29044 Federal Register / Vol. 63, No. 101 /Wednesday, May 27, 1998 / Notices

connection with the assignment.

Applicants state that they may not be

entitled to rely on rule 15a–4 because of

the benefits that Cowen will receive as

a result of the Acquisition.

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

the Commission 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 submit that the terms

and timing of the Acquisition were

determined in response to a number of

factors substantially unrelated to the

Funds and that the Existing Advisory

Agreements constitute a relatively small

part of the Acquisition. Applicants state

that the Closing Data does not allow a

sufficient time to secure prior

shareholder approval of the New

Advisory Agreements. Applicants state

that the requested relief will permit

continuity of investment management of

the Funds during the period following

the Acquisition so that advisory services

will not be disrupted. Applicants

represent that the Funds will receive the

same scope and quality of investment

advisory services provided by

essentially the same investment

management personnel under the New

Advisory Agreements as they receive

under the Existing Advisory

Agreements. If the investment

management personnel changes

materially, the New Adviser will

apprise and consult with the Boards to

ensure that the Boards, including a

majority of the Disinterested Directors,

are satisfied that the services provided

by the New Adviser will not be

diminished in scope and quality.

6. Applicants contend that to deprive

the New Adviser of investment advisory

fees during the Interim Period would be

an unduly harsh and unreasonable

penalty to attach to the Acquisition and

would serve no useful purpose.

Applicants note that the fees will not be

released to the New Adviser by the

Escrow Agent without an appropriate

certification that the New Advisory

Agreements have been approved by the

Funds’ respective shareholders.

Applicants’ Conditions

Applicants agree as conditions to the

issuance of the exemptive order

requested by the application that:

1. The New Advisory Agreements will

contain substantially the same terms

and conditions as the Existing Advisory

Agreements, except for the

identification of the New Adviser and

the dates of execution and termination.

2. The portion of the investment

advisory fee earned by the New Adviser

during the Interim Period will be

maintained in an interest-bearing

escrow account, and amounts in the

account (including interest earned on

such amounts) will be paid to the New

Adviser only upon approval of each

New Advisory Agreement by the

applicable Fund’s shareholders or in the

absence of such approval, to the Fund.

3. Each Fund will promptly schedule

a meeting of shareholders to vote on the

approval of the New Agreements to be

held within 150 days following the

commencement of the Interim Period

(but in no event later than December 31,

1998).

4. The Current Adviser will pay the

costs of preparing and filing the

application and the costs relating to the

solicitation and approval of Fund

shareholders of the New Advisory

Agreements necessitated by the

Acquisition.

5. Cowen and SG will take all

appropriate actions to ensure that the

scope and quality of investment

advisory and other services to be

provided to the Funds by the New

Adviser during the Interim Period will

be at least equivalent, in the judgment

of the Boards, including a majority of

the Disinterested Directors, to the scope

and quality of services provided by the

Current Adviser. In the event of any

material change in investment

management personnel providing

advisory services pursuant to the New

Advisory Agreements, the New Adviser

will apprise and consult with the

Boards to ensure that the Boards,

including a majority of the Disinterested

Directors, are satisfied that the services

provided will not be diminished in

scope or quality.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–13958 Filed 5–26–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

23197; File No. 812–10974]

Mitchell Hutchins Portfolios, et al.;

Notice of Application

May 20, 1998.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’).

ACTION: Notice of application for an

order under section 17(d) of the

Investment Company Act of 1940 (the

‘‘Act’’) and rule 17d–1 under the Act.

SUMMARY OF APPLICATION: Applicants

request an order that would permit

certain registered open-end management

investment companies relying on

section 12(d)(1)(G) of the Act to enter

into a special servicing agreement.

APPLICANTS: Mitchell Hutchins

Portfolios (the ‘‘Trust’’); PaineWebber

America Fund, PaineWebber Cashfund,

Inc. (‘‘Cashfund’’), PaineWebber

Investment Series, PaineWebber

Investment Trust, PaineWebber

Managed Investments Trust,

PaineWebber Olympus Fund,

PaineWebber Securities Trust, (the

‘‘PaineWebber Investment Companies,’’

and together with the Trust, the

‘‘PaineWebber Mutual Funds’’),

Mitchell Hutchins Asset Management

Inc. (‘‘Mitchell Hutchins’’), and

PaineWebber Incorporated

(‘‘PaineWebber’’). Applicant also

request relief for each existing or future

registered open-end management

investment company and series thereof

that is part of the same group of

investment companies as the

PaineWebber Mutual Funds under

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

which is, or will be, advised by Mitchell

Hutchins or PaineWebber or any entity

controlling, controlled by, or under

common control with Mitchell Hutchins

or PaineWebber, or for which Mitchell

Hutchins or PaineWebber or any entity

controlling, controlled by, or under

common control with Mitchell Hutchins

or PaineWebber serves, or will serve as

principal underwriter (collectively, the

‘‘PaineWebber Family of Funds’’).

FILING DATES: The application was filed

on January 26, 1998. Applicants have

agreed to file an amendment during the

notice period, the substance of which is

reflected in this notice.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the Commission orders a

hearing. Interested persons may request

a hearing by writing to the

Commission’s Secretary and serving

applicants with a copy of the request,

personally or by mail. Hearing requests

should be received by the Commission

by 5:30 p.m. on June 15, 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 who wish to be

notified of a hearing may request
Federal Register / Vol. 63, No. 101 /Wednesday, May 27, 1998 / Notices 29045

1The Portfolios may not be Underlying Funds

and no Portfolio will invest in another Portfolio.

notification by writing to the

Commission’s Secretary.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

NW., Washington, D.C. 20549.

Applicants, 1285 Avenue of the

Americas, New York, NY 10019.

FOR FURTHER INFORMATION CONTACT:

Kathleen L. Knisely, Staff Attorney, at

(202) 942–0517, 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

Commission’s Public Reference Branch,

450 Fifth Street, NW, Washington, DC

20549 (tel. 202–942–8090).

Applicants’ Representations

1. The Trust, a Delaware business

trust, is an open-end management

investment company registered under

the Act. The Trust currently offers three

portfolios (the ‘‘Portfolios’’) which will

invest all, or substantially all, of their

assets in shares of other investment

companies in the PaineWebber Family

of Funds (‘‘Underlying Funds’’),1 in

reliance on section 12(d)(1)(G) of the

Act and thereby operate as a fund of

funds. The Portfolios will allocate their

assets among the following Underlying

Funds: PaineWebber Global Equity

Fund, PaineWebber Global Income

Fund, PaineWebber Growth Fund,

PaineWebber Growth and Income Fund,

PaineWebber Small Cap Fund,

PaineWebber High Income Fund,

PaineWebber Investment Grade Income

Fund, PaineWebber Low Duration U.S.

Government Income Fund, PaineWebber

U.S. Government Income Fund, and

Cashfund. In the future, other registered

open-end management investment

companies in the PaineWebber Family

of Funds may be added as Underlying

Funds. Each Portfolio and each

Underlying Fund is authorized to issue

multiple classes of shares in accordance

with rule 18f–3 under the Act.

2. Mitchell Hutchins and

PaineWebber (collectively, the

‘‘Advisers’’) are registered as investment

advisers under the Investment Advisers

Act of 1940. Mitchell Hutchins is a

subsidiary of PaineWebber, which is

wholly owned by Paine Webber Group,

Inc., a publicly owned financial services

holding company. Mitchell Hutchins

serves as investment adviser and

administrator to the Portfolios. Mitchell

Hutchins also serves as the principal

underwriter of each Portfolios’s shares

and each Underlying Fund’s shares

(other than Cashfund, for which

PaineWebber serves as principal

underwriter). Mitchell Hutchins or

PaineWebber serves as investment

adviser to the Underlying Funds.

3. Applicants propose to enter into a

special servicing agreement (‘‘Servicing

Agreement’’) among each Portfolio, the

Underlying Funds and the Adviser.

Under the Servicing Agreement, the

Underlying Funds would bear the

expenses of the Portfolio (other than

advisory fees and rule 12b–1 fees) in

proportion to the average daily value of

the Underlying Fund’s shares owned by

the Portfolio. Payments by an

Underlying Fund under the Servicing

Agreement would be a fund-wide

expense of the Underlying Fund.

4. Applicants believe that each

Portfolio creates savings to the

Underlying Funds primarily due to a

reduction in the administrative

expenses incurred by the Underlying

Funds as a result of the avoidance of

numerous shareholder accounts which

would have been established if investors

in the Portfolios had invested directly in

the Underlying Funds. No Underlying

Fund would bear any expenses of a

Portfolio that exceed Net Benefits as

defined in the condition below, to the

Underlying Fund from the arrangement.

Applicants’ Legal Analysis

1. Section 17(d) of the Act and rule

17d–1 under the Act provide that an

affiliated person of, or a principal

underwriter for, a registered investment

company, or an affiliate of such person

or principal underwriter, acting as

principal, shall not participate in, or

effect any transaction in connection

with, any joint enterprise or other joint

arrangement in which the registered

investment company is a participant

unless the Commission has issued an

order approving the arrangement.

Because the Adviser is an affiliated

person of each Portfolio and each

Underlying Fund and because the

Portfolios and Underlying Funds share

a common board of directors/trustees

(‘‘Board’’), each of the Portfolios and

Underlying Funds advised by the

Adviser could be deemed to be under

common control with all the other

Portfolios and Underlying Funds, and

therefore, an affiliated person of those

Funds. Consequently, the Servicing

Agreement could be deemed to be a

joint transaction.

2. Rule 17d–1 under the Act provides

that, in passing upon exemptive

requests under the rule, the Commission

considers whether the investment

company’s participation in the joint

enterprise is consistent with the

provision, policies and purposes of the

Act, and the extent to which such

participation is on a basis different

from, or less advantageous than that of

other participants.

3. Applicants request relief under

section 17(d) and rule 17d–1 to permit

them to enter into the Service

Agreement. Applicants contend that

each Underlying Fund will pay a

Portfolio’s expenses only in direct

proportion to the average daily value of

each Underlying Fund’s shares held by

each Portfolio to ensure that expenses of

the Portfolios will be borne

proportionately and fairly. Applicants

also state that prior to an Underlying

Fund’s entering into a Service

Agreement, and at least annually

thereafter, the Board of the Underlying

Fund, including a majority of directors

who are not interested persons under

section 2(a)(19) of the Act

(‘‘Disinterested Directors’’), must

determine that the Servicing Agreement

will result in Net Benefit, as defined in

the condition below, to the Underlying

Fund. In making the annual

determination, one of the factors the

Board must consider is the amount of

Net Benefits actually experienced by

each class of shareholders of the

Underlying Fund and the Underlying

Fund as a whole during the preceding

year. For these reasons, the applicants

believe the requested relief meets the

standards of section 17(d) of the Act and

rule 17d–1 under the Act.

Applicants’ Condition

Applicants agree that any order

granting the requested relief will be

subject to the following condition:

Prior to the Underlying Fund’s

entering into a Servicing Agreement,

and at least annually thereafter, the

Board of the Underlying Fund,

including a majority of Disinterested

Directors of the Underlying Fund, must

determine that the Servicing Agreement

will result in quantifiable benefits to

each class of shareholders of the

Underlying Fund and to the Underlying

Fund as a whole that will exceed the

costs of the Servicing Agreement borne

by each class of shareholders of the

Underlying Fund and by the Underlying

Fund as a whole (‘‘Net Benefits’’). In

making the annual determination, one

of the factors the Board must consider

is the amount of Net Benefits actually

experienced by each class of

shareholders of the Underlying Fund

and the Underlying Fund as a whole

during the preceding year. The

Underlying Fund will preserve for a

period of not less than six years from
29046 Federal Register / Vol. 63, No. 101 /Wednesday, May 27, 1998 / Notices

the date of a determination of the Board,

the first two years in an easily accessible

place, a record of the determination and

the basis and information upon which

the determination was made. This

record will be subject at all times to

examination by the Commission and its

staff.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–13956 Filed 5–26–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

23192; 812–10596]

Stein Roe Income Trust, et al.; Notice

of Application

May 19, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under section 17(d) of the

Investment Company Act of 1940 (the

‘‘Act’’) and rule 17d–1.

SUMMARY OF THE APPLICATION:

Applicants request an order to permit

certain registered investment companies

to deposit uninvested cash balances in

a joint account to be used to enter into

short-term investments.

APPLICANTS: Stein Roe Income Trust,

Stein Roe Investment Trust, Stein Roe

Municipal Trust, Stein Roe Institutional

Trust, Stein Roe Advisor Trust, Stein

Roe Trust, SR&F Base Trust (each a

‘‘Trust,’’ and collectively, the ‘‘Trusts’’),

and Stein Roe & Farnham Incorporated

(the ‘‘Adviser’’).

FILING DATES: The application was filed

on March 26, 1997 and amended on

August 5, 1997 and April 17, 1998.

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

June 15, 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 who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

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

Applicants, c/o Cameron S. Avery, Bell,

Boyd & Lloyd, Three First National

Plaza, Suite 3300, Chicago, IL 60602.

FOR FURTHER INFORMATION CONTACT:

Michael W. Mundt, Staff Attorney, at

(202) 942–0578, or Nadya B. Roytblat,

Assistant Director, at (202) 942–0564

(Office of Investment Company

Regulation, Division of Investment

Management).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch, 450 Fifth

Street, NW., Washington, DC 20549 (tel.

202–942–8090).

Applicant’s Representations

1. Each Trust, other than SR&F Base

Trust (‘‘Base Trust’’), is organized as a

business trust under the laws of

Massachusetts. Base Trust is organized

as a common law trust under the laws

of Massachusetts. Each Trust is

registered under the Act as an open-end

management investment company and

has, or intends to have, multiple series

(‘‘Funds’’). Base Trust was organized so

that its various series could serve as

master funds in a master-feeder

structure. Currently, each series of Stein

Roe Advisor Trust, Stein Roe

Institutional Trust, Stein Roe Trust,

Stein Roe Investment Trust (other than

Stein Roe Emerging Markets Fund and

Stein Roe Capital Opportunities Fund),

Stein Roe Municipal Money Market

Fund (a series of Stein Roe Municipal

Trust), and Stein Roe High Yield Fund

(a series of Stein Roe Income Trust)

operate as feeder funds.

2. The Adviser, a wholly-owned

indirect subsidiary of Liberty Financial

Companies, Inc., is registered as an

investment adviser under the

Investment Advisers Act of 1940 and

provides investment advisory services

to the respective series of the Base Trust

and to each of the Funds that are not

feeder funds. The Adviser also provides

administrative, accounting and

bookkeeping services to certain of the

Funds. The Adviser has discretion to

purchase and sell securities for each

Fund in accordance with that Fund’s

investment objectives, policies and

restrictions.

3. Applicants request that any relief

granted pursuant to the application also

apply to any other registered open-end

management investment company and

series thereof for which the Adviser may

serve as investment adviser in the future

(‘‘Future Funds’’). Any Future Fund

relying on the requested relief will do so

only in compliance with the terms and

conditions of the application.

4. The assets of the Funds are held by

State Street Bank and Trust Company

(‘‘State Street’’). On each trading day,

some or all of the Funds generally have

uninvested cash balances in their

accounts. Each Fund is authorized to

invest its uninvested cash assets in

repurchase agreements and certain

short-term money market instruments.

Currently, such cash balance of each

Fund is used on an individual basis to

invest in short-term instruments,

including individual issues of

commercial paper or United States

Government agency paper. Applicants

assert that these separate purchases

result in certain inefficiencies that limit

a Fund’s return on its cash balances. In

addition, the assets of some Funds are

too small or become available too late

on a given day to be invested effectively

on an individual basis.

5. Applicants propose to deposit all or

a portion of their uninvested cash

balances into a single joint account

(‘‘Joint Account’’) to enter into one or

more short-term investment

transactions, including repurchase

agreements ‘‘collateralized fully’’ as

defined in rule 2a–7 under the Act and

other short-term money market

instruments that constitute ‘‘eligible

securities’’ as defined in rule 2a–7

under the Act. All counterparties to

repurchase agreements entered into

through the Joint Account are expected

to be banks and broker-dealers.

Repurchase agreements will be entered

into on a ‘‘hold-in-custody’’ basis (i.e.,

repurchase agreements where the

counterparty or one of its affiliated

persons may have possession of, or

control over, the collateral subject of the

agreement) only where cash is received

very late in the business day and

otherwise would be unavailable for

investment. Purchases of short-term

money market instruments will be made

from dealers in the open market or

directly from issuers and will include

investments in various taxable and taxexempt short-term money market

instruments with overnight, over-theweekend or over-the-holiday maturities.

6. Any repurchase agreements entered

into through the Joint Accounts will

comply with the terms of Investment

Company Act Release No. 13005

(February 2, 1983) and interpretations of

the staff of the SEC. Applicants

acknowledge that they have a

continuing obligation to monitor the

SEC’s published statements on

repurchase agreements and represent

that the repurchase agreement

transactions entered into through a Joint

Account will comply with future