduce its covered credit for both its base report and weekly reports by 30 per cent. Additional shares could be sold to bank trust departments or other fiduciaries managing funds eligible for collective investment by banks without incurring a special deposit liability. Shifting the exclusion from the definition of covered creditor to the definition of covered credit has no effect on the type of activities permitted to bank trust departments or trust companies. All collective investment funds of a bank are covered creditors, but they need not file reports unless they hold covered credit, and their holdings are generally excluded from covered credit. Moneys that are not held incidentally to the management of other trust assets are covered. For example, a revocable, inter vivos trust, with the settler's spouse as beneficiary and with instructions to a bank trustee to invest the corpus in its -3- short term investment fund, gives rise to covered credit. It should be noted, however, that under the revised Subpart a bank trustee would incur a special deposit liability only on increases in such covered credit, not on the entire increase in a short term investment fund that contained money from one or more nonexempt accounts. Generally, moneys held by a bank or trust company pursuant to a bona fide trust purpose are within the "incidentally" exclusion even though they may temporarily be invested largely in a short term investment fund. However, Individual Retirement Accounts are not exempt. The exclusion for moneys from pension, retirement, profit sharing and other tax exenpt trusts in the Subpart is identical to the provisions of the trust regulation of the Comptroller of the Currency (12 C.F.R. § 9.18), and the Comptroller's interpretations of that provision apply. Money market funds may oily exclude from covered credit funds from sources that a bank would be permitted to commingle. TAX EXEMPT BOND FUNDS The Board has received comments regarding certain money market funds which, by their investment objectives, are limited to the purchase of tax exenpt bonds of state and local governments and their agencies. The Board's Credit Restraint regulation is not generally intended to limit extensions of credit to state and local governments. Moreover, the tax exempt assets have generally low yields and will appeal to a very limited class of investors who would in all liklihood purchase such securities directly in the absence of the funds. Accordingly, these funds may reduce their covered credit for both base and weekly calculations by the proportion of their extensions of credit which are tax exenpt obligations. UNIT INVESTMENT TRUSTS The Board has received comments regarding the provisions of the original Subpart that assigned a base of zero to newly established unit investment trusts. Commenters felt that this represented different treatment for sponsors of those trusts than was accorded to the investment advisors of open end management funds, which were permitted to retain an existing base. However, the base provided for the management funds serves generally to benefit existing shareholders, and cannot, consistent with the fund's fidicuary duties, serve as a basis for major expansion of fund's activities. Accordingly, the Board has revised the definition of the term base for unit investment trusts to permit unit holders of record in those trusts in existence on March 14, 1980, to roll over their investments into new trusts when the old ones expire without incurring a special deposit liability for the trust. The unit holders and persons -4 - who subsequently purchase units from them could continue to roll over their units into new trusts. To prevent the expansion of a sponsor's activity through the creation of trusts with a partial base, any new trust must consist entirely of prior unit holders. A new trust for prior unit holders must also be marketed with substantially similar fees as the sponsor's previous trusts. The Board is aware that the sponsors of some unit investment trusts do not market them directly but through broker-dealers. Where the sponsor does not know the identity of its unit holders, it may treat the broker-dealers as holders of record The Board has also received questions about the period during which unit investment trusts must maintain special deposits. While the trust is established by the exchange of any assets, such as a contract for purchase of a certificate of deposit and letters of credit, for the units of the trust, the special deposit must be maintained starting when the trust acquires its investment assets, such as a certificate of deposit, which typically occurs at the end of an initial underwriting period. The special deposit must be held from that day until the day before the trust dissolves. However, in the event that a unit holder elects to redeem his units, the trust may request from the Federal Reserve Bank a pro rata return of the special deposit. The Subpart has been amended to reflect this possibility. MINIMUM BASE Several comments suggested that small money market funds that had not yet achieved viable size would be unfairly disadvantaged by the Subpart. The Board has amended the definition of base to permit a fund in operation, but with less than $100 million in extensions of credit o t March 14, 1980, to calculate its base as if it had $100 million in extensions of credit on March 14, 1980. For example, a fund which has $50 million in extensions of credit and has 50 per cent of its shares owned by bank trust departments has covered credit of $25 million. However, it may calculate its base as 50 per cent of $100 million = $50 million. If during a later weekly reporting period it has $80 million in covered credit and 25 per cent of its shareholders are bank trust departments, it would report $60 million of covered credit for the week, and its special deposit requirement would be $1.5 million. OTHER COMMENTS The Board also considered requests that it exempt money market funds that provide corporate cash management services and exempt funds that invest solely in securities of the Small Business Administration and the Farmers Home Administration. The Board rejected the former request because such funds serve to expand types of credit which the Board wishes to restrain and because moneys invested in such funds might otherwise be invested in regional markets. The Board rejected the second request because it believes it would be difficult to make meaningful -5 - distinctions between these securities and obligations of a wide variety of other Federal government agencies. WEEKLY REPORTING Under the original regulation, funds would have reported on a monthly basis and held a special deposit for a period of roughly one month beginning approximately two weeks after the end of the reporting period. Thus, a special deposit could be held as long as two and one half months after the increase in covered credit for which it was required. Since the shareholders of a fund may change considerably over such a period, the return of the later shareholders could be reduced by the investments of the earlier shareholders. In order to lessen the impact of such changes, the Board has changed to weekly reporting periods running from Monday of each week to Sunday of the following week, with a weekly report due on the following Wednesday. Except for the first two reporting periods, the special deposit will be maintained for a week beginning eight days after the end of the reporting week. For exanple, for the week of April 7 to 13, 1980, a report must be filed by April 16, 1980, and a special deposit maintained for the week of April 21 to 27, 1980. For the first three weekly reporting periods, which begin on March 17, 24, and 31, 1980, reports must be filed by April 10, 1980, and a special deposit equal to the sum of the special deposits required for the three periods must be maintained for the week of April 14 to April 20. BASE REPORTING DATE In view of the amendments to the regulation and related revisions of reporting forms, the Board has extended the time for filing of base reports to April 8, 1980. These actions are being taken in view of the comments received, as indicated above,, on Subpart B of the Board's Credit Restraint regulation. Because these revisions affect the operations and compliance responsibilities of creditors covered by the regulation, the Board therefore for good cause finds that further notice, public procedure, and deferral of effective date provisions of 5 U.S.C. § 533(b) with regard to these actions are impracticable and contrary to the public interest. Pursuant to its authority under the Credit Control Act (12 U.S.C. §§ 1901-1909) the Board hereby amends Subpart B of its Credit Restraint regulation (12 C.F.R. Part 229) effective March 28, 1980, as follows: -6SECTION 229.11— AUTHORITY, PURPOSE, AND SCOPE (a) Authority. Uiis Subpart is issued by the Board of Governors of the Federal Reserve System pursuant to the Credit Control Act (12 U.S.C. §§ 1901 - 1909), as implemented by Executive Order 12201. (b) Purpose and Scope. Ibis Subpart is intended to curb inflation generated by the extension of credit by certain of those financial intermediaries that are not subject to either the amendments of law effected by Pub. L. 89-597, as amended, or section 19 of the Federal Reserve Act, as amended (12 U.S.C. § 461), and that are primarily engaged in the extension of short-term credit, specifically money market funds and other similar creditors. SECTION 229.12— DEFINITIONS (a) For the purposes of this Subpart, the terms "credit,” "creditor," and "extension of credit" shall have the meanings given them in the Credit Control Act. In addition, the following definitions apply. (b) "Base” means: (1) for a managed creditor that was a managed creditor on March 14, 1980, the amount of covered credit it held on March 14, 1980: provided, however, that a managed creditor (A) that was engaged in continuously offering its shares to the public .on March 14, 1980, or, in the case of a collective investment fund, held investment assets on March 14, 1980, and (B) that held less than $100 million in total extensions of credit on March 14, 1980, may calculate its base as if it held $100 million in total extensions of credit on March 14, 1980. (2) for a managed creditor that becomes a managed creditor after March 14, 1980, the amount of covered credit with maturities of 13 months or less that it held on March 14, 1980; and (3) for a unit investment trust in existence on March 14, 1980, the amount of covered credit it held on the date it acquired investment assets; (4) for a unit investment trust established after March 14, 1980, zero: provided, however, that a unit investment trust shall have a base equal to the amount of covered credit it held on the date it acquired investment assets if (A) the sales charges and other fees of the unit investment trust are substantially identical to those of previous trusts of the same sponsor, and (B) the units are held (i) entirely by persons -7 - who held units in an expiring trust of thesame sponsor with a base equal tothe amount of its covered credit, and (ii) in amounts not exceeding the individual holdings of such persons in expiring trusts. (c) "Covered credit" means all extensions of credit originated through the acquisition of a security, deposit, or other instrument,— including but not limited to domestic and Eurodollar certificates of deposit, U.S. Treasury bills, repurchase agreements, commercial paper, bankers acceptances, and State and local government obligations, and any interest accrued thereon, held as assets by a covered creditor, multiplied by the proportion of shares, units, or other interests in a covered creditor not held (1) by a bank, trust company or other fiduciary provided all moneys invested therein would be eligible for collective investment by a bank in its capacity as a trustee executor, administrator or guardian, and are held incidentally to the management of other trust assets, or (2) by or as agent for the trustee of a retirement, pension, profit sharing, stock bonus, or other trust that is exempt from Federal income taxation under the Internal Revenue Code and whose funds are eligible for collective investment by a bank. To determine the covered credit of a covered creditor whose stated investment objective is to invest 80 per cent or more of its assets in obligations of State and local governments and agencies and subdivisions thereof, the income from which are exenpt from Federal income taxation, shall further multiply its covered credit as determined above by the proportion of its assets that are not tax exenpt. (d) "Covered creditor" means any creditor (1) that is (A) an investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940, (B) any series of shares or units of such a conpany, or (C) any collective investment fund maintained by a bank or trust company; and (2) whose investment portfolio consists primarily of securities, deposits or other instruments with maturities of 13 months or less,—' including but not limited to domestic and Eurodollar ' certificates of deposits, U.S. Treasury bills, repurchase agreements, commercial paper, and State and local obligations. However, a unit investment trust is not a covered creditor unless its investment portfolio consists primarily of securities, deposits, or other instruments with maturities of 13 months or less— at the time the unit investment trust acquires those assets. 1/ Assets should be valued for purposes of this Subpart by the same procedure used by a registered investment company to value assets in calculating net share or unit value under the Investment Company Act of 1940 and rules promulgated thereunder. 2/ This includes variable rate securities, deposits or other instruments with longer nominal maturities but with interest rates subject to adjust ment at intervals shorter than 13 months. -8 - (e) "Managed creditor” means any covered creditor that is not a unit investment trust. (f) "Unit investment trust" means any unit investment trust as defined in the Investment Company Act of 1940, or a series of units of such a trust. (g) "Collective investment fund" means collective investment fund as defined in section 9.18 of regulations of the Comptroller of the Currency (12 C.P.R. § 9.18). (h) Act of 1933. "Security" means any security as defined in the Securities SECTION 229.13— REPORTS (a) Each managed creditor that holds covered credit shall file a base report and weekly reports. The base report shall state the amount of the covered creditor's base and shall be submitted no later than April 8, 1980, or in the case of a managed creditor that becomes a managed creditor or begins holding covered credit after March 14, 1980, within one week of acquiring or holding assets or accepting trust moneys that require it to file reports. Weekly reports shall be filed for reporting periods which begin on Monday and end on the following Sunday, and shall state the amount by which the average of the daily amounts of covered credit outstanding during the reporting period exceeds the base. Reports for the reporting periods beginning March 17, 24, and 31, 1980, shall be submitted by close of business on April 10, 1980. Reports for each succeeding period, or in the case of a covered creditor that becomes a covered creditor after March 14, for each full reporting period after it becomes a covered creditor, shall be filed by close of business on the first Wednesday following the reporting period. (b) A covered creditor that is a unit investment trust established after March 14, 1980, shall file a base report stating its base and the amount of covered credit it holds. This report shall be filed immediately upon acquisition of investment assets by the unit investment trust. (c) All reports shall be filed with the Federal Reserve Bank in the District where the covered creditor has its principal place of business. -9- SECTION 229.14— MAINTENANCE OF SPECIAL DEPOSIT (a)(1) Each managed creditor that holds covered credit shall maintain a non-interest bearing special deposit equal to 15 per cent of the amount by which the average of the daily amounts of its covered credit outstanding during each reporting period exceeds its base. (2) During the seven-day deposit maintenance period beginning April 14, 1980, each managed creditor shall maintain a special deposit equal to the sum of the special deposits required for the reporting periods beginning March 17, March 24, and March 31. During the sevenday deposit maintenance period beginning April 21, 1980, and for each seven-day deposit maintenance period thereafter, each managed creditor shall maintain the special deposit required for the reporting period ending eight days prior to the beginning of the corresponding deposit maintenance period. (b) Each covered creditor that is a unit investment trust established after March 14, 1980, shall maintain a non-interest bearing special deposit equal to 15 per cent of the amount by which the covered credit it holds as of the date it acquires investment assets' exceeds its base. This special deposit shall be maintained during the period beginning the day the covered creditor acquires assets consisting of covered credit and ending one day prior to final distribution of trust assets by the trustee pursuant to the terms of the trust agreement. Upon two weeks notice, the special deposit will be returned to the trustee one day prior to maturity or final distribution pursuant to the terms of the trust agreement. The deposit may also be returned pro rata in the event of redemption of units of the trust. (c) Special deposits shall be maintained in collected funds in the form of U.S. dollars at the Federal Reserve Bank to which the covered creditor reports. SECTION 229.15— PENALTIES For each willful violation of this Part, the Board may assess against any creditor, or officer, director or enployee thereof who willfully participates in the violation, a maximum civil penalty of $1,000. In addition, a maximum criminal penalty of $1,000 and imprisonment of one year may be imposed for willful violation of this Part. Board of Governors of the Federal Reserve System, effective March 28, 1980. (signed) Griffith L. Garwood Griffith L. Garwood Deputy Secretary of the Board [SEAL] h R 2063a OMB No. 55 R 0 2 7 3 Af>proved by Federal Reserve Board and OMB March 1980 Report of Covered Credit for the Calculation of Special Deposit Requirements for Managed Creditors F or period e n d in g _____________________ , 1 9 _____ This rep o rt is re qu ire d by law (12 U.S.C. $ § 1 9 0 1 1909, as i m p l e m e n t e d by Execu tive Order 12 20 1.) The Federal Reserve S yst em regards the i n f o rm a t i o n pr ov id ed b y each r e s p o n d e n t as c o n f i d e n t i a l . If it sh ou ld be d e t e r m i n e d s u b s e q u e n t l y t h a t a n y i n f o rm a t i o n co llec ted on this f o r m m u s t b e released, r e s p o n d e n t s will be notifie d. Bils . Mils . Thous. 1. Daily average amount of outstanding extensions of credit during computation week................................................ SECTION A: To be completed by managed creditors except those whose objective is to invest in short-term tax-exempt obligations. Proportion 2. Daily average proportion of shares not representing exempt funds of fiduciaries during computation week (report proportion rounded to 5 decimal places).............................................. 3. Daily average amount of covered credit during computation week (amount reported in Item 1 multiplied by the proportion reported in Item 2)......................................................... Bils . M i l s . Thous. GO TO SECTION C SECTION B: To be completed only by managed creditors whose objective is to invest in short-term tax-exempt obligations. Proportion 2. a. Daily average proportion of shares not representing exempt funds of fiduciaries during computation week (report propor tion rounded to 5 decimal places)............................ P r o p o r tio n b. Daily average proportion of total outstanding extensions of credit representing other than tax-exempt obligations of state and local governments during computation week (report propor tion rounded to 5 decimal places) ............................. 3 Bils. Mils . Thous. B il s. Daily average amount of covered credit during computation week (amount reported in Item 1 multiplied by the proportion reported in Item 2.a and the proportion reported in Item 2.b) ............. Mils. Thous. Bils. Mils . T hous. GO TO SECTION C SECTION C: To be completed by all managed creditors, FR 2063b) ..... 5. Amount by which the daily average amount of covered credit during the computation week exceeds the base (Item 3 from appropriate Section minus Item 4 ) ............................................. If Item 5 is zero or period. Please sign negative, no special deposit is required during the maintenance below and return this form to the designated Federal Reserve Bank. If Item 5 is greater period. Item 6 must than zero, a special be completed for the deposit is required during the maintenance calculation of the special deposit requirement. NONINTEREST-BEARING DEPOSIT MAINTENANCE PERIOD (Note: Report Mils . Thous. Dols. this amount in dollars.) I certify that the information shown on this report is correct. Aut ho rize d S ig natur e N am e and Ad dre ss o f R e sp o n d e n t T itle Area Code and T e l e p h o n e N u m b e r RETURN BY THE CLOSE OF BUSINESS ON THE W EDN ESD AY FOLLOW ING THE REPORTING WEEK TO THE FED E R A L RESERVE BANK OF THE D IS TR IC T IN WHICH Y O U R P R INC IPAL O FFIC E IS LOCATED. P E N A L T IE S . For each w illful violation o f 1 2 C .F .R . 2 2 9 Subpart B, the Board may assess against any creditor, or officer, director or employee thereof w ho w illfu lly participates in the vio lation , a m axim um civil penalty o f $ 1 ,0 0 0 . In addition, a m axim um criminal penalty of $ 1 ,0 0 0 and im prisonm ent of up to one year m ay be imposed fo r w illfu ll violation of this subpart. 4 FR 2063a Instructions for the Report of Covered Credit for the Calculation of Special Deposit Requirements for Managed Creditors Who must report. This report is required from managed creditors consisting of money market funds (excluding unit investment trusts) and certain common trust funds of banks that invest in short-term assets (short term investment funds). [See 12 CFR 229.11-.15.] These financial inter mediaries accept funds from investors and extend credit primarily through purchasing money market instruments with maturities of 13 months or less, such as domestic and Eurodollar certificates of deposit, U.S. Treasury or other governmental agency obligations, repurchase agreements, commercial paper, and state and local obligations. A managed creditor will be covered if its investment portfolio pri marily consists of short-term securities, deposits, or other instruments with original or remaining maturities of 13 months or less through which it extends credit to banks; federal, state or local governmental units or agencies thereof; any corporation, partnership or other business entity; or any person. Managed creditors include both open and closed-end management companies. A series of shares of a registered investment company (excluding unit invest ment trusts) is a managed creditor if the investment assets which are included in the valuation of the shares or units in the series primarily have maturi ties of 13 months or less. Common trust funds of banks and trust companies are also included unless all moneys contributed to them are held by the bank or trust company incidentally to the management of other trust assets. Col lective investment funds consisting entirely of funds for retirement, pension, or other similar purposes need not report. "Covered credit" is defined as any extension of credit originated through the acquisition of a security, deposit, or other instrument, including but not limited to domestic and Eurodollar certificates of deposit, U.S. Treasury bills, repurchase agreements, commercial paper, bankers acceptances, and state and local government obligations, and any interest accrued thereon. Covered credit excludes, however, the amount of such extensions of credit representing shares or other interests in the managed creditor held (1) by a bank, trust company, or other fiduciary, provided that all moneys invested therein would be eligible for collective investment by a bank in its capacity as a trustee, executor, administrator, or guardian, and are held incidentally to the management of other trust assets, or (2) by or as agent for the trustee of a retirement, pension, profit sharing, stock bonus, or other trust that is exempt from Federal income taxation under the Internal Revenue Code and whose funds are eligible for collective investment by a bank. Covered credit also excludes the tax-exempt extensions of credit of a covered creditor whose stated investment objective is to invest 80 percent or more of its assets in obligations of state and local governments and agencies and subdivisions thereof, the income from which is exempt from Federal income taxation. V Page 2 FR 2063a A creditor that acquires or holds assets or trust moneys that cause it to become a managed creditor after March 14, 1980 shall file a base report (FR 2063b) within one week after it becomes a managed creditor and shall file this weekly report of covered credit thereafter. A managed creditor that holds no covered credit is not required to file reports. In the event of a merger of managed creditors or an acquisition of a managed creditor, a revised base report (FR 2063b) must be filed by the sur viving managed creditor prior to filing this weekly report. All weekly reports for computation periods subsequent to the merger or acquisition should reflect the revised base amount of covered credit calculated on the base report. Purpose of the report. This report will be used to establish the amount of the special deposit to be held by managed creditors. A noninterestbearing special deposit in collected funds equal to 15 percent of the amount by which the daily average of covered credit for each reporting period exceeds the base must be held with the Federal Reserve Bank of the District in which the principal office of the managed creditor is located. The computation period for the calculation of the special deposit to be held by managed creditors is the week beginning on Monday and ending the following Sunday. Reports for the computation periods beginning March 17, March 24, and March 31, 1980 shall be submitted to the Federal Reserve Bank by the close of business on April 10, 1980. Reports for each succeeding period, or in the case of a creditor that becomes a managed creditor after March 14, 1980, for each computation week after it becomes a managed creditor, shall be filed by the close of business on the first Wednesday following the computation week. For example, the report for the computation week of April 7-13, 1980 shall be filed with the Federal Reserve Bank by the close of business on April 16, 1980. During the seven-day deposit maintenance period beginning April 14, 1980, each managed creditor shall maintain a special deposit equal to the sum of the special deposits required for the reporting periods beginning March 17, March 24, and March 31. During the seven-day deposit maintenance period beginning April 21, 1980, and for each seven-day deposit maintenance period thereafter, each managed creditor shall maintain the special deposit required for the reporting period ending eight days prior to the beginning of the corresponding deposit maintenance period. For example, for the computation week of April 7-13, 1980 the deposit maintenance period will be April 21-27, 1980. Maintenance of a special deposit at a Federal Reserve Bank does not entitle managed creditors to Federal Reserve services. How to report. Report all daily averages of dollar amounts to the nearest thousand dollars. The amount of the special deposit must be reported in dollars. Amounts denominated in foreign currencies should be initially valued in U.S. dollars at the prevailing exchange rate at the time the transaction originally occurs and should be periodically revalued on a con sistent basis. Page 3 FR 2063a For the computation of daily average amounts, a managed creditor should sum the outstanding amount of the item to be reported as of the close of business on each day of the computation week and divide the sum by 7. For any day on which the managed creditor was closed, repeat the outstanding amounts from the preceding day. Consolidation. For a managed creditor that is a series of shares of a registered investment company (excluding a unit investment trust), reports should be filed and deposits maintained by the registered investment company. The registered investment company must file a single report which consolidates the extensions of covered credit of all ofits series that are managed creditors except any series that is a short-term tax-exempt creditor. The registered investment company must exclude from its consolidated report any series that was not a managed creditor on March 14, 1980 and it must file a separate consolidated report and maintain a separate deposit for all series that are short-term tax-exempt creditors. If a series that was in existence on March 14 becomes a managed creditor after March 14, the registered investment company must file a base report. If the registered investment company also had other series that were managed creditors on March 14, a consolidated, revised base report should be submitted. All subsequent weekly reports should reflect the revised base amount of covered credit calculated on the base report. Series that are or become short-term tax-exempt creditors should be aggregated separately according to the procedures described above for managed creditors. ITEM DEFINITIONS 1. Daily average amount of outstanding extensions of credit during computation week. This item is defined as the daily average of the amount of all extensions of credit originated through the acquisition of a security, deposit, or other instrument, including but not limited to domestic and Euro dollar certificates of deposit, U.S. Treasury and other governmental agency obligations, repurchase agreements, commercial paper, bankers acceptances, and state and local government obligations, and interest accrued thereon. This item excludes common stocks, balances held at the Federal Reserve Bank, and currency and coin. For purposes of this report, investment assets should be valued by the same procedures used by a registered investment company to value assets in calculating net share or unit value under the Investment Company Act of 1940 and rules promulgated thereunder. Section A; 2. Daily average proportion of shares not representing exempt funds of fiduciaries during computation week. Report in this item the daily average of the ratio of the number of shares not representing exempt funds of fiduciaries to the total number of shares outstanding during the computation week. Shares representing exempt funds of fiduciaries are those held (1) by a bank, trust company, or other fiduciary, provided that all moneys invested would be eligible for collective investment by a bank in its capacity as a trustee, executor, administrator, or guardian, and are held incidentally to the management of other trust assets, or (2) by or as agent for the trustee of a retirement, pension, profit sharing, stock bonus, Page 4 FR 2063a or other trust that is exempt from Federal income taxation under the Internal Revenue Code and whose funds are eligible for collective investment by a bank. If there are no shares outstanding that represent exempt funds of fiduciaries, the ratio reported in this item is 1.00000. If 10 percent of the shares out standing represent exempt funds of fiduciaries, the ratio reported in this item is 0.90000. Report this ratio to 5 decimal places. A managed creditor is expected to maintain records of the shares reported on the base report (FR 2063b) as representing exempt funds of fiduciaries outstanding on March 14, 1980. For the weekly reports, managed creditors are expected to maintain adequate documentation to demonstrate the amount of additional exempt funds of fiduciaries received by the managed creditor and to record any reductions in the number of shares representing exempt funds of fiduciaries outstanding on March 14, 1980 that are included in the base report calculation. Section A: 3. Daily average amount of covered credit during compu tation week. This amount is calculated by multiplying the amount reported in Item 1 by the ratio reported in Item 2. Section B: 2. a. Daily average proportion of shares not repre senting exempt funds of fiduciaries during computation week. Report in this item the daily average of the ratio of the number of shares not representing exempt funds of fiduciaries to the total number of shares outstanding during the computation week. Shares representing exempt funds of fiduciaries are those held (1) by a bank, trust company, or other fiduciary, provided that all moneys invested would be eligible for collective investment by a bank in its capacity as a trustee, executor, administrator, or guardian, and are held incidentally to the management of other trust assets, or (2) by or as agent for the trustee of a retirement, pension, profit sharing, stock bonus, or other trust that is exempt from Federal income taxation under the Internal Revenue Code and whose funds are eligible for collective investment by a bank. If there are no shares outstanding that represent exempt funds of fiduciaries the ratio reported in this item is 1.00000. If 10 percent of the shares out standing represent exempt funds of fiduciaries, the ratio reported in this item is 0.90000. Report this ratio to 5 decimal places. A managed creditor is expected to maintain records of the shares reported on the base report (FR 2063b) as representing exempt funds of fiduciaries outstanding on March 14, 1980. For subsequent weekly reports, managed creditors are expected to maintain adequate documentation to demon strate the amount of additional exempt funds of fiduciaries received by the managed creditor and to record any reductions in the number of shares repre senting exempt funds of fiduciaries outstanding on March 14, 1980 that are included in the base report calculation. Section B: 2. b. Daily average proportion of total outstanding extensions of credit other than tax-exempt obligations of state and local governments during computation week. Report in this item the daily average of the ratio of extensions of credit other than tax-exempt obligations of state and local governments and agencies and subdivisions thereof to total extensions of credit during the computation week. Report this ratio to 5 decimal places. FR 2 0 6 3 a Page 5 Section B: 3. Daily average amount of covered credit during compu tation week. This amount is calculated by multiplying the amount reported in Item 1 first by the ratio reported in Item 2.a and then multiplying the resulting product by the ratio reported in Item 2.b. For example, if Item 1 is 200, Item 2.a is 0.75000 and Item 2 .b is 0.10000, the amount reported in this item would be (200 x 0.75000 x 0.10000) or 15. This amount represents the proportion of nontax-exempt credit extended by the creditor that is not represented by exempt funds of fiduciaries on the base date. Section C: 4. Base amount of covered credit. Report in this item the base amount of covered credit as calculated on the base report (FR 2063b). Section C: 5. Amount by which the daily average amount of covered credit during the computation week exceeds the base. This amount is calculated by subtracting the base amount of covered credit (Section C; Item 4) from the daily average amount of covered credit during the computation week (Section B or C, as appropriate; Item 3). If this amount is zero or negative, no special deposit is required during the maintenance period. Section C: 6. 15 percent of Item 5: SPECIAL NONINTEREST-BEARING DEPOSIT REQUIRED TO BE HELD DURING THE MAINTENANCE PERIOD. This amount is calculated by multiplying the amount by which the daily average of covered credit during the computation week exceeds the base (Section C; Item 5) by 0.15. If the amount reported in Item 5 is zero or negative, this item need not be completed since no special deposit will be required. Note that this amount must be reported in dollars rather than thousands of dollars. FR 2063c O M B No. 55-S 8 0 0 0 4 A p p r o v e d b y F e d e ra l Re serv e B o a r d a n d O M B M arch 1980 Report of Covered Credit for the Calculation of Special Deposit Requirements for Unit Investment Trusts This report is required by law (12 U.S.C. § § 1909-1909, as implemented bv Executive Order 12201). The Federal Reserve System regards the info rm a tio n provided by each respondent as confidential. If it should be determ ined subsequently that any info rm a tio n collected on this form must be released, respondents w ill be n o tifie d. Date 1. Date of acquisition of investment assets, Bils . Mils. Thous. 2. Total extensions of credit..... ........................ 3. Base amount of credit extended as of date of acquisition. 4. Amount by which extensions of credit exceed the base (Item 2 minus Item 3)............................................... If Item 4 is zero or negative, no special deposit is required during the maintenance period. Please sign below and return this form to the designated Federal Reserve Bank. If Item 4 is greater than zero, a special deposit may be required. Section A or Section B should be completed as appropriate to determine the amount of covered credit. Section C should be completed to calculate the special deposit. SECTION A: To be completed by unit investment trusts except those whose objective is to invest in short-term tax-exempt obligations. Proportion 5. Proportion of units not representing exempt funds of fiduciaries (report proportion rounded to 5 decimal places)................ . Bils . Mils . Thous. 6. Covered credit (amount reported in Item 4 multiplied by the pro portion reported in Item 5)..................................... GO TO SECTION C SECTION B: To be completed only by unit investment trusts whose objective is to invest in short-term tax-exempt obligations. Proportion 5. a. Proportion of units not representing exempt funds of fidu ciaries (report proportion rounded to 5 decimal places) .. . . Proportion 5. b. Proportion of total extensions of credit representing other than tax-exempt obligations of state and local governments (report proportion rounded to 5 decimal places)............ 6. Covered credit (amount reported in Item 4 multiplied by the pro portion reported in Item 5.a and the proportion reported in Item 5 .b)..................................................... Bils . Mils. Thous. GO TO SECTION C SECTION C: To be completed by all unit investment trusts completing either Section A or B , 7. 15 percent of Item 6: SPECIAL NONINTEREST-BEARING DEPOSIT REQUIRED TO BE HELD DURING THE MAINTENANCE PERIOD (Note: Report this amount in dollars.)...................................... . Mils . Thous. Dols . I certify that the information shown on this report is correct. A u t h o r i z e d S ig nature N a m e and Address o f R e s p o nd e n t T itle A re a C o d e and T e le p h o n e N u m b e r RETURN BY THE CLOSE OF BUSINESS TWO DAYS PRIOR TO THE A CQ U ISITIO N OF IN V ES TM E N T ASSETS TO THE FED E R A L RESERVE BANK OF THE D IS TR IC T IN W HICH YOUR PRINC IPAL O FFIC E IS LOCATED PEN ALTIES. For each w illfu l vio la tio n o f 12 C.F.R. 229 Subpart B, the Board may assess against any cred ito r, or o ffice r, d irector or employee thereof w ho w illfu lly participates in the vio la tio n , a m axim um civil penalty of $1,000. In ad d ition , a m axim um crim inal penalty o f $1,000 and im prisonm ent of up to one year may be imposed fo r w illfu ll vio la tio n o f this subpart. * FR 2063b Instructions for the Base Report for the Calculation of Special Deposit Requirements for Managed Creditors Who must report. This report is required from managed creditors consisting of money market funds (excluding unit investment trusts) and certain common trust funds of banks that invest in short-term assets (short term investment funds). [See 12 CFR 229.11-.15.] These financial inter mediaries accept funds from investors and extend credit primarily through purchasing money market instruments with maturities of 13 months or less, such as domestic and Eurodollar certificates of deposit, U.S. Treasury or other governmental agency obligations, repurchase agreements, commercial paper, and state and local obligations. A managed creditor will be covered if its investment portfolio pri marily consists of short-term securities, deposits, or other instruments with original or remaining maturities of 13 months or less through which it extends credit to banks; federal, state or local governmental units or agencies thereof; any corporation, partnership or other business entity; or any person. Managed creditors include both open and closed-end management companies. A series of shares of a registered investment company (excluding unit invest ment trusts) is a managed creditor if the investment assets which are included in the valuation of the shares or units in the series primarily have maturi ties of 13 months or less. Common trust funds of banks and trust companies are also included unless all moneys contributed to them are held by the bank or trust company incidentally to the management of other trust assets. Col lective investment funds consisting entirely of funds for retirement, pension, or other similar purposes need not report. "Covered credit" is defined as any extension of credit originated through the acquisition of a security, deposit, or other instrument, including but not limited to domestic and Eurodollar certificates of deposit, U.S. Treasury bills, repurchase agreements, commercial paper, bankers acceptances, and state and local government obligations, and any interest accrued thereon. Covered credit excludes, however, the amount of such extensions of credit representing shares or other interests in the managed creditor held (1) by a bank, trust company, or other fiduciary, provided that all moneys invested therein would be eligible for. collective investment by a bank in its capacity as a trustee, executor, administrator, or guardian, and are held incidentally to the management of other trust assets, or (2) by or as agent for the trustee of a retirement, pension, profit sharing, stock bonus, or other trust that is exempt from Federal income taxation under the Internal Revenue Code and whose funds are eligible for collective investment by a bank. Covered credit also excludes the tax-exempt extensions of credit of a covered creditor whose stated investment objective is to invest 80 percent or more of its assets in obligations of state and local governments and agencies and subdivisions thereof, the income from which is exempt from Federal income taxation. A managed creditor holding covered credit on on March 14, 1980, shall file a base report for that date by April 8, 1980. A creditor that acquires or holds assets or trust moneys that cause it to become a managed creditor after March 14, 1980 shall file a base report within one week after P age 2 FR 2063b it becomes a managed creditor. A managed creditor that holds no covered credit is not required to file reports. The base report will state the amount of the creditor's covered credit held as of March 14, 1980, whether or not it was a managed creditor at that time. (See Consolidation.) If the managed creditor was not in existence on March 14, 1980, a base report shall be filed indicating a base amount of zero. In the event of a merger of managed creditors or an acquisition of a managed creditor, a revised base report must be filed by the surviving managed creditor. The base should be calculated by combining the amounts of covered credit extended and of exempt funds of fiduciaries held on March 14, 1980 by the managed creditors involved. The calculations specified on this base report should be made using the combined amounts. If the surviving managed creditor has the investment objective of holding at least 80 percent of its assets in tax-exempt obligations (short-term tax-exempt creditor), the base should be calculated as specified in Section B, using combined amounts from the managed creditors involved. If a managed creditor changes its investment objective to become a short-term tax-exempt creditor, a revised base report must be filed. The revised base will be 20 percent of the base previously calculated for March 14, 1980. Purpose of the report. This report will be used to establish the base for managed creditors. The report will be followed by a regular weekly report of the daily average of covered credit by each managed creditor. A noninterest-bearing special deposit in collected funds equal to 15 percent of the amount by which the daily average of covered credit for each succeed ing reporting period exceeds the base must be held with the Federal Reserve Bank of the District in which the principal office of the managed creditor is located. The computation period for the calculation of the special deposit to be held by managed creditors is the week beginning on Monday and ending the following Sunday. A special deposit based on the weekly report must be maintained at the Federal Reserve Bank during the second week (Monday through Sunday) following the computation week. For example, for the computation week of April 14-20, 1980, the maintenance week will be April 28 - May 4, 1980. Maintenance of a special deposit at a Federal Reserve Bank does not entitle managed creditors to Federal Reserve services. How to report. Report all dollar amounts to the nearest thousand dollars as of the close of business on the base date. Amounts denominated in foreign currencies should be initially valued in U.S. dollars at the pre vailing exchange rate at the time the transaction originally occurs and should be periodically revalued on a consistent basis. Consolidation. For a managed creditor that is a series of shares of a registered investment company (excluding a unit investment trust), reports should be filed and deposits maintained by the registered investment company. The registered investment company must file a single report which consolidates the extensions of covered credit of all of its series that are managed creditors except any series that is a short-term tax-exempt creditor. FR 2063b Page 3 The registered investment company must exclude from its consolidated report any series that was not a managed creditor on March 14, 1980 and it must file a separate consolidated report and maintain a separate deposit for all series that are short-term tax-exempt creditors. If a series that was in existence on March 14 becomes a managed creditor after March 14, the registered investment company must file a base report. If the registered investment company also had other series that were managed creditors on March 14, a consolidated, revised base report should be submitted. The base should be recalculated using the combined amounts of credit extended and of exempt funds of fiduciaries held on March 14, 1980 by all series that were or have become managed creditors. Series that are or become short-term tax-exempt creditors should be aggregated separately accord ing to the procedures described above for managed creditors. ITEM DEFINITIONS 1. Total extensions of credit as of March 14, 1980. This item is defined as the amount of all extensions of credit originated through the acquisition of a security, deposit, or other instrument, including but not limited to domestic and Eurodollar certificates of deposit, U.S. Treasury and other governmental agency obligations, repurchase agreements, commercial paper, bankers acceptances, and state and local government obligations, and interest accrued thereon. This item excludes common stocks, balances held at the Federal Reserve Bank, and currency and coin. For purposes of this report, investment assets should be valued by the same procedures used by a registered investment company to value assets in calculating net share or unit value under the Investment Company Act of 1940 and rules promulgated thereunder. Section A: 2. Proportion of shares not representing exempt funds of fiduciaries as of March 14, 1980. Report in this item the ratio of the number of shares not representing exempt funds of fiduciaries to the total number of shares outstanding on March 14, 1980. Shares representing exempt funds of fiduciaries are those held (1) by a bank, trust company, or other fiduciary, provided that all moneys invested would be eligible for collective investment by a bank in its capacity as a trustee, executor, administrator, or guardian, and are held incidentally to the management of other trust assets, or (2) by or as agent for the trustee of a retirement, pension, profit sharing, stock bonus, or other trust that is exempt from Federal income taxation under the Internal Revenue Code and whose funds are eligible for collective invest ment by a bank. If there are no shares outstanding that represent exempt funds of fiduciaries, the ratio reported in this item is 1.00000. If 10 per cent of the shares outstanding represent exempt funds of fiduciaries, the ratio reported in this item is 0.90000. Report this ratio to 5 decimal places. For purposes of this base report, the number of shares representing exempt funds of fiduciaries outstanding on March 14, 1980 may be reported on the basis of a good faith estimate prepared according to documented procedures. If subsequent data indicate that a substantial error was made in estimating the base, a revised base report should be submitted. A managed creditor is expected to maintain records of those shares reported as representing exempt funds of fiduciaries outstanding on March 14, 1980. For subsequent weekly Page 4 FR 2063b reports, managed creditors are expected to maintain adequate documentation to demonstrate the amount of additional exempt funds of fiduciaries received by the managed creditor and to record any reductions in the number of shares representing exempt funds of fiduciaries outstanding on March 14, 1980. Section A; 3. Base amount of covered credit as of March 14, 1980. This amount is calculated by multiplying the amount reported in Item 1 OR $100 million, whichever is larger, by the ratio reported in Item 2. Section B; 2. Proportion of shares not representing exempt funds of fiduciaries as of March 14, 1980.' Report in this item the ratio of the number of shares not representing exempt funds of fiduciaries to the total number of shares outstanding on March 14, 1980. Shares representing exempt funds of fiduciaries are those held (1) by a bank, trust company, or other fiduciary, provided that- all moneys invested would be eligible for collective investment by a bank in its capacity as a trustee, executor, administrator, or guardian, and are held incidentally to the management of other trust assets, or (2) by or as agent for the trustee of a retirement, pension, profit sharing, stock bonus, or other trust that is exempt from Federal income taxation under the Internal Revenue Code and whose funds are eligible for collective invest ment by a bank. If there are no shares outstanding that represent exempt funds of fiduciaries the ratio reported in this item is 1.00000. If 10 per cent of the shares outstanding represent exempt funds of fiduciaries, the ratio reported in this item is 0.90000. Report this ratio to 5 decimal places. For purposes of this base report, the number of shares representing exempt funds of fiduciaries outstanding on March 14, 1980 may be reported on the basis of a good faith estimate prepared according to documented procedures. If subsequent data indicate that a substantial error was made in estimating the base, a revised base report should be submitted. A managed creditor is expected to maintain records of those shares reported as representing exempt funds of fiduciaries outstanding on March 14, 1980. For subsequent weekly reports, managed creditors are expected to maintain adequate documentation to demonstrate the amount of additional exempt funds of fiduciaries received by the managed creditor and to record any reductions in the number of shares representing exempt funds of fiduciaries outstanding on March 14, 1980. Section B; 3. Proportion of total extensions of credit representing other than tax-exempt obligations of state and local governments as of March 14, 1980. Report in this item the ratio of extensions of credit other than taxexempt obligations of state and local governments and agencies and subdivisions thereof to total extensions of credit as of March 14, 1980. Report this ratio to 5 decimal places. Section B: 4. Base amount of covered credit as of March 14, 1980. This amount is calculated by multiplying the amount reported in Item 1 OR $100 million, whichever is larger, first by the ratio reported in Item 2 and then multiplying the resulting product by the ratio reported in Item 3. For example, if Item 1 is 200, Item 2 is 0.75000 and Item 3 is 0.10000, the amount reported in this item would be (200 x 0.75000 x 0.10000) or 15. This amount represents the proportion of nontax-exempt credit extended by the creditor that is not represented by exempt funds of fiduciaries on the base date. FR 2063b O M B No. 55 S 80004 A p p r o v e d b y F ed eral R e serve B o a rd a n d O M B M a rc h 1 980 Base Report for the Calculation of Special Deposit Requirements for Managed Creditors This report is required by law (12 U.S.C. § S 1909-1909, as im plem ented by Executive Order 122011. The Federal Reserve System regards the inform ation provided by each respondent as co n fid en tia l. If it should be determined subsequently that any info rm a tio n collected on this form must be released, respondents w ill be n o tifie d. Bils . Mils. Thous. 1. Total extensions of credit as of March 14, 1980................. SECTION A: To be completed by managed creditors except those whose objective is to invest in short-term tax-exempt obligations. 2. Proportion of shares not representing exempt funds of fiduciaries as of March 14, 1980 (report proportion rounded 3. Base amount of covered credit as of March 14, 1980 (amount reported in Item 1 OR $100 million, whichever is larger, Proportion Bils . Mils. Thous . SECTION B: To be completed only by managed creditors whose objective is to invest in short-term tax-exempt obligations. 2. Proportion of shares not representing exempt funds of fiduciaries as of March 14, 1980 (report proportion rounded Proportion 3. Proportion of total extensions of credit representing other than tax-exempt obligations of state and local governments as of March 14, 1980 (report proportion rounded to 5 decimal places)... Proportion 4. Base amount of covered credit as of March 14, 1980 (amount reported in Item 1 OR $100 million, whichever is larger, multiplied by the proportion reported in Item 2 and the Bils. Mil s . Thous. I certify that the information shown on this report is correct. A u th o r iz e d S ig n a tu re N a m e and Address o f R e sponden t T itle A rea C ode and T e le p h o n e N u m b e r RETURN BY THE CLOSE OF BUSINESS A PR IL 8, 1980 TO THE FEDERAL RESERVE BANK OF THE D IS TR IC T IN WHICH YOUR PRINCIPAL OFFICE IS LOCATED. PENALTIES. For each w illfu l violation o f 12 C.F.R. 229 Subpart B, the Board may assess against any creditor, or o ffic e r, director or employee thereof who w illfu lly participates in the vio la tio n , a m axim um civil penalty of $1,000. In addition, a m axim um crim inal penalty o f $1,000 and im prisonm ent of up to one year may be imposed fo r w illfu ll violation o f this subpart. FR 2063c Instructions for the Report of Covered Credit for the Calculation of Special Deposit Requirements for Unit Investment Trusts Who must report. This report is required from unit investment trusts that invest in short-term assets. [See 12 CFR 229.11-.15.] These financial intermediaries accept funds from investors and extend credit primarily through purchasing money market instruments with maturities of 13 months or less, such as domestic and Eurodollar certificates of deposit, U.S. Treasury or other governmental agency obligations, repurchase agree ments, commercial paper, and state and local obligations. A unit investment trust will be covered if its investment portfolio primarily consists of short-term securities, deposits, or other instruments with original or remaining maturities of 13 months or less through which it extends credit to banks; federal, state or local governmental units or agencies thereof; any corporation, partnership or other business entity; or any person. A series of units of a unit investment trust is a managed creditor if the investment assets which are included in the valuation of the units in the series primarily have maturities of 13 months or less. "Covered credit" is defined as any extension of credit originated through the acquisition of a security, deposit, or other instrument, including but not limited to domestic and Eurodollar certificates of deposit, U.S. Treasury bills, repurchase agreements, commercial paper, bankers acceptances, and state and local government obligations, and any interest accrued thereon. Covered credit excludes, however, the amount of such extensions of credit representing units or other interests in the unit investment trust held (1) by a bank, trust company, or other fiduciary, provided that all moneys invested therein would be eligible for collective investment by a bank in its capacity as a trustee, executor, administrator, or guardian, and are held incidentally to the management of other trust assets, or (2) by or as agent for the trustee of a retirement, pension, profit sharing, stock bonus, or other trust that is exempt from Federal income taxation under the Internal Revenue Code and whose funds are eligible for collective investment bya bank. Covered credit also excludes the tax-exempt extensions of credit of a unit investment trust whose investment objective is to invest 80 percent or more of its assets in obli gations of state and local governments and agencies and subdivisions thereof, the income from which is exempt from Federal income taxation. A unit investment trust or series of units of such a trust that holds assets on March 14, 1980 need not file reports or maintain special deposits, as their assets are fixed as of the date they are transferred to the trust and will not increase after March 14, 1980. A unit investment trust or series of units of such a trust that acquires assets after March 14, 1980 shall file this report two days prior to the acquisition of investment assets by the trust stating the amount of covered credit to be held by the trust and the amount of the special deposit to be held by the trust. FR 2063c P age 2 Purpose of the report. This report will be used to establish the amount of the special deposit requirement for unit investment trusts. A noninterest-bearing special deposit in collected funds equal to 15 percent of the amount by which the covered credit exceeds the base must be held with the Federal Reserve Bank of the District in which the principal office of the unit investment trust is located. A unit investment trust or series of units of such a trust must maintain the special deposit during the period beginning with the acquisition of assets by such a creditor and ending on the day prior to termination of the trust pursuant to the terms of the trust agreement. A unit investment trust is only required to file a report and maintain a deposit if, at its inception, its assets primarily have original or remaining maturities of less than 13 months. A unit investment trust whose assets at its inception had longer maturities but whose asset maturities fall below 13 months as the termination of the trust approaches is not required to report or to maintain a special deposit. A unit investment trust established after March 14, 1980, and con sisting solely of units held by unit holders (and their successors) in trusts of the same sponsor that were in existence on March 14, 1980 will not be required to hold the special deposit, as long as the sales charge for such units is not substantially increased, and a unit holder is not permitted to subscribe to more units than he held in maturing trusts. Other unit invest ment trusts established after March 14, 1980 have a base of zero and will be required to hold a special deposit based on their covered credit. Maintenance of a special deposit at a Federal Reserve Bank does not entitle managed creditors to Federal Reserve services. How to report. Report all dollar amounts dollars. The amount of the special deposit must be Amounts denominated in foreign currencies should be dollars at the prevailing exchange rate at the time occurs. to the nearest thousand reported in dollars. initially valued in U.S. the transaction originally ITEM DEFINITIONS 1. Date of acquisition of investment assets. Report in this item the date of acquisition of investment assets by the unit investment trust. The special deposit as calculated on this report must be held with the Federal Reserve Bank beginning on this date. 2. Total extensions of credit. This item is defined as the daily average of the amount of all extensions of credit originated through the acquisition of a security, deposit, or other instrument, including but not limited to domestic and Eurodollar certificates of deposit, U.S. Treasury and other governmental agency obligations, repurchase agreements, commercial paper, bankers acceptances, and state and local government obligations, and interest accrued thereon. This item excludes common stocks, balances held at the Federal Reserve Bank, and currency and coin. For purposes of this FR 2063c Page 3 report, investment assets should be valued by the same procedures used by a registered investment company to value assets in calculating net share or unit value under the Investment Company Act of 1940 and rules promulgated thereunder. 3. Base amount of credit extended as of date of acquisition. For a unit investment trust established after March 14, 1980 the base amount reported in this item will be the amount of extensions of credit on the date the trust acquired investment assets LF (1) the sales charges and other fees of the unit investment trust are substantially identical to those of previous trusts of the same sponsor, and (2) the units are held (a) entirely by per sons who held units in an expiring trust of the same sponsor with a base equal to the amount of its total extensions of credit and (b) in amounts not exceeding the individual holdings of such persons in expiring trusts. Other wise, the amount of the base to be reported in this item is zero. 4. Amount by which extensions of credit exceed the base. This item is cal culated by subtracting the base amount of credit extended (Item 3) from the total extensions of credit (Item 2). Section A: 5. Proportion of units not representing exempt funds of fiduciaries. Report in this item the ratio of the number of units not representing exempt funds of fiduciaries to the total number of units out standing. Units representing exempt funds of fiduciaries are those held (1) by a bank, trust company, or other fiduciary, provided that all moneys invested would be eligible for collective investment by a bank in its capacity as a trustee, executor, administrator, or guardian, and are held incidentally to the management of other trust assets, or (2) by or as agent for the trustee of a retirement, pension, profit sharing, stock bonus, or other trust that is exempt from Federal income taxation under the Internal Revenue Code and whose funds are eligible for collective investment by a bank. If there are no units outstanding that represent exempt funds of fiduciaries, the ratio reported in this item is 1.00000. If 10 percent of the units outstanding represent exempt funds of fiduciaries, the ratio reported in this item is 0.90000. Report this ratio to 5 decimal places. A unit investment trust is expected to maintain records of the units reported as representing exempt funds of fiduciaries. Section A: 6. Covered credit. This amount is calculated by multi plying the amount reported in Item 4 by the ratio reported in Item 5. Section B: 5. a. Proportion of units not representing exempt funds of fiduciaries. Report in this item the ratio of the number of units not representing exempt funds of fiduciaries to the total number of units out standing. Units representing exempt funds of fiduciaries are those held (1) by a bank, trust company, or other fiduciary, provided that all moneys invested would be eligible for collective investment by a bank in its capacity as a trustee, executor, administrator, or guardian, and are held incidentally to the management of other trust assets, or (2) by or as agent for the trustee P age 4 FR 2063c of a retirement, pension, profit sharing, stock bonus, or other trust that is exempt from Federal income taxation under the Internal Revenue Code and whose funds are eligible for collective investment by a bank. If there are no units outstanding that represent exempt funds of fiduciaries the ratio reported in this item is 1.00000. If 10 percent of the units outstanding represent exempt funds of fiduciaries, the ratio reported in this item is 0.90000. Report this ratio to 5 decimal places. A unit investment trust is expected to maintain records of the units reported as representing exempt funds of fiduciaries. Section B: 5. b. Proportion of total extensions of credit repre senting other than tax-exempt obligations of state and local governments. Report in this item the daily average of the ratio of extensions of credit other than tax-exempt obligations of state and local governments and agencies and subdivisions thereof to total extensions of credit. Report this ratio to 5 decimal places. Section B: 6. Covered credit. This amount is calculated by multiplying the amount reported in Item 4 first by the ratio reported in Item 5.a and then multiplying the resulting product by the ratio reported in Item 5.b. For example, if Item 4 is 200, Item 5.a is 0.75000 and Item 5.b is 0.10000, the amount reported in this item would be (200 x 0.75000 x 0.10000) or 15. This amount represents the proportion of nontax-exempt credit extended by the creditor that is represented by units of persons other than funds of fiduciaries. Section C: 7. 15 percent of Item 6: SPECIAL NONINTEREST-BEARING DEPOSIT REQUIRED TO BE HELD DURING THE MAINTENANCE PERIOD. This amount is calculated by multiplying the amount of covered credit (Section B or C as appropriate; Item 6) by 0.15. Note that this amount must be reported in dollars rather than thousands of dollars.
@FedFRASER