Securities and Exchange Commission (“Commission”).
Notice of an application under section 12(d)(1)(J) of the Investment Company Act of 1940 (“Act”) for an exemption from section 12(d)(1)(G)(i)(II) of the Act.
SUMMARY OF THE APPLICATION:
Applicants request an order to permit funds relying on section 12(d)(1)(G) of the Act to invest in certain securities and financial instruments.
Mercury QA Strategy Series, Inc. (“Company”), Quantitative Master Series Trust (“Master Trust”), Mercury QA Equity Series, Inc. (“Equity Series Fund”), Fund Asset Management, L.P. (“FAM”).
The application was filed on September 8, 1999. Applicants have agreed to file an amendment, the Start Printed Page 20234substance of which is included in this notice, during the notice period.
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 May 2, 2000, 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 by writing to the Commission's Secretary.
Secretary, Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. Applicants, 800 Scudders Mill Road, Plainsboro, NJ 08536.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Michael W. Mundt, Branch Chief, at (202) 942-0564 (Division of Investment Management, Office of Investment Company Regulation).End Further Info End Preamble Start Supplemental Information
The following is a summary of the application. The complete application may be obtained for a fee from the Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, DC 20549-0102 (telephone (202) 942-8090).
1. The Company is organized as a Maryland corporation and registered under the Act as an open-end management investment company. The Company currently offers three series: Mercury QA Strategy Growth and Income Fund, Mercury QA Strategy Long-Term Growth Fund, and Mercury QA Strategy All-Equity Fund (each a “Strategy Fund”). Mercury Asset Management US “MAM”) will be the investment adviser to each Strategy Fund and is a division of FAM, an investment adviser registered under the Investment Advisers Act of 1940. The Master Trust, a Delaware business trust registered under the Act as an open-end management investment company, consists of eight operating series advised by FAM, including the Master Aggregate Bond Index Series (“Master Bond Series”). The Equity Series Fund is an open-end management investment company organized as a Maryland corporation and registered under the Act. The Equity Series Fund currently consists of six series (each an “Equity Series”) that will be advised by MAM. The Strategy Funds will initially invest primarily in the Master Bond Series and the Equity Series.
2. Applicants seek relief so that the Strategy Funds also may invest, consistent with their investment objectives, policies, and restrictions, in other securities of any kind permissible under the Act, including, without limitation, any security within the meaning of the Act (excluding investments in shares of investment companies other than those made in reliance on section 12(d)(1)(G)), reverse repurchase agreements, financial futures and options on currencies (collectively, “Other Securities”). Applicants request that the relief apply to any existing or future open-end management investment company or its series advised by FAM or other entities controlled by, in control of, or under common control with FAM (together with the Strategy Funds, the “Upper Tier Funds”) that invests in a registered open-end management investment company or its series advised by FAM or other entities controlled by, in control of, or under common control with FAM and part of the same “group of investment companies” (as defined in section 12(d)(1)(G) of the Act) as the investing Upper Tier Fund (together with the Master Bond Series and Equity Series, the “Underlying Funds”).
Applicants' Legal Analysis
1. Section 12(d)(1)(A) of the Act provides that no registered investment company may acquire securities of another investment company if such securities represent more than 3% of the acquired company's outstanding voting stock or more than 5% of the acquiring company's total assets, or if such securities, together with the securities of other investment companies, represent more than 10% of the acquiring company's total assets. Section 12(d)(1)(B) of the Act provides that no registered open-end investment company may sell its securities to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company's voting stock, or cause more than 10% of the acquired company's voting stock to be owned by investment companies.
2. Section 12(d)(1)(G) of the Act provides that section 12(d)(1) will not apply to securities of an acquired company purchased by an acquiring company if: (i) The acquiring company and the acquired company are part of the same group of investment companies; (ii) the acquiring company holds only securities of acquired companies that are part of the same group of investment companies, government securities, and short-term paper; (iii) the aggregate sales loads and distribution-related fees of the acquiring company and the acquired company are not excessive under rules adopted pursuant to section 22(b) or section 22(c) of the Act by a securities association registered under section 15A of the Securities Exchange Act of 1934 or by the Commission; and (iv) the acquired company has a policy that prohibits it from acquiring securities of registered open-end management investment companies or registered unit investment trust in reliance on section 12(d)(1)(F) or (G).
3. Section 12(d)(1)(J) of the Act provides that the Commission may exempt persons or transactions from any provision of section 12(d)(1) if, and to the extent that, the exemption is consistent with the public interest and the protection of investors. Applicants request an order under section 12(d)(1)(J) exempting them from section 12(d)(1)(G)(i)(II). Applicants assert that permitting Upper Tier Funds to invest in Underlying Funds and Other Securities as proposed would not raise any of the concerns that the requirements of section 12(d)(1)(G) were designed to address.
Applicants agree that the order granting the requested relief will be subject to the following conditions:
1. Before approving any advisory contract under section 15 of the Act, the board of directors of the Company (on behalf of each Strategy Fund) or of another Upper Tier Fund, including a majority of the directors who are not “interested persons” as defined in section 2(a)(19) of the Act, will find that advisory fees, if any, charge under the contract are based on services provided that are in addition to, rather than duplicative of, services provided pursuant to any Underlying Fund's advisory contract. This finding, and the basis upon which it was made, will be recorded fully in the minute books of the Company (on behalf of each Strategy Fund) or other Upper Tier Fund.
2. Applicants will comply with all provisions of section 12(d)(1)(G), except for section 12(d)(1)(G)(i)(II) to the extent that it restricts each Strategy Fund or other Upper Tier Fund from investing in Other Securities as described in the application.Start Signature
For the Commission, by the Division of Investment Management, under delegated authority.
Margaret H. McFarland,
1. All existing entities that currently intend to rely on the order are named as applicants. Any registered open-end management investment company that may rely on the order in the future will do so only in accordance with the terms and conditions of the application.Back to Citation
[FR Doc. 00-9275 Filed 4-13-00; 8:45 am]
BILLING CODE 8010-01-M