[Federal Register Volume 63, Number 70 (Monday, April 13, 1998)]
[Notices]
[Pages 18050-18052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9663]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23105; 812-10786]


Liberty Variable Investment Trust, et al.; Notice of Application

April 7, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of 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.

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SUMMARY OF THE APPLICATION: Applicants request an order to permit 
Liberty Asset Management Company (``LAMCO'') to enter into and 
materially amend subadvisory agreements without obtaining shareholder 
approval.

APPLICANTS: Liberty Variable Investment Trust (``LVIT''), LAMCO, and 
Liberty Advisory Services Corp. (``LASC'').

FILING DATES: The application was filed on September 16, 1997. 
Applicants have agreed to file an amendment during the notice period, 
the substance of which is included in this notice.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on May 4, 1998, 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, N.W., Washington, D.C. 
20549. Liberty Variable Investment Trust and

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Liberty Asset Management Company, Federal Reserve Plaza, 600 Atlantic 
Avenue, Boston, MA 02210-2214; Liberty Advisory Services Corp., 125 
High Street, Boston, MA 02110.

FOR FURTHER INFORMATION CONTACT: Kathleen L. Knisely, Staff Attorney, 
at (202) 942-0517, 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 Fifth Street, N.W., Washington, D.C. 
20549 (tel. 202-942-8090).

Applicants' Representations

    1. LVIT is registered under the Act as an open-end management 
investment company and currently offers several series (the ``LVIT 
Funds'') which serve as funding vehicles for variable annuity contracts 
(``VA Contracts'') and variable life insurance policies (``VLI 
Policies'') issued by separate accounts of Keyport Life Insurance 
Company and other affiliated and unaffiliated insurance companies 
(``Participating Insurance Companies''). LVIT established the Liberty 
All-Star Equity Fund, Variable Series (the ``LVIT All-Star Fund'') as a 
new series in August 1997.
    2. LASC, an indirect wholly-owned subsidiary of Liberty Financial 
Companies, Inc. (``LFC''), is registered as an investment adviser under 
the Investment Advisers Act of 1940 (``Advisers Act''). LASC designs 
and supervises a continuous investment program for LVIT. LASC also is 
responsible for administering the operations of LVIT.
    3. LAMCO, an indirect wholly-owned subsidiary of LFC, is registered 
as an investment adviser under the Advisers Act. Pursuant to a 
management agreement among LVIT, LASC and LAMCO, LAMCO serves as a co-
adviser with LASC. LAMCO allocates and reallocates the LVIT All-Star 
Fund's portfolio among two or more independent investment management 
firms (``Sub-Advisers''), which are selected and recommended by LAMCO 
in accordance with LAMCO's multi-manager methodology.\1\ LVIT All-Star 
Fund currently has five Sub-Advisers. LAMCO's sole investment advisory 
function is comprised of the recommendation and monitoring of the Sub-
Advisers.\2\
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    \1\ The manner of operation and rationale of LAMCO's multi-
manager methodology and the substance and effect of the requested 
order have been disclosed in LVIT's prospectus since the effective 
day of the Post-Effective Amendment to the Registration Statement of 
LVIT, which added the LVIT All-Star Fund as a series of LVIT.
    \2\ Applicants also request an exemption for future multi-
managed series of LVIT advised by LAMCO and LASC and operated in 
substantially the same manner as the LVIT All-Star Fund (``Future 
Funds'').
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    4. The division of duties and responsibilities for the LVIT All-
Star Fund allows LAMCO to dedicate itself to the role of selecting and 
monitoring Sub-Advisers, leaving administrative responsibilities for 
the LVIT All-Star Fund to LASC. LAMCO is paid by LASC out of the fund 
management fee LASC receives from LVIT and, LAMCO, in turn, pays the 
Sub-Advisers a portion of this fee.
    5. The Sub-Advisers' responsibility is limited to the discretionary 
investment management of the respective portions of the LVIT All-Star 
Fund's portfolio assigned to them by LAMCO and related recordkeeping 
and reporting. All present and future Sub-Advisers of the LVIT All-Star 
Fund and of any Future Funds are and will be registered as investment 
advisers under the Advisers Act.
    6. Applicants request an exemption to permit LAMCO to enter into 
and materially amend advisory agreements with Sub-Advisers without 
obtaining shareholder approval. No exemptive relief is being sought for 
LVIT All-Star Fund's advisory agreement with LAMCO or LASC, which will 
remain subject to the shareholder approval requirements of the Act.

Applicants' Legal Analysis

    1. Section 15(a) of the Act makes it unlawful for any person to act 
as investment adviser to a registered investment company except 
pursuant to a written contract that has been approved by a majority 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. Applicants believe that under LAMCO's multi-manager methodology 
the Sub-Advisers function as the equivalent of individual portfolio 
managers in a conventional fund structure. Applicants state that VA 
Contract and VLI Policy holders selected the LVIT All-Star Fund with 
knowledge of LAMCO's multi-manager methodology and, in effect, 
determined to rely on LAMCO's ability to select, monitor, and replace 
the Sub-Advisers.
    3. Section 6(c) of the Act provides that the SEC may exempt any 
person, security, or transaction from any provision of the Act, if and 
to the extent that such exemption is necessary or appropriate in the 
public interest and consistent with the protection of investors and 
purposes fairly intended by the policy and provisions of the Act. 
Applicants believe that the requested relief meets this standard.

Applicants' Conditions

    Applicants agree that the requested order will be subject to the 
following conditions:
    1. Before a Future Fund that does not presently have an effective 
registration statement may rely on the order requested in this 
application, the operation of the Future Fund in the manner described 
in the application will be approved by its initial shareholder before 
shares of such Future Fund are made available to public VA Contract or 
VLI Policy purchasers.
    2. LVIT will disclose in its prospectus the existence, substance, 
and effect of any order granted pursuant to this application with 
respect to the LVIT All-Star Fund and any Future Fund. In addition, the 
LVIT All-Star Fund and any Future Fund will hold itself out to the 
public as employing the sub-adviser structure described in this 
application. The prospectus with respect to the LVIT All-Star Fund and 
any Future Fund will prominently disclose that LAMCO and LASC have the 
ultimate responsibility for the investment performance of such Funds 
due to LASC's responsibility to oversee LAMCO and LAMCO's 
responsibility to oversee the Sub-Advisers and recommend their hiring, 
termination, and replacement.
    3. Neither the LVIT All-Star Fund nor any Future Fund will enter 
into a sub-advisory agreement with any Sub-Adviser that is an 
``affiliated person,'' as defined in section 2(a)(3) of the Act, of 
LAMCO, LASC or the LVIT Funds other than by reason of serving as a Sub-
Adviser to one or more of the Funds (an ``Affiliated Sub-Adviser'') 
without such agreements, including the compensation to be paid 
thereunder, being approved by the holders of the VA Contracts and VLI 
Policies with assets allocated to any sub-account of a separate account 
for which the LVIT All-Star Fund or such Future Fund serves as a 
funding vehicle.
    4. At all times a majority of the board of trustees of LVIT will be 
persons each of whom is not an ``interested person'' (as defined in 
section 2(a)(19) of the Act) of the LVIT All-Star Fund or any Future 
Fund (the ``Independent Trustees''), and the nomination of new or 
additional Independent Trustees will be placed within the discretion of 
the then existing Independent Trustees.

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    5. No trustee or officer of LVIT or director of LAMCO or LASC will 
own directly or indirectly (other than through a pooled investment 
vehicle that is not controlled by any such trustee, director, or 
officer) any interest in any Sub-Adviser except for (i) ownership of 
interests in LAMCO, LASC, LFC, or any other entity that controls, is 
controlled by, or is under common control with LAMCO or LASC, 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 Sub-
Adviser or any entity that controls, is controlled by, or is under 
common control with a Sub-Adviser.
    6. When a change of Sub-Adviser is proposed for the LVIT All-Star 
Fund with an Affiliated Sub-Adviser, LVIT's trustees, including a 
majority of the Independent Trustees, will make a separate finding, 
reflected in LVIT's board minutes, that the change is in the best 
interests of LVIT and its shareholders \3\ and does not involve a 
conflict of interest from which LAMCO, LASC or the Affiliated Sub-
Adviser derives an inappropriate advantage.
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    \3\ The term ``shareholder'' of the LVIT All-Star Fund or any 
Future Fund includes the holders of the VA Contracts and VLI 
Policies for which the LVIT All-Star Fund and any Future Fund serves 
as the funding medium.
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    7. Within 90 days of the hiring of a Sub-Adviser, owners of VA 
Contracts or VLI Policies with assets allocated to any registered 
separate account for which the LVIT All-Star Fund or any Future Fund 
serves as a funding medium will be furnished all information about the 
Sub-Adviser and its sub-advisory agreement that would be included in a 
proxy statement, including any change in such disclosure caused by the 
addition of a new Sub-Adviser. LAMCO will meet this condition by 
providing shareholders within 90 days of the hiring of a Sub-Adviser, 
with an informal information statement meeting the requirements of 
Regulation 14C and Schedule 14C under the Securities Exchange Act of 
1934 (the ``Exchange Act''). Such information statement will also meet 
the requirements of Item 22 of Schedule 14A under the Exchange Act. The 
Participating Insurance Companies will ensure that the information 
statement is sent to each owner of a VA Contract or VLI Policy funded 
in whole or in part by shares of the LVIT All-Star fund or such Future 
Fund.
    8. LASC will provide general investment management services to the 
LVIT All-Star Fund, including overall supervisory responsibility for 
the general management and investment of the portfolio of the LVIT All-
Star Fund. LAMCO, subject to review and approval by LVIT's trustees, 
will: (i) Together with LASC, set overall investment strategies for the 
LVIT All-Star Fund; (ii) recommend Sub-Advisers; (iii) when appropriate 
allocate and reallocate the LVIT All-Star Fund's assets among the Sub-
Advisers; and (iv) monitor and evaluate the investment performance of 
the Sub-Advisers, including their compliance with the LVIT All-Star 
Fund's investment objectives, policies, and restrictions.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-9663 Filed 4-10-98; 8:45 am]
BILLING CODE 8010-01-M