[Federal Register Volume 64, Number 71 (Wednesday, April 14, 1999)]
[Notices]
[Pages 18452-18454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-9315]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23777; 812-11568]


American Skandia Trust and American Skandia Investment Services, 
Inc.; Notice of Application

April 8, 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.

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SUMMARY: Applicants American Skandia Trust (the ``Fund''), on behalf of 
its series AST Putnam Value Growth & Income Portfolio, AST Putnam 
International Equity Portfolio and AST Putnam Balanced Portfolio (the 
``Portfolios''), and American Skandia Investment Services, Inc. (the 
``Manager'') seek an order to permit the implementation, without 
shareholder approval, of new investment sub-advisory agreements 
(``Interim Agreements'') following the resignation of the investment 
sub-adviser to the Portfolios. The order would cover a period beginning 
on the date that the termination of the existing sub-advisory agreement 
becomes effective (the ``Effective Date'') and continue for a period of 
up to 150 days (but in no event later than September 30, 1999) (the 
``Interim Period''). The order also would permit the payment of fees 
earned under the Interim Agreements during the Interim Period, 
following shareholder approval.

FILING DATE: The application was filed on April 8, 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

[[Page 18453]]

by 5:30 p.m. on April 29, 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, Securities and Exchange Commission, 450 Fifth 
Street, NW, Washington, DC 20549-0609. Applicants, One Corporate Drive, 
P.O. Box 883, Shelton, Conn. 06484-0883.

FOR FURTHER INFORMATION CONTACT: 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 Fifth Street, NW, Washington, 
DC 20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. The Fund, a Massachusetts business trust, is registered under 
the Act as an open-end management investment company. The Fund is 
organized as a series company consisting of 29 series, including the 
Portfolios. The Manager is registered under the Investment Advisers Act 
of 1940 (the ``Advisers Act'') and is the investment adviser to each of 
the Portfolios.
    2. The advisory agreements between the Portfolios and the Manager 
(the ``Management Agreements'') allow the Manager to engage a sub-
adviser for each Portfolio, subject to the approval of the board of 
trustees of the Fund (the ``Board'') and the shareholders of the 
Portfolios. Under this authority, the Manager entered into investment 
sub-advisory agreements for each Portfolio (the ``Existing 
Agreements'') with Putnam Investment Management, Inc. (``Putnam''), an 
investment adviser registered under the Advisers Act. The Existing 
Agreements have been approved by the Board and the shareholders of the 
Portfolios in accordance with section 15 of the Act. On March 4, 1999, 
Putnam gave written notice of its intent to resign as sub-adviser to 
each of the Portfolios (the ``Resignation''). The Effective Date of the 
Resignation is scheduled for May 3, 1999. Applicants state that the 
terms and timing of the Resignation were wholly determined by Putnam 
without advance discussion with applicants, and were not reasonably 
foreseeable by the Fund or the Manager.
    3. Applicants state that they have conducted preliminary 
discussions with candidate organizations to serve as investment sub-
advisers to the Portfolios (``Successor Sub-advisers'') but have not 
completed the evaluation process and identified the best candidate or 
negotiated terms and conditions of the new investment sub-advisory 
agreements for the Portfolios (the ``New Agreements''). Any Successor 
Sub-adviser will be an investment adviser registered or exempt from 
registration under the Advisers Act. Once applicants have identified an 
appropriate candidate as Successor Sub-adviser and negotiated terms and 
conditions of a New Agreement, the Board, including a majority of the 
trustees who are not interested persons (as defined in section 2(a)(19) 
of the Act) of the Manager or the proposed Successor Sub-Adviser 
(``Independent Trustees''), will meet to approve the Interim Agreements 
and the New Agreements in accordance with section 15(c) of the Act. The 
Board currently is scheduled to meet on April 21, 1999.
    4. Applicants request an exemption (a) to permit the implementation 
during the Interim Period, without shareholder approval, of the Interim 
Agreements with the Successor Sub-advisers, and (b) to permit the 
Successor Sub-advisers to receive from the Manager, upon approval of 
the New Agreements by the Portfolios' shareholders, all fees earned 
during the Interim Period. Applicants state that the Interim Agreements 
will contain substantially the same terms and conditions as the 
Existing Agreements, except for their effective and termination dates 
and the name of the Successor Sub-adviser.
    5. Applicants propose to enter into an escrow agreement with an 
unaffiliated financial institution (``Escrow Agent''). The portion of 
the investment advisory fees payable to the Successor Sub-adviser 
during the Interim Period under the Interim Agreements would be paid by 
the Manager into an interest-bearing escrow account maintained by the 
Escrow Agent. The amounts in the escrow account (including any interest 
earned on such paid fees) would be paid to the Successor Sub-adviser 
only upon approval of the New Agreements by each Portfolio's 
shareholders. In the absence of such approval, the amounts will be paid 
to the applicable Portfolio. The Board will be notified before any 
amounts are released from the escrow account.

Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in pertinent part, that it 
shall be unlawful for any person to serve or act as investment adviser 
of a registered investment company, except pursuant to a written 
contract that has been approved by the vote of a majority of the 
outstanding voting securities of such registered investment company. 
Rule 15a-4 under the Act provides, in pertinent part, that if an 
investment advisory contract with a registered investment company is 
terminated by certain events set forth in section 15(a) of the Act, an 
adviser may serve for 120 days under a written contract that has not 
been approved by the company's shareholders, provided that (a) the new 
contract is approved by that company's board of directors (including a 
majority of non-interested directors) and (b) the compensation to be 
paid under the new contract does not exceed the compensation that would 
have been paid under the contract most recently approved by the 
company's shareholders. Applicants state that the Resignation is not a 
termination of an advisory contract by an event set forth in section 
15(a) of the Act that is set forth in rule 15a-4 under the Act.
    2. Section 6(c) of the Act provides that the Commission 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 
the purposes fairly intended by the policy and provisions of the Act. 
Applicants believe that the requested relief meets this standard.
    3. Applicants submit that the terms and timing of the Resignation 
and subsequent termination of the Existing Agreements were wholly 
determined by Putnam, without advance discussion with applicants, and 
were not foreseeable. Applicants state that the Effective Date does not 
provide the Board with sufficient time to perform adequately its 
responsibilities in identifying a Successor Sub-adviser, negotiating 
the New Agreements, soliciting proxies, and securing shareholder 
approval of the New Agreements. Applicants contend that, under the 
circumstances, acceleration of the shareholder approval process would 
not be in the best interests of shareholders.
    4. Applicants state that the requested relief will allow for the 
continued conduct of the Portfolios' investment program, without 
disruption, during the Interim Period, and facilitate the orderly and 
reasonable consideration of the

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New Agreements by shareholders. Applicants state that the Board, 
including the Independent Trustees, will undertake the review required 
by section 15(c) of the Act and that the scope and quality of services 
provided to the Portfolios by the Successor Sub-adviser during the 
Interim Period will be at least equivalent to that provided under the 
Existing Agreements. Applicants also state that such services will be 
provided at fees unchanged from the fees paid under the Existing 
Agreements.

Applicants' Conditions

    Applicants agree that the requested order will be subject to the 
following conditions:
    1. The Interim Agreement for each Portfolio will have substantially 
the same terms and conditions as the Existing Agreement for such 
Portfolio, except for the name of the Successor Sub-adviser, the 
effective and termination dates and the inclusion of escrow 
arrangements.
    2. The advisory fees payable by the Manager to the Successor Sub-
adviser for each Portfolio during the Interim Period will not be 
greater than the fees payable under the Existing Agreement. The portion 
of the advisory fees payable by the Manager to the Successor Sub-
adviser during the Interim Period will be maintained in an interest-
bearing escrow account, and amounts in the escrow account (including 
interest earned on such amounts) will be paid (a) to the Successor Sub-
adviser after the requisite approval of the New Agreement for such 
Portfolio is obtained, or (b) to the Portfolio in the absence of such 
approval.
    3. Each Portfolio will promptly schedule a meeting of shareholders 
to vote on approval of its New Agreement to be held on or before the 
150th day following the termination of its Existing Agreement (but in 
no event later than September 30, 1999).
    4. The Manager will take, and the Successor Sub-adviser for each 
Portfolio will be required to take, all appropriate steps so that the 
scope and quality of sub-advisory services provided to the Portfolio 
during the Interim Period will be at least equivalent, in the judgment 
of the Fund's Board, including the Independent Trustees, to the scope 
and quality of services previously provided under the Existing 
Agreement for the Portfolio.
    5. The Board of the Fund, including a majority of the Independent 
Trustees, will have approved the Interim Agreement and the New 
Agreement for each Portfolio in accordance with the requirements of 
section 15(c) of the Act prior to termination of the Existing Agreement 
for the Portfolio.
    6. The costs of preparing and filing the application and the costs 
related to the solicitation of shareholder approval of the New Sub-
advisory Agreements will be borne by the Portfolios, provided that the 
Board of Trustees, including a majority of the Independent Trustees, 
determines that the Manager or a controlling person of the Manager will 
not directly or indirectly receive money or other benefit, including, 
but not limited to, an increased portion of the fees under the 
Management Agreements for the Portfolios or a reduced level of 
responsibility, in connection with the New Sub-advisory Agreements.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-9315 Filed 4-13-99; 8:45 am]
BILLING CODE 8010-01-M