[Federal Register Volume 64, Number 119 (Tuesday, June 22, 1999)]
[Notices]
[Pages 33330-33331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15847]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23872; 812-10636]
J.P. Morgan Series Trust and J.P. Investment Management Inc.;
Notice of Application
June 16, 1999.
AGENCY: Securities and Exchange Commission (the ``Commission'').
ACTION: Notice of application for an exemption under sections 6(c) and
17(b) the Investment Company Act of 1940 (the ``Act'') from section
17(a) of the Act.
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Summary of Application: Applicants seek an order to permit
redemptions in-kind of shares of certain registered open-end management
investment companies by certain affiliated shareholders.
Applicants: J.P. Morgan Series Trust (the ``Trust'') and J.P.
Morgan Investment Management Inc. (the ``Adviser'').
Filing Dates: The application was filed on April 28, 1997, and
amended on March 29, 1999 and May 20, 1999.
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 applicant 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, 1999 and should be accompanied by proof of
service on applicant, 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 5th Street, NW., Washington, DC
20549-0609. Applicants, 60 State Street, Boston, Massachusetts 02109.
FOR FURTHER INFORMATION CONTACT: Lawrence W. Pisto Senior Counsel, at
(202) 942-0527, or Nadya B. Roytblat, Assistant Director, 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 Trust, a Massachusetts business trust, is an open-end
management investment company registered under the Act, and currently
consists of seven series (the ``Funds''). The Adviser, a wholly-owned
subsidiary of J.P. Morgan & Co. Incorporated, is registered under the
Investment Advisers Act of 1940, and serves as the investment adviser
to the Funds.
2. Applicants request relief to permit the Funds to satisfy
redemption requests made by shareholders who are ``affiliated persons''
of the Funds solely by reason of owning, controlling or holding with
the power to vote, five percent or more of a Fund's shares (``Covered
Shareholders'') by distributing portfolio securities in-kind. The
relief sought would not extend to shareholders who are ``affiliated
persons'' of a Fund within the meaning of sections 2(a)(3)(B) through
(F) of the Act.\1\
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\1\ Applicants request that the relief also extend to all future
registered open-end management investment companies and their series
for which the Adviser or any person controlling, controlled by, or
under common control with the Adviser serves as investment adviser.
All registered open-end management investment companies that
currently intend to rely on the requested order are named as
applicants. Any existing or future registered open-end management
investment company that relies on the order in the future will do so
only in accordance with the terms and conditions contained in the
application.
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3. Each Fund's prospectus provides that redemption request
generally will be paid in cash, but that the Fund reserves the right to
pay redemption requests greater than $250,000 in whole or in part in-
kind. The board of trustees of the Trust, including a majority of the
trustees who are not ``interested persons'' as defined in section
2(a)(19) of the Act (``Non-Interested Trustees''), have determined that
it would be in the best interest of the Funds and their shareholders to
pay to a Covered Shareholder the redemption price for shares of the
Funds in-kind to the extent permitted by certain Funds' election to be
governed by rule 18f-1 under the Act.
Applicants' Legal Analysis
Section 17(a)(2) of the Act, in relevant part, makes it unlawful
for an affiliated person of a registered investment company or an
affiliated person of such a person, acting as principal, to knowingly
``purchase'' from such registered investment company any security or
other property (except securities of which the seller is the issuer).
Section 2(a)(3)(A) of the Act defines ``affiliated person'' to include
any person owning 5% or more of the outstanding voting securities of
such
[[Page 33331]]
other person. Applicants state that to the extent that an in-kind
redemption could be deemed to involve the purchase of portfolio
securities (of which the affected Fund is not the issuer) by a Covered
Shareholder, the proposed redemptions in-kind would be prohibited by
section 17(a)(2).
2. Section 17(b) of the Act provides that, notwithstanding section
17(a), the Commission shall exempt a proposed transaction from section
17(a) if evidence establishes that: (a) The terms of the proposed
transaction are fair and reasonable and do not involve overreaching;
(b) the proposed transaction is consistent with the policy of each
registered investment company involved; and (c) the proposed
transaction is consistent with the general purposes of the Act.
3. Section 6(c) of the Act provides, in part, that the Commission,
by order upon application, may conditionally or unconditionally exempt
any person, security or transaction from any provisions of the Act, if
and to the extent that such exemption is necessary or appropriate in
the public interest and consistent with the protection of investors and
the purposes fairly intended by the policy and provision of the Act.
4. Applicants request an order under sections 6(c) and 17(b) of the
Act exempting them from the provisions of section 17(a) of the Act to
permit Covered Shareholders to redeem their shares in-kind from the
Funds. The requested order will not apply to redemptions by
shareholders who are affiliated persons of a Fund within the meaning of
sections 2(a)(3)(B) through (F) of the Act.
5. Applicants submit that the requested relief satisfies the
requirements of sections 6(c) and 17(b). Applicants assert that neither
an affected Fund nor the Covered Shareholder will have any choice as to
the type of consideration to be received in connection with a
redemption request, and neither the Adviser nor the Covered Sharehold
will have any opportunity to select the specific portfolio securities
to be distributed. Applicants further state that the portfolio
securities to be distributed will be valved according to an objective,
verifiable standard and that the in-kind redemptions are consistent
with the investment policies of the Funds. Applicants also state that
the proposed in-kind redemptions are consistent with the general
purposes of the Act because the Covered Shareholder would not receive
any advantage not available to other redeeming shareholders.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The securities distributed to both Covered Shareholders and non-
affiliated shareholders pursuant to a redemption in-kind (the ``In-Kind
Securities'') will be limited to securities that are traded on a public
securities market or for which quoted bid prices are available.
2. The In-Kind Securities will be distributed by each Fund on a pro
rata basis after excluding: (a) securities which could not be publicly
offered or sold in the United States without registration under the
Securities Act of 1933; (b) certain portfolio positions (such as
futures and options contracts and repurchase agreements) that, although
they may be liquid and marketable, involve the assumption of contactual
obligations, require special trading facilities or can only be traded
with an institutional counterparty to the transaction; (c) cash
equivalents (such as certificates of deposit, commercial paper and
repurchase agreements); (d) other assets which are not readily
distributable (including recevables and prepaid expenses); and (e)
portfolio securities representing fractional shares, odd lot securities
and accruals on such securities. Cash will be paid for the portion of
the in-kind distribution represented by assets set forth in (a)-(e)
less liabilities (including accounts payable).
3. The In-Kind Securities distributed to the Covered Shareholders
will be valued in the same manner as they would be valued for purposes
of computing each Fund's net asset value.
4. The Trust's Board, including a majority of the Non-Interested
Trustees, will determine no less frequently than annually: (a) whether
the In-Kind Securities, if any, have been distributed in accordance
with conditions 1 and 2; (b) whether the In-Kind Securities, if any,
have been valued in accordance with condition 3; and (c) whether the
distribution of any such In-Kind Securities is consistent with the
policies of each affected Fund as reflected in its prospectus. In
addition, the Board will make and approve such changes in the
procedures as it deems necessary for monitoring the Fund's compliance
with the terms and conditions of this application.
5. Each Fund will maintain and preserve for a period of not less
than six years from the end of the fiscal year in which a proposed in-
kind redemption by a Covered Shareholder occurs, the first two years in
an easily accessible place, a written record of each such redemption
setting forth the identity of the Covered Shareholder, a descrption of
each security distributed in-kind, the terms of the in-kind
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. 99-15847 Filed 6-21-99; 8:45 am]
BILLING CODE 8010-01-M