[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]



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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.

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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'').
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    \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.
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    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'').
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    \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.
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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

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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