[Federal Register Volume 66, Number 30 (Tuesday, February 13, 2001)]
[Notices]
[Pages 10039-10041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-3626]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24856; 812-12410]


Mutual Fund Select Group, et al.; Notice of Application

February 8, 2001.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application under section 17(b) of the Investment 
Company Act of 1940 (``Act'') for an exemption from section 17(a) of 
the Act.

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    Summary of Application: Applicants request an order to permit the 
proposed reorganization of (a) Chase Vista Select Short-Term Bond Fund 
(``Select Short-Term Bond Fund''), a series of Mutual Fund Select Group 
(``MFSG''), with and into Chase Vista Short-Term Bond Fund (``Short-
Term Bond Fund''), a series of Mutual Fund Group (``MFG''), and (b) 
Chase Vista Bond Fund (``Bond Fund''), a series of MFG, with and into 
Chase Vista Select Bond Fund (``Select Bond Fund''), a series of MFSG. 
Because of certain affiliations, applicants may not rely on rule 17a-8 
under the Act.
    Applicants: MFSG, MFG, and The Chase Manhattan Bank (``Chase'').
    Filing Dates: The application was filed on January 16, 2001. 
Applicants have agreed to file an amendment during the notice period, 
the substance of which is reflected in this notice.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on February 28, 2001, 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 may request notification of a hearing by writing to 
the Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicants, 1211 Avenue of the Americas, 41st Floor, New 
York, New York, 10036.

FOR FURTHER INFORMATION CONTACT: John L. Sullivan, Senior Counsel, at 
(202) 942-0681, or Michael W. Mundt, 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 at the 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (tel. 202-942-8090).

Applicant's Representations

    1. MFSG, a Massachusetts business trust,is registered under the Act 
as an open-end management investment

[[Page 10040]]

company and currently offers ten series, including Select Short-Term 
Bond Fund and Select Bond Fund. MFG, a Massachusetts business trust, is 
registered under the Act as an open-end management investment company 
and currently offers twenty series, including Bond Fund and Select 
Short-Term Bond Fund. Select Short-Term Bond Fund, Select Bond Fund, 
Short-Term Bond Fund and Bond Fund are each a ``Fund.'' Chase serves as 
investment adviser, and Chase Fleming Asset Management (USA) Inc. 
(``CFAM''), a wholly owned subsidiary of Chase, serves as subadviser to 
each Fund. Chase is not currently required to register as an investment 
adviser pursuant to section 202(a)(11)(A) of the Investment Advisers 
Act of 1940 (``Advisers Act''), while CFAM is an investment adviser 
registered under the Advisers Act. Chase holds of record for the 
benefit of others, in trust, more than 5% (in come cases, more than 
25%) of the total outstanding voting securities of each of the Funds.
    2. On September 19, 2000 and October 24, 2000, the boards of 
trustees of the Funds (together, the ``Boards'') including the trustees 
who are not ``interested persons'' of the Funds, as defined in section 
2(a)(19) of the Act (``Independent Trustees''), unanimously approved 
plans of reorganization (``Plans'') under which Select Short-Term Bond 
Fund will reorganize into Short-Term Bond Fund, and Bond Fund will 
reorganize into Select Bond Fund (Select Short-Term Bond Fund and Bond 
Fund are ``Acquired Funds,'' and Short-Term Bond Fund and Select Bond 
Fund are ``Acquiring Funds''). Under the Plans, each Acquiring Fund 
will acquire all of the assets and liabilities of the corresponding 
Acquired Fund in exchange for shares of the Acquiring Fund (each a 
``Reorganization''). The shares of each Acquiring Fund exchanged will 
have an aggregate net asset value equal to the aggregate net asset 
value of the corresponding Acquired Fund's shares determined as of the 
close of regular trading on the New York Stock Exchange on the closing 
date of each Reorganization (each a ``Closing Date''), currently 
anticipated to occur as soon as practicable after the granting of the 
order of the Commission requested by the application. The value of the 
assets of each Fund will be determined according to the Fund's then-
current prospectus and statement of additional information. On the 
Closing Date, each Acquired Fund will be liquidated by the distribution 
of the corresponding Acquiring Fund's shares pro rata to the 
shareholders of the Acquired Fund.
    3. Applicants state that the in vestment objectives and policies of 
each Acquired Fund are identical to those of the corresponding 
Acquiring Fund. Select Short-Term Bond Fund currently offers shares 
that are not subject to sales charges or distribution fees, but are 
subject to shareholder servicing fees. Shareholders of Select Short-
Term Bond Fund will receive shares of a class of Short-Term Bond Fund 
with the same sales charge and fee arrangements. Bond Fund offers three 
classes of shares, and Select Bond Fund currently offers only one class 
of shares. However, in connection with the Reorganizations, Select Bond 
Fund will introduce two new classes, and shareholders of Bond Fund will 
receive shares of Select Bond Fund subject to the same sales charges, 
distribution fees, and shareholder servicing fees as their current 
shares. For purposes of calculating deferred sales charges on certain 
shares, the amount of time a shareholder held shares of Bond Fund will 
be added to the amount of time the shareholder holds shares of Select 
Bond Fund. No sales charge will be imposed in connection with the 
Reorganizations. Chase will bear all of the costs associated with the 
Reorganizations.
    4. Each Board, including the Independent Trustees, unanimously 
determined that the participation of its Fund in the respective 
Reorganization was in the best interests of the Fund and the 
shareholders, and that the interests of the shareholders of the Fund 
would not be diluted as a result of the Reorganization. In approving 
the Reorganizations, the Board of Each Acquired Fund considered various 
factors, including: (a) The terms of the Plan; (b) the Funds' 
historical, current and projected expense ratios; (c) the Funds' 
investment objectives and policies; and (d) the tax-free nature of the 
Reorganizations. The Board of each Acquiring Fund considered factors 
including: (a) The terms of the Plan; 9b) the potential operational and 
administrative efficiencies resulting from the Reorganizations, and (c) 
the fact that Chase would bear the expenses of the Reorganizations.
    5. The Reorganizations are subject to a number of conditions, 
including that: (a) The shareholders of each Acquired Fund will have 
approved the Reorganization; (b) the Funds will have received opinions 
of counsel concerning the tax-free nature of each Reorganization; and 
(c) applicants will have received exemptive relief from the Commission 
to permit the Reorganization. An Acquired Fund or Acquiring Fund may 
terminate its Plan by written notice if certain conditions are not 
satisfied prior to the Closing Date. Applicants agree not to make any 
material changes to either Plan that affect the exemptive order without 
prior approval of the Commission or its staff.
    6. A registration statement on Form N-14 with respect to each 
Reorganization, containing a proxy statement/prospectus, was filed on 
October 25, 2000 with the Commission and became effective on November 
27, 2000. Definitive proxy materials were filed with the Commission on 
December 13, 2000 and first mailed to shareholders on or about December 
14, 2000. The shareholders of each Acquired Fund considered and 
approved the Reorganizations at special meetings held on January 26, 
2001.

Applicants' Legal Analysis

    1. Section 17(a) of the Act, in relevant part, prohibits an 
affiliated person of a registered investment company, or an affiliated 
person of such a person, acting as principal, from selling any security 
to, or purchasing any security from, the company. Section 2(a)(3) of 
the Act defines an ``affiliated person'' of another person to include, 
among others: (a) Any person directly or indirectly owning, 
controlling, or holding with power to vote 5% or more of the 
outstanding voting securities of the other person; (b) any person 5% or 
more of whose securities are directly or indirectly owned, controlled, 
or held with power to vote by the other person; (c) any person directly 
or indirectly controlling, controlled by, or under common control with 
the other person; and (d) if the other person is an investment company, 
any investment adviser of that company.
    2. Rule 17a-8 under the Act exempts from the prohibitions of 
section 17(a) certain mergers, consolidations, and sales of 
substantially all of the assets of registered investment companies that 
are affiliated persons, or affiliated persons of an affiliated person, 
solely by reason of having a common investment adviser, common 
directors, and/or common officers, provided that certain conditions are 
satisfied.
    3. Applicants state that Chase holds of record for the benefit of 
others, in trust, more than 5% (in some cases, more than 25%) of the 
total outstanding voting securities of each of the Funds. Because Chase 
holds these securities, each Acquiring Fund and Acquired Fund may be 
deemed to be affiliated persons for reasons other than those set forth 
in rule 17a-8 and therefore unable to rely on the rule.

[[Page 10041]]

    4. Section 17(b) of the Act provides, in relevant part, that the 
Commission may exempt a transaction from the provisions of section 
17(a) if evidence establishes that the terms of the proposed 
transaction, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, and that the proposed transaction is consistent with 
the policy of each registered investment company concerned and with the 
general purposes of the Act.
    5. Applicants requests an order under section 17(b) of the Act 
exempting them from section 17(a) to the extent necessary to complete 
the Reorganizations. Applicants submit that the Reorganizations satisfy 
the standards of section 17(b). Applicants state that the Boards, 
including the Independent Trustees, unanimously found that the 
participation of the Acquired Funds and Acquiring Funds in the 
Reorganizations is in the best interest of each Fund and its 
shareholders and that such participation will not dilute the interests 
of the existing shareholders of each Fund. In addition, applicants 
state that the Reorganizations will be on the basis of the Funds' 
relative net asset values.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-3626 Filed 2-12-01; 8:45 am]
BILLING CODE 8010-01-M