[Federal Register Volume 63, Number 101 (Wednesday, May 27, 1998)]
[Notices]
[Pages 29048-29050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-13957]


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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.

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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

[[Page 29049]]

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 Friedland-Wechsler, 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 master-feeder 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\
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    \1\ The 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.
    \2\ UBSAM-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.
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    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\
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    \3\ Applicants 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.
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    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

[[Page 29050]]

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 non-interested 
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 non-interested 
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