Federal Register / Vol. 62, No. 182 / Friday, September 19, 1997 / Notices 49267

6The Commission notes that if, for some reason,

WM/Reuters changes the exchange rate after it has

already been disseminated, Amex will

correspondingly recalculate the Index value, if the

change occurs during the trading day. When a

change occurs on a settlement day, the new Index

value will be used for settlement purposes if it is

calculated prior to settlement. Telephone

conversation between Claire P. McGrath, Vice

President and Special Counsel, Amex, and Heather

Seidel, Attorney, Market Supervision, Commission,

on September 9, 1997.

7As of April 15, 1997, the outstanding interest in

HKO Index contracts with expiration dates after

July 1, 1997 was as follows: September 1997 series,

2042 contracts; December 1997 series, 835

contracts; and January 1998 series, 162 contracts.

Phone conversation between Claire McGrath,

Managing Director and Special Counsel, Amex, and

Heather Seidel, Attorney, Market Regulation,

Commission, on April 18, 1997.

8See Amendment No. 1, supra note 3. Currently

the Exchange has the following series on the current

HK Index option trading: July 1997; August 1997;

September 1997; October 1997; November 1997;

December 1997; March 1998; and January 1998

(reduced value). Therefore, once the March 1998

contracts expire, the Exchange will have only one

HK Index option trading which will calculate the

index using a floating rate of exchange for the Hong

Kong dollar rather than the fixed rate currently

being used. Id.

9 15 U.S.C. 78f(b).

10 15 U.S.C. 78f(b)(5).

11 In approving this rule, the Commission notes

that it has considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

12For example, if the Index is at 300, the value

in U.S. dollars is $300.

13 15 U.S.C. 78s(b)(2).

14 17 CFR 200.30–3(a)(12).

of ‘‘snapshots’’ of the latest contributed

quotations taken from the Reuters

System. Amex will receive this

exchange rate between approximately

11:30 a.m. and 12:00 noon (New York

time) each trading day. The Exchange

will then use this rate in calculating and

disseminating the HK Index value after

it is received on that trading day, and

will also use the rate in calculating and

disseminating the HK Index value on

the following day until a new value is

received, again typically between 11:30

a.m. and 12:00 noon.6 If on any business

day WM/Reuters does not post a closing

spot exchange rate for the Hong Kong

dollar, the last reported closing spot rate

will remain in effect until a new rate is

posted. Amex intends to establish a

separate contract on the HK Index using

the floating rate in its calculation. The

current contract using the fixed rate will

continue to trade until the expiration of

any remaining contracts.7 No new series

will be added using the fixed rate after

the new floating rate calculation goes

into effect. Until a phase-out of the

current contract using the fixed rate is

complete, options on both indexes will

be trading simultaneously using

different symbols.8

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange, and, in particular, with the

requirements of Section 6(b) of the Act.9

Specifically, the Commission believes

the proposal is consistent with the

section 6(b)(5) 10 requirements that the

rules of an exchange be designed to

promote just and equitable principles of

trade, to prevent fraudulent and

manipulative acts, and, in general, to

protect investors and the public.11

The Commission believes that the

proposed rule change will help to

protect investors and the public by

guarding against the possibility of a

change in the exchange rate for the

Hong Kong dollar, now that control of

Hong Kong has reverted to China, as of

midnight on June 30, 1997. The current

exchange rate is a fixed rate that does

not change and which is pegged to the

U.S. dollar so that each Hong Kong

Index unit is valued at one U.S. dollar.12

The new rate will be a floating rate,

based upon the daily exchange rate

calculated by WM/Reuters, and the

Index level will be multiplied by the

exchange rate in order to determine the

Index value. This change will allow

Amex to protect against fluctuations in

the exchange rate between the U.S.

dollar and the Hong Kong dollar.

The Commission also notes that the

Exchange has adequately addressed

concerns about investor confusion over

the simultaneous trading of HK Index

options contracts using the current

valuation method, and the HK Index

options using the new fluctuating rate

method for a certain period of time. The

two contracts will be assigned different

trading symbols for identification

purposes. In addition, the Exchange will

issue an Information Circular to its

members discussing the new calculation

method and the procedures for phasing

in the contracts using the new

calculation and phasing out those

contracts using the old calculation

method.

The Commission finds good cause to

approves Amendment No. 1 to the

proposed rule change prior to the

thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. Specifically, by

clarifying that Amex will distinguish

between the old and new contracts by

using different symbols, and by stating

that Amex will advise its members of

the change in the method of calculation

for the HKO Index, Amendment No. 1

will help ensure that members of the

Exchange receive adequate notice of the

change in the method of calculation of

the HKO Index and the procedures for

phasing in the contracts using the new

method of calculation and phasing out

the contracts using the old calculation

method. Accordingly, the Commission

believes that it is consistent with section

6(b)(5) of the Act to approve

Amendment No. 1 to the proposal on an

accelerated basis.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning Amendment No.

1 to the rule proposal. Persons making

written submissions should file six

copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, NW., Washington, DC

20549. Copies of the submission, all

subsequent amendments, all written

statements with respect to the proposed

rule change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying at

the Commission’s Public Reference

Room. Copies of such filing also will be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–Amex–97–18 and should be

submitted by October 10, 1997.

V. Conclusion

It is therefore ordered, pursuant to

section 19(b)(2) of the Act,13 that the

proposed rule change (SR–AMEX–97–

18), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24861 Filed 9–18–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

22821; 812–10520]

The Reserve Private Equity Series, et

al.; Notice of Application

September 12, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under section 6(c) of the

Investment Company Act of 1940 (the
49268 Federal Register / Vol. 62, No. 182 / Friday, September 19, 1997 / Notices

1Applicants request that the order also extend to

(a) Any other Series organized in the future, and (b)

any other open-end management investment

company (a ‘‘Future Company’’) advised or

managed by the Manager, or a person controlling,

controlled by, or under common control with the

Manager, in the future, provided that such Future

Company operates in the same manner as the Funds

and complies with the conditions of the order

requested in the application.

‘‘Act’’) from the provisions of section

15(a) of the Act of and rule 18f–2.

SUMMARY OF APPLICATION: Applicants

request an order to permit them to enter

into and materially amend investment

management agreements with the funds’

subadvisers without shareholder

approval.

APPLICANTS: The Reserve Private Equity

Series, The Reserve Fund, The Reserve

Tax-Exempt Trust, The Reverse New

York Tax-Exempt Trust, and The

Reserve Institutional Trust (collectively,

the ‘‘Funds’’); Reserve Management Co.,

Inc. (the ‘‘Manager’’) and Resrv Partners,

Inc.

FILING DATES: The application was filed

on February 7, 1997 and amended on

July 21, 1997. Applicants have agreed to

file an amendment during the notice

period, the substance of which is

reflected 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

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

October 7, 1997 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, 810 Seventh Avenue, New

York, New York 10019.

FOR FURTHER INFORMATION CONTACT:

John K. Forst, Attorney Advisor, at (202)

942–0569, 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 from the SEC’s

Public Reference Branch, 450 Fifth

Street, NW., Washington, DC 20549 (tel.

202–942–8090).

Applicants’ Representations

1. Each Fund is registered under the

Act as an open-end management

investment company with one or more

series (‘‘Series’’).1 The Reserve Fund,

The Reserve Tax-Exempt Trust, The

Reserve New York Tax-Exempt Trust,

and The Reserve Institutional Trust are

business trusts organized under

Massachusetts law. The Reserve Private

Equity Series is a business trust

organized under Delaware law.

2. The Manager is registered as an

investment adviser under the

Investment Advisers Act of 1940

(‘‘Advisers Act‘‘). The Manager serves as

investment manager to each Series

pursuant to an investment management

agreement between the manager and

each Fund. The Manager provides

general management services to the

Funds and is responsible for the day-today administration of the Series’

activities. The manager is paid a fee

based on average daily net assets of each

Series.

3. The Reserve Private Equity Series

currently employs subadvisers, each of

which is registered as an investment

adviser under the Advisers Act. The

Reserve Private Equity Series currently

employs only on subadviser for each

one of its Series, but may employ

multiple subadvisers for each Series in

the future. The other Funds do not have

Series that currently employ

subadvisers, but they may do so in the

future. All investment decisions for the

Series that employ subadvisers are made

by the subadvisers, who have

discretionary authority to invest all or a

portion of the assets of a Series, subject

to the general supervision of the

Manager and the board of trustees of

each Fund. The Manager recommends

subadvisers to the Fund’s board, and

also will recommend the termination of

a subadviser when the Manager deems

a termination to be in the best interests

of a Series. Subadvisers provide

advisory services pursuant to a written

advisory agreement (‘‘Subadvisory

Agreement’’). The subadvisers’ fees are

paid by the Manager out of the fees paid

by a Series to the Manager at rates

negotiated by the Manager. The fees are

based on assets allocated to the

subadviser.

Applicants’ Legal Analysis

1. Section 15(a) of the Act makes it

unlawful for any person to act as

investment adviser to a registered

investment company except pursuant to

a written contract that has been

approved by a majority of the

company’s outstanding voting

securities. Rule 18f–2 under the Act

provides that each series or class of

stock in a series company affected by a

matter must approve such matter if the

Act requires shareholder approval.

2. Applicants request an exemption

from section 15(a) of the Act and rule

18f–2 to permit the Funds and the

Manager to enter into and materially

amend Subadvisory Agreements

without shareholder approval.

3. Applicants state that the Series’

shareholders rely on the Manager for

investment management and expertise

in selecting subadvisers. The Manager

seeks to enhance Series’ performance

and reduce market risk by allocating a

Series’ assets among multiple

‘‘specialist’’ subadvisers. Applicants

state that the Manager employs a

comprehensive screening process of

reviewing the qualifications and

capabilities of potential new

subadvisers, and engages in a thorough

on-going analysis of the continued

advisability as to the retention of its

existing subadvisers. Applicants

contend that the Manager’s continuing

quantitative and qualitative evaluation

of the subadvisers will permit new

subadvisers to be introduced or, at such

time as multi-subadvisers are utilized,

the proportion of shareholders’ assets

subject to particular subadviser styles to

be reallocated, to the extent the Manager

deems appropriate to achieve the overall

investment objectives of the particular

Series. Applicants assert that

shareholders are, in effect, electing to

have the Manager select one or more

subadvisers best suited to achieve each

Series’ investment objective. Applicants

state that the subadvisers are concerned

only with the selection of portfolio

investments in accordance with a

Series’ investment objectives and

policies.

4. Applicants contend that, because

shareholders rely on the Manager for

investment results and overall

management services, it is the

investment advisory agreements with

the Manager (‘‘Management

Agreements’’) over which shareholders

should exercise control. Management

Agreements would continue to be

subject to the shareholder approval

requirements of section 15 of the Act.

5. Applicants contend that requiring

shareholder approval of subadvisers and

Subadvisory Agreements would impose

costs on the Series without advancing

shareholder interests. Applicants also

believe that requiring shareholder

approval of new subadvisers and

amendments to Subadvisory

Agreements would prevent the Funds

from promptly and timely employing
Federal Register / Vol. 62, No. 182 / Friday, September 19, 1997 / Notices 49269

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 38795

(June 30, 1997), 62 FR 36594 (July 8, 1997).

4Pub. L. 104–290, 110 Stat. 3416 (1996).

5 15 U.S.C. 77s.

subadvisers best suited to the needs of

the Series. Applicants believe that

shareholders’ interests are adequately

protected by their voting rights with

respect to the Management Agreements

and the responsibilities assumed by the

Manager and the Funds’ boards.

6. Applicants contend that

shareholders will be provided with

adequate information about subadvisers.

Funds’ prospectuses and statements of

additional information will contain all

required information regarding each

subadviser. Within 90 days of the hiring

of a new subadviser, a Fund will furnish

shareholders with all the information

that would have been provided in a

proxy statement.

7. Section 6(c) of the Act 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. For the reasons stated above,

applicants believe that the requested

exemptive relief satisfies this standard.

Applicants’ Conditions

Applicants agree that any order of the

SEC granting the requested relief will be

subject to the following conditions:

1. Before a Series may rely on the

order requested in the application, the

operation of the Series in the manner

described in the application will be

approved by a majority of the

outstanding voting securities, as defined

in the Act, of the Series or, in the case

of a new Series whose public

shareholders purchased shares on the

basis of a prospectus containing the

disclosure contemplate by condition 2

below, by the sole initial shareholder(s)

before offering shares of such Series to

the public.

2. Any Series relying on the requested

relief will disclose in its prospectus the

existence, substance, and effect of any

order granted pursuant to the

application. In addition, the Series will

hold itself out to the public as

employing the subadviser structure

described in the application. The

prospectus will prominently disclose

that the Manager has ultimate

responsibility to oversee the subadvisers

and recommend their hiring,

termination, and replacement.

3. The Manager will provide

management and administrative

services to the Funds and, subject to the

review and approval of their respective

boards of trustees, will set the overall

investment strategies of the Series;

recommend subadvisers; where

appropriate, allocate and reallocate the

assets of the Series among subadvisers;

and monitor and evaluate the

investment performance of the

subadvisers, including their compliance

with the investment objectives, policies,

and restrictions of the Series.

4. A majority of each board of trustees

of each Fund will be persons each of

whom is not an ‘‘interested person’’ of

the Fund (as defined in section 2(a)(19)

of the Act) (the ‘‘Independent

Trustees’’), and the nomination of new

or additional Independent Trustees will

be placed within the discretion of the

then existing Independent Trustees.

5. The Funds will not enter into

Subadvisory Agreements with any

subadviser that is an ‘‘affiliated person,’’

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

of the Series, or the Manager other than

by reason of serving as a subadviser to

one or more of the Series (an ‘‘Affiliated

Subadviser’’) without such agreement,

including the compensation to be paid

thereunder, being approved by the

shareholders of the applicable Series.

6. When a change of subadviser is

proposed for a Series with an Affiliated

Subadviser, the board of trustees of the

applicable Fund including a majority of

the Independent Trustees, will make a

separate finding, reflected in the

minutes of the meeting of the board of

trustees of the Fund, that the change of

subadviser is in the best interest of the

Series and its shareholders and does not

involve a conflict of interest from which

the Manager, or an Affiliated Subadviser

derives an inappropriate advantage.

7. No director, trustee, or officer of a

Fund or the Manager will own directly

or indirectly (other than through a

pooled investment vehicle that is not

controlled by any such director, trustee,

or officer) any interest in a subadviser

except for ownership of interests in the

Manager or any entity that controls, is

controlled by, or under common control

with the Manager, or ownership of less

than 1% of the outstanding securities of

any class of equity or debt securities of

a publicly-traded company that is either

a subadviser or an entity that controls,

is controlled by, or is under common

control with a subadviser.

8. Within 90 days of the hiring of any

subadviser, the affected Series will

furnish its shareholders with all

information about the new subadviser

that would be included in a proxy

statement. Such information will

include any change in such disclosure

caused by the addition of a new

subadviser. The Fund will meet this

condition by providing shareholders,

within 90 days of the hiring of a

subadviser with an information

statement meeting the requirements of

Regulation 14C and Schedule 14C under

the Securities Exchange Act of 1934

(‘‘1934 Act’’). The information statement

also will meet the requirements of Item

22 of Schedule 14A under the 1934 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24970 Filed 9–18–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39055; File No. SR–CHX–

97–17]

Self-Regulatory Organizations;

Chicago Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change Relating to Tier I Listing

Standards to Adopt a Share Price

Maintenance Standard for Common

Stock Listed on the Exchange

September 11, 1997.

I. Introduction

On June 25, 1997, the Chicago Stock

Exchange, Inc. (‘‘CHX’’ or ‘‘Exchange’’)

submitted to the Securities and

Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 and Rule 19b–4

thereunder,2 a proposed rule change to

add a share price maintenance standard

for common stock listed on Tier I of the

Exchange.

The proposed rule change was

published for comment in the Federal

Register on July 8, 1997.3 No comments

were received on the proposal. This

order approves the proposal.

II. Description of the Proposal

The National Securities Markets

Improvement Act of 1996 4 amended

section 18 of the Securities Act of 1933 5

to provide for exclusive federal

registration of securities listed, or

authorized for listing, on the New York

Stock Exchange (‘‘NYSE’’), the

American Stock Exchange (‘‘Amex’’) or

listed on the National Market System of

the Nasdaq Stock Market (‘‘Nasdaq/

NMS’’), or any other national securities

exchange designated by the Commission

by rule to have substantially similar

listing standards to those markets. The