[Federal Register Volume 65, Number 4 (Thursday, January 6, 2000)]
[Notices]
[Pages 797-799]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-232]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 24226; 812-11668]
Manufacturers Investment Trust and Manufacturers Securities
Services, LLC; Notice of Application
December 29, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (``Act'') for an exemption from section 15(a) of
the Act and rule 18f-2 under the Act.
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Summary of Application: Applicants, Manufacturers Investment Trust (the
``Trust'') (formerly NASL Series Trust) and Manufacturers Securities
Services, LLC (the ``Adviser'') (formerly NASL Financial Services,
Inc.), request an order that would permit applicants to enter into and
materially amend sub-advisory agreements without shareholder approval.
The order would supersede a prior order.
Filing Dates: The application was filed on June 22, 1999 and
amended on October 8, 1999. Applicants have agreed to file an amendment
during the notice period, the substance of which is reflected in this
notice.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicant with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 pm on January 24, 2000 and should be accompanied by proof of
service on applicant, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons may request notification of a hearing by writing to
the Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 5th
Street NW, Washington, DC 20549-0609. Applicant, c/o John W. Blouch,
Esq., Jones & Blouch L.L.P., 1025 Thomas Jefferson St., NW, Suite 405
West, Washington, DC 20007.
FOR FURTHER INFORMATION CONTACT: Lawrence W. Pisto, Senior Counsel, at
(202) 942-0527, or George J. Zornada, Branch Chief at (202) 942-0564,
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 Branch, 450 5th Street NW, Washington, DC
20549-0102 (tel. 202-942-8090).
Applicants' Representations
1. The Trust, a Massachusetts business trust, is registered under
the Act as an open-end management investment company. The Trust is
currently comprised of thirty-nine series (``Portfolios''), each of
which has its own investment objectives, and policies.\1\ The shares of
the Portfolios serve as funding vehicles for variable annuity contracts
and life insurance contracts offered through separate accounts of
subsidiaries of The Manufacturers Life Insurance Company, a Canadian
life insurance company (``Manulife'').
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\1\ Applicants also request relief with respect to future series
of the Trust and all future registered open-end management
investment companies that are: (a) Advised by the Adviser or any
entity controlling, controlled by, or under common control within
the Adviser, and (b) which operate in substantially the same manner
as the Trust and comply with the terms and conditions contained in
the application. The Trust is the only existing investment company
that currently intends to rely on the order.
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2. The Adviser, a Delaware limited liability company, serves as
investment adviser to each of the Portfolios, and is registered as an
investment adviser under the Investment Advisers Act of 1940
(``Advisers Act''). The Adviser is an indirectly-owned subsidiary of
Manulife.
3. The Adviser serves as investment adviser to the Portfolios
pursuant to an investment advisory agreement between the Adviser and
the Trust that was approved by the board of trustees of the Trust (the
``Board''), including a majority of the trustees (``Trustees'') who are
not ``interested persons,'' as defined in section 2(a)(19) of the Act
(``Independent Trustees''), and the shareholders of the Trust
(``Investment Advisory Agreement''). Under the Investment Advisory
Agreement, the Adviser has overall general supervisory responsibility
for the investment program of the Portfolios and recommends to the
Board the selection of one or more subadvisers (each a ``Manager'' and
collectively, ``Managers'') to provide one or more Portfolios with day-
to-day portfolio management services (``Manager of Managers
Strategy''). Each Manager is an investment adviser registered or exempt
from registration under the Advisers Act, and performs services
pursuant to a written agreement with the Adviser (the ``Portfolio
Management Agreement''). Managers' fees are paid by the Adviser out of
its fees from the Portfolios at rates negotiated with the Managers by
the Adviser. The Portfolios currently have 16 Managers.
4. The Trust has operated under a prior order (``Original Order'')
granting relief for the Manager of Managers Strategy since December 31,
1996.\2\ The Adviser makes qualitative evaluations of each Manager's
skills and demonstrated performance in managing assets under particular
investment styles. The Adviser recommends to the Board for selection
those Managers that have consistently distinguished themselves
[[Page 798]]
and demonstrated a high level of service and responsibility to
investors. The Adviser reviews, monitors and reports to the Board
regarding the performance and procedures of the Managers. The Adviser
may recommend to the Board reallocation of assets of a Portfolio among
Managers, if necessary, and the Adviser also may recommend hiring
additional Managers or the termination of Managers in appropriate
circumstances.
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\2\ Investment Company Act Release Nos. 22382 (Dec. 9, 1996)
(notice) and 22429 (Dec. 31, 1996) (order). The Original Order was
granted to NASL Financial Services, Inc., NASL Series Trust and
North American Funds. NASL Financial Services, Inc. has been merged
into another wholly-owned subsidiary of Manulife. NASL Series
Trust's name has been changed to Manufactures Investment Trust. The
Adviser is no longer advising North American Funds; consequently it
is not a party to this application. The Original Order also granted
relief from certain disclosure requirements.
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5. Applicants request relief to permit the Adviser to enter in and
materially amend Portfolio Management Agreements without shareholder
approval.\3\ The order would supersede the Original Order. The
requested relief will not extend to a Manager that is an affiliated
person, as defined in section 2(a)(3) of the Act, of the Trust or the
Adviser, other than by reason of serving as a Subadviser to one or more
of the Portfolios (an ``Affiliated Manager''). Currently, one of the
Managers is an Affiliated Manager.
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\3\ The term ``shareholder'' includes variable life insurance
policy and variable annuity contract owners that are unitholders of
any separate account for which the Portfolios serve as a funding
medium.
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Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that it is
unlawful for any person to act as an investment adviser to a registered
investment company except pursuant to a written contract that has been
approved by the vote of the company's outstanding voting securities.
Rule 18f-2 under the Act provides that each series or class of stock in
a series company affected by a matter must approve such matter if the
Act requires shareholder approval.
2. Section 6(c) of the Act provides that the Commission may exempt
any person, security, or transaction or any class or classes of
persons, securities, or transactions from any provision of the Act, or
from any rule thereunder, 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. Applicants request an exemption under section 6(c) of the Act from
section 15(a) of the Act and rule 18f-2 under the Act to permit them to
enter into and materially amend Portfolio Management Agreements without
shareholder approval.
3. Applicants assert that under the Manager of Managers Strategy,
the Portfolios' shareholders rely on the Adviser to select and monitor
one or more Managers best suited to achieve a Portfolios' investment
objectives. Applicants contend that, from the perspective of the
investor, the role of the Managers is comparable to that of individual
portfolio managers employed by other investment advisory firms.
Applicants contend that requiring shareholder approval of Portfolio
Management Agreements would impose expenses and unnecessary delays on
the Portfolios, and may preclude the Adviser from promptly acting in a
manner considered advisable by the Board. Applicants note that the
Investment Advisory Agreement between the Trust and the Adviser will
remain subject to section 15(a) of the Act and rule 18f-2 under the
Act, including the requirements for shareholder approval.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. No Portfolio will enter into a Portfolio Management Agreement
with an Affiliated Manager without such agreement, including the
compensation to be paid thereunder, being approved by the shareholders
of the Portfolio (or, if the Portfolio serves as a funding medium for
any sub-account of a registered separate account, pursuant to voting
instructions by the unitholders of the sub-account).
2. At all times, a majority of the Trustees will be Independent
Trustees, and the nomination of new or additional Independent Trustees
will be at the discretion of the then-existing Independent Trustees.
3. When a Manager change is proposed for a Portfolio with an
Affiliated Manager, the Trustees, including a majority of the
Independent Trustees, will make a separate finding, reflected in the
Trust's Board minutes, that the change is in the best interests of the
Portfolio and its shareholders (or, if the Portfolio serves as a
funding medium for any sub-account of a registered separate account, in
the best interests of the Portfolio and the unitholders of any sub-
account) and that the change does not involve a conflict of interest
from which the Adviser or the Affiliated Manager derives an
inappropriate advantage.
4. Before a Portfolio may rely on the order, the operation of the
Portfolio in the manner described in the application will be approved
by a majority of the Portfolio's outstanding voting securities (or, if
the Portfolio serves as a funding medium for any sub-account of a
registered separate account, pursuant to voting instructions provided
by the unitholders of the sub-account), as defined in the Act, or in
the case of a new Portfolio whose public shareholders (or variable
contract owners through a separate account) purchase shares on the
basis of a prospectus(es) containing the disclosure contemplated by
Condition 6 below, by the sole initial shareholder(s) before the shares
of such Portfolio are offered to the public (or the variable contract
owners through a separate account).
5. The Adviser will provide management services to the Trust and
its Portfolios, including overall supervisory responsibility for the
general management and investment of each Portfolio's securities
portfolio, and, subject to review and approval by the Board will (a)
set each Portfolio's overall investment strategies; (b) evaluate,
select and recommend Managers to manage all or a part of a Portfolio's
assets; (c) when appropriate, allocate and reallocate a Portfolio's
assets among multiple Managers; (d) monitor and evaluate the investment
performance of Managers; and (e) implement procedures reasonably
designed to ensure that the Managers comply with the relevant
Portfolio's investment objectives, policies, and restrictions.
6. Each Portfolio relying on the requested relief will disclose in
its prospectus the existence, substance and effect of any order granted
pursuant to this application. In addition, any such Portfolio will hold
itself out as employing the Manager of Managers Strategy described in
the application. The prospectus will prominently disclose that the
Adviser has ultimate responsibility to oversee the Managers and
recommend their hiring, termination, and replacement.
7. No Trustee or officer of the Trust or officer or director of the
Adviser will own directly or indirectly (other than through a pooled
investment vehicle that is not controlled by that trustee, officer or
director) any interest in a Manager except for (i) ownership of
interests in the Adviser or any entity that controls, is controlled by,
or is under common control with the Adviser; or (ii) ownership of less
than 1% of the outstanding securities of any class of equity or debt
securities of a publicly-traded company that is either a Manager or an
entity controls, is controlled by, or is under common control with a
Manager.
8. Within 90 days of the hiring of any new Manager, the Adviser
will furnish shareholders (or, if the Portfolio serves as a funding
medium for any sub-account of a registered separate account, the
Adviser will furnish the unit holders of the sub-account) with respect
to the appropriate Portfolio all information about the new Manager that
would be included in a proxy statement. Such
[[Page 799]]
information will include any changes caused by the addition of a new
Manager. To meet this condition, the Adviser will provide shareholders
(or, if the Portfolio serves as a funding medium for any sub-account of
a registered separate account, then by providing unitholders of the
sub-account) with an information statement meeting the requirements of
Regulation 14C, Schedule 14C, and Item 22 of Schedule 14A under the
Securities Exchange Act of 1934.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-232 Filed 1-5-00; 8:45 am]
BILLING CODE 8010-01-M
