45888 Federal Register / Vol. 62, No. 168 / Friday, August 29, 1997 / Notices

5. The Advisers will not enter into a

sub-advisory agreement with any subadviser that is an affiliated person, as

defined in section 2(a)(3) of the Act, the

advisers, or the Trusts other than by

reason of serving as sub-adviser to one

or more Series (‘‘Affiliated SubAdviser’’) without such agreement,

including compensation to be paid

thereunder, being approved by the

shareholders of the applicable Series.

6. At all times, a majority of the

trustees of the Trusts will be persons

each of whom is not an ‘‘interested

person’’ of each of the Trusts (as defined

in section 2(a)(19) of the Act) (the

‘‘Independent Trustees’’), and the

nomination of new or additional

Independent Trustees will be committed

to the discretion of then existing

Independent Trustees.

7. When a sub-adviser change is

proposed for a Series having an

Affiliated Sub-Adviser, the trustees of

the Trusts, including a majority of the

Independent Trustees, will make a

separate finding, reflected in such

Trust’s board minutes, that the change

is in the best interests of the Series and

its shareholders and does not involve a

conflict of interest from which the

Advisers or the Affiliated Sub-Adviser

derives an inappropriate advantage.

8. No trustee or officer of the Trusts,

or the Advisers will own directly or

indirectly (other than through a pooled

investment vehicle that is not controlled

by any such trustee or officer) any

interest in a sub-adviser except for: (a)

Ownership of interests in the Advisers

or any entity that controls the Advisers;

or (b) ownership of less than 1% of the

outstanding securities of any class of

equity or debt of a publicly-traded

company that is either a sub-adviser or

an entity that controls, is controlled by,

or is under common control with a subadviser.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–23007 Filed 8–28–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22797; International Series

Release No. 1098; File No. 812–10376]

Tele-Communications International,

Inc.; Notice of Application

August 22, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

SUMMARY OF APPLICATION: Applicant

Tele-Communications International, Inc.

requests an order under section 6(c) of

the Act that would permit applicant and

its controlled companies to participate

in certain foreign tele-media ventures

without being subject to the provisions

of the Act.

FILING DATES: The application was filed

on October 2, 1996, and amended on

June 30, 1997 and August 18, 1997.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

September 16, 1997 by proof of service

on applicant, 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 who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

General Counsel, Applicant, 5619 DTC

Parkway, Englewood, CO 80111.

FOR FURTHER INFORMATION CONTACT:

David W. Grim, Staff Attorney, at (202)

942–0571, 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, N.W., Washington, D.C. 20549;

(202) 942–8090].

Applicant’s Representations

1. Applicant, a Delaware corporation,

was incorporated in 1994 as a whollyowned subsidiary of TeleCommunications, Inc. (‘‘TCI’’), a

Delaware corporation. TCI, through its

subsidiaries and affiliates (other than

applicant), is principally engaged in the

construction, acquisition, ownership,

and operation of cable television

systems in the United States and the

provision of cable and satellitedelivered video entertainment,

information, and home shopping

programming services to various

distribution media.

2. Applicant was formed by TCI as a

holding company for the purpose of

consolidating TCI’s international cable

and telecommunications and certain of

its international programming

businesses under one corporation,

pending an initial public offering of

stock by applicant in mid-1995.

Applicant was formed with its own

management team, which largely

consisted of those executive officers of

TCI who had been responsible for the

operations of TCI’s international

divisions. During the fourth quarter of

1994 and the first quarter of 1995, TCI

contributed its ownership interests in

substantially all of its international

cable and telephony assets and certain

of its international programming assets

to applicant (the ‘‘TCI Contributions’’).

TCI currently owns approximately 85%

of the outstanding shares of all series of

common stock of applicant and

approximately 92% of the combined

voting power of all series of outstanding

shares of common stock of applicant.

3. Applicant has expanded and built

upon the assets it received through the

TCI Contributions and has established

ventures in new markets. Today

applicant, directly and through joint

ventures and controlled companies, is

engaged in the business of acquiring,

developing, operating, and managing

broadband distribution,

telecommunications, and programming

businesses in selected markets outside

the United States.

4. Applicant’s assets are not held as

passive or portfolio investments and are

not traded for short-term profit.

Applicant has never been a registered

investment company (or subject to any

analogous regulatory scheme in another

jurisdiction) and has never been

engaged in the business of investing,

reinvesting, or trading in securities.

5. Applicant requests relief to permit

applicant and each entity that is now or

in the future controlled by, or under

common control with, applicant (each,

including applicant, a ‘‘Covered Entity’’)

to engage, either directly or indirectly

through subsidiaries, in certain foreign

tele-media ventures without being

subject to the provisions of the Act. For

purposes of the application, applicant

represents that ‘‘foreign tele-media

venture’’ means any and all activities

outside the United States involving:

communications; media; the creation,

storage and transmission of voice, video,

or data; programming, including

entertainment, news, information, and

home shopping services; print media;

broadband and satellite distribution;

over the air broadcast;

telecommunications; wireline or

wireless distribution and telephony;
Federal Register / Vol. 62, No. 168 / Friday, August 29, 1997 / Notices 45889

network construction; design, operation,

and ownership of related transport

construction; and any and all related or

similar activities, services, and assets.

6. Applicant is a holding company

and, directly and through other Covered

Entities, is engaged in the business of

acquiring proprietary interests in, and

developing, operating, and managing,

foreign tele-media ventures. Applicant’s

management team has significant

experience and expertise in pioneering

the development of, acquiring interests

in, and managing distribution,

telecommunications, and programming

companies both domestically and in

markets outside the United States. The

officers and employees of applicant

spend the vast majority of their time on

the business and affairs of applicant’s

foreign tele-media ventures.

Contributions by these individuals

include working to implement the

construction of distribution networks,

hiring staff, developing and

implementing business plans and

budgets, creating, acquiring, developing,

and scheduling programming services,

overseeing lobbying and other

regulatory efforts, and providing

technical, operational, marketing, and

engineering direction. Management’s

time is also spent performing market

analyses, developing new business

opportunities for applicant, determining

possible partner candidates, serving on

boards of directors and management

committees of foreign tele-media

ventures, and maintaining relationships

with strategic investors and partners.

Applicant becomes involved in most of

its foreign tele-media ventures in the

start-up or development stage. In other

cases, its involvement comes after the

development stage, but applicant’s

participation enables the venture to

advance more rapidly or effectively its

business plan.

7. Applicant participates in foreign

tele-media ventures in either of two

ways. One way is for applicant, directly

or through one or more other Covered

Entities, to invest in a foreign tele-media

company. A ‘‘foreign tele-media

company,’’ as used herein, is any

corporation, partnership, joint venture,

association, joint stock company,

limited liability company, or other form

of organization (i) substantially all of

whose operations are conducted outside

of the United States, (ii) that owns the

assets of the foreign tele-media ventures

(which may consist of capital assets or

stock of operating subsidiaries), and (iii)

whose business primarily relates to, or

whose operations consist primarily of,

the ownership, development, and

operation of, or the provision of

management or operational services

relating to, foreign tele-media ventures.

Applicant, directly or through one or

more other Covered Entities, acquires a

substantial interest in the foreign telemedia company, and provides active

developmental assistance to the

company. For purposes of the

application, applicant represents that

‘‘substantial interest’’ means any

ownership interest that represents at

least a 10% economic or voting interest.

Applicant further represents that ‘‘active

developmental assistance’’ means

material involvement in the creation,

development, or operation of, the

provision of material managerial,

advisory, or operational services relating

to, or significant input on material

decisions affecting the development or

operations of, a foreign tele-media

venture.

8. The second way applicant

participates in foreign tele-media

ventures is by investing, either directly

or through one or more other Covered

Entities, in a tele-media partnership. For

purposes of the application, applicant

represents that a ‘‘tele-media

partnership’’ means any partnership,

joint venture, limited liability company,

or other unincorporated association (i)

substantially all of whose operations are

conducted outside of the United States,

and (ii) whose purpose is to acquire

interests in, and to develop, operate, or

provide management services to, one or

more foreign tele-media companies.

Representatives of applicant or another

Covered Entity participate on the

management committee or similar

governing body of the tele-media

partnership. Applicant, directly or

through one or more other Covered

Entities, acquires a substantial interest

in the tele-media partnership which, in

turn, directly or through one or more

subsidiaries, acquires a substantial

interest in one or more foreign telemedia companies. Applicant or another

Covered Entity, either directly or

through the tele-media partnership,

provides active developmental

assistance to the foreign tele-media

ventures of the tele-media partnership.

9. Applicant represents that providing

‘‘active developmental assistance’’

requires applicant or another Covered

Entity to be or have been materially

involved in providing such assistance.

Thus, if applicant or another Covered

Entity was materially involved in the

development of a foreign tele-media

venture, such entity may thereafter

cease to provide active developmental

assistance to such venture after the

venture has moved past the

development stage, provided it

continues to have a substantial interest

in the venture. Similarly, if applicant or

another Covered Entity acquires a

substantial interest in a foreign telemedia venture after the development

stage and provides active developmental

assistance to that venture, then

applicant or such Covered Entity may

continue to rely on the requested

exemptive order, notwithstanding that it

ceases to provide such developmental

assistance to the venture, if applicant or

such Covered Entity maintains its

substantial interest in the venture, and

(i) the business of the foreign tele-media

venture was significantly enhanced by

the participation of applicant or such

Covered Entity, or (ii) such foreign telemedia venture (a) is merged or

combined with, or acquired by, a

company in the same or a related

business, or (b) effects an initial public

offering of voting stock. Material

involvement in a foreign tele-media

venture will not be present, however, in

arrangements that are immaterial to the

overall development or successful

operation of the foreign tele-media

venture.

10. The degree of applicant’s

participation in foreign tele-media

ventures with local and strategic

partners is a result of both restrictions

on foreign investment under the laws of

many countries in which applicant does

business, as well as benefits, both

tangible and intangible, that applicant

obtains from joining with strategic

partners to create, develop, and operate

such ventures. Applicant’s structure

was not established for the purpose of

creating an investment company within

the contemplation of the Act. While

applicant believes that today it is not

required to register under the Act, it is

seeking the requested exemptive order

as it and its foreign tele-media ventures

are increasingly constrained by the

requirements of the Act.

Applicant’s Legal Analysis

1. Section 3(a)(1)(C) of the Act defines

an ‘‘investment company’’ as including

any issuer that is engaged in the

business of investing, reinvesting,

owning, holding, or trading in

securities, and owns investment

securities having a value exceeding 40%

of the value of such issuer’s total assets

(exclusive of Government securities and

cash items). Section 3(a)(2) defines

‘‘investment securities’’ to include all

securities except, in pertinent part,

securities issued by majority-owned

subsidiaries of the owner which are not

investment companies and which are

not excepted from the definition of

investment company by section 3(c)(1)

or section 3(c)(7). Section 2(a)(24)

defines a ‘‘majority-owned subsidiary’’

of a person as a company 50% or more
45890 Federal Register / Vol. 62, No. 168 / Friday, August 29, 1997 / Notices

1 ‘‘Primary control’’ under rule 3a–1 means a

degree of control that is greater than that of any

other person. See Health Communications Services,

Inc. (pub. avail. Apr. 26, 1985). 1 15 U.S.C. § 78s(b)(1) (1994).

of the outstanding voting securities of

which are owned by such person, or by

a company which, within the meaning

of section 2(a)(24), is a majority-owned

subsidiary of such person.

2. Rule 3a–1 under the Act deems

certain issuers that meet the statutory

definition of investment company in

section 3(a)(1)(C) of the Act not to be

investment companies, provided such

issuers meet certain criteria. An issuer

can qualify for this exemption only if no

more than 45% of its assets consist of,

and no more than 45% of its net income

is derived from, securities other than,

among others, securities of certain

companies controlled primarily by the

issuer.1

3. Applicant represents that it seeks to

acquire a majority voting interest in its

foreign tele-media ventures or, where

such an interest is not permitted under

applicable foreign investment laws or is

inadvisable for business reasons, seeks

to acquire interests that grant it primary

control. Applicant asserts that these

ownership thresholds are prohibitively

large, as applicant often seeks to join

with two or three strategic partners in a

foreign tele-media venture. Applicant

represents that each partner typically

desires an interest in, and rights over,

the venture that is equal to that of the

other partners. Hence, applicant states

that its acquisition of a majority interest,

or the largest interest, in a foreign telemedia venture is often impossible.

4. Applicant states that it also may

participate in a foreign tele-media

venture through a ‘‘joint venture,’’ in

which applicant’s interest may not be a

‘‘security’’ for purposes of the Act.

However, applicant states that whether

an arrangement is a joint venture is

sometimes difficult to determine.

5. Applicant asserts that the need to

structure its participation in foreign

tele-media ventures in a manner that

complies with the Act has resulted in

severe constraints on its ability to

operate effectively and efficiently and

grow its business. Applicant states that

if it is unable to obtain either a majority

interest or primary control for purposes

of section 3(a)(1)(C) or rule 3a–1, or a

degree of control that will allow it to

obtain an opinion of counsel that it can

classify its participation as a joint

venture interest, then applicant most

likely will abstain from participating in

that foreign tele-media venture.

6. Applicant also states that as

ventures grow out of the development

stage, they will often seek to expand

their businesses through acquisitions, or

will seek public financing. Applicant

notes that these goals are often in direct

conflict with the need of applicant to

maintain its ownership interest at a

level that permits such interest to be

classified as a non-investment security.

Applicant submits that this has resulted

in serious delays in the development of

certain of applicant’s foreign tele-media

ventures, as applicant seeks to structure

transactions around the requirements of

the Act. Applicant states that at times,

especially when applicant’s interest

would fall below the level of

presumptive control set forth in section

2(a)(9) of the Act, applicant has denied

a foreign tele-media venture permission

to undertake a transaction that would

have been in the best interests of

applicant and that venture.

7. Section 6(c) provides that the SEC

may exempt any person, security, or

transaction from any provision of the

Act or any rule or regulation thereunder,

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. Applicant

requests an order under section 6(c) to

permit applicant and the other Covered

Entities to engage, directly or through

subsidiaries, in foreign tele-media

ventures without being subject to the

provisions of the Act.

8. Applicant believes that the

requested relief is necessary and

appropriate in the public interest.

Applicant states that its business does

not entail the types of risk to public

investors that the Act was designed to

eliminate or mitigate. Applicant asserts

that its assets cannot be characterized as

liquid, mobile, and readily negotiable,

or as large liquid pools of funds.

Applicant represents that it does not

acquire securities for the purpose of

disposing of them from time to time at

a profit. Applicant also states that it is

not a so-called ‘‘special situation’’

investment company; that is, a company

that takes a controlling position in other

issuers primarily for the purpose of

making a profit in the sale of the

controlled company’s securities.

Applicant states that rather, it is a

holding company that participates in

foreign tele-media ventures as a strategic

investor. Applicant states that in doing

so, it acquires a substantial interest and

participates in the development of its

foreign tele-media ventures by

providing active developmental

assistance.

9. Applicant believes that the

requested relief is consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the Act. Applicant

believes that the requirements of its

business, its strategy of directly or

indirectly acquiring substantial interests

in foreign tele-media companies and

tele-media partnerships, and its

representation that each Covered Entity

will provide active developmental

assistance to its foreign tele-media

ventures demonstrate that applicant is

not the type of entity and does not

engage in the type of activities that the

Act was designed to regulate.

Applicant’s Conditions

Applicant agrees that the order

granting the requested relief shall be

subject to the following conditions:

1. No Covered Entity that seeks to rely

on the exemptive order will hold itself

out as being engaged in the business of

investing, reinvesting, or trading in

securities.

2. Each Covered Entity may rely on

the exemptive order only if the manner

in which it is involved in foreign telemedia ventures is, in all material

respects, consistent with that described

in the application.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–23004 Filed 8–28–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38962; File No. SR–CBOE–

97–36]

Notice of Filing of Proposed Rule

Change by the Chicago Board Options

Exchange, Incorporated, Related to the

Procedures Regarding Opening

Rotations

August 22, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

July 25, 1997, the Chicago Board

Options Exchange, Incorporated

(‘‘CBOE’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by the CBOE. The Commission

is publishing this notice to solicit

comments on the proposed rule change

from interested persons.