[Federal Register Volume 66, Number 163 (Wednesday, August 22, 2001)]
[Notices]
[Pages 44187-44189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-21280]



[[Page 44187]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25116; 812-12568]


Mutual Fund Trust, et al.; Notice of Application

August 17, 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.

-----------------------------------------------------------------------

SUMMARY OF APPLICATION: Applicants request an order to permit certain 
series of registered open-end management investment companies to 
acquire all of the assets and liabilities of certain series of 
registered open-end management investment companies. Because of certain 
affiliations, applicants may not rely on rule 17a-8 under the Act.

APPLICANTS: Mutual Fund Trust (``MFT''), Mutual Fund Group (``MFG''), 
J.P. Morgan Funds (``JPMF''), J.P. Morgan Institutional Funds 
(``JMIF''), J.P. Morgan Series Trust (``JPMST'') (each, a ``Trust,'' 
and collectively, the ``Trusts''), J.P. Morgan Fleming Asset Management 
(USA) Inc. (``JPMFAM''), and J.P. Morgan Investment Management Inc. 
(``JPMIM'').

FILING DATES: The application was filed on July 2, 2001 and amended on 
August 17, 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 September 6, 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: c/o Joseph J. Bertini, JPMIM, 522 Fifth Avenue, 
New York, NY 10036.

FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at 
(202) 942-0567, 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).

Applicants' Representations

    1. MFT, MFG, JPMF, JPMIF, and JPMST, each a Massachusetts business 
trust, are open-end management investment companies registered under 
the Act. MFT has nine series, three of which are involved in the 
proposed transactions. MFG has seventeen series, three of which are 
involved in the proposed transactions. JPMF has eighteen series, eight 
of which are involved in the proposed transactions. JPMIF has thirty-
four series, eleven of which are involved in the proposed transactions. 
JPMST has thirteen series, one of which is involved in the proposed 
transactions. The twenty-six series involved in the proposed 
transactions are collectively the ``Funds.'' Certain of these Funds are 
``Acquiring Funds'' and certain Funds are ``Acquired Funds'' \1\ 
JPMorgan Fleming International Equity (``Fleming International Equity 
Fund'') and the nineteen Funds that are series of JPMF and JPMIF 
currently operate as ``feeder'' Funds (each, a ``Feeder Fund'' and 
collectively, the ``Feeder Funds'') in a ``master-feeder'' structure. 
Each Feeder Fund invests all of its investable assets in a 
corresponding ``master'' portfolio (each, a ``Master Fund'') that is 
registered as an open-end management investment company under the Act.
---------------------------------------------------------------------------

    \1\ The Acquired Funds and the corresponding Acquiring Funds 
are: (i) J.P. Morgan Global Strategic Income Fund and J.P. Morgan 
Institutional Global Strategic Income Fund; (ii) J.P. Morgan Tax 
Exempt Money Market Fund and JPMorgan Tax Free Money Market Fund; 
(iii) J.P. Morgan Institutional European Equity Fund and JPMorgan 
Fleming European Fund; (iv) J.P. Morgan International Opportunities 
Fund and J.P. Morgan Institutional International Opportunities Fund; 
(v) JPMorgan Fleming International Equity Fund and J.P. Morgan 
Institutional International Opportunities Fund; (vi) J.P. Morgan 
U.S. Equity Fund and J.P. Morgan Institutional U.S. Equity Fund; 
(vii) J.P. Morgan U.S. Equity Fund--Advisor Series and J.P. Morgan 
Institutional U.S. Equity Fund; (viii) JPMorgan Large Cap Equity 
Fund and J.P. Morgan Institutional U.S. Equity Fund; (ix) J.P. 
Morgan U.S. Small Company Fund and J.P. Morgan Institutional U.S. 
Small Company Fund; (x) J.P. Morgan Diversified Fund and J.P. Morgan 
Institutional Diversified Fund; (xi) J.P. Morgan Bond Fund and J.P. 
Morgan Institutional Bond Fund; (xii) J.P. Morgan Institutional Bond 
Fund--Ultra and J.P. Morgan Institutional Bond Fund; (xiii) JPMorgan 
California Intermediate Tax Free Income Fund and J.P. Morgan 
Institutional California Bond Fund; (xiv) J.P. Morgan Federal Money 
Market Fund and JPMorgan Federal Money Market Fund II; (xv) J.P. 
Morgan Institutional Federal Money Market Fund and JPMorgan Federal 
Money Market Fund II; and (xvi) J.P. Morgan Institutional Service 
Federal Money Market Fund and JPMorgan Federal Money Market Fund II.
---------------------------------------------------------------------------

    2. JPMFAM and JPMIM are registered as investment advisers under the 
Investment Advisers Act of 1940 (the ``Advisers Act''). JPMFAM serves 
as the investment adviser to the Funds that are series of MFT and MFG 
(other than Fleming International Equity Fund) and to the corresponding 
Master Fund of Fleming International Equity Fund. JPMIM serves as the 
investment adviser to each remaining Master Fund and to J.P. Morgan 
Institutional California Bond Fund, J.P. Morgan Fleming Asset 
Management (London) Limited (``Subadviser'') is registered as an 
investment adviser under the Advisers Act and serves as the sub-adviser 
to JPMorgan Fleming European Fund and to the corresponding Master Fund 
of Fleming International Equity Fund. JPMFAM, JPMIM, and Subadviser are 
wholly-owned subsidiaries of J.P. Morgan Chase & Co. (``JPMC'').
    3. Morgan Guaranty Trust Company of New York (``Morgan'') and The 
Chase Manhattan Bank (``Chase'') are both wholly-owned subsidiaries of 
JPMC. As of May 23, 2001, Morgan or Chase, as applicable, held of 
record for the benefit of others, in trust, more than 5% (in some 
cases, more than 25%) of the outstanding voting securities of certain 
of the Funds.
    4. On January 23-24 and March 26-27, 2001 (with respect to JPMF, 
JPMIF and JPMST) and February 22 and April 3, 2001 (with respect to MFT 
and MFG), the board of trustees of each Trust (each, a ``Board'' and 
collectively, the ``Boards''), including all the trustees who are not 
``interested persons'' within the meaning of section 2(a)(19) of the 
Act (the ``Independent Trustees''), unanimously approved an agreement 
and plan of reorganization (each, a ``Plan'' and collective, the 
``Plans'') for each Fund. Under the Plans, each Acquiring Fund will 
acquire all of the assets and liabilities of the corresponding Acquired 
Fund in exchange for shares of designated classes of the Acquiring Fund 
(each, a ``Reorganization'' and collectively, the ``Reorganizations''). 
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

[[Page 44188]]

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. In connection with the Reorganizations, each Feeder Fund will 
either convert to, or be reorganized with, a Fund that invests directly 
in securities.
    5. Applicants state that the investment objectives and policies of 
each Acquired Fund (or corresponding Master Fund) are identical to or 
generally similar to those of its corresponding Acquiring Fund (or 
corresponding Master Fund). Applicants state that shareholders of the 
Acquired Funds will receive shares of the Acquiring Funds that are 
subject to the same service fees, sales charges, or distribution fees 
as their Acquired Fund shares, except for shareholders of J.P. Morgan 
U.S. Equity Fund--Advisory Series who will receive shares of a class of 
its corresponding Acquiring Fund (ordinarily with a maximum front-end 
sales charge of 5.75%) if a concurrent reorganization occurs. For 
purposes of calculating deferred sales charges on shares of an Acquired 
Fund that currently have a deferred sales charge, the amount of time a 
shareholder held shares of the Acquired Fund will be added to the 
amount of time the shareholder holds shares of the applicable Acquiring 
Fund. Applicants represents that the rights and obligations of each 
class of shares of each Acquired Fund are substantially similar to 
those of the corresponding class of shares of the Acquiring Funds into 
which they will be reorganized. No sales charge will be imposed in 
connection with the Reorganizations. JPMC will bear all of the costs 
associated with the Reorganizations.
    6. Each Board, including the Independent Trustees, unanimously 
determined that the participation of each Fund in the respective 
Reorganization was in the best interests of the Fund and its 
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 Boards considered various factors, including: 
(a) The terms of the Plan; (b) a comparison of each Fund's historical 
and projected expense ratio; (c) the investment objectives and policies 
of the relevant Acquired Fund and the Acquiring Fund; (d) the fact that 
all costs and expenses of the relevant Reorganization will be borne by 
JPMC; and (e) the tax-free nature of the Reorganizations. With respect 
to the Reorganizations involving Feeder Funds, each applicable Board 
also considered other factors, including agreements by Morgan or Chase 
to waive or reimburse certain expenses of the Acquiring Funds.
    7. 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 Reorganizations. The consummation of certain of the 
Reorganizations is also contingent upon the consummation of one or more 
reorganizations, including reorganizations that are not covered by the 
application. An Acquired Fund or Acquiring Fund may terminate its Plan 
if certain conditions are not satisfied prior to the Closing Date. 
Applicants agree not to make any material changes to any Plan that 
affect the exemptive order without prior approval of the Commission or 
its staffs.
    8. A registration statement on Form N-14 with respect to each 
Reorganization, containing a prospectus/Proxy statement, was filed with 
the Commission on April 12, 13, or 16, 2001, and became effective on 
May 12, 13, or 16, 2001, respectively. Definitive combined prospectus/
proxy statement materials were first mailed to shareholders of the 
Acquired Funds on or about May 22, 2001. Each Acquired Fund held a 
special meeting of shareholders on July 3, 2001, which meetings (except 
for the meeting of shareholders of JP Morgan California Intermediate 
Tax Free Income Fund (``Tax Free Income Fund'')) were adjourned until 
July 25, 2001, because a quorum was not present. The shareholders of 
Tax Free Income Fund approved its Reorganization at the July 3, 2001 
meeting. At the special meetings of shareholders on July 25, 2001, 
shareholders of each remaining Acquired Fund approved the respective 
Reorganizations.

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 affiliated persons, 
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 Morgan or Chase, as applicable, holds of 
record for the benefit of others, in trust, more than 5% (in some 
cases, more than 25%) of the outstanding voting securities of certain 
of the Funds. Because Morgan or Chase holds these securities, certain 
Acquiring Funds and Acquired Funds may be deemed to be affiliated 
persons, or affiliated persons of affiliated persons, for reasons other 
than those set forth in rule 17a-8 and therefore unable to rely on the 
rule.
    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 request an order under section 17(b) exempting them 
from section 17(a) to the extent necessary to complete the 
Reorganizations. Applicants submit that the Reorganization 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 interests 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

[[Page 44189]]

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.
Jonathan G. Katz,
Secretary.
[FR Doc. 01-21280 Filed 8-20-01; 11:41 am]
BILLING CODE 8010-01-M