[Federal Register Volume 60, Number 199 (Monday, October 16, 1995)]
[Notices]
[Pages 53658-53660]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25508]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 21404; 812-9782]
Prairie Funds, et al.; Notice of Application
October 6, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: Prairie Funds, Prairie Institutional Funds, Prairie
Intermediate Bond Fund, and Prairie Municipal Bond Fund, Inc.,
(collectively, the ``Funds''); First Chicago Investment Management
Company (``FCIMCO'') and ANB Investment Management and Trust Company
(``ANB-IMC'').
RELEVANT ACT SECTIONS: Order requested under section 6 (c) for an
exemption from section 15(a).
SUMMARY OF APPLICATION: First Chicago Corporation, the ultimate parent
of FCIMCO, will merge with and into NBD Bancorp, Inc. (``NBD''). The
merger will result in the assignment, and thus the termination, of
existing investment advisory and sub-advisory contracts of the Funds.
The order would permit the implementation, without shareholder
approval, of new advisory and sub-advisory contracts for a period of up
to 120 days following November 30, 1995 (``Interim Period''). The order
also would permit FCIMCO and ANB-IMC to receive from the Funds fees
earned under the new investment advisory and sub-advisory contracts
during the Interim Period following approval by the Funds'
shareholders.
FILING DATES: The application was filed on September 26, 1995 and
amended on October 6, 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 October 31,
1995, 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, N.W., Washington, D.C.
20549. Applicants, c/o First Chicago Investment Management Company,
Three First National Plaza, Chicago, Illinois 60670, Attention:
Secretary.
FOR FURTHER INFORMATION CONTACT: Sarah A. Buescher, Staff Attorney, at
(202) 942-0573, or C. David Messman, 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.
Applicants' Representations
1. Each Fund is registered under the Act as an open-end management
investment company. Each Fund has entered into an investment advisory
agreement (the``Existing Advisory Agreement'') with FCIMCO, an
investment adviser registered under the Investment Advisers Act of
1940, under which FCIMCO provides investment advisory services to each
Fund. FCIMCO has engaged ANB-IMC, a registered investment adviser, to
provide the day-to-day management of the International Equity Fund
series of the Prairie Fund pursuant to a sub-investment advisory
agreement (the ``Existing Sub-Investment Advisory Agreement,'' and
together with the Existing Advisory Agreements, the ``Existing
Agreements'').
2. FCIMCO is a wholly-owned subsidiary of The First National Bank
of Chicago, which in turn is a wholly-owned subsidiary of First Chicago
Corporation. ANB-IMC is a wholly-owned subsidiary of American National
Bank and Trust Company, which in turn is a wholly-owned subsidiary of
First Chicago Corporation.
3. Under an Agreement and Plan of Merger (the ``Merger Agreement'')
dated July 11, 1995 between First Chicago Corporation and NBD, First
Chicago Corporation agreed to merge with and into NBD, with NBD as the
surviving corporation in the Merger and continuing under the name
``First Chicago NBD Corporation.''
4. On September 19, 1995, the respective boards of the Funds met to
discuss the Merger. During those meetings, the boards, which are
comprised entirely of members who are not ``interested persons'' (as
that term is defined in the Act) of the respective Funds, considered
the new investment advisory agreements between FCIMCO and each Fund
(the ``New Advisory Agreements'') and the new sub-investment advisory
agreement between FCIMCO and ANB-IMC with respect to the International
Equity Fund (the ``New Sub-Investment Advisory Agreement'' and,
together with the New Advisory Agreements, the ``New Agreements'') to
be entered into upon consummation of the Merger. The boards evaluated
the New Agreements after receiving such information as they requested
as being reasonably necessary to evaluate whether the terms of the New
Agreements were in the best interests of the Funds and their
shareholders. Each New Agreement is identical to the relevant Existing
Agreement, except for its effective date. In accordance with
[[Page 53659]]
section 15(c) of the Act, the boards approved the New Agreements.\1\
\1\ Section 15(c) provides, in relevant part, that it shall be
unlawful for any registered investment company to enter into an
investment advisory contract unless the terms of such contract have
been approved by the vote of a majority of directors, who are not
parties to such contract or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such
approval.
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5. Originally, it was anticipated that the Merger would occur
during the first quarter of 1996. Accordingly, the Funds tentatively
had scheduled their shareholders' meetings for late December 1995 with
the expectation of being able to adjourn into January 1996 or later, if
necessary, to obtain the requisite vote. First Chicago Corporation
recently was advised that the necessary bank regulatory approval for
the Merger could occur more rapidly and that the Merger date could be
advanced to November 30, 1995. Although the Funds have prepared the
required proxy materials and have scheduled shareholder meetings for
November 28, 1995, there may not be an adequate solicitation period.
6. Applicants propose to enter into an escrow arrangement with an
unaffiliated financial institution as escrow agent. The arrangement
would provide that: (a) the fees payable to FCIMCO and ANB-IMC during
the Interim Period under the New Agreements would be paid into an
interest-bearing escrow account maintained by the escrow agent; (b) the
amounts in the escrow account (including interest earned on such paid
fees) would be paid to FCIMCO and ANB-IMC only upon approval by Fund
shareholders of the New Agreements or, in the absence of such approval,
to the respective Fund.
Applicants' Legal Analysis
1. Applicants seek an exemption pursuant to section 6(c) from
section 15(a) of the Act to permit the implementation, without
shareholder approval, of the New Agreements during the Interim Period.
Applicants also request permission for FCIMCO and ANB-IMC to receive
from each Fund all fees earned under the New Agreements implemented
during the Interim Period if and to the extent the New Agreements are
approved by the shareholders of such Fund. Applicants anticipate that
the Merger could occur on November 30, 1995. Accordingly, the exemption
would cover the period commencing on November 30, 1995 and continuing
through the date the New Agreements are approved or disapproved by the
shareholders of the respective Funds, which period shall be no longer
than 120 days following the termination of the Existing Agreements (but
in no event later than March 30, 1996).
2. 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 voting
securities of such investment company. Section 15(a) further requires
that such written contract provide for its automatic termination in the
event of an assignment. Section 2(a)(4) 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.
3. Upon completion of the Merger, First Chicago Corporation,
FCIMCO's and ANB-IMC's ultimate parent, will merge into First Chicago
NBD Corporation. The Merger will result in an ``assignment'' of the
Existing Agreements within the meaning of section 2(a)(4). Consistent
with section 15(a), therefore, each Existing Agreement will terminate
according to its terms upon completion of the Merger.
4. Rule 15a-4 provides, in relevant part, that if an investment
adviser's investment advisory contract with an investment company is
terminated by assignment, the 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
neither the investment adviser nor a controlling person thereof
directly or indirectly receives money or other benefit in connection
with the assignment. Because First Chicago Corporation will receive a
benefit in connection with the assignment of the Existing Agreements,
applicants may not rely on rule 15a-4.
5. Section 6(c) 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 meets this standard.
6. Applicants believe that the requested relief is necessary, as it
would permit continuity of investment management to each Fund during
the period following the Merger so that services to the Funds would not
be disrupted. Applicants believe that the Interim Period they request
will facilitate the orderly and reasonable consideration of the New
Agreements by the Funds' shareholders in a manner that is consistent
with the provisions of section 15 as well as the corporate governance
objectives of the Act.
7. Applicants believe that the best interests of Fund shareholders
would be served if FCIMCO and ANB-IMC receive fees for services during
the Interim Period. These fees are essential to maintain FCIMCO's and,
to a lesser degree, ANB-IMC's ability to provide services to the Funds.
In addition, the fees to be paid during the Interim Period are at the
same rate as the fees currently payable by the Funds under the Existing
Agreements.
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. The New Agreements will have the same terms and conditions as
the Existing Agreements, except for their effective dates.
2. Fees earned by FCIMCO and ANB-IMC in respect of the New
Agreements during the Interim Period will be maintained in an interest-
bearing escrow account, and amounts in the account (including interest
earned on such paid fees) will be paid (a) to FCIMCO and ANB-IMC in
accordance with the New Agreement, after the requisite approvals are
obtained, or (b) to the respective Fund, in the absence of such
approvals.
3. The Funds will hold meetings of stockholders to vote on approval
of the New Agreements on or before the 120th day following the
termination of the Existing Agreements (but in no event later than
March 30, 1996).
4. First Chicago Corporation will bear the costs of preparing and
filing this application and the costs relating to the solicitation of
stockholder approval of the Funds' stockholders necessitated by the
Merger.
5. FCIMCO and ANB-IMC will take all appropriate steps so that the
scope and quality of advisory and other services provided to the Funds
during the Interim Period will be at least equivalent, in the judgment
of the respective boards, including a majority of the non-interested
board members, to the scope and quality of services previously
provided. If personnel providing material services during the Interim
Period change materially, FCIMCO will apprise and consult with the
boards of the affected Funds to assure that they, including a majority
of the non-interested board members, are satisfied that the services
provided will not be diminished in scope or quality.
[[Page 53660]]
For the SEC, by the Division of Investment Management, under
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 95-25508 Filed 10-13-95; 8:45 am]
BILLING CODE 8010-01-M