99-18777. Colchester Street Trust, et al., Notice of Application  

  • [Federal Register Volume 64, Number 141 (Friday, July 23, 1999)]
    [Notices]
    [Pages 40052-40054]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 99-18777]
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    
    [Rel. No. IC-23904; 812-11550 ]
    
    
    Colchester Street Trust, et al., Notice of Application
    
    July 16, 1999.
    AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').
    
    ACTION: Notice of application for an order under sections 6(c), 
    12(d)(1)(J) and 17(b) of the Investment Company Act of 1940 (the 
    ``Act'') for exemptions from sections 12(d)(1) and 17(a) and under 
    section 17(d) of the Act and rule 17d-1 under the Act to permit certain 
    joint transactions.
    
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        Summary of Application: Applicants seek an order that would amend a 
    prior order (``Prior Order'') \1\ to permit certain registered 
    investment companies and other entities (``Participating Funds'') to 
    investment uninvested cash (``Uninvested Cash'') and cash collateral 
    received in connection with a securities lending program (``Cash 
    Collateral'') in shares of affiliated money market funds and/or short-
    term bond funds (``Investment Funds'').
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        \1\ Daily Money Fund, et al., Investment Company Act Release 
    Nos. 22236 (Sept. 20, 1996) (notice) and 22285 (Oct. 16, 
    1996)(order).
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        Applicants: Colchester Street Trust, Fidelity Aberdeen Street 
    Trust, Fidelity Advisor Korea Fund, Inc., Fidelity Advisor Emerging 
    Asia Fund, Inc., Fidelity Advisor Series I, Fidelity Advisor Series II, 
    Fidelity Advisor Series III, Fidelity Advisor Series IV, Fidelity 
    Advisor Series V, Fidelity Advisor Series VI, Fidelity Advisor Series 
    VII, Fidelity Advisor Series VIII, Fidelity Beacon Street Fund, 
    Fidelity Boston Street Trust, Fidelity California Municipal Trust, 
    Fidelity California Municipal Trust II, Fidelity Capital Trust, 
    Fidelity Charles Street Trust, Fidelity Commonwealth Trust, Fidelity 
    Concord Street Trust, Fidelity Congress Street Fund, Fidelity 
    Contrafund, Fidelity Court Street Trust, Fidelity Court Street Trust 
    II, Fidelity Covington Trust, Fidelity Destiny Portfolios, Fidelity 
    Devonshire Trust, Fidelity Exchange Fund, Fidelity Financial Trust, 
    Fidelity Fixed-Income Trust, Fidelity Hastings Street Trust, Fidelity 
    Hereford Street Trust, Fidelity Income Fund, Fidelity Investment Trust, 
    Fidelity Magellan Fund, Fidelity Massachusetts Municipal Trust, 
    Fidelity Money Market Trust, Fidelity Mt. Vernon Street Trust, Fidelity 
    Municipal Trust, Fidelity Municipal Trust II, Fidelity New York 
    Municipal Trust, Fidelity New York Municipal Trust II, Fidelity Oxford 
    Street Trust, Fidelity Phillips Street Trust, Fidelity Puritan Trust, 
    Fidelity Revere Street Trust, Fidelity School Street Trust, Fidelity 
    Securities Fund, Fidelity Select Portfolios, Fidelity Summer Street 
    Trust, Fidelity Trend Fund, Fidelity Union Street Trust, Fidelity Union 
    Street Trust II, Fidelity U.S. Investment-Bond Fund, L.P., Fidelity 
    Investments-Government Securities Fund, L.P., Newbury Street Trust, 
    Variable Insurance Products Fund, Variable Insurance Products Fund II, 
    Variable Insurance Products Fund III (collectively, the ``Trust''); 
    Fidelity Advisor World Global High Income Fund (Bermuda) Ltd., Fidelity 
    Advisor World U.S. Intermediate Bond Fund (Bermuda) Ltd., Fidelity 
    Advisor World International Bond Fund (Bermuda) Ltd., Fidelity Advisor 
    World U.S. Large-Cap Stock Fund (Bermuda) Ltd., Fidelity Advisor World 
    Europe Fund (Bermuda) Ltd., Fidelity Advisor World Southeast Asia Fund 
    (Bermuda) Ltd., Fidelity Advisor World U.S. Treasury Money Fund 
    (Bermuda) Ltd. (collectively, the ``World Funds''), Fidelity Management 
    & Research Company (``FMR''); Fidelity Group Trust for Employee Benefit 
    Plans (``Group Trust'')' Fidelity Management Trust Company (``FMTC''); 
    Fidelity Service Company, Inc. (``FSC''); Fidelity Investments 
    Institutional Operations Company, Inc. (``FIIOC''); Fidelity 
    Investments Money Management, Inc. (``FIMM''); all other registered 
    investment companies and series thereof that are advised by FMR or a 
    person controlling, controlled by, or under common control with FMR 
    (collectively, the ``Adviser'') and all other registered investment 
    companies and series thereof for which the Adviser in the future acts 
    as investment adviser (collectively, the ``Registered Funds''); the 
    World Funds, and other pooled investment funds advised or in the future 
    advised by the Adviser, or a person controlling, controlled by, or 
    under common control with the Adviser, offered exclusively outside the 
    United States to non-U.S. residents (the ``Off-Shore Funds''); state 
    and local entities or accounts thereof advised or in the future advised 
    by the Adviser that are exempt from regulation under the Act pursuant 
    to section 2(b) of the Act (the ``2(b) Entities''); collective trust 
    funds of the Group Trust, the trustee for which, or in the future the 
    trustee for which, is FMTC, that are excepted from the definition of 
    investment company by section 3(c)(11) of the Act (the ``3(c)(11) 
    Entities''); and individual institutional accounts advised by the 
    Adviser (``Institutional Accounts'').\2\
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        \2\ All existing entities that currently intend to rely on the 
    requested order are named as applicants. Any other existing entity 
    and future entity will rely on the requested order only in 
    accordance with the terms and conditions of the application.
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        Filing Dates: The application was filed on March 26, 1999. 
    Applicants have agreed to file an amendment, the substance of which is 
    reflected in this notice, period.
        Hearing or Notification of Hearing: An order granting the 
    application will be issued unless the SEC orders a hearing. Interested 
    person 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 August 
    10, 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 who wish to 
    be notified of a hearing may request notification by writing to the 
    SEC's Secretary.
    
    ADDRESSES: Secretary, SEC, 450 Fifth Street, NW, Washington, DC 20549-
    0609. Applicants, 82 Devonshire Street, Boston, Massachusetts 02109.
    
    FOR FURTHER INFORMATION CONTACT: Elaine M. Boggs, Senior Counsel, at 
    (202) 942-0572, or Nadya B. Roytblat, Assistant Director, at (202) 942-
    0564 (Division of Investment Management, Office of Investment Company 
    Regulation).
    
    SUPPLEMENTARY INFORMATION: The following is a summary of the 
    application. The complete application may be obtained for a fee at the 
    SEC's Public Reference Branch, 450 5th Street, NW, Washington, DC 
    20549-0102 (tel. (202) 942-8090).
    
    Applicants' Representations
    
        1. Each of the Registered Funds is registered under the Act and 
    most of the Trusts are series companies. The Participating Funds 
    include the Registered Funds (``Participating Registered Funds''), Off-
    Shore Funds, 2(b) Entities, 3(c)(11) Entities, and Institutional 
    Accounts. The current Off-Shore Funds are established under the
    
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    laws of Bermuda. Each 3(c)(11) Entity is organized as a separate pooled 
    account under the Fidelity Group Trust, for which FMTC acts as trustee. 
    FMR, an investment adivser registered under the Investment Advisers Act 
    of 1940, acts as each Participating Fund's investment manager and 
    provides the Participating Funds with administrative services.
        2. Certain of the Investment Funds (the ``Central Funds'') are 
    series of Fidelity Revere Street Trust, an open-end management 
    investment company registered under the Act. The Central Funds have not 
    registered their shares under the Securities Act of 1933 (``Securities 
    Act''). Shares of the Central Funds will be sold only to the 
    Participating Funds. FIMM, a wholly-owned subsidiary of FMR, serves as 
    investment adviser to the Central Funds. The other Investment Funds are 
    open-end management investment companies registered under the Act, and 
    their shares are registered under the Securities Act. These Investment 
    Funds are advised by FMR. All Investment Funds will be taxable or tax-
    exempt money market funds or short-term bond funds with a portfolio 
    maturity of three years or less.
        3. Approximately 45 Registered Funds participate in a securities 
    lending program in which they earn additional income by lending their 
    portfolio securities. Cash Collateral received by the Registered Funds 
    may be invested in shares of investment companies approved by the board 
    of trustees of the Registered Fund and that have investment objectives 
    that are consistent with the investment restrictions and guidelines of 
    the Registered Fund.
        4. The Prior Order permits Participating Funds to invest cash that 
    has otherwise not been invested in portfolio securities in the Central 
    Funds. In addition, the Prior Order permits the Participating Funds and 
    the Central Funds to engage in interfund purchase and sale transactions 
    in securities that would otherwise be effected in reliance on rule 17a-
    7 under the Act (``Interfund Transactions'').
        5. Applicants request an order amending the Prior Order to permit 
    the Participating Funds to invest Cash Collateral and Uninvested Cash 
    in other Investment Funds in addition to the Central Funds. The 
    requested relief would permit (a) the Participating Funds to use Cash 
    Collateral and Uninvested Cash to purchase shares of the Investment 
    Funds; (b) the Investment Funds to sell their shares to the 
    Participating Funds; (c) the Investment Funds to redeem their shares 
    from the Participating Funds; and (d) the Adviser to effect these 
    purchases and sales (collectively, these transactions are the ``Cash 
    Transactions'').
        6. The board of trustees of the Participating Registered Funds has 
    or will approve the Investment Funds as vehicles for the investment of 
    Cash Collateral and Uninvested Cash. The investment by each 
    Participating Registered Fund in shares of the Investment Funds will be 
    in accordance with that Registered Fund's investment policies and 
    restrictions as set forth in its registration statement. A 
    Participating Registered Fund that is a money market fund will not 
    invest its Uninvested Cash or Cash Collateral in an Investment Fund 
    that does not comply with the requirements of rule 2a-7 under the Act.
    
    Applicants' Legal Analysis
    
    A. Section 12(d)(1)
    
        1. Section 12(d)(1)(A) of the Act provides, in relevant part, that 
    no investment company may acquire securities of a registered investment 
    company if such securities represent more than 3% of the acquired 
    company's outstanding voting stock, more than 5% of the acquiring 
    company's total assets, or if such securities, together with the 
    securities of other acquired investment companies, represent more than 
    10% of the acquiring company's outstanding total assets. Section 
    12(d)(1)(B) of the Act provides that no registered open-end investment 
    company may sell its securities 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 the 
    investment company. Applicants state that the investment of Uninvested 
    Cash and Cash Collateral by the Registered Funds and Off-Shore Funds in 
    shares of the Investment Funds is subject to the limits in sections 
    12(d)(1)(A) and (B).
        2. Section 12(d)(1)(J) of the Act provides that the Commission may 
    exempt any person, security, or transaction from any provision of 
    section 12(d)(1) if and to the extent that such exemption is consistent 
    with the public interest and the protection of investors. Applicants 
    request relief under section 12(d)(1)(J) to permit the Registered Funds 
    and the Off-Shore Funds to invest in the Investment Funds in excess of 
    the limits in sections 12(d)(1)(A) and (B).
        3. Applicants state that the proposed arrangement will not result 
    in the abuses that sections 12(d)(1)(A) and (B) were intended to 
    prevent. Applicants state that the proposed arrangement will not result 
    in inappropriate layering of either sales charges or investment 
    advisory fees. Shares of the Investment Funds sold to the Participating 
    Funds will not be subject to a sales load, redemption fee, asset-based 
    distribution fee or service fee. Applicants state that since investment 
    advisory fees are calculated on the net, rather than the total, assets 
    of the Participating Registered Funds, and since Cash Collateral does 
    not increase net assets, the Participating Registered Funds would not 
    pay duplicative advisory fees with respect to investments made with 
    Cash Collateral. Applicants further state advisory fees with respect to 
    an investment of Uninvested Cash will be subject to condition 2 below. 
    Applicants also state that because each Participating Fund will invest 
    in an Investment Fund on the same basis as each other Participating 
    Fund, there is no risk that the Adviser would exercise undue influence 
    to advantage any Participating Funds to the detriment of others.
    
    B. Section 17(a)
    
        1. Section 17(a) of the Act makes it unlawful for any affiliated 
    person of a registered investment company, or any affiliated person of 
    such affiliated person, acting as principal, to sell or purchase any 
    security to or from such investment company. Section 2(a)(3) of the Act 
    defines an affiliated person to include any person directly or 
    indirectly controlling, controlled by, or under common control with, 
    the other person or the investment adviser to an investment company. 
    The Adviser is an affiliated person of each Registered Fund under 
    section 2(a)(3). Because the Participating Funds either share a common 
    investment adviser or have an investment adviser that is under common 
    control with the investment adviser to another Participating Fund, and 
    most Registered Funds also share a common board of trustees, the 
    Participating Funds may be deemed to be under ``common control'' and 
    therefore affiliated persons of each other. As a result, applicants 
    state that section 17(a) would prohibit the Cash Transactions.
        2. Section 17(b) of the Act authorizes the SEC to exempt a 
    transaction from section 17(a) if the term of the proposed transaction, 
    including the consideration to be paid or received, are reasonable and 
    fair and do not involve overreaching on the part of any person 
    concerned, the proposed transaction is consistent with the policy of 
    each registered investment company
    
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    concerned, and the proposed transaction is consistent with the general 
    policy of the Act. Section 6(c) under the Act permits the SEC to exempt 
    any person or transaction 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 policies of the Act.
        3. Applicants submit that the requested relief satisfies the 
    standards for relief in sections 6(c) and 17(b). Applicants state that 
    the Cash Transactions will provide the Participating Funds and their 
    shareholders with a means of obtaining high current rates of return on 
    Cash Collateral and Uninvested Cash, reducing aggregate counterparty 
    exposure on repurchase agreements, protecting liquidity, reducing 
    credit exposure to custodian banks, reducing transaction costs, and 
    diversifying risk. In addition, applicants state that the Cash 
    Transactions will be effected in accordance with each Participating 
    Fund's investment restrictions and will be consistent with each 
    Participating Registered Fund's policies as set forth in its 
    registration statement.
    
    C. Section 17(d) and Rule 17d-1
    
        1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
    any affiliated person of or principal underwriter for a registered 
    investment company or any affiliated person of such person or principal 
    underwriter, acting as principal, from effecting any transaction in 
    connection with any joint enterprise or other joint arrangement or 
    profit sharing plan, in which the investment company participates. As 
    noted above, applicants are affiliated persons of each other. 
    Applicants state that Cash Transactions may be deemed a joint 
    enterprise for the purposes of section 17(d) and rule 17d-1.
        2. Rule 17d-1 permits the SEC to approve a proposed joint 
    transaction covered by the terms of section 17(d). In determining 
    whether to approve a transaction, the SEC is to consider whether the 
    proposed transaction is consistent with the provisions, policies, and 
    purposes of the Act, and the extent to which the participation of the 
    investment companies is on a basis different from or less advantageous 
    than that of the other participants. Applicants state that investments 
    by the Participating Registered Funds in the Investment Funds will be 
    on the same basis as other participants.
    
    Applicants' Conditions
    
        Applicants agree that any order of the SEC granting the requested 
    relief will be subject to the following conditions:
        1. The shares of the Investment Funds that are sold to and redeemed 
    from the Registered Funds will not be subject to a sales load, 
    redemption fee, distribution fee under a plan adopted in accordance 
    with rule 12b-1, or service fee (as defined in rule 2830(b)(9) of the 
    National Association of Securities Dealers' Rules of Conduct).
        2. If the Adviser to an Investment Fund collects a fee from the 
    Investment Fund for acting as its investment adviser, and unless the 
    fee payable to the Adviser for acting as the adviser of the Registered 
    Fund is reduced by the amount of such other fee paid with respect to 
    the investment of the Registered Fund's Uninvested Cash, before the 
    next meeting of the board of trustees of a Registered Fund (``Board'') 
    that invests in the Investment Fund is held for the purpose of voting 
    on an advisory contract under section 15 of the Act, the Adviser to the 
    Registered Fund will provide the board with specific information 
    regarding the approximate cost to the Adviser for managing the 
    Uninvested Cash that can be expected to be invested in such Investment 
    Fund. Before approving any advisory contract under section 15, the 
    Board, including a majority of the trustees who are not ``interested 
    persons,'' as defined in section 2(a)(19) of the Act, shall consider to 
    what extent, if any, the advisory fees charged to the Registered Fund 
    by the Adviser should be reduced to account for the fee indirectly paid 
    by the Registered Fund because of the advisory fee paid by the 
    Investment Fund, to the extent that the latter fee is not credited 
    against the advisory fee payable by the Registered Fund. The minute 
    books of the Registered Fund will record fully the Board's 
    consideration in approving the advisory contract, including the 
    considerations relating to fees referred to above.
        3. Each Participating Fund, each Investment Fund, and any future 
    fund that may rely on the order shall be advised by or, in the case of 
    a 3(c)(11) Entity, shall have as its trustee, FMR or a person 
    controlling, controlled by, or under common control with FMR.
        4. Investment in shares of the Investment Funds will be in 
    accordance with each Registered Fund's respective investment 
    restrictions and will be consistent with each Registered Fund's 
    policies as set forth in its prospectus and statement of additional 
    information.
        5. No Investment Fund in which a Registered Fund invests shall 
    acquire securities of any other investment company in excess of the 
    limits contained in section 12(d)(1)(A) of the Act, except as permitted 
    by a Commission order concerning an interfund lending and borrowing 
    facility.
        6. Each of the Registered Funds will invest Uninvested Cash in, and 
    hold shares of, the Investment Funds only to the extent that a 
    Registered Fund's aggregate investment of Uninvested Cash in the 
    Investment Funds at the time the investment is made does not exceed 25% 
    of the Registered Fund's total net assets. For purposes of this 
    limitation, each Registered Fund or series thereof will be treated as a 
    separate investment company.
        7. To engage in Interfund Transactions, the Participating Funds 
    will comply with rule 17a-7 under the Act in all respects other than 
    the requirement that the parties to the transaction be affiliated 
    persons (or affiliated persons of affiliated persons) of each other 
    solely by reason of having a common investment adviser or investment 
    advisers which are affiliated persons of each other, common officers, 
    and/or common directors.
        8. A Registered Fund that is a money market fund will not invest 
    its Uninvested Cash or Cash Collateral in an Investment Fund that does 
    not comply with the requirements of rule 2a-7 under the Act.
    
        For the Commission, by the Division of Investment Management, 
    under delegated authority.
    Margaret H. McFarland,
    Deputy Secretary.
    [FR Doc. 99-18777 Filed 7-22-99; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
07/23/1999
Department:
Securities and Exchange Commission
Entry Type:
Notice
Action:
Notice of application for an order under sections 6(c), 12(d)(1)(J) and 17(b) of the Investment Company Act of 1940 (the ``Act'') for exemptions from sections 12(d)(1) and 17(a) and under section 17(d) of the Act and rule 17d-1 under the Act to permit certain joint transactions.
Document Number:
99-18777
Dates:
The application was filed on March 26, 1999. Applicants have agreed to file an amendment, the substance of which is reflected in this notice, period.
Pages:
40052-40054 (3 pages)
Docket Numbers:
Rel. No. IC-23904, 812-11550
PDF File:
99-18777.pdf