[Federal Register Volume 67, Number 140 (Monday, July 22, 2002)]
[Notices]
[Pages 47872-47874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-18403]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25662; 812-12530]


Met Investors Series Trust and Met Investors Advisory LLC; Notice 
of Application

July 16, 2002.
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, under sections 6(c) and 
17(b) of the Act for an exemption from section 17(a) of the Act, and 
under section 17(d) of the Act and rule 17d-1 under the Act to permit 
certain joint transactions.

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    Summary of the Application: Applicants request an order that would 
permit certain registered open-end management investment companies to 
invest uninvested cash and cash collateral in affiliated money market 
funds in excess of the limits in sections 12(d)(1)(A) and (B) and the 
Act.
    Applicants: Met Investors Series Trust (the (``Trust''), all 
existing and future series of the Trust, and any other registered open-
end management investment company and its series that are currently on 
in the future advised by Met Investors Advisory LLC (the (``Adviser'') 
or any entity controlling, controlled by, or under common control with 
the Adviser (collectively, the ``Funds''), and the Adviser.
    Filing Dates: The application was filed on May 29, 2001, and 
amended on July 16, 2002.
    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 9, 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 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, 22 Corporate Plaza Drive, Newport Beach, CA 
92660.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 942-0581, 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 at the 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. The Trust is organized as a business trust under the laws of the 
State of Delaware and is an open-end management investment company 
registered under the Act. The Trust currently offers Class A, Class B, 
and Class E shares in 22 Funds, one of which is a money market fund 
subject to rule 2a-7 under the Act (together with any future Funds that 
are money market funds, the ``Money Market Funds;'' all other Funds 
that are not money market funds are collectively referred to as the 
(``Non-Money Market Funds'').\1\ Not all Funds offer Class A, Class B, 
or Class E shares. The Funds selling Class A shares sell such shares to 
qualified pension and profit sharing plans and to separate accounts of 
Metropolitan Life Insurance Company and its affiliates (collectively, 
``MetLife'') to fund variable annuity and variable life contracts. The 
Class B and Class E shares are sold exclusively to MetLife separate 
accounts.\2\ The Adviser serves as the investment adviser to each Fund 
and is registered as an investment adviser under the Investment 
Advisers Act of 1940 (the ``Advisers Act''). The Adviser selects other 
affiliated and unaffiliated investment advisers registered under the 
Advisers Act (``Subadvisers'') to manage the portfolio for each Fund.
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    \1\ All existing Funds that currently intend to rely on the 
order have been named as applicants, and any other existing or 
future Fund that subsequently relies on the order will comply with 
the terms and conditions in the application.
    \2\ Class C shares are authorized for all Funds; however, none 
are currently being offered.
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    2. Applicants state that each Non-Money Market Fund has, or may be 
expected to have, uninvested cash (``Uninvested Cash'') held by its 
custodian. Uninvested Cash may result from a variety of sources, 
including dividends or interest received from portfolio securities, 
unsettled securities transactions, strategic reserves, matured 
investments, proceeds from liquidation of investment securities, and 
new investor capital. The Non-Money Market Funds also may receive cash 
(``Cash Collateral,'' and together with Uninvested Cash, ``Cash 
Balances'') in connection with a securities lending program 
(``Securities Lending Agreement'') between the Trust and State Street 
Bank and Trust Company (``State Street'') under which a Non-Money 
Market Fund may lend its portfolio securities to registered broker-
dealers or other institutional investors. Pursuant to the Securities 
Lending

[[Page 47873]]

Agreement, State Street serves as the securities lending agent for the 
Funds. State Street is not affiliated with the Adviser, the 
Subadvisers, or any of their affiliates. The Securities Lending 
Agreement requires that the loans be continuously secured by collateral 
equal at all times to at least the market value of the securities 
loaned.
    3. Applicants request an order to permit a Non-Money Market Fund to 
use its Cash Balances to purchase and redeem shares of a Money Market 
Fund, and the Money Market Fund to sell shares to and redeem shares as 
requested by the Non-Money Market Fund. Applicants believe that the 
ability to invest Cash Balances in Money Market Funds will benefit the 
Non-Money Market Funds by providing higher rates of return, ready 
liquidity, and increased diversification.

Applicants' Legal Analysis

    1. Section 12(d)(1)(A) of the Act provides that no registered 
investment company may acquire securities of another investment company 
if the securities represent more than 3% of the acquired company's 
outstanding voting stock, more than 5% of the acquiring company's total 
assets, or, together with the securities of other acquired investment 
companies, more than 10% of the acquiring company's total assets. 
Section 12(d)(1)(B) of the Act provides that no registered open-end 
investment company may sell its securities 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.
    2. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any persons 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) to permit the Non-Money Market Funds to invest Cash 
Balances in the Money Market Funds in excess of the limitations in 
sections 12(d)(1)(A) and (B).
    3. Applicants submit that the proposed transactions do not 
implicate the abuses that sections 12(d)(1)(A) and (B) were intended to 
prevent. Applicants state that each of the Money Market Funds will be 
managed specifically to maintain a highly liquid portfolio and will not 
be susceptible to undue control due to the threat of large scale 
redemptions. Applicants also submit that there will be no layering of 
fees because no sales load, redemption fee or asset based distribution 
fee will be charged in connection with the purchase and sale of shares 
of the Money Market Funds. To the extent that both a Money Market Fund 
and Non-Money Market Fund charge a service fee as defined in rule 2830 
of the conduct rules of the National Association of Securities Dealers 
(``NASD Conduct Rules''), the Adviser will waive its advisory fee for 
each Non-Money Market Fund in an amount that offsets the amount of the 
fee incurred by the Non-Money Market Fund. If a Money Market Fund 
offers more than one class of shares, each Non-Money Market Fund will 
invest only in the class with the lowest expense ratio at the time of 
the investment. Before approving any advisory contract with the Adviser 
or a Subadviser for a Non-Money Market Fund, the board of trustees of 
the Fund (``Board''), including a majority of the trustees who are not 
``interested persons'' as defined in section 2(a)(19) of the Act 
(``Independent Trustees''), will consider to what extent, if any, the 
advisory fees charged to the Non-Money Market Fund by the Adviser and 
the Subadviser should be reduced to account for the reduced services 
provided to the Non-Money Market Fund by the Adviser and the Subadviser 
as a result of Uninvested Cash being invested in the Money Market Fund. 
No Money Market Fund will acquire shares of any other investment 
company in excess of the limits in section 12(d)(1)(A) of the Act.
    4. Section 17(a) of the Act makes it unlawful for any affiliated 
person of a registered investment company, or an affiliated person of 
the affiliated person, acting as principal, to sell or purchase any 
security to or from the company. Section 2(a)(3) of the Act defines an 
affiliated person of an investment company to include any person 
directly or indirectly controlling, controlled by, or under common 
control with the investment company. Applicants state that because the 
Funds share a common investment adviser and have identical Boards, each 
Fund may be deemed to be under common control and affiliated persons of 
one another. As a result, section 17(a) would prohibit the sale of the 
shares of a Money Market Fund to a Non-Money Market Fund and the 
redemption of the shares by the Non-Money Market Funds.
    5. Section 17(b) of the Act provides that the Commission may exempt 
a transaction from section 17(a) if the terms of the proposed 
transaction, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, and the proposed transaction is consistent with the 
policy of each registered investment company concerned and the general 
purposes of the Act. Section 6(c) of the Act permits the Commission to 
exempt persons or transactions from any provision of the Act if the 
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.
    6. Applicants submit that the request for relief satisfies the 
standards of sections 17(b) and 6(c). Applicants state that the 
proposed transactions are reasonable and fair and would not involve 
overreaching because shares of the Money Market Fund will be purchased 
and redeemed by the Non-Money Market Funds at net asset value. 
Applicants also note that the Non-Money Market Funds will retain their 
ability to invest their Cash Balances directly in money market 
instruments in accordance with their investment objectives and 
policies. Applicants state that each Money Market Fund may discontinue 
selling its shares to any of the Non-Money Market Funds if the Board of 
the Money Market Fund determines that the sale would adversely affect 
the Money Market Fund's portfolio management and operations.
    7. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of an investment company, acting as principal, 
from participating in or effecting any transaction in connection with 
any joint enterprise or joint arrangement in which the investment 
company participates. Applicants state that the Funds, by participating 
in the proposed transactions, and the Adviser and Subadvisers, by 
managing the proposed transactions, could be deemed to be participating 
in a joint arrangement within the meaning of section 17(d) and rule 
17d-1.
    8. In considering whether to permit a joint transaction under rule 
17d-1, the Commission considers whether the investment company's 
participation in the joint enterprise is consistent with the 
provisions, policies, and purposes of the Act, and the extent to which 
the participation is on a basis different from or less advantageous 
than that of other participants. Applicants submit that the Funds will 
participate in the proposed transactions on the same basis and will be 
indistinguishable from any other shareholder and that the transactions 
will be consistent with the Act.

[[Page 47874]]

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The shares of the Money Market Funds sold to and redeemed by the 
Non-Money Market Funds will not be subject to a sales load, redemption 
fee or distribution fee under a plan adopted in accordance with rule 
12b-1 under the Act. To the extent that both a Money Market Fund and a 
Non-Money Market Fund may charge a service fee (as defined in rule 
2830(b)(9) of the NASD Conduct Rules), the Adviser will waive its 
advisory fee for each Non-Money Market Fund in an amount that offsets 
the amount of the service fee incurred by the Non-Money Market Fund.
    2. Before the next meeting of the Board of a Non-Money Market Fund 
is held for the purpose of voting on an advisory contract with the 
Adviser or a Subadviser under section 15 of the Act, the Adviser and 
Subadviser will provide the Board with specific information regarding 
the approximate costs to the Adviser and Subadviser of, or portion of 
the advisory fee under the existing advisory contract with the Adviser 
and the Subadviser attributable to, managing the Uninvested Cash of the 
Non-Money Market Fund, the Board, including a majority of the 
Independent Trustees, shall consider to what extent, if any, the 
advisory fees charged to the Non-Money Market Fund by the Adviser and 
the Subadviser as a result of Uninvested Cash being invested in the 
Money Market Funds. The Non-Money Market Fund's minute books will 
record fully the Board's considerations in approving the advisory 
contract with the Adviser or a Subadviser, including the considerations 
relating to fees referred to above.
    3. Each Non-Money Market Fund will invest Uninvested Cash in, and 
hold shares of, the Money Market Funds only to the extent that the Non-
Money Market Fund's aggregate investment of Uninvested Cash in the 
Money Market Funds does not exceed 25 percent of the Non-Money Market 
Fund's total assets. For purposes of this limitation, each Non-Money 
Market Fund or series thereof will be treated as a separate investment 
company.
    4. Investment of Cash Balances in shares of the Money Market Funds 
will be in accordance with each Non-Money Market Fund's respective 
investment restrictions, if any, and will be consistent with each Non-
Money Market Fund's policies as set forth in its prospectus and 
statement of additional information.
    5. The Non-Money Market Funds and the Money Market Funds will be 
advised by the Adviser or a person controlling, controlled by, or under 
common control with the Adviser.
    6. No Money Market Fund will require securities of an investment 
company in excess of the limits contained in section 12(d)(1)(A) of the 
Act.
    7. Before a Fund may participate in the Securities Lending 
Agreement, a majority of its Board, including a majority of the 
Independent Trustees, will approve the Fund's participation in the 
Securities Lending Agreement. The Board also will evaluate the 
Securities Lending Agreement and its results no less frequently than 
annually and determine that any investment of Cash Collateral in the 
Money Market Funds is in the best interest of the shareholders of the 
Fund.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-18403 Filed 7-19-02; 8:45 am]
BILLING CODE 8010-01-M