[Federal Register Volume 69, Number 45 (Monday, March 8, 2004)]
[Notices]
[Pages 10766-10768]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5055]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26373; 812-12817]


Money Market Obligations Trust, et al.; Notice of Application

March 2, 2004.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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SUMMARY OF APPLICATION: Applicants seek an order under section 17(b) of 
the act in connection with the transfer of certain assets of Tax-Free 
Instruments Trust (``TFIT''), a series of Money Market Obligations 
Trust (the ``Trust''), to Edward Jones Tax Free Money Market Fund (the 
``Jones Fund'') in exchange for shares of the Jones Fund.

Applicants: The Trust and the Jones Fund.

Filing Dates: The application was filed on May 1, 2002 and amended on 
March 1, 2004.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a

[[Page 10767]]

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 March 26, 2004, 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, Commission, 450 5th Street, NW., Washington, DC 
20549-0609. Applicants, c/o Leslie K. Ross, Esq., Reed Smith LLP, 
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-
3779.

FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Senior Counsel, at (202) 
942-0582, or Mary Kay Frech, 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 5th Street, NW., Washington, 
DC 20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. The Trust, established in 1988, is organized as a Massachusetts 
business trust and is registered under the Act as an open-end 
management investment company. The Trust currently offers forty series, 
including TFIT. TFIT has two classes of shares, ``Investment Shares'' 
and ``Institutional Service Shares.'' The Jones Fund is organized as a 
Massachusetts business trust and is registered under the Act as an 
open-end management investment company. The Jones Fund was established 
on January 25, 2001 and has not conducted any business other than that 
incident to its organization. TFIT and the Jones Fund (the ``Funds'') 
are both money market funds whose investment objective is to provide 
current income exempt from federal income tax consistent with stability 
of principal.
    2. Federated Investment Management Company (``FIMCO''), a wholly-
owned subsidiary of Federated Investors, Inc. (``Federated''), serves 
as investment adviser to TFIT. Passport Research Ltd. (the ``Jones 
Adviser''), a Pennsylvania limited partnership, serves as investment 
adviser to the Jones Fund. The sole general partner of the Jones 
Adviser is FIMCO and the sole limited partner is Edward Jones & Co. 
L.P. (``Edward Jones''), a broker-dealer registered under the 
Securities Exchange Act of 1934. FIMCO and the Jones Adviser are 
registered as investment advisers under the Investment Advisers Act of 
1940. Edward Jones brokerage customers (the ``Jones Shareholders'') 
hold almost eighty percent of TFIT's outstanding shares in connection 
with their brokerage accounts. All of the Jones Shareholders own 
Investment Shares. Applicants propose to transfer the Jones 
Shareholders from TFIT to the Jones Fund.
    3. Rule 2510(d) of the Conduct Rules of the National Association of 
Securities Dealers, Inc. (``NASD Rule 2510(d)'') provides an exception 
to the general rule prohibiting the exercise of discretionary power in 
a customer's account for which the customer has not given prior written 
authorization. NASD rule 2510(d) permits the use of negative response 
letters in connection with bulk exchanges at net asset value of money 
market funds in sweep accounts. A negative response letter would be 
provided to all Jones Shareholders at least 30 days in advance of the 
consummation of the Exchange (as defined below). The letter would 
contain a tabular comparison of the nature and amount of fees charged 
by the Funds as well as a comparative description of the investment 
objectives of each Fund. In addition, a prospectus for the Jones Fund 
would accompany the letter. Any shareholder objecting to the Exchange 
within the allotted time period would not have his or her shares 
exchanged and instead would remain a shareholder of TFIT. Following 
completion of the proposed Exchange, Jones Shareholders who elect to 
remain shareholders of TFIT will no longer be able to use it as a sweep 
vehicle in connection with their brokerage accounts.
    4. Applicants propose that TFIT would transfer a pro rata portion 
of its assets (the ``Assets'') to the Jones Fund in exchange (the 
``Exchange'') for shares of the Jones Fund (the ``Jones Shares'').\1\ 
The Exchange will not be a taxable event. Immediately after the 
Exchange, the Jones Shares received by TFIT in exchange for the 
transferred Assets will be distributed to the Jones Shareholders pro 
rata in exchange for their TFIT shares (the ``Redemption'').\2\
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    \1\ Certain securities may be excluded from the pro rata 
transfer. Such securities include securities restricted on 
disposition, certificated securities, odd lots and fractional 
positions.
    \2\ Jones Shareholders not choosing to invest in the Jones Fund 
could remain in TFIT or redeem their shares either before or after 
the Redemption and Exchange.
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    5. The investment objective and policies, as well as the fee 
structure, of the Investment Shares class of TFIT and the Jones Fund 
are identical. In addition, applicants expect the expense ratios of the 
Investment Shares class of TFIT and the Jones Fund will be the same as 
TFIT's current expense ratio for the Investment Shares class after the 
Exchange and Redemption. Both the Jones Fund and the Investment Shares 
class of TFIT have a management fee of .50%, shareholder services fee 
of .25%, and other expenses of .15%, resulting in total gross expenses 
of .90%. After voluntary fee waivers and/or assumptions of expenses, 
the total annual operating expenses for the Investment Shares class of 
TFIT currently are, and the Jones Fund will be, .75%.
    6. The Assets will be valued at their amortized cost value on the 
date of the Exchange so that the number of shares issued will equal the 
number of shares of TFIT held by Jones Shareholders. After the 
Exchange, each Jones Shareholder will hold the same number of Jones 
Shares as he or she held in TFIT prior to the Exchange. No brokerage 
commission, fee (except customary transfer fees) or remuneration will 
be paid in connection with the Exchange and Redemption.

Applicants' Legal Analysis

    1. Section 17(a) of the Act prohibits any affiliated person of a 
registered investment company, or any affiliated person of such person, 
acting as principal, knowingly to sell any security or other property 
to such registered investment company, or to purchase from such 
registered investment company any security or other property (except 
securities of which the seller is the issuer). Section 2(a)(3) of the 
Act defines the term ``affiliated person'' of another person to include 
any person controlling, controlled by, or under common control with, 
the other person.
    2. Applicants state that TFIT and the Jones Fund may be viewed as 
being under the common control of FIMCO, and thus affiliated persons of 
each other. Applicants further state that to the extent that the 
Exchange and Redemption may be deemed to constitute a purchase and sale 
of securities between TFIT and the Jones Fund, the Exchange and 
Redemption would be prohibited by section 17(a).
    3. Rule 17a-8 exempts certain mergers, consolidations, and 
purchases or sales of substantially all of the assets of affiliated 
registered investment

[[Page 10768]]

companies from the provisions of section 17(a) of the Act provided, 
among other requirements, that the board of directors of each 
affiliated investment company determines that the transaction is in the 
best interests of the company and the interests of the existing 
shareholders will not be diluted as a result of the transaction. 
Applicants state that the relief provided by rule 17a-8 is unavailable 
for the Exchange and Redemption because the transaction does not 
involve substantially all of the assets of TFIT.
    4. Section 17(b) provides that the Commission shall exempt a 
transaction from section 17(a) if evidence establishes that the terms 
of the proposed transaction, including the consideration to be paid, 
are reasonable and fair and do not involve overreaching, the proposed 
transaction is consistent with the policy of each registered investment 
company concerned, and the proposed transaction is consistent with the 
general purposes of the Act. Applicants request relief under section 
17(b) to allow the Exchange and Redemption.
    5. Applicants state that the board of trustees of TFIT and the 
board of trustees of the Jones Fund have approved the Exchange and 
Redemption in the manner required by rule 17a-8. In approving the 
Exchange and Redemption, the boards considered that (a) The Funds will 
not directly or indirectly bear any fees or expenses in connection with 
the proposed transactions; (b) the proposed transactions will not have 
any effect on the Funds' annual operating expenses, shareholder fees or 
services; (c) the proposed transactions will not result in a change to 
the investment objectives, restrictions and policies of the Funds; and 
(d) the proposed transactions will not result in direct or indirect 
federal income tax consequences to shareholders of the Funds. A 
majority of the trustees of TFIT and the Jones Fund are independent 
trustees and the independent trustees select and nominate other 
independent trustees. Persons who act as legal counsel to the 
independent trustees are independent legal counsel.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The Exchange and Redemption will be effected by the transfer of 
a pro rata portion of the assets of TFIT to the Jones Fund; provided, 
however, securities restricted on disposition, certificated securities, 
odd lots and fractional shares will be excluded from the pro rata 
transfer.
    2. The Assets will be valued for purposes of the Exchange and 
Redemption using the amortized cost method so long as the board of 
trustees of each of TFIT and the Jones Fund makes the findings required 
in rule 2a-7(c)(1) under the Act.
    3. No brokerage commission, fee (except for customary transfer 
fees), or other remuneration will be paid in connection with the 
Exchange and Redemption.
    4. TFIT will maintain and preserve for a period of not less than 
six years from the end of the fiscal year in which the Exchange and 
Redemption occurs, the first two years in an easily accessible place, a 
written record of the transaction setting forth a description of each 
security transferred, the terms of the distribution, and the 
information or materials upon which the valuation was made.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-5055 Filed 3-5-04; 8:45 am]
BILLING CODE 8010-01-P