[Federal Register Volume 61, Number 3 (Thursday, January 4, 1996)]
[Notices]
[Pages 365-366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-129]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 21629; 812-9850]


Mutual Fund Group, et al.; Notice of Application

December 28, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of Application for Exemption under the Investment 
Company Act of 1940 (the ``Act'').

-----------------------------------------------------------------------

APPLICANTS: Mutual Fund Group (``MFG''), Mutual Fund Trust, Mutual Fund 
Variable Annuity Trust, Growth & Income Portfolio, Capital Growth 
Portfolio, International Equity Portfolio, Global Fixed Income 
Portfolio (collectively, the ``Chase Funds''); Atlanta Capital 
Management Company (``Atlanta Capital''); and The Chase Manhattan Bank, 
National Association (the ``Adviser'').

RELEVANT ACT SECTIONS: Order requested under section 6(c) for an 
exemption from section 15(a).

SUMMARY OF APPLICATION: The Chase Manhattan Corporation (``Chase''), 
the Adviser's holding company, will be merged with Chemical Banking 
Corporation (``CBC''). The merger will result in the assignment, and 
thus the termination, of the Chase Funds' existing investment advisory 
and sub-advisory contracts with the Adviser and Atlanta Capital, a sub-
adviser. Applicants request an order to permit the implementation, 
without shareholder approval, of interim advisory and sub-advisory 
contracts, during a period of up to 120 days following January 31, 
1996. The order also will permit the Adviser and Atlanta Capital to 
receive fees earned under the interim advisory and sub-advisory 
contracts following approval by the Chase Funds' shareholders.

FILING DATES: The application was filed on November 6, 1995 and amended 
on December 28, 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 22, 
1996, 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 such notification by writing to 
the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549. 
Applicants: The Chase Manhattan Bank, National Association, One Chase 
Manhattan Plaza, New York, New York 10081; Atlanta Capital Management 
Company, Two Midtown Plaza, 1360 Peachtree Street, Suite 1600, Atlanta, 
Georgia 30309; all other applicants, 125 West 55th Street, New York, 
New York 10019.

FOR FURTHER INFORMATION CONTACT:
Marianne H. Khawly, Staff Attorney, at (202) 942-0562, 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 from 
the SEC's Public Reference Branch.

Applicant's Representations

    1. The Chase Funds are registered open-end management investment 
companies. The Adviser is a national banking association and is a 
wholly-owned subsidiary of Chase, a bank holding company. Each Chase 
Fund has entered into a investment advisory agreement with the Adviser. 
The Adviser and Atlanta Capital have entered into an investment sub-
advisory agreement pursuant to which Atlanta Capital acts as sub-
adviser to a portfolio of MFG, IEEE Balanced Fund (the sub-advisory 
agreement together with the investment advisory agreements, the 
``Existing Agreements'').
    2. On August 27, 1995, CBC and Chase entered into an Agreement and 
Plan of Merger, pursuant to which Chase will be merged with and into 
CBC (the ``Holding Company Merger''). CBC will be the surviving 
corporation and will continue its corporate existence under the name 
``The Chase Manhattan Corporation.'' The Holding Company Merger will be 
effected as a stock transaction, with the outstanding shares of Chase 
common stock being exchanged for newly issued shares of CBC common 
stock at a predetermined exchange rate. Applicants anticipate that the 
Holding Company Merger will occur on or before January 31, 1996. 
Subsequent to the Holding Company Merger, the Adviser will be merged 
with Chemical Bank, a wholly-owned direct subsidiary of CBC (the ``Bank 
Merger'' and together with the Holding Company Merger, the 
``Mergers''). The surviving bank will continue operations under the 
name ``The Chase Manhattan Bank.''
    3. On December 11, 1995, the respective shareholders of Chase and 
CBC voted to approve the Holding Company Merger. At a special meeting 
held on December 14, 1995, the respective Boards of Trustees of the 
Chase Funds (the ``Boards'') met to discuss the Mergers. During this 
meeting, the Boards, met to discuss the Mergers. During this meeting, 
the Boards, including a majority of the Board members who are not 
``interested persons,'' as that term is defined in the Act (the 
``Independent Trustees''), of the respective Chase Funds, with the 
advice and assistance of counsel to the Independent Trustees, made a 
full evaluation of interim investment advisory and sub-advisory 
agreements (the ``Interim Agreements''). In accordance with section 
15(c) of the Act, the Boards voted to approve the Interim Agreements. 
The Boards of each Chase Fund also voted to recommend that shareholders 
of each Chase Fund approve the Interim Agreements.
    4. In approving the Interim Agreements, the Boards concluded that 
payment of the advisory and sub-advisory fees during the interim period 
would be appropriate and fair because there will be no diminution in 
the scope and quality of services provided to the Chase Funds, the fees 
to be paid are unchanged from the fees paid under the Existing 
Agreements, the fees would be maintained in an interest-bearing escrow 
account until payment is approved or disapproved by shareholders, and 
the nonpayment of fees would be inequitable to the Adviser (including 
its successor in the event that the Bank Merger occurs during the 
interim period, the ``Successor'') and Atlanta Capital in view of the 
substantial services to be provided.
    5. Chase and CBC expect a combination of Chase Funds and registered 
investment companies that are advised by CBC subsidiaries 
(collectively, the ``CBC Funds'') into a family of mutual funds with 
consistent structural characteristics where appropriate, consolidated 
management, consistent share class structures, rationalized investment 
objectives and policies, and consolidated marketing efforts (the ``Fund 
Family Combination''). Applicants expect that a number of Chase Funds 
will consummate a transaction with (a) an 

[[Page 366]]
existing CBC Fund providing for the transfer of substantially all of 
the assets of one such fund to the other in exchange for the other's 
shares, or (b) a CBC Fund to be newly created providing for the 
transfer of substantially all of the assets of such Chase Fund to the 
newly created CBC Fund in exchange for shares of the newly created CBC 
Fund (each such transaction, a ``Fund Merger'').
    6. Applicants believe that it will not be possible to complete the 
Fund Family Combination or any of the expected Fund Mergers prior to 
the Holding Company Merger. Accordingly, applicants request an 
exemption from section 15(a) of the Act to permit the implementation, 
without shareholder approval, of the Interim Agreements. The exemption 
would cover the period commencing on the date of the Holding Company 
Merger and continuing through the date the Interim Agreements are 
approved or disapproved by shareholders of the respective Chase Funds, 
which period shall be no longer than 120 days after January 31, 1996 
(the ``Interim Period''). Applicants also request that such relief 
extend to the Bank Merger during the Interim Period.

Applicants' Legal Analysis

    1. Section 15(a) prohibits an investment adviser from providing 
investment advisory services to an investment company except under a 
written contract that has been approved by a majority of the investment 
company's voting securities. The section further requires that the 
written contract provide for its automatic termination in the event of 
an assignment. Section 2(a)(4) of the Act defines ``assignment'' to 
include any direct or indirect transfer of a contract by the assignor 
or of a controlling block of the assignor's outstanding voting 
securities by a security holder of the assignor.
    2. Section 2(a)(9) defines ``control'' as the power to exercise a 
controlling influence over the management or policies of a company. 
Beneficial ownership of more than 25% of a company's voting securities 
is presumed to constitute control.
    3. Upon consummation of the Holding Company Merger, approximately 
43% of the voting securities of the surviving corporation will be owned 
by the current Chase shareholders and 57% will be owned by the current 
CBC shareholders. Thus, the Holding Company Merger may be deemed to 
result in an ``assignment'' of the Existing Agreements. Therefore, 
these agreements will terminate by their terms. Similarly, the Bank 
Merger may be deemed to result in an ``assignment'' of the Interim 
Agreements, thus terminating these agreements.
    4. Rule 15a-4 provides, among other things, that if an advisory 
contract is terminated by assignment, the investment adviser may 
continue to act as such for 120 days at the previous compensation rate 
if a new contract is approved by the board of directors of the 
investment company, and if the investment adviser or a controlling 
person of the investment adviser does not directly or indirectly 
receive money or other benefit in connection with the assignment. 
Because Chase and the Adviser will receive a benefit in connection with 
the assignment of the contracts, applicants may not rely on the rule.
    5. Absent the requested relief, applicants believe that it may be 
necessary, in the case of most Chase Funds, to undertake multiple proxy 
solicitations within a relatively short time frame. Applicants believe 
that engaging in the solicitation of multiple proxies from the 
shareholders of a single investment company for approvals arising out 
of the same series of events would be confusing to shareholders, 
burdensome, inefficient, costly, and not in the best interests of the 
Chase Funds or their shareholders.
    6. Applicants believe that the requested relief will allow for the 
orderly completion of the Fund Mergers and the Fund Family Combination, 
as well as reasonable adjournments of shareholder meetings if necessary 
to obtain sufficient shareholder responses to proxy solicitations to 
obtain the various approvals as may be necessary in connection with the 
Fund Mergers.
    7. 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 the requested relief from section 15(a) meets 
this standard.

Applicants' Conditions

    Applicants agree as conditions to the requested exemptive relief 
that:
    1. Each Interim Agreement will have the same terms and conditions 
as the respective Existing Agreement, except for the effective and 
termination dates.
    2. Fees earned by the Adviser (or the Successor, if applicable) and 
Atlanta Capital and paid by a Chase Fund during the Interim Period in 
accordance with the Interim Agreement will be maintained in an 
interest-bearing escrow account, and amounts in such account (including 
interest earned on such paid fees) will be paid to the Adviser (or the 
Successor, if applicable) and in the case of IEEE Balanced Fund, paid 
to Atlanta Capital only upon approval of the related Chase Fund 
shareholders or, in the absence of such approval, to the related Chase 
Fund.
    3. Each Chase Fund will hold meetings of shareholders to vote on 
approval of the related Interim Agreement, on or before the 120th day 
following January 31, 1996.
    4. Chase, CBC and/or one or more subsidiaries of the foregoing will 
pay the costs of preparing and filing this application. Chase, CBC and/
or one or more subsidiaries of the foregoing will pay the costs 
relating to the solicitation of the approvals of the Chase Fund 
shareholders, to the extent such costs relate to the shareholder 
approval of Interim Agreements necessitated by the Mergers.
    5. The Adviser (or the Successor, if applicable) and Atlanta 
Capital, as the case may be, will take all appropriate actions to 
ensure that the scope and quality of advisory and other services 
provided to the Chase Funds under the Interim Agreements will be at 
least equivalent, in the judgment of the respective Boards, including a 
majority of the Independent Trustees, to the scope and quality of 
services previously provided. In the event of any material change in 
personnel providing services under the Interim Agreements, the Adviser 
(or the Successor, if applicable) or Atlanta Capital, as the case may 
be, will apprise and consult the Boards of the affected Chase Funds to 
assure that such Boards, including a majority of the Independent 
Trustees, are satisfied that the services provided by the Adviser (or 
the Successor, if applicable) or Atlanta Capital, as the case may be, 
will not be diminished in scope or quality.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 96-129 Filed 1-3-96; 8:45 am]
BILLING CODE 8010-01-M