[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