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[Federal Register Volume 65, Number 230 (Wednesday, November 29, 2000)]
[Notices]
[Pages 71149-71150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30371]

[[Page 71149]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-24746; 812-12088]

TIP Funds, et al.; Notice of Application

November 21, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 6(c) of the 
Investment Company Act of 1940 (``Act'') for an exemption from section 
15(f)(1)(A) of the Act.

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    Applicants: TIP Funds (``TIP Funds''), Turner Investment Partners, 
Inc. (``Turner''), Mercury Funds, Inc. (``Company''), Mercury Master 
Trust (``Trust''), and Fund Asset Management, L.P. (``FAM'').
    Summary of Application: Applicants request an order that would 
permit the Company not to reconstitute its board of directors following 
an acquisition of substantially all of the assets of a series of TIP 
Funds in order to comply with the disinterested director requirement of 
section 15(f)(1)(A) of the Act.
    Filing Dates: The application was filed on May 3, 2000, and amended 
on November 13, 2000.
    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 December 15, 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 who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, N.W., Washington, 
DC 20549-0609. Applicants, TIP Funds and Turner, 1235 Westlakes Drive, 
Suite 350, Berwyn, PA 19312; the Company, the Trust and FAM, 800 
Scudders Mill Road, Plainsboro, NJ 08536.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 942-0634 or Nadya Roytblat, Assistant Director, at (202) 942-0693 
(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, N.W., 
Washington, DC 20549-0101, telephone (202) 942-8090.

Applicants' Representations

    1. TIP Funds is a Massachusetts business trust registered under the 
Act as an open-end management investment company. Turner Large Cap 
Growth Fund (``Turner Fund'') was a series of TIP Funds. Turner is an 
investment adviser registered under the Investment Advisers Act of 1940 
(the ``Advisers Act''), and served as the investment adviser to the 
Turner Fund until the Reorganization (as defined below).
    2. The Company is a Maryland corporation registered under the Act 
as an open-end management investment company. The Company is comprised 
of seven separate series, one of which is Mercury Select Growth Fund 
(``Mercury Fund''). On June 19, 2000, the Mercury Fund acquired 
substantially all of the assets of the Turner Fund in exchange for the 
assumption by the Mercury Fund of substantially all of the liabilities 
of the turner Fund and Class I shares of the Mercury Fund equal in 
value to the net asset value of the assets acquired from the Turner 
Fund (the ``Reorganization''). The Mercury Fund invests substantially 
all of its assets in the Master Select Growth Portfolio (``Master 
Portfolio''), a series of the Trust. The Trust is a Delaware business 
trust registered under the Act as an open-end management investment 
company. FAM, an investment adviser registered under the Advisers Act, 
serves as the investment adviser to the Master Portfolio, and Turner 
serves as the subadviser.
    3. Applicants state that the board of directors of the Company 
consists of 2 directors who are interested persons, as defined in 
section 2(a)(19) of the Act (``Interested Directors''), and 4 directors 
who are not interested persons (``Disinterested Directors''). 
Applicants request an order under section 6(c) of the Act exempting the 
Company from the provisions of section 15(f)(1)(A) of the Act with 
respect to the Reorganization.\1\
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    \1\ Applicants request that the relief apply also to the board 
of trustees of the Trust, which is comprised of the same individuals 
as the board of directors of the Company.
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Applicants' Legal Analysis

    1. Section 15(f) of the Act is a safe harbor that permits an 
investment adviser to a registered investment company (or an affiliated 
person of the investment adviser) to receive ``any amount or benefit'' 
in connection with the sale of securities of, or sale of any interest 
in, such adviser (which results in the assignment of an investment 
advisory contract with such company) if certain conditions are met. 
Section 15(f)(1)(A) requires that, for a period of three years after 
such sale, at least 75 percent of the board of directors of an 
investment company (or its successor, by reorganization or otherwise) 
may not be ``interested persons'' with respect to either the 
predecessor or successor investment adviser to the investment company.
    2. Section 6(c) of the Act permits the Commission to exempt any 
person or transaction from any provision of the Act, or rule or 
regulation thereunder, if the 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 provisions of the Act. 
Section 15(f)(3)(B) of the Act provides that if the assignment of an 
investment advisory contract results from the merger of, or sale of 
substantially all the assets by, a registered investment company with 
or to another registered investment company with assets substantially 
greater in amount, such discrepancy in size shall be considered by the 
Commission in determining whether, or to what extent, to grant 
exemptive relief pursuant to section 6(c) from section 15(f)(1)(A). 
Applicants state that, as a result of the Reorganization, it could be 
argued that section 15(f)(1)(A) of the Act requires the board of 
directors of the Company to be comprised of at least 75% Disinterested 
Directors. Applicants request an order under section 6(c) of the Act 
for an exemption from the requirement in section 15(f)(1)(A) with 
respect to the Reorganization. Applicants acknowledge that the 
requested order would grant relief only for the period following the 
date on which the order is granted.
    3. Applicants state that the aggregate net assets of the Company 
($2,906,843,959 as of June 16, 2000) were substantially greater than 
the aggregate net assets of the Turner Fund ($45,527,647 as of June 16, 
2000), making the Turner Fund's assets approximately 1.5% of the 
Company's assets. Applicants submit that it is appropriate for the 
assets of the Company as a whole, as opposed to the Mercury Fund alone, 
to be taken into account when considering the ``substantially greater'' 
test of section 15(f)(3)(B).
    4. Applicants state that, in order to comply with section 
15(f)(1)(A), the Company would have to either add two Disinterested 
Directors or reduce the number of Interested Directors from two

[[Page 71150]]

to one. The shareholders have elected all six of the Company's current 
directors. If the Company were to add two Disinterested Directors, the 
Company would not be required to seek shareholder approval to comply 
with section 16(a) of the Act, which requires that at least two-thirds 
of a fund's directors be elected by shareholders. The Company would be 
vulnerable to the possibility of having to unexpectedly call a 
shareholders' meeting that it would not otherwise have to call in the 
event of the death or resignation of a director. If the Company were 
instead to reduce the number of Interested Directors from two to one, 
it would reduce the size of its board by over sixteen percent. 
Applicants submit that reconstitution of the Company's board would 
serve no public interest, and may be contrary to the interests of 
shareholders of the Company.
    5. For the reasons stated above, applicants submit that the 
requested relief is necessary and appropriate in the public interest 
and consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-30371 Filed 11-28-00; 8:45 am]
BILLING CODE 8010-01-M
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