PaineWebber Incorporated and PaineWebber Equity Trust, ABCs Trust Series 1; Notice of Application

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 5th Street, N.W., Washington, D.C. 20549-0102 (tel. (202) 942-8090).

Applicants' Representations

1. Each Series will be a series of the Trust and will be a UIT registered under the Act. PaineWebber will be the sponsor of each Series. Each Series will be created under the laws of one of the United States pursuant to a trust indenture, which will contain information specific to that Series, and which will incorporate by reference a master trust indenture between the Sponsor and a financial institution that is a bank within the meaning of section 2(a)(5) of the Act and that satisfies the criteria in section 26(a) of the Act and will be unaffiliated with the Sponsor (the ``Trustee''). 2. The investment objective of each Series will be to provide for capital appreciation and/or dividend income by investing in equity securities. The Sponsor will deposit with the Trustee portfolio securities which will be chosen according to fixed criteria from securities that appear on the PaineWebber Equity Research Department's Analysts' Best Call List as of the initial date of deposit. Each Series' portfolio may include equity securities that have (a) a minimum market capitalization of U.S. $1 billion and (b) had an average daily trading volume in the preceding 60 trading days of at least 50,000 shares equal in value to at least U.S. $250,000 on an exchange (``Qualified Exchange'') which is (i) a national securities exchange which meets the qualifications of section 6 of the Securities Exchange Act of 1934, (ii) the Nasdaq National Market, or (iii) a foreign securities exchange that meets the qualifications set out in the proposed amendments to rule 12d3-1(d)(6) under the Act \2\ (``Qualified Rollover Securities''). ---------------------------------------------------------------------------

\2\ Investment Company Act Release No. 17096 (Aug. 3, 1989) (proposing amendments to rule 12d3-1). The proposed amended rule defined a ``Qualified Foreign Exchange'' to mean a stock exchange in a country other than the United States where (a) trading generally occurred at least four days a week; (b) there were limited restrictions on the ability of registered investment companies to trade their holdings on the exchange; (c) the exchange had a trading volume in stocks for the previous year of at least U.S. $7.5 billion; and (d) the exchange had a turnover ratio for the proceeding year of at least 20% of its market capitalization. The version of the amended rule that was adopted did not include the part of the proposed amendment defining the term ``Qualified Foreign Exchange.'' ---------------------------------------------------------------------------

3. Each Series has at least one rollover date (``Rollover Date'') on which unitholders in the Series (``Rollover Series'') may redeem their units in the Rollover Series on a specified date (``Special Liquidation Date'') and receive units of a subsequent Series of the same type (``New Series''), which will be created on or about the Rollover Date. 4. Each Rollover Series will terminate approximately one year after it is offered for sale. The Sponsor anticipates that there will be some overlap in the Qualified Rollover Securities selected for the portfolios of each Rollover Series and the related New Series. In connection with the rollover, absent the requested relief, each Rollover Series would sell all of its Qualified Rollover Securities and each New Series would acquire its Qualified Rollover Securities on the applicable securities exchange. This would result in the unitholders of both the Rollover Series and the New Series incurring brokerage commissions on the same securities.

Applicants' Legal Analysis

1. Section 17(a) of the Act prohibits an affiliated person of a registered investment company from selling securities to, or purchasing securities from, the company. Section 2(a)(3) of the Act defines an ``affiliated person'' of another person to include, in pertinent part, any person directly or indirectly controlling, controlled by or under common control with, such other person. Each Series will have a common sponsor. Applicants state that, since the sponsor of a Series may be deemed to control the Series, all of the Series may be deemed to be under common control and, thus affiliated persons of each other. 2. Rule 17a-7 under the Act permits registered investment companies that might be deemed affiliated persons solely by reason of having common investment advisers, directors, and/or officers, to purchase securities from, or sell securities to, one another at an independently determined price, provided certain conditions are met. Applicants represent that they will comply with all of the provisions of rule 17a- 7, other than paragraph (e). 3. Paragraph (e) of the rule requires an investment company's board of directors to adopt and monitor certain procedures to assure compliance with the rule. Since a UIT does not have a board of directors, the Series would be unable to comply with this requirement. 4. Section 17(b) of the Act authorizes the SEC 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 registered investment company concerned, and the proposed transaction is consistent with the general purposes of the Act. Section 6(c) under the Act permits the SEC to exempt any person or transaction from any provision of the Act, if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policies of the Act. Applicants request relief under sections 6(c) and 17(b) to permit a Rollover Series to sell Qualified Rollover Securities to a New Series at the closing sales prices of the Qualified Rollover Securities on a Qualified Exchange on the Special Liquidation Date of the Rollover Series (``Sale Date''), and to permit the New Series to purchase the Qualified Rollover Securities. 5. Applicants state that the terms of the proposed transactions will meet the standards of sections 6(c) and 17(b). Applicants represent that purchases and sales between Series will be consistent with the policy of each Series. Applicants state that permitting the proposed transactions would result in savings on brokerage commissions for the Series. 6. Applicants state that the requirements for Qualified Rollover Securities would help to protect against overreaching. In addition, applicants state that the Sponsor will certify to the Trustee, within five days of each sale of Qualified Rollover Securities from a Rollover Series to a New Series: (a) that the transaction is consistent with the policy of both the Rollover Series and the New Series, as recited in their respective registration statements and reports filed under the Act, (b) the date of the transaction, and (c) the closing sales price on the Qualified Exchange

for the Sale Date of the Qualified Rollover Securities. The Trustee will then countersign the certificate, unless, in the unlikely event that the Trustee disagrees with the closing sales price listed on the certificate, the Trustee immediately informs the Sponsor orally of the disagreement and returns the certificate within five days to the Sponsor with corrections duly noted. Upon the Sponsor's receipt of a corrected certificate, if the Sponsor can verify the corrected price by reference to an independently published list of closing sales prices for the date of the transactions, the Sponsor will ensure that the price of units of the New Series, and distributions to holders of the Rollover Series with regard to redemption of their units or termination of the Rollover Series, accurately reflect the corrected price. To the extent that the Sponsor disagrees with the Trustee's corrected price, the Sponsor and the Trustee will jointly determine the correct sales price by reference to a mutually agreeable, independently published list of closing sales prices for the date of the transaction.

Applicants' Conditions

Applicants agree that the order granting the requested relief will be subject to the following conditions: 1. Each sale of Qualified Rollover Securities by a Rollover Series to a New Series will be effected at the closing price of the Qualified Rollover Securities sold on a Qualified Exchange on the Sale Date, without any brokerage charges or other remuneration except customary transfer fees, if any. 2. The nature and conditions of the transaction will be fully disclosed to investors in the appropriate prospectus of each Rollover Series and New Series. 3. The Trustee of each Rollover Series and New Series will (a) review the procedures relating to the sale of Qualified Rollover Securities from a Rollover Series and the purchase of those Qualified Rollover Securities for deposit in a New Series, and (b) make such changes to the procedures as the Trustee deems necessary that are reasonably designed to comply with paragraphs (a) through (d) of rule 17a-7. 4. A written copy of these procedures and a written record of each transaction pursuant to this order will be maintained as provided in rule 17a-7(f).

For the SEC, by the Division of Investment Management, under delegated authority. Jonathan G. Katz, Secretary. [FR Doc. 99-9442 Filed 4-14-99; 8:45 am] BILLING CODE 8010-01-M