Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Notices 7615

1Cityfed Financial Corp., Investment Company

Act Release Nos. 20074 (Feb. 15, 1994) (notice) and

20135 (Mar. 15, 1994) (order).

exchanges and quoted in the OTCBB by

NASD members.

It Is Therefore Ordered, pursuant to

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

proposed rule change be, and hereby is,

approved for an interim period through

April 28, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority, 17 CFR 200.30–3(a)(12).

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–3036 Filed 2–7–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–20877; 812–9378]

Cityfed Financial Corp.; Notice of

Application

February 2, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: Cityfed Financial Corp.

(‘‘Cityfed’’).

RELEVANT ACT SECTIONS: Order requested

under sections 6(c) and 6(e) of the Act.

SUMMARY OF APPLICATION: Applicant

requests an order that would exempt it

from all provisions of the Act, except

sections 9, 17(a) (modified as discussed

herein), 17(d) (modified as discussed

herein), 17(e), 17(f), 36 through 45, and

47 through 51 of the Act and the rules

thereunder until the earlier of one year

from the date of the requested order or

such time as Cityfed would no longer be

required to register as an investment

company under the Act. The requested

exemption would extend an exemption

originally granted until March 15, 1995.

FILING DATE: The application was filed

on December 20, 1994.

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 27, 1995, 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.

Applicant, 4 Young’s Way, P.O. Box

3126, Nantucket, MA 02584.

FOR FURTHER INFORMATION CONTACT:

James M. Curtis, Senior Counsel, at

(202) 942–0563, or Robert A. Robertson,

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.

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’’). 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 (the ‘‘OTS’’)

placed City Federal into receivership

and appointed the Resolution Trust

Corporation (the ‘‘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 Bank, F.S.B., whose

deposits, assets, and liabilities in turn

were acquired by 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 and

substantially all of its assets consisted of

cash that has been invested in money

market instruments with a maturity of

one year or less and money market

mutual funds. As of September 30,

1994, Cityfed held cash and securities of

approximately $9.03 million. Because of

Cityfed’s asset composition, it may be

an investment company under the Act.

Rule 3a–2 under the Act provides a oneyear safe harbor to issuers that meet the

definition of an investment company

but intend to engage in a business other

than investing in securities. Because of

various claims against Cityfed and

certain Cityfed officers and directors,

Cityfed could not acquire an operating

company within the one year safe

harbor. The expiration of the safe harbor

period necessitated the filing of an

application for exemption from all

provisions of the Act, with certain

exceptions. In 1994, Cityfed was granted

conditional relief from all provisions of

the Act until March 15, 1995.1

3. While Cityfed’s board of directors

has considered from time to time

whether to engage in an operating

business, the board has determined not

to engage in an operating business at the

present time because of the claims filed

against Cityfed, whose liability

thereunder cannot be reasonably

estimated and may exceed its assets.

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

Notice of Charges and Hearing for Cease

and Desist Order to Direct Restitution

and Other Appropriate Relief and

Notice of Assessment of Civil Money

Penalties (‘‘Notice of Charges’’) against

Cityfed and certain current or former

directors and, in some cases, officers of

Cityfed and City Federal. The Notice of

Charges requests that an order be

entered by the Director of the OTS

requiring Cityfed to make restitution,

reimburse, indemnify or guarantee the

OTS against loss in an amount not less

than $118.4 million, which the OTS

alleges represents the regulatory capital

deficiency reported by City Federal in

the fall of 1989. The Notice of Charges

provides that a hearing will be held

before an administrative law judge on

the question of whether a final cease

and desist order should be issued

against Cityfed. As of the date of the

filing of the application, no date has

been set for such hearing.

5. Also on June 2, 1994, the OTS

issued a Temporary Order to Cease and

Desist (‘‘Temporary Order’’) against

Cityfed. The Temporary Order required

Cityfed to post $9.0 million as security

for the payment of the amount sought by

the OTS in its Notice of Charges. Cityfed

unsuccessfully petitioned the district

court for an injunction against the

Temporary Order. Cityfed has appealed

to the Court of Appeals. On October 26,

1994, Cityfed and the OTS entered into

an Escrow Agreement (‘‘Escrow

Agreement’’) with CoreStates Bank, N.A.

(‘‘CoreStates’’) pursuant to which

Cityfed transferred substantially all of

its assets to CoreStates for deposits into

an escrow account to be maintained by

CoreStates. Cityfed’s assets in the

escrow account continue to be invested

in money market instruments with a

maturity of one year or less and money

market mutual funds. Withdrawals or

disbursements from the escrow account

are not permitted without the written

authorization of the OTS, other than for

(a) monthly transfer to Cityfed in the

amount of $15,000 for operating

expenses, (b) the disbursement of funds
7616 Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Notices

on account of purchases of securities by

Cityfed, and (c) the payment of the

escrow fee and expenses to CoreStates.

The Escrow Agreement also provides

that CoreStates will restrict the escrow

account in such a manner as to

implement the terms of the Escrow

Agreement and to prevent a change in

status or function of the escrow account

unless authorized by Cityfed and the

OTS in writing.

6. On December 7, 1992, the RTC filed

suit against Cityfed and two former

officers of City Federal seeking damages

of $12 million dollars for failure to

maintain the net worth of City Federal

(the ‘‘First RTC Action’’). In connection

with this action, the RTC sought a court

order to place Cityfed’s assets under the

control of the court. On January 5, 1993,

the RTC and Cityfed entered into an

agreement (the ‘‘Agreement’’) whereby

the RTC would refrain from seeking the

above order and Cityfed could continue

to make payments for ordinary and

reasonable business expenses and

certain legal fees. In light of the filing by

the OTS of the Notice of Charges on

June 2, 1994, the RTC and Cityfed

agreed to dismiss without prejudice the

RTC’s claim against Cityfed in the First

RTC Action.

7. In addition, the RTC filed suit

against several former directors and

officers of City Federal alleging gross

negligence and breach of fiduciary duty

with respect to certain loans (the

‘‘Second RTC Action’’). The RTC seeks

in excess of $200 million in damages.

Under Cityfed’s bylaws, Cityfed may be

obligated to indemnify these former

officers and directors and advance their

legal expenses. Cityfed generally has

agreed to advance expenses in

connection with these requests. Because

of the Temporary Order and the Escrow

Agreement, however, Cityfed is not

continuing to advance expenses in

connection with these requests. Cityfed

is unable to determine with any

accuracy the extent of its liability with

respect to these indemnification claims,

although the amount may be material.

8. Currently, Cityfed’s stock is traded

sporadically in the over-the-counter

market. Cityfed has one employee who

is president, chief executive officer, and

treasurer. Cityfed’s secretary does not

receive any compensation for her

service. If Cityfed is unable to resolve

the above claims successfully, Cityfed

may seek protection from the

bankruptcy courts or liquidate. Cityfed

asserts that it probably will not be in a

position to determine what course of

action to pursue until most, if not all, of

its contingent liabilities are resolved.

9. During the term of the proposed

exemption, Cityfed will comply with

sections 9, 17(a), 17(d), 17(e), 17(f), 36

through 45, and 47 through 51 of the

Act and the rules thereunder, subject to

the following modifications. With

respect to section 17(d), Cityfed

represents that it established a stock

option plan when it was an operating

company. Although the plan has been

terminated, certain former employees of

Cityfed have existing rights under the

plan. Cityfed believes that the plan may

be deemed a joint enterprise or other

joint arrangement or profit-sharing plan

within the meaning of section 17(d) and

rule 17d–1 thereunder. Because the plan

was adopted when Cityfed was an

operating company and to the extent

there are existing right under the plan,

Cityfed seeks an exemption to the extent

necessary from section 17(d). In

addition, Cityfed may become subject to

the jurisdiction of a bankruptcy court.

With respect to transactions approved

by the bankruptcy court, applicant

requests an exemption from sections

17(a) and 17(d) as further described in

condition 3 below.

Applicant’s Legal Analysis

1. Section 3(a)(1) defines an

investment company as any issuer of a

security who ‘‘is or holds itself out as

being engaged primarily * * * in the

business of investing, reinvesting or

trading in securities.’’ Section 3(a)(3)

further defines as investment company

as an issuer who is engaged in the

business of investing in securities that

have a value in excess of 40% of the

issuer’s total assets (excluding

government securities and cash). Cityfed

acknowledges that it may be deemed to

fall within one of the Act’s definitions

of an investment company. Accordingly,

applicant requests an exemption under

sections 6(c) and 6(e) from all

provisions of the Act, subject to certain

exceptions.

2. In determining whether to grant an

exemption for a transient investment

company, the SEC considers such

factors as whether the failure of the

company to become primarily engaged

in a non-investment business or

excepted business or liquidate within

one year was due to factors beyond its

control; whether the company’s officers

and employees during that period tried,

in good faith, to effect the company’s

investment of its assets in a noninvestment business or excepted

business or to cause the liquidation of

the company; and whether the company

invested in securities solely to preserve

the value of its assets. Cityfed believes

that it meets these criteria.

3. Cityfed believes that its failure to

become primarily engaged in a noninvestment business by March 15, 1995

is due to factors beyond its control.

Because of outstanding and potential

claims against Cityfed and certain of its

officers and directors, Cityfed cannot

acquire an operating company. Cityfed

has diligently pursued its claims against

others and has taken steps to determine

the extent of its contingent liabilities.

Since the filing of its initial application

for exemptive relief under sections 6(c)

and 6(e) on October 19, 1990, Cityfed

has invested in money market

instruments and money market mutual

funds solely to preserve the value of its

assets.

4. Cityfed requests an order that

would exempt it from all provisions of

the Act, subject to certain exemptions,

until the earlier of one year from the

date of any order issued on this

application or such time as Cityfed

would no longer be required to register

as an investment company under the

Act.

Applicant’s Conditions

Cityfed agrees that the requested

exemption will be subject to the

following conditions, each of which will

apply to Cityfed from the date of the

order until it no longer meets the

definition of an investment company or

during the period of time it is exempt

from registration under the Act:

1. Cityfed will not purchase or

otherwise acquire any additional

securities other than securities that are

rated investment grade or higher by a

nationally recognized statistical rating

organization or, if unrated, deemed to be

of comparable quality under guidelines

approved by Cityfed’s board of

directors, subject to two exceptions:

a. Cityfed may make an equity

investments in issuers that are not

investment companies as defined in

section 3(a) of the Act (including issuers

that are not investment companies

because they are covered by a specific

exclusion from the definition of

investment company under section 3(c)

of the Act other than section 3(c)(1)) in

connection with the possible acquisition

of an operating business as evidenced

by a resolution approved by Cityfed’s

board of directors; and

b. Cityfed may invest in one or more

money market mutual funds that limit

their investments to ‘‘Eligible

Securities’’ within the meaning of rule

2a–7(a)(5) promulgated under the Act.

2. Cityfed’s Form 10–KSB, Form 10–

QSB and annual reports to shareholders

will state that an exemptive order has

been granted pursuant to sections 6(c)

and 6(e) of the Act and that Cityfed and

other persons, in their transactions and

relations with Cityfed, are subject to

sections 9, 17(a), 17(d), 17(e), 17(f), 36
Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Notices 7617

1 1.5 narrow-body aircraft (DC8, MD80, B707,

B727, B737, B757 or similar aircraft) is considered

equivalent to one wide-body aircraft (L1011, DC10,

A300, B747SP, B767 or similar aircraft). Two

narrow-body aircraft is considered equivalent to

one B747–100 or similar aircraft.

2 Designated U.S. carriers for combination

services may operate via the following intermediate

points: Panama City, Panama; Guayaquil and Quito,

Ecuador; and on a blind-sector basis Bogota and

Cali, Colombia.

3Service to Guayaquil, Bogota and Cali may be

operated on a blind-sector basis only.

4American Airlines was awarded certificate

authority to serve Peru by Order 90–5–5. It has an

application pending for renewal of its certificate in

Docket 48343. Challenge was granted exemption

authority to serve Peru in 1987 (Order 87–2–38) and

has been allocated the five available all-cargo

frequencies. (See Orders 87–7–52, 89–7–42, 91–6–

38 and 93–3–38.) Challenge has a pending

application in Docket 50009 for renewal of its

underlying authority and its frequency allocation.

5By Order 94–12–21, the Department allocated

United Air Lines, Inc. the available 4.5 weekly

combination frequencies on a temporary basis for

the period January 15, 1995 through April 15, 1995,

while we process a case for longer-term authority.

through 45, and 47 through 51 of the

Act, and the rules thereunder, as if

Cityfed were a registered investment

company, except insofar as permitted by

the order requested hereby.

3. Notwithstanding sections 17(a) and

17(d) of the Act, an affiliated person (as

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

Cityfed may engage in a transaction that

otherwise would be prohibited by these

sections with Cityfed:

(a) If such proposed transaction is first

approved by a bankruptcy court on the

basis that (i) the terms thereof, including

the consideration to be paid or received,

are reasonable and fair to Cityfed, and

(ii) the participation of Cityfed in the

proposed transaction will not be on a

basis less advantageous to Cityfed than

that of other participants; and

(b) In connection with each such

transaction, Cityfed shall inform the

bankruptcy court of (i) the identity of all

of its affiliated persons who are parties

to, or have a direct or indirect financial

interest in, the transaction; (ii) the

nature of the affiliation; and (iii) the

financial interests of such persons in the

transaction.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–3111 Filed 2–7–95; 8:45 am]

BILLING CODE 8010–01–M

Issuer Delisting; Notice of Application

to Withdraw From Listing and

Registration; (Fund American

Enterprises Holdings, Inc., Common

Stock, $1.00 Par Value) File No. 1–8993

February 2, 1995.

Fund American Enterprises Holdings,

Inc. (‘‘Company’’) has filed an

application with the Securities and

Exchange Commission (‘‘Commission’’),

pursuant to Section 12(d) of the

Securities Exchange Act of 1934 (‘‘Act’’)

and Rule 12d2–2(d) promulgated

thereunder, to withdraw the above

specified security (‘‘Security’’) from

listing and registration on the Pacific

Stock Exchange, Inc. (‘‘PSE’’). The

Security will continue to be listed on

the New York Stock Exchange

(‘‘NYSE’’).

The reasons alleged in the application

for withdrawing the Security from

listing and registration include the

following: (1) The average monthly

volume of the Security on the PSE for

the past six months has been

diminutive; (2) it is difficult to justify

the expense of the annual listing fee; (3)

all public documents that the Company

files must be filed in triplicate to the

PSE, resulting in a significant amount of

labor and other expense associated with

the maintenance of the PSE listing; and

(4) the Company no longer has a West

Coast business presence or significant

ownership base which were important

considerations in the original listing.

Any interested person may, on or

before February 24, 1995, submit by

letter to the Secretary of the Securities

and Exchange Commission, 450 Fifth

Street, NW., Washington, DC 20549,

facts bearing upon whether the

application has been made in

accordance with the rules of the

exchanges and what terms, if any,

should be imposed by the Commission

for the protection of investors. The

Commission, based on the information

submitted to it, will issue an order

granting the application after the date

mentioned above, unless the

Commission determines to order a

hearing on the matter.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 95–3110 Filed 2–7–95; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

New Route Opportunities (U.S.-Peru);

Notice

By this Notice we invite certificate

applications from U.S. air carriers

interested in providing combination and

all-cargo services in the U.S.-Peru

market.

Under the 1986 Air Transport

Agreement between the United States

and Peru there are no limits on the

number of U.S. carriers that may be

designated to provide scheduled

combination or all-cargo services. The

number of frequencies these carriers

could operate, however, was limited to

16.5 weekly narrow body frequencies

for combination services and five

weekly narrow body frequencies for allcargo services. By an Exchange of Notes

on January 13, 1995, the Agreement was

amended to increase the number of

frequencies available to U.S. carriers for

the operation of scheduled combination

and all-cargo services. Under the

amended Agreement, U.S. carriers may

operate a maximum of 21 weekly

narrow-body frequencies or their widebody equivalent for combination

services; and eight frequencies per week

with narrow-body aircraft or their widebody equivalent for all-cargo air

services, effective January 15, 1995.1

There has been no change to the route

schedules. This means that designated

U.S. carriers may provide combination

services from the United States via

intermediate points to Lima, and

beyond to: La Paz, Bolivia and beyond

to Asuncion, Paraguay (to be operated as

one route); Santiago, Chile; and Buenos

Aires, Argentina (Santiago and Buenos

Aires to be served on separate flights

beyond Lima).2 Designated U.S. allcargo airlines are permitted to operate

between Miami and Lima via the

intermediate points Panama City,

Panama; Guayaquil, Ecuador; and

Bogota and Cali, Colombia.3

American Airlines currently holds the

16.5 narrow-body frequencies for

combination services, and Challenge Air

holds the 5 weekly narrow-body

frequencies for all-cargo services.4

Therefore, 4.5 narrow-body combination

and 3 narrow-body all-cargo frequencies

are available new long-term allocations.5

Carriers interested in using these new

opportunities should file certificate

applications including attendant

requests for frequency allocations

within 14 calendar days of the date of

this notice. Answers to any applications

filed will be due seven calendar days

thereafter; replies to any answers filed

will be due within five calendar days

after the answer date.

Except for the procedural dates,

certificate applications should conform

to Part 302, Subpart Q. Applications

should be filed with the Department’s

Docket Section, Room PL–401, 400

Seventh Street SW., Washington, DC

20590. Further procedures for acting on

the applications filed, if necessary, will