Federal Register / Vol. 60, No. 241 / Friday, December 15, 1995 / Notices 64461

11The aggregate amount of such guarantees and

indemnification of sureties is reduced by similar

undertakings made or incurred by Southern in

connection with activities of certain other

subsidiaries.

exempt from the requirement of prior

Commission approval under section 6(a)

of the Act), from time to time through

December 31, 2000, in an aggregate

amount not to exceed $1.2 billion at any

one time outstanding.

Guaranties may take the form of direct

guaranties, standby equity funding

commitments, obligations under capital

maintenance agreements or

reimbursement agreements in respect of

bank letters of credit, or other similar

financial instruments or undertakings.

Pledge of Securities

Southern proposes to pledge the

shares of Holdings, and Holdings,

Domestic Holdings, Foreign Holdings

and any Intermediate Subsidiary

propose to pledge the shares of their

respective subsidiaries, as security in

connection with the sale of debt

securities by Holdings and such

subsidiaries.

Performance Guaranties

Southern is currently authorized by

the December 1994 Order to guaranty

performance by or act as indemnitor or

surety with respect to contractual

obligations of Southern Electric, any

subsidiary of Southern Electric or any

project entity in which Southern

directly or indirectly holds an interest,

in an aggregate amount not to exceed

$800 million at any one time

outstanding through December 31,

2003 11. Southern requests that this

authorization be modified so that it may

provide such performance guaranties on

behalf of Holdings and any direct or

indirect subsidiary of Holdings,

including Southern Electric, any

Exempt Project, other power project,

energy-related company or Intermediate

Subsidiary.

Holdings, Domestic Holdings, Foreign

Holdings and any Intermediate

Subsidiary also propose to provide

performance guaranties on behalf of any

of their direct and indirect subsidiaries.

The amount of these guaranties will be

included in calculating the above

maximum amount of performance

guaranties provided by Southern only if

they are supported by an agreement or

undertaking of Southern.

Services and Goods

The applicants propose that Special

Purpose Subsidiaries of Holdings,

Domestic Holdings or Foreign Holdings

may render services or sell goods to

associate companies. Such services will

be rendered and goods will be sold at

cost, in compliance with the Act and the

rules thereunder, unless the Special

Purpose Subsidiary complies with the

conditions specified in the December

1994 Order with respect to Southern

Electric, in which case services or goods

may be sold at market prices.

Reporting

The applicants propose that a single

consolidated quarterly report be filed by

Southern and Holdings pursuant to rule

24 with respect to all activities of

Holdings and its subsidiaries authorized

in this file. This report would replace

the combined report currently being

filed pursuant to the December 1994

Order and the Orders with respect to the

activities of Southern Electric and the

Project Parents.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–30528 Filed 12–14–95; 8:45 am]

BILLING CODE 8010–01–M

[Investment Company Act Release No.

21590; 812–9534]

Managed Accounts Services Portfolio

Trust and Mitchell Hutchins Asset

Management Inc.; Notice of

Application

December 11, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: Managed Accounts Services

Portfolio Trust (the ‘‘Trust’’) and

Mitchell Hutchins Asset Management

Inc. (‘‘Mitchell Hutchins’’).

RELEVANT ACT SECTIONS: Applicants

request an exemption under section 6(c)

of the Act from section 15(a) of the Act

and rule 18f–2 thereunder.

SUMMARY OF APPLICATION: The Trust is a

registered investment company advised

by Mitchell Hutchins. Mitchell

Hutchins oversees the selection of other

investment advisers for the Trust’s

series, monitors such investment

advisers, and allocates assets among

them. The order would permit an

investment adviser other than Mitchell

Hutchins to serve as an investment

adviser to one or more series of the

Trust without receiving prior

shareholder approval.

FILING DATE: The application was filed

on March 16, 1995, and amended on

August 9, and December 8, 1995.

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

January 5, 1996, and should be

accompanied by proof of service on

applicants, in the form of an addidavit,

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, D.C. 20549.

Applicants, 1285 Avenue of the

Americas, New York, New York 10019.

FOR FURTHER INFORMATION CONTACT:

Deepak T. Pai, Staff Attorney, at (202)

942–0574 or Alison E. Baur, 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 is

available for a fee from the SEC’s Public

Reference Branch.

Applicants’ Representations

1. The Trust is a registered open-end

management investment company

organized as a Delaware business trust.

The Trust is currently composed of

twelve separate investment portfolios

(each a ‘‘Portfolio,’’ and collectively, the

‘‘Portfolios’’). The Trust was organized

by Mitchell Hutchins and its parent,

PaineWebber Incorproated

(‘‘PaineWebber’’), to provide to

participants in the PaineWebber PACE

Program (the ‘‘PACE Program’’) a costeffective investment method (i.e., a

series of pooled investment funds) to

invest their assets in a variety of

different asset classes managed by

investment advisers selected and

monitored by Mitchell Hutchins.

2. Mitchell Hutchins, a Delaware

corporation that is registered as an

investment adviser, acts as the

investment manager and administrator

to the Trust pursuant to an Investment

Management and Administration

Agreement with the Trust (the

‘‘Management Agreement’’) and is

responsible for the selection or

termination of investment advisers

(‘‘Sub-Advisers’’) for each of the

Portfolios. Mitchell Hutchins also serves

as the adviser to the PACE Money

Market Investment Portfolio, one of the
64462 Federal Register / Vol. 60, No. 241 / Friday, December 15, 1995 / Notices

1Shares of the Portfolios may also be available at

some future date for purchase through other asset

allocation programs offered by professional asset

managers (e.g. banks, trust companies, or registered

investment advisers) who, for compensation, engage

in the business of advising others as to the value

of securities or as to the advisability of investing in,

purchasing or selling securities.

2The Trust’s prospectus has also disclosed, since

the effective date of the Trust’s registration

statement on June 21, 1995, that the Trust was

seeking an exemptive order from the SEC

exempting it from the requirement that each

agreement between the Trust and a Sub-Adviser be

approved by a vote of a majority of the shareholders

of the affected Portfolio.

Trust’s Portfolios. None of the SubAdvisers has any affiliation with

Mitchell Hutchins or PaineWebber.

Each Portfolio will pay Mitchell

Hutchins a management fee for

investment management services

provided to the Trust, and an

administrative fee for administrative

services provided to each Portfolio.

Mitchell Hutchins compensates each

Sub-Adviser from the management fees

that it receives from the applicable

Portfolio.

3. The purchase of shares of the Trust

by a PACE Program participant must be

made through a brokerage account

maintained with PaineWebber.1 As

described in the Trust’s prospectus and

marketing materials, under the PACE

Program, PaineWebber Managed

Accounts Services (‘‘PMAS’’), a division

of PaineWebber, will provide

participants with asset allocation

recommendations and related services

with respect to their investments in the

Portfolios for a fee, which will be

charged directly to the participant’s

brokerage account. These

recommendations are based on an

evaluation of each participant’s

identified investment objectives and

risk tolerances. PMAS will provide each

participant with written

recommendations appropriate to that

participant, but the participant is under

no obligation to act on the

recommendations, and PMAS will not

have investment discretion over the

participant’s account. Participants in the

PACE Program are expected to include

individuals, institutional investors,

individual retirement accounts and

qualified employee benefit plans.

4. An important element of the PACE

Program, as disclosed in the Trust’s

prospectus2 and emphasized in the

PACE Program marketing materials, is

the use of a significant number of

different Sub-Advisers evaluated,

selected and monitored by Mitchell

Hutchins. This structure is often

referred to as a ‘‘multi-manager fund.’’

An explanatory supplemental sales

literature brochure titled ‘‘Investment

Manager Profiles’’ provided to each

PACE Program participant describes the

Sub-Adviser selection process and the

Sub-Advisers employed currently by the

Trust.

5. Initially, each Portfolio, with the

exception of the PACE Money Market

Investments Portfolio which will be

advised by Mitchell Hutchins, will have

one Sub-Adviser. Mitchell Hutchins

anticipates that it may recommend the

use of two or more Sub-Advisers for

some, and perhaps most, Portfolios as

assets of the Portfolios increase and it

becomes cost-effective to allocate a

Portfolio’s assets among several SubAdvisers. Each Sub-Adviser would

pursue a distinct but complementary

investment process.

6. Under the Management Agreement,

Mitchell Hutchins manages the

investment operations of the Trust,

administers the Trust’s affairs, and,

except as provided below, makes

recommendations for each Portfolio to

the Board of Trustees of the Trust

regarding (a) the investment strategies

and policies of each Portfolio and (b) the

selection and retention of Sub-Advisers

who will exercise investment discretion

with respect to the assets of each

Portfolio. Mitchell Hutchins’ services do

not include recommendations regarding

the purchase of individual securities,

but consist of professional advice as to

the Sub-Advisers that are most likely,

over time, to achieve the investment

objectives of the Portfolios.

7. Mitchell Hutchins provides

investment advisory services for the

PACE Money Market Investments

Portfolio, although the Trust reserves

the right to hire another Sub-Adviser to

provide investment advisory services to

the PACE Money Market Investments

Portfolio if Mitchell Hutchins

recommends, and the Board of Trustees

approves, such action.

8. Applicants request an exemption

from section 15(a) and rule 18f–2 to

permit a Sub-Adviser to serve as an

investment adviser to one or more

Portfolios under a written contract that

has not been approved by a vote of the

majority of the outstanding voting

securities of the Portfolios, including a

contract that has terminated as a result

of its ‘‘assignment.’’ Although

shareholders will not vote on SubAdviser changes, applicants will

provide shareholders with all the

information that would be included in

a proxy statement within 90 days of the

hiring of any new Sub-Adviser or the

implementation of any proposed

material change in a Sub-Adviser

contract.

9. The Trust will rely on Mitchell

Hutchins to monitor the performance of

each Sub-Adviser employed by the

Trust, as well as other attributes that

could affect a Sub-Adviser’s future

performance. Applicants believe that it

is in the best interest of the Trust’s

shareholders for the Trust’s Trustees to

be able to respond promptly to Mitchell

Hutchins’ recommendations by

negotiating changes in Sub-Advisers’

contracts or, if necessary, by adding one

or more new Sub-Advisers.

Applicants’ Legal Conclusions

1. Section 15(a) 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 investment company’s outstanding

voting securities. Rule 18f–2 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. The Trust holds itself out as a

multi-manager fund whereby investors

obtain Mitchell Hutchins’ services as a

professional organization that will

evaluate and determine which SubAdvisers are most likely to make

portfolio securities selections that will

achieve the investor’s defined

objectives. Applicants believe that

investors choosing to invest in the Trust

have determined that they are unable or

unwilling to select and/or monitor)

effectively the best Sub-Advisers for a

Portfolio and, therefore, desire that a

professional organization with

substantial experience and resources

conduct these services on their behalf.

Under the Trust’s structure, applicants

assert that the selection or change in a

Sub-Adviser is not an event that

significantly alters the nature of the

shareholder’s investment and thus does

not implicate the policy concerns

requiring shareholder approval.

3. Applicants assert that, unlike the

conventional investment company, the

structure of the Trust provides complete

independence from the Sub-Advisers.

By contracting with Mitchell Hutchins

for corporate management and

distribution functions, the Trust

provides investors with the full services

of a conventional investment company,

but also retains complete freedom to

select or change investment advisers.

Applicants believe that there are no

compelling policy reasons that require

the Trust, any more than shareholders of

the conventional investment company

should approve its adviser’s change of a

portfolio manager or revision of that

portfolio manager’s employment

contract.

4. Applicants assert that the Trust’s

investors will be able to exercise control

over their relationship with Mitchell
Federal Register / Vol. 60, No. 241 / Friday, December 15, 1995 / Notices 64463

1 15 U.S.C. 78s(b)(1(1988).

2 17 CFR 240.19b–4 (1994).

3Position limits impose a ceiling on the number

of option contracts in each class on the same side

of the market (i.e., aggregating long calls and short

puts or long puts and short calls) that can be held

or written by an investor or group of investors

Continued

Hutchins, the party the investors have

chosen to hold accountable for

investment results, through the voting

rights pursuant to section 15(a) of the

Act and rule 18f–2 thereunder

concerning the Trust’s Management

Agreement with Mitchell Hutchins.

Applicants believe that a shareholder

vote concerning a Sub-Advisory

Agreement prior to its effective date

should not be required, particularly

when doing so will (i) increase the

Trust’s expenses and (ii) may delay

prompt implementation of the action

Mitchell Hutchins (and ultimately the

investors themselves) has determined is

most beneficial to the Trust’s

shareholders. Therefore, applicants

contend that requiring the Trust to

obtain immediate and costly

shareholder approval for every change

in control of a Sub-Adviser is

unreasonably burdensome, particularly

where shareholders have chosen

Mitchell Hutchins to determine the

impact of the proposed change on their

behalf.

5. 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 policies and purposes

fairly intended by the policies and

provisions of the Act. Applicants

believe that the requested relief meets

this standard.

Applicants’ Conditions

Applicants agree that the requested

exemption is subject to the following

conditions:

1. 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 or Mitchell

Hutchins other than by reason of serving

as a Sub-Adviser to one or more of the

Portfolios (an ‘‘Affiliated Sub-Adviser’’)

without such agreement, including the

compensation to be paid thereunder,

being approved by the shareholders of

the applicable Portfolio.

2. 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

with the discretion of the then existing

Independent Trustees.

3. When a Sub-Adviser change is

proposed for a Portfolio with an

Affiliated Sub-Adviser, the Trustee of

the Trust, including a majority of the

Independent Trustees, will make a

separate finding, reflected in the Trust’s

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.

4. Mitchell Hutchins will provide

general management and administrative

services to the Trust, and, subject to

review and approval by the Trust’s

Trustees, will: (a) Set the Portfolios’

overall investment strategies; (b) select

Sub-Advisers; (c) allocate and, when

appropriate, reallocate the Portfolios’

assets among Sub-Advisers; (d) monitor

and evaluate the performance of SubAdvisers; and (e) ensure that the SubAdvisers comply with the Trust’s

investment objectives, policies, and

restrictions.

5. Before a future Portfolio that does

not presently have an effective

registration statement may rely on the

order, its initial shareholder will

approve the multi-manager structure

before Portfolio shares are offered to the

public.

6. Within 90 days of the hiring of any

new Sub-Adviser or the implementation

of any proposed material change in a

Sub-Advisory Agreement, the Trust will

furnish shareholders all information

about a new Sub-Adviser or SubAdvisory Agreement that would be

included in a proxy statement. Such

information will include any change in

such disclosure caused by the addition

of a new Sub-Adviser or any proposed

material change in a Portfolio’s SubAdvisory Agreement. The Trust will

meet this condition by providing

shareholders, within 90 days of the

hiring of a Sub-Adviser or the

implementation of any material change

to the terms of a Sub-Advisory

Agreement, with an information

statement meeting the requirements of

Regulation 14C and Schedule 14C under

the Securities Exchange Act of 1934 (the

‘‘Exchange Act’’). The information

statement also will meet the

requirements of Schedule 14A under the

Exchange Act.

7. No Trustee or officer of the Trust

or Mitchell Hutchins 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

Mitchell Hutchins or 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 equity or debt of a publiclytraded company that is either a SubAdviser or an entity that controls, is

controlled by, or is under common

control with a Sub-Adviser.

8. The Trust will disclose in all

prospectuses relating to any Portfolio

the existence, substance, and effect of

any order granted pursuant to the

application.

9. Shares of the Trust will be offered

exclusively to participants in the PACE

Program or other asset allocation

services offered by professional asset

managers who, for compensation,

engage in the business of advising

others as to the value of securities or as

to the advisability of investing in,

purchasing or selling securities.

For the SEC, by the Division of Investment

Management, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–30569 Filed 12–14–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36567; File No. SR-Amex–

95–35]

Self-Regulatory Organizations; Order

Granting Partial Approval to a

Proposed Rule Change by the

American Stock Exchange, Inc.,

Relating to the Members’ Compliance

With Position and Exercise Limits for

Non-Amex Listed Options

December 8, 1995.

On August 25, 1995, the American

Stock Exchange, Inc. (‘‘Amex’’ 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

amend (1) Amex Rule 900(a),

‘‘Applicability,’’ to confirm the

Exchange’s enforcement authority over

Amex members’ options transactions

effected on another options exchange;

and (2) Amex Rules 904, ‘‘Position

Limits,’’ and 905, ‘‘Exercise Limits,’’ to

require Amex members who trade nonAmex listed option contracts and who

are not members of the exchange where

the options are traded to comply with

the option position and exercise limits

set by the exchange where the

transactions are effected.3 The Amex