[Federal Register Volume 66, Number 152 (Tuesday, August 7, 2001)]
[Notices]
[Pages 41272-41274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-19698]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25098; 812-12168]


Sage Life Assurance of America, Inc. et al.; Notice of 
Application

August 1, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 12(d)(1)(J) 
of the Investment Company Act of 1940 (the ``Act'') for an exemption 
from sections 12(d)(1)(A) and (B) of the Act and under sections 6(c) 
and 17(b) of the Act for an exemption from section 17(a) of the Act.

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Summary of Application

    Applicants request an order that would permit them to implement a 
``fund of funds'' arrangement. The fund of funds would invest in other 
funds that are part of the same group of investment companies and in 
funds that are not part of the same group of investment companies in 
reliance on section 12(d)(1)(F) of the Act.

[[Page 41273]]

    Applicants: Sage Life Assurance of American, Inc. (``Sage Life''), 
Sage Life Assurance Co. of New York (``Sage Life/NY''), Sage Advisors, 
Inc. (``SAI''), Sage Distributors, Inc. (``SDI''), and Sage Life 
Investment Trust (the ``Trust'').
    Filing Dates: The application was filed on July 7, 2000 and was 
amended on June 19, 2001.
    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 27, 2001, and should be accompanied by proof of 
service on the 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; Applications, c/o James E. Bronsdon, Esq., Sage Life 
Assurance of America, Inc., 300 Atlantic Street, 3rd Floor, Stamford, 
CT 06901.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at 
(202) 942-0527 (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 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (telephone (202) 942-8090.

Applicant's Representations

    1. Sage Life is a stock life insurance company organized and 
existing under the laws of the state of Delaware. Sage Life/NY is a 
stock insurance corporation organized in 1998 existing under the laws 
of the State of New York. Sage Group Limited is a South African 
corporation.
    2. The Trust is a Delaware business trust registered under the Act 
as an open-end management investment company. The Trust currently 
consists of five series (each a ``Series''). SAI is registered under 
the Investment Advisers Act of 1940 and serves as investment adviser to 
the Trust. Sage Distributors, Inc. (``SDI'') is a registered broker-
dealer and a member firm of the National Association of Securities 
Dealers, Inc. (``NASD''). SDI is the principal underwriter of the 
Trust.
    3. Applicants request relief to permit the Series and any other 
registered open-end management investment company or series thereof 
that is part of the ``same group of investment companies'' (as defined 
in section 12(d)(1)(G)(ii) of the Act) as the Trust (collectively, the 
``Asset Allocation Funds'') to purchase shares of a Series of the Trust 
and other registered open-end management investment companies or their 
series, now existing or created in the future, that are part of the 
same ``group of investment companies'' as the Asset Allocation Funds 
(the ``Underlying Funds'').\1\ The Asset Allocation Funds also would 
invest in shares of other registered open-end management investment 
companies that are not part of the same ``group of investment 
companies'' as the Trust (the ``Other Funds'') in reliance on section 
12(d)(1)(F) of the Act. In addition to investing in the Underlying 
Funds and the Other Funds, the Asset Allocation Funds also may invest 
in a limited array of fixed income securities.
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    \1\ The existing registered open-end management investment 
company that currently intends to rely on the order is named as an 
applicant. Any registered open-end management investment company 
that relies on the order in the future will do so only in accordance 
with the terms and conditions of the application.
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    4. Shares of the Trust are currently, and shares of the Asset 
Allocation Funds will be, offered to variable contract separate 
accounts of Sage. Applicants state that the Asset Allocation Funds will 
be specifically designed to provide asset allocation for variable 
contract owners. In the future, shares of the Trust and shares of the 
Asset Allocation Funds may be offered to separate accounts of insurers 
not affiliated with Sage to fund variable contracts issued by such 
insurance companies. Shares of the Trust may also be offered in the 
future directly to qualified plans.

Applicants' Legal Analysis

Section 12(d)(1) of the Act

    1. Section 12(d)(1)(A) of the Act prohibits a registered investment 
company from acquiring shares of an investment company if the 
securities represent more than 3% of the acquired company's outstanding 
total voting stock, more than 5% of the acquiring company's total 
assets, or if such securities, together with the securities of any 
other investment companies, represent more than 10% of the acquired 
company's total assets. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company from selling its shares 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 investment companies generally.
    2. Section 12(d)(1)(G) of the Act provides that section 12(d)(1) 
shall not apply to the securities of a registered open-end investment 
company acquired by a registered open-end investment company if the 
acquired company and the acquiring company are part of the same group 
of investment companies, provided that certain other requirements 
contained in section 12(d)(1)(G) are met. Applicants state that they 
may not rely on section 23(d)(1)(G) because an Asset Allocation Fund 
will invest in shares of both the Underlying Funds and the Other Funds 
as well as fixed-income securities.
    3. Section 12(d)(1)(J) 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 section 
12(d)(1) if the exemption is consistent with the public interest and 
the protection of investors. Applicants request relief under section 
12(d)(1)(J) of the Act to permit the Asset Allocation Funds to invest 
in the Underlying Funds and to permit an Underlying Fund to sell shares 
to an Asset Allocation Fund beyond the limits in sections 12(d)(1)(A) 
and 12(d)(1)(B). The Asset Allocation Funds will purchase shares of the 
Other Funds in reliance on section 12(d)(1)(F) of the Act.
    4. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 12(d)(1)(A) and (B), 
which includes concerns about undue influence by a fund of funds over 
underlying funds, excessive layering of fees, and overly complex fund 
structures. Because the Asset Allocation Funds and the Underlying Funds 
are part of the same group of investment companies, Applicants submit 
that there is little risk for SAI to exercise inappropriate control 
over the Underlying Funds.
    5. Applicants further state that the proposed conditions would 
appropriately address any concerns about the layering of advisory fees, 
sales charges, and other fees. Applicants state that the arrangements 
would not become overly complex because the Underlying Funds and Other 
Funds will not invest in other investment companies in excess of the 
limits of section 12(d)(1)(A).

[[Page 41274]]

Section 17(a) of the Act

    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and an affiliated 
person of a registered investment company or an affiliated person of 
such person acting as principal. Section 2(a)(3) of the Act defines an 
``affiliated person'' of another person to include: (a) Any person that 
directly or indirectly owns, controls, or holds with a power to vote 5% 
or more of the outstanding voting securities of the other person; (b) 
any person 5% or more of whose outstanding voting securities are 
directly or indirectly owned, controlled, or held with power to vote by 
the other person; and (c) any person directly or indirectly 
controlling, controlled by, or under common control with the other 
person.
    2. Applicants state that the Asset Allocation Funds and the 
Underlying Funds may be deemed to be affiliated persons of one another 
by virtue of being under the common control of SAI. Applicants also 
state that an Asset Allocation Fund and an Underlying Fund might be 
deemed affiliated persons if the Asset Allocation Fund acquires more 
than 5% of the Underlying Fund's outstanding voting securities. In 
light of these possible affiliations, section 17(a) could prevent an 
Underlying Fund from selling shares to and redeeming shares from an 
Asset Allocation Fund.
    3. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise prohibited by section 17(a) if 
it finds that (a) the terms of the proposed transaction are fair and 
reasonable and do not involve overreaching on the part of any person 
concerned; (b) the proposed transaction is consistent with the policies 
of the registered investment company involved; and (c) the proposed 
transaction is consistently with the general purposes of the Act. 
Section 6(c) of the Act permits the Commission to exempt any person or 
transactions 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 policy 
and provisions of the Act.
    4. Applicants submit that the proposed arrangement satisfies the 
standards for relief under sections 17(b) and 6(c) of the Act. 
Applicants state that the terms of the proposed transactions are fair 
and do not involve overreaching. Applicants note that the consideration 
paid for the sale and redemption of shares of the Underlying Funds will 
be based on net asset values of the Underlying Funds. Applicants also 
state that the proposed arrangement will be consistent with the 
policies of each Asset Allocation Fund and the general purposes of the 
Act.

Applicants' Conditions

    Applicants agree that any order of the Commission granting the 
requested relief will be subject to the following conditions:
    1. All underlying Funds and the Asset Allocation Funds will be part 
of the same ``group of investment companies,'' as defined in section 
12(d)(1)(G)(ii) of the Act.
    2. No Underlying Fund or Other Fund will acquire securities of any 
other investment company in excess of the limits contained in section 
12(d)(1)(A) of the Act, except to the extent that such Underlying Fund 
or Other Fund(a) receives securities of another investment company as a 
dividend or as a result of a plan of reorganization of a company (other 
than a plan devised for the purpose of evading section 12(d)(1) of the 
Act); or (b) acquires (or is deemed to have acquired) securities of 
another investment company pursuant to exemptive relief from the 
Commission permitting such Underlying Fund or Other Fund to (i) acquire 
securities of one or more affiliated investment companies for short-
term cash management purposes; or (ii) engage in interfund borrowing 
and lending transactions.
    3. With respect to separate accounts that invest in an Asset 
Allocation Fund, no sales load will be charged at the Asset Allocation 
Fund level or at the Underlying Fund/Other Fund level. Sales charges 
and service fees (as defined in rule 2830(d) of the Conduct Rules of 
the NASD), if any, will only be charged at the Asset Allocation Fund or 
at the Underlying Fund/Other Fund level, not both. With respect to 
other investments in an Asset Allocation Fund, any sales charges and or 
service fees (as those terms are defined in rule 2830(d) of the Conduct 
Rules of the NASD) charged with respect to shares of an Asset 
Allocation Fund will not exceed the limits set forth in rule 2830 
applicable to a fund of funds (as defined in NASD Conduct rule 2830).
    4. Before approving any advisory contract under section 15 of the 
Act, the board of trustees of an Asset Allocation Fund, including a 
majority of the trustees who are not ``interested persons,'' as defined 
in section 2(a)(19) of the Act, will find that the advisory fees 
charged under the Asset Allocation Fund's contract are based on 
services provided that are in addition to, rather than duplicative of, 
services provided under the advisory contract of any Underlying Fund or 
Other Fund. This finding, and the basis upon which the finding was 
made, will be recorded fully in the minute books of the Asset 
Allocation Fund.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-19698 Filed 8-6-01; 8:45 am]
BILLING CODE 8010-01-M