[Federal Register Volume 67, Number 137 (Wednesday, July 17, 2002)]
[Notices]
[Pages 47006-47007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-17916]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25655; 812-12640]


The Phoenix Edge Series Fund and Phoenix Variable Advisors, Inc.; 
Notice of Application

July 10, 2002.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application for an exemption under section 6(c) of 
the Investment Company Act of 1940 (``Act'') from section 15(a) of the 
Act and rule 18f-2 under the Act.

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    Summary of Application: The order would permit applicants to enter 
into and materially amend subadvisory agreements without shareholder 
approval.
    Applicants: The Phoenix Edge Series Fund (the ``Fund'') and Phoenix 
Variable Advisors, Inc. (the ``Advisor'').
    Filing Dates: The application was filed on September 26, 2001, and 
amended on July 9, 2002.
    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 August 
5, 2002, 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 may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549-
0609. Applicants, One American Row, P.O. Box 5056, Hartford, CT, 06102-
5056.

FOR FURTHER INFORMATION CONTACT: Keith A. Gregory, Senior Counsel, at 
(202) 942-0611, or Mary Kay Frech, 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 SEC's Public Reference Branch, 450 Fifth Street, NW, Washington, DC 
20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. The Fund is a Massachusetts business trust registered under the 
Act as an open-end management investment company. The Fund is presently 
comprised of twenty-seven series, each with its own investment 
objectives, policies, and restrictions. Shares of the Fund are 
currently offered only to the separate accounts of Phoenix Life 
Insurance Company (``Phoenix''), PHL Variable Insurance Company, and 
Phoenix Life and Annuity Company to fund benefits under variable 
annuity and variable life insurance contracts issued by those 
companies.
    2. The Advisor, a Delaware corporation, serves as the investment 
adviser to certain series of the Fund that use the management structure 
described in the application (each a ``Series'' and collectively, the 
``Series'') \1\. The Advisor is registered under the Investment 
Advisers Act of 1940 (the ``Advisers Act'') and is an indirect, wholly 
owned subsidiary of Phoenix.
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    \1\ The Applicants also request relief with respect to current 
or future series of the Fund and any other registered open-end 
management investment companies and their series that: (a) Are 
advised by the Advisor or any entity controlling, controlled by, or 
under common control with the Advisor; (b) use the management 
structure described in the application; and (c) comply with the 
terms and conditions in the application (``Future Series,'' included 
in the term ``Series''). The Fund is the only registered open-end 
management investment company that currently intends to rely on the 
requested order. Applicants state that if a Series has the name of 
any Subadvisor, as defined below, in the Series' name, the Series' 
name will be preceded by the name of the Advisor (such as 
``Phoenix,'' which is the name of the Advisor in conducting its 
business) or the name of the entity controlling, controlled by, or 
under common control with the Advisor that serves as the primary 
adviser to such Series.
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    3. The Fund, on behalf of the Series, has entered into an 
investment advisory agreement with the Advisor (the ``Advisory 
Agreement''), pursuant to which the Advisor serves as the investment 
adviser to the Series. The Advisory Agreement has been approved by a 
majority of the Fund's board of trustees (``Board''), including a 
majority of the trustees who are not ``interested persons,'' as defined 
in section 2(a)(19) of the Act, of the Fund or the Advisor 
(``Independent Trustees''), and each Series' shareholder(s). Under the 
terms of the Advisory Agreement, the Advisor, subject to oversight by 
the Board, has supervisory responsibility for the investment program of 
each Series. The Advisor also evaluates, selects, and recommends 
subadvisors (``Subadvisors'') to manage all or a portion of the assets 
of each Series. Each Subadvisor is, or will be, an investment adviser 
registered, or exempt from registration, under the Advisers Act, and 
performs services pursuant to a written agreement with the Advisor 
(``Subadvisory Agreement''). As compensation for its services, the 
Advisor receives a fee from the Fund at annual rates based on a 
percentage of the applicable Series' average daily net assets. Each 
Subadvisor will be paid by the Advisor out of the fees received by the 
Advisor from the Series.
    4. The Advisor selects Subadvisors based on continuing quantitative 
and qualitative evaluation of their skills and proven abilities in 
managing assets pursuant to a specific investment style. The Advisor 
monitors compliance of Subadvisors with the investment objectives and 
related policies of each Series and reviews the performance of each 
Subadvisor in order to assure continuing quality of performance. The 
Advisor may recommend to the Board reallocation of Series' assets among 
Subadvisors, if necessary, or recommend that the Fund employ or 
terminate particular Subadvisors, to the extent the Advisor deems 
appropriate to achieve the overall objectives of a particular Series.
    5. Applicants request an order to permit the Advisor, subject to 
oversight by the Board, to enter into and materially amend Subadvisory 
Agreements without obtaining shareholder approval. The requested relief 
will not extend to any Subadvisor that is an affiliated person, as 
defined in section 2(a)(3) of the Act, of the Fund or the Advisor, 
other than by reason of serving as a Subadvisor to one or more of the 
Series (``Affiliated Subadvisor''). None of the current Subadvisors is 
an Affiliated Subadvisor.

Applicants' 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 adviser to a registered 
investment company except pursuant to a written contract that has been 
approved by a vote of the company's outstanding voting securities. Rule 
18f-2 under the Act provides, in relevant part, that each series or 
class of stock in a series company affected by a matter must approve 
the matter if the Act requires shareholder approval.
    2. Section 6(c) of the Act authorizes the Commission to exempt 
persons or transactions from the provisions of the

[[Page 47007]]

Act to the extent that the exemption is necessary or appropriate in the 
public interest and consistent with the protection of investors and the 
purposes fairly intended by the policies 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 them to 
enter into and materially amend Subadvisory Agreements without 
shareholder approval.
    3. Applicants assert that shareholders rely on the Advisor to 
select and monitor the Subadvisors best suited to achieve a Series' 
investment objectives. Applicants assert that, from the perspective of 
the investor, the role of the Subadvisors is comparable to that of 
individual portfolio managers employed by other investment advisory 
firms. Applicants contend that requiring shareholder approval of the 
Subadvisory Agreements would impose expenses and unnecessary delays on 
the Series, and may preclude the Advisor from acting promptly in a 
manner considered advisable by the Board. Applicants note that the 
Advisory Agreement will remain fully 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 the order granting the requested relief will 
be subject to the following conditions:
    1. The Advisor will not enter into a Subadvisory Agreement with any 
Affiliated Subadvisor without that agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Series (or, if the Series serves as a funding medium 
for any sub-account of a registered separate account, pursuant to 
voting instructions provided by owners of the variable annuity 
contracts and variable life insurance contracts (``Contract Owners'') 
who have allocated assets to that sub-account).
    2. At all times, a majority of the Board will be Independent 
Trustees, subject to the suspension of this requirement for the death, 
disqualification or bona fide resignation of trustees as provided by 
rule 10e-1 under the Act, and the nomination of new or additional 
Independent Trustees will be at the discretion of the then-existing 
Independent Trustees.
    3. When a Subadvisor change is proposed for a Series with an 
Affiliated Subadvisor, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
Board minutes, that the change is in the best interests of the Series 
and its shareholders (or, if the Series serves as a funding medium for 
any sub-account of a registered separate account, in the best interests 
of the Series and the Contract Owners who have allocated assets to that 
sub-account), and does not involve a conflict of interest from which 
the Advisor or the Affiliated Subadvisor derives an inappropriate 
advantage.
    4. Before a Series may rely on the requested order, the operation 
of the Series in the manner described in the application will be 
approved by a majority of the Series' outstanding voting securities, 
(or, if the Series serves as a funding medium for any sub-account of a 
registered separate account, pursuant to voting instructions provided 
by Contract Owners who have allocated assets to that sub-account) or, 
in the case of a Series whose public shareholders (or Contract Owners 
through a sub-account of a registered separate account) purchase shares 
on the basis of a prospectus containing the disclosure contemplated by 
condition 6 below, by the initial shareholder(s) before offering shares 
of that Series to the public (or to Contract Owners through a sub-
account of a registered separate account).
    5. The Advisor will provide general management services to the Fund 
and its Series, including overall supervisory responsibility for the 
general management and investment of each Series' securities portfolio, 
and, subject to review and approval by the Board, will: (a) Set the 
Series' overall investment strategies; (b) evaluate, select and 
recommend Subadvisors to manage all or part of a Series' assets; (c) 
allocate and, when appropriate, reallocate a Series' assets among 
multiple Subadvisors; (d) monitor and evaluate the performance of 
Subadvisors; and (e) implement procedures reasonably designed to ensure 
that the Subadvisors comply with the relevant Series' investment 
objectives, policies and restrictions.
    6. Each Series relying on the requested order will disclose in its 
prospectus the existence, substance, and effect of any order granted 
pursuant to the application. In addition, each Series will hold itself 
out to the public as employing the management structure described in 
the application. The prospectus will prominently disclose that the 
Advisor has the ultimate responsibility (subject to oversight by the 
Board) to oversee the Subadvisors and recommend their hiring, 
termination, and replacement.
    7. No trustee or officer of the Fund or officer or director of the 
Advisor will own directly or indirectly (other than through a pooled 
investment vehicle that is not controlled by that trustee, director or 
officer), any interest in a Subadvisor, except for: (a) Ownership of 
interests in the Advisor or any entity that controls, is controlled by, 
or is under common control with the Advisor; or (b) 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 Subadvisor or an entity that 
controls, is controlled by, or is under common control with a 
Subadvisor.
    8. Within 90 days of the hiring of any new Subadvisor, shareholders 
of the Series (or, if the Series serves as a funding medium for any 
sub-account of a registered separate account, Contract Owners who have 
allocated assets to that sub-account) will be furnished all information 
about the new Subadvisor that would be included in a proxy statement, 
including any change in such disclosure caused by an addition of a new 
Subadvisor. To meet this condition, the Series will provide 
shareholders (or Contract Owners) 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, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-17916 Filed 7-16-02; 8:45 am]
BILLING CODE 8010-01-P