29048 Federal Register / Vol. 63, No. 101 /Wednesday, May 27, 1998 / Notices

under the Act will use the average

maturity of the instrument(s) in the Joint

Account in which such Fund has an

interest (determined on a dollar

weighted basis) for the purpose of

computing the Fund’s average portfolio

maturity with respect to the portion of

its assets held in the Joint Account for

that day.

5. In order to ensure that there will be

no opportunity for one participant to

use any part of a balance of the Joint

Account credited to another participant,

no participant will be allowed to create

a negative balance in the Joint Account

for any reason, although each Fund will

be permitted to draw down its entire

balance at any time. Each Fund’s

decision to invest in the Joint Account

will be solely at its option, and no Fund

will be obligated either to invest in the

Joint Account or to maintain any

minimum balance in the Joint Account.

In addition, each Fund will retain the

sole rights of ownership to any of its

assets invested in the Joint Account,

including interest payable on such

assets in the Joint Account.

6. Not every participant in the Joint

Account will necessarily have its cash

invested in every short-term investment

entered into through the Joint Account.

However, to the extent that a

participant’s cash is applied to a

particular short-term investment made

through the Joint Account, the

participant will participate in and own

a proportionate share of such short-term

investment, and any income earned or

accrued thereon, based upon the

percentage of such investment

purchased with monies contributed by

the participant.

7. The Adviser will administer the

investment of cash balances in and

operations of the Joint Account as part

of its general duties under its existing or

any future investment advisory

contracts will the Funds and the

Adviser will not collect any additional

or separate fees from any Fund for

advising the Joint Account.

8. The administration of the Joint

Account will be within the fidelity bond

coverage required by section 17(g) of the

Act and rule 17g–1 thereunder.

9. The Board of Trustees of each Trust

that has Funds and/or Future Funds

participating in the Joint Account will

adopt procedures pursuant to which the

Joint Account will operate, which will

be reasonably designed to provide that

the requirements of this application will

be met. The Board of Trustees of each

Trust that has Funds and/or Future

Funds participating in the Joint Account

will make and approve such changes as

each deems necessary to ensure that

such procedures are followed. In

addition, each of such Board of Trustees

will determine, no less frequently than

annually, that the Joint Account has

been operated in accordance with the

proposed procedures and will permit

continued participation by those Funds

in the Joint Account only if it

determines that there is a reasonable

likelihood that the Fund and its

shareholders will benefit from the Joint

Account.

10. Any short-term investments made

through the Joint Account will satisfy

the investment criteria of all

participants in that investment.

11. The Adviser and State Street will

maintain records documenting, for any

given day, each participant’s aggregate

investment in the Joint Account and its

pro rata share of each investment made

through the Joint Account. The records

will be maintained in conformity with

section 31 of the Act and the rules and

regulations thereunder.

12. Short-term investments held in

the Joint Account generally will not be

sold prior to maturity unless: (a) The

Adviser believes the investment no

longer presents minimal credit risks; (b)

the investment no longer satisfies the

investment criteria of all participants in

the investment because of downgrading

or otherwise; or (c) in the case of a

repurchase agreement, the counterparty

defaults. The Adviser may, however,

sell any short-term investment (or any

fractional portion thereof) on behalf of

some or all participants prior to the

maturity of the investment if the cost of

such transactions will be borne solely

by the selling participants and the

transactions will not adversely affect

other participants participating in the

Joint Account. In no case would an early

termination by less than all participants

be permitted if it would reduce the

principal amount or yield received by

other participants in the Joint Account

or otherwise adversely affect the other

participants. Each participant in the

Joint Account will be deemed to have

consented to such sale and partition of

the investments in the Joint Account.

13. Short-term investments held

through the Joint Account with a

remaining maturity of more than seven

days, as calculated pursuant to rule 2a–

7 under the Act, would be considered

illiquid and would be subject to the

restriction that a Fund may not invest

more than 15% or, in the case of a

money market fund, more than 10% (or,

in either such case, such other

percentage as set forth by the SEC from

time to time) of its net assets in illiquid

securities, if the Adviser cannot sell the

instruments, or the Fund’s fractional

interest in such instrument, pursuant to

the preceding condition.

14. Future Funds will be permitted to

participate in the Joint Account

arrangement only on the same terms and

conditions as the Funds have set forth

herein.

For the SEC, by the Division of Investment

Management, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–13959 Filed 5–26–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel No. IC–23194; 812–11114]

UBS Investor Portfolios Trust, et al.;

Notice of Application

May 20, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application under

section 6(c) of the Investment Company

Act of 1940 (the ‘‘Act’’) for an

exemption from section 15(a) of the Act.

SUMMARY OF APPLICATION: Applicants

seek an order to permit the

implementation, without prior

shareholder approval, of new

investment advisory and sub-advisory

agreements (‘‘New Advisory

Agreements’’) in connection with the

merger of Union Bank of Switzerland

(‘‘UBS’’) and Swiss Bank Corporation

(‘‘SBC’’). The order would cover a

period of up to 150 days following the

later of: (i) date on which the

transactions contemplated by the merger

agreement are consummated (the

‘‘Closing Date’’), or (ii) the date upon

which the requested order is issued (but

in no event later than December 31,

1998) (the ‘‘Interim Period’’). The order

also would permit UBS-New York

Branch (‘‘UBS–NY Branch’’), UBS Asset

Management (New York) Inc.

(‘‘UBSAM–NY’’), and UBS International

Investment London Limited (UBSII)

(collectively, the ‘‘Advisers’’), following

shareholder approval, to receive all fees

earned under the New Advisory

Agreements during the Interim Period.

Applicants: UBS Investor Portfolios

Trust (‘‘UBS Investor Portfolios’’), UBS,

UBSAM–NY, and UBSIL.

Filing Dates: The application was

filed on April 20, 1998. Applicants have

agreed to file an amendment during the

notice period, the substance of which is

included 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
Federal Register / Vol. 63, No. 101 /Wednesday, May 27, 1998 / Notices 29049

1The six portfolios include: UBS Bond Portfolio,

UBS High Yield Bond Portfolio, UBS Value Equity

Portfolio, UBS Large Cap Growth Portfolio, UBS

Small Cap Portfolio, and UBS International Equity

Portfolio.

2UBSAM–NY serves as sub-adviser to UBS High

Yield Bond Portfolio, UBS Large Cap Growth

Portfolio, and UBS Small Cap Portfolio; UBSII

serves as sub-adviser to UBS International Equity

Portfolio.

3Applicants state that if the Closing Date

precedes the issuance of the requested order, the

Advisers will serve as investment advisers after the

Closing Date and prior to the issuance of the order

in a manner consistent with their fiduciary duty to

provide investment advisory services to the Funds

even though appoval of the New Advisory

Agreements has not yet been secured from the

Funds’ respective shareholders. Applicants also

state that in such event the Advisers will be entitled

to receive from the Funds, from the Closing Date

until receipt of the requested order, no more than

the actual out-of-pocket costs to the Advisers for

providing investment advisory services to the

Funds.

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 may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW, Washington, DC 20549.

Applicants, c/o Naomi FriedlandWechsler, Esq., Union Bank of

Switzerland, 1345 Avenue of the

Americas, New York, New York 10105.

FOR FURTHER INFORMATION CONTACT:

J. Amanda Machen, Senior Counsel, at

(202) 942–7120, 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 at the SEC’s

Public Reference Branch, 450 Fifth

Street, NW, Washington, DC 20549 (tel.

202–942–8090).

Applicants’ Representations

1. UBS, directly and through its

subsidiaries, offers a wide range of

financial services worldwide, including

asset management and investment

advisory services. UBS conducts its

asset management business in the

United States through its branch located

in New York, UBS–NY Branch, and

through its wholly-owned indirect

subsidiaries, UBSAM–NY and UBSIL.

UBSAM–NY and UBSII are both

registered under the Investment

Advisers Act of 1940 (‘‘Advisers Act’’).

UBS–NY Branch is not so registered, in

reliance on section 202(a)(11)(A) of the

Advisers Act. UBS–NY Branch serves as

investment adviser to UBS Investor

Portfolios, and open-end management

investment company registered under

the Act, which organized in a masterfeeder structure with six active

portfolios and one in registration (each

portfolio, a ‘‘Fund,’’ and collectively,

the ‘‘Funds’’).1 UBSAM–NY and UBSII

serve as investment sub-advisers to

certain of the Funds.2

2. UBS and SBC have agreed to merge

into a newly created entity (‘‘New

UBS’’) under the terms of a merger

agreement dated December 5/6, 1997

(‘‘Merger Agreement’’). Upon

consummation of the transactions

contemplated by the Merger Agreement

(‘‘Merger’’), New UBS will be owned

approximately 60% by former UBS

stockholders and 40% by former SBC

stockholders. Upon completion of the

Merger, UBS and SBC will both cease to

exist and all of their assets, including

the stock of the Adviser subsidiaries,

will become assets of New UBS.

3. Applicants state that the Merger

may result in an assignment and

termination of the existing advisory and

sub-advisory agreements of UBS–NY

Branch and UBSAM–NY. Because the

existing advisory agreement of UBSII

with UBS Investor Portfolios terminates

by its terms when the related UBS–NY

Branch advisory agreement terminates,

applicants state that Merger also may

result in termination of this agreement

(together with the existing advisory

agreements of UBS–NY Branch and

UBSAM–NY, the ‘‘Existing Advisory

Agreements’’). Applicants request an

exemption to permit the

implementation, without prior

shareholder approval, of the New

Advisory Agreements. The requested

exemption will cover the Interim Period

of not more than 150 days, beginning on

the later of (i) the Closing Date or (ii) the

date on which the order requested by

this application is issued and

continuing with respect to each Fund

through the date on which each New

Advisory Agreement is approved or

disapproved by the Fund’s

shareholders, but in no event after

December 31, 1998. Applicants state

that the terms and conditions of the

corresponding Existing and New

Advisory Agreements will be the same

in all material respects, except for the

dates of execution and termination. The

Closing Date may occur as early as June

1, 1998.3

4. The board of directors of each Fund

(the ‘‘Boards’’) met on May 12, 1998, in

accordance with section 15(c) of the

Act, to consider and evaluate the New

Advisory Agreements and determined

that the New Advisory Agreements were

in the best interests of the Funds and

their respective shareholders. The

Boards also voted to recommend that

the Funds’ respective shareholders

approve the New Advisory Agreements.

5. Applicants propose to enter into an

escrow arrangement with an unaffiliated

financial institution (’’Escrow Agent’’).

The fees earned by the Advisers under

the New Advisory Agreements during

the Interim Period will be paid into an

account maintained by the Escrow

Agent. The Escrow Agent will release

the amounts held in the escrow account

(including any interest earned): (a) to

the Advisers only upon receipt of

certification that the New Advisory

Agreements have been approved by the

shareholders of the relevant Fund; or (b)

to the relevant Fund in the absence of

approval by its shareholders. Before any

certification is released, the relevant

Board will be notified.

Applicants’ Legal Analysis

1. Section 15(a) of the Act provides,

in pertinent part, that it shall be

unlawful for any person to serve or act

as an investment adviser of a registered

investment company, except pursuant

to a written contract that has been

approved by the vote of a majority of the

outstanding voting securities of the

registered investment company. Section

15(a) of the Act further requires that the

written contract provide for automatic

termination in the event of its

‘‘assignment.’’ Section 2(a)(4) of the Act

defines ‘‘assignment’’ to include any

direct or indirect transfer of a contract

by the assignor, or of a controlling block

of the assignor’s outstanding voting

securities by a security holder of the

assignor.

2. Applicants believe that the Merger

will not result in a transfer of a

controlling block of UBS under section

2(a)(4) of the Act. Applicants state,

however, that under the terms of the

Merger and the current business plan of

New UBS, certain changes in portfolio

management personnel, structure and

process are expected at UBS–NY Branch

and UBSAM–NY. Applicants assert that

these changes could result in a change

of the actual control or management of

UBS–NY Branch and UBSAM–NY.

Applicants state that there may

therefore be an assignment, and thus
29050 Federal Register / Vol. 63, No. 101 /Wednesday, May 27, 1998 / Notices

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

automatic termination, of their Existing

Advisory Agreements. In addition,

applicants state that the Existing

Advisory Agreement of UBSII with UBS

Investor Portfolios will terminate in

accordance with its terms.

3. Rule 15a–4 under the Act provides,

in pertinent part, that if an investment

advisory contract with an investment

company is terminated by an

assignment in which the adviser does

not directly receive a benefit, the

adviser may continue to serve for 120

days under a written contract that has

not been approved by the company’s

shareholders, provided that: (a) the new

contract is approved by the company’s

board of directors (including a majority

of the non-interested directors); (b) the

compensation to be paid under the new

contract does not exceed the

compensation that would have been

paid under the contract most recently

approved by the company’s

shareholders; and (c) neither the adviser

nor any controlling person of the

adviser ‘‘directly or indirectly receives

money or other benefit’’ in connection

with the assignment. Applicants state

that they cannot rely on rule 15a–4

because UBS–NY Branch, UBSAM–NY

or UBSII, or UBS as their controlling

person, may be deemed to receive a

benefit in connection with

consummation of the Merger.

4. Section 6(c) 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

assert that the requested relief meets

this standard.

5. Applicants submit that the terms

and timing of the Merger were

determined by UBS and SBC in

response to a number of factors beyond

the scope of the Act and substantially

unrelated to the Funds. Applicants state

that there is insufficient time to obtain

shareholder approval of the New

Advisory Agreements before the Closing

Date. Applicants assert that the

requested relief would permit

continuity of investment management of

the Funds, without interruption, during

the period following consummation of

the Merger.

6. UBS represents that the Funds will

receive the same scope and quality of

investment advisory services during the

Interim Period. The relevant Adviser

will render investment advisory services

to the Funds under the New Advisory

Agreements, which will be the same as

the Existing Advisory Agreements,

except for the dates of execution and

termination. Applicants assert that

during the Interim Period, investment

advisory services will be provided by

investment management personnel with

the same or comparable skills,

experience and responsibilities, in the

same manner and at the same fee levels.

Applicants state that, in the event of any

material change in personnel, the

relevant Adviser will apprise and

consult the Boards to assure that the

Boards, including a majority of the noninterested directors, are satisfied that

the services provided by the Adviser

will not be diminished in scope or

quality.

7. Applicants note that the fees

payable to the Advisers during the

Interim Period under the New Advisory

Agreements will be at the same rate as

the fees currently payable by each Fund

under the Existing Advisory Agreements

and have been approved by the

appropriate Fund’s Board and

respective shareholders. Applicants also

state that the fees will not be released

to the Adviser by the Escrow Agent

without an appropriate certification that

the New Advisory Agreements have

been approved by the Fund’s respective

shareholders.

Applicants’ Conditions

Applicants agree that any order of the

SEC granting the requested relief will be

subject to the following conditions:

1. The New Advisory Agreements will

contain the same terms and conditions

as the Existing Advisory Agreements,

except for the dates of execution and

termination.

2. The portion of the investment

advisory fees earned by an 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 (a) to the

Adviser only upon approval of each

New Advisory Agreement by the

applicable Fund’s shareholders, or (b) in

the absence of shareholder approval

prior to the expiration of the Interim

Period, to the Fund.

3. Each Fund will promptly schedule

a meeting of shareholders to vote on

approval of the New Advisory

Agreements to be held within 150 days

following the commencement of the

Interim Period (but in no event after

December 31, 1998).

4. UBS, UBSAM–NY and UBSII will

pay the costs of preparing and filing the

application, and the costs relating to the

solicitation of approval of Fund

shareholders of the New Advisory

Agreements necessitated by the Merger.

5. UBS will take all appropriate

actions to ensure that the scope and

quality of investment advisory and other

services provided to the Funds by the

Advisers during the Interim Period will

be at least equivalent, in the judgment

of the Boards, including a majority of

the non-interested Board members, to

the scope and quality of services

currently provided by the Adviser. In

the event of any material change in the

personnel providing services pursuant

to the New Advisory Agreements, the

Adviser will apprise and consult with

the Boards to ensure that the Boards,

including a majority of the noninterested Board members, are satisfied

that the services provided will not be

diminished in scope or quality.

For the SEC, by the Division of

Investment Management, under

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–13957 Filed 5–26–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40005; File No. SR–NASD–

98–18]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Notice of Extension of

Comment Period for Proposal Relating

to Qualified Immunity in Arbitration

Proceedings for Statements Made on

Forms U–4 and U–5

May 19, 1998.

On April 21, 1998, the NASD

Regulations, Inc. (‘‘NASD Regulation’’)

filed a proposed rule change with the

Securities and Exchange Commission

(‘‘SEC’’ or ‘‘Commission’’) pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934.1 NASD

Regulation proposes to provide

members of the NASD with qualified

immunity in arbitration proceedings for

statements made in good faith in certain

disclosures filed with the NASD on

Forms U–4 and U–5, the uniform

registration and termination notices for

registered persons.

Notice of the proposed rule change

was provided by the issuance of

Securities Exchange Act Release No.

39892 (April 21, 1998) and by

publication in the Federal Register on

April 28, 1998 (63 FR 23321). The

Commission has received requests for

an extension of time for public comment