32686 Federal Register / Vol. 63, No. 114 / Monday, June 15, 1998 / Notices

and 57 thereunder, permit holding

companies registered under the Act to

make direct or indirect investments in

exempt wholesale generators (‘‘EWGs’’)

and foreign utility companies

(‘‘FUCOs’’), as defined in sections 32

and 33 of the Act, respectively, without

the prior approval of the Commission, if

certain conditions are met. Rules 53, 54

and 55 do not create a reporting burden

for respondents. These rules do,

however, contain a recordkeeping and

retention requirement. The purpose of

requiring the availability of books and

records identifying investments in and

earnings from any subsidiary EWG or

FUCO is to allow the Commission to

monitor the extent and the effect of

registered holding companies’

investments in these new entities. This

criterion was specifically cited by

Congress as an appropriate item for

inclusion in the Commission’s

rulemaking. The Commission estimate

that the total annual reporting and

recordkeeping burden of collections

under each of rules 53, 54 and 55 is 110

hours per rule (e.g., 11 responses per

rule × 10 hours per rule = 110 burden

hours per rule).

Rule 57 imposes two reporting

requirements. First, and pursuant to rule

57(a) companies seeking FUCO status

must file a notification on Form U–57

on the occasion of each transaction

involving the acquisition of a FUCO. In

instances where non-utility entities

acquire a FUCO, Form U–57 is the

Commission’s sole source of

information regarding such projects.

Even when public-utility companies

make the acquisition, Form U–57 may

provide the only prospective data

available to the Commission with

respect to such acquisition. The

Commission estimates that the total

reporting and recordkeeping burden of

collections under rule 57(a) is 144 hours

(e.g., 48 responses × 3 hours = 144

burden hours).

The second reporting requirement of

Rule 57 is the filing of Form U–33–S,

which imposes an annual reporting

requirement on any public-utility

company that acquires one or more

FUCOs. The information from Form U–

33–S allows the Commission to monitor

overseas investments by public-utility

companies. The Commission estimates

that the total reporting and

recordkeeping burden of collections

under rule 57(b) is 267 hours (e.g., 89

responses × 3 hours = 267 burden

hours).

Section 3 of the Act and rule 2 under

the Act require the Commission to

monitor exempt holding companies to

make sure that exemptions are not

detrimental to the public interest or the

interest of investors or consumers. Form

U–3A–2 is the single uniform periodic

submission which allows the staff to

effectively accomplish this task. The

Commission estimates that the total

reporting and recordkeeping burden of

collections under rule 2 is 319 hours

(e.g., 91 responses × 3.5 hours=319

burden hours).

Section 5 of the Act imposes similar

duties on the Commission with respect

to registered holding companies. The

Form U5S allows the staff to gather an

annual ‘‘snapshot’’ of each registered

system for review and comparison with

other systems. Relying on the

fragmented information submitted with

applications on Form U–1 for

Commission approval of certain

transactions, or other submissions by

registered holding companies or their

subsidiaries, would not be an

appropriate substitute for the

comprehensive and timely information

provided on Form U5S. The

Commission estimates that the total

reporting and recordkeeping burden of

collections under Form U5S is 4,142

hours (e.g., 19 responses × 218 hours =

4,142 burden hours).

These estimates of average burden

hours are made solely for the purposes

of the Paperwork Reduction Act and are

not derived from a comprehensive or

even a representative survey or study of

the costs of SEC rules and forms.

It should be noted that ‘‘an agency

may not conduct or sponsor, and a

person is not required to respond to, a

collection of information unless it

displays a currently valid control

number.’’

Written comments are invited on (a)

Whether the proposed collection of

information is necessary for the proper

performance of the functions of the

agency, including whether the

information will have practical utility;

(b) the accuracy of the agency’s estimate

of the burden of the collection of

information; (c) ways to enhance the

quality, utility, and clarity of the

information collected; and (d) ways to

minimize the burden of the collection of

information on respondents, including

through the use of automated collection

techniques or other forms of information

technology. Consideration will be given

to comments and suggestions submitted

in writing within 60 days of this

publication.

Please direct your written comments

to Michael E. Bartell, Associate

Executive Director, Securities and

Exchange commission, 450 5th Street,

NW, Washington, DC 20549.

Dated: June 5, 1998.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15825 Filed 6–12–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. IC–23246; 812–10970]

M Fund, Inc., et al.; Notice of

Application

June 9, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under section 6(c) of the

Investment Company Act of 1940 (the

‘‘Act’’) from section 15(a) of the Act and

rule 18f–2 under the Act.

SUMMARY OF APPLICATION: Applicants, M

Fund, Inc. (‘‘Company’’) and M

Financial Investment Advisers, Inc.

(‘‘Adviser’’), request an order to permit

them to enter into and materially amend

investment advisory contracts without

shareholder approval.

FILING DATES: The application was filed

on January 16, 1998, and amended on

May 18, 1998, and June 4, 1998.

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

June 30, 1998, 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 who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW, Washington, DC 20549.

Applicants, 205 S.E. Spokane Street,

Portland, Oregon 97202.

FOR FURTHER INFORMATION CONTACT:

Edward P. Macdonald, 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
Federal Register / Vol. 63, No. 114 / Monday, June 15, 1998 / Notices 32687

1Applicants request that the relief also apply to

any series of the Company that may be created in

the future, and to all subsequently registered openend investment companies that in the future are

advised by the Adviser, or any entity controlling,

controlled by, or under common control with the

Adviser, provided that these companies operate in

substantially the same manner as the Funds with

respect to the Adviser’s responsibility to select,

evaluate and supervise Managers and comply with

the conditions to the requested order as set forth in

the application (‘‘Future Funds’’).

2The Company’s prospectus has disclosed, since

the effective date of the Company’s registration

statement, that the Company would seek an

exemptive order from the SEC permitting changes

in Managers without submitting the Subadvisory

Agreements to a vote of the Company’s

shareholders.

may be obtained for a fee at the SEC’s

Public Reference Branch, 450 Fifth St.,

N.W., Washington, DC 20549 (tel. 202–

942–8090).

Applicants’ Representations

1. The Company, a Maryland

corporation registered under the Act as

an open-end diversified management

investment company currently has four

series (‘‘Funds’’) that are offered

exclusively to variable annuity and

variable life insurance separate accounts

of life insurance companies. The

Adviser, registered under the

Investment Advisers Act of 1940

(‘‘Advisers Act’’), is the investment

adviser to each of the Funds pursuant to

an investment advisory agreement

(‘‘Agreement’’). Each Fund currently has

one investment subadviser (‘‘Manager’’),

each of which is registered under the

Advisers Act.

2. Under the Agreement, the Adviser

oversees the administration of all

operations of the Company and oversees

each Fund’s Manager. Each Manager

recommended by the Adviser is

ultimately approved by the Fund’s

board of directors (‘‘Board’’), including

a majority of the Fund’s directors who

are not ‘‘interested persons’’ of the Fund

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

(‘‘Independent Directors’’). The Adviser

monitors each Manager’s compliance

with each Fund’s investment objectives

and policies, reviews the performance of

each Manager, and periodically reports

each Manager’s performance to the

Board. As compensation for its services,

the Adviser receives a fee, paid by the

Company, based on the average daily

net assets of each of the Funds.

3. Under subadvisory agreements

between the Adviser and the Managers

(‘‘Subadvisory Agreements’’) the

specific investment decisions for each

Fund are, and will continue to be, made

by each Manager. The Managers’ fees

are paid by the Adviser out of its fee.

4. Applicants request an exemption

from section 15(a) of the Act and rule

18f–2 under the Act to permit Managers

selected by the Adviser and approved

by the Board to serve as investment

subadvisers for the Funds without

shareholder approval.1

Shareholder approval is, and will

continue to be, required for any

Manager that is an affiliated person, as

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

other than by reason of serving as a

Manager to one or more of the Funds

(‘‘Affiliated Manager’’).

Applicants’ Legal Analysis

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

unlawful for any person to act as an

investment adviser to a registered

investment company except pursuant to

a written contract that has been

approved by a majority of the

investment 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 the matter if the

Act requires shareholder approval.

2. 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. Applicants believe that their

requested relief meets this standard for

the reasons discussed below.

3. Applicants assert that the

Company’s investors rely on the Adviser

to select Managers best suited to achieve

a Fund’s investment objectives. The

Adviser has represented itself as an

investment adviser whose strength and

expertise lies in its ability to evaluate,

select and supervise those Managers

who can add the most value to a

shareholder’s investment in the

Company. Applicants state that, from

the perspective of an investor, the role

of the Managers is similar to that of

individual portfolio managers employed

by traditional investment advisory

firms. Applicants thus contend that the

requested relief will allow each Fund to

operate more efficiently by enabling the

Funds to act quickly and cost effectively

to replace Managers when the Board

and the Adviser feel that a change

would benefit the Fund. Applicants also

note that the Agreement will remain

fully subject to the requirements of

section 15 of the Act and rule 18f–2

under the Act, including the

requirements for shareholder approval.2

Applicants’ Conditions

Applicants agree that the requested

order will be subject to the following

conditions:

1. Before a Future Fund that does not

presently have an effective registration

statement may rely on the order

requested herein, the operation of the

Future Fund in the manner described in

the application will be approved by its

initial shareholder(s) before shares of

the Future Fund are made available to

the public.

2. The Company will disclose in its

prospectus the existence, substance, and

effect of any order granted pursuant to

this application. In addition, each Fund

will hold itself out to the public as

employing the management structure

described in the application. The

prospectus will prominently disclose

that the Adviser has the ultimate

responsibility to oversee the Managers

and recommend their hiring,

termination, and replacement.

3. At all times, a majority of the

Company’s Board will consist of

Independent Directors, and the

nomination of new or additional

Independent Directors will be at the

discretion of the then existing

Independent Directors.

4. The Adviser will not enter into a

Subadvisory Agreement with any

Affiliated Manager without that

Agreement, including the compensation

to be paid thereunder, being approved

by the shareholders of the applicable

Fund.

5. When a Manager change is

proposed for a Fund with an Affiliated

Manager, the Company’s Board,

including a majority of the Independent

Directors, will make a separate finding,

reflected in the Company’s Board

minutes, that the change is in the best

interests of the Fund and its

shareholders and does not involve a

conflict of interest from which the

Adviser of the Affiliated Manager

derives an inappropriate advantage.

6. Within 90 days of the hiring of any

new Manager shareholders will be

furnished relevant information about

the new Manager or Subadvisory

agreement that would be contained in a

proxy statement including any change

in the disclosure caused by the addition

of the new Manager. The Adviser will

meet this condition by providing

shareholders, within 90 days of the

hiring of a Manager, an informal

information statement meeting the

requirements of Regulations 14C,

Schedule 14C, and Item 22 of Schedule

14A under the Securities Exchange Act

of 1934.

7. The Adviser will provide general

management services to each Fund,
32688 Federal Register / Vol. 63, No. 114 / Monday, June 15, 1998 / Notices

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

2 17 CFR 240.19b–4

3See, letter from Timothy H. Thompson, Director,

Regulatory Affairs, Legal Department, CBOE to

Victoria Berberi-Doumar, Special Counsel, Division

of Market Regulation, SEC, dated April 15, 1998.

4Securities Exchange Act Release No. 39911

(April 24, 1998), 63 FR 23820 (April 30, 1998).

5OEX stands for options on the Standard & Poor’s

100 Index.

6 DJX stands for options on the Dow Jones

Industrial Average.

7 15 U.S.C. 78f(b)(5).

8 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).

9 15 U.S.C. 78s(b)(2).

10 17 CFR 200.30–3(a)(12).

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

including overall supervisory

responsibility for the general

management and investment of each

Fund’s portfolio, and subject to review

and approval by the Board, will: (i) set

the Fund’s overall investment strategies;

(ii) select managers, (iii) when

appropriate, recommend to the Board

the allocation and reallocation of a

Fund’s assets among multiple Managers;

(iv) monitor and evaluate the

performance of Manager; and (v) ensure

that the Managers comply with the

Fund’s investment objectives, policies,

and restrictions.

8. No director or officer of the

Company or director or officer of the

Adviser will own directly or indirectly

(other than through a pooled investment

vehicle that is not controlled by that

director or officer) any interest in a

Manager except for (i) ownership of

interests in the Adviser or any entity

that controls, is controlled by, or is

under common control with the

Adviser; or (ii) ownership of less than

1% of the outstanding securities of any

class of debt or equity of a publiclytraded company that is either a Manager

or an entity that controls, is controlled

by, or is under common control with a

Manager.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15826 Filed 6–12–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40075; File No. SR–CBOE–

98–07]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

the Chicago Board Options Exchange,

Incorporated Relating to the

Committee Responsible for Governing

RAES Participation in SPX

June 4, 1998.

On February 20, 1998, the Chicago

Board Options Exchange, Incorporated

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

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change pursuant to Section 19(b)(1) of

the Securities Exchange Act of 1934

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

to change the Committee responsible for

governing RAES eligibility in options on

the Standard & Poor’s 500 Index

(‘‘SPX’’) from the appropriate Floor

Procedure Committee to the appropriate

Market Performance Committee. CBOE

filed an amendment on April 15, 1998,

requesting that the filing be handled as

a regular way filing under Section

19(b)(2) of the Act.3 The Commission

published notice of the proposed rule

change in the Federal Register on April

30, 1998.4 No comment letters were

received. This order approves the

proposed rule change.

I. Description of the Proposal

The Exchange proposes to change the

Committee responsible for governing

RAES eligibility in options on the SPX

from the appropriate Floor Procedure

Committee to the appropriate Market

Performance Committee. Currently, SPX

is the only options class in which the

issues concerning the eligibility of

market-makers to participate in RAES is

governed by a Floor Procedure

Committee instead of by a Market

Performance Committee. Rule 8.16 (in

the case of option classes other than

OEX 5, SPX, and DJC6) and Rule 24.17

(in the case of OEX and DJX option

classes) provide that the appropriate

Market Performance Committee will

govern the RAES market-maker

eligibility issues. This change, therefore,

will make the regulation of SPX RAES

eligibility consistent with that of the

other option classes traded on the

Exchange. The governance of eligibility

issues for SPX RAES will initially be

delegated to the newly formed Index

Market Performance Committee.

As with the other options classes, the

Index Market Performance Committee

will have authority to exempt marketmakers the requirement that the marketmaker be present in the crowd to log

onto or remain on RAES (Rule

24.16(a)(iii), the requirement that the

market-maker must log onto RAES at

any time during an expiration month

when he is present in the crowd and

when he has logged on previously

during that expiration month (Rule

24.16(d)), certain requirements

concerning the participation of joint

accounts (Rule 24.16(c)), and certain

requirements concerning the

participation of member organizations

with multiple nominees (Rule 24.16(d)).

The Index Market Performance

Committee will also take over the

broader authority of the SPX Floor

Procedure Committee to set the

maximum number of RAES participants

in RAES groups, to disallow the

participation of certain RAES groups

(Rule 24.16(e)), to require marketmakers of the trading crowd to log onto

RAES if there is inadequate

participation (Rule 24.16(f)), and to take

other remedial action as appropriate

(Rule 24.16(g)).

II. 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, the

requirements of Sections 6(b)(5) 7 of the

Act in that it is designed to prevent

fraudulent and manipulative acts and

practices and to promote just and

equitable principles of trade, and to

remove impediments to and protect the

mechanism of a free and open market.8

Specifically, the Commission believes

that changing the Committee that

oversees the eligibility of market makers

to participate in RAES for the trading of

SPX will ensure that the regulation of

SPX RAES eligibility will be consistent

with that of the other options classes

traded on the Exchange.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act 9 that the

proposed rule change SR–CBOE–98–07)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

[FR Doc. 98–15780 Filed 6–12–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40071; File No. SR–DTC–

98–10]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing and Immediate Effectiveness of

Proposed Rule Change Relating to

Fees and Charges

June 4, 1998.

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

Securities Exchange Act of 1934

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