[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