[Federal Register Volume 67, Number 120 (Friday, June 21, 2002)]
[Notices]
[Pages 42304-42306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15708]


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SECURITIES AND EXCHANGE COMMISSION

[Rel No. IC-25614; 812-12106]


Merrimac Master Portfolio, et al.; Notice of Application

June 17, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from section 15(a) 
of the Act and rule 18f-2 under the Act.

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    Summary of Application: Applicants seek an order that would permit 
them to enter into and materially amend subadvisory agreements without 
shareholder approval.
    Applicants: Merrimac Master Portfolio (``Master Trust''), Merrimac 
Series (``Feeder Series Trust''), Merrimac Funds (``Feeder Funds 
Trust'') and Investors Bank & Trust Company--Advisory Division 
(``Adviser'').
    Filing Dates: The application was filed on May 19, 2000, and 
amended on June 12, 2002.
    Hearing or Notification of Hearing: An order granting the requested 
relief 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 July 12, 2002, 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 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC, 20549-0609. Applicants, c/o Investors Bank 
& Trust Company, 200 Clarendon Street, Boston, MA, 02116.

FOR FURTHER INFORMATION CONTACT: Julia Kim Gilmer, Senior Counsel, at 
(202) 942-0528, or Todd F. Kuehl, 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. The Master Trust, the Feeder Series Trust and the Feeder Funds 
Trust are registered under the Act as open-end management investment 
companies.\1\

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The Master Trust, a New York common law trust, consists of five 
Investment Companies (individually, a ``Master Fund'') each with its 
own investment objectives, policies, and restrictions. The Feeder 
Series Trust and the Feeder Funds Trust are Delaware trusts and are 
composed of five and two Investment Companies respectively. Each 
Investment Company of a Feeder Series Trust and Feeder Funds Trust (a 
``Feeder Fund'') invests all of its investable assets in a single 
Master Fund with the same investment objective and policies as that 
Feeder Fund. The Adviser is registered under the Investment Advisers 
Act of 1940 (``Advisers Act'') and serves as investment adviser to each 
Master Fund pursuant to an investment advisory agreement (``Investment 
Adviser Agreement'') that was approved by each Master Fund's 
shareholders and the Master Trust's board of trustees (``Board'') 
(including a majority of the trustees who are not ``interested 
persons,'' as defined in section 2(a)(19) of the Act (``Independent 
Trustees'')). The Investment Adviser Agreements permit the Adviser to 
enter into separate investment advisory agreements (``Sub-Advisory 
Agreements'') with subadvisers (each a ``Sub-Adviser'') to whom the 
Adviser delegates its responsibility for providing investment advice 
and making investment decisions for the particular Investment Company.
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    \1\ Applicants also request that any relief granted pursuant to 
the application also apply to any other existing or future 
registered open-end management investment company (``Future Trust,'' 
together with the Master Trust, the Feeder Series Trust and the 
Feeder Funds Trust, the ``Trusts'') and all current and future 
series of the Trusts (``Investment Companies'') that: (i) are 
advised by the Adviser (or a person controlling, controlled by, or 
under common control with the Adviser); (ii) use the same management 
structure; and (iii) comply with the terms and conditions in the 
application. The registered investment companies that currently 
intend to rely on the requested order are named as applicants. If 
the name of an Investment Company contains the name of a Sub-Adviser 
(as defined below), it will be preceded by the name of the Adviser.
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    2. Under the terms of the Investment Adviser Agreements the Adviser 
assumes overall responsibility, subject to ongoing supervision of the 
Board, for administering all operations of the Master Trust and for 
monitoring and evaluating the management of each Master Fund's assets 
by one or more Sub-Advisers. Sub-Advisers will be recommended to the 
Board by the Adviser and selected and approved by the Board, including 
by a majority of the Independent Trustees. Each Sub-Adviser's fees will 
be paid by the Adviser out of the management fees received by the 
Adviser from the applicable Master Fund. Each Sub-Adviser is or will be 
registered under the Advisers Act. Currently, each Master Fund has a 
single Sub-Adviser.
    3. The Adviser will administer all operations of the Master Trust, 
evaluate each Sub-Adviser's management of assets and recommend to the 
Board the hiring, termination and replacement of Sub-Advisers. The 
Adviser will recommend Sub-Advisers based on a number of factors used 
to evaluate their skills in managing assets pursuant to particular 
investment objectives.
    4. Applicants request relief to permit the Adviser, subject to 
Board oversight, to enter into and materially amend Sub-Advisory 
Agreements without shareholder approval. The requested relief will not 
extend to a Sub-Adviser that is an affiliated person, as defined in 
section 2(a)(3) of the Act, of the Trusts or the Adviser, other than by 
reason of serving as a Sub-Adviser to one or more of the Investment 
Companies (``Affiliated Sub-Adviser'').

Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in part, that it is unlawful 
for any person to act as investment adviser to a registered investment 
company except pursuant to a written contract that has been approved by 
the vote of a majority of the company's outstanding voting securities. 
Rule 18f-2 under the Act provides, in relevant part, that each series 
or class of stock in a series company affected by a matter must approve 
such matter if the Act requires shareholder approval.\2\
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    \2\ In the case of the Master Funds, shareholder approval 
requirements under section 15(a) and rule 18f-2 also are governed by 
the voting provisions set forth in section 12(d)(1)(E) of the Act.
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    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities or transactions from any provision of the Act, or 
from any rule thereunder, if such exemption is necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policies and provisions of the 
Act. Applicants state that the requested relief meets this standard for 
the reasons discussed below.
    3. Applicants assert that the shareholders of each Investment 
Company are relying on the Adviser to select and monitor the activities 
of Sub-Advisers best suited for the Investment Company. Applicants 
assert that, from the perspective of the investor, the role of the Sub-
Advisers is comparable to that of individual portfolio managers 
employed by other investment advisory firms. Applicants contend that 
requiring shareholder approval of each Sub-Advisory Agreement may 
impose unnecessary costs and delays on the Investment Company, and may 
preclude the Adviser from acting promptly and efficiently in a manner 
considered advisable by the Board and the Adviser. Applicants note that 
the Investment Adviser Agreements will remain subject to section 15(a) 
of the Act and rule 18f-2 under the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before an Investment Company may rely on the order requested in 
the application, the operation of the Investment Company in the manner 
described in the application will be approved by a majority of the 
outstanding voting securities of the Investment Company, within the 
meaning of the Act, which in the case of a Master Fund will be pursuant 
to voting instructions provided by shareholders of the Feeder Fund 
investing in such Master Fund or other voting arrangements that comply 
with section 12(d)(1)(E)(iii)(aa) of the Act, if applicable; or, in the 
case of an Investment Company whose shareholders have purchased shares 
on the basis of a prospectus or offering circular containing the 
disclosure contemplated by condition 2 below, by the initial 
shareholder(s) before offering shares of that Investment Company to the 
public.
    2. The offering circular or prospectus of any Investment Company 
relying on the requested relief or, in the case of a Master Fund 
relying on the requested relief, its offering documents and the 
corresponding Feeder Fund's offering circular or prospectus will 
disclose the existence, substance and effect of any order granted 
pursuant to this application. In addition, any such Investment Company 
will hold itself out to the public as employing the management 
structure described in the application. The offering circular or 
prospectus of such Investment Company, or in the case of such Master 
Fund, its offering documents and the corresponding Feeder Fund's 
offering circular or prospectus, will prominently disclose that the 
Adviser has the ultimate responsibility to oversee the Sub-Advisers and 
recommend their hiring, termination, and replacement.
    3. At all times, a majority of the Board of each Trust will be 
Independent Trustees, and the nomination of new or additional 
Independent Trustees will be at the discretion of the then existing 
Independent Trustees.
    4. Neither the Adviser nor any Investment Company will enter into a 
Sub-Advisory Agreement with an Affiliated Sub-Adviser without that 
agreement, including the compensation to be paid thereunder, being 
approved

[[Page 42306]]

by the shareholders of the applicable Investment Company, which in the 
case of a Master Fund will be pursuant to voting instructions provided 
by shareholders of those Feeder Funds investing in such Master Fund 
that are registered under the Act, or other voting arrangements that 
comply with section 12(d)(1)(E)(iii)(aa) of the Act, if applicable.
    5. When a Sub-Adviser change is proposed for an Investment Company 
with an Affiliated Sub-Adviser, the applicable Board of Trustees, 
including a majority of the Independent Trustees, will make a separate 
finding, reflected in the minutes of the Board of the Master Fund and 
the Board of Trustees of the corresponding Feeder Fund, that the change 
is in the best interests of the Master Fund and its shareholders, and 
any Feeder Fund investing in the Master Fund and its respective 
shareholders, and does not involve a conflict of interest from which 
the Adviser or Affiliated Sub-Adviser derives an inappropriate 
advantage.
    6. Within 90 days of the hiring of any new Sub-Adviser, the 
shareholders of the applicable Master Fund and Feeder Fund will be 
furnished all information about the new Sub-Adviser that would have 
been contained in a proxy statement, including any change in such 
disclosure caused by the addition of a new Sub-Adviser. The Trusts will 
meet this condition by providing such shareholders, within 90 days of 
the hiring of a new Sub-Adviser an information statement meeting the 
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 
14A under the Securities Exchange Act of 1934.
    7. The Adviser will provide general management services to each 
Investment Company, including overall supervisory responsibility for 
the general management and investment of each Investment Company's 
portfolio, and, subject to review and approval by the respective 
Trusts' Board will (i) set the Investment Company's overall investment 
strategies; (ii) select Sub-Advisers; (iii) when appropriate, recommend 
to the Investment Company's Board the allocation and reallocation of 
the Investment Company's assets among multiple Sub-Advisers; (iv) 
monitor and evaluate the performance of Sub-Advisers; and (v) implement 
procedures reasonably designed to ensure that the Sub-Advisers comply 
with the Investment Company's investment objectives, policies, and 
restrictions.
    8. No trustee, or officer of a Trust or director or officer of the 
Adviser will own directly or indirectly (other than through a pooled 
investment vehicle that is not controlled by the trustee, director or 
officer) any interest in a Sub-Adviser except for (i) ownership of 
interests in the Adviser or any entity that controls, is controlled by, 
or is under common control with the Adviser; or (ii) ownership of less 
than 1% of the outstanding securities of any class of equity or debt of 
a publicly-traded company that is either a Sub-Adviser or an entity 
that controls, is controlled by or is under common control with a Sub-
Adviser.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-15708 Filed 6-20-02; 8:45 am]
BILLING CODE 8010-01-P