[Federal Register Volume 64, Number 175 (Friday, September 10, 1999)]
[Notices]
[Pages 49252-49254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23609]
[[Page 49252]]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23989; 812-11384]
Massachusetts Investors Trust, et al.; Notice of Application
September 2, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order under section 17(d) of the
Investment Company Act of 1940 (the ``Act'') and rule 17d-1 under the
Act.
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Summary of Application: Applicants seek to amend an existing order to
permit additional entities to rely on the existing order, which permits
certain registered investment companies to pool cash balances in a
joint account for the purpose of investing in short-term investments.
Applicants: Massachusetts Investors Trust, MFS Series Trust I, MFS
Series Trust II, MFS Series Trust III, MFS Series Trust IV, MFS Series
Trust V, MFS Series Trust VI, MFS Series Trust VII, MFS Series Trust
VIII, MFS Series Trust IX, MFS Series Trust X, MFS Series Trust XI, MFS
Municipal Series Trust, MFS Growth Opportunities Fund, MFS Government
Securities Fund, Massachusetts Investors Growth Stock Fund, MFS
Government Limited Maturity Fund, MFS Institutional Trust, MFS
Municipal Income Trust, MFS Intermediate Income Trust, MFS Multimarket
Income Trust, MFS Government Markets Income Trust, MFS Charter Income
Trust, MFS Special Value Trust, MFS/Sun Life Series Trust, MFS Variable
Insurance Trust (the ``MFS Trusts''), Money Market Variable Account,
High Yield Variable Account, Capital Appreciation Variable Account,
Government Securities Variable Account, World Governments Variable
Account, Total Return Variable Account, Managed Sectors Variable
Account (the ``MFS Variable Funds'') (together with the MFS Trusts, the
``MFS Funds''). MFS Meridian U.S. Government Bond Fund, MFS Meridian
Global Government Fund, MFS Meridian Charter Income Fund, MFS Meridian
Limited Maturity Fund, MFS Meridian U.S. Emerging Growth Fund, MFS
Meridian Global Equity Fund, MFS Meridian Money Market Fund, MFS
Meridian U.S. Equity Fund, MFS Meridian Research Fund, MFS Meridian
Global Balanced Fund, MFS Meridian Global Growth Fund, MFS Meridian
Emerging Markets Debt Fund, MFS Meridian U.S. High Yield Fund, MFS
Meridian Global Asset Allocation Fund, MFS Meridian Strategic Growth
Fund, MFS Meridian Research International Fund (the ``Meridian
Funds''), MFS American Funds, Massachusetts Financial Services Company
(``MFS''), MFS International Ltd. (``MIL''), Vertex Investment
Management, Inc. (``Vertex'').
Filing Date: The application was filed on October 29, 1998. Applicants
have agreed to file an amendment to the application, the substance of
which is reflected in this notice, during the notice period.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on September 27,
1999, 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 SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549-0609. Applicants: MFS Trust, MFS, and Vertex, 500 Boylston
Street, Boston, MA 02116; MFS Variable Funds, One Sun Life Executive
Park, Wellesley Hills, MA 02181; Meridian Funds, Maples and Calder,
P.O. Box 309, Grand Cayman, Cayman Islands, British West-Indies; MFS
American Funds, 47, Boulevard Royal, c/o State Street Luxembourg, S.A.,
L-2449 Luxembourg, Grand-Duchy of Luxembourg; MIL, Cedar House, 41
Cedar Avenue, Hamilton HM12, Bermuda.
FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Staff Attorney, at
(202) 942-0634, 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 from
the SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington,
D.C. 20549-0102 (tel. (202) 942-8090).
Applicants' Representations
1. Each of the MFS Funds is an open-end or a closed-end management
investment company registered under the Act. Each of the Meridian Funds
is an open-end investment company incorporated as an exempt company
under the laws of the Cayman Islands. Each of the MFS American Funds is
an investment company established in Luxembourg. The Meridian Funds and
the MFS American Funds are offered exclusively outside of the United
States to non-United States residents and are collectively referred to
as the ``Offshore Funds.''\1\
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\1\ For purposes of the application, the term ``Offshore Funds''
includes other pooled investment vehicles advised by, or in the
future advised by, MFS (or an entity controlling, controlled by, or
under common control with MFS) offered exclusively outside of the
United States to non-United States residents.
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2. MFS, MIL, and Vertex are each registered as an investment
adviser under the Investment Advisers Act of 1940. MFS is presently
investment adviser to all of the MFS Funds, except for certain series
of MFS Series Trust XI, and investment sub-adviser to all of the
Offshore Funds. MIL serves as investment adviser to all of the Offshore
Funds. Vertex serves as an investment adviser to certain series of MFS
Series Trust XI. MIL and Vertex are each a wholly-owned subsidiary of
MFS.
3. Pursuant to a prior order, as amended previously (the ``Prior
Order''),\2\ the MFS Funds are permitted to pool cash balances and
reserves in a joint account (the ``Joint Account'') for the purpose of
investing in certain short-term investments (``Short-Term
Investments''). The requested order would amend the Prior Order to
allow the Offshore Funds to participate in the Joint Account.
Applicants propose to continue to operate the Joint Account in the same
manner as permitted by the Prior Order.\3\
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\2\ MFS Capital Development Fund, et al., Investment Company Act
Release Nos. 19109 (Nov. 19, 1992) (notice) and 19158 (Dec. 16,
1992) (order), as amended by Massachusetts Investors Trust, et al.,
Investment Company Act Release Nos. 20354 (Jun. 14, 1994) (notice)
and 20395 (Jul. 12, 1994) (order).
\3\ All entities that currently intend to rely on the requested
order are named as applicants. Any entity that relies upon the
requested order in the future will company with the terms and
conditions contained in the application.
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4. Applicants request that any relief granted also apply to (i) all
existing or future series of the MFS Funds and the Offshore Funds; (ii)
all existing or future registered management investment companies for
which MFS (or an entity controlling, controlled by, or under common
control with MFS) in the future acts as investment adviser or future
Offshore Funds (``Future Funds,''
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together with the MFS Funds and the Offshore Funds, the ``Funds''); and
(iii) any existing or future entity controlling, controlled by, or
under common control with MFS that in the future serves as investment
adviser to any Future Fund (together with MFS, MIL, and Vertex, the
``Adviser'').
5. The Funds will purchase Short-Term Investments through the Joint
Account that are consistent with their investment objectives and
policies.\4\ All Short-Term Investments constitute ``eligible
securities,'' as defined in rule 2a-7 under the Act. The Offshore Funds
will use the same systems and standards for evaluating and acquiring
Short-Term Investments as the MFS Funds. Prior to participation by any
Offshore Fund in the Joint Account, the board of directors of the
Offshore Fund must make findings similar to those made by the boards of
trustees/managers of the MFS Funds (together with the Offshore Funds'
boards of directors, the ``Boards'').
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\4\ The Funds will enter into ``hold-in-custody'' repurchase
agreements (i.e., repurchase agreements where the counterparty or
one of its affiliated persons may have possession of, or control
over, the collateral subject to the agreement) only where cash is
received late in the business day and otherwise would be unavailable
for investment.
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Applicants' Legal Analysis
1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company, or an
affiliated person of such a person, acting as principal, for
participating in any joint enterprise or arrangement in which that
investment company is a participant, unless the SEC has issued an order
authorizing the arrangement. In passing on these applications, the SEC
considers whether the participation of the registered investment
company in the proposed joint arrangement is consistent with the
provisions, policies, and purposes of the Act and the extent to which
the participation is on a basis different from or less advantageous
than that of other participants.
2. Section 2(a)(3)(C) of the Act defines an ``affiliated person''
or another person to include any person directly or indirectly
controlling, controlled by, or under common control with, the other
person. Applicants state that the Funds may be considered ``affiliated
persons'' because they may be deemed to be under the common control of
the Adviser. Applicants state that the Offshore Funds, by participating
with the other Funds in the Joint Account, and the Adviser, by
administering the Joint Account, could be deemed to be ``joint
participants'' in a transaction within the meaning of section 17(d). In
addition, applicants state that each Joint Account could be deemed to
be a ``joint enterprise or other joint arrangement'' within the meaning
of rule 17d-1.
3. Applicants submit that the proposed amendment to the Prior Order
is consistent with the findings required by section 17(d) of the Act
and rule 17d-1 for granting orders pursuant to rule 17d-1, including
the finding that any Fund would participate in the Joint Account on a
basis no different from or less advantageous than that of any other
Fund. Applicants state that participation by the Offshore Funds in the
Joint Account will not result in any conflicts of interest between any
of the Funds or between a Fund and the Adviser. Applicants assert that
the Offshore Funds will participate in the Joint Account on the same
terms and conditions as the MFS Funds.
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions:
1. The Joint Account will not be distinguishable from any other
accounts maintained by a Fund at its custodian bank, except that monies
from the Funds will be deposited in the Joint Account on a commingled
basis. The Joint Account will not have a separate existence and will
not have indicia of a separate legal entity. The sole function of the
Joint Account will be to provide a convenient way of aggregating
individual transactions which would otherwise require daily management
by each Fund.
2. Cash in the Joint Account will be invested in one or more of the
following Short-Term Investments: (i) interest bearing or discounted
commercial paper with a remaining maturity of 60 days or less; (ii)
repurchase agreements, with maturities not to exceed 60 days,
``collateralized fully,'' as that term is defined in rule 2a-7 under
the Act, by U.S. Government Securities; (iii) U.S. Government
Securities with remaining maturities of up to 60 days; (iv) tax-exempt
variable rate demand notes (``VRDNs'') that have demand features
providing for maturities of up to 30 days or one month; or (v)
securities other than VRDNs exempt from federal and/or state income tax
with remaining maturities of up to 60 days.
3. Any investment made through the Joint Account will satisfy the
investment criteria of all Funds participating in that investment.
4. All assets held in the Joint Account will be valued on an
amortized cost basis to the extent permitted by applicable SEC
releases, rules, or orders.
5. Each Fund valuing its net assets in reliance on rule 2a-7 under
the Act will use the average maturity of the instruments in the Joint
Account in which such Fund has an interest (determined on a dollar
weighted basis) for the purpose of computing its average portfolio
maturity with respect to its portion of the assets held in a Joint
Account on that day.
6. In order to assure that there will be no opportunity for any
Fund to use any part of a balance of the Joint Account credited to
another Fund, no Fund will be allowed to create a negative balance in
the Joint Account for any reason. Each Fund's decision to invest in the
Joint Account will be solely at the Fund's option. No Fund will be
obligated to invest in the Joint Account or to maintain any minimum
balance in the Joint Account. In addition, each Fund will retain the
sole rights of ownership of any of its assets held through the Joint
Account, including interest payable on such assets.
7. The Adviser and the custodian of each Fund will maintain records
documenting, for any given day, each Fund's aggregate investment in the
Joint Account and each Fund's pro rata share of each investment made
through the Joint Account. The records maintained for each Fund will be
maintained in conformity with section 31 of the Act and rules and
regulations thereunder. Each Offshore Fund will maintain and make
available to the SEC, upon request, books and records containing
information related to its participation in the Joint Account.
8. Not every Fund participating in the Joint Account will
necessarily have its cash invested in every Short-Term Investment held
in the Joint Account. However, to the extent a Fund's cash is applied
to a particular Short-Term Investment made through the Joint Account,
the Fund will participate in and own a proportionate share of the
investment, and the income earned or accrued thereon, based upon the
percentage of the investment purchased with monies contributed by the
Fund.
9. The Adviser will administer the investments of the Joint Account
as part of its duties under its existing or any future investment
advisory agreements with the Funds and will not collect any additional
fees for the management of the Joint Account.
10. Each Board will adopt procedures pursuant to which the Joint
Account will operate, which will be reasonably designed to provide that
the requirements of the application will be met. Each Board will make
and approve such changes as it deems necessary to ensure that such
procedures are
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followed. In addition, each Board will determine, no less frequently
than annually, that the Joint Account has been operated in accordance
with the proposed procedures and will permit a Fund to continue to
participate therein only if it determines that there is a reasonable
likelihood that the Fund and its shareholders will benefit from the
Fund's continued participation.
11. The administration of the Joint Account will be within the
fidelity bond coverage required by section 17(g) of the Act and rule
17g-1 under the Act.
12. Short-Term Investments held in the Joint Account generally will
not be sold prior to maturity except if: (i) the Adviser believes the
investment no longer presents minimal credit risks; (ii) the investment
no longer satisfies the investment criteria of all participating Funds
in the investment because of a downgrading or otherwise; or (iii) in
the case of a repurchase agreement, the counterparty defaults. A Fund
may, however, sell any Short-Term Investment (or any fractional portion
thereof) prior to the maturity of the investment if the cost of such
transaction will be borne solely by the selling Fund and the
transaction will not adversely affect other Funds participating in the
Short-Term Investment. In no case would an early termination by less
than all participating Funds be permitted if it would reduce the
principal amount or yield received by other Funds participating in a
particular Short-Term Investment or otherwise adversely affect the
other participating Funds. Each Fund participating in the Joint Account
will be deemed to have consented to such sale and partition of the
investments in the Joint Account.
13. Short-Term Investments held through a Joint Account with a
remaining maturity of more than seven days, as calculated pursuant to
rule 2a-7 under the Act, will be considered illiquid and will be
subject to the restriction that a Fund may not invest more than 15% or,
in the case of a money market fund, more than 10% (or, in either case,
such other percentage as set forth by the SEC from time to time) of its
net assets in illiquid securities, if the Fund cannot sell the
instrument, or the Fund's fractional interest in the instrument,
pursuant to the preceding condition, or if the investment would
otherwise be considered illiquid if held by a money market fund.
For the SEC, by the Division of Investment Management, pursuant
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-23609 Filed 9-9-99; 8:45 am]
BILLING CODE 8010-01-M