38218 Federal Register / Vol. 63, No. 135 /Wednesday, July 15, 1998 / Notices

registered investment company, acting

as principal, from participating in any

joint arrangement with the investment

company unless the SEC has issued an

order authorizing the arrangement.

Applicants believe that each Fund may

be deemed to be participating in a joint

transaction with each other Fund

through the pooling of assets in the

Foundation, and that the Funds could

be deemed to be participating in a joint

transaction with the Foundation

through their investments in HSII.

2. In determining whether to grant an

exemption under rule 17d–1, the SEC

considers whether the investment

company’s participation in the joint

enterprises in consistent with the

provisions, policies and purposes of the

Act, and the extend to which such

participation is on a basis different from

or less advantageous than that of other

participants. Applicants assert that all

investors in the Foundation will

participate on the same basis.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–18760 Filed 7–14–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCAHNGE

COMMISSION

[Rel. No. IC–23308; 812–10008]

Corporate Income Fund, et al.; Notice

of Application

July 9, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (‘‘Act’’).

SUMMARY OF APPLICATION: Applicants

request an order under section 6(c) of

the Investment Company Act of 1940 to

permit certain unit investment trusts to

invest up to 10.5% of their assets in

securities of an issuer that derives more

than 15% of its gross revenues from

securities-related activities.

APPLICANTS: Corporate Income Fund,

Equity Income Fund, International Bond

Fund, and Defined Asset Funds, each on

behalf of its component unit investment

trust (each a ‘‘Trust’’).

FILING DATES: The application was filed

on February 22, 1996, and amended on

July 10, 1996, January 13, 1997, and

January 23, 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

August 3, 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, DC 20549.

Applicants, c/o Merrill Lynch, Pierce,

Fenner & Smith Inc., P.O. Box 9051,

Princeton, N.J. 08543–9051, Attention:

Teresa Koncick, Esq.

FOR FURTHER INFORMATION CONTACT:

Mary T. Geffroy, Senior Counsel, (202)

942–0553, or Nadya B. Roytblat,

Assistant Director, (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 St.

N.W., Washington, D.C. 20549 (tel. (202)

942–8090).

Applicant’s Representations

1. Each applicant is a unit investment

trust registered under the Act and

composed of one or more separate

Trusts. The depositors of the Trusts are

Merrill Lynch, Pierce, Fenner & Smith

Inc., PaineWebber Inc., Smith Barney

Inc., and Dean Witter Reynolds Inc.

(collectively, the ‘‘Sponsors’’).

2. Each Trust pursues its investment

objective by investing over its life in a

fixed portfolio of securities. Following

the initial deposit of securities in a

Trust, the Sponsors may, in response to

investor demand for units, deposit

additional securities. Subsequent

deposits of securities into the Trust

must generally maintain the original

proportionate relationship among the

securities comprising the Trust’s

portfolio.

3. Disposition of a Trust’s portfolio

securities is generally limited to sales

made in response to redemptions of

units and at the termination of the

Trust. Other than these specific

instances, the Sponsors’ discretion to

sell a Trust’s portfolio securities is

limited to narrow circumstances,

principally: a default in payment by an

issuer; the institution of certain legal

proceedings; a default under certain

documents adversely affecting the

future declaration of dividends or

payment of amounts due by an issuer;

to maintain a Trust’s qualification under

the federal tax laws; to remain

consistent with a Trust’s investment

objectives; or the occurrence of certain

other market or credit factors that, in the

opinion of the Sponsors, would make

the retention of certain securities in a

Trust detrimental to the interest of the

unitholders.

4. Applicants would like the

flexibility to invest up to 10.5% of a

Trust’s assets in securities of an issuer

that derives more than 15% of its gross

revenues from securities-related

activities (as defined below). No Trust

will invest in securities issued by any of

the Sponsors or other underwriters for

the Trusts.

Applicants’ Legal Analysis

1. Section 12(d)(3) of the Act

generally prohibits a registered

investment company from acquiring any

security issued by any person who is a

broker, dealer, investment adviser, or

engaged in the business of underwriting

(collectively, ‘‘securities-related

activities’’). Rule 12d3–1 under the Act,

in relevant part, exempts from the

prohibition of section 12(d)(3)

purchases of securities of an issuer that

derives more than 15% of its gross

revenues from securities-related

activities if certain conditions are met.

One of these conditions, set forth in rule

12d3–1(b)(3), requires that, immediately

after the acquisition, the investment

company has invested not more than

5% of the value of its total assets in

securities of the issuer.

2. Applicants request an exemption

from rule 12d3–1(b)(3) to permit a Trust

to invest up to 10.5% of its assets in

securities of an issuer that derives more

than 15% of its gross revenues from

securities-related activities. Applicants

will comply with all other requirements

of rule 12d3–1.

3. 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.

4. Applicants state that section

12(d)(3) was designed to prevent certain

potential conflicts of interest and to

eliminate certain reciprocal practices

between investment companies and

securities-related businesses. One

potential abusive practice is that an
Federal Register / Vol. 63, No. 135 /Wednesday, July 15, 1998 / Notices 38219

investment company may purchase

shares of a broker-dealer firm to reward

it for selling shares of the investment

company.

Applicants assert that their proposal

does not raise this concern because

units of the Trusts are sold almost

exclusively by the Sponsors and the

Trusts will not purchase shares of the

Sponsors or other underwriters for the

Trusts. The Sponsors estimate that, over

the past year, both in the primary and

secondary markets, over 99% of all unit

sales for the Trusts were made by the

Sponsors. Applicants also state that the

balance of sales generally are made by

a few regional brokerage firms as

dealers, that these firms are not

members of the underwriting group and

that no special incentives are paid to

these dealers to induce sales of Trust

units.

5. Another concern underlying

section 12(d)(3) was that an investment

company may direct brokerage to a

broker-dealer in which it has invested to

enhance the broker-dealers’ profitability

or assist it during financial difficulty,

although the broker-dealer may not offer

the best price and execution. Applicants

assert that their proposal does not raise

this concern because, as a condition to

the requested relief, the Trusts will not

rely on the order to purchase securities

of any issuer that executes portfolio

transactions for the Trusts. Applicants

also note that the Trusts, as unmanaged

vehicles, do not engage in portfolio

transactions with the same frequency or

purpose as managed investment

companies.

6. Section 12(d)(3) also was designed

to prevent the practice of a broker-dealer

giving advice to its customers regarding

which investment company to invest in

based on whether the investment

company has invested in the brokerdealer; thus using the investment

company’s assets to boost the price of

the broker-dealer’s securities.

Applicants assert that the concern about

purchases by a Trust affecting the price

of the issuer’s securities is not present

in the proposed arrangement because a

Trust does not actively trade its

portfolio securities.

Applicants’ Conditions

Applicants agree that the order shall

be subject to the following conditions:

1. The debt obligations and nonvoting preferred stocks held by a Trust

relying on the order will be rated

investment grade by a nationally

recognized statistical rating organization

or be of comparable quality at the time

of their initial deposit.

2. The common stocks held by a Trust

relying on the order will be listed on a

nationally or internationally recognized

securities exchange or market at the

time of their initial deposit.

3. No company whose securities

constitute more than 5% of the total

assets of the portfolio of a Trust relying

on the order nor any affiliate thereof

will act as broker for any purchase or

sale of any portfolio security for any

Trust relying on the order.

4. No Trust relying on the order will

invest more than 5% of its total assets

as of its initial date of deposit in the

securities of any company that, to the

knowledge of the Sponsors, has sold, or

whose affiliate has sold, units of any

other Trust within one year preceding

such initial date of deposit.

5. No company whose securities

constitute more than 5% of the total

assets of the portfolio of a Trust relying

on the order nor any affiliate thereof

will, for a period of at least one year

after the date of the last deposit into the

Trust, act as an underwriter of the units

of any other Trust or be permitted to

acquire any such units directly from a

Sponsor.

6. With respect to any securities

acquired in reliance on the order, such

securities will be acquired only in the

secondary market and not as part of any

offering by the issuers thereof.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–18842 Filed 7–14–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–23307; 812–11122]

EuroPacific Growth Fund, et al.; Notice

of Application

July 9, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under section 6(c) of the

Investment Company Act of 1940 (the

‘‘Act’’) for relief from section 2(a)(19) of

the Act.

SUMMARY OF APPLICATION: Applicants

request an order under section 6(c) of

the Act declaring that a director on the

boards of certain registered investment

companies who also is an outside

director for the parent company of a

registered broker-dealer, will not be

deemed an ‘‘interested person’’ of the

registered investment companies.

APPLICANTS: EuroPacific Growth Fund

(‘‘EUPAC’’), the New Economy Fund

(‘‘NEF’’), New Perspective Fund, Inc.

(‘‘NPF’’), SMALLCAP World Fund, Inc.

(‘‘SCWF’’), The Investment Company of

America (‘‘ICA’’) (collectively, the

‘‘Fund’’); Capital Research and

Management Company (‘‘Capital

Research’’); and American Funds

Distributors, Inc. (‘‘AFD’’).

FILING DATES: The application was filed

on April 29, 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

August 3, 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: 333 South Hope Street, Los

Angeles, CA 90071–1447.

FOR FURTHER INFORMATION CONTACT:

Mary T. Geffroy, Senior Counsel, at

(202) 942–0553, 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, N.W., Washington, D.C. 20549

(tel. (202) 942–8090).

Applicant’s Representations

1. Each of the Funds is an open-end

management investment company

registered under the Act. EUPAC and

NEF are Massachusetts business trusts.

NPF and SCWF are Maryland

corporations. ICA is a Delaware

corporation.

2. Capital Research, an investment

adviser registered under the Investment

Advisers Act of 1940, serves as

investment adviser to the Funds and

certain other registered investment

companies. The Funds and these

investment companies, together with

any future registered investment

company advised by Capital Research,

are referred to as the ‘‘American

Funds.’’ AFD, a wholly-owned