4870 Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Notices

1 Managed Accounts Services Portfolio Trust and

Mitchell Hutchins Asset Management, Inc.,

Investment Company Act Release Nos. 21590 (Dec.

15, 1995) (notice) and 21666 (Jan. 11, 1996) (order).

and approved by the requisite votes of

the holders of the outstanding shares of

each of the Acquired Portfolios in

accordance with the provisions of each

Portfolio’s Agreement and Declaration

of Trust and By-laws; (b) the Acquired

Portfolio and the Acquiring Portfolio

have received opinions of counsel

stating, among other things, that (i) each

Fund Reorganization will constitute a

‘‘fund reorganization’’ under Section

368 of the Internal Revenue Code of

1986, as amended (the ‘‘Code’’), (ii) the

Acquiring Portfolio and the Acquired

Portfolio is a ‘‘party to a fund

reorganization’’ within the meaning of

Section 368 of the Code, (iii) no gain or

loss will be recognized by the Acquiring

Portfolio upon the receipt of the assets

of the Acquired Portfolio solely in

exchange for the Acquiring Portfolio

shares and the assumption by the

Acquiring Portfolio of the identified

liabilities of the Acquired Portfolio and

(iv) no gain or loss will be recognized

by the Acquired Portfolio upon the

transfer of the Acquired Portfolio’s

assets to the Acquiring Portfolio in

exchange for the Acquiring Portfolio

shares and the assumption by the

Acquiring Portfolio of the identified

liabilities of the Acquired Portfolio or

upon the distribution of the Acquiring

Portfolio shares to Acquired Portfolio

shareholders in exchange for their

shares of the Acquired Portfolio; and (c)

the Acquired Portfolio and the

Acquiring Portfolio shall have received

from the Commission an order

exempting the Fund Reorganizations

from the provisions of Section 17(a) of

the 1940 Act.

Applicants’ Legal Analysis

1. Section 17(a) of the 1940 Act

provides, in pertinent part, that it is

unlawful for any affiliated person of a

registered investment company, or any

affiliated person of such a person, ‘‘(1)

knowingly to sell any security or other

property to such registered company

* * * [or] (2) knowingly to purchase

from such registered company * * *

any security or other property * * *’’

Section 2(a)(3) of the 1940 Act defines

the term ‘‘affiliated person’’ of another

person in include, in pertinent part,

‘‘(A) any person directly or indirectly

owning, controlling, or holding with

power to vote, 5 per centum or more of

the outstanding voting securities of such

other person; (B) any person 5 per

centum or more of whose outstanding

voting securities are directly or

indirectly owned, controlled, or held

with power to vote, by such other

person; (C) any person directly or

indirectly controlling, controlled by, or

under common control with, such other

person * * *; and (E) if such other

person in an investment company, any

is an investment advises thereof * * *’’

2. Applicants assert that Rule 17a–8

under the 1940 Act may not be available

to exempt the proposed transactions

described herein. The premise of Rule

17a–8 is that the investment companies

involved in mergers or consolidations

are under common control by virtue of

having a common investment adviser,

directors and/or officers and no other

affiliation exists. In this case, certain of

the Portfolios may be deemed to be

affiliated persons or affiliated persons of

each other because of the Insurance

Companies and FIRMCO’s share

ownership of the Portfolios.

3. Section 17(b) of the 1940 Act

provides that, notwithstanding Section

17(a), any person may file with the

Commission an application for an order

exempting a proposed transaction from

one or more provisions of that

subsection and that the Commission

shall grant such application and issue

such order of exemption if evidence

establishes that ‘‘(1) 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; (2) the proposed transaction

is consistent with the policy of each

registered investment company

concerned, as recited in its registration

statement and reports filed under [the

1940 Act], and (3) the proposed

transaction is consistent with the

general purpose of [the 1940 Act]

* * *.’’

4. Applicants submit that the terms of

the Fund Reorganizations satisfy the

standards set forth in section 17(b), in

that the terms are fair and reasonable

and do not involve overreaching on the

part of any person concerned.

Applicants note that the Boards of

Trustees of CST and SFT, including the

Disinterested Trustees, found that

participation in the Fund

Reorganization is in the best interests of

each Portfolio based on the following

factors: (a) The interests of shareholders

will not be diluted; (b) the Portfolio’s

investment objectives and policies

generally are substantially similar; (c)

certain operational efficiencies may be

achieved upon the combination of the

Portfolios as a result of the economies

of scale associated with a more diverse

family of mutual funds; (d) no sales

charges will be imposed in connection

with the Fund Reorganizations; (e) the

service and distribution resources

available to MIT and the anticipated

increased array of investment

alternatives available to shareholders of

MIT; (f) the transactions will be free

from Federal income taxes; (g) the

conditions and policies of Rule 17a–8

under the 1940 Act will be followed; (h)

the transfer of securities in exchange for

shares will be at relative net asset value;

and (i) no overreaching by any person

concerned with the transactions will

occur.

Conclusion

For the reasons and upon the facts set

forth above, Applicants state that the

requested order meets the standards set

forth in Section 17(b) and should,

therefore, be granted.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 01–1403 Filed 1–17–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. IC–24823 (812–12276)]

PaineWebber PACE Select Advisors

Trust and Mitchell Hutchins Asset

Management, Inc.; Notice of

Application

January 11, 2001.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’)

ACTION: Notice of application for an

order under section 6(c) of the

Investment Company Act of 1940 (the

‘‘Act’’) to amend a prior order that

granted an exemption from section 15(a)

of the Act and rule 18f–2 under the Act.

Summary of Application: Applicants

request an order amending a prior order

(‘‘Prior Order’’) that permits them to

enter into and materially amend

investment sub-advisory contracts

without receiving shareholder

approval.1

Applicants: PaineWebber PACE Select

Advisors Trust (formerly, Managed

Accounts Services Portfolio Trust) (the

‘‘Trust’’) and Mitchell Hutchins Asset

Management Inc. (‘‘Mitchell Hutchins’’).

Filing Date: The application was filed

on November 30, 1999 and amended on

January 5, 2001.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the Commission orders a

hearing. Interested persons may request

a hearing by writing to the

Commission’s Secretary and serving

Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Notices 4871

applicants with a copy of the request,

personally or by mail. Hearing requests

should be received by the Commission

by 5:30 p.m. on February 5, 2001, 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

Commission’s Secretary.

ADDRESSES: Secretary, Commission, 450

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

20549–0609. Applicants: 1285 Avenue

of the Americas, New York, New York

10019.

FOR FURTHER INFORMATION CONTACT: Sara

P. Crovitz, Senior Counsel, at (202) 942–

0667 or Nadya Roytblat, Assistant

Director, 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

Commission’s Public Reference Branch,

450 Fifth Street, N.W., Washington, D.C.

20549–0101, (202) 942–8090.

Applicants’ Representations

1. The Trust is an open-end

management investment company

currently composed of twelve

investment portfolios (‘‘Portfolios’’).

Mitchell Hutchins, a wholly owned

subsidiary of PaineWebber, acts as

investment manager and administrator

to the Trust and is responsible, subject

to oversight by the Board of Trustees of

the Trust (‘‘Board’’) for the selection of

investment sub-advisers (‘‘SubAdvisers’’) and the ongoing review of

the Sub-Advisers’ performance.

2. On January 11, 1996, applicants

received the Prior Order permitting the

Trust and Mitchell Hutchins to enter

into sub-advisory agreements (‘‘SubAdvisory Agreements’’) for the

Portfolios without obtaining shareholder

approval. Among other things, the Prior

Order is subject to a condition that

requires a notice, in the form of an

information statement, be sent to

shareholders following the hiring of a

new Sub-Adviser or the implementation

of a material change to a Sub-Advisory

Agreement. Applicants seek to amend

the Prior Order to preserve the

requirement to provide notice to

shareholders regarding the hiring of a

new Sub-Adviser, but to eliminate the

requirement to provide a notice in the

form of an information statement of

other material changes to a SubAdvisory Agreement. Applicants state

that supplements to the Trust’s

prospectus or statements of additional

information serve as a more appropriate

and less costly alternative to the latter

requirement. Applicants also seek to

amend the Prior Order to eliminate the

requirement that shares of the Trust be

offered exclusively to participants in the

PaineWebber PACE Program (the ‘‘Pace

Program’’) or other asset allocation

services.

Applicants’ Legal Analysis

1. Section 6(c) of the Act authorizes

the Commission to exempt persons or

transactions from any provisions of the

Act to the extent that such exemptions

are 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 submit

that amending the Prior Order as

requested would be consistent with the

standards of section 6(c) of the Act.

Applicants’ Conditions

Applicants agree that the order

granting the requested relief will be

subject to the following conditions:

1. Before a Portfolio may rely on the

order, the operation of the Portfolio in

the manner described in the application

will be approved by a majority of the

outstanding voting securities of the

Portfolio, as defined in the Act, or in the

case of a Portfolio whose public

shareholders purchased shares on the

basis of a prospectus containing the

disclosure contemplated by condition 2

below, by the sole initial shareholder

before offering shares of such Portfolio

to the public.

2. The Trust will disclose in all

prospectuses relating to any Portfolio

the existence, substance and effect of

any order granted pursuant to the

application. In addition, each Portfolio

relying on the requested order will hold

itself out to the public as employing the

management structure described in the

application. The prospectus will

prominently disclose that Mitchell

Hutchins has the ultimate responsibility

(subject to oversight by the Board) to

oversee the Sub-Advisers and

recommend their hiring, termination

and replacement.

3. At all times, a majority of the

trustees of the Trust will be persons

each of whom is not an ‘‘interested

person’’ of the Trust (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.

4. Mitchell Hutchins will not enter

into a Sub-Advisory Agreement with

any Sub-Adviser that is an affiliated

person (as defined in section 2(a)(3) of

the Act) of the Trust, Mitchell Hutchins

or the Portfolios, other than by reason of

serving as a Sub-Adviser to one or more

of the Portfolios (the ‘‘Affiliated SubAdviser’’) without such agreement,

including the compensation to be paid

thereunder, being approved by the

shareholders of the applicable Portfolio.

5. When a Sub-Adviser change is

proposed for a Portfolio with an

Affiliated Sub-Adviser, the trustees of

the Trust, including a majority of the

Independent Trustees, will make a

separate finding, reflected in the Board

minutes, that the change is in the best

interests of the Portfolio and its

shareholders and does not involve a

conflict of interest from which Mitchell

Hutchins or the Affiliated sub-Adviser

derives an inappropriate advantage.

6. Within 90 days of the hiring of any

new SubAdviser, the Trust will furnish

shareholders of the applicable Portfolio

all information about a 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 Trust will meet this

condition by providing shareholders

with an information statement meeting

the requirements of Regulation 14C and

Schedule 14C and Item 22 of Schedule

14A under the Securities Exchange Act

of 1934.

7. Mitchell Hutchins will provide

general management and administrative

services to the Trust, and, subject to

review and approval by the Board, will:

(a) Set the Portfolios’ overall investment

strategies; (b) evaluate, select and

recommend Sub-Advisers to manage all

or a part of the Portfolio’s assets; (c)

allocate and, when appropriate,

reallocate the Portfolios’ assets among

Sub-Advisers; (d) monitor and evaluate

the investment performance of SubAdvisers; and (e) implement procedures

reasonably designed to ensure that the

Sub-Advisers comply with the relevant

Portfolio’s investment objectives,

policies and restrictions.

8. No Trustee or officer of the Trust

or director or office of Mitchell

Hutchins will own directly or indirectly

(other than through a polled investment

vehicle that is not controlled by any

such Trustee, director or officer) any

interest in a Sub-Adviser except for: (a)

Ownership of interest in Mitchell

Hutchins or in any entity that controls,

is controlled by, or is under common

control with Mitchell Hutchins; or (b)

ownership of less than 1% of the

outstanding securities of any class of

4872 Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Notices

1CityFed Financial Corp., Investment Company

Act Release Nos. 24252 (Jan. 13, 2000) (notice) and

24283 (Feb. 9, 2000) (order).

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 Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–1405 Filed 1–17–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

24825; 812–12352]

CityFed Financial Corp.; Notice of

Application

January 11, 2001.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’).

ACTION: Notice of application for an

order under sections 6(c) and 6(e) of the

Investment Company Act of 1940

(‘‘Act’’) for exemption from all

provisions of the Act, except sections 9,

17(a) (modified as discussed in the

application), 17(d) (modified as

discussed in the application), 17(e),

17(f), 36 through 45, and 47 through 51

of the Act and the rules thereunder.

SUMMARY OF APPLICATION: The requested

order would exempt the applicant,

CityFed Financial Corp. (‘‘CityFed’’),

from certain provisions of the Act until

the earlier of one year from the date the

requested order is issued or such time

as CityFed would no longer be required

to register as an investment company

under the Act. The order would extend

an exemption granted until February 9,

2001.1

FILING DATES: The application was filed

on December 4, 2000 and amended on

January 10, 2001.

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

February 5, 2001, and should be

accompanied 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, NW., Washington, DC 20549–

0609. CityFed, 4 Young’s Way, P.O. Box

3126, Nantucket, MA 02584.

FOR FURTHER INFORMATION CONTACT:

Bruce R. MacNeil, Senior Counsel, at

(202) 942–0634, 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, NW., Washington, DC 20549–

0102 (tel. no. 202–942–8090).

Applicant’s Representations

1. CityFed was a savings and loan

holding company that conducted its

savings and loan operations through its

wholly-owned subsidiary, City Federal

Savings Bank (‘‘City Federal’’). During

the five-year period ending December

31, 1988, City Federal was the source of

substantially all of CityFed’s revenues

and income. As a result of substantial

losses in its mortgage banking and real

estate operations, City Federal was

unable to meet its regulatory capital

requirements. Accordingly, on

December 7, 1989, the Office of Thrift

Supervision (‘‘OTS’’) placed City

Federal into receivership and appointed

the Resolution Trust Corporation

(‘‘RTC’’) as City Federal’s receiver. City

Federal’s deposits and substantially all

of its assets and liabilities were acquired

by a newly created federal mutual

savings bank, City Savings, F.S.B. (‘‘City

Savings’’). The OTS appointed the RTC

as receiver of City Savings.

2. Once City Federal was placed into

receivership, CityFed no longer

conducted savings and loan operations

through any subsidiary. Thus, since

December 8, 1989, almost all of

CityFed’s assets consisted of cash that

has been invested in (i) money market

instruments with a maturity of one year

or less, and (ii) money market mutual

funds.

3. On June 2, 1994, the OTS issued a

Notice of Charges (‘‘OTS Action’’)

against CityFed and certain current or

former directors and, in some cases,

officers of CityFed and City Federal

(‘‘Individual Respondents’’). The OTS

Action sought restitution from and a

civil money penalty against both

CityFed and the Individual

Respondents. Also on June 2, 1994, the

OTS issued a Temporary Order to Cease

and Desist (‘‘Temporary Order’’) against

CityFed. The Temporary Order sought

to freeze CityFed’s assets by placing

them in various respects under the

controls of the OTS. On October 26,

1994, CityFed and the OTS entered into

an escrow agreement with CoreStates

Bank, N.A. (now First Union National

Bank (‘‘First Union’’)) (‘‘Escrow

Agreement’’) pursuant to which CityFed

transferred substantially all of its assets

to First Union for deposit into an escrow

account. The Escrow Agreement

provided CityFed with $15,000 per

month for operating expenses and

allowed CityFed to sell and purchase

securities in the escrow account.

4. On May 19, 2000, CityFed finalized

with the OTS and the Federal Deposit

Insurance Corporation (‘‘FDIC’’), the

statutory successor to the RTC, a

settlement of the OTS Action

(‘‘Settlement’’). Pursuant to the

Settlement, the OTS dismissed with

prejudice the OTS Action and the FDIC

gave full and complete releases to

CityFed and the Individual

Respondents. In turn, CityFed and the

Individual Respondents gave full and

complete releases to the OTS and the

FDIC. The OTS also dissolved the

Temporary Order and authorized First

Union to release to CityFed all of its

assets remaining in the escrow account.

5. On December 7, 1992, the RTC filed

suit against CityFed and two former

officers of City Federal seeking damages

of $12 million for failure to maintain the

net worth of City Federal (‘‘First RTC

Action’’ ). In light of the filing of the

OTS Action on June 2, 1994, the RTC

and CityFed agreed to dismiss without

prejudice the RTC’s claim against

CityFed in the First RTC Action.

Pursuant to the Settlement, the FDIC

released CityFed from all claims in the

First RTC Action.

6. The RTC also filed suit against

several former directors and officers of

City Federal alleging gross negligence

and breach of fiduciary duty with

respect tot certain loans (‘‘Second RTC

Action’’). The RTC sought in excess of

$200 million in damages. CityFed states

that all of the defendants in the Second

RTC Action have settled with the RTC

or the FDIC. Pursuant to the Settlement,

the FDIC assigned any rights it acquired

in these settlements to CityFed. Under

its bylaws, CityFed may be obligated to

indemnify these former officers and

directors and pay their legal expenses,

including settlement amounts. On the

advice of counsel to a special committee

of CityFed’s board of directors,

comprised of directors who have not

been named in the First or Second RTC

Action, CityFed advanced reasonable