Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Notices 56209

1Core Trust will not register under the Securities

Act of 1933; its shares will be offered only in

private placement transactions to registered

investment companies and other institutional

investors.

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

22865; 812–10522]

Federated Investors, et al.; Notice of

Application

October 22, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application under

section 12(d)(1)(J) of the Investment

Company Act of 1940 (the ‘‘Act’’) for an

exemption from section 12(d)(1), and

under sections 6(c) and 17(b) for an

exemption from section 17(a).

Summary of Application: Applicants

seek an order to permit certain open-end

investment companies to invest a

portion of their assets in other open-end

investment companies in the same

group of investment companies as well

as to invest in securities of other issuers.

Applicants: Managed Series Trust

(‘‘MST’’), Fixed Income Securities, Inc.

(‘‘FIS’’), Investment Series Funds, Inc.

(‘‘ISF’’), Federated Total Return Series,

Inc. (‘‘FTRS’’), Federated Stock and

Bond Fund, Inc. (‘‘FSBF’’) (collectively,

‘‘Federated Funds’’); Federated Core

Trust (‘‘Core Trust’’); and Federated

Investors (‘‘Federated’’), as the parent

company for Federated Advisers,

Federated Management, Federated

Research Corp., Federated

Administrative Services, Federated

Investment Counseling, Federated

Research, Passport Research, Ltd., and

Federated Global Research Corp.

(collectively, ‘‘Advisers’’). All existing

investment companies that currently

intend to rely on the requested order are

named as applicants. The requested

order also would extend to (i) any other

registered open-end investment

company or series thereof (except Core

Trust and the Portfolios, as defined

below) advised by the Advisers, or any

entity controlling, controlled by, or

under common control with the

Advisers (together with Federated

Funds, the ‘‘Funds’’) that wishes to

invest in another registered open-end

investment company in the same group

of investment companies as the Funds

and advised by the Advisers, or any

entity controlling, controlled by, or

under common control with the

Advisers (together with Core Trust, the

‘‘Portfolios’’), and (ii) any such

Portfolio.

Filing Dates: The application was

filed on February 5, 1997, and amended

on August 14, 1997. Applicants have

also agreed to file an additional

amendment during the notice period.

The substance of the additional

amendment is incorporated in this

notice.

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

November 17, 1997, and should be

accompanied by proof of service on

applicants, in the form of an affidavit,

or, for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

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

Applicants, Federated Investors Tower,

Pittsburgh, PA 15222–3779.

FOR FURTHER INFORMATION CONTACT:

Kathleen L. Knisely, Staff Attorney, at

(202) 942–0517, or Christine Y.

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

(tel. 202–942–8090).

Applicants’ Representations

1. FIS and ISF, organized under

Maryland law, are registered under the

Act as open-end management

investment companies. FIS and ISF are

advised by Federated Advisers. FIS

currently offers three portfolios,

including Federated Strategic Income

Fund. ISF currently offers two

portfolios, including Federated Bond

Fund.

2. FTRS and FSBF, organized under

Maryland law, are registered under the

Act as open-end management

investment companies. FTRS and FSBF

are advised by Federated Management.

FTRS currently offers four portfolios,

including Federated Total Return Bond

Fund, and Federated Total Return

Limited Duration Fund. FSBF currently

is not a series investment company.

3. MST, organized under

Massachusetts law, is registered under

the Act as an open-end management

investment company. MST is advised by

Federated Management. MST currently

offers four portfolios, including

Federated Managed Aggressive Growth

Fund, Federated Managed Growth

Fund, Federated Managed Growth &

Income Fund, and Federated Managed

Income Fund.

4. Core Trust, organized under

Massachusetts law, will be registered as

an open-end management investment

company under the Act. Core Trust is

advised by Federated Research Corp.

Core Trust currently has one series,

High-Yield Bond Portfolio (‘‘Bond Core

Portfolio’’), which invests in high-yield

bonds.1

5. Federated Managed Aggressive

Growth Fund, Federated Managed

Growth Fund, Federated Managed

Growth & Income Fund, Federated

Managed Income Fund, Federated

Strategic Income Fund, Federated Bond

Fund, Federated Total Return Bond

Fund, Federated Total Return Limited

Duration Fund, and FSBF (the ‘‘Blended

Funds’’) would like to be able to invest

in securities directly as well as to invest

a portion of assets that they allocate for

investment in the high-yield bond asset

class in the Bond Core Portfolio. The

Funds also would like to be able to

invest in other Portfolios.

6. Bond Core Portfolio currently is

intended to be offered only to the

Blended Funds. However, Bond Core

Portfolio may, in the future, be offered

to funds relying on any order granting

this application, or to other investors.

7. A Blended Fund’s investment in

the Bond Core Portfolio will be

consistent with the Blended Fund’s

investment objective as described in its

prospectus. If a Blended Fund allocates

its assets to an asset class not

represented by Bond Core Portfolio, or

pursues a different investment strategy

or style with respect to the asset class

than Bond Core Portfolio, it will invest

in those securities directly and/or

through another Portfolio.

8. Federated Management and

Federated Advisers, as investment

advisers to the Blended Funds, will

charge an annual investment advisory

fee based upon a percentage of each

Blended Fund’s average daily net assets.

Federated Research Corp. currently will

not charge Bond Core Portfolio an

advisory fee. Applicants currently

anticipate that sales charges and service

fees will be incurred only at the

Blended Fund level and that Bond Core

Portfolio will be sold without any such

sales charge or service fee.

9. Applicants expect Bond Core

Portfolio to provide broad diversity and

exposure to all aspects of the high-yield
56210 Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Notices

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

bond sector of the market while at the

same time providing greater liquidity

than the Blended Funds would provide

separately. Applicants state that the

Bond Core Portfolio likely will own

more issuers in the high-yield bond

sector than any single Blended Fund

would own. As a result, events that

affect the price of a single issuer in this

sector can be expected to have less

impact on Bond Core Portfolio than they

would have on the high-yield bond

sector of a Blended Fund that was less

diversified. Applicants represent that

this diversification can be expected to

benefit both Bond Core Portfolio and its

shareholders, the Blended Funds, by

providing greater price stability and

lower volatility, while at the same time

capturing the performance benefits of

exposure to the high-yield bond sector.

10. Applicants anticipate that the

efficiencies resulting from the use of the

Bond Core Portfolio will result in cost

savings to the Blended Funds.

Applicants expect that the cost savings

will occur because Bond Core Portfolio

will experience trading costs that will

be substantially less than the trading

costs that would be incurred if highyield bonds were purchased separately

for each of the Blended Funds.

Applicants’ Legal Analysis

1. Section 12(d)(1)(A) of the Act

provides that no registered investment

company may acquire securities of

another investment company

representing more than 3% of the

acquired company’s outstanding voting

stock, more than 5% of the acquiring

company’s total assets, or, together with

the securities of other investment

companies, more than 10% of the

acquiring company’s total assets.

Section 12(d)(1)(B) provides that no

registered open-end investment

company may sell its securities to

another investment company if the sale

will cause the acquiring company to

own more than 3% of the acquired

company’s voting stock, or if the sale

will cause more than 10% of the

acquired company’s voting stock to be

owned by investment companies.

2. Section 12(d)(1)(G) of the Act

exempts from the above limitations

certain ‘‘funds of funds,’’ subject to

conditions stated in that section.

Applicants state that section 12(d)(1)(G)

is not available to them because the

Blended Funds will continue to invest

directly in corporate bonds, other

investment grade securities, and other

instruments, in addition to investing in

the Portfolios.

3. Section 12(d)(1)(J) provides that the

SEC may exempt persons or transactions

from any provision of section 12(d)(1) if

and to the extent such exemption is

consistent with the public interest and

the protection of investors. Applicants

request relief from the limitations of

section 12(d)(1) to permit: (a) A Fund to

(i) purchase in excess of 3% of the total

outstanding voting shares of a Portfolio;

(ii) purchase securities of a Portfolio

having an aggregate value in excess of

5% of the value of the total assets of a

Fund; and (iii) purchase securities of a

Portfolio having an aggregate value in

excess of 10% of the assets of a Fund;

(b) a Portfolio to sell more than 3% of

its total outstanding shares to any Fund;

and (c) a Portfolio to sell more than 10%

of its total outstanding voting stock to

the Funds. Applicants believe that none

of the concerns underlying section

12(d)(1) are present in the proposed

arrangement.

4. Applicants also request an

exemption from section 17(a) of the Act,

which prohibits certain purchases and

sales of securities between investment

companies and their affiliated persons,

as defined in section 2(a)(3) of the Act.

Because the Federated Funds and Core

Trust have common trustees, directors,

and officers, and are advised by

commonly controlled Advisers, the

Blended funds and the Bond Core

Portfolio could be deemed affiliated

persons of one another. Accordingly,

purchases or sales between the Blended

Funds and the Bond Core Portfolio

could be deemed to be principal

transactions between affiliated persons

under section 17(a).

5. Applicants submit that the terms of

their proposed arrangement satisfy the

standards for relief under sections 6(c)

and 17(b). Applicants state that the

terms of the proposed transactions are

reasonable and fair and do not involve

overreaching. Applicants state that there

are sufficient protections in the

proposed arrangement against

duplicative or excessive advisory fees

and sales loads. Applicants state that a

Fund’s investment in a Portfolio will be

in accordance with the Fund’s

investment restrictions and will be

consistent with its policies as recited in

its registration statement.

Applicants’ Conditions

Applicants agree that the order

granting the requested relief shall be

subject to the following conditions:

1. Each Fund and each Portfolio will

be part of the same ‘‘group of

investment companies,’’ as defined in

section 12(d)(1)(G)(ii) of the Act.

2. A fund will not invest in any

Portfolio if the Portfolio may acquire

securities of any other investment

company in excess of the limits

contained in section 12(d)(1)(A) of the

Act, except for securities received as a

dividend or as a result of a plan of

reorganization of any company.

3. Prior to approving any advisory

contract under section 15 of the Act, the

directors or trustees of each Fund,

including a majority of the individuals

who are not ‘‘interested persons’’ of the

Fund, as that term is defined in section

2(a)(19) of the Act (‘‘Independent

Trustees’’), shall find that the advisory

fees charged under such contract, if any,

are based on services that will be in

addition to, rather than duplicative of,

the services provided under the

contracts of any Portfolio in which the

Fund ;may invest; provided that no such

findings will be necessary if the Adviser

to a Portfolio waives all advisory fees

that may be imposed for serving as

investment adviser to the Portfolio or, if

only a portion of such advisory fees are

waived, the Adviser or another party

reimburses the Fund for any advisory

fee or portion thereof that is not waived.

These findings and their basis will be

recorded fully in the minute books of

the Fund.

4. Any sales charges and service fees,

as such terms are defined under Rule

2830 of the NASD’s Conduct Rules, and

may be charged with respect to

securities of a Fund, when aggregated

with any such sales charges and service

fees borne by the Fund with respect to

the shares of a Portfolio, shall not

exceed the limits set forth in Rule 2830

of the NASD’s Conduct Rules.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–28567 Filed 10–28–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39267; File No. SR–CBOE–

97–33]

Self-Regulatory Organizations;

Chicago Board Options Exchange,

Inc.; Order Granting Approval to

Proposed Rule Change Relating to

Suspensions for Failure to Pay Debts

Owed to the Exchange

October 22, 1997.

On July 24, 1997, the Chicago Board

Options Exchange, Inc. (‘‘CBOE’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission

(‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 and Rule 19b–4