[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
