Federal Register / Vol. 61, No. 3 / Thursday, January 4, 1996 / Notices 365

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–132 Filed 1–3–96; 8:45 am]

BILLING CODE 8010–01–M

[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 subadvisory 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 whollyowned 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 subadvisory 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 subadvisory 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
366 Federal Register / Vol. 61, No. 3 / Thursday, January 4, 1996 / Notices

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