62904 Federal Register / Vol. 60, No. 235 / Thursday, December 7, 1995 / Notices

1The Trust was established in November 1986 to

function as the underlying investment medium for

the separate account of an otherwise unaffiliated

insurance company and subsequently of a separate

account of an affiliate of that insurance company.

Those two separate accounts, together with the

Account, are the only separate accounts invested in

the Trust. The unaffiliated insurance company

separate accounts hold shares in all the Portfolios

of the Trust except the BP, Fixed Income and

Aggressive Growth Portfolios.

Contract to be issued. Such additional

requests for exemptive relief would

present no issues under the 1940 Act

not already addressed in this request for

exemptive relief.

13. Applicants assert that the

standards of Section 6(c) of the 1940 Act

are satisfied because the requested relief

is appropriate in the public interest and

consistent with the purposes of the 1940

Act and the protection of investors.

Applicants submit that the requested

relief would promote competitiveness in

the variable life insurance market by

eliminating the need for CG Life to file

redundant exemptive applications,

thereby reducing its administrative

expenses and maximizing efficient use

of its resources. Applicants further

submit that the delay and expense

involved in having to seek exemptive

relief repeatedly would impair the

ability of CG Life to take full advantage

of business opportunities as they arise.

Moreover, if CG Life were required to

seek exemptive relief repeatedly with

respect to the issues addressed in this

application, investors would not receive

any benefit or additional protection

thereby, and might be disadvantaged as

a result of increased overhead expenses

for CG Life.

Conditions for Relief

Applicants agree to comply with the

following conditions for relief.

1. CG Life will monitor the tax burden

imposed on it, and undertakes to reduce the

tax burden charge to the extent of any

significant decrease in tax burden.

2. The registration statement for any

Contracts and Future Contracts under which

a tax burden charge is deducted will: (i)

disclose the charge; (ii) explain the purpose

of the charge; and (iii) state that the charge

is reasonable in relation to CG Life’s increase

federal income tax burden under Section 848

of the Code resulting from the receipt of

premiums.

3. The registration statement for any

Contracts and Future Contracts under which

a tax burden charge is deducted will contain

as an exhibit an actuarial opinion as to: (i)

the reasonableness of the charge in relation

to CG Life’s increased federal income tax

burden under Section 848 resulting from the

receipt of premiums; (ii) the reasonableness

of the after tax rate of return used in

calculating such charge, and the relationship

of that charge to CG Life’s cost of capital; and

(iii) the appropriateness of the factors taken

into account by CG Life in determining the

after tax rate of return.

Conclusion

For the reasons and upon the facts set

forth above, Applicants submit that the

requested exemptions from Section

27(c)(2) of the 1940 Act and Rule 6e–

3(T)(c)(4)(v) thereunder—to permit the

deduction of 0.5% of premium

payments under the Contracts and any

Future Contracts—would be appropriate

in the public interest and consistent

with the protection of investors and the

purposes fairly intended by the policy

and provisions of the 1940 Act.

For the Commission, by the Division of

Investment Management, by delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29830 Filed 12–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21559; File No. 812–9706]

PaineWebber Life Insurance Company,

et al.

November 30, 1995.

AGENCY: Securities and Exchange

Commission (the ‘‘SEC’’ or the

‘‘Commission’’).

ACTION: Notice of application for an

order under the Investment Company

Act of 1940 (the ‘‘1940 Act’’).

APPLICANTS: PaineWebber Life Insurance

Company (‘‘PaineWebber Life’’), and

PaineWebber Variable Annuity Account

(the ‘‘Account’’).

RELEVANT 1940 ACT SECTIONS: Approval

requested under Section 26(b) of the

1940 Act.

SUMMARY OF APPLICATION: Applicants

seek an order pursuant to Section 26(b)

of the 1940 Act approving the

substitution of shares of the Balanced

Portfolio (‘‘BP’’) of the PaineWebber

Series Trust (‘‘Trust’’) for the shares of

the Asset Allocation Portfolio (‘‘AAP’’)

of the Trust.

FILING DATE: The application was filed

on August 4, 1995.

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 on this application by writing

to the Secretary of the SEC and serving

Applicants with a copy of the request,

personally or by mail. Hearing requests

must be received by the Commission by

5:30 p.m. on December 26, 1995 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 interest, the reason for

the request, and the issues contested.

Persons may request notification of a

hearing by writing to the Secretary of

the SEC.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

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

Applicants, Mr. Richard J. Tucker,

PaineWebber Life Insurance Company,

1200 Harbor Boulevard, Weehawken,

New Jersey 07087.

FOR FURTHER INFORMATION CONTACT:

Joseph G. Mari, Senior Special Counsel,

or Wendy Friedlander, Deputy Chief,

both at (202) 942–0670, Office of

Insurance Products, Division of

Investment Management.

SUPPLEMENTARY INFORMATION: Following

is a summary of the application. The

complete application is available for a

fee from the Commission’s Public

Reference Branch.

Applicants’ Representations

1. PaineWebber Life is a stock life

insurance company organized under

California law in 1956. PaineWebber

Holdings, Inc., a wholly-owned

subsidiary of PaineWebber Group, Inc.,

owns 100 percent of the stock of

PaineWebber Life. The Account,

established by PaineWebber Life to fund

variable annuity contracts (‘‘Contracts’’)

on December 31, 1992, pursuant to

California law, is registered with the

Commission as a unit investment trust.

The assets of the Account are divided

among ten investment divisions

(‘‘Divisions’’), each of which invests in

shares of one of the ten designated

portfolios of the Trust, including the BP

and AAP, each with its own investment

objectives and investment portfolio. The

Trust is an open-end diversified

management investment company

registered under the 1940 Act.1 Mitchell

Hutchins Asset Management, Inc.

(‘‘Mitchell Hutchins’’), a registered

investment adviser under the

Investment Advisers Act of 1940, is the

investment adviser and administrator

for the Trust.

2. PaineWebber Incorporated (‘‘PWI’’),

a wholly-owned subsidiary of

PaineWebber Group, Inc., a brokerdealer registered under the Securities

Exchange Act of 1934 and a member of

the National Association of Securities

Dealers, Inc., acts as principal

underwriter for the Contracts.

3. The BP seeks total return while

preserving capital by investing in equity

securities and by investing no less than

25% of its assets in fixed income

securities. The BP pays its investment

adviser an annual fee of .75% of average

daily net assets. The total assets of the
Federal Register / Vol. 60, No. 235 / Thursday, December 7, 1995 / Notices 62905

BP as of December 31, 1994, were

approximately $12 million. The AAP

seeks to provide a high total return with

low volatility by allocating investments

among equity securities, long- and midterm debt securities and money market

instruments. The AAP pays its

investment adviser an annual fee of

.75% of average daily net assets as

compensation for its services. The total

assets of the AAP as of December 31,

1994, were approximately $23.3 million.

4. On July 20, 1995, the Board of

Trustees of the Trust (‘‘Board’’)

approved both changing the name and

the investment policies of the AAP. The

changes will cause the AAP to operate

more as a balanced fund in that it would

invest in a combination of equity

securities, investment grade debt

obligations and money market

instruments. The AAP name will be

changed to the ‘‘Balanced Portfolio.’’

5. Also on July 20, 1995, the Board

determined that it was in the best

interest of the shareholders of the BP to

terminate the sale of shares of that

Portfolio, effective July 21, 1995. The

Board based its decision on (a) the

minimal assets of BP after almost three

years of operations; (b)

disproportionately high expenses; (c)

the investment adviser’s indication that

the small size of the Portfolio, partially

the result of the Portfolio being offered

to only one separate account, makes it

difficult to make appropriate investment

decisions and comply with the

diversification requirements applicable

to variable insurance products under

section 817(h) of the Internal Revenue

Code (‘‘Code’’); and (d) PaineWebber

Life’s assertion that because the

investment objectives and policies of

the BP and the AAP, as recently

changed by the Board, are substantially

similar, the two Portfolios basically

compete for the same investment goals

of Contract purchasers. PaineWebber

Life was notified of the Board’s

determination and discontinued

accepting premium payments in the

Balanced Division.

6. PaineWebber Life proposes that

shares of the AAP be substituted for the

shares of the BP now held by the

Account’s Balanced Division. The

substitution would be effected at net

asset value so that the dollar value of

the amount invested in shares of the BP

would be the same as the amount

invested in shares of the AAP after the

substitution. Contract owners will be

able to direct their interests in the BP

among the remaining eight Portfolios of

the Trust (‘‘Remaining Portfolios’’) if

they do not want to move their interests

to the AAP.

7. On the date of the substitution, the

per share values of each of the Portfolios

will be determined in the normal course

of business. The shares underlying the

contract values in the BP will be

redeemed by PaineWebber Life and the

net asset values applied to purchase

shares of the AAP at net asset value. The

investment securities held by the BP

will be disposed of and any expense

incurred in disposing of the investment

securities and effecting substitution will

be shared by PaineWebber Life and

Mitchell Hutchins. There will be no

change in the amount of the Contract

owner’s cash value as a result of the

substitution.

8. The Contracts reserve to

PaineWebber Life the right to replace

the shares of the Trust held by the

Separate Account with shares of another

series or another registered investment

company, subject to Commission

approval. Contract owners were notified

that shares of the BP were no longer

available as an investment option for

purchase or transfer under the Contracts

and that PaineWebber Life intended to

file this application with the SEC

seeking an Order permitting it to

effectuate the proposed substitution.

Contract owners with allocation

instructions on file with PaineWebber

Life that currently direct net premiums

to the BP have been notified of the

discontinuance of the BP as an

investment option.

9. Upon receipt of SEC approval of the

proposed substitution, Contract owners

with Contract values in the BP will be

provided a form with which they can

elect to transfer their Contract values to

one or more of the Remaining Portfolios.

Contract owners will be advised that the

AAP has an investment objective most

similar to the BP in which the Contract

owner has values invested. If no

instructions are received within 30 days

after notice of the request to elect,

Contract values in the BP will be

transferred automatically to the AAP.

10. The Contracts provide Contract

owners the right to transfer part or all

of the Contract value from one

allocation option to one or more of the

remaining options. The Contracts also

provide that each transfer in excess of

12 in a calendar year is subject to a $10

charge, which has been waived by

PaineWebber Life until further notice.

The substitution of the shares of one or

more of the Remaining Portfolios for

shares of the BP will not be considered

a ‘‘transfer’’ for the purpose of the above

limitation. Contract owners will not be

subject to any charges or costs for the

substitution.

Applicants’ Legal Analysis

1. Section 26(b) of the 1940 Act

prohibits the depositor or trustee of a

registered unit investment trust holding

the security of a single issuer from

substituting another security for such

security unless the Commission has

approved the substitution. Section 26(b)

provides that the Commission will

approve a substitution if it is consistent

with the protection of investors and the

purposes fairly intended by the policy

and provisions of the 1940 Act.

2. Contract owners will not be subject

to any additional fees or charges as a

result of the substitution. The

substitution will not affect any benefits,

rights or Contract values under the

Contracts nor will it affect the purchase

payment dates under the Contracts used

in determining the early withdrawal

charge. Contract owners will be given

notice of the substitution and an

opportunity to allocate existing Contract

values among the eight Remaining

Portfolios as they wish.

3. Since the Account can no longer

purchase shares of the BP, with normal

redemptions the BP is expected to

shrink rapidly. Applicants state that

because of the relatively minor amount

of total net assets in the BP, the fact that

only one separate account had been

investing in the BP when the sale of

shares was terminated, and the resulting

expense level and investment

limitations, PaineWebber Life believes

investment in the BP is no longer

appropriate. Applicants contend that

combining the assets of the BP and

AAP, and the investment in the

Portfolio by three separate accounts,

should enhance its asset growth

abilities.

4. Applicants state that the

diminishing amount of assets in the BP

makes it difficult for the investment

adviser to make appropriate investments

for the Portfolio that will meet the

Code’s requirement for diversification.

Failure to meet the diversification

requirement could result in the entire

Contract being currently taxable, not

just that portion of the Contract that is

invested in the non-complying Portfolio.

Applicants state that it was determined

that it was more important to the

interests and the benefit of Contract

owners to preserve the tax status

enjoyed by Contract owners than to

maintain the Portfolio which is no

longer available for additional purchase.

Applicants also contend that the

minimal amount of total net assets

available for investment and the

termination of the sale of shares

diminishes investment opportunities

and handicaps Mitchell Hutchins in its
62906 Federal Register / Vol. 60, No. 235 / Thursday, December 7, 1995 / Notices

1Certain series of Stagecoach Inc., Stagecoach

Trust and Overland are feeder funds in a master/

feeder structure and currently invest substantially

all of their assets in corresponding master portfolios

of MIP, MIT or MSIT.

ability to invest in potentially

advantageous securities.

5. Applicants state that expenses

incurred by the BP have remained

relatively high, and a large portion of

the BP’s expenses is fixed. Applicants

represent that the lack of substantial

assets in the BP results in high operating

expenses that are borne by the Contract

owners. The BP’s 1994 actual expenses

of 1.56% of average total net assets were

higher than expenses of 1.03% of

average total net assets for the AAP.

Applicants contend that in comparing

the expenses of the BP and AAP, the

asset base of the BP and the increasing

asset base of the AAP is a relevant

consideration. Applicants assert that the

increase in total assets of the AAP

resulting from the substitution should

result in a lessening of its overall

expenses.

6. Applicants state that the AAP offers

Contract owners investments

compatible with the objectives of

Contract owners investing in the BP.

Applicants state that management of

PaineWebber Life, in consultation with

Mitchell Hutchins, studied the

investment objectives, policies and

restrictions of each of the Remaining

Portfolios to form an opinion as to

which of the Remaining Portfolios

appeared most closely identified with

the investment intent of a Contract

owner invested in the BP. It was

concluded that a Contract owner who

had Contract values invested in the BP

was primarily interested in a Portfolios

with an objective of a stable return

while preserving capital. The

investment objective of the AAP is to

seek a high total return with low

volatility, and the recent revision of the

investment policies of the BP led to the

conclusion that the AAP most closely

suits the investment intent of the

Contract owner who now has Contract

values invested in the BP.

Applicants’ Conclusion

For the reasons discussed above,

applicants submit that the proposed

substitution of shares of the AAP for

shares of the BP is consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29831 Filed 12–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No IC–21562; File No. 812–9794]

Stagecoach Funds, Inc., et al.; Notice

of Application

December 1, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’)

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (‘‘Act’’).

APPLICANTS: Stagecoach Funds, Inc.

(‘’Stagecoach Funds’’), Stagecoach Inc.,

Stagecoach Trust, Overland Express

Funds, Inc. (‘‘Overland’’), Life &

Annuity Trust (‘‘Annuity Trust’’),

Master Investment Portfolio (‘‘MIP’’),

Master Investment Trust (‘‘MIT’’),

Managed Series Investment Trust

(‘‘MSIT’’) (collectively, the

‘‘Companies’’), Wells Fargo Bank, N.A.

(‘‘Wells Fargo’’), and The Nikko

Building Co., Ltd. (‘‘Nikko Building’’).

RELEVANT ACT SECTIONS: Order requested

under section 6(c) for an exemption

from section 15(f)(1)(A).

SUMMARY OF APPLICATION: Applicants

request an exemption from section

15(f)(1)(A) to permit Wells Fargo and

Nikko Building to sell their interests in

Wells Fargo Nikko Investment Advisors

(‘‘WFNIA’’), the sub-adviser to certain of

the series offered by the Companies, to

Barclays Bank PLC (’’Barclays’’).

Without the requested exemption, the

Companies would have to reconstitute

their boards of directors to meet the 75

percent non-interested director

requirement of section 15(f)(1)(A) in

order to comply with the safe harbor

provisions of section 15(f).

FILING DATES: The application was filed

on October 4, 1995, and amended on

December 1, 1995.

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

December 22, 1995, 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 writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street NW., Washington, DC 20549.

Applicants: Companies, 111 Center

Street, Little Rock, Arkansas 72201;

Wells Fargo, 420 Montgomery Street,

San Francisco, California 94105; Nikko

Building, 3–1 Marunouchi, 3-Chrome,

Chiyoda-Ku, Tokyo 100, Japan.

FOR FURTHER INFORMATION CONTACT:

Courtney S. Thornton, Senior Counsel,

at (202) 942–0583, or Robert A.

Robertson, 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.

Applicants’ Representations

1. The Companies are open-end

management investment companies

registered under the Act, each of which

currently offers several series.1 Wells

Fargo, a wholly-owned subsidiary of

Wells Fargo & Co., currently serves as

investment adviser to each series of the

Companies (including the master

portfolios in which feeder funds invest,

but not the feeder funds themselves).

2. WFNIA is a California general

partnership owned 50 percent by Wells

Fargo Investment Advisors (‘‘WF

Advisors’’), a wholly-owned subsidiary

of Wells Fargo, and 50 percent by The

Nikko Building U.S.A., Inc., a whollyowned subsidiary of Nikko Building.

WFNIA currently serves as sub-adviser

to 15 of the 40 active series (the ‘‘SubAdvised Series’’) offered by the

Companies. As of June 30, 1995, the

Sub-Advised Series had approximately

$3 billion in assets under management,

which represented less than 27% of the

aggregate assets under management in

all active series of the Companies, and

approximately 1.6% of the

approximately $183 billion in assets

that WFNIA had under management.

3. On June 21, 1995, Wells Fargo,

Nikko Building, and certain of their

affiliates entered into a purchase and

assumption agreement (the

‘‘Agreement’’) with Barclays to sell their

interests in WFNIA for an aggregate

price of approximately $443 million,

subject to various adjustments at the

time of closing (the ‘‘Transaction’’). As

part of the purchase price, the

Agreement also provides for Barclays to

make monthly payments to Wells Fargo

and its affiliated sellers of .15 percent of

the aggregate value of the interests held

by retail shareholders of Stagecoach

Trust in the LifePath Master Portfolios