MetLife Investors USA Insurance Company, et al.; Notice of Application, 48449-48453 [E5-4488]

Download as PDF Federal Register / Vol. 70, No. 158 / Wednesday, August 17, 2005 / Notices company participates, unless the Commission has approved the joint arrangement. Applicants state that the Participating Clients, by purchasing and redeeming shares of the Money Market Funds, the Money Market Funds, by selling shares to and redeeming shares from Participating Clients, and the Advisers, by managing the assets of the Participating Clients invested in the Money Market Funds, could be deemed to be participating in a joint enterprise or joint arrangement within the meaning of section 17(d) and rule 17d–1. 8. In considering whether to approve a joint transaction under rule 17d–1, the Commission considers whether the registered investment company’s participation in the joint transaction 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. Applicants submit that the proposed transactions meet the standards for an order under rule 17d–1. 9. Applicants state that the investment by the Participating Funds in shares of Money Market Funds will be on the same basis and will be indistinguishable from any other shareholder account maintained by the Money Market Funds. Applicants also maintain that, to the extent that the Money Market Funds participate on a basis that is different from the other participants, the relative advantages and disadvantages will vary randomly over time and are not expected to be material. Applicants’ Conditions Applicants agree that any order granting the requested relief shall be subject to the following conditions: 1. Investment of Cash Balances in shares of a Money Market Fund will be in accordance with each Participating Fund’s investment restrictions, if any, and will be consistent with its objectives and policies as set forth in such Participating Fund’s registration statement. 2. The shares of the Money Market Funds sold to and redeemed by the Participating Funds will not be subject to a sales load, redemption fee, distribution fee adopted in accordance with rule 12b–1 under the Act, or service fees (as defined in rule 2830(b)(9) of the NASD’s Conduct Rules), or, if such shares are subject to any such fee, the Adviser for each Participating Fund will waive its advisory fee for each Participating Fund in an amount that offsets the amount of such fees that are incurred by the Participating Fund. VerDate jul<14>2003 13:34 Aug 16, 2005 Jkt 205001 3. Prior to reliance on the order by a Participating Fund, the Board of the Participating Fund will hold a meeting for the purpose of voting on an advisory contract under section 15 of the Act. Before approving any advisory contract for a Participating Fund, the Board, including a majority of the Independent Board Members, taking into account all relevant factors, shall consider to what extent, if any, the advisory fees charged to the Participating Fund by the Adviser should be reduced to account for reduced services provided to the Participating Fund by the Adviser as a result of Uninvested Cash being invested in the Money Market Funds. In connection with this consideration, the Adviser to the Participating Fund will provide the Board with specific information regarding the approximate cost to the Adviser of, or portion of the advisory fee under the existing advisory fee attributable to, managing the Uninvested Cash of the Participating Fund that can be expected to be invested in the Money Market Funds. The minute books of the Participating Fund will record fully the Board’s consideration in approving the advisory contract, including the considerations relating to fees referred to above. 4. Each Participating Fund will invest Uninvested Cash in, and hold shares of, the Money Market Funds only to the extent that the Participating Fund’s aggregate investment of Uninvested Cash in the Money Market Funds does not exceed 25% of the Participating Fund’s total assets. 5. Each Participating Fund and each Money Market Fund that relies on the order will be part of the same group of investment companies as defined in section 12(d)(1)(G) of the Act, and will be advised, or provided the Adviser manages the Cash Balances, sub– advised by an Adviser. Each Unregistered Fund and Other Institutional Client that relies on the order will have an Adviser as its investment adviser, trustee, managing member or general partner exercising investment discretion. 6. No Money Market Fund in which a Participating Fund invests shall acquire securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except securities of a registered open-end investment company in the same group of investment companies as the Money Market Fund to the extent permitted by section 12(d)(1)(E) of the Act. 7. Before a Participating Fund that participates in the Securities Lending Program is permitted to invest Cash PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 48449 Collateral in the Money Market Funds, a majority of the Board (including a majority of the Independent Board Members) will approve such investment. No less frequently than annually, the Board of each Participating Fund (including a majority of the Independent Board Members) will evaluate the Securities Lending Program and its results and determine that investing Cash Collateral in the Money Market Funds is in the best interests of the Participating Fund. 8. The Board of any Participating Fund will satisfy the fund governance standards as defined in rule 0–1(a)(7) under the Act by the compliance date for the rule. For the Commission, by the Division of Investment Management, under delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–4463 Filed 8–16–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 27028; 812–13142] MetLife Investors USA Insurance Company, et al.; Notice of Application August 11, 2005. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (‘‘Act’’) for an exemption from sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) and 17(b) of the Act for an exemption from section 17(a) of the Act. AGENCY: Summary of the Application: The order would permit certain registered open-end management investment companies to acquire shares of other registered open-end management investment companies and unit investment trusts (‘‘UITs’’) that are within and outside the same group of investment companies. Applicants: (a) MetLife Investors USA Insurance Company (including any insurance company controlling, controlled by or under common control with MetLife Investors USA Insurance Company, including, without limitation, Metropolitan Life Insurance Company) (‘‘MLI USA’’); (b) Met Investors Series Trust (‘‘MIST’’) and Metropolitan Series Fund, Inc. (‘‘Met Series Fund,’’ and together with MIST, the ‘‘Investment Companies’’), including the currently E:\FR\FM\17AUN1.SGM 17AUN1 48450 Federal Register / Vol. 70, No. 158 / Wednesday, August 17, 2005 / Notices existing series and all future series thereof; (c) any existing or future registered open-end management investment companies and any series thereof that are part of the same ‘‘group of investment companies,’’ as defined in section 12(d)(1)(G)(ii) of the Act, as the Investment Companies, and are, or will be, advised by Met Investors Advisory LLC (‘‘Met Investors’’) or MetLife Advisers, LLC (‘‘MetLife Advisers,’’ and together with Met Investors, the ‘‘Managers’’) 1 or any entity controlling, controlled by or under common control with Met Investors or MetLife Advisers; (d) Met Investors; and (e) MetLife Advisers.2 Filing Dates: The application was filed on December 8, 2004, and amended on August 5, 2005. 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 September 6, 2005, 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, 100 F Street, NE., Washington, DC 20549– 9303. Applicants: MLI USA, MIST, and Met Investors, 22 Corporate Plaza Drive, Newport Beach, CA 92660; Met Series Fund and MetLife Advisers, 501 Boylston Street, Boston, MA 02116. FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior Counsel, at (202) 551–6879, or Mary Kay Frech, Branch Chief, at (202) 551–6821 (Office of Investment Company Regulation, Division of Investment Management). 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 Desk, 100 F Street, NE., Washington, DC 20549–0102 (telephone (202) 551–5850). 1 The Managers are each referred to in this notice as a ‘‘Manager’’ and include any existing or future entity controlling, controlled by or under common control with a Manager. 2 All entities that currently intend to rely on the requested order are named as applicants. Any other entity that relies on the order in the future will comply with the terms and conditions of the application. VerDate jul<14>2003 13:34 Aug 16, 2005 Jkt 205001 Applicants’ Representations 1. MLI USA is a stock life insurance company organized under the laws of the state of Delaware and an indirect wholly-owned subsidiary of MetLife, Inc., a publicly traded company. MLI USA issues group and individual variable annuity contracts and variable life insurance policies (collectively, the ‘‘Contracts’’), which offer opportunities to invest in the Investment Companies through separate accounts registered under the Act (‘‘Registered Separate Accounts’’) and separate accounts exempt from registration under the Act (‘‘Unregistered Separate Accounts,’’ and together with the Registered Separate Accounts, the ‘‘Separate Accounts’’). 2. MIST is organized as a Delaware statutory trust and Met Series Fund is organized as a Maryland corporation. Each of MIST and Met Series Fund is registered under the Act as an open-end management investment company.3 MIST and Met Series Fund currently offer 30 and 33 Funds, respectively. Except for organizational seed capital for certain of the Funds invested by Met Investors or an affiliate, shares of MIST and Met Series Fund are sold exclusively to the Separate Accounts to fund benefits under the Contracts issued by MLI USA and its affiliates. 3. Each Manager is an affiliated person of MLI USA and is registered under the Investment Advisers Act of 1940. Met Investors serves as investment adviser to MIST and each of its current Funds. MetLife Advisers serves as investment adviser to Met Series Fund and each of its current Funds. 4. Applicants request relief to permit certain Funds (each such Fund, a ‘‘Fund of Funds’’) to invest in: (a) other Funds (‘‘Affiliated Funds’’), and/or (b) registered open-end management investment companies and UITs that are not part of the same ‘‘group of investment companies’’ (as defined in section 12(d)(1)(G)(ii) of the Act) as the Investment Companies (‘‘Unaffiliated Funds,’’ and together with the Affiliated Funds, the ‘‘Underlying Funds’’). The Unaffiliated Funds may include UITs (‘‘Unaffiliated Underlying Trusts’’) and open-end management investment companies registered under the Act (‘‘Unaffiliated Underlying Funds’’). Certain of the Unaffiliated Underlying Trusts or Unaffiliated Underlying Funds 3 The Investment Companies and any existing or future registered open-end management investment company that is part of the same group of investment companies as the Investment Companies are each referred to in this notice as an ‘‘Investment Company,’’ and each series thereof is referred to in this notice as a ‘‘Fund,’’ and all series thereof are, collectively, referred to as ‘‘Funds.’’ PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 may be ‘‘exchange-traded funds’’ that are registered under the Act as UITs or open-end management investment companies and have received exemptive relief to sell their shares on a national securities exchange at negotiated prices (‘‘ETFs’’). Each Fund of Funds may also make investments in government securities, domestic and foreign common and preferred stock, fixed income securities, futures transactions, options on the foregoing and in other securities that are not issued by registered investment companies and which are consistent with its investment objective, including money market instruments (the ‘‘Other Securities’’). 5. Applicants state that the requested relief will provide an efficient and simple method of allowing investors to create a comprehensive asset allocation program. Applicants’ Legal Analysis A. Section 12(d)(1) 1. Section 12(d)(1)(A) of the Act prohibits a registered investment company from acquiring shares of an investment company if the securities represent more than 3% of the total outstanding voting stock of the acquired company, more than 5% of the total assets of the acquiring company, or, together with the securities of any other investment companies, more than 10% of the total assets of the acquiring company. Section 12(d)(1)(B) of the Act prohibits a registered open-end investment company, its principal underwriter and any broker or dealer from selling the shares of the investment company to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company’s voting stock, or if the sale will cause more than 10% of the acquired company’s voting stock to be owned by investment companies generally. 2. Section 12(d)(1)(G) provides, in relevant part, that section 12(d)(1) will not apply to securities of a registered open-end investment company or registered UIT if the acquired company and the acquiring company are part of the same group of investment companies, provided that certain other requirements contained in section 12(d)(1)(G) are met. Applicants state that, while the Funds of Funds currently rely on section 12(d)(1)(G) with respect to their investments in Affiliated Funds, if the Funds of Funds wish to invest in Unaffiliated Funds and Other Securities in addition to Affiliated Funds, they cannot then rely on section 12(d)(1)(G). 3. Section 12(d)(1)(J) of the Act provides that the Commission may E:\FR\FM\17AUN1.SGM 17AUN1 Federal Register / Vol. 70, No. 158 / Wednesday, August 17, 2005 / Notices exempt any person, security, or transaction, or any class or classes of persons, securities or transactions, from any provision of section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors. Applicants seek an exemption under section 12(d)(1)(J) to permit the Funds of Funds to acquire shares of Affiliated and Unaffiliated Funds and to permit the Affiliated and Unaffiliated Funds, their principal underwriters and any broker or dealer to sell shares to the Funds of Funds beyond the limits set forth in sections 12(d)(1)(A) and (B) of the Act. 4. Applicants state that the proposed arrangement will not give rise to the policy concerns underlying sections 12(d)(1)(A) and (B), which include concerns about undue influence by a fund of funds over underlying funds, excessive layering of fees, and overly complex fund structures. Accordingly, applicants believe that the requested exemption is consistent with the public interest and the protection of investors. 5. Applicants state that the proposed arrangement will not result in undue influence by a Fund of Funds or its affiliated persons over the Unaffiliated Funds. To limit the control that a Fund of Funds may have over an Unaffiliated Fund, applicants propose a condition prohibiting: (a) Each Manager and any person controlling, controlled by or under common control with the Manager, any investment company and any issuer that would be an investment company but for section 3(c)(1) or section 3(c)(7) of the Act advised or sponsored by the Manager or any person controlling, controlled by or under common control with the Manager (collectively, the ‘‘Group’’), and (b) any investment adviser within the meaning of section 2(a)(20)(B) of the Act (‘‘SubAdviser’’) to a Fund of Funds, any person controlling, controlled by or under common control with the SubAdviser, and any investment company or issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act (or portion of such investment company or issuer) advised by the Sub-Adviser or any person controlling, controlled by or under common control with the Sub-Adviser (collectively, the ‘‘Sub-Adviser Group’’) from controlling an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. 6. Applicants also propose conditions 2–7, stated below, to preclude a Fund of Funds and its affiliated entities from taking advantage of an Unaffiliated Fund with respect to transactions between the entities and to ensure the transactions will be on an arm’s length VerDate jul<14>2003 13:34 Aug 16, 2005 Jkt 205001 basis. Condition 2 precludes a Fund of Funds and its Manager, Sub-Adviser, promoter, principal underwriter and any person controlling, controlled by or under common control with any of these entities (each, a ‘‘Fund of Funds Affiliate’’) from causing any existing or potential investment by the Fund of Funds in an Unaffiliated Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated Fund or its investment adviser(s), sponsor, promoter, principal underwriter and any person controlling, controlled by or under common control with any of these entities (each, an ‘‘Unaffiliated Fund Affiliate’’). Condition 5 precludes a Fund of Funds and Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Underlying Fund or sponsor to an Unaffiliated Underlying Trust) from causing an Unaffiliated Fund to purchase a security in an offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an officer, director, member of an advisory board, Manager, Sub-Adviser, or employee of the Fund of Funds, or a person of which any such officer, director, member of an advisory board, Manager, Sub-Adviser, or employee is an affiliated person (each, an ‘‘Underwriting Affiliate,’’ except any person whose relationship to the Unaffiliated Fund is covered by section 10(f) of the Act is not an Underwriting Affiliate). An offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an Underwriting Affiliate is an ‘‘Affiliated Underwriting.’’ 7. As an additional assurance that an Unaffiliated Underlying Fund understands the implications of an investment by a Fund of Funds under the requested order, prior to a Fund of Funds’ investment in an Unaffiliated Underlying Fund in excess of the limit in section 12(d)(1)(A)(i), condition 8 requires that the Fund of Funds and Unaffiliated Underlying Fund execute an agreement stating, without limitation, that their boards of directors or trustees and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order. Applicants note that an Unaffiliated Fund (other than an ETF whose shares are purchased by a Fund of Funds in the secondary market) will retain the right PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 48451 to reject an investment by a Fund of Funds.4 8. Applicants do not believe that the proposed arrangement will involve excessive layering of fees. With respect to investment advisory fees, applicants state that, prior to reliance on the requested order and subsequently in connection with the approval of any investment advisory contract under section 15 of the Act, the board of directors or trustees of each Fund of Funds (‘‘Board’’), including a majority of the directors or trustees who are not ‘‘interested persons,’’ as defined in section 2(a)(19) of the Act (‘‘Disinterested Trustees’’), will find that the investment advisory fees charged under a Fund of Fund’s investment advisory contract(s) are based on services provided that are in addition to, rather than duplicative of, services provided pursuant to any Affiliated Fund’s and Unaffiliated Underlying Fund’s advisory contract(s). Applicants further state that each Manager will waive fees otherwise payable to it by a Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Underlying Fund under rule 12b–1 under the Act) received from an Unaffiliated Fund by the Manager, or an affiliated person of the Manager, other than any advisory fees paid to the Manager or its affiliated person by the Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Fund. 9. Applicants state that the proposed arrangement will not create an overly complex fund structure. Applicants note that an Underlying Fund will be prohibited from acquiring securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A), except to the extent that such Underlying Fund: (a) Receives securities of another investment company as a dividend or as a result of a plan of reorganization of a company (other than a plan devised for the purpose of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed to have acquired) securities of another investment company pursuant to exemptive relief from the Commission permitting such Underlying Fund to: (i) Acquire securities of one or more affiliated investment companies for short-term cash management purposes, or (ii) engage in interfund borrowing and lending transactions. Applicants 4 An Unaffiliated Fund, including an ETF, would retain its right to reject any initial investment by a Fund of Funds in excess of the limit in section 12(d)(1)(A)(i) of the Act by declining to execute the agreement with the Fund of Funds. E:\FR\FM\17AUN1.SGM 17AUN1 48452 Federal Register / Vol. 70, No. 158 / Wednesday, August 17, 2005 / Notices also represent that a Fund of Funds’ prospectus and sales literature will contain concise, ‘‘plain English’’ disclosure designed to inform investors of the unique characteristics of the proposed Fund of Funds structure, including, but not limited to, its expense structure and the additional expenses of investing in Underlying Funds. B. Section 17(a) 1. Section 17(a) of the Act generally prohibits sales or purchases of securities between a registered investment company and any affiliated person of the company. Section 2(a)(3) of the Act defines an ‘‘affiliated person’’ of another person to include (a) any person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of the other person; (b) any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the other person; and (c) any person directly or indirectly controlling, controlled by, or under common control with the other person. 2. Applicants state that the Funds of Funds and the Affiliated Funds might be deemed to be under common control of the Manager and therefore affiliated persons of one another. Applicants also state that the Funds of Funds and the Underlying Funds might be deemed to be affiliated persons of one another if a Fund of Funds acquires 5% or more of an Underlying Fund’s outstanding voting securities. In light of these possible affiliations, section 17(a) could prevent an Underlying Fund from selling shares to and redeeming shares from a Fund of Funds. 3. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that (a) the terms of the proposed transaction are fair and reasonable and do not involve overreaching on the part of any person concerned; (b) the proposed transaction is consistent with the policies of each registered investment company involved; and (c) the proposed transaction is consistent with the general purposes of the Act. Section 6(c) of the Act permits the Commission to exempt any person or transactions from any provision of the Act 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 policy and provisions of the Act. 4. Applicants submit that the proposed arrangement satisfies the VerDate jul<14>2003 13:34 Aug 16, 2005 Jkt 205001 standards for relief under sections 17(b) and 6(c) of the Act. Applicants state that the terms of the arrangement are fair and reasonable and do not involve overreaching. Applicants note that the terms upon which an Underlying Fund will sell its shares to or purchase its shares from a Fund of Funds will be based on the net asset value of each Underlying Fund.5 Applicants state that the proposed arrangement will be consistent with the policies of each Fund of Funds and Underlying Fund, and with the general purposes of the Act. Applicants’ Conditions Applicants agree that the order granting the requested relief shall be subject to the following conditions: 1. The members of the Group will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. The members of the Sub-Adviser Group will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. If, as a result of a decrease in the outstanding voting securities of an Unaffiliated Fund, the Group or the Sub-Adviser Group, each in the aggregate, becomes a holder of more than 25 percent of the outstanding voting securities of the Unaffiliated Fund, it (except for any member of the Group or the Sub-Adviser Group that is a Separate Account) will vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund’s shares. A Registered Separate Account will seek voting instructions from its contract holders and will vote its shares of an Unaffiliated Fund in accordance with the instructions received and will vote those shares for which no instructions were received in the same proportion as the shares for which instructions were received. An Unregistered Separate Account will either: (i) Vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund’s shares; or (ii) seek voting instructions from its contract holders and vote its shares in accordance with the instructions received and vote those shares for which no instructions were received in the same proportion as the 5 Applicants note that a Fund of Funds generally would purchase and sell shares of an Underlying Fund that operates as an ETF through secondary market transactions at market prices rather than through principal transactions with the Underlying Fund at net asset value. Applicants would not rely on the requested relief from section 17(a) for such secondary market transactions. PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 shares for which instructions were received. This condition will not apply to the Sub-Adviser Group with respect to an Unaffiliated Fund for which the Sub-Adviser or a person controlling, controlled by, or under common control with the Sub-Adviser acts as the investment adviser within the meaning section 2(a)(20)(A) of the Act (in the case of an Unaffiliated Underlying Fund) or as the sponsor (in the case of an Unaffiliated Underlying Trust). 2. No Fund of Funds or Fund of Funds Affiliate will cause any existing or potential investment by the Fund of Funds in an Unaffiliated Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated Fund or an Unaffiliated Fund Affiliate. 3. The Board of each Fund of Funds, including a majority of the Disinterested Trustees, will adopt procedures reasonably designed to assure that the Manager and any Sub-Adviser are conducting the investment program of the Fund of Funds without taking into account any consideration received by the Fund of Funds or a Fund of Funds Affiliate from an Unaffiliated Fund or an Unaffiliated Fund Affiliate in connection with any services or transactions. 4. Once an investment by a Fund of Funds in the securities of an Unaffiliated Underlying Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Underlying Fund, including a majority of the Disinterested Trustees, will determine that any consideration paid by the Unaffiliated Underlying Fund to a Fund of Funds or a Fund of Funds Affiliate in connection with any services or transactions: (a) Is fair and reasonable in relation to the nature and quality of the services and benefits received by the Unaffiliated Underlying Fund; (b) is within the range of consideration that the Unaffiliated Underlying Fund would be required to pay to another unaffiliated entity in connection with the same services or transactions; and (c) does not involve overreaching on the part of any person concerned. This condition does not apply with respect to any services or transactions between an Unaffiliated Underlying Fund and its investment adviser(s), or any person controlling, controlled by, or under common control with such investment adviser(s). 5. No Fund of Funds or Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Underlying Fund or sponsor to an Unaffiliated Underlying Trust) will cause an E:\FR\FM\17AUN1.SGM 17AUN1 Federal Register / Vol. 70, No. 158 / Wednesday, August 17, 2005 / Notices Unaffiliated Fund to purchase a security in any Affiliated Underwriting. 6. The Board of an Unaffiliated Underlying Fund, including a majority of the Disinterested Trustees, will adopt procedures reasonably designed to monitor any purchases of securities by the Unaffiliated Underlying Fund in an Affiliated Underwriting, once an investment by a Fund of Funds in the securities of the Unaffiliated Underlying Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, including any purchases made directly from an Underwriting Affiliate. The Board of the Unaffiliated Underlying Fund will review these purchases periodically, but no less frequently than annually, to determine whether the purchases were influenced by the investment by the Fund of Funds in the Unaffiliated Underlying Fund. The Board of the Unaffiliated Underlying Fund will consider, among other things: (a) Whether the purchases were consistent with the investment objectives and policies of the Unaffiliated Underlying Fund; (b) how the performance of securities purchased in an Affiliated Underwriting compares to the performance of comparable securities purchased during a comparable period of time in underwritings other than Affiliated Underwritings or to a benchmark such as a comparable market index; and (c) whether the amount of securities purchased by the Unaffiliated Underlying Fund in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The Board of the Unaffiliated Underlying Fund will take any appropriate actions based on its review, including, if appropriate, the institution of procedures designed to assure that purchases of securities in Affiliated Underwritings are in the best interests of shareholders. 7. Each Unaffiliated Underlying Fund will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than 6 years from the end of the fiscal year in which any purchase from an Affiliated Underwriting occurred, the first 2 years in an easily accessible place, a written record of each purchase of securities in an Affiliated Underwriting once an investment by a Fund of Funds in the securities of an Unaffiliated Underlying Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth from whom the securities were VerDate jul<14>2003 13:34 Aug 16, 2005 Jkt 205001 acquired, the identity of the underwriting syndicate’s members, the terms of the purchase, and the information or materials upon which the determinations of the Board of the Unaffiliated Underlying Fund were made. 8. Prior to its investment in shares of an Unaffiliated Underlying Fund in excess of the limit in section 12(d)(1)(A)(i) of the Act, the Fund of Funds and the Unaffiliated Underlying Fund will execute an agreement stating, without limitation, that their boards of directors or trustees and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order. At the time of its investment in shares of an Unaffiliated Underlying Fund in excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Underlying Fund of the investment. At such time, the Fund of Funds will also transmit to the Unaffiliated Underlying Fund a list of the names of each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of Funds will notify the Unaffiliated Underlying Fund of any changes to the list as soon as reasonably practicable after a change occurs. The Unaffiliated Underlying Fund and the Fund of Funds will maintain and preserve a copy of the order, the agreement, and the list with any updated information for the duration of the investment and for a period of not less than 6 years thereafter, the first 2 years in an easily accessible place. 9. Before approving any advisory contract under section 15 of the Act, the Board of each Fund of Funds, including a majority of the Disinterested Trustees, shall find that the advisory fees charged under the advisory contract are based on services provided that are in addition to, rather than duplicative of, services provided under the advisory contract(s) of any Underlying Fund in which the Fund of Funds may invest. Such finding, and the basis upon which the finding was made, will be recorded fully in the minute books of the appropriate Fund of Funds. 10. Each Manager will waive fees otherwise payable to it by a Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Underlying Fund under rule 12b–1 under the Act) received from an Unaffiliated Fund by the Manager, or an affiliated person of the Manager, other than any advisory fees paid to the Manager or its affiliated person by the Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Fund. Any Sub-Adviser PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 48453 will waive fees otherwise payable to the Sub-Adviser, directly or indirectly, by the Fund of Funds in an amount at least equal to any compensation received from an Unaffiliated Fund by the SubAdviser, or an affiliated person of the Sub-Adviser, other than any advisory fees paid to the Sub-Adviser or its affiliated person by the Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Fund made at the direction of the Sub-Adviser. In the event that the Sub-Adviser waives fees, the benefit of the waiver will be passed through to the Fund of Funds. 11. With respect to Registered Separate Accounts that invest in a Fund of Funds, no sales load will be charged at the Fund of Funds level or at the Underlying Fund level. Other sales charges and service fees, as defined in rule 2830 of the Conduct Rules of the NASD, if any, will only be charged at the Fund of Funds level or at the Underlying Fund level, not both. With respect to other investments in a Fund of Funds, any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to funds of funds set forth in rule 2830 of the Conduct Rules of the NASD. 12. No Underlying Fund will acquire securities of any other investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent that such Underlying Fund: (a) Receives securities of another investment company as a dividend or as a result of a plan of reorganization of a company (other than a plan devised for the purpose of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed to have acquired) securities of another investment company pursuant to exemptive relief from the Commission permitting such Underlying Fund to: (i) Acquire securities of one or more affiliated investment companies for short-term cash management purposes, or (ii) engage in interfund borrowing and lending transactions. 13. The Board of any Fund of Funds and any Unaffiliated Underlying Fund will satisfy the fund governance standards as defined in rule 0–1(a)(7) under the Act by the compliance date for the rule. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–4488 Filed 8–16–05; 8:45 am] BILLING CODE 8010–01–P E:\FR\FM\17AUN1.SGM 17AUN1

Agencies

[Federal Register Volume 70, Number 158 (Wednesday, August 17, 2005)]
[Notices]
[Pages 48449-48453]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-4488]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27028; 812-13142]


MetLife Investors USA Insurance Company, et al.; Notice of 
Application

August 11, 2005.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 12(d)(1)(J) of 
the Investment Company Act of 1940 (``Act'') for an exemption from 
sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) and 
17(b) of the Act for an exemption from section 17(a) of the Act.

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    Summary of the Application: The order would permit certain 
registered open-end management investment companies to acquire shares 
of other registered open-end management investment companies and unit 
investment trusts (``UITs'') that are within and outside the same group 
of investment companies.
    Applicants: (a) MetLife Investors USA Insurance Company (including 
any insurance company controlling, controlled by or under common 
control with MetLife Investors USA Insurance Company, including, 
without limitation, Metropolitan Life Insurance Company) (``MLI USA''); 
(b) Met Investors Series Trust (``MIST'') and Metropolitan Series Fund, 
Inc. (``Met Series Fund,'' and together with MIST, the ``Investment 
Companies''), including the currently

[[Page 48450]]

existing series and all future series thereof; (c) any existing or 
future registered open-end management investment companies and any 
series thereof that are part of the same ``group of investment 
companies,'' as defined in section 12(d)(1)(G)(ii) of the Act, as the 
Investment Companies, and are, or will be, advised by Met Investors 
Advisory LLC (``Met Investors'') or MetLife Advisers, LLC (``MetLife 
Advisers,'' and together with Met Investors, the ``Managers'') \1\ or 
any entity controlling, controlled by or under common control with Met 
Investors or MetLife Advisers; (d) Met Investors; and (e) MetLife 
Advisers.\2\
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    \1\ The Managers are each referred to in this notice as a 
``Manager'' and include any existing or future entity controlling, 
controlled by or under common control with a Manager.
    \2\ All entities that currently intend to rely on the requested 
order are named as applicants. Any other entity that relies on the 
order in the future will comply with the terms and conditions of the 
application.
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    Filing Dates: The application was filed on December 8, 2004, and 
amended on August 5, 2005.
    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 September 6, 2005, 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, 100 F Street, NE., Washington, DC 
20549-9303. Applicants: MLI USA, MIST, and Met Investors, 22 Corporate 
Plaza Drive, Newport Beach, CA 92660; Met Series Fund and MetLife 
Advisers, 501 Boylston Street, Boston, MA 02116.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 551-6879, or Mary Kay Frech, Branch Chief, at (202) 
551-6821 (Office of Investment Company Regulation, Division of 
Investment Management).

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 Desk, 100 F Street, NE., Washington, DC 
20549-0102 (telephone (202) 551-5850).

Applicants' Representations

    1. MLI USA is a stock life insurance company organized under the 
laws of the state of Delaware and an indirect wholly-owned subsidiary 
of MetLife, Inc., a publicly traded company. MLI USA issues group and 
individual variable annuity contracts and variable life insurance 
policies (collectively, the ``Contracts''), which offer opportunities 
to invest in the Investment Companies through separate accounts 
registered under the Act (``Registered Separate Accounts'') and 
separate accounts exempt from registration under the Act 
(``Unregistered Separate Accounts,'' and together with the Registered 
Separate Accounts, the ``Separate Accounts'').
    2. MIST is organized as a Delaware statutory trust and Met Series 
Fund is organized as a Maryland corporation. Each of MIST and Met 
Series Fund is registered under the Act as an open-end management 
investment company.\3\ MIST and Met Series Fund currently offer 30 and 
33 Funds, respectively. Except for organizational seed capital for 
certain of the Funds invested by Met Investors or an affiliate, shares 
of MIST and Met Series Fund are sold exclusively to the Separate 
Accounts to fund benefits under the Contracts issued by MLI USA and its 
affiliates.
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    \3\ The Investment Companies and any existing or future 
registered open-end management investment company that is part of 
the same group of investment companies as the Investment Companies 
are each referred to in this notice as an ``Investment Company,'' 
and each series thereof is referred to in this notice as a ``Fund,'' 
and all series thereof are, collectively, referred to as ``Funds.''
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    3. Each Manager is an affiliated person of MLI USA and is 
registered under the Investment Advisers Act of 1940. Met Investors 
serves as investment adviser to MIST and each of its current Funds. 
MetLife Advisers serves as investment adviser to Met Series Fund and 
each of its current Funds.
    4. Applicants request relief to permit certain Funds (each such 
Fund, a ``Fund of Funds'') to invest in: (a) other Funds (``Affiliated 
Funds''), and/or (b) registered open-end management investment 
companies and UITs that are not part of the same ``group of investment 
companies'' (as defined in section 12(d)(1)(G)(ii) of the Act) as the 
Investment Companies (``Unaffiliated Funds,'' and together with the 
Affiliated Funds, the ``Underlying Funds''). The Unaffiliated Funds may 
include UITs (``Unaffiliated Underlying Trusts'') and open-end 
management investment companies registered under the Act 
(``Unaffiliated Underlying Funds''). Certain of the Unaffiliated 
Underlying Trusts or Unaffiliated Underlying Funds may be ``exchange-
traded funds'' that are registered under the Act as UITs or open-end 
management investment companies and have received exemptive relief to 
sell their shares on a national securities exchange at negotiated 
prices (``ETFs''). Each Fund of Funds may also make investments in 
government securities, domestic and foreign common and preferred stock, 
fixed income securities, futures transactions, options on the foregoing 
and in other securities that are not issued by registered investment 
companies and which are consistent with its investment objective, 
including money market instruments (the ``Other Securities'').
    5. Applicants state that the requested relief will provide an 
efficient and simple method of allowing investors to create a 
comprehensive asset allocation program.

Applicants' Legal Analysis

A. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act prohibits a registered investment 
company from acquiring shares of an investment company if the 
securities represent more than 3% of the total outstanding voting stock 
of the acquired company, more than 5% of the total assets of the 
acquiring company, or, together with the securities of any other 
investment companies, more than 10% of the total assets of the 
acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter and 
any broker or dealer from selling the shares of the investment company 
to another investment company if the sale will cause the acquiring 
company to own more than 3% of the acquired company's voting stock, or 
if the sale will cause more than 10% of the acquired company's voting 
stock to be owned by investment companies generally.
    2. Section 12(d)(1)(G) provides, in relevant part, that section 
12(d)(1) will not apply to securities of a registered open-end 
investment company or registered UIT if the acquired company and the 
acquiring company are part of the same group of investment companies, 
provided that certain other requirements contained in section 
12(d)(1)(G) are met. Applicants state that, while the Funds of Funds 
currently rely on section 12(d)(1)(G) with respect to their investments 
in Affiliated Funds, if the Funds of Funds wish to invest in 
Unaffiliated Funds and Other Securities in addition to Affiliated 
Funds, they cannot then rely on section 12(d)(1)(G).
    3. Section 12(d)(1)(J) of the Act provides that the Commission may

[[Page 48451]]

exempt any person, security, or transaction, or any class or classes of 
persons, securities or transactions, from any provision of section 
12(d)(1) if the exemption is consistent with the public interest and 
the protection of investors. Applicants seek an exemption under section 
12(d)(1)(J) to permit the Funds of Funds to acquire shares of 
Affiliated and Unaffiliated Funds and to permit the Affiliated and 
Unaffiliated Funds, their principal underwriters and any broker or 
dealer to sell shares to the Funds of Funds beyond the limits set forth 
in sections 12(d)(1)(A) and (B) of the Act.
    4. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 12(d)(1)(A) and (B), 
which include concerns about undue influence by a fund of funds over 
underlying funds, excessive layering of fees, and overly complex fund 
structures. Accordingly, applicants believe that the requested 
exemption is consistent with the public interest and the protection of 
investors.
    5. Applicants state that the proposed arrangement will not result 
in undue influence by a Fund of Funds or its affiliated persons over 
the Unaffiliated Funds. To limit the control that a Fund of Funds may 
have over an Unaffiliated Fund, applicants propose a condition 
prohibiting: (a) Each Manager and any person controlling, controlled by 
or under common control with the Manager, any investment company and 
any issuer that would be an investment company but for section 3(c)(1) 
or section 3(c)(7) of the Act advised or sponsored by the Manager or 
any person controlling, controlled by or under common control with the 
Manager (collectively, the ``Group''), and (b) any investment adviser 
within the meaning of section 2(a)(20)(B) of the Act (``Sub-Adviser'') 
to a Fund of Funds, any person controlling, controlled by or under 
common control with the Sub-Adviser, and any investment company or 
issuer that would be an investment company but for section 3(c)(1) or 
3(c)(7) of the Act (or portion of such investment company or issuer) 
advised by the Sub-Adviser or any person controlling, controlled by or 
under common control with the Sub-Adviser (collectively, the ``Sub-
Adviser Group'') from controlling an Unaffiliated Fund within the 
meaning of section 2(a)(9) of the Act.
    6. Applicants also propose conditions 2-7, stated below, to 
preclude a Fund of Funds and its affiliated entities from taking 
advantage of an Unaffiliated Fund with respect to transactions between 
the entities and to ensure the transactions will be on an arm's length 
basis. Condition 2 precludes a Fund of Funds and its Manager, Sub-
Adviser, promoter, principal underwriter and any person controlling, 
controlled by or under common control with any of these entities (each, 
a ``Fund of Funds Affiliate'') from causing any existing or potential 
investment by the Fund of Funds in an Unaffiliated Fund to influence 
the terms of any services or transactions between the Fund of Funds or 
a Fund of Funds Affiliate and the Unaffiliated Fund or its investment 
adviser(s), sponsor, promoter, principal underwriter and any person 
controlling, controlled by or under common control with any of these 
entities (each, an ``Unaffiliated Fund Affiliate''). Condition 5 
precludes a Fund of Funds and Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to an 
Unaffiliated Underlying Fund or sponsor to an Unaffiliated Underlying 
Trust) from causing an Unaffiliated Fund to purchase a security in an 
offering of securities during the existence of any underwriting or 
selling syndicate of which a principal underwriter is an officer, 
director, member of an advisory board, Manager, Sub-Adviser, or 
employee of the Fund of Funds, or a person of which any such officer, 
director, member of an advisory board, Manager, Sub-Adviser, or 
employee is an affiliated person (each, an ``Underwriting Affiliate,'' 
except any person whose relationship to the Unaffiliated Fund is 
covered by section 10(f) of the Act is not an Underwriting Affiliate). 
An offering of securities during the existence of any underwriting or 
selling syndicate of which a principal underwriter is an Underwriting 
Affiliate is an ``Affiliated Underwriting.''
    7. As an additional assurance that an Unaffiliated Underlying Fund 
understands the implications of an investment by a Fund of Funds under 
the requested order, prior to a Fund of Funds' investment in an 
Unaffiliated Underlying Fund in excess of the limit in section 
12(d)(1)(A)(i), condition 8 requires that the Fund of Funds and 
Unaffiliated Underlying Fund execute an agreement stating, without 
limitation, that their boards of directors or trustees and their 
investment advisers understand the terms and conditions of the order 
and agree to fulfill their responsibilities under the order. Applicants 
note that an Unaffiliated Fund (other than an ETF whose shares are 
purchased by a Fund of Funds in the secondary market) will retain the 
right to reject an investment by a Fund of Funds.\4\
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    \4\ An Unaffiliated Fund, including an ETF, would retain its 
right to reject any initial investment by a Fund of Funds in excess 
of the limit in section 12(d)(1)(A)(i) of the Act by declining to 
execute the agreement with the Fund of Funds.
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    8. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. With respect to investment advisory 
fees, applicants state that, prior to reliance on the requested order 
and subsequently in connection with the approval of any investment 
advisory contract under section 15 of the Act, the board of directors 
or trustees of each Fund of Funds (``Board''), including a majority of 
the directors or trustees who are not ``interested persons,'' as 
defined in section 2(a)(19) of the Act (``Disinterested Trustees''), 
will find that the investment advisory fees charged under a Fund of 
Fund's investment advisory contract(s) are based on services provided 
that are in addition to, rather than duplicative of, services provided 
pursuant to any Affiliated Fund's and Unaffiliated Underlying Fund's 
advisory contract(s). Applicants further state that each Manager will 
waive fees otherwise payable to it by a Fund of Funds in an amount at 
least equal to any compensation (including fees received pursuant to 
any plan adopted by an Unaffiliated Underlying Fund under rule 12b-1 
under the Act) received from an Unaffiliated Fund by the Manager, or an 
affiliated person of the Manager, other than any advisory fees paid to 
the Manager or its affiliated person by the Unaffiliated Fund, in 
connection with the investment by the Fund of Funds in the Unaffiliated 
Fund.
    9. Applicants state that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that an Underlying 
Fund will be prohibited from acquiring securities of any investment 
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in 
excess of the limits contained in section 12(d)(1)(A), except to the 
extent that such Underlying Fund: (a) Receives securities of another 
investment company as a dividend or as a result of a plan of 
reorganization of a company (other than a plan devised for the purpose 
of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed 
to have acquired) securities of another investment company pursuant to 
exemptive relief from the Commission permitting such Underlying Fund 
to: (i) Acquire securities of one or more affiliated investment 
companies for short-term cash management purposes, or (ii) engage in 
interfund borrowing and lending transactions. Applicants

[[Page 48452]]

also represent that a Fund of Funds' prospectus and sales literature 
will contain concise, ``plain English'' disclosure designed to inform 
investors of the unique characteristics of the proposed Fund of Funds 
structure, including, but not limited to, its expense structure and the 
additional expenses of investing in Underlying Funds.

B. Section 17(a)

    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and any 
affiliated person of the company. Section 2(a)(3) of the Act defines an 
``affiliated person'' of another person to include (a) any person 
directly or indirectly owning, controlling, or holding with power to 
vote, 5% or more of the outstanding voting securities of the other 
person; (b) any person 5% or more of whose outstanding voting 
securities are directly or indirectly owned, controlled, or held with 
power to vote by the other person; and (c) any person directly or 
indirectly controlling, controlled by, or under common control with the 
other person.
    2. Applicants state that the Funds of Funds and the Affiliated 
Funds might be deemed to be under common control of the Manager and 
therefore affiliated persons of one another. Applicants also state that 
the Funds of Funds and the Underlying Funds might be deemed to be 
affiliated persons of one another if a Fund of Funds acquires 5% or 
more of an Underlying Fund's outstanding voting securities. In light of 
these possible affiliations, section 17(a) could prevent an Underlying 
Fund from selling shares to and redeeming shares from a Fund of Funds.
    3. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise prohibited by section 17(a) if 
it finds that (a) the terms of the proposed transaction are fair and 
reasonable and do not involve overreaching on the part of any person 
concerned; (b) the proposed transaction is consistent with the policies 
of each registered investment company involved; and (c) the proposed 
transaction is consistent with the general purposes of the Act. Section 
6(c) of the Act permits the Commission to exempt any person or 
transactions from any provision of the Act 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 policy 
and provisions of the Act.
    4. Applicants submit that the proposed arrangement satisfies the 
standards for relief under sections 17(b) and 6(c) of the Act. 
Applicants state that the terms of the arrangement are fair and 
reasonable and do not involve overreaching. Applicants note that the 
terms upon which an Underlying Fund will sell its shares to or purchase 
its shares from a Fund of Funds will be based on the net asset value of 
each Underlying Fund.\5\ Applicants state that the proposed arrangement 
will be consistent with the policies of each Fund of Funds and 
Underlying Fund, and with the general purposes of the Act.
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    \5\ Applicants note that a Fund of Funds generally would 
purchase and sell shares of an Underlying Fund that operates as an 
ETF through secondary market transactions at market prices rather 
than through principal transactions with the Underlying Fund at net 
asset value. Applicants would not rely on the requested relief from 
section 17(a) for such secondary market transactions.
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Applicants' Conditions

    Applicants agree that the order granting the requested relief shall 
be subject to the following conditions:
    1. The members of the Group will not control (individually or in 
the aggregate) an Unaffiliated Fund within the meaning of section 
2(a)(9) of the Act. The members of the Sub-Adviser Group will not 
control (individually or in the aggregate) an Unaffiliated Fund within 
the meaning of section 2(a)(9) of the Act. If, as a result of a 
decrease in the outstanding voting securities of an Unaffiliated Fund, 
the Group or the Sub-Adviser Group, each in the aggregate, becomes a 
holder of more than 25 percent of the outstanding voting securities of 
the Unaffiliated Fund, it (except for any member of the Group or the 
Sub-Adviser Group that is a Separate Account) will vote its shares of 
the Unaffiliated Fund in the same proportion as the vote of all other 
holders of the Unaffiliated Fund's shares. A Registered Separate 
Account will seek voting instructions from its contract holders and 
will vote its shares of an Unaffiliated Fund in accordance with the 
instructions received and will vote those shares for which no 
instructions were received in the same proportion as the shares for 
which instructions were received. An Unregistered Separate Account will 
either: (i) Vote its shares of the Unaffiliated Fund in the same 
proportion as the vote of all other holders of the Unaffiliated Fund's 
shares; or (ii) seek voting instructions from its contract holders and 
vote its shares in accordance with the instructions received and vote 
those shares for which no instructions were received in the same 
proportion as the shares for which instructions were received. This 
condition will not apply to the Sub-Adviser Group with respect to an 
Unaffiliated Fund for which the Sub-Adviser or a person controlling, 
controlled by, or under common control with the Sub-Adviser acts as the 
investment adviser within the meaning section 2(a)(20)(A) of the Act 
(in the case of an Unaffiliated Underlying Fund) or as the sponsor (in 
the case of an Unaffiliated Underlying Trust).
    2. No Fund of Funds or Fund of Funds Affiliate will cause any 
existing or potential investment by the Fund of Funds in an 
Unaffiliated Fund to influence the terms of any services or 
transactions between the Fund of Funds or a Fund of Funds Affiliate and 
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
    3. The Board of each Fund of Funds, including a majority of the 
Disinterested Trustees, will adopt procedures reasonably designed to 
assure that the Manager and any Sub-Adviser are conducting the 
investment program of the Fund of Funds without taking into account any 
consideration received by the Fund of Funds or a Fund of Funds 
Affiliate from an Unaffiliated Fund or an Unaffiliated Fund Affiliate 
in connection with any services or transactions.
    4. Once an investment by a Fund of Funds in the securities of an 
Unaffiliated Underlying Fund exceeds the limit of section 
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Underlying 
Fund, including a majority of the Disinterested Trustees, will 
determine that any consideration paid by the Unaffiliated Underlying 
Fund to a Fund of Funds or a Fund of Funds Affiliate in connection with 
any services or transactions: (a) Is fair and reasonable in relation to 
the nature and quality of the services and benefits received by the 
Unaffiliated Underlying Fund; (b) is within the range of consideration 
that the Unaffiliated Underlying Fund would be required to pay to 
another unaffiliated entity in connection with the same services or 
transactions; and (c) does not involve overreaching on the part of any 
person concerned. This condition does not apply with respect to any 
services or transactions between an Unaffiliated Underlying Fund and 
its investment adviser(s), or any person controlling, controlled by, or 
under common control with such investment adviser(s).
    5. No Fund of Funds or Fund of Funds Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to an 
Unaffiliated Underlying Fund or sponsor to an Unaffiliated Underlying 
Trust) will cause an

[[Page 48453]]

Unaffiliated Fund to purchase a security in any Affiliated 
Underwriting.
    6. The Board of an Unaffiliated Underlying Fund, including a 
majority of the Disinterested Trustees, will adopt procedures 
reasonably designed to monitor any purchases of securities by the 
Unaffiliated Underlying Fund in an Affiliated Underwriting, once an 
investment by a Fund of Funds in the securities of the Unaffiliated 
Underlying Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, 
including any purchases made directly from an Underwriting Affiliate. 
The Board of the Unaffiliated Underlying Fund will review these 
purchases periodically, but no less frequently than annually, to 
determine whether the purchases were influenced by the investment by 
the Fund of Funds in the Unaffiliated Underlying Fund. The Board of the 
Unaffiliated Underlying Fund will consider, among other things: (a) 
Whether the purchases were consistent with the investment objectives 
and policies of the Unaffiliated Underlying Fund; (b) how the 
performance of securities purchased in an Affiliated Underwriting 
compares to the performance of comparable securities purchased during a 
comparable period of time in underwritings other than Affiliated 
Underwritings or to a benchmark such as a comparable market index; and 
(c) whether the amount of securities purchased by the Unaffiliated 
Underlying Fund in Affiliated Underwritings and the amount purchased 
directly from an Underwriting Affiliate have changed significantly from 
prior years. The Board of the Unaffiliated Underlying Fund will take 
any appropriate actions based on its review, including, if appropriate, 
the institution of procedures designed to assure that purchases of 
securities in Affiliated Underwritings are in the best interests of 
shareholders.
    7. Each Unaffiliated Underlying Fund will maintain and preserve 
permanently in an easily accessible place a written copy of the 
procedures described in the preceding condition, and any modifications 
to such procedures, and will maintain and preserve for a period of not 
less than 6 years from the end of the fiscal year in which any purchase 
from an Affiliated Underwriting occurred, the first 2 years in an 
easily accessible place, a written record of each purchase of 
securities in an Affiliated Underwriting once an investment by a Fund 
of Funds in the securities of an Unaffiliated Underlying Fund exceeds 
the limit of section 12(d)(1)(A)(i) of the Act, setting forth from whom 
the securities were acquired, the identity of the underwriting 
syndicate's members, the terms of the purchase, and the information or 
materials upon which the determinations of the Board of the 
Unaffiliated Underlying Fund were made.
    8. Prior to its investment in shares of an Unaffiliated Underlying 
Fund in excess of the limit in section 12(d)(1)(A)(i) of the Act, the 
Fund of Funds and the Unaffiliated Underlying Fund will execute an 
agreement stating, without limitation, that their boards of directors 
or trustees and their investment advisers understand the terms and 
conditions of the order and agree to fulfill their responsibilities 
under the order. At the time of its investment in shares of an 
Unaffiliated Underlying Fund in excess of the limit in section 
12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Underlying 
Fund of the investment. At such time, the Fund of Funds will also 
transmit to the Unaffiliated Underlying Fund a list of the names of 
each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of 
Funds will notify the Unaffiliated Underlying Fund of any changes to 
the list as soon as reasonably practicable after a change occurs. The 
Unaffiliated Underlying Fund and the Fund of Funds will maintain and 
preserve a copy of the order, the agreement, and the list with any 
updated information for the duration of the investment and for a period 
of not less than 6 years thereafter, the first 2 years in an easily 
accessible place.
    9. Before approving any advisory contract under section 15 of the 
Act, the Board of each Fund of Funds, including a majority of the 
Disinterested Trustees, shall find that the advisory fees charged under 
the advisory contract are based on services provided that are in 
addition to, rather than duplicative of, services provided under the 
advisory contract(s) of any Underlying Fund in which the Fund of Funds 
may invest. Such finding, and the basis upon which the finding was 
made, will be recorded fully in the minute books of the appropriate 
Fund of Funds.
    10. Each Manager will waive fees otherwise payable to it by a Fund 
of Funds in an amount at least equal to any compensation (including 
fees received pursuant to any plan adopted by an Unaffiliated 
Underlying Fund under rule 12b-1 under the Act) received from an 
Unaffiliated Fund by the Manager, or an affiliated person of the 
Manager, other than any advisory fees paid to the Manager or its 
affiliated person by the Unaffiliated Fund, in connection with the 
investment by the Fund of Funds in the Unaffiliated Fund. Any Sub-
Adviser will waive fees otherwise payable to the Sub-Adviser, directly 
or indirectly, by the Fund of Funds in an amount at least equal to any 
compensation received from an Unaffiliated Fund by the Sub-Adviser, or 
an affiliated person of the Sub-Adviser, other than any advisory fees 
paid to the Sub-Adviser or its affiliated person by the Unaffiliated 
Fund, in connection with the investment by the Fund of Funds in the 
Unaffiliated Fund made at the direction of the Sub-Adviser. In the 
event that the Sub-Adviser waives fees, the benefit of the waiver will 
be passed through to the Fund of Funds.
    11. With respect to Registered Separate Accounts that invest in a 
Fund of Funds, no sales load will be charged at the Fund of Funds level 
or at the Underlying Fund level. Other sales charges and service fees, 
as defined in rule 2830 of the Conduct Rules of the NASD, if any, will 
only be charged at the Fund of Funds level or at the Underlying Fund 
level, not both. With respect to other investments in a Fund of Funds, 
any sales charges and/or service fees charged with respect to shares of 
a Fund of Funds will not exceed the limits applicable to funds of funds 
set forth in rule 2830 of the Conduct Rules of the NASD.
    12. No Underlying Fund will acquire securities of any other 
investment company or company relying on section 3(c)(1) or 3(c)(7) of 
the Act in excess of the limits contained in section 12(d)(1)(A) of the 
Act, except to the extent that such Underlying Fund: (a) Receives 
securities of another investment company as a dividend or as a result 
of a plan of reorganization of a company (other than a plan devised for 
the purpose of evading section 12(d)(1) of the Act); or (b) acquires 
(or is deemed to have acquired) securities of another investment 
company pursuant to exemptive relief from the Commission permitting 
such Underlying Fund to: (i) Acquire securities of one or more 
affiliated investment companies for short-term cash management 
purposes, or (ii) engage in interfund borrowing and lending 
transactions.
    13. The Board of any Fund of Funds and any Unaffiliated Underlying 
Fund will satisfy the fund governance standards as defined in rule 0-
1(a)(7) under the Act by the compliance date for the rule.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4488 Filed 8-16-05; 8:45 am]
BILLING CODE 8010-01-P
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