[Federal Register Volume 63, Number 126 (Wednesday, July 1, 1998)]
[Notices]
[Pages 36003-36007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17473]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23284; 812-10620]
PaineWebber America Fund et al.; Notice of Application
June 24, 1998.
AGENCY: Securities and Exchange Commission (``Commission'' or ``SEC'').
ACTION: Notice of application for an order under sections 6(c) and
17(b) of the Investment Company Act of 1940 (the ``Act'') for an
exemption from sections 17(a) and (e) of the Act, and 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 APPLICATION: Applicants request an order to permit certain
registered investment companies to use cash collateral from securities
lending transactions and uninvested cash to purchase shares
(``Shares'') of a private investment company (``New Fund'') advised by
Mitchell Hutchins Asset Management Inc. (``Mitchell Hutchins'');
PaineWebber Incorporated (``PaineWebber'') and Mitchell Hutchins to
accept fees from certain other registered investment companies that are
affiliated persons solely because they hold 5% or more of the Shares of
the New Fund (the ``Other Funds''); and PaineWebber and certain
affiliated broker-dealers to borrow portfolio securities from certain
affiliated registered investment companies and to receive brokerage
commissions from, and to engage in principal securities transactions
with, the Other Funds.
APPLICANTS: PaineWebber; Mitchell Hutchins; 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,
[[Page 36004]]
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., Global Small Cap 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,
PaineWebber Index Trust, Managed High Yield Plus Fund Inc., Mitchell
Hutchins Institutional Series (collectively, the ``Affiliated Funds''),
and any other registered investment company, or series thereof, which
currently is or in the future may be advised by Mitchell Hutchins or
PaineWebber, or any entity controlling, controlled by, or under common
control with PaineWebber or Mitchell Hutchins,\1\ that may purchase
Shares of New Fund; and any Other Fund.
\1\ All existing Affiliated Funds that currently intend to rely
on the order have been named as applicants. Any other existing or
future Affiliated Funds that may rely on the order in the future
will do so in accordance with the terms and conditions in the
application.
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FILING DATES: The application was filed on April 17, 1997. Applicants
have agreed to file an amendment, the substance of which is
incorporated in this notice, during the notice period.
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 20, 1998,
and should be accompanied by proof of service on the 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, NW., Washington, DC 20549.
Applicants, 1285 Avenue of the Americas, New York, New York 10019.
FOR FURTHER INFORMATION CONTACT: Brian T. Hourihan, Senior Counsel, at
(202) 942-0526, or Mary Kay Frech, Branch Chief, at (202) 942-0564
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch, 450 Fifth Street, NW, Washington, DC
20549 (tel. (202) 942-8090).
Applicants' Representations
1. The Affiliated Funds are registered under the Act as either
closed-end or open-end management investment companies. PaineWebber and
Mitchell Hutchins, each an investment adviser registered under the
Investment Advisers Act of 1940 (``Advisers Act''), serve as investment
adviser and sub-adviser, respectively, to PaineWebber Cashfund, Inc.,
PaineWebber RMA Money Fund, Inc., PaineWebber RMA Tax-Free Fund, Inc.,
PaineWebber Managed Municipal Trust, PaineWebber Municipal Money Market
Series, and Liquid Institutional Reserves. Mitchell Hutchins is a
wholly-owned subsidiary of PaineWebber and serves as investment adviser
to the remaining Affiliated Funds. Both PaineWebber and Mitchell
Hutchins are registered as broker-dealers under the Securities Exchange
Act of 1934. PaineWebber, Mitchell Hutchins, and any other broker-
dealer controlled by or under common control with PaineWebber are
referred to as ``Affiliated Broker-Dealers.''
2. Each Affiliated Fund is permitted under its investment
objectives, policies, and restrictions to lend its portfolio
securities. PaineWebber has been authorized by the board of directors/
trustees of each Affiliated Fund (the ``Board'') to act as securities
lending agent for the Fund. The PaineWebber personnel providing day-to-
day lending agency services to the Affiliated Funds do not provide
investment advisory services to the Funds, or participate in any way in
the selection of portfolio securities or other aspects of the
management of the Funds. In addition, depending on the particular
Affiliated Fund, PaineWebber's activities as lending agent are
conducted under the supervision of investment management personnel of
the Affiliated Fund's investment adviser, who are not in any manner
involved in PaineWebber's lending agency operations. PaineWebber also
provides securities lending agency services to various other clients,
including the Other Funds.
3. PaineWebber, as lending agent for the Affiliated Funds, is
responsible for soliciting borrowers of portfolio securities
(``Borrowers''), monitoring daily the value of the loaned securities
and collateral, and performing other administrative functions.
PaineWebber, under the supervision of each Affiliated Fund's investment
adviser enters into loans with pre-approved Borrowers on terms that
have been pre-approved by the Fund's investment adviser. At present,
the Affiliated Funds may not lend portfolio securities to PaineWebber.
Applicants request that the Affiliated Funds, as well as the Other
Funds, have the flexibility to lend their securities to any Affiliated
Broker-Dealer.
4. Each Borrower of an Affiliated Fund's portfolio securities is
required to tender collateral to the Fund's custodian in the form of
cash, U.S. Government securities, or irrevocable letters of credit.
When the collateral consists of U.S. government securities or letters
of credit, PaineWebber typically negotiates on behalf of the Affiliated
Fund a lending fee to be paid by the Borrower to the Affiliated Fund.
Alternatively, when the collateral consists of cash (``Cash
Collateral''), the Affiliated Fund, instead of receiving a separate
lending fee, typically receives a portion of the return earned on the
investment of the Cash Collateral by or under the direction of the
Fund's investment adviser. For its services as lending agent to the
Affiliated Funds, PaineWebber is permitted to receive fees based on a
share of the revenue generated from securities lending transactions for
the Affiliated Funds.\2\
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\2\ See PaineWebber America Fund, et al., Investment Company Act
Release Nos. 22541 (March 4, 1997) (notice) and 22594 (Apr. 1, 1997)
(order).
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5. Affiliated Funds and Other Funds may have uninvested cash
(``Uninvested Cash'') on hand from a variety of sources. Uninvested
Cash may result from dividend or interest payments, unsettled
securities transactions, reserves held for future investments,
scheduled maturity of investments, liquidation of portfolio securities,
as well as cash received from new investors.
6. Currently, the Affiliated Funds invest their Cash Collateral and
Uninvested Cash in short-term money market instruments. Applicants
propose to create the New Fund to serve as an alternative investment
option for the Affiliated Funds, the Other Funds, and other clients of
PaineWebber and Mitchell Hutchins for the investment of Cash Collateral
and Uninvested Cash. The New Fund may be organized as a New York or
Delaware business trust or
[[Page 36005]]
limited liability company and will be comprised of one or more separate
investment series. The New Fund will operate as a private investment
company in reliance on section 3(c)(7) of the Act. The New Fund will
offer daily redemption of its shares at the current net asset value per
Share. The New Fund will not impose any sales load, redemption or
asset-based distribution fees. By investing in the New Fund, the
Affiliated and Other Funds anticipate that they will be able to lower
transaction costs, increase liquidity, achieve greater diversification,
and enjoy greater returns in connection with their investment of Cash
Collateral and Uninvested Cash.
7. Applicants intend to operate the initial investment series of
the New Fund as a money market portfolio that values its securities
based on the amortized cost method and complies with rule 2a-7 under
the Act (``Money Market Series''). Future investment series of the New
Fund could operate as Money Market Series, as well as portfolios which
invest in high quality securities but with longer maturities or
different quality standards. Any Affiliated or Other Fund that complies
with the requirements of rule 2a-7 under the Act will invest only in a
Money Market Series.
8. Mitchell Hutchins or PaineWebber may serve as Trustee to the New
Fund. Mitchell Hutchins will act as investment adviser to the New Fund.
For acting as investment adviser, Mitchell Hutchins will receive an
advisory fee from the initial series of the New Fund, but will waive
its advisory fees for any Affiliated Fund to the extent necessary to
avoid a duplication of advisory fees for the Affiliated Fund. In
addition, PaineWebber, Mitchell Hutchins, or an affiliated person may
provide administrative, accounting, transfer agent and other services
to the New Fund and receive reasonable compensation for providing the
services.
Applicants' Legal Analysis
A. Sections 17(a), 17(b), and 17(d), and Rule 17d-1
1. Sections 17(a)(1) and 17(a)(2) of the Act make it unlawful for
any affiliated person of a registered investment company, or any
affiliated person of the affiliated person, acting as a principal, to
sell any security to, or purchase any security from, the investment
company. Section 17(a)(3) of the Act makes it unlawful for any
affiliated person of a registered investment company or any affiliated
person of the affiliated person, acting as principal, to borrow money
or other property from the investment company. Section 17(d) of the Act
and rule 17d-1 under the Act prohibit any affiliated person of or
principal underwriter for a registered investment company or any
affiliated person of the affiliated person or principal underwriter,
acting as principal, from effecting any transaction in connection with
the any joint enterprise or other joint arrangement or profit sharing
plan in which the investment company participates, unless an
application regarding the joint transaction has been filed with the
Commission and granted by order.
2. Section 2(a)(3) of the Act defines an ``affiliated person'' of
another person to include any person directly or indirectly owning,
controlling, or holding with the power to vote, 5 percent of more of
the outstanding voting securities of the other person, as well as any
person directly or indirectly controlling, controlled by, or under
common control with, the other person; and in the case of an investment
company, its investment adviser. Section 2(a)(9) of the Act defines
``control'' to mean the power to exercise a controlling influence over
the management or policies of a company.
3. The Affiliated Funds and New Fund may be deemed affiliated
persons because they are advised by Mitchell Hutchins or PaineWebber.
Accordingly, the sale or redemption of Shares of the New Fund by the
Affiliated Funds may be prohibited under sections 17(a)(1) and
17(a)(2). Moreover, by owning more than 5 percent of the New Fund's
Shares, an Other Fund may be deemed to be an affiliated person of the
New Fund and thus subject to the same prohibitions. Applicants also
state that the Affiliated Funds and the Other Funds by purchasing and
redeeming Shares of the New Fund, PaineWebber and Mitchell Hutchins by
acting as investment adviser or sub-adviser to the New Fund,
PaineWebber by acting as lending agent for the Affiliated and Other
Funds, and PaineWebber or Mitchell Hutchins by serving as Trustee and
providing other services to the New Fund, may be deemed participants in
a joint transaction under section 17(d) of the Act and rule 17d-1 under
the Act.
4. Sections (17(a)(1) and 17(a)(2) also may prohibit the Affiliated
Broker-Dealers, acting as principal, from selling securities to or
purchasing portfolio securities from the Other Funds. Similarly,
section 17(a)(3) may prohibit an Affiliated Broker-Dealer from being a
Borrower of portfolio securities of the Affiliated and Other Funds.
Applicants also believe that the proposed lending of portfolio
securities by the Affiliated and Other Funds to the Affiliated Broker-
Dealers may be deemed to involve a ``joint enterprise or joint
arrangement or profit-sharing plan'' within the meaning of section
17(d) and rule 17d-1.
5. Section 17(b) of the Act authorizes the Commission to exempt a
transaction from section 17(a) if the terms of the transaction,
including the consideration to be paid or received, are reasonable and
fair and do not involve overreaching on the part of any person, the
transaction is consistent with the policy of each registered investment
company, and the general purposes of the Act. Section 6(c) of the Act
authorizes the Commission to exempt any class of transactions from any
provision of the Act if the exemption is necessary or appropriate in
the public interest and consistent with the protection of investors and
the purposes fairly intended by the policy and provisions of the Act.
Under rule 17d-1, in passing on applications for orders under section
17(d), the Commission considers whether the company's participation in
the proposed transaction is consistent with the provisions, policies,
and purposes of the Act, and the extent to which the participation is
on a basis different from or less advantageous than that of other
participants.
6. Applicants request an order under sections 6(c), 17(b), and
17(d) of the Act and rule 17d-1 under the Act to permit the Affiliated
and Other Funds to purchase Shares of the New Fund. Applicants submit
that the terms of the proposed transactions are reasonable and fair and
do not involve overreaching because the Affiliated and Other Funds will
be treated like any other shareholder in the New Fund and will purchase
and redeem Shares on the same terms as Shares are purchased and
redeemed by other investors in the New Fund. Applicants also state that
the New Fund will not impose any sales load, redemption or asset-based
distribution fee, and that PaineWebber or Mitchell Hutchins, as
applicable, will waive advisory fees paid to it by an Affiliated Fund,
to the extent necessary to avoid a duplication of advisory fees for the
Affiliated Funds as a result of their investment in the New Fund.
Finally, applicants state that the New Fund will comply with the
provisions of the Act relating to prohibitions on affiliated
transactions, leveraging and the issuance of senior securities, and
rights of redemption.
7. Applicants submit that investment in the New Fund of Cash
Collateral and Uninvested Cash will be consistent with the policy of
each Affiliated or Other Fund, as recited in its registration
[[Page 36006]]
statement and reports filed under the Act. Applicants state that any
Affiliated or Other Fund that complies with the requirements of rule
2a-7 under the Act will invest only in a Money Market Series of the New
Fund; and that the investment of Cash Collateral in the New Fund will
be conducted in accordance with the SEC staff's securities lending
guidelines.
8. Applicants request an order under sections 6(c) and 17(b) of the
Act to permit the Affiliated Broker-Dealers to engage in principal
transactions with the Other Funds. Applicants state that each such
transaction between an Other Fund and an Affiliated Broker-Dealer will
be the product of arms-length bargaining because each Other Fund has
its own investment adviser that is not controlled by the Affiliated
Broker-Dealer and that, in economic reality, may be a competitor of the
Affiliated Broker-Dealer.
9. Applicants request an order under sections 6(c) and 17(b) of the
Act exempting them from section 17(a)(3) of the Act, and under section
17(d) of the Act and rule 17d-1 under the Act, to permit the Affiliated
Broker-Dealers to be Borrowers of portfolio securities from an
Affiliated or Other Fund. Applicants state that each loan to an
Affiliated Broker-Dealer by an Affiliated Fund will be made with a
spread that is no lower than that applied to comparable loans to
unaffiliated broker-dealers.\3\ In this regard, applicants state that
at least 50% of the loans made by the Affiliated Fund, on an aggregate
basis, will be made to unaffiliated Borrowers. Moreover, all loans will
be made with spreads that are no lower than those set forth in a
schedule of spreads established by directors/trustees of each
Affiliated Fund who are not ``interested persons'' as defined in
section 2(a)(19) of the Act (the ``Disinterested Directors'') (the
``Lending Committee'') and all transactions with the Affiliated Broker-
Dealers will be reviewed periodically by the officers of the Affiliated
Funds and by the Boards of the Affiliated Funds. Lastly, the Lending
Committee will review detailed quarterly compliance reports on all
lending activity.
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\3\ A ``spread'' is the compensation earned by a fund, as
lender, from a securities loan, that is in the form either of a
lending fee payable by the borrower to the fund (when non-cash
collateral is posted) or the excess--retained by the fund--over a
rebate rate payable by the fund to the borrower (when cash
collateral is posted and then invested by the fund).
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10. Applicants also request an order under section 17(d) of the Act
and rule 17d-1 under the Act to permit PaineWebber to receive lending
agency fees from the Other Funds based on a share of securities lending
revenues, and Mitchell Hutchins to receive fees from the Other Funds
for providing administrative and management services relating to the
Cash Collateral. Applicants note that, absent the existence of New Fund
and the ownership of 5 percent or more of the Shares of New Fund by an
Other Fund, PaineWebber and Mitchell Hutchins may receive these fees
from an Other Fund. Applicants thus assert that it is appropriate to
permit PaineWebber and Mitchell Hutchins to receive the fees from the
Other Funds because the affiliation between PaineWebber and Mitchell
Hutchins and the Other Funds is technical in nature and the fees will
be the product of arms-length bargaining.
B. Section 17(e)
11. Section 17(e)(2) of the Act makes it unlawful for any
affiliated person of a registered investment company, or any affiliated
person of the affiliated person, acting as broker in connection with
the sale of securities to or by the investment company, to receive from
any source a commission for effecting the transaction which exceeds (a)
the usual and customary broker's commission if the sale is effected on
a securities exchange, (b) 2 percent of the sales price if the sale is
effected in connection with a secondary distribution of the securities,
or (c) 1 percent of the purchase or sale price of the securities if the
sale if otherwise effected.
12. Applicants request an order under section 6(c) of the Act
exempting them from section 17(e)(2) of the Act as it may apply to
transactions by Other Funds that are brokered by an Affiliated Broker-
Dealer. Applicants state that an investment adviser for an Other Fund
would have no interest in preferring or benefiting an Affiliated
Broker-Dealer at the expense of the Other Fund. Applicants thus assert
that brokerage transactions by the Affiliated Broker-Dealer for the
Other Funds do not raise the concerns underlying section 17(e)(2).
Applicants' Conditions
Applicants agree that any order of the Commission granting the
requested relief will be subject to the following conditions:
Borrowing of Portfolio Securities
1. The Affiliated Funds, on an aggregate basis, will make at least
50% of their portfolio securities loans to unaffiliated Borrowers.
2. An Affiliated Fund will not make any loan to any Affiliated
Broker-Dealer unless the income attributable to such loan fully covers
the transaction costs incurred in making the loan.
3. a. All loans will be made with spreads no lower than those set
forth in a schedule of spreads which will be established and may be
modified from time to time by each Affiliated Fund's Lending Committee
(the ``Schedule of Spreads'').
b. The Schedule of Spreads will set forth rates of compensation to
the Affiliated Funds that are reasonable and fair and that are
determined in light of those considerations set forth in the
application. The Schedule of Spreads and any modifications will be
ratified by the full Board and by a majority of the Disinterested
Directors.
c. The Schedule of Spreads will be uniformly applied to all
Borrowers of the Affiliated Funds' portfolio securities, and will
specify the lowest allowable spread with respect to a loan of
securities to any Borrower.
d. If a security is lent to an unaffiliated Borrower with a spread
higher than the minimum set forth in the Schedule of Spreads, all
comparable loans to Affiliated Broker-Dealers will be made at no less
than the higher spread.
e. The securities lending program for each Affiliated Fund will be
monitored on a daily basis by an officer of each Affiliated Fund who is
subject to section 36(a) of the Act. This officer will review the terms
of each loan to Affiliated Broker-Dealers for comparability with loans
to unaffiliated Borrowers and conformity with the Schedule of Spreads,
and will periodically, and at least quarterly, report his or her
findings to the Affiliated Funds' Lending Committees.
4. The Boards of the Affiliated Funds, including a majority of the
Disinterested Directors, (a) will determine no less frequently than
quarterly that all transactions with Affiliated Broker-Dealers effected
during the preceding quarter were effected in compliance with the
requirements of the procedures adopted by the Boards and the conditions
of any order that may be granted and that such transactions were
conducted on terms that were reasonable and fair; and (b) will review
no less frequently than annually such requirements and conditions for
their continuing appropriateness.
5. The Affiliated Funds will maintain and preserve permanently in
an easily accessible place a written copy of the procedures (and any
modifications thereto) which are followed in lending securities, and
shall maintain and preserve for a period of not less than six years
from the end of the fiscal year in which any loan occurs, the first two
[[Page 36007]]
years in an easily accessible place, a written record of each loan
setting forth the number of shares loaned, the face amount of the
securities lent, the fee received (or the rebate rate remitted), the
identity of the Borrower, the terms of the loan, and any other
information or materials upon which the finding was made that each loan
made to Affiliated Broker-Dealers was fair and reasonable, and that the
procedures followed in making such loan were in accordance with the
other undertakings set forth in the application.
6. The total value of securities loaned to any one broker-dealer on
the approved list will be in accordance with a schedule to be approved
by the Board of each Affiliated Fund, but in no event will the total
value of securities lent to any one Affiliated Broker-Dealer exceed 10%
of the net assets of the Affiliated Fund, computed at market.
Investment of Uninvested Cash and Cash Collateral
7. The Affiliated Funds, New Fund, and any future Affiliated Fund
that relies on the order will be advised by PaineWebber, Mitchell
Hutchins, or any entity controlling, controlled by, or under common
control with, PaineWebber or Mitchell Hutchins.
8. A majority of the Board of an Affiliated Fund (including a
majority of the Disinterested Directors), will initially and at least
annually thereafter determine that investing Uninvested Cash and Cash
Collateral in Shares of New Fund is in the best interests of the
shareholders of the Affiliated Fund.
9. With respect to any Affiliated Fund that invests in Shares of
New Fund, PaineWebber or Mitchell Hutchins will reduce its advisory fee
charged to the Affiliated Fund in an amount (the ``Reduction Amount'')
equal to the net asset value of the Affiliated Fund's holdings in New
Fund multiplied by the rate at which advisory fees are charged by
Mitchell Hutchins to New Fund. Any fees remitted or waived pursuant to
this condition will not be subject to recoupment by PaineWebber or
Mitchell Hutchins or their affiliates at a later date.
10. Investment in Shares of New Fund by an Affiliated or Other Fund
will be consistent with the Affiliated or Other Fund's investment
objectives and policies.
11. An Affiliated or Other Fund's Uninvested Cash and Cash
Collateral will be invested in a particular investment series of the
New Fund only if that investment series invests in the types of
instruments that the Affiliated or Other Fund has authorized for the
investment of its Uninvested Cash and Cash Collateral.
12. Each investment series of the New Fund that uses the amortized
cost method of valuation as defined in rule 2a-7 under the Act will
comply with rule 2a-7. With respect to such series, Mitchell Hutchins
will adopt and monitor the procedures described in rule 2a-7(c)(6)
under the Act and will take such other actions as are required to be
taken pursuant to such procedures. An Affiliated or Other Fund may only
purchase Shares of an investment series of the New Fund using the
amortized cost method of valuation if Mitchell Hutchins determines on
an ongoing basis that the investment series is in compliance with rule
2a-7. Mitchell Hutchins will preserve for a period not less than six
years from the date of determination, the first two years in an easily
accessible place, a record of such determination and the basis upon
which the determination was made. This record will be subject to
examination by the Commission and the staff.
13. An Affiliated or Other Fund that complies with rule 2a-7 under
the Act will not invest its Cash Collateral or Uninvested Cash in an
investment series of the New Fund that does not comply with the
requirements of rule 2a-7.
14. The securities lending program of each Affiliated and Other
Fund will comply with all present and future applicable Commission
staff positions regarding securities lending arrangements.
15. Each Affiliated or Other Fund will invest Uninvested Cash in,
and hold Shares of, the New Fund only to the extent that the Affiliated
or Other Fund's aggregate investment of Uninvested Cash in Shares of
the New Fund does not exceed 25% of the Affiliated or Other Fund's
total assets.
Operation of the New Fund
16. The New Fund will comply as to each investment series with the
requirements of sections 17 (a), (d), and (e), and 18 of the Act as if
the New Fund were a registered open-end investment company. With
respect to all redemption requests made by an Affiliated or Other Fund,
the New Fund will comply with section 22(e) of the Act. Mitchell
Hutchins will, subject to approval by the Trustee, adopt procedures
designed to ensure that the New Fund complies with sections 17 (a),
(d), and (e), 18, and 22(e) of the Act. Mitchell Hutchins will also
periodically review and periodically update as appropriate the
procedures and will maintain books and records describing the
procedures, and maintain the records required by rules 31a-1(b)(1),
31a-1(b)(2)(ii), and 31a-1(b)(9) under the Act. All books and records
required to be made pursuant to this condition will be maintained and
preserved for a period of not less than six years from the end of the
fiscal year in which any transaction occurred, the first two years in
an easily accessible place, and will be subject to examination by the
Commission and the staff.
17. The net asset value per share with respect to Shares of the New
Fund will be determined separately for each investment series by
dividing the value of the assets belonging to that investment series,
less the liabilities of that investment series, by the number of Shares
outstanding with respect to that investment series.
18. The Shares of the New Fund will not be subject to a sales load,
redemption fee, asset-based sales charge, or service fee (as defined in
rule 2830(b)(9) of the Conduct Rules of the National Association of
Securities Dealers).
19. Each Affiliated or Other Fund will purchase and redeem Shares
of the New Fund as of the same time and at the same price, and will
receive dividends and bear its proportionate share of expenses on the
same basis, as other shareholders of the New Fund. A separate account
will be established in the shareholder records of the New Fund for the
account of each Affiliated or Other Fund.
20. The New Fund will not acquire securities of any investment
company in excess of the limits contained in section 12(d)(1)(A) of the
Act.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-17473 Filed 6-30-98; 8:45 am]
BILLING CODE 8010-01-M
