No-Action Letter under
Investment Company Act of 1940 - Section 17(d); Rule 17d-1

USB Global Asset Management (US), Inc.

November 21, 2002

Response of the Office of Investment Company Regulation, Division of Investment Management
Our Ref. No. 02-4-ICR
UBS Global Asset Management
(US) Inc., et al.

Your letter of November 14, 2002 requests our assurance that we would not recommend that the Securities and Exchange Commission (the "Commission") take any enforcement action under the Investment Company Act of 1940 (the "Act") if UBS Global Asset Management (US) Inc. ("UBS Global AM"), UBS Warburg LLC ("UBS Warburg"), and certain registered investment companies ("Funds") continue to rely upon two orders under section 17(d) of the Act and rule 17d-1 under the Act (the "Existing Orders")¹. UBS Global AM, UBS Warburg, and UBS PaineWebber are each indirect wholly owned subsidiaries of UBS AG, which is organized under the laws of Switzerland.

You state that the Existing Orders permitted the Funds to pay fees to UBS PaineWebber for acting as securities lending agent with respect to securities lending transactions by the Funds, subject to specified conditions. UBS PaineWebber now proposes to transfer its securities lending agency business to UBS Warburg in January, 2003. The proposed transfer of securities lending responsibilities from UBS PaineWebber to UBS Warburg is part of an overall consolidation of certain business units within the various subsidiaries of UBS AG. Following this transfer, UBS Warburg will act as securities lending agent for the Funds.

You state that in transferring the securities lending agency operations of UBS PaineWebber to UBS Warburg, the fees charged by, and the scope and nature of services provided by, UBS Warburg will be consistent in all respects with that of UBS PaineWebber's current securities lending agency operations, and that the performance by UBS Warburg of the securities lending operations will not result in any changes in the nature of the services rendered by, or the calculation of the associated fees payable to, UBS PaineWebber, and UBS Warburg will assume all the duties and obligations imposed on UBS PaineWebber by the Existing Orders and the existing securities lending agency agreements.

You state that in order to effect this transfer of securities lending operations, all personnel rendering securities lending agency services on behalf of UBS PaineWebber will transfer to UBS Warburg and henceforth provide these services solely on behalf of UBS Warburg. These employees will continue to perform the same securities lending agency functions for UBS Warburg that they performed for UBS PaineWebber. The resources and facilities available to these employees at UBS Warburg will be the same as or comparable to those available to them at UBS PaineWebber, and they will operate under essentially identical managerial and operational systems as currently utilized by UBS PaineWebber in its securities lending agency operations.

You state that as is the case within UBS PaineWebber, the securities lending agency operations of UBS Warburg will be separate and distinct from its portfolio management operations, to the extent such operations exist. The individual(s) who manage UBS PaineWebber's securities lending agency operations will manage the comparable operations at UBS Warburg, and neither those persons nor their direct reports have had or will have any responsibility for or involvement in portfolio management for the Funds or any other investment advisory client of UBS Global AM. You also state that the ultimate responsibility for determining which securities are available to be loaned and to whom the securities may be loaned resides with the portfolio management personnel of UBS Global AM who have responsibility for the Funds, subject to parameters set forth in procedures approved by the Funds' boards of directors ("Boards"), and not with employees of UBS Warburg's securities lending operations.

You state that, as required by the 1997 Order, prior to UBS Warburg's serving as lending agent for the Funds for compensation, the Boards of the Funds, including a majority of the directors who are not "interested persons" of the Funds, will determine that (i) the contract with UBS Warburg is in the best interests of the Funds and their shareholders; (ii) the services to be performed by UBS Warburg are required by the Funds; (iii) the nature and quality of the services provided by UBS Warburg are at least equal to those provided by others offering the same or similar services; and (iv) the fees for UBS Warburg's services are fair and reasonable in light of the usual and customary charges imposed by others for services of the same nature and quality. You further state that the Boards of the Funds, UBS Warburg and the Funds also will comply with all of the other terms and conditions of the Existing Orders.

Based on the facts and representations made in your letter, we would not recommend enforcement action to the Commission if UBS Warburg acts as securities lending agent for the Funds, provided that the Funds and UBS Warburg continue to comply with the terms and conditions of the Existing Orders. This response expresses the Division's position on enforcement action only, and does not purport to express any legal conclusions concerning the issues presented. Facts or representations different from those presented in your letter might require a different conclusion.

Endnotes

¹ PaineWebber America Fund, et al., Investment Company Act Release Nos. 22541 (March 4, 1997) (notice) and 22594 (April 1, 1997) (order) ("1997 Order"). An order subsequently was issued under sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a) and 17(e) of the Act, and under section 17(d) and rule 17d-1 permitting, among other things, UBS PaineWebber Inc. ("UBS PaineWebber") to accept lending agency fees from certain other registered investment companies for providing services in connection with securities lending transactions. PaineWebber America Fund, et al., Investment Company Act Release Nos. 23284 (June 24, 1998) (notice) and 23322 (July 21, 1998) (order) ("1998 Order").

Incoming Letter:

UBS Global Asset Management (US) Inc.

David M. Goldenberg
Executive Director
Deputy General Counsel
Tel: 212-882-5572
Fax: 212-882-5472
david.goldenberg@ubs.com

November 22, 2002

Nadya B. Royblat, Esq.
Assistant Director
Office of Investment Company Regulation
Division of Investment Management
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0506

Re: PaineWebber America Fund, et al.

Dear Ms. Roytblat:

This letter is being submitted in order to seek assurance from the staff of the Division of Investment Management (the "Staff") that it will not recommend that the Securities and Exchange Commission (the "Commission") take enforcement action under the Investment Company Act of 1940 (the "Act") if, under the circumstances described below, UBS Global Asset Management (US) Inc. ("UBS Global AM")¹, UBS Warburg LLC ("UBS Warburg") and certain registered investment companies ("Funds") continue to rely upon two orders permitting certain transactions in accordance with Section 17(d) and Rule 17d-1 under the Act (the "Existing Orders")². Specifically, UBS Warburg proposes to assume the responsibilities of UBS PaineWebber Inc.³ ("UBS PaineWebber" as securities lending agent for the Funds under the same terms and conditions that UBS PaineWebber has been authorized to act under the Existing Orders. UBS Global AM, UBS Warburg and UBS PaineWebber are each indirect wholly owned subsidiaries of UBS AG, an internationally diversified organization, organized under the laws of Switzerland, with headquarters in Zurich, Switzerland. It is anticipated that UBS Warburg will assume the responsibilities as securities lending agent in or about January 2003. The proposed transfer of securities lending responsibilities from UBS PaineWebber to UBS Warburg is part of an overall consolidation of certain business units within the various subsidiaries of UBS AG.

Background Information

UBS Global AM is registered as an investment adviser under the Investment Advisers Act of 1940. UBS Global AM was formerly a wholly owned subsidiary of PaineWebber Incorporated. Following the acquisition of PaineWebber Incorporated by UBS AG in 2000, UBS Global AM became an indirect subsidiary of UBS AG and under common control with both UBS PaineWebber and UBS Warburg. UBS Global AM, or an affiliate, serves as each Fund's investment advisor, administrator and principal underwriter.

The Existing Orders permit the Funds to pay fees to UBS PaineWebber for acting as securities lending agent with respect to securities lending transactions by the Funds, subject to specified conditions. We have been advised that UBS PaineWebber now proposes to transfer its securities lending agency business, including acting as securities lending agent to the Funds, to UBS Warburg. Following this transfer, UBS Warburg would act as securities lending agent for the Funds.

In transferring the securities lending agency operations of UBS PaineWebber to UBS Warburg, the fees charged by, and the scope and nature of services provided by, UBS Warburg will be consistent in all respects with that of UBS PaineWebber's current securities lending agency operations. Thus, the performance by UBS Warburg of the securities lending operations will not result in any changes in the nature of the services currently rendered by, or the calculation of the associated fees currently payable to, UBS PaineWebber, and UBS Warburg will assume all the duties and obligations imposed on UBS PaineWebber by the Existing Orders and the existing securities lending agency agreements.

In order to effect this transfer of securities lending agency operations, all personnel rendering securities lending agency services on behalf of UBS PaineWebber will transfer to UBS Warburg and henceforth provide these services solely on behalf of UBS Warburg. These employees will continue to perform the same securities lending agency functions for UBS Warburg that they performed for UBS PaineWebber. The resources and facilities available to these employees at UBS Warburg will be the same as or comparable to those available to them at UBS PaineWebber, and they will operate under essentially identical managerial and operational systems as currently utilized by UBS PaineWebber in its securities lending agency operations.

As is the case within UBS PaineWebber, the securities lending agency operations of UBS Warburg will be separate and distinct from its portfolio management operations, to the extent such operations exist. The individual(s) who manage UBS PaineWebber's securities lending agency operations will manage the comparable operations at UBS Warburg and neither those persons nor their direct reports have had or will have any responsibility for or involvement in portfolio management for the Funds or any other investment advisory client of UBS Global AM.

The ultimate responsibility for determining which securities are available to be loaned and to whom the securities may be loaned resides with the portfolio management personnel of UBS Global AM who have responsibility for the Funds, subject to parameters set forth in procedures approved by the Funds' boards of directors or trustees ("Boards"), and not with employees of UBS Warburg's securities lending agency operations.

As required by the 1997 Order, prior to UBS Warburg's serving as lending agent for the Funds for compensation⁴, based on a share of the revenue generated from securities lending transactions, the Boards of the Funds, including a majority of the directors who are not "interested persons" of the Funds, will determine that (i) the contract with UBS Warburg is in the best interests of the Funds and their shareholders; (ii) the services to be performed by UBS Warburg are required by the Funds; (iii) the nature and quality of the services provided by UBS Warburg are at least equal to those provided by others offering the same or similar services; and (iv) the fees for UBS Warburg's services are fair and reasonable in light of the usual and customary charges imposed by others for services of the same nature and quality. The Boards of the Funds, UBS Warburg and the Funds also will comply with all of the other terms and conditions of the Existing Orders.

Conclusion

Accordingly, since the relevant facts upon which the Existing Orders were granted will not change and the terms and conditions of the Existing Orders will be met, we submit that the granting of this no-action letter, like the granting of the Existing Orders, is in the public interest and consistent with the protection of investors.

Should you have any questions or wish additional information regarding this request, please call the undersigned at 212-882-5572 or Todd Lebo at 212-882-5961.

Very truly yours,

David M. Goldenberg
Executive Director and
Deputy General Counsel

cc: Jack W. Murphy
Amy Doberman

Endnotes

¹ UBS Global AM was formerly known as Brinson Advisors, Inc. and prior to that was known as Mitchell Hutchins Asset Management Inc.

² PaineWebber America Fund, et al., Investment Company Act Release Nos. 22541 (March 4, 1997) (notice) and 22594 (April 1, 1997) (order) ("1997 Order"). An order subsequently was issued under sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a) and 17(e) of the Act, and under section 17(d) and rule 17d-1 to permit affiliated broker-dealers to borrow securities from the Funds, to receive brokerage commissions from and to engage in principal transactions with the Funds and to permit UBS PaineWebber Inc. and UBS Global AM to accept fees, for providing services in connection with securities lending transactions, from certain other registered investment companies that are affiliated persons because they hold 5% or more of the shares of an affiliated private investment company, and to allow the Funds to invest cash collateral received in securities lending transactions and uninvested cash in an affiliated private investment company that operates as a money market fund. PaineWebber America Fund, et al., Investment Company Act Release Nos. 23284 (June 24, 1998) (notice) and 23322 (July 21, 1998) (order) ("1998 Order").

³ UBS PaineWebber was formerly known as PaineWebber Incorporated.

⁴ UBS Warburg currently does not serve as lending agent for the Funds.

http://www.sec.gov/divisions/investment/noaction/usbglobal112102.htm