99-15598. PaineWebber Group Inc., et al.; Notice of Application  

  • [Federal Register Volume 64, Number 118 (Monday, June 21, 1999)]
    [Notices]
    [Pages 33120-33124]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 99-15598]
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    
    [Investment Company Act Release No. 23871; 812-9416]
    
    
    PaineWebber Group Inc., et al.; Notice of Application
    
    June 15, 1999.
    AGENCY: Securities and Exchange Commission (``SEC'').
    
    ACTION: Notice of application for an exemption under sections 6(c) and 
    17(b) of the Investment Company Act of 1940 (the ``Act'') from section 
    17(a) of the Act, under section 6(c) of the Act from section 12(d)(3) 
    of the Act, and for an order under section 17(d) of the Act and rule 
    17d-1 under the Act to permit certain joint transactions.
    
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    SUMMARY OF THE APPLICATION: Applicants request an order to permit: (a) 
    GE Issuers (as defined below) to sell commercial paper issued by the GE 
    Issuers to certain registered investment companies and the GE Issuers 
    to repurchase (i.e., prepay) the commercial paper; (b) certain 
    registered investment companies to purchase municipal obligations 
    insured by the Financial Guaranty Insurance Company (``FGIC'') and/or 
    insurance policies issued by FGIC on municipal obligations; and (c) 
    certain registered investment companies to purchase in the secondary 
    market common stock and other securities issued by General Electric 
    Company and its subsidiaries.
        Applicants: PaineWebber Group Inc. (``PWG''), PaineWebber 
    Incorporated (``PWI''), Mitchell Hutchins Asset Management Inc. 
    (``MHAM''), (collectively, the ``PaineWebber Companies''), General 
    Electric Company (``GE''), General Electric Capital Services, Inc. 
    (``GECS''), General Electric Capital Corporation (``GECC''), GE 
    Financial Assurance Holdings, Inc. (``GEFA'') (collectively, the ``GE 
    Issuers''), FGIC, PaineWebber America Fund, PaineWebber Cashfund, Inc., 
    PaineWebber Investment Series, PaineWebber Managed Assets Trust, 
    PaineWebber Managed Investments Trust, PaineWebber Managed Municipal 
    Trust, PaineWebber Master Series, Inc., PaineWebber Municipal Series, 
    PaineWebber Mutual Fund Trust, PaineWebber Olympus Fund, PaineWebber 
    Financial Services Growth Fund Inc., PaineWebber RMA Money Fund, Inc., 
    PaineWebber RMA Tax-Free Fund, Inc., PaineWebber Securities Trust, 
    Mitchell Hutchins Series Trust, Strategic Global Income Fund, Inc., 
    2002 Target Term Trust Inc., All-American Term Trust Inc., Global High 
    Income Dollar Fund Inc., Investment Grade Municipal Income Fund Inc., 
    Insured Municipal Income Fund Inc., Managed High Yield Fund Inc., 
    PaineWebber Municipal Money Market Series, PaineWebber Investment 
    Trust, PaineWebber Investment Trust II, Liquid Institutional Reserves, 
    PaineWebber PACE Select Advisors Trust, Mitchell Hutchins Portfolios, 
    PaineWebber Index Trust, Mitchell Hutchins Institutional Series, 
    Managed High Yield Plus Fund Inc. (``PaineWebber Funds''), and The 
    Infinity Mutual Funds, Inc. (the ``Outside Fund,'' and, together with 
    PaineWebber Funds and any other registered investment companies for 
    which PWG or any of its subsidiaries may serve as investment adviser or 
    principal underwriter in the future (``Future Funds''), the ``Funds'').
        Filing Dates: The application was filed on January 3, 1995, and 
    amended on August 16, 1996, and June 1, 1999.
        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 July 6, 
    1999, 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. 
    20549-0609. PaineWebber Group Inc., 1285 Avenue of the Americas, New 
    York 10019. The Infinity Mutual Funds, Inc., 3235 Stelzer Road, 
    Columbus, Ohio 4319-3035. General Electric Company, 3135 Easton 
    Turnpike, Fairfield, Connecticut 06431. General Electric Capital 
    Services, Inc., and General Electric Capital Corporation, 260 Long 
    Ridge Road, Stamford, Connecticut 06927. GE Financial Assurance 
    Holdings, Inc., 6604 West Broad Street, Richmond, Virginia 23230. 
    Financial Guaranty Insurance Company, 115 Broadway, New York, New York 
    10006.
    
    FOR FURTHER INFORMATION CONTACT: J. Amanda Machen, Senior Counsel, at 
    (202) 942-7120, 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, 450 Fifth St., N.W., Washington, D.C. 
    20549-0102 (tel. 202-942-8090).
    
    Applicants' Representations
    
        1. PWG is a publicly held financial services holding company. GE 
    owns approximately 21.6% of PWG's common stock acquired in a 1994 
    transaction (``1994 Transaction''). Pursuant to a 1995 SEC order, GE 
    does not control PWG within the meaning of section 2(a)(9) of the Act 
    and will not control PWG for a 15 year period ending on December 16, 
    2009 (``Effective
    
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    Period'').\1\ PWI, a wholly-owned subsidiary of PWG, is a broker-dealer 
    registered under the Securities Exchange Act of 1934 (``Exchange Act'') 
    and an investment adviser registered under the Investment Advisers Act 
    of 1940 (``Advisers Act''). MHAM, a wholly-owned subsidiary of PWI, a 
    broker-dealer registered under the Exchange Act and an investment 
    adviser registered under the Advisers Act.
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        \1\ See In the Matter of Paine Webber Group Inc., Investment 
    Company Release Nos. 21177 (June 30, 1995) (notice) and 21261 (July 
    27, 1995) (order).
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        2. Each of the Paine Webber Funds is organized as a Massachusetts 
    or Delaware business trust or Maryland corporation and is registered 
    under the Act as an open-end or closed-end investment company. Each of 
    the Paine Webber Funds has entered into an investment advisory 
    agreement with PWI or MHAM. PWI or MHAM serves as principal underwriter 
    to all of the open-end Paine Webber Funds. GE Investment Management 
    Incorporated (``GEIM''), a wholly-owned subsidiary of GE, serves as 
    investment subadviser to Global Small Cap Fund Inc. Series of Funds for 
    which GEIM serves, or may in the future serve, as investment adviser or 
    subadviser are referred to as ``GEIM-Advised Series.'' \2\ The Infinity 
    Mutual Funds, Inc. is organized as a Maryland corporation and MHAM 
    serves as investment adviser to two of its series.
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        \2\ Series of Funds for which GEIM in the past served, but no 
    longer serves, as investment adviser or subadviser will not be 
    considered GEIM-Advised Series. To the extent that a series of a 
    Fund for which GEIM serves as investment adviser or subadviser 
    ceases to be advised by GEIM, such series will be deemed a Future 
    Fund for purposes of the application.
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        3. GE and its consolidated affiliates (the ``GE Company'') comprise 
    one of the largest and most diversified industrial corporations in the 
    world. Through GECS, a wholly-owned subsidiary of GE, and GECS' two 
    principal subsidiaries, GECC and GE Global Insurance Holding 
    Corporation, the GE Company engages in a broad spectrum of financial 
    services. FGIC, which provides financial guaranty insurance, 
    principally on municipal obligations and structured finance issues, is 
    a subsidiary of FGIC Holdings, Inc., a Delaware holding company that 
    is, in turn, a wholly-owned subsidiary of GECC.
        4. Applicants request relief to permit (i) the GE Issuers to sell 
    to the Funds short-term obligations issued by the GE Issuers, commonly 
    known as commercial paper (``GE commercial paper''), (ii) the Funds to 
    purchase, to the extent otherwise permitted by their investment 
    objectives, policies, and restrictions, from the GE Issuers, GE 
    commercial paper, and (iii) the GE Issuers to repurchase (i.e., 
    prepay), and the Funds to request repurchase by the GE Issuers of, GE 
    commercial paper held by the Funds (collectively, ``GE Debt 
    Transactions''). While the PaineWebber Funds and the Outside Fund have 
    differing investment objectives, policies and restrictions, virtually 
    all are able to invest some portion of their assets, either as part of 
    their regular investment program or for temporary defensive purposes, 
    in commercial paper.
        5. Applicants also request relief to permit (i) the Funds to 
    purchase, to the extent otherwise permitted by their investment 
    objectives, policies, and restrictions, municipal obligations insured 
    as to timely payment of principal and interest by FGIC and/or insurance 
    policies issued by FGIC on municipal obligations, and (ii) FGIC to sell 
    such insurance policies to the Funds (collectively, the ``FGIC 
    Transactions''). In addition, with respect to municipal obligations 
    insured by FGIC, applicants request relief to permit the Funds (i) to 
    accept certain payments that might arise from claims made upon such 
    insurance and (ii) in connection with the Funds' acceptance of any such 
    payments, to assign to FGIC the Funds' rights of recovery (i.e., to 
    permit subrogation of FGIC, to the extent of such payments, to the 
    Funds' rights of recovery against other parties) (collectively, ``Claim 
    Settlement Transactions'').
        6. A number of the Funds are permitted to invest at least some 
    portion of their assets, and one has a policy requiring it under normal 
    circumstances to invest at least 80% of its assets, in municipal 
    obligations that are insured as to timely payment of principal and 
    interest (``Insured Municipal Obligations'') under an insurance policy 
    (a) obtained by the issuer or underwriter of the municipal obligation 
    (``Primary Market Insurance''), or (b) purchased by a Fund or by a 
    previous owner of the municipal obligation (``Secondary Market 
    Insurance''). The purchase of Secondary Market Insurance by the Funds 
    themselves, however, would be unusual, and the Funds would only 
    purchase Secondary Market Insurance directly from FGIC if the prices 
    offered by FGIC were at least as favorable as those obtainable from 
    non-affiliated insurers of similar stature and creditworthiness.
        7. Applicants also request relief to permit the Funds to purchase 
    in the secondary market (on an exchange or over the counter), to the 
    extent otherwise permitted by their investment objectives, policies, 
    and restrictions, common stock and other securities issued by GE and 
    its subsidiaries.
        8. Applicants state that as of May 6, 1999, GE had approximately 
    $4.2 billion, GECS had approximately $5.6 billion, GECC had 
    approximately $77.6 billion, and GEFA had approximately $1.0 billion in 
    commercial paper outstanding. Collectively, the GE Issuers are the 
    largest issuer of commercial paper in the United States, with a 
    collective market share of approximately 7.7% as of December 31, 1998. 
    Applicants state that large institutional investors have consistently 
    viewed GE commercial paper as an attractive short-term investment. 
    Commercial paper issued by each of GE, GECS, GECC and GEFA is rated in 
    the highest possible rating category for commercial paper by Standard & 
    Poor's Rating Group, a division of the McGraw Hill Companies, Inc. 
    (``S&P'') and Moody's Investors Service, Inc. (``Moody's''). GE 
    commercial paper is also highly liquid, in that the GE Issuers are 
    prepared generally to prepay their paper upon request from a holder, 
    subject to prevailing market conditions and the GE commercial paper's 
    liquidity. Moreover, GE Issuers, like a number of other large 
    corporations, permit institutional purchasers to purchase commercial 
    paper directly, thereby saving the purchaser a dealer's markup.
        9. Applicants further state that for at least the last eight years 
    prior to the 1994 Transaction, GE commercial paper represented 
    significant investment opportunities for the PaineWebber Funds. 
    Historically, when considering investments in commercial paper, MHAM 
    has considered investment in commercial paper of various other issuers 
    comparable to the GE Issuers. Of these, the GE Issuers have the largest 
    market presence in the United States (collectively), and, in the 
    judgment of MHAM, offer the highest quality commercial paper at a 
    favorable price. In addition, commercial paper issued by GE itself, 
    representing investments in the electric, appliance, finance, 
    broadcasting, and other industries, offers greater diversification than 
    commercial paper issued by most other issuers, whose commercial paper 
    represents investment in a narrower band of industries.
        10. Applicants represent that, with respect to each GE Debt 
    Transaction, a determination will be required, based upon the 
    information reasonably available to the purchasing Fund and its 
    investment adviser, that the commercial paper available for purchase 
    from the GE Issuer in question is of an overall quality and value equal 
    to or better than
    
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    commercial paper then available in the same quantities from other 
    issuers, taking into consideration such factors as yield, maturity, 
    rating by a NRSRO, quality of issuer, flexibility, transaction costs or 
    any other factor deemed relevant by the Fund and adviser in evaluating 
    the desirability of an investment in commercial paper. In particular, 
    applicants represent that before purchasing any commercial paper from a 
    GE Issuer, applicants will obtain yield information on commercial paper 
    offered by at least two comparable issuers, i.e., issuers with similar 
    credit rating and program size, and in a similar market segment or 
    segments, as the GE Issuer.
        11. With respect to FGIC Transactions, applicants state that FGIC 
    is among a small number of leading insurers in the market for issuing 
    insurance policies which guarantee the timely payment of principal of, 
    and interest on, particular municipal obligations or on a portfolio of 
    municipal obligations. As of December 31, 1998, FGIC's 21.7% market 
    share of insured new issues ranked FGIC as third in the market. FGIC 
    has received insurance claims-paying ability ratings of AAA/Aaa/AAA by 
    S&P, Moody's, and Fitch IBCA, Inc. FGIC-insured municipal bonds have 
    represented significant investment opportunities for certain of the 
    Funds.
        12. Applicants acknowledge and agree that the requested order will 
    be effective only during the Effective Period and will not be 
    applicable with respect to any GEIM-Advised Series. Applicants further 
    acknowledge and agree that the applicability of the requested order to 
    any Fund is conditioned upon approval of the conditions set forth in 
    the application by the Fund's disinterested directors/trustees.
    
    Applicants' Legal Analysis
    
    Sections 17(a) and (d)
    
        1. Section 17(a) of the Act provides, in relevant part, that it is 
    unlawful for any affiliated person of a registered investment company, 
    or any affiliated person of such an affiliated person, acting as 
    principal, knowingly: (i) to sell any security or other property to 
    such registered company; (ii) to purchase any security or other 
    property from such registered company; or (iii) to borrow money or 
    other property from such registered company. To the extent that GE and 
    each of the GE entities would be deemed to be an affiliated person of 
    an affiliated person of each of the Funds, section 17(a) could be 
    deemed applicable to GE Debt Transactions, FGIC Transactions, and Claim 
    Settlement Transactions.
        2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
    an affiliated person of a registered investment company, or an 
    affiliated person of such affiliated person, acting as principal, from 
    engaging in a joint enterprise or other joint arrangement with such 
    registered investment company, unless an application regarding such 
    enterprise or arrangement has been filed with the SEC and an order has 
    been granted. To the extent that GE and each of the GE entities would 
    be deemed to be affiliated persons of an affiliated person of each of 
    the Funds, section 17(d) and rule 17d-1 could be deemed applicable to 
    FGIC Transactions and Claim Settlement Transactions.
        3. Section 17(d) provides that on application, the SEC shall grant 
    an order exempting a proposed transaction from section 17(a) if 
    evidence establishes that: (1) the terms of the proposed transaction, 
    including the consideration to be paid or received, are reasonable and 
    fair and do not involve overreaching on the part of any person 
    concerned; (2) the proposed transaction is consistent with the policy 
    of each registered investment company concerned; and (3) the proposed 
    transaction is consistent with the general purposes of the Act. Rule 
    17d-1(b) provides that in passing upon applications, the SEC will 
    consider whether each party's participation in the proposed joint 
    transaction ``is consistent with the provisions, policies and purposes 
    of the Act'' as well as the ``extent to which such participation is on 
    a basis different or less advantageous than that of other 
    participants.''
        4. Section 6(c) of the Act provides, in pertinent part, that the 
    SEC may, by order upon application, conditionally or unconditionally 
    exempt any class of transactions from any provisions of the Act ``if 
    and to the extent that such exemption is necessary or appropriate in 
    the public interest and consistent with the protection of investors and 
    the purposes fairly intended by the policies and provisions of this 
    title.''
        5. Applicants seek an order: (1) Under sections 6(c) and 17(b) of 
    the Act, granting an exemption from the provisions of section 17(a) of 
    the Act to permit the GE Debt Transactions, FGIC Transactions, and 
    Claim Settlement Transactions; and (2) under section 17(d) of the Act 
    and rule 17d-1 under the Act to permit FGIC Transactions and Claim 
    Settlement Transactions.
        6. Applicants state that while the requested order would enable the 
    Funds to engage in the enumerated transactions, it would neither 
    require nor encourage the Funds to do so. Such transactions would be 
    matters left solely within the discretion of the Funds' investment 
    advisers and boards of directors, consistent with each of the Funds' 
    investment objectives, policies and restrictions.
        7. With respect to GE Debt Transactions, applicants state that the 
    ability of any Fund to continue to invest in GE commercial paper is 
    important to the management of the Funds and their opportunity to 
    achieve their overall investment objectives to the benefit of their 
    shareholders. Applicants contend that in light of the significant 
    market share of GE commercial paper in the commercial paper market, it 
    is undesirable for the Funds to be precluded from these potentially 
    favorable investment opportunities. Since purchases in the 
    significantly smaller secondary market in GE commercial paper are often 
    at a less favorable price than direct purchases from GE Issuers, 
    applicants argue that in the absence of the requested relief, the Funds 
    may not have a reasonable and cost-effective opportunity to purchase GE 
    commercial paper. Given many of the Funds' diversification 
    requirements, applicants contend that the inability of the Funds to 
    purchase GE commercial paper (or to ``sell'' such paper back to the GE 
    Issuers through requesting prepayment on such paper) could cause the 
    Funds to turn to smaller, possibly less attractive issuers of 
    commercial paper.
        8. With respect to the FGIC Transactions, applicants state that the 
    ability of those Funds which are permitted to invest in municipal 
    obligations to continue to engaged in FGIC Transactions is important to 
    the management of the Funds and their opportunity to achieve their 
    overall investment objectives to the benefit of their shareholders. 
    Applicants contend that given the significant position of FGIC in the 
    market of insurers of municipal bonds, as well as the fact that insured 
    municipal bonds make up an increasingly large percentage of the market, 
    it is undesirable for the Funds to be precluded from these potentially 
    favorable investment opportunities. Applicants argue that precluding 
    any municipal Funds, whether or not diversified, from purchasing FGIC-
    insured municipal obligations would significantly reduce the pool of 
    potential investments for these Funds, thereby potentially adversely 
    affecting the Funds' ability to achieve the most favorable investment 
    results, and could increase the Funds' exposure in the event that one 
    of the other insurers
    
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    experiences problems meeting its insurance obligations.
        9. Applicants state that the proposed conditions will help to 
    ensure that GE Debt Transactions and FGIC Transactions will be 
    reasonable and fair to the shareholders of the Funds will not involve 
    overreaching on the part of any person concerned, and will accord with 
    the relevant policies of the Act by ensuring that the Funds' portfolios 
    securities will not be selected in the interest of affiliated persons 
    or FGIC rather than in the interest of the Funds' shareholders. In 
    addition, with respect to Claim Settlement Transactions, applicants 
    assert that the terms of any Claim Settlement Transactions will be 
    reasonable and fair and will not involve overreaching on the part of 
    any person concerned.
    
    Section 12(d)(3)
    
        10. Section 12(d)(3) of the Act generality prohibits a registered 
    investment company from acquiring any security issued by a securities 
    related buisness--i.e. the business of any person who is a broker, a 
    dealer, an underwriter, or an investment adviser. Although rule 12d3-1 
    exempts from section 12(d)(3) purchases by an investment company of 
    certain such securities, rule 12d3-1(c) provides that the exemption 
    does not extend to the acquisition of any security issued by the 
    acquiring company's investment adviser, promoter, or principal 
    underwriter, or any affiliated person of such investment adviser, 
    promoter, or principal underwriter.
        11. To the extent that GE and its subsidiaries may be deemed to be 
    affiliated persons of PWI and MHAM, or to be engaged in a securities-
    related business, applicants seek an order from the SEC pursuant to 
    section 6(c) of the Act exempting them from section 12(d)(3) to the 
    extent necessary to permit the GE Debt Transactions, as well as 
    secondary market submit that the concerns at which section 12(d)(3) is 
    directed are not implicated, and the criteria of section 6(c) are met, 
    with respect to the proposed transactions. Applicants note that the GE 
    Company itself derived less than 1% of its gross revenues from 
    ``securities related activities'' (excluding its interest in PWG) of 
    its fiscal year ended December 31, 1989.
    
    Applicants' Conditions
    
        Applicants agree that any order granting this requested relief will 
    be subject to the following conditions:
        1. GE Debt Transactions will be limited to commercial paper issued 
    by the GE Issuer that is a party to the transaction.
        2. Before any GE Debt Transaction is consummated, the Fund or its 
    investment adviser will obtain such information as it deems necessary 
    to satisfy itself that the price available to the Fund is at least as 
    favorable to the Fund as the price available to other institutional 
    purchasers or sellers, buying or selling, respectively, in 
    approximately the same quantities at approximately the same time.
        3. All GE commercial paper purchased by the Funds from GE Issuers 
    under the order will, at the time of purchase, be an ``eligible 
    security'' and a ``rated security'' as those terms are defined in rule 
    2a-7 under the Act.
        4. Each GE Debt Transaction will be in accordance with the 
    participating Fund's investment objectives, policies and restrictions, 
    and neither MHAM, PWI nor any other investment adviser of any of the 
    Funds will take any action to encourage a change in such investment 
    objectives, policies or restrictions with the intent of facilitating GE 
    Debt Transactions.
        5. The Funds will not purchase commercial paper of a GE Issuer if, 
    after such purchase, the Funds' holdings in the aggregate of such GE 
    Issuer's commercial paper would exceed: (a) 10% (measured at the time 
    of purchase) of the value of the outstanding commercial paper of such 
    GE Issuer if such GE Issuer is GE or GECS (or 15%, measured at the time 
    of purchase), if the Funds are investing for temporary defensive 
    purposes or for other purposes of liquidity) or (b) 5% (measured at the 
    time of purchase) of the value of the outstanding commercial paper of 
    such GE Issuer if such GE Issuer is GECC (or 10%, measured at the time 
    of purchase, if the Funds are investing for temporary defensive 
    purposes or for other purposes of liquidity). The Funds will calculate 
    the amount of limitations applicable under this paragraph on the bases 
    of the amount of each GE Issuer's outstanding commercial paper as shown 
    in, and as of the end of the period covered by, the GE Issuer's most 
    recent quarterly report, or, if more recent, the GE Issuers' annual 
    report.
        6. No fund or series of any Fund will invest more then 1% (measured 
    to the time of purchase) of the value of its total assets, or, if 
    lower, the maximum percentage permitted by its investment policies and 
    restrictions, in the commercial paper of GE Issuers, measured in the 
    aggregate, except that each Money Market Fund or series of any Money 
    Market Fund may invest up to 5% (measured at the time of purchase) of 
    the value of its total assets in the commercial paper of GE Issuers, 
    measured in the aggregate, subject to any limitations in rule 2a-7 
    under the Act.
        7. The Funds and their investment advisers will maintain such 
    records with respect to GE Debt Transactions conducted pursuant to the 
    requested order (``Order'') as may be necessary to confirm compliance 
    with the conditions of the Order.
        a. Each Fund shall maintain an itemized daily record of all 
    purchases and sales of securities pursuant to the Order, showing for 
    each transaction: the name and quality of securities; the unit purchase 
    or sale price; the time and date of the transaction; and the rating of 
    the securities. Such records also shall document for each commercial 
    paper transaction at least two quotations on securities of comparable 
    issuers, including: the source of the quotations (Telerate or another 
    generally accepted electronic means); the prices quoted; the time and 
    dates the quotations were received; and the ratings of these securities 
    of comparable issuers.
        b. Each Fund shall maintain a ledger or other record showing, on a 
    daily basis, the percentage of that Fund's total assets invested in GE 
    commercial paper.
        c. Each Fund and/or its investment adviser shall maintain records 
    sufficient to verify compliance with the limitations in condition 5 
    above.
        The records required by this condition 7 will be maintained and 
    preserved in the same manner as records required under rule 31a-1(b)(1) 
    under the Act.
        8. Each FGIC Transaction will be in accordance with the 
    participating Fund's investment objectives, policies and restrictions, 
    and neither MHAM, PWI nor any other investment adviser of any of the 
    Funds will take any action to encourage a change to such investment 
    objectives, policies or restrictions with the intent of facilitating 
    FGIC Transactions.
        9. The Funds and their investment advisers will maintain such 
    records with respect to FGIC Transactions conducted pursuant to the 
    Order as may be necessary to confirm compliance with the conditions of 
    the Order. The records will show for each transaction conducted 
    pursuant to the Order, among other things, the time and date of the 
    FGIC Transaction, the price of the insured purchased pursuant to the 
    Order, the type of insurance covering the security, and, in the case of 
    Secondary Market Insurance purchased directly from FGIC, the procedures 
    taken to make the determination set forth on condition 10. The records 
    will
    
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    be maintained and preserved in the same manner as records required 
    under rule 31a-1(b)(1) under the Act.
        10. The Funds will not purchase Secondary Market Insurance from 
    FGIC unless the Funds or their investment advisers determine that: (a) 
    the rates and terms of such insurance are at least as favorable to the 
    Funds as the rates and terms FGIC offers non-affiliated investment 
    companies; and (b) the rates and terms of such insurance are at least 
    as favorable to the Funds as those obtainable from non-affiliated 
    insurers of similar stature and creditworthiness.
        11. The Funds will not purchase: (a) in any initial public offering 
    of municipal securities insured wholly through FGIC Primary Market 
    Insurance, more than 10% of the offering; and (b) in any initial public 
    offering of municipal securities insured partly through FGIC Primary 
    Market Insurance, more than 10% of that portion of the offering insured 
    by FGIC.
        12. A Fund that purchases insurance with an option to continue in 
    effect after the resale of a municipal obligation will only exercise 
    such option when the insured value of the security, less the cost of 
    the premium for the insurance, exceeds the value of the security 
    without the insurance.
        13. In the event there is a payment default on a municipal 
    obligation held by a Fund that is insured by FGIC, the Fund will not 
    accept from FGIC in settlement of any claim less than an amount 
    sufficient to pay any principal or interest then due on such municipal 
    obligation in accordance with the insurance policy to which such 
    obligation is subject without obtaining a further exemptive order or 
    other relief from the SEC except as follows: If holders of such 
    obligation, otherwise unaffiliated with FGIC or any GE entity and 
    holding in the aggregate a larger principal amount than the Fund, 
    accept a settlement by a majority (in principal amount) of such 
    unaffiliated holders, then the Fund may accept a settlement on terms as 
    least as favorable as those accepted by such majority without obtaining 
    an order from the Commission, provided the Fund's board of directors/
    trustees (``Board''), including a majority of the non-interested 
    directors/trustees (``Disinterested Directors''), approve the 
    settlement as in the best interests of the Fund.
        14. The Board of each Fund, including a majority of the 
    Disinterested Directors, will adopt guidelines for the Funds and their 
    investment advisers to ensure compliance with the conditions set forth 
    in the application. Each Fund shall maintain and preserve permanently 
    in an easily accessible place a copy of the guidelines. The Board shall 
    review, no less frequently than annually, compliance with such 
    guidelines in order to determine that: (a) transactions conducted 
    pursuant to the Order comply with the conditions set forth herein; (b) 
    the above procedures are followed in all respects; and (c) 
    participation by the Fund in such transactions is, and continues to be, 
    in the best interests of the Fund and its shareholders. The minutes of 
    the meeting of the Board of each Fund at which this determination is 
    made will reflect in detail the reasons for the Board's determination.
    
        For the Commission, by the Division of Investment Management, 
    pursuant to delegated authority.
    Margaret H. McFarland,
    Deputy Secretary.
    [FR Doc. 99-15598 Filed 6-18-99; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
06/21/1999
Department:
Securities and Exchange Commission
Entry Type:
Notice
Action:
Notice of application for an exemption under sections 6(c) and 17(b) of the Investment Company Act of 1940 (the ``Act'') from section 17(a) of the Act, under section 6(c) of the Act from section 12(d)(3) of the Act, and for an order under section 17(d) of the Act and rule 17d-1 under the Act to permit certain joint transactions.
Document Number:
99-15598
Dates:
The application was filed on January 3, 1995, and amended on August 16, 1996, and June 1, 1999.
Pages:
33120-33124 (5 pages)
Docket Numbers:
Investment Company Act Release No. 23871, 812-9416
PDF File:
99-15598.pdf