The Payden & Rygel Investment Group and Payden & Rygel; Notice of Application

The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 20549-0102 (tel. 202-942-8090).

Applicants' Representations

1. The P&R Group, a Massachusetts business trust, is registered under the Act as an open-end management investment company. The P&R Group currently consists of twenty-three Funds, including the Bunker Hill Money Market Fund which holds itself out as a money market fund and is subject to the requirements of rule 2a-7 under the Act (together with any other future money market Funds, ``Money Market Funds'').\1\ Payden, a privately-owned California company, is registered as an investment adviser under the Investment Advisers Act of 1940 (``Advisers Act'') and serves as investment adviser to each Fund. ---------------------------------------------------------------------------

\1\ All Investment Companies and Funds that currently intend to rely on the requested relief are named as applicants. Any other Investment Companies and Funds that may rely on the relief in the future will do so only in accordance with the terms and conditions of the application. ---------------------------------------------------------------------------

2. Applicants state that each of the Funds has, or may have, uninvested cash held by its custodian (``Uninvested Cash''). Such Uninvested Cash may result from a variety of sources, including dividends or interest received on portfolio securities, unsettled securities transactions, strategic reserves, matured investments, proceeds from liquidation of investment securities, dividend payments, or money received from investors. The Funds also may participate in a securities lending program under which a Fund may lend its portfolio securities to broker-dealers or other institutional investors (``Securities Lending Program''). The loans are continuously secured by collateral equal at all times to at least the market value of the securities loaned. Collateral for these loans may include cash (``Cash Collateral,'' and together with Uninvested Cash, ``Cash Balances''). 3. Applicants request an order to permit each of the Funds (``Investing Funds'') to invest their Cash Balances in one or more Money Market Funds, and the Money Market Funds to sell their shares to, and redeem their shares from, the Investing Funds. Investment of Cash Balances in shares of Money Market Funds will be made only to the extent that such investments are consistent with each Investing Fund's investment restrictions and policies as set forth in its prospectus and statement of additional information. Applicants believe that the proposed transactions may reduce transaction costs, create more liquidity, increase returns, and diversify holdings.

Applicants' Legal Analysis

1. Section 12(d)(1)(A) of the Act provides, in pertinent part, that no registered investment company may acquire securities of another investment company if such securities represent more than 3% of the acquired company's outstanding voting stock, more than 5% of the acquiring company's total assets, or if such securities, together with the securities of other acquired investment companies, represent more than 10% of the acquiring company's total assets. Section 12(d)(1)(B) of the Act, in pertinent part, provides that no registered open-end investment company may sell its securities to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company's voting stock, or if the sale will cause more than 10% of the acquired company's voting stock to be owned by investment companies. 2. Section 12(d)(l)(J) of the Act provides that the Commission may exempt any person, security, or transaction from any provision of section 12(d)(l) if, and to the extent that, such exemption is consistent with the public interest and the protection of investors. Applicants request relief under section 12(d)(l)(J) from the limitations of sections 12(d)(l)(A) and (B) to permit the Investing Funds to invest Cash Balances in Money Market Funds. 3. Applicants state that the proposed arrangement would not result in the abuses that sections 12(d)(l)(A) and (B) were intended to prevent. Applicants state that because each Money Market Fund will maintain a highly liquid portfolio, an Investing Fund will not be in a position to gain undue influence over a Money Market Fund through threat of redemption. Applicants represent that the proposed arrangement will not result in an inappropriate layering of fees because shares of the Money Market Funds sold to the Investing Funds will not be subject to a sales load, redemption fee, distribution fee under a plan adopted in accordance with rule 12b-1 under the Act, or service fee (as defined in rule 2830 of the National Association of Securities Dealers' (``NASD'') Conduct Rules), or, if such shares are subject to any such sales load, redemption fee, distribution fee or service fee, Payden will waive its advisory fee for each Investing Fund in an amount that offsets the amount of such fees incurred by the Investing Fund. In connection with approving any advisory contract for an Investing Fund, the Investing Fund's board of directors of trustees (the ``Board''), including a majority of the directors or trustees who are not ``interested persons,'' as defined in section 2(a)(19) of the Act (``Independent Directors or Trustees'') will consider to what extent, if any, the advisory fees charged to the Investing Fund by Payden should be reduced to account for reduced services provided to the Investing Fund by Payden as a result of the investment of Uninvested Cash in the Money Market Funds. Applicants represent that no Money Market Fund will acquire securities of any other investment company of the limitations contained in section 12(d)(1)(A) of the Act. 4. Section 17(a) of the Act makes it unlawful for any affiliated person of a registered investment company, or an affiliated person of such person, acting as principal, to sell or purchase any security to or from the company. Section 2(a)(3) of the Act defines an ``affiliated person'' of an investment company to include, among others, any person directly or indirectly controlling, controlled by, or under common control with the other person and any person owning, controlling, or holding with power to vote, 5% or more of the other person. Applicants state that, because the Funds share a common adviser, each Fund may be deemed to be under common control with each of the other Funds, and thus an affiliated person of each of the other Funds. In addition, if the relief is granted, an Investing Fund may acquire 5% or more of a Money Market Fund and become an affiliated person of the Money Market Fund. As a result, section 17(a) would prohibit the sale of the shares of a Money Market Fund to the Investing Funds, and the redemption of the shares by a Money Market Fund.

5. Section 17(b) of the Act authorizes the Commission to exempt a transaction from section 17(a) if the terms of the proposed transaction, including the consideration to be paid or received, are reasonable and fair and do not involve overreaching on the part of any person concerned, the proposed transaction is consistent with the policy of each investment company concerned, and the proposed transaction is consistent with the general purposes of the Act. Section 6(c) of the Act permits the Commission to exempt persons or transactions from any provision of the Act if the exemption is necessary or appropriate in the public interested and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. 6. Applicants submit that their request for relief to permit the purchase and redemption of shares of a Money Market Fund by the Investing Funds satisfies the standards in sections 6(c) and 17(b) of the Act. Applicants note that shares of the Money Market Funds will be purchased and redeemed at their net asset value, the same consideration paid and received for these shares by any other shareholder. Applicants state that the Investing Funds will remain their ability to invest Cash Balances directly in money market instruments as authorized by their respective investment objectives and policies if they believe they can obtain a higher rate of return, or for any other reason. Applicants also state that a Money Market Fund has the right to discontinue selling shares to any of the Investing Funds if the Money Market Fund's Board determines that such sale would adversely affect its portfolio management and operations. 7. Section 17(d) of the Act and rule 17d-1 under the Act prohibit an affiliated person of an investment company, acting as principal, from participating in or effecting any transaction in connection with any joint enterprise or joint arrangement in which the investment company participates. Applicants state that each Investing Fund, by purchasing shares of a Money Market Fund, Payden, by managing the assets of the Investing Funds investing in a Money Market Fund, and a Money Market Fund, by selling shares to the Investing Funds, could be deemed to be participants in a joint enterprise or arrangement within the meaning of section 17(d) of the Act and rule 17d-1 under the Act. 8. Rule 17d-1 permits the Commission to approve a proposed joint transaction covered by the terms of section 17(d) of the Act. In determining whether to approve a transaction, the Commission is to consider whether the proposed transaction is consistent with the provisions, policies, and purposes of the Act, and the extent to which the participation is on a basis different from or less advantageous than that of other participants. Applicants submit that the investment by the Investing Funds in shares of a Money Market Fund would be on the same basis and would be indistinguishable from any other shareholder account maintained by the same class of the Money Market Fund and that the transactions will be consistent with the Act.

Applicants' Conditions

Applicants agree that any order granting the requested relief will be subject to the following conditions: 1. Shares of the Money Market Funds sold to and redeemed by the Investing Funds will not be subject to a sales load, redemption fee, distribution fee under a plan adopted in accordance with rule 12b-1 under the Act or service fee (as defined in rule 2830(b)(9) of the NASD's Conduct Rules), or if such shares are subject to any such fee, Payden will waive its advisory fee for each Investing Fund in an amount that offsets the amount of such fees incurred by the Investing Fund. 2. Prior to reliance on the order, an Investing Fund will hold a meeting of the Board for the purpose of voting on the advisory contract under section 15 of the Act. Before approving any advisory contract for an Investing Fund, the Board, including a majority of the Independent Directors or Trustees, taking into account all relevant factors, shall consider to what extent, if any, the advisory fees charged to the Investing Fund by Payden should be reduced to account for reduced services provided to the Fund by Payden as a result of the Uninvested Cash being invested in the Money Market Fund. In connection with this consideration, Payden will provide the Board with specific information regarding the approximate cost to Payden of, or portion of the advisory fee under the existing advisory contract attributable to, managing the Uninvested Cash of the Investing Fund that can be expected to be invested in the Money Market Fund. The minute books of the Investing Fund will record fully the Board's considerations in approving the advisory contract, including the consideration relating to fees referred to above. 3. Each Investing Fund will invest Uninvested Cash in, and hold shares of, the Money Market Funds only to the extent that the Investing Fund's aggregate investment in the Money Market Funds does not exceed 25 percent of the Investing Fund's total assets. For purposes of this limitation, each Investing Fund will be treated as a separate investment company. 4. Investment of Cash Balances in shares of the Money Market Funds will be in accordance with each Investing Fund's respective investment restrictions, if any, and will be consistent with each Investing Fund's policies as set forth in its prospectuses and statements of additional information. 5. Each Investing Fund, each Money Market Fund, and any future Fund that may rely on the order shall be part of the same group of investment companies, as defined in section 12(d)(1)(G)(ii) of the Act and shall be advised or, provided Payden manages Cash Balances, subadvised by Payden, or a person controlling, controlled by, or under common control with Payden. 6. No Money Market Fund whose shares are acquired by an Investing Fund shall acquire securities of any investment company in excess of the limits contained in section 12(d)(1)(A) of the Act. 7. Before a Fund may participate in Securities Lending Arrangements, a majority of the Board, including a majority of the Independent Directors or Trustees, will approve the Fund's participation in Securities Lending Arrangements. Such Independent Directors or Trustees also will evaluate the Securities Lending Arrangements and their results no less frequently than annually and determine that any investment of Cash Collateral in the Money Market Funds is in the best interest of the shareholders of the Fund.

For the Commission, by the Division of Investment Management, pursuant to delegated authority. Jonathan G. Katz, Secretary. [FR Doc. 99-32063 Filed 12-9-99; 8:45 am] BILLING CODE 8010-01-M