[Federal Register Volume 65, Number 73 (Friday, April 14, 2000)]
[Notices]
[Pages 20233-20235]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-9275]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24382; 812-11770]


Mercury QA Strategy Fund, Inc., et al.; Notice of Application

April 7, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: 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.

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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.

APPLICANTS: 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'').

FILING DATES: The application was filed on September 8, 1999. 
Applicants have agreed to file an amendment, the

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substance 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.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW, Washington, DC 
20549-0609. Applicants, 800 Scudders Mill Road, Plainsboro, NJ 08536.

FOR FURTHER INFORMATION CONTACT: 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 from 
the Commission's Public Reference Branch, 450 Fifth Street, NW, 
Washington, DC 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    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'').\1\
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    \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.
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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.

Applicant's Conditions

    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.


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    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-9275 Filed 4-13-00; 8:45 am]
BILLING CODE 8010-01-M