Federal Register / Vol. 63, No. 76 /Tuesday, April 21, 1998 / Notices 19765

3Each Partnership will preserve the accounts,

books and other documents required to be

maintained in an easily accessible place for the first

two years.

4Each Partnership will preserve the accounts,

books and other documents required to be

maintained in an easily accessible place for the first

two years.

termination of the Partnership engaging

in the transaction and at least two years

thereafter, and will be subject to

examination by the SEC and its staff.3

2. In connection with the Section 17

Transactions, the Board, through the

General Partner, will adopt, and

periodically review and update,

procedures designed to ensure that

reasonable inquiry is made, prior to the

consummation of any transaction, with

respect to the possible involvement in

the transaction of any affiliated person,

promoter of, or principal underwriter

for the Partnerships, or any affiliated

person of that person, promoter, or

principal underwriter.

3. The General Partner will not invest

the funds of any Partnership in any

investment in which a ‘‘Co-Investor’’ (as

defined below) has acquired, or

proposes to acquire, the same class of

securities of the same issuer, where the

investment involves a joint enterprises

or other joint arrangement within the

meaning of rule 17d–1 in which the

Partnership and the Co-Investor are

participants, unless the Co-Investor,

prior to disposing of all or part of its

investment (i) gives the General Partner

sufficient, but not less than one day’s

notice of its intent to dispose of its

investment, and (ii) refrains from

disposing of its investment unless the

Partnership has the opportunity to

dispose of the Partnership’s investment

prior to, or concurrently with, on the

same terms as, and pro rata with, the

Co-Investor. The term ‘‘Co-Investor’’

means any person who is (i) an

‘‘affiliated person’’ (as that term is

defined in the Act) of the Partnership

(other than a Third Party Fund); (ii) an

entity within the Lehman Group; (iii) an

officer or director of an entity within the

Lehman Group; or (iv) a company in

which the General Partner of the

Partnership has the capacity to control

the sale or other disposition of the

company’s securities. The restrictions

contained in this condition, however,

will not be deemed to limit or prevent

the disposition of an investment by a

Co-Investor (i) to its direct or indirect

wholly-owned subsidiary, to any

company (a ‘‘parent’’) of which the CoInvestor is a direct or indirect whollyowned subsidiary, or to a direct or

indirect wholly-owned subsidiary of its

parent; (ii) to Qualified Family Members

of the Co-Investor or a trust or other

investment vehicle established for a

Qualified Family Member; (iii) when the

investment is comprised of securities

that are listed on any exchange

registered as a national securities

exchange under section 6 of the

Exchange Act; (iv) when the investment

is comprised of securities that are

national market system securities

pursuant to section 11A(a)(2) of the

Exchange Act and rule 11A2–1 under

that Act, or (v) when the investment is

comprised of securities that are listed on

or traded on any foreign securities

exchange or board of trade that satisfies

regulatory requirements under the law

of the jurisdiction in which the foreign

securities exchange or board of trade is

organized similar to those that apply to

a national securities exchange or a

national market system for securities.

4. Each Partnership and its General

Partner of the Partnership will maintain

and preserve, for the life of the

Partnership and at least two years

thereafter, those accounts, books, and

other documents that constitute the

record forming the basis for the audited

financial statements that are to be

provided to the Limited Partners, and

each annual report of the Partnership

required to be sent to those Limited

Partners, and agree that the records will

be subject to examination by the SEC

and its staff.4

5. The General Partner will send to

each Limited Partner who had an

interest in any capital account of the

Partnership, at any time during the

fiscal year then ended, Partnership

financial statements audited by the

Partnerships’s independent accountants.

At the end of each fiscal year, the

General Partner will make a valuation or

have a valuation made of all of the

assets of the Partnership as of that fiscal

year end in a manner consistent with

customary practice with respect to the

valuation of assets of the kind held by

the Partnership. In addition, as soon as

practicable after the end of each fiscal

year of each Partnership, the General

Partner will send a report to each person

who was a Limited Partner at any time

during the fiscal year then ended,

setting forth tax information as will be

necessary for the preparation by the

Limited Partner of federal and state

income tax returns, and a report of the

investment activities of the Partnership

during that year.

6. In any case where purchases or

sales are made by a Partnership from or

to an entity affiliated with a Partnership

by reason of a 5% or more investment

in that entity by a Lehman Group

director, officer or employee, that

individual will not participate in the

Partnership’s determination of whether

or not to effect the purchase or sale.

For the SEC, by the Division of Investment

Management, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–10499 Filed 4–20–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–23114; 812–10602]

NationsBanc Montgomery Securities

LLC; Notice of Application

April 14, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under section 12(d)(1)(J) of the

Investment Company Act of 1940 (the

‘‘Act’’) for an exemption from section

12(d)(1) of the Act, under section 6(c) of

the Act for an exemption from section

14(a) of the Act, and under section 17(b)

of the Act for an exemption from section

17(a) of the Act.

SUMMARY OF APPLICATION: NationsBanc

Montgomery Securities LLC

(‘‘NationsBanc’’) requests an order with

respect to the Hybrid Income Trust

Securities (‘‘HITS’’) trusts and future

trusts that are substantially similar to

the HITS trusts and for which

NationsBanc will serve as a principal

underwriter (collectively, the ‘‘Trusts’’)

that would (i) permit other registered

investment companies, and companies

excepted from the definition of

investment company under sections

3(c)(1) and (c)(7) of the Act, to own a

greater percentage of the total

outstanding voting stock (the

‘‘Securities’’) of any Trust than that

permitted by section 12(d)(1), (ii)

exempt the Trusts from the initial net

worth requirements of section 14(a), and

(iii) permit the Trusts to purchase U.S.

government securities from NationsBanc

at the time of a Trust’s initial issuance

of Securities.

FILING DATES: The application was filed

on April 4, 1997. Applicant has 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 NationsBanc with

a copy of the request, personally or by
19766 Federal Register / Vol. 63, No. 76 /Tuesday, April 21, 1998 / Notices

1 Initially, no Trust will hold Contracts relating to

the Shares of more than one issuer. However, if

certain events specified in the Contracts occur, such

as the issuer of Shares spinning-off securities of

another issuer to the holders of the Shares, the

Trust may receive shares of more than one issuer

at the termination of the Contracts.

2A formula is likely to limit the Holder’s

participation in any appreciation of the underlying

Shares, and it may, in some cases, limit the Holder’s

exposure to any depreciation in the underlying

Shares. It is anticipated that the Holders will

receive a yield greater than the ordinary dividend

yield on the Shares at the time of the issuance of

the Securities, which is intended to compensate

Holders for the limit on the Holders’ participation

in any appreciation of the underlying Shares. In

some cases, there may be an upper limit on the

value of the Shares that a Holder will ultimately

receive.

3The contracts may provide for an option on the

part of a counterparty to deliver Shares, cash, or a

combination of Shares and cash to the Trust at the

termination of each Trust.

4A ‘‘majority of the Trust’s outstanding

Securities’’ means the lesser of (i) 67% of the

Securities represented at a meeting at which more

than 50% of the outstanding Securities are

represented, and (ii) more than 50% of the

outstanding Securities.

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

May 7, 1998, and should be

accompanied by proof of service on

NationsBanc, 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, NW., Washington, DC 20549.

NationsBanc, 9 West 57th Street, 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).

Applicant’s Representations

1. Each Trust will be a limited-life,

grantor trust registered under the Act as

a non-diversified, closed-end

management investment company.

NationsBanc will serve as a principal

underwriter (as defined in section

2(a)(29) of the Act) of the Securities

issued to the public by each Trust.

2. Each Trust will, at the time of its

issuance of Securities, (i) enter into one

or more forward purchase contracts (the

‘‘Contracts’’) with a counterparty to

purchase a formulaically-determined

number of a specified equity security or

securities (the ‘‘Shares’’) of one

specified issuer,1 and (ii) in some cases,

purchase certain U.S. Treasury

securities (‘‘Treasuries’’), which may

include interest-only or principal-only

securities maturing at or prior to the

Trust’s termination. The Trusts will

purchase the Contracts from

counterparties that are not affiliated

with either the relevant Trust or

NationsBanc. The investment objective

of each Trust will be to provide to each

holder of Securities (‘‘Holder’’) (i)

current cash distributions from the

proceeds of any Treasuries, and (ii)

participation in, or limited exposure to,

changes in the market value of the

underlying Shares.

3. In all cases, the Shares will trade

in the secondary market and the issuer

of the Shares will be a reporting

company under the Securities Exchange

Act of 1934. The number of Shares, or

the value of the Shares, that will be

delivered to a Trust pursuant to the

Contracts may be fixed (e.g., one Share

per Security issued) or may be

determined pursuant to a formula, the

product of which will vary with the

price of the Shares. A formula generally

will result in each Holder of Securities

receiving fewer Shares as the market

value of the Shares increases, and more

Shares as their market value decreases.2

At the termination of each Trust, each

Holder will receive the number of

Shares per Security, or the value of the

Shares, as determined by the terms of

the Contracts, that is equal to the

Holder’s pro rata interest in the Shares

or amount received by the Trust under

the Contracts.3

4. Securities issued by the Trust will

be listed on a national securities

exchange or traded on The Nasdaq

National Market System. Thus, the

Securities will be ‘‘national market

system’’ securities subject to public

price quotation and trade reporting

requirements. After the Securities are

issued, the trading price of the

Securities is expected to vary from time

to time based primarily upon the price

of the underlying Shares, interest rates,

and other factors affecting conditions

and prices in the debt and equity

markets. NationsBanc currently intends,

but will not be obligated, to make a

market in the Securities of each Trust.

5. Each Trust will be internally

managed by three trustees and will not

have a separate investment adviser. The

trustees will have limited or no power

to vary the investments held by each

Trust. A bank qualified to serve as a

trustee under the Trust Indenture Act of

1939, as amended, will act as custodian

for each Trust’s assets and as

administrator, paying agent, registrar,

and transfer agent with respect to the

Securities of each Trust. The bank will

have no other affiliation with, and will

not be engaged in any other transaction

with, any Trust. The day-to-day

administration of each Trust will be

carried out by NationsBanc or the bank.

6. The Trusts will be structured so

that the trustees are not authorized to

sell the Contracts or Treasuries under

any circumstances or only upon the

occurrence of a default under a

Contract. The Trusts will hold the

Contracts until maturity or any earlier

acceleration, at which time they will be

settled according to their terms.

However, in the event of the bankruptcy

or insolvency of any counterparty to a

Contract with a Trust, or the occurrence

of certain other defaults provided for in

the Contract, the obligations of the

counterparty under the Contract will be

accelerated and the available proceeds

of the Contract will be distributed to the

Security Holders.

7. The trustees of each Trust will be

selected initially by NationsBanc,

together with any other initial Holders,

or by the grantors of the Trust. The

Holders of each Trust will have the

right, upon the declaration in writing or

vote of more than two-thirds of the

outstanding Securities of the Trust, to

remove a trustee. Holders will be

entitled to a full vote for each Security

held on all matters to be voted on by

Holders and will not be able to

cumulate their votes in the election of

trustees. The investment objectives and

policies of each Trust may be changed

only with the approval of a ‘‘majority of

the Trust’s outstanding Securities’’ 4 or

any greater number required by the

Trust’s constituent documents. Unless

Holders so request, it is not expected

that the Trusts will hold any meetings

of Holders, or that Holders will ever

vote.

8. The Trusts will not be entitled to

any rights with respect to the Shares

until any Contracts requiring delivery of

the Shares to the Trust are settled, at

which time the Shares will be promptly

distributed to Holders. The Holders,

therefore, will not be entitled to any

rights with respect to the Shares

(including voting rights or the right to

receive any dividends or other

distributions) until receipt by them of

the Shares at the time the Trust is

liquidated.

9. Each Trust will be structured so

that its organizational and ongoing
Federal Register / Vol. 63, No. 76 /Tuesday, April 21, 1998 / Notices 19767

expenses will not be borne by the

Holders, but rather, directly or

indirectly, by NationsBanc, the

counterparties, or another third party, as

will be described in the prospectus for

the relevant Trust. At the time of the

original issuance of the Securities of any

Trust, there will be paid to each of the

administrator, the custodian, and the

paying agent, and to each trustee, a onetime amount in respect of such agent’s

fee over its term. Any expenses of the

Trust in excess of this anticipated

amount will be paid as incurred by a

party other than the Trust itself (which

party may be NationsBanc).

Applicant’s Legal Analysis

A. Section 12(d)(1)

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

prohibits (i) any registered investment

company from owning in the aggregate

more than 3% of the total outstanding

voting stock of any other investment

company, and (ii) any investment

company from owning in the aggregate

more than 3% of the total outstanding

voting stock of any registered

investment company. A company that is

excepted from the definition of

investment company under section

3(c)(1) or (c)(7) of the Act is deemed to

be an investment company for purposes

of section 12(d)(1)(A)(i) of the Act under

sections 3(c)(1)(D) of the Act. Section

12(d)(1)(C) of the Act similarly prohibits

any investment company, other

investment companies having the same

investment adviser, and companies

controlled by such investment

companies from owning more than 10%

of the total outstanding voting stock of

any closed-end investment company.

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

provides that the SEC may exempt

persons or transactions from any

provision of section 12(d)(1), if, and to

the extent that, the exemption is

consistent with the public interest and

protection of investors.

3. NationsBanc believes, in order for

the Trusts to be marketed most

successfully, and to be traded at a price

that most accurately reflects their value,

that it is necessary for the Securities of

each Trust to be offered to large

investment companies and investment

company complexes. NationsBanc states

that these investors seek to spread the

fixed costs of analyzing specific

investment opportunities by making

sizable investments in those

opportunities. Conversely, NationsBanc

asserts that it may not be economically

rational for the investors, or their

advisers, to take the time to review an

investment opportunity if the amount

that the investors would ultimately be

permitted to purchase is immaterial in

light of the total assets of the investment

company or investment company

complex. Therefore, NationsBanc argues

that these investors should be able to

acquire Securities in each Trust in

excess of the limitations imposed by

sections 12(d)(1)(A)(i) and 12(d)(1)(C).

NationsBanc requests that the SEC issue

an order under section 12(d)(1)(J)

exempting the Trusts from the

limitations.

4. NationsBanc states that section

12(d)(1) was designed to prevent one

investment company from buying

control of other investment companies

and creating complicated pyramidal

structures. NationsBanc also states that

section 12(d)(1) was intended to address

the layering of costs to investors.

5. NationsBanc believes that the

concerns about pyramiding and undue

influence generally do not arise in the

case of the Trusts because neither the

trustees nor the Holders will have the

power to vary the investments held by

each Trust or to acquire or dispose of

the assets of the Trusts. To the extent

that Holders can change the

composition of the board of trustees or

the fundamental policies of each Trust

by vote, NationsBanc argues that any

concerns regarding undue influence will

be eliminated by a provision in the

charter documents of the Trusts that

will require any investment companies

owning voting stock of any Trust in

excess of the limits imposed by sections

12(d)(1)(A)(i) and 12(d)(1)(C) to vote

their Securities in proportion to the

votes of all other Holders. NationsBanc

also believes that the concern about

undue influence through a threat to

redeem does not arise in the case of the

Trusts because the Securities will not be

redeemable.

6. Section 12(d)(1) also was designed

to address the excessive costs and fees

that may result from multiple layers of

investment companies. NationsBanc

believes that these concerns do not arise

in the case of the Trusts because of the

limited ongoing fees and expenses

incurred by the Trusts and because

generally these fees and expenses will

be borne, directly or indirectly, by

NationsBanc or another third party, not

by the Holders. In addition, the Holders

will not, as a practical matter, bear the

organizational expenses (including

underwriting expenses) of the Trusts.

NationsBanc asserts that the

organizational expenses effectively will

be borne by the counterparties in the

form of a discount in the price paid to

them for the Contracts, or will be borne

directly by NationsBanc, the

counterparties, or other third parties.

Thus, a Holder will not pay duplicative

charges to purchase securities in any

Trust. Finally, there will be no

duplication of advisory fees because the

Trusts will be internally managed by

their trustees.

7. NationsBanc believes that the

investment product offered by the

Trusts serves a valid business purpose.

The Trusts, unlike most registered

investment companies, are not marketed

to provide investors with either

professional investment asset

management or the benefits of

investment in a diversified pool of

assets. Rather, NationsBanc asserts that

the Securities are intended to provide

Holders with an investment having

unique payment and risk characteristics,

including an anticipated higher current

yield than the ordinary dividend yield

on the Shares at the time of the issuance

of the Securities.

8. NationsBanc believes that the

purposes and policies of section 12(d)(1)

are not implicated by the Trusts and

that the requested exemption from

section 12(d)(1) is consistent with the

public interest and the protection of

investors.

B. Section 14(a)

1. Section 14(a) of the Act requires, in

pertinent part, that an investment

company have a net worth of at least

$100,000 before making any public

offering of its shares. The purpose of

section 14(a) is to ensure that

investment companies are adequately

capitalized prior to or simultaneously

with the sale of their securities to the

public. Rule 14a–3 exempts from

section 14(a) unit investment trusts that

meet certain conditions in recognition

of the fact that, once the units are sold,

a unit investment trust requires much

less commitment on the part of the

sponsor than does a management

investment company. Rule 14a–3

provides that a unit investment trust

investing in eligible trust securities shall

be exempt from the net worth

requirement, provided that the trust

holds at least $100,000 of eligible trust

securities at the commencement of a

public offering.

2. NationsBanc argues that, while the

Trusts are classified as management

companies, they have the characteristics

of unit investments trusts. Investors in

the Trusts, like investors in a unit

investment trust, will not be purchasing

interests in a managed pool of

securities, but rather in a fixed and

disclosed portfolio that is held until

maturity. NationsBanc believes that the

make-up of each trust’s assets, therefore,

will be ‘‘locked-in’’ for the life of the

portfolio, and there is no need for an
19768 Federal Register / Vol. 63, No. 76 /Tuesday, April 21, 1998 / Notices

ongoing commitment on the part of the

underwriter.

3. NationsBanc states that, in order to

ensure that each Trust will become a

going concern, the Securities of each

Trust will be publicly offered in a firm

commitment underwriting, registered

under the Securities Act of 1933,

resulting in net proceeds to each Trust

of at least $10,000,000. Prior to the

issuance and delivery of the Securities

of each Trust to the underwriters, the

underwriters will enter into an

underwriting agreement pursuant to

which they will agree to purchase the

Securities subject to customary

conditions to closing. The underwriters

will not be entitled to purchase less

than all of the Securities of each Trust.

Accordingly, NationsBanc states that

either the offering will not be completed

at all or each Trust will have a net worth

substantially in excess of $100,000 on

the date of the issuance of the

Securities. NationsBanc also does not

anticipate that the net worth of the

Trusts will fall below $100,000 before

they are terminated.

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

the SEC may exempt persons or

transactions if, and to the extent that,

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. NationsBanc requests that the

SEC issue an order under section 6(c)

exempting the Trusts from the

requirements of section 14(a).

NationsBanc believes that the

exemption is appropriate in the public

interest and consistent with the

protection of investors and the policies

and provisions of the Act.

C. Section 17(a)

1. Sections 17(a) (1) and (2) of the Act

generally prohibit the principal

underwriter, or any affiliated person of

the principal underwriter, of a

registered investment company from

selling or purchasing any securities to or

from that investment company. The

result of these provisions is to preclude

the Trusts from purchasing Treasuries

from NationsBanc.

2. Section 17(b) of the Act provides

the SEC shall exempt a proposed

transaction from section 17(a) if

evidence establishes that the terms of

the proposed transaction are reasonable

and fair and do not involve

overreaching, and the proposed

transaction is consistent with the

policies of the registered investment

company involved and the purposes of

the Act. NationsBanc requests an

exemption from sections 17(a) (1) and

(2) to permit the Trusts to purchase

Treasuries from NationsBanc.

3. NationsBanc states that the policy

rationale underlying section 17(a) is the

concern that an affiliated person of an

investment company, by virtue of this

relationship, could cause the investment

company to purchase securities of poor

quality from the affiliated person or to

overpay for securities. NationsBanc

argues that it is unlikely that it would

be able to exercise any adverse

influence over the Trusts with respect to

purchases of Treasuries because

Treasuries do not vary in quality and are

traded in one of the most liquid markets

in the world. Treasuries are available

through both primary and secondary

dealers, making the Treasury market

very competitive. In addition, market

prices on Treasuries can be confirmed

on a number of commercially available

information screens. NationsBanc

argues that because it is one of a limited

number of primary dealers in

Treasuries, it will be able to offer the

Trusts prompt execution of their

Treasury purchases at very competitive

prices.

4. NationsBanc states that it is only

seeking relief from section 17(a) with

respect to the initial purchase of the

Treasuries and not with respect to an

ongoing course of business.

Consequently, investors will know

before they purchase a Trust’s Securities

the Treasuries that will be owned by the

Trust and the amount of the cash

payments that will be provided

periodically by the Treasuries to the

Trust and distributed to Holders.

NationsBanc also asserts that whatever

risk there is of overpricing the

Treasuries will be borne by the

counterparties and not by the Holders

because the cost of the Treasuries will

be calculated into the amount paid on

the Contracts. NationsBanc argues that,

for this reason, the counterparties will

have a strong incentive to monitor the

price paid for the Treasuries, because

any overpayment could result in a

reduction in the amount that they

would be paid on the Contracts.

5. NationsBanc believes that the terms

of the proposed transaction are

reasonable and fair and do not involve

overreaching on the part of any person,

that the proposed transaction is

consistent with the policy of each of the

Trusts, and that the requested

exemption is appropriate in the public

interest and consistent with the

protection of investors and purposes

fairly intended by the policies and

provisions of the Act.

Applicant’s Conditions

NationsBanc agrees that the order

granting the requested relief will be

subject to the following conditions:

1. Any investment company owning

voting stock of any Trust in excess of

the limits imposed by section 12(d)(1) of

the Act will be required by the Trust’s

charter documents, or will undertake, to

vote its Trust shares in proportion to the

vote of all other Holders.

2. The trustees of each Trust,

including a majority of the trustees who

are not interested persons of the Trust,

(i) will adopt procedures that are

reasonably designed to provide that the

conditions set forth below have been

complied with; (ii) will make and

approve such changes as are deemed

necessary; and (iii) will determine that

the transactions made pursuant to the

order were effected in compliance with

such procedures.

3. The Trusts (i) will maintain and

preserve in an easily accessible place a

written copy of the procedures (and any

modifications to the procedures), and

(ii) will maintain and preserve for the

longer of (a) the life of the Trusts and

(b) six years following the purchase of

any Treasuries, the first two years in an

easily accessible place, a written record

of all Treasuries purchased, whether or

not from NationsBanc, setting forth a

description of the Treasuries purchased,

the identity of the seller, the terms of

the purchase, and the information or

materials upon which the

determinations described below were

made.

4. The Treasuries to be purchased by

each Trust will be sufficient to provide

payments to Holders of Securities that

are consistent with the investment

objectives and policies of the Trust as

recited in the Trust’s registration

statement and will be consistent with

the interests of the Trust and the

Holders of its Securities.

5. The terms of the transactions will

be reasonable and fair to the Holders of

the Securities issued by each Trust and

will involve overreaching of the Trust or

the Holders of Securities of the Trust on

the part of any person concerned.

6. The fee, spread, or other

remuneration to be received by

NationsBanc will be reasonable and fair

compared to the fee, spread, or other

remuneration received by dealers in

connection with comparable

transactions at such time, and will

comply with section 17(e)(2)(C) of the

Act.

7. Before any Treasuries are

purchased by the Trust, the Trust must

obtain such available market

information as it deems necessary to
Federal Register / Vol. 63, No. 76 /Tuesday, April 21, 1998 / Notices 19769

1The TopFunds may not be Underlying Funds

and no TopFund will invest in another TopFund.

determine that the price to be paid for,

and the terms of, the transaction are at

least as favorable as that available from

other sources. This will include the

Trust obtaining and documenting the

competitive indications with respect to

the specific proposed transaction from

two other independent government

securities dealers. Competitive

quotation information must include

price and settlement terms. These

dealers must be those who, in the

experience of the Trust’s trustees, have

demonstrated the consistent ability to

provide professional execution of

Treasury transactions at competitive

market prices. They also must be those

who are in a position to quote favorable

prices.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–10502 Filed 4–20–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–23116; 812–10228]

New England Funds, L.P. et al.; Notice

of Application

April 15, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order pursuant to section 17(d) and rule

17d–1 under the Investment Company

Act of 1940 (the ‘‘Act’’).

SUMMARY OF APPLICATION: Applicants

request an order that would permit

funds relying on section 12(d)(1) (E) or

(G) of the Act to enter into a special

servicing agreement.

APPLICANTS: New England Funds, L.P.

(‘‘NEF’’); New England Funds

Management, L.P. (‘‘NEFM’’); New

England Funds Trust I, on behalf of its

series, New England Balanced Fund,

New England Growth Fund, New

England Value Fund, New England

International Equity Fund, New England

Capital Growth Fund, New England

Bond Income Fund, New England Tax

Exempt Income Fund, New England

Government Securities Fund, New

England Star Advisers Fund, New

England Strategic Income Fund, and

New England Star Worldwide Fund;

New England Funds Trust II, on behalf

of its series, New England

Massachusetts Tax Free Income Fund,

New England High Income Fund, New

England Growth Opportunities Fund,

New England Limited Term U.S.

Government Fund, New England

Adjustable Rate U.S. Government Fund,

New England Intermediate Term Tax

Free Fund of California, and New

England Intermediate Term Tax Free

Fund of New York; New England Funds

Trust III, on behalf of its series, New

England Equity Income Fund

(collectively with New England Funds

Trusts I, II, and III, the ‘‘New England

Funds’’); and each existing or future

open-end management investment

company or series thereof, including

TopFund Series Trust, that is part of the

same group of investment companies as

the New England Funds under section

12(d)(1)(G)(ii) of the Act and which is,

or will be, advised by NEFM or any

entity controlling, controlled by, or

under common control with NEFM, or

for which NEF or any entity controlling,

controlled by, or under common control

with NEF, serves as principal

underwriter.

FILING DATES: The application was filed

on July 1, 1996, and amended on

December 5, 1996, May 1, 1997, and

September 11, 1997. Applicants have

agreed to file an additional 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

May 11, 1998, 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: New England Funds, L.P.,

399 Boylston Street, Boston,

Massachusetts 02116, c/o Robert E.

O’Hare, Esq.

FOR FURTHER INFORMATION CONTACT:

Mary T. Geffroy, Senior Counsel, at

(202) 942–0553, or Nadya B. Roytblat,

Assistant Director, 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 at the SEC’s

Public Reference Branch, 450 Fifth

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

(tel. (202) 942–8090).

Applicants’ Representatives

1. Each New England Fund is an

open-end management investment

company registered under the Act. New

England Funds are referred to as

‘‘Underlying Funds.’’

2. NEFM is an investment adviser

registered under the Investment

Advisers Act of 1940 (the ‘‘Advisers

Act’’). NEFM serves as adviser to the

New England Funds, except for the New

England Growth Fund, which is advised

by Capital Growth Management, L.P., an

investment adviser registered under the

Advisers Act. NEF is registered as a

broker-dealer under the Securities

Exchange Act of 1934. NEF serves as the

principal underwriter of the New

England Funds, including the New

England Growth Fund.

3. TopFund Series Trust will be

organized as a Massachusetts business

trust and registered under the Act as an

open-end management investment

company. The term ‘‘TopFund Series

Trust’’ refers to each existing and future

open-end management investment

company or any series of that company

(the ‘‘TopFunds’’) that (1) is part of the

same group of investment companies as

the Underlying Funds under section

12(d)(1)(G)(ii) of the Act and (a) is, or

will be, advised by NEFM or any entity

controlling, controlled by, or under

common control with NEFM, or (b) for

which NEF or any entity controlling,

controlled by, or under common control

with NEF, serves as principal

underwriter and (2) intends to invest

substantially all of its assets in the

Underlying Funds.1 Certain TopFunds

will invest in multiple Underlying

Funds in accordance with section

12(d)(1)(G) of the Act and other

TopFunds will invest all of their assets

in a single Underlying Fund in

accordance with section 12(d)(1)(E) of

the Act. Each TopFund and each

Underlying Fund will be a multiple

class fund in reliance on rule 18f–3

under the Act.

4. Applicants propose to enter into a

Special Servicing Agreement (the

‘‘Agreement’’), which will be among

NEFM, TopFund Series Trust, NEF,

New England Funds Trust I, New

England Funds Trust II, and New

England Funds Trust III. Under the

Agreement, the Underlying Fund will

bear the expenses of a TopFund (other

than advisory fees and rule 12b–1 fees)

in proportion to the average daily value