Federal Register / Vol. 65, No. 14 / Friday, January 21, 2000 / Notices 3505

3 15 U.S.C. 78l(b).

4 15 U.S.C. 78m.

5 17 CFR 200.30–3(a)(1).

1Applicants also request relief with respect to

future Funds, and any other registered open-end

management investment companies or series

thereof (a) that are advised by the Adviser or any

entity controlling, controlled by, or under common

control with the Adviser, and (b) which operate in

substantially the same manner as the Funds

(‘‘Future Funds,’’ and together with the Funds, the

‘‘Funds’’). Any Fund that relies on the requested

order will do so only in accordance with the terms

and conditions contained in the application. The

Trust is the only existing investment company that

currently intends to rely on the order.

2The New Funds use Sub-Advisers, with Equity

Fund having four Sub-Advisers and Fixed Income

Fund having two Sub-Advisers.

The Company’s application relates

solely to the withdrawal of the Security

from listing and registration on the

Amex and shall have no effect upon the

Security’s continued listed and

registration on the NYSE. By reason of

Section 12(b) of the Act 3 and the rules

and regulations of the Commission

thereunder, the Company shall continue

to be obligated to file reports with the

Commission under Section 13 of the

Act.4

Any interested person may, on or

before February 4, 2000, submit by letter

to the Secretary of the Securities and

Exchange Commission, 450 Fifth Street,

N.W., Washington, D.C. 20549–0609,

facts bearing upon whether the

application has been made in

accordance with the rules of the

Exchange 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.5

Jonathan G. Katz,

Secretary.

[FR Doc. 00–1474 Filed 1–20–00 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

24253; 812–11750]

The Wachovia Funds and Wachovia

Bank, N.A.; Notice of Application

January 14, 2000.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’).

ACTION: Notice of an application under

section 6(c) of the Investment Company

Act of 1940 (the ‘‘Act’’) for an

exemption from section 15(a) of the Act

and rule 18f–2 under the Act, as well as

from certain disclosure requirements.

SUMMARY OF THE APPLICATION:

Applicants, The Wachovia Funds (the

‘‘Trust’’) and Wachovia Bank, N.A.

(‘‘Wachovia’’), request an order to

permit them to enter into and materially

amend subadvisory agreements without

shareholder approval and to grant relief

from certain disclosure requirements.

FILING DATE: The application was filed

on August 17, 1999. 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 Commission orders a

hearing. Interested persons may request

a hearing by writing to the

Commission’s Secretary and serving

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 7, 2000, 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, c/o Courtney

S. Thornton, Esq. Kirkpatrick &

Lockhart LLP, 1800 Massachusetts

Avenue, N.W., Washington, D.C. 20036.

FOR FURTHER INFORMATION CONTACT:

Emerson S. Davis, Sr., Senior Counsel,

at (202) 942–0714, or George J. Zornada,

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

Commission’s Public Reference Branch,

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

20549–0102 (telephone (202) 942–8090).

Applicants’ Representations

1. The Trust, a Massachusetts

business trust, is registered under the

Act as an open-end management

investment company. The Trust

currently is comprised of sixteen series

(each a ‘‘Fund’’), including Wachovia

Executive Equity Fund (‘‘Equity Fund’’)

and Wachovia Executive Fixed Income

Fund (‘‘Fixed Income Fund’’ and with

the Equity Fund, the ‘‘New Funds’’).

Each Fund has its own investment

objectives, policies and restrictions.

Wachovia is a wholly-owned subsidiary

of Wachovia Corporation, a publiclyheld bank holding company, and is

exempt from registration under the

Investment Advisers Act of 1940

(‘‘Advisers Act’’). Wachovia Asset

Management (the ‘‘Adviser’’), a business

unit of Wachovia, serves as the

investment adviser to each of the

Funds.1

2. The Trust, on behalf of each Fund,

and the Adviser have entered into an

investment management agreement

(‘‘Advisory Agreement’’) that was

approved by the board of trustees of the

Trust (the ‘‘Board’’), including a

majority of the trustees who are not

‘‘interested persons,’’ as defined in

section 2(a)(19) of the Act

(‘‘Independent Trustees’’), and the

shareholder(s) of each Fund. Under the

terms of the Advisory Agreement, the

Adviser manages the investment of

assets of each Fund and may, subject to

oversight by the Board, hire one or more

sub-advisers (‘‘Sub-Advisers’’) to

provide portfolio management services

to each of the Funds pursuant to

separate investment advisory

agreements (‘‘Sub-Advisory

Agreements’’).2 Each Sub-Adviser is, or

will be, an investment adviser that is

either registered or exempt from

registration under the Advisers Act.

Sub-Advisers are recommended to the

Board by the Adviser and selected and

approved by the Board, including a

majority of the Independent Trustees.

Each Sub-Advisers’s fees are, or will be,

paid by the Adviser out of the

management fees received by the

Adviser from the respective Fund.

3. The Adviser recommends SubAdviser based on its continuing

quantitative and qualitative evaluation

of their skills in managing assets

pursuant to particular investment styles.

The Adviser monitors the Funds and the

Sub-Advisers and makes

recommendations to the Board

regarding allocation, and reallocation, of

assets between Sub-Advisers and is

responsible for recommending the

hiring, termination and replacement of

Sub-Advisers.

4. Applicants request relief to permit

the Adviser, subject to the oversight of

the Board, to enter into and materially

amend Sub-Advisory Agreements

without shareholder approval. The

requested relief will not extend to a

Sub-Adviser that is an affiliated person,

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

3506 Federal Register / Vol. 65, No. 14 / Friday, January 21, 2000 / Notices

3The Trust employs officers and employees of the

Trust’s administrator, Federated Services Company

(‘‘Federated’’), and affiliated persons of Federated,

to serve as officers of the Trust. For purposes of the

requested order, the term Affiliated Sub-Adviser

includes Federated Investment Management

Company, an affiliated person of Federated and a

Sub-Adviser to Equity Fund, and any other

affiliated person of Federated that serves as a SubAdviser to a Fund.

of the Trust or the Adviser, other than

by reason of serving as a Sub-Adviser to

one or more of the Funds (an ‘‘Affiliated

Sub-Adviser’’).3

5. Applicants also request an

exemption from the various disclosure

provisions described below that may

require the Funds to disclose the fees

paid by the Adviser to the Sub-Advisers.

The Trust will disclose for each Fund

(both as a dollar amount and as a

percentage of a Fund’s net assets): (a)

aggregate fees paid to the Adviser and

Affiliated Sub-Advisers; and (b)

aggregate fees paid to Sub-Advisers

other than Affiliated Sub-Advisers

(‘‘Aggregate Fee Disclosure’’). For any

Fund that employs an Affiliated SubAdviser, the Fund will provide separate

disclosure of any sub-advisory fees paid

to the Affiliated Sub-Adviser.

Applicants’ Legal Analysis

1. Section 15(a) of the Act provides,

in relevant part, that it is 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 the

vote 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. Form N–1A is the registered

statement used by open-end investment

companies. Item 15(a)(3) of Form N–1A

requires disclosure of the method and

amount of the investment adviser’s

compensation.

3. Rule 20a–1 under the Act requires

proxies solicited with respect to an

investment company to comply with

Schedule 14A under the Securities

Exchange Act of 1934 (the ‘‘Exchange

act’’). Items 22(c)(1)(ii), 22(c)(1)(iii),

22(c)(8), and 22(c)(9) of Schedule 14A,

taken together, require a proxy

statement for a shareholder meeting at

which the advisory contract will be

voted upon to include the ‘‘rate of

compensation of the investment

adviser,’’ the ‘‘aggregate amount of the

investment adviser’s fees,’’ a description

of ‘‘the terms of the contract to be acted

upon,’’ and, if a change in the advisory

fee is proposed, the existing and

proposed fees and the difference

between the two fees.

4. Form N–SAR is the semi-annual

report filed with the Commission by

registered investment companies. Item

48 of Form N–SAR requires investment

companies to disclose the rate schedule

for fees paid to their investment

advisers, including the Sub-Advisers.

5. Regulation S–X sets forth the

requirements for financial statements

required to be included as part of

investment company registration

statements and shareholder reports filed

with the Commission. Sections 6–

07(2)(a), (b), and (c) of Regulation S–X

require that investment companies

include in their financial statements

information about investment advisory

fees.

6. Section 6(c) of the Act provides that

the Commission may exempt any

person, security, or transaction or any

classes of persons, securities, or

transactions from any provision of the

Act, or from any rule thereunder, if 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 the requested relief meets

this standard for the reasons discussed

below.

7. Applicants assert that the investors

are relying on the Adviser’s experience

to select one or more Sub-Advisers best

suited to achieve a Fund’s desired

investment objectives. Applicants assert

that, from the perspective of the

investor, the role of the Sub-Advisers is

comparable to that of individual

portfolio managers employed by other

investment advisory firms. Applicants

contend that requiring shareholder

approval of Sub-Advisory Agreements

may impose unnecessary costs and

delays on the Funds, and may preclude

the Adviser from acting promptly in a

manner considered advisable by the

Board. Applicants note that the

Advisory Agreement will remain subject

to section 15(a) of the Act and rule 18f–

2 under the Act.

8. Applicants assert that some SubAdvisers use a ‘‘posted’’ rate schedule to

set their fees. Applicants state that the

Adviser may not be able to negotiate

below ‘‘posted’’ fee rates with SubAdvisers if each Sub-Adviser’s fees are

required to be disclosed. Applicants

submit that the nondisclosure of the

individual Sub-Adviser’s fees is in the

best interest of the Funds and their

shareholders, where the disclosure of

such fees would increase costs to

shareholders without an offsetting

benefit to the Funds and their

shareholders.

Applicants’ Conditions

Applidcants agree that any order

granting the requested relief will be

subject to the following conditions:

1. Before a Fund may rely on the

order, the operation of the Fund in the

manner described in the application

will be approved by a majority of the

outstanding voting securities of the

Fund, as defined in the Act, or in the

case of a Fund 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 Fund to

the public.

2. The Trust will disclose in its

prospectus(es) the existence, substance

and effect of any order granted pursuant

to the application. In addition, each

Fund 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 the Adviser 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 Board

will be Independent Trustees, and the

nomination of new or additional

Independent Trustees will be at the

discretion of the then-existing

Independent Trustees.

4. The Adviser will not enter into a

Sub-Advisory Agreement with any

Affiliated Sub-Adviser without that

agreement, including the compensation

to be paid thereunder, being approved

by the shareholders of the applicable

Fund.

5. When a change in Sub-Adviser is

proposed for a Fund with an Affiliated

Sub-Adviser, the Board, including a

majority of the Independent Trustees,

will make a separate finding, reflected

in the Fund’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 or the Affiliated SubAdviser derives an inappropriate

advantage.

6. Within 90 days of the hiring of any

new Sub-Adviser, shareholders will be

furnished all information about a new

Sub-Adviser that would be contained in

a proxy statement, except as modified to

permit Aggregate Fee Disclosure. This

information will include Aggregate Fee

Disclosure and any change in such

disclosure caused by the addition of a

new Sub-Adviser. The Adviser will

meet this condition by providing

shareholders, within 90 days of the

Federal Register / Vol. 65, No. 14 / Friday, January 21, 2000 / Notices 3507

1CityFed Financial Corp., Investment Company

Act Release Nos. 23659 (Jan. 20, 1999) (notice) and

23692 (Feb. 12, 1999) (order).

hiring of a Sub-Adviser, an information

statement meeting the requirements of

Regulation 14C, Schedule 14C, and Item

22 of Schedule 14A under the Exchange

Act, except as modified by the order to

permit Aggregate Fee Disclosure.

7. The Adviser will provide

management services to each Fund

relying on the requested order,

including overall supervisory

responsibility for the general

management and investment of the

Fund’s assets, and, subject to review

and approval by the Board; will: (a) set

the Fund’s overall investment strategies;

(b) evaluate, select and recommend SubAdvisers to manage all or a part of the

Fund’s assets; (c) when appropriate,

allocate and reallocate the Fund’s assets

among multiple Sub-Advisers; (d)

monitor and evaluate the investment

performance of Sub-Advisers; and (e)

ensure that the Sub-Advisers comply

with the Fund’s investment objectives,

policies, and restrictions by, among

other things, implementing procedures

reasonably designed to ensure

compliance.

8. No Trustee or officer of the Trust,

or director of officer of Wachovia who

participates directly in Wachovia’s

investment advisory activities

(including the management or

administration of the Trust) or

otherwise is able to influence the

selection of Sub-Advisers, will own

directly or indirectly (other than

through a pooled investment vehicle

that is not controlled by such person)

any interest in a Sub-Adviser except for

(a) ownership of interests in (i)

Wachovia or an entity that controls, is

controlled by, or is under common

control with Wachovia or (ii) Federated

or an entity that controls, is controlled

by, or is under common control with

Federated; 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.

9. The Trust will disclose in its

registration statement the Aggregate Fee

Disclosure.

10. Independent counsel

knowledgeable about the Act and the

duties of Independent Trustees will be

engaged to represent the Independent

Trustees. The selection of such counsel

will be within the discretion of the

Independent Trustees.

11. With respect to the Funds relying

on the relief requested, the Adviser will

provide the Board, no less frequently

than quarterly, with information about

the Adviser’s profitability on a per Fund

basis. This information will reflect the

impact on the profitability of the hiring

or termination of any Sub-Adviser

during the applicable quarter.

12. Whenever a Sub-Adviser is hired

or terminated, the Adviser will provide

the Board with information showing the

expected impact on the Adviser’s

profitability.

For the Commission, by the Division

of Investment Management, under

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–1472 Filed 1–20–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

24252; 812–11844]

CityFed Financial Corp. Notice of

Application

DATE: January 13, 2000.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

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 will February 12,

2000.1

Filing Date: The application was filed

on November 5, 1999.

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 8, 2000, 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’ 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, N.W., Washington, D.C. 20549–

0609. CityFed, 35 Old South Road, P.O.

Box 3126, Nantucket, MA 02584.

FOR FURTHER INFORMATION CONTACT:

Bruce R. MacNeil, Staff Attorney, 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, N.W., Washington, D.C., 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 Bank, 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,

1999, CityFed held cash and securities

of approximately $9.5 million.

3. While CityFed’s board of directors

(‘‘Board’’) 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