[Federal Register Volume 64, Number 151 (Friday, August 6, 1999)]
[Notices]
[Pages 42999-43001]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20251]
[[Page 42999]]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23931; 812-11536]
American Skandia Advisors Fund, Inc. et al.; Notice of
Application
July 30, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from section 15(a)
of the Act and rule 18f-2 under the Act.
-----------------------------------------------------------------------
SUMMARY OF THE APPLICATION: American Skandia Advisors Funds, Inc.
(``ASAF''), American Skandia Trust (``AST''), American Skandia Master
Trust (``ASMT'') (each a ``Fund'' and collectively, the ``Funds''), on
behalf of their respective series (``Portfolios'') and American Skandia
Investment Services, Inc. (``Manager''), request an order that would
permit applicants to enter into and materially amend subadvisory
agreements without shareholder approval.
Filing Date: The application was filed on March 15, 1999 and amended on
July 27, 1999.
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 August 24, 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 Commission's Secretary.
ADDRESSES: Secretary, Commission, 450 Fifth Street, NW, Washington, DC,
20549-0609. Applicants, c/o Eric Freed, Esquire, American Skandia
Investment Services, Incorporated, One Corporate Drive, P.O. Box 883,
Shelton, CT 06484.
FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel,
at (202) 942-0714, or George J. Zornada, Branch Chief, at (202) 942-
0564 (Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the Commission's Public Reference Branch, 450 Fifth Street, NW,
Washington, DC 20549-0102 (telephone (202) 942-8090).
Applicants' Representations
1. ASAF, a Maryland corporation, is registered under the Act as an
open-end management investment company and is currently comprised of
sixteen Portfolios, each of which has its own investment objectives,
policies and restrictions.\1\ Five ASAF Portfolios (the ``Feeder
Portfolios'') invest all their assets in corresponding Portfolios of
ASMT (the ``Core Portfolios''). ASMT, a Delaware business trust, is
registered under the Act as an open-end management investment company
and currently consists of the five Core Portfolios. Each Core Portfolio
serves as a master fund in the master/feeder structure. ASAF offers the
shares of all of its Portfolios for sale to the public. AST, a
Massachusetts business trust, is registered under the Act as an open-
end management investment company. AST consists of twenty-nine
Portfolios, and offers its shares for sale through separate accounts
that fund variable annuity and variable life insurance contracts of
life insurance companies and directly to qualified retirement plans.
The Manager, a Connecticut corporation, serves as the investment
adviser to each of the Portfolios and is registered under the
Investment Advisers Act of 1940 (``Advisers Act'').
---------------------------------------------------------------------------
\1\ Applicants also request relief with respect to future
portfolios of ASAF, AST and ASMT and any other registered open-end
management investment companies that are: (a) advised by the Manager
or any entity controlling, controlled by, or under common control
with the Manager, and (b) which operate in substantially the same
manner as the Funds and comply with the terms and conditions
contained in the application. ASAF, AST and ASMT are the only
existing investment companies that currently intend to rely on the
other.
---------------------------------------------------------------------------
2. The Manager has entered into investment management agreements
with respect to each of the Portfolios (each a ``Management
Agreement'') that were approved by the board of directors or trustees
of the Funds (the ``Boards''), including a majority of the directors or
trustees who are not ``interested persons,'' as defined in section
2(a)(19) of the Act (``Independent Directors or Trustees''), and the
shareholders of the Funds. Under the terms of each Management
Agreement, the Manager supervises the general business, administrative,
investment advisory and portfolio management operations of the
Portfolios. For its services, the Manager receives a management fee at
an annual rate based on a percentage of the applicable Portfolio's
average net assets.
3. The Manager seeks to achieve the investment objective of each
Portfolio by selecting, subject to the oversight and approval of the
Boards, one or more subadvisers (each a ``Subadviser'') to manage the
assets of each Portfolio (``Manager/Subadviser Structure''). Under the
Manager/Subadviser Structure, the specific investment decisions for
each Portfolio are made by one or more Subadvisers, each of which has
discretionary authority to invest all or a portion of the assets of
particular Portfolio, subject to the general supervision of the Manager
and the applicable Board. The Subadvisers are investment advisers
registered or exempt from registration under the Advisers Act.
Currently, each Portfolio has a single Subadviser.
4. The Manager selects Subadvisers based on a process that includes
researching each Subadviser's investment performance record, conformity
to investment objectives and policies, organizational structure,
management team, compliance and operational capabilities, and assets
under management. The Manager recommends to the Board for selection
those Subadvisers that have distinguished themselves and reviews,
monitors and reports to the Board regarding the performance and
procedures of the Subadvisers. The Manager may recommend to the Board
the reallocation of assets of a Portfolio among Subadvisers, if
necessary, and may recommend hiring additional Subadvisers or the
termination of Subadvisers in appropriate circumstances. Each
Subadviser performs services pursuant to a written agreement with the
Manager (the ``Sub-Advisory Agreement''). Subadvisers' fees are paid by
the Manager out of its fees from the Funds.
5. Applicants request relief to permit the Manager, subject to the
oversight of the applicable Board, to enter into and materially amend
Sub-Advisory Agreements without shareholder approval.\2\ The requested
relief will not extend to a Subadviser that is an affiliated person, as
defined in section 2(a)(3) of the Act, of a Fund or the Manager, other
than by reason of serving as a Subadviser to one or more of the
Portfolios (an ``Affiliated Subadviser'').
---------------------------------------------------------------------------
\2\ The term ``shareholder'' includes variable life insurance
policy and variable annuity contract owners that are unit holders of
any separate account for which the Portfolios serve as a funding
medium.
---------------------------------------------------------------------------
Applicant's 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
[[Page 43000]]
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 the
Manager, subject to Board approval, to enter into and materially amend
Sub-Advisory Agreements without shareholder approval.
3. Applicants assert that under the Manager/Subadviser Structure,
each Portfolio's shareholders rely on the Manager's experience to
select and monitor one or more Subadvisers best suited to achieve the
Portfolio's desired investment objectives. Applicants assert that, from
the perspective of the investor, the role of the Subadvisers is
comparable to that of individual portfolio managers employed by other
investment advisory firms. Applicants contend that requiring
shareholder approval of Sub-Advisory Agreements would impose expenses
and unnecessary delays on the Portfolios, and may preclude the Manager
from promptly acting in a manner considered advisable by the applicable
Portfolio's Board. Applicants note that the Management Agreements
between the Funds and the Manager 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. 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 outstanding voting securities of the Portfolio,
within the meaning of the Act, which in the case of a Core Portfolio
will be pursuant to voting instructions provided by shareholders of the
Feeder Portfolio investing in such Core Portfolio or other voting
arrangements that comply with section 12(d)(1)(E)(iii)(aa) of the Act,
if applicable, and in the case of a Portfolio of AST will be pursuant
to voting instructions provided by annuity and life insurance policy
contract owners that are unit holders in insurance company separate
accounts investing in such Portfolio. Before a Fund or Portfolio that
does not presently have an effective registration statement may rely on
the order requested in the application, the operation of such Fund or
Portfolio in the manner described in the application will be approved
in the manner described above or, in the case of such Fund or Portfolio
whose shareholders (or, in the case of a Core Portfolio, the
shareholders of its corresponding Feeder Portfolio or, in the case of a
Portfolio of AST, annuity and life insurance policy contract owners
that are unit holders of separate accounts investing in the Portfolio)
purchase shares on the basis of a prospectus containing the disclosure
contemplated by Condition 2 below, by the initial shareholder(s) before
the shares of such Fund or Portfolio are offered to the public.
2. A Portfolio's prospectus, or in the case of a Core Portfolio,
its offering documents and the corresponding Feeder Portfolio's
prospectus will disclose the existence, substance and effect of any
offer granted pursuant to this application. In addition, the Portfolios
will hold themselves out as employing he Manager/Subadviser Structure
described in the application. A Portfolio's prospectus, or in the case
of a Core Portfolio, its offering documents and the corresponding
Feeder Portfolio's prospectus will prominently disclose that the
Manager has ultimate responsibility to oversee the Subadvisers and
recommend their hiring, termination, and replacement.
3. The Manager will provide management and administrative services
to the Portfolios, including overall supervisory responsibility for the
general management and investment of each Portfolio, and, subject to
review and approval by a Portfolio's Board will (a) set each
Portfolio's overall investment strategies; (b) evaluate, select and
recommend Subadvisers to manage all or a part of a Portfolio's assets;
(c) when appropriate, allocate and reallocate a Portfolio's assets
among multiple Subadvisers; (d) monitor and evaluate the investment
performance of Subadvisers; and (e) implement procedures reasonably
designed to ensure that the Subadvisers comply with the relevant
Portfolio's investment objectives, policies, and restrictions.
4. At all times, a majority of the Board of each Fund will be
Independent Directors or Trustees, and the nomination of new or
additional Independent Directors or Trustees will be placed within the
discretion of the then-existing Independent Directors or Trustees.
5. Neither the Manager nor any Portfolio will enter into a Sub-
advisory Agreement with any Affiliated Subadviser, without such Sub-
advisory Agreement, including the compensation to be paid thereunder,
being approved by the shareholders of the applicable Portfolio within
the meaning of the Act, which in the case of Core Portfolio will be
pursuant to voting instructions provided by shareholders of those
Feeder Portfolios investing in such Core Portfolio that are registered
under the Act, or other voting arrangements that comply with section
12(d)(1)(E)(iii)(aa) of the Act, if applicable, and in the case of a
Portfolio of AST will be pursuant to voting instructions by annuity and
life insurance contract owners that are unit holders in insurance
company separate accounts investing in such Portfolio.
6. When a Subadviser change is proposed for a Portfolio with an
Affiliated Subadviser, the applicable Board, including a majority of
the Independent Directors or Trustees, will make a separate finding,
reflected in the minutes of the meeting of the applicable Board, that
such change is in the best interests of the applicable Portfolio and
its shareholders and does not involve a conflict of interest from which
the Manager or the Affiliated Subadviser derives an inappropriate
advantage.
7. No director, trustee, or officer of a Fund or director or
officer of the Manager will own directly or indirectly (other than
through a pooled investment vehicle that is not controlled by such
director, trustee or officer) any interest in a Subadviser except for
(i) ownership of interests in the Manager or any entity that controls,
is controlled by, or is under common control with Manager; or (ii)
ownership of less than 1% of the outstanding securities of any class of
equity or debt of a publicly-traded company that is either a Subadviser
or an entity that controls, is controlled by, or is under common
control with a Subadviser.
8. Within 90 days of the hiring of any new Subadviser, the Manager
will furnish shareholders of the applicable Portfolio (or, in the case
of a Core Portfolio, the shareholders of its corresponding Feeder
Portfolio or, in the case of a Portfolio of AST, annuity and life
insurance policy contract owners that are unit holders of separate
accounts investing in the Portfolio) all the information that would
have been
[[Page 43001]]
included in a proxy statement. Such information will include any
changes caused by the addition of a new Subadviser. To meet this
obligation, the Manager will provide shareholders of the applicable
Portfolio (or, in the case of a Core Portfolio, the shareholders of its
corresponding Feeder Portfolio or, in the case of a Portfolio of AST,
annuity and life insurance policy contract owners that are unit holders
of separate accounts investing in the Portfolio) 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. 99-20251 Filed 8-5-99; 8:45 am]
BILLING CODE 8010-01-M
