Federal Register / Vol. 62, No. 241 / Tuesday, December 16, 1997 / Notices 65827

4. Section 6(c) of the Act provides that

the SEC may exempt any person,

security, or transaction from any

provision 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 policy and provisions of

the Act. Applicants believe that the

requested relief meets this standard.

5. Applicants note that the timing of

the Merger is influenced by a number of

factors relating principally to the

merging companies’ commercial

banking and other similar business

concerns, as well as pending regulatory

approvals and satisfaction of other

closing conditions. Applicants state that

these circumstances make it difficult,

from a timing perspective, to secure

prior approval of the New Advisory

Agreements by the Funds’ shareholders.

Applicants state that, in addition,

because it is likely that one or more of

the Funds will be merged into

corresponding funds of the Nations

Funds family of funds in 1998, the

granting of the requested order will

allow the Funds to undertake a single

proxy solicitation for obtaining

shareholder approval of the plan of

reorganization and the New Advisory

Agreements, rather than conducting

more than one proxy solicitation within

a relatively short time frame, and should

thus serve to reduce costs and minimize

any potential shareholder confusion.

6. Applicants submit that they will

take all appropriate actions to prevent

any diminution in the scope of quality

of services provided to the Funds during

the Interim Period. Applicants state that

the Existing Advisory Agreements were

approved by the Board and the

shareholders of the Funds. Applicants

represent that the New Advisory

Agreements will have the same terms

and conditions as the Existing Advisory

Agreements, except for the dates of

commencement and termination and the

inclusion of escrow arrangements.

Accordingly, applicants assert that each

Fund will receive, during the Interim

Period, substantially identical

investment advisory services, provided

in the same manner, as it received prior

to the Merger. Applicants state that, in

the event there is any material change

in the Adviser’s personnel providing

advisory services under the New

Advisory Agreements during the Interim

Period, the Adviser will apprise and

consult the Board to ensure that the

Board, including a majority of the

Indepenednet Trustees, are satisfied that

the services provided by the Adviser

will not be diminished in scope or

quality.

7. Applicants contend that to deprive

the Adviser and Sub-Advisers of their

customary fees during the Interim

Period for no reason, other than the fact

that the Merger may be deemed to result

in an assignment of the Existing

Advisory Agreements, would be an

unduly harsh and unreasonable penalty

to impose upon an investment adviser

in the circumstances of the application.

Applicants submit that, in good faith

and consistent with the Act and the

spirit of rule 15a-4, they seek to promote

the interests of the Funds and their

shareholders by undertaking the fee and

other arrangements described in the

application. Applicants emphasize that

the fees payable to the Adviser and SubAdvisers under the New Advisory

Agreements have been approved by the

Board, including a majority of the

Independent Trustees, and that these

fees will not be released by the escrow

agent without the approval of the

respective Fund’s shareholders.

Applicants’ Conditions

Applicants agree as conditions to the

issuance of the exemptive order

requested by the application that:

1. Each New Advisory Agreement will

have the same terms and conditions as

the respective Existing Advisory

Agreement, except for the effective and

termination dates and the inclusion of

escrow arrangements.

2. Fees earned by the Adviser and

paid by a Fund during the Interim

Period in accordance with a New

Advisory Agreement will be maintained

in an interest-bearing escrow account,

and amounts in such account (including

interest earned on such amounts) will

be paid to the Adviser only upon

approval of the New Advisory

Agreement by the shareholders of the

related Fund or, in the absence of

approval by such shareholders, to the

Fund.

3. The Trust will hold meetings of

shareholders to vote on approval of the

New Advisory Agreements on or before

the 120th day following the termination

of the Existing Advisory Agreements

(but in no event later than May 30,

1998).

4. The Adviser will pay the costs of

preparing and filing the application.

The Adviser will pay the costs relating

to the solicitation of approval of Fund

shareholders, to the extent such costs

relate to shareholder approval of the

New Advisory Agreements necessitated

by the Merger.

5. The Adviser will take all

Appropriate actions to ensure that the

scope and quality of advisory and other

services provided to the Funds under

the New Advisory Agreements will be at

least equivalent, in the judgment of the

Board, including a majority of the

Independent Trustees, to the scope and

quality of services provided under the

Existing Advisory Agreements. In the

event of any material change in

personnel providing services pursuant

to the New Advisory Agreements, the

Adviser will apprise and consult the

Board to assure that the Board and a

majority of the Independent Trustees are

satisfied that the services provided by

the Adviser will not be diminished in

scope or quality.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–32754 Filed 12–15–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

22933; 812–10670]

Financial Institutions Series Trust, et

al.; Notice of Application

December 10, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for order

under section 11(a) of the Investment

Company Act of 1940 (the ‘‘Act’’).

SUMMARY OF APPLICATION: Applicants

request an order permitting certain

offers of exchange of shares (the

‘‘Exchange Program’’) between Summit

Cash Reserves Fund Portfolio (‘‘MMF’’),

a money market fund sponsored by

Merrill Lynch, Pierce, Fenner & Smith

Incorporated (‘‘Merrill Lynch’’) and

certain non-money market funds in

other groups of investment companies

(the ‘‘Participating Funds’’) on a basis

other than their respective net asset

values per share.

APPLICANTS: Financial Institutions Series

Trust; Fund Asset Management, L.P.

(‘‘FAM’’); Merrill Lynch Asset

Management, L.P. (‘‘MLAM’’); Merrill

Lynch Funds Distributor, Inc.

(‘‘MLFD’’); and Merrill Lynch.

FILING DATES: The application was filed

on May 15, 1997. Counsel for applicants

has agreed to file an amendment to the

application during the notice period, the

substance of which is incorporated

herein.

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
65828 Federal Register / Vol. 62, No. 241 / Tuesday, December 16, 1997 / Notices

1 In the future, MMF may be a feeder fund to

another money market fund in reliance on section

12(d)(1)(E) of the Act, in which case the only

investment securities it would hold would be

shares of the master fund. In that event, either FAM

or MLAM will serve as the investment adviser of

the fund in which MMF invests.

2Rule 11a–3 defines ‘‘group of investment

companies’’ to mean two or more open-end

investment companies that hold themselves out as

being related and that have a common adviser or

principal underwriter (or advisers and underwriters

that are affiliated persons of one another within the

meaning of section 2(a)(3) of the Act).

3Shares held in certificated form will not be

eligible for the Exchange Program.

Secretary and serving applicants with a

copy of the request, personally or by

mail. Hearing requests should state the

nature of the writer’s interest, the reason

for the request and the issues contested.

All requests must be received by the

SEC by 5:30 p.m. on January 2, 1998,

and should be accompanied by proof of

service on applicants, in the form of an

affidavit or, for lawyers, a certicate of

service. Persons who wish to be notified

of the date 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.

Applicants, c/o Merrill Lynch Asset

Management, L.P. Attn: Robert Harris,

Esq., 800 Scudders Mill Road,

Plainsboro, New Jersey 08536.

FOR FURTHER INFORMATION CONTACT: H.R.

Hallock, Jr., Senior Counsel, at (202)

942–0568 (Division of Investment

Management, Office of Disclosure and

Review), or Mercer E. Bullard, Special

Counsel, at (202) 942–0659 (Division of

Investment Management, Office of Chief

Counsel).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee by writing the

SEC’s Public Reference Branch at 450

Fifth Street, N.W., Washington, D.C., or

by telephone at (202) 942–8090.

Applicants’ Representations

1. MMF, a money market fund, is a

series of Financial Institutions Series

Trust, an open-end management

investment company registered under

the Act. FAM and MLAM are whollyowned by Merrill Lynch & Co.

(‘‘ML&Co.’’) and are registered as

investment advisers under the

Investment Advisers Act of 1940. FAM

serves as MMF’s investment adviser.1

MLFD, a broker-dealer registered under

the Securities Exchange Act of 1934 (the

‘‘1934 Act’’) and a member of the

National Association of Securities

Dealers, Inc. (the ‘‘NASD’’), serves as

MMF’s distributor. Merrill Lynch, a

wholly-owned subsidiary of ML&Co., is

a broker-dealer registered under the

1934 Act and a member of the NASD.

2. The Participating Funds will be

non-money market open-end

management investment companies

registered under the Act (a) that are or

will be sold to customers of Merrill

Lynch under agreements whereby

Merrill Lynch serves as a selected dealer

or agent; (b) whose investment adviser

is other than FAM or MLAM; (c) whose

principal underwriter is other than

MLFD; and (d) that have agreed to

participate in the Exchange Program.

Shares of Participating Funds may be

sold with a front-end sales load

(‘‘FESL’’), subject to a contingent

deferred sales charge (‘‘CDSC’’) or

subject to alternative sales charge

arrangements (e.g., a level load). Each of

the principal underwriters of the

Participating Funds will be registered as

a broker-dealer under the 1934 Act and

a member of the NASD.

3. Customers of Merrill Lynch who

have acquired shares of Participating

Funds typically have such shares held

in nominee name on the books of

Merrill Lynch. Merrill Lynch provides

consolidated account statements and

year-end tax reports for its customers

reflecting all positions held on the

books of Merrill Lynch, including shares

of Participating Funds. Merrill Lynch

does not typically act as a selected

dealer for money market funds other

than those in the Merrill Lynch ‘‘group

of investment companies’’ (including

MMF), as that term is defined in rule

11a–3.2 Accordingly, Merrill Lynch

does not typically hold on its books

shares of money market funds that

currently have exchange privileges with

the Participating Funds.

4. The Participating Funds generally

offer exchange privileges that permit an

investor to exchange shares of one

Participating Fund for shares of another

Participating Fund in the same group of

investment companies without paying a

CDSC on the redemption of the shares

exchanged or a FESL on the shares

purchased, depending on the sales loads

charged by each Fund. Currently, a

Merrill Lynch customer who is a

shareholder of a Participating Fund may

exchange into a money market fund

with which the Participating Fund has

an exchange privilege. In that event,

because the customer’s interest in that

money market fund will not be carried

on Merrill Lynch’s books, Merrill Lynch

is unable to provide a consolidated

report of the customer’s entire position.

Alternatively, the customer could

acquire a money market fund in the

Merrill Lynch group of investment

companies, the shares of which can be

recorded on the books of Merrill Lynch.

In that case, however, the customer

would have to redeem shares of the

Participating Fund and pay any

applicable CDSC or, if Participating

Fund shares subject to an FESL are

redeemed, the customer may have to

pay the FESL upon any subsequent

repurchase of those shares.

5. The Exchange Program would

enable Merrill Lynch customers who

hold Participating Fund shares to

maintain all of their holdings at Merrill

Lynch, while also being able to avail

themselves of the exchange privileges

offered by the Participating Fund in

which they have invested. These

shareholders would be able to make

exchanges into MMF, or exchanges back

into shares of the same Participating

Fund involved in the original exchange,

without incurring a sales load. These

shareholders also would be able to

exchange their MMF shares at a reduced

or no sales load into shares of certain

other Participating Funds in the same

group of investment companies as the

Participating Fund involved in the

original exchange.

6. Any exchange under the Exchange

Program will be made in accordance

with the exchange privileges offered by

the Participating Fund group in which

the Merrill Lynch customer has

invested. Thus, shareholders of a

Participating Fund who exchange their

shares for shares of MMF may not

exchange the MMF shares for shares of

another fund that is not in the same

group of investment companies as the

Participating Fund. The Exchange

Program also will not enable

Participating Fund shareholders to

exchange their shares directly for shares

of another Participating Fund except in

accordance with the exchange privileges

offered by the particular Participating

Fund group.

7. All shares involved in the Exchange

Program will be held in Merrill Lynch’s

omnibus account on each Fund’s

books.3 Merrill Lynch, as selected dealer

for both MMF and the Participating

Fund involved in the exchange, will

process the sale and related purchase of

shares at the price calculated in

accordance with each Fund’s

prospectus. Merill Lynch will accept

and record the payment of sales loads,

administrative fees and redemption fees.

In particular, upon receipt of a share

exchange request, Merrill Lynch will

process the share exchange on its

mutual fund shareholder software

system in accordance with the

directions of the prospectuses for MMF

and for the Participating Fund involved
Federal Register / Vol. 62, No. 241 / Tuesday, December 16, 1997 / Notices 65829

in the exchange. Merrill Lynch also will

prepare and mail appropriate

confirmations or statements related to

the share exchange transactions.

8. The exchange arrangements for

MMF and each Participating Fund will

be described in general terms in MMF’s

prospectus, including the existence of

any administrative or redemption fees

charged (without necessarily identifying

the specific Funds available for

exchange). Each Participating Fund’s

prospectus will be required to disclose

the amount of any administrative or

redemption fees that will be imposed in

connection with an exchange to or from

MMF.

Applicants’ Legal Analysis

1. Section 11(a) of the Act prohibits

any offer by a registered open-end

management investment company or its

principal underwriter involving the

exchange of the company’s shares on

any basis other than the relative net

asset value of the securities to be

exchanged, unless the terms of the offer

have been approved in advance by the

SEC or meet the requirements of any

rules adopted to regulate exchange

offers.

2. Rule 11a–3 allows an investment

company or its principal underwriter to

make exchange offers to its shareholders

or to shareholders in another company

in the same group of investment

companies, and to charge a sales load,

redemption fee, administrative fee or

any combination thereof in connection

with the exchange, subject to

compliance with certain requirements.

Among other requirements, paragraph

(b)(6)(i) of the rule requires that the

prospectus of the offering company

disclose the amount of any

administrative or redemption fee

charged in connection with an

exchange.

3. Applicants request an order under

section 11(a) to permit the exchange of

shares of MMF for shares of

Participating Funds, and shares of

Participating Funds for shares of MMF,

at other than their respective net asset

values at the time of exchange.

Applicants state that these exchanges

would include, for example, (i)

exchanges of MMF shares for shares of

a Participating Fund sold with an FESL

or a CDSC (‘‘CDSC Shares’’), (ii)

exchanges of CDSC Shares of a

Participating Fund for MMF shares, and

(iii) the imposition of an

‘‘administrative’’ and/or ‘‘redemption’’

fee (as defined in rule 11a–3) in

connection with the exchanges.

4. Applicants state that each exchange

will comply with all the requirements of

rule 11a–3, except (a) the requirement

that the Participating Funds and MMF

be part of the same ‘‘group of

investment companies,’’ as that term is

defined in paragraph (a)(5) of the rule,

and (b) the requirement of paragraph

(b)(6)(i) that MMF’s prospectus disclose

the amount of any administrative or

redemption fee imposed on an exchange

transaction for its securities, provided

that MMF’s prospectus will disclose the

existence of these fees.

5. Applicants submit that the

Exchange Program would not create any

opportunity for improper gain by the

underwriters of the Participating Funds,

by MLFD, or by Merrill Lynch, and

would not raise the possibility of

inducing exchanges for the purpose of

exacting additional sales charges, the

abuse against which section 11(a) was

directed. Furthermore, if the exchanges

were always made at relative net asset

values, applicants believe that the

distribution systems of the Participating

Funds could be disrupted because an

investor could easily avoid applicable

FESLs by acquiring shares of MMF and

immediately exchanging those shares

for Participating Fund shares, or avoid

applicable CDSCs by exchanging CDSC

Shares for MMF shares and then

redeeming such shares without payment

of any otherwise applicable CDSC.

Applicants contend that the Exchange

Program would avoid these problems.

6. Applicants also contend that the

Exchange Program would benefit

exchanging shareholders by crediting

them for FESLs already paid, or, in the

case of CDSC Shares, for the time the

MMF shares are held or for distribution

fees paid with respect to MMF shares

under rule 12b–1 under the Act,

consistent with the requirements of rule

11a–3. Finally, applicants contend

Merrill Lynch is logically positioned to

implement the Exchange Program even

though members of different ‘‘groups of

investment companies’’ are involved

because it is the single entity with the

information needed to execute both the

redemption and purchase orders

involved in a share exchange.

7. Applicants believe there will be

such a wide variety of potential

exchange arrangements offered by

different families of Participating Funds

that it would be impractical for MMF’s

prospectus to state the amounts of

administrative or redemption fees

imposed on an exchange transaction.

Applicants also submit that

shareholders will be fully informed of

the fees and charges applicable to any

exchange, because each Participating

Fund’s prospectus will include the

information required by rule 11a–3.

Finally, applicants note that MMF’s

prospectus will include general

information about the Exchange

Program and refer shareholders to their

financial consultants for more detailed

information.

Applicants’ Conditions

Applicants agree that any order

granting the requested relief will be

subject to the following conditions:

1. Merrill Lynch will be responsible

for tracking the payment of sales loads,

administrative fees and redemption fees

by shareholders of investment

companies or portfolios covered by the

application, and otherwise will conduct

share exchanges in accordance with the

applicants’ representations.

2. Offers of exchange pursuant to the

applicants’ Exchange Program will be

conducted in accordance with rule 11a–

3 under the Act, except that:

(a) An offering company will not be

limited to making an exchange offer

only to the holder of a security of the

offering company, or of another openend investment company within the

same group of investment companies as

the offering company;

(b) MMF’s prospectus will describe

the existence (but not the amount) of

any administrative or redemption fees

imposed on an exchange pursuant to the

Exchange Program.

3. Merrill Lynch will maintain and

enforce internal control procedures that

are designed to assure the Exchange

Program’s compliance with all

applicable provisions of rule 11a–3

under the Act.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–32749 Filed 12–15–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22937; 811–5517]

Heartland Technology, Inc. (Formerly

Milwaukee Land Company); Notice of

Application

December 10, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

deregistration under section 8(f) of the

Investment Company Act of 1940 (the

‘‘Act’’).

SUMMARY OF APPLICATION: Applicant

seeks an order declaring that it has

ceased to be an investment company.

Filing Dates: The application was

filed on June 20, 1997, and amended on