[Federal Register Volume 67, Number 219 (Wednesday, November 13, 2002)]
[Notices]
[Pages 68891-68893]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-28807]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25794 ; 812-12554]


Federated Index Trust, et al.; Notice of Application

November 6, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order 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: The order would permit applicants to enter 
into and materially amend subadvisory agreements without shareholder 
approval.

Applicants:  Federated Index Trust (the ``Trust'') and Federated 
Investment Management Company (``the Adviser'').

Filing Dates: The application was filed on June 21, 2001. Applicants 
have agreed to file an amendment during the notice period, the 
substance of which is reflected in this notice.

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 the 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 December 2, 2002, 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 5th Street, NW., Washington, DC 
20549-0609. Applicants, c/o Matthew G. Maloney, Esq., Dickstein Shapiro 
Morin & Oshinsky LLP, 2101 L Street, NW, Washington, DC 20037.

FOR FURTHER INFORMATION CONTACT: John Yoder, Attorney-Adviser, at (202) 
942-0544, or Nadya Roytblat, Assistant Director, 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 5th Street, NW, Washington, 
DC 20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. The Trust, a Massachusetts business trust, is registered under 
the Act as an open-end management investment company. The Trust 
currently offers four series (``Funds''), each of which has its own 
investment objectives, policies and restrictions. The Adviser is 
registered under the Investment Advisers Act of 1940 (the

[[Page 68892]]

``Advisers Act''), and serves as the investment adviser to the 
Funds.\1\
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    \1\ Applicants request that the relief also apply to any 
registered open-end investment company or series thereof that (a) is 
advised by the Adviser or any entity controlling, controlled by or 
under common control with the Adviser; (b) uses the management 
structure described in the application; and (c) complies with the 
terms and conditions of the requested order (included in the term 
``Funds'').
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    2. The Trust is the only existing investment company that currently 
intends to rely on the order. Applicants represent that if the name of 
any Fund should contain the name of a Subadviser, it will also contain 
the name of the Adviser, which will appear before the name of the 
Subadviser.
    3. The Adviser serves as the investment adviser to each Fund 
pursuant to an investment advisory agreement with the Trust (``Advisory 
Agreement'') that was approved by the board of trustees of the Trust 
(the ``Board''), including a majority of the Trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act 
(``Independent Trustees''), and the shareholders of each Fund. Under 
the terms of the Management Agreement, the Adviser provides supervision 
of the investments of the Funds and may, as permitted by the Board, 
hire one or more subadvisers (``Subadvisers'') to effect purchases and 
sales of portfolio securities pursuant to separate investment advisory 
agreements (``Subadvisory Agreements''). Each Subadviser is or will be 
an investment adviser registered under the Advisers Act. Subadvisers 
are recommended to the Board by the Adviser and selected and approved 
by the Board. Each Subadviser's fees are paid by the Adviser out of the 
management fees received by the Adviser from the respective Fund.
    4. The Adviser monitors the Funds and the Subadvisers and makes 
recommendations to the Board regarding allocation of assets between 
Subadvisers and is responsible for recommending the hiring, termination 
and replacement of Subadvisers. The Adviser recommends Subadvisers 
based on a number of factors used to evaluate their skills in managing 
assets pursuant to particular investment objectives.
    5. Applicants request relief to permit the Adviser, subject to the 
Board's approval, to enter into and materially amend Subadvisory 
Agreements without shareholder approval. The requested relief would not 
extend to any Subadviser that is an affiliated person, as defined in 
section 2(a)(3) of the Act, of the Trust or the Adviser, other than by 
reason of serving as a Subadviser to one or more of the Funds (an 
``Affiliated Subadviser'').

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 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, 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 state that the requested 
relief meets this standard for the reasons discussed below.
    3. Applicants assert that the Funds' shareholders rely on the 
Adviser to select the Subadvisers best suited to achieve a Fund's 
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 submit that the requested relief will reduce the 
Funds' expenses associated with shareholder meetings and proxy 
solicitations, and enable the Funds to operate more efficiently. 
Applicants also note that the Advisory Agreement will remain subject to 
section 15(a) of the Act and rule 18f-2 under the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Fund may rely on the requested order, the operation of 
the Fund, as described in this application, will be approved by the 
vote of a majority of the Fund's outstanding voting securities, as 
defined in the Act, or in the case of a Fund whose public shareholders 
purchased shares on the basis of a prospectus containing the disclosure 
contemplated by condition 2 below, by the initial shareholders before 
offering shares of that Fund to the public.
    2. Each Fund relying on the requested relief will disclose in its 
prospectus the existence, substance, and effect of any order granted 
pursuant to the application. In addition, each Fund will hold itself 
out to the public as employing the management structure described in 
the Application. The prospectus will prominently disclose that the 
Adviser has ultimate responsibility, subject to review of the Board, to 
monitor and evaluate Subadvisers and recommend their hiring, 
termination and replacement.
    3. At all times, a majority of the Board will be Independent 
Trustees, and the nomination of new or additional Independent Trustees 
will be at the discretion of the then-existing Independent Trustees.
    4. The Adviser will not enter into a Subadvisory Agreement with an 
Affiliated Subadviser without that agreement, including the 
compensation to be paid under it, being approved by the shareholders of 
the applicable Fund.
    5. When a Subadviser change is proposed for a Fund with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
Trust's Board minutes, that the change is in the best interests of the 
Fund and its shareholders, and does not involve a conflict of interest 
from which the Adviser or the Affiliated Subadviser derives an 
inappropriate advantage.
    6. Within 90 days of the hiring of any new Subadviser, the Adviser 
will furnish shareholders of the affected Fund with all information 
about the Subadviser that would be included in a proxy statement. The 
Adviser will meet this condition by providing shareholders of the 
applicable Fund 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.
    7. The Adviser will provide general management services to the 
Funds including overall supervisory responsibility for the general 
management and investment of each Fund's securities portfolio and, 
subject to review and approval by the Board, will (a) set each Fund's 
overall investment strategies; (b) evaluate, select, and recommend 
Subadvisers to manage all or a part of a Fund's assets; (c) when 
appropriate, allocate and reallocate the Fund's assets among multiple 
Subadvisers; (d) monitor and evaluate the performance of the 
Subadvisers; and (e) implement procedures reasonably designed to ensure 
that the Subadvisers comply with the Fund's investment objectives, 
restrictions and policies.
    8. No trustee or officer of the Trust or director or officer of the 
Adviser will

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own, directly or indirectly (other than through a pooled investment 
vehicle that is not controlled by any such director, trustee, or 
officer), any interest in a Subadviser except for: (a) ownership of 
interests in the Adviser or any entity that controls, is controlled by, 
or under common control with the Adviser, or (b) ownership of less than 
1% of the outstanding securities of any class of equity or debt 
securities of any publicly traded company that is either a Subadviser 
or an entity that controls, is controlled by, or is under common 
control with a Subadviser.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-28807 Filed 11-12-02; 8:45 am]
BILLING CODE 8010-01-P