[Federal Register Volume 69, Number 184 (Thursday, September 23, 2004)]
[Notices]
[Pages 57104-57110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2347]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26600; 812-12462]


Federated Investors, Inc., et al.

September 17, 2004.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 12(d)(1)(J) of 
the Investment Company Act of 1940 (``Act'') for exemptions from, 
alternatively, sections 12(d)(1)(A) and (B) of the Act, section 
12(d)(1)(F)(ii) of the Act, and section 12(d)(1)(G)(i)(II) 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: The order would permit, alternatively, certain 
registered open-end management investment companies (a) to acquire 
shares of other registered open-end management investment companies 
that are within and outside the same group of investment companies, (b) 
to invest pursuant to section 12(d)(1)(F) of the Act but charge a sales 
load in excess of 1\1/2\% and (c) to invest pursuant to section 
12(d)(1)(G) of the Act but invest also in securities and other 
financial instruments.

Applicants: Federated Investors, Inc. (``Federated''); Federated 
Advisory Services Company, Federated Equity Management Company of 
Pennsylvania, Federated Global Investment Management Corp., Federated 
Investment Counseling, Federated Investment Management Company, 
Passport Research Ltd. and Passport Research II, Ltd. (together with 
entities controlling, controlled by or under common control with these 
entities, the ``Federated Advisers''); Brown Brothers Harriman & Co., 
CB Capital Management, Inc., Hibernia National Bank, M&I Investment 
Management Corp., Morgan Asset Management, Inc., Provident Investment 
Advisors, Inc., SouthTrust Bank, MTB Investment Advisors, Inc., 
WesBanco Bank, Inc., BB&T Asset Management, Inc., and Huntington Asset 
Advisors, Inc. (together with entities controlling, controlled by or 
under common control with these entities, the ``Proprietary Advisers'' 
and with the Federated Advisers, the ``Advisers''); Cash Trust Series, 
Cash Trust Series, Inc., Cash Trust Series II, Federated American 
Leaders Fund, Inc., Federated Adjustable Rate Securities Fund (formerly 
Federated ARMs Fund), Federated Core Trust, Federated Core Trust II, 
L.P., Federated Equity Funds, Federated Equity Income Fund, Inc., 
Federated Fixed Income Securities, Inc., Federated GNMA Trust, 
Federated Government Income Securities, Inc., Federated High Income 
Bond Fund, Inc., Federated High Yield Trust, Federated Income 
Securities Trust, Federated Income Trust, Federated Index Trust, 
Federated Institutional Trust, Federated Insurance Series, Federated 
International Series, Inc., Federated Investment Series Funds, Inc., 
Federated Limited Duration Government Fund, Inc. (formerly Federated 
Adjustable Rate U.S. Government Fund, Inc.), Federated Managed 
Allocation Portfolios, Federated Municipal Opportunities Fund, Inc., 
Federated Municipal Securities Fund, Inc., Federated Municipal 
Securities Income Trust, Federated Short-Term Municipal Trust, 
Federated Stock and Bond Fund, Inc., Federated Stock Trust, Federated 
Total Return Government Bond Fund (formerly Federated U.S. Government

[[Page 57105]]

Securities Fund: 5-10 Years), Federated Total Return Series, Inc., 
Federated U.S. Government Bond Fund, Federated U.S. Government 
Securities Fund: 1-3 Years, Federated U.S. Government Securities Fund: 
2-5 Years, Federated World Investment Series, Inc., Intermediate 
Municipal Trust, Edward Jones Money Market Fund (formerly Edward D. 
Jones & Co. Daily Passport Cash Trust), Edward Jones Tax-Free Money 
Market Fund, and Money Market Obligations Trust (together with any 
future registered open-end investment company advised by a Federated 
Adviser and in the same ``group of investment companies,'' as defined 
in section 12(d)(1)(G)(ii) of the Act, the ``Federated Funds''); BBH 
Prime Institutional Money Market Fund, Inc., BBH Common Settlement Fund 
II, Inc., BBH Fund, Inc., BBH Money Market Portfolio, BBH Trust, Golden 
Oak Family of Funds, Hibernia Funds, Marshall Funds, Inc., Regions 
Morgan Keenan Select Funds (formerly Regions Funds), The Provident 
Riverfront Funds, SouthTrust Funds, MTB Group of Funds (formerly Vision 
Group of Funds), WesMark Funds, BB&T Funds, and The Huntington Funds 
(together with any future registered open-end investment company 
advised by a Proprietary Adviser and in the same group of investment 
companies, the ``Proprietary Funds,'' and together with the Federated 
Funds, the ``Funds'').\1\
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    \1\ All Funds that currently intend to rely on the order are 
named as applicants. Any other investment company that relies on the 
order in the future will comply with the terms and conditions of the 
application. Applicants intend to amend the order periodically to 
enable future Proprietary Advisers that are not controlling, 
controlled by, or under common control with any of the current 
applicant Proprietary Advisers, and the Proprietary Funds advised by 
any of these Proprietary Advisers, to rely on the requested relief. 
Any such future applications to amend the order will be filed by 
Federated, the new Proprietary Adviser and the new Proprietary 
Fund(s).

Filing Date: The application was filed on March 2, 2001 and amended on 
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June 13, 2001 and on September 10, 2004.

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 October 12, 2004, 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 Victor R. Siclari, Esq., Reed Smith LLP, 
Federated Investors Tower, 1001 Liberty Avenue--12th Floor, Pittsburgh, 
PA 15222-3779.

FOR FURTHER INFORMATION CONTACT: Stacy L. Fuller, Senior Counsel, or 
Michael W. Mundt, Senior Special Counsel, 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 20549-0101, (202) 942-8090.

Applicants' Representations

    1. Each of the Funds is an open-end management investment company 
registered under the Act. Certain of the Funds are comprised of 
separate series (each series, also a ``Fund''). Each Adviser is 
registered under the Investment Advisers Act of 1940.\2\
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    \2\ Three of the Proprietary Advisers are registered, and render 
investment advisory services, through a separately identifiable 
department or division: Hibernia National Bank is registered, and 
rends investment advisory services, through Hibernia Asset 
Management; SouthTrust Bank is registered, and renders investment 
advisory services, through SouthTrust Investment Advisers; WesBanco 
Bank, Inc. is registered, and renders investment advisory services, 
through WesBanco Investment Department.
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    2. Applicants request relief to permit (a) certain Funds 
(``Investing Funds'') to acquire shares of registered open-end 
management investment companies that are part of the same ``group of 
investment companies,'' as defined in section 12(d)(1)(G)(ii) of the 
Act, as the Investing Funds (``Same Group Funds'') and shares of 
registered open-end management investment companies that are not part 
of the same group of investment companies as the Investing Funds 
(``Other Group Funds'') in excess of the limits set forth in section 
12(d)(1)(A) of the Act, and the Same Group Funds and Other Group Funds 
to sell their shares to the Investing Funds in excess of the limits set 
forth in section 12(d)(1)(B) of the Act,\3\ (b) Investing Funds that 
invest in Other Group Funds pursuant to section 12(d)(1)(F) of the Act 
to charge a sales load in excess of 1\1/2\% and (c) Investing Funds 
that invest in Same Group Funds pursuant to section 12(d)(1)(G) of the 
Act also to invest, to the extent described in the relevant prospectus, 
in, among other things, domestic and foreign common and preferred 
stock, debt obligations, futures transactions, options on the foregoing 
and other instruments, including money market instruments (``Direct 
Investments'').\4\ Applicants also seek relief, to the extent 
necessary, to permit Same Group Funds and Other Group Funds that become 
affiliated persons of an Investing Fund to sell shares to, and redeem 
shares from, the Investing Fund.\5\
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    \3\ The following Funds currently intend to serve as Investing 
Funds: Federated American Leaders Fund, Inc., Federated Adjustable 
Rate Securities Fund (formerly Federated ARMs Fund), Federated 
Equity Funds, Federated Equity Income Fund, Inc., Federated Fixed 
Income Securities, Inc., Federated Government Income Securities, 
Inc., Federated High Income Bond Fund, Inc., Federated High Yield 
Trust, Federated Income Securities Trust, Federated Income Trust, 
Federated International Series, Inc., Federated Investment Series 
Funds, Inc., Federated Limited Duration Government Fund, Inc. 
(formerly Federated Adjustable Rate U.S. Government Fund, Inc.), 
Federated Managed Allocation Portfolios, Federated Stock and Bond 
Fund, Inc., Federated Stock Trust, Federated Total Return Government 
Bond Fund (formerly Federated U.S. Government Securities Fund: 5-10 
Years), Federated Total Return Series, Inc. and Federated World 
Investment Series, Inc.; and certain portfolios of BB&T Funds, MTB 
Group of Funds (formerly Vision Group of Funds), The Huntington 
Funds and Marshall Funds, Inc.
    \4\ Direct Investments will not include shares of any registered 
investment companies that are not in the same group of investment 
companies as the Investing Fund.
    \5\ Applicants state that the relief requested in the 
application is not intended to permit Investing Funds to purchase 
shares of Same Group Funds that are money market funds as part of a 
cash management program.
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    3. Applicants state that each Investing Fund will provide a 
consolidated and efficient means through which investors will have 
access to a comprehensive investment vehicle through which advice in 
several types of investment securities will be available. Applicants 
assert that, in the absence of such a vehicle, investors would have to 
evaluate and acquire shares of each Same Group Fund and Other Group 
Fund separately in light of their investment goals.

Applicants' Legal Analysis

A. Sections 12(d)(1)(A) and (B) of the Act

    1. Section 12(d)(1)(A) prohibits a registered investment company 
from acquiring shares of another registered investment company if the 
securities represent more than 3% of the total outstanding voting stock 
of the acquired company, more than 5% of the total assets of the 
acquiring company or, together with the securities of other investment 
companies, more than 10% of the total assets of the acquiring company. 
Section 12(d)(1)(B) prohibits a

[[Page 57106]]

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 outstanding voting stock 
or more than 10% of the acquired company's voting stock to be owned by 
investment companies generally.
    2. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security or transaction from any provisions of 
section 12(d)(1), if the exemption is consistent with the public 
interest and the protection of investors. Applicants seek an exemption 
under section 12(d)(1)(J) to permit Investing Funds to acquire shares 
of Same Group Funds and Other Group Funds, and Same Group Funds and 
Other Group Funds to sell their shares to Investing Funds, beyond the 
limits set forth in sections 12(d)(1)(A) and (B).
    3. Applicants state that the proposed arrangement will be 
structured to mitigate the potential abuses from which sections 
12(d)(1)(A) and (B) are designed to protect investors, such as undue 
influence by a fund of funds over underlying funds, excessive layering 
of fees and overly complex fund structures. Accordingly, applicants 
believe that the requested exemption is consistent with the public 
interest and the protection of investors.
    4. Applicants state that the proposed arrangement will not result 
in undue influence by an Investing Fund or its affiliates over any Same 
Group Fund or Other Group Fund. To limit the influence that an 
Investing Fund may have over an Other Group Fund, applicants propose a 
condition prohibiting (a)(i) the Adviser of an Investing Fund, (ii) any 
person controlling, controlled by or under common control with the 
Adviser and (iii) any investment company or issuer that would be an 
investment company but for section 3(c)(1) or 3(c)(7) of the Act 
advised or sponsored by the Adviser or any person controlling, 
controlled by or under common control with the Adviser (``Adviser 
Group''), and (b)(i) any investment adviser within the meaning of 
section 2(a)(20)(B) of the Act (``Subadviser'') of an Investing Fund, 
(ii) any person controlling, controlled by or under common control with 
the Subadviser and (iii) any investment company or issuer that would be 
an investment company but for section 3(c)(1) or 3(c)(7) of the Act (or 
portion of such investment company or issuer) advised or sponsored by 
the Subadviser or any person controlling, controlled by or under common 
control with the Subadviser (``Subadviser Group''), from controlling 
(individually or in the aggregate) an Other Group Fund within the 
meaning of section 2(a)(9) of the Act.
    5. Applicants also propose conditions A.2-A.7, stated below, to 
preclude an Investing Fund and its affiliated entities from taking 
advantage of an Other Group Fund with respect to transactions between 
the entities and to ensure the transactions will be on an arm's length 
basis. Condition A.2 precludes an Investing Fund and its Adviser, any 
Subadviser, promoter, principal underwriter and any person controlling, 
controlled by or under common control with any of these entities (each, 
an ``Investing Fund Affiliate'') from causing any existing or potential 
investment by the Investing Fund in an Other Group Fund to influence 
the terms of any services or transactions between the Investing Fund or 
an Investing Fund Affiliate and the Other Group Fund or its investment 
adviser(s), promoter, principal underwriter and any person controlling, 
controlled by or under common control with any of these entities (each, 
an ``Other Group Fund Affiliate''). Condition A.5 precludes an 
Investing Fund and Investing Fund Affiliates (except to the extent they 
are acting in their capacity as an investment adviser to an Other Group 
Fund) from causing an Other Group Fund to purchase a security in an 
offering of securities during the existence of any underwriting or 
selling syndicate of which a principal underwriter is an officer, 
director, member of an advisory board, Adviser, Subadviser or employee 
of the Investing Fund, or a person of which any such officer, director, 
member of an advisory board, Adviser, Subadviser or employee is an 
affiliated person (each, an ``Underwriting Affiliate,'' except any 
person whose relationship to the Other Group Fund is covered by section 
10(f) of the Act is not an Underwriting Affiliate). An offering of 
securities during the existence of any underwriting or selling 
syndicate of which a principal underwriter is an Underwriting Affiliate 
is an ``Affiliated Underwriting.''
    6. In addition, as an assurance that an Other Group Fund 
understands the implications of an investment by an Investing Fund 
operating in reliance on the request from sections 12(d)(1)(A) and (B), 
prior to any investment by the Investing Fund in the Other Group Fund 
in excess of the limit set forth in section 12(d)(1)(A)(i), condition 
A.8 requires the Investing Fund and the Other Group Fund to execute an 
agreement stating, without limitation, that their boards and their 
investment advisers understand the terms and conditions of the order 
and agree to fulfill their responsibilities under the order. Applicants 
note that the Other Group Fund has the right to reject an investment 
from an Investing Fund.
    7. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. With respect to investment advisory 
fees, applicants state that, prior to reliance on the order and 
subsequently in connection with the approval of any investment advisory 
contract under section 15 of the Act, the board of directors or 
trustees of an Investing Fund (``Board''), including a majority of the 
directors or trustees who are not ``interested persons,'' as defined in 
section 2(a)(19) of the Act (``Independent Trustees''), will find that 
any investment advisory fees charged to the Investing Fund under its 
investment advisory contract(s) are based on services provided that are 
in addition to, rather than duplicative of, services provided under the 
investment advisory contract(s) of any Same Group Fund and Other Group 
Fund, unless (a) the Adviser to the Investing Fund waives the advisory 
fees payable by the Investing Fund in an amount that offsets the amount 
of advisory fees incurred by the Investing Fund as a result of 
investing in the Same Group Fund or Other Group Fund or (b) advisory 
fees are charged only at the Investing Fund level, or at the Same Group 
Fund or Other Group Fund level. Applicants further state, with respect 
to investments in an Other Group Fund outside the limits of sections 
12(d)(1)(A) and (B), the Adviser to an Investing Fund will waive fees 
otherwise payable to the Adviser by the Investing Fund in an amount at 
least equal to any compensation (including fees received pursuant to a 
plan adopted by the Other Group Fund under rule 12b-1 under the Act 
(``12b-1 Fees'')) received from the Other Group Fund by the Adviser, or 
an affiliated person of the Adviser, other than any advisory fees paid 
to the Adviser or its affiliated person, in connection with the 
investment by the Investing Fund in the Other Group Fund. Applicants 
also state that any Subadviser to an Investing Fund will waive fees 
otherwise payable to the Subadviser by the Investing Fund in an amount 
at least equal to any compensation received from the Other Group Fund 
by the Subadviser, or an affiliated person of the Subadviser, other 
than any advisory fees paid to the Subadviser or its affiliated person, 
in connection with the investment by the Investing Fund in the Other 
Group Fund made at the direction of the Subadviser. Applicants agree 
that the benefit of any

[[Page 57107]]

such waiver by a Subadviser will be passed through to the Investing 
Fund.
    8. Applicants represent that the aggregate sales charges and/or 
service fees (as defined in the Conduct Rules of the National 
Association of Securities Dealers (``NASD Conduct Rules'')) charged 
with respect to shares of any Investing Fund will not exceed the limits 
applicable to funds of funds set forth in rule 2830 of the NASD Conduct 
Rules (``Rule 2830''). Moreover, the prospectus and sales literature of 
an Investing Fund that operates in reliance on the relief requested 
from sections 12(d)(1)(A) and (B) will contain concise, ``plain 
English'' disclosure tailored to the particular document designed to 
inform investors of the unique characteristics of the fund of funds 
structure, including but not limited to, its expense structure and the 
additional expenses of investing in Same Group Funds and Other Group 
Funds.
    9. Applicants contend that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that Same Group Funds 
and Other Group Funds will be prohibited from acquiring securities of 
any investment company or company relying on section 3(c)(1) or 3(c)(7) 
of the Act in excess of the limits contained in section 12(d)(1)(A), 
except to the extent that such Same Group Fund or Other Group 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)) or (b) acquires 
(or is deemed to have acquired) securities of another investment 
company pursuant to exemptive relief from the Commission permitting 
such Same Group Fund or Other Group 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.

B. Section 12(d)(1)(F) of the Act

    1. Section 12(d)(1)(F) provides that section 12(d)(1) will not 
apply to the acquisition by a registered investment company of the 
securities of an investment company if, among other things, the 
acquiring company and its affiliates immediately after the purchase own 
no more than 3% of the acquired company's total outstanding stock and 
the acquiring company does not charge a sales load of more than 1\1/2\% 
on sales of its shares. Applicants state that the proposed arrangement 
would comply with the provisions of section 12(d)(1)(F), except for the 
sales load limit of 1\1/2\%.
    2. Applicants seek an exemption under section 12(d)(1)(J) exempting 
them from section 12(d)(1)(F)(ii) to permit Investing Funds that invest 
in Other Group Funds pursuant to section 12(d)(1)(F) to impose a sales 
load in excess of 1\1/2\%. Applicants agree, as a condition to any 
order granting the relief, that any sales charges and/or service fees 
(as defined in Rule 2830) charged with respect to shares of an 
Investing Fund will not exceed the limits applicable to funds of funds 
set forth in Rule 2830.

C. Section 12(d)(1)(G) of the Act

    1. Section 12(d)(1)(G) provides that section 12(d)(1) will not 
apply to securities of a registered open-end investment company 
purchased by another registered open-end investment company, if (a) the 
acquiring company and the acquired company are part of the same group 
of investment companies, (b) the acquiring company holds only 
securities of acquired companies that are part of the same group of 
investment companies, government securities, and short-term paper, (c) 
the aggregate sales loads and distribution-related fees of the 
acquiring company and the acquired company are limited in certain 
respects and (d) the acquired company has a policy that generally 
prohibits it from acquiring securities of registered investment 
companies in reliance on section 12(d)(1)(F) or (G). Applicants state 
that the proposed arrangement would comply with the provisions of 
section 12(d)(1)(G), but for the fact that an Investing Fund will 
invest in Direct Investments in addition to Same Group Funds.
    2. Applicants request an order under section 12(d)(1)(J) exempting 
them from section 12(d)(1)(G)(i)(II) to permit Investing Funds that 
invest pursuant to section 12(d)(1)(G) to make Direct Investments. 
Applicants assert that permitting Investing Funds to invest in Direct 
Investments, as described in the application, would not raise the 
concerns underlying section 12(d)(1)(G).

D. Section 17(a) of the Act

    1. Section 17(a) generally prohibits purchases and sales of 
securities, on a principal basis, between a registered investment 
company and any affiliated person or promoter of, or principal 
underwriter for, the company, and affiliated persons of such persons. 
Section 2(a)(3) of the Act defines an ``affiliated person'' of another 
person to include, among other things, any person directly or 
indirectly owning, controlling or holding with power to vote 5% or more 
of the other's outstanding voting securities; 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; any person 
directly or indirectly controlling, controlled by or under common 
control with the other person; and any investment adviser to an 
investment company.
    2. Section 17(b) 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, including the 
consideration to be paid and received, 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 each registered 
investment company concerned; and (c) the proposed transaction is 
consistent with the general purposes of the Act. Section 6(c) permits 
the Commission to exempt any person or transaction, or any class or 
classes of persons or transactions from any provisions 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.
    3. Applicants state that a Same Group Fund or an Other Group Fund 
might be deemed to be an affiliated person of an Investing Fund if the 
Investing Fund acquires 5% or more of the Same Group Fund's or Other 
Group Fund's outstanding voting securities. Applicants also state that 
since certain of the Investing Funds, Same Group Funds and Other Group 
Funds may be advised, subadvised, administered and/or distributed by 
Federated or an entity controlling, controlled by or under common 
control with Federated, or share common officers and/or directors, they 
may be deemed to be under common control and, therefore, affiliated 
persons of each other. Accordingly, section 17(a) could prevent a Same 
Group Fund or an Other Group Fund from selling shares to, and redeeming 
shares from, an Investing Fund.
    4. Applicants seek an exemption under sections 6(c) and 17(b) to 
allow the proposed transactions. Applicants state that the transactions 
satisfy the standards for relief under sections 6(c) and 17(b). 
Specifically, applicants state that the terms of the transactions are 
fair and reasonable and do not involve overreaching. Applicants 
represent that the proposed transactions will be consistent with the 
policies of each Investing Fund, Same Group Fund and

[[Page 57108]]

Other Group Fund, and with the general purposes of the Act. In 
addition, applicants note that the consideration paid in sales and 
redemptions permitted under the requested order of shares of Same Group 
Funds and Other Group Funds will be based on the net asset values of, 
respectively, the Same Group Funds and Other Group Funds.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    A. With respect to Investing Funds that purchase shares of Same 
Group Funds and Other Group Funds outside the limit set forth in 
sections 12(d)(1)(A) and (B) and are not relying on section 12(d)(1)(F) 
or (G), or the exemptions therefrom requested in the application:
    1. The members of the Adviser Group will not control (individually 
or in the aggregate) an Other Group Fund within the meaning of section 
2(a)(9) of the Act. The members of the Subadviser Group will not 
control (individually or in the aggregate) an Other Group Fund within 
the meaning of section 2(a)(9) of the Act. If, as a result of a 
decrease in the outstanding voting securities of an Other Group Fund, 
the Adviser Group or the Subadviser Group, each in the aggregate, 
becomes a holder of more than 25% of the outstanding voting securities 
of an Other Group Fund, it will vote its shares of the Other Group Fund 
in the same proportion as the vote of all other holders of the Other 
Group Fund's shares. This condition shall not apply to the Subadviser 
Group with respect to an Other Group Fund for which the Subadviser or a 
person controlling, controlled by or under common control with the 
Subadviser acts as the investment adviser within the meaning of section 
2(a)(20)(A) of the Act.
    2. No Investing Fund or Investing Fund Affiliate will cause any 
existing or potential investment by the Investing Fund in shares of an 
Other Group Fund to influence the terms of any services or transactions 
between the Investing Fund or an Investing Fund Affiliate and the Other 
Group Fund or an Other Group Fund Affiliate.
    3. The Board of the Investing Fund, including a majority of the 
Independent Trustees, will adopt procedures reasonably designed to 
assure that the Adviser and any Subadviser to the Investing Fund are 
conducting the investment program of the Investing Fund without taking 
into account any consideration received by the Investing Fund or an 
Investing Fund Affiliate from an Other Group Fund or an Other Group 
Fund Affiliate in connection with any services or transactions.
    4. Once an investment by an Investing Fund in the securities of an 
Other Group Fund exceeds the limit of section 12(d)(1)(A)(i), the board 
of directors or trustees of the Other Group Fund, including a majority 
of the Independent Trustees, will determine that any consideration paid 
by the Other Group Fund to the Investing Fund or an Investing Fund 
Affiliate in connection with any services or transactions: (a) Is fair 
and reasonable in relation to the nature and quality of the services 
and benefits received by the Other Group Fund; (b) is within the range 
of consideration that the Other Group Fund would be required to pay to 
another unaffiliated entity in connection with the same services or 
transactions; and (c) does not involve overreaching on the part of any 
person concerned. This condition does not apply with respect to any 
services or transactions between an Other Group Fund and its investment 
adviser(s), or any person controlling, controlled by or under common 
control with such investment adviser(s).
    5. No Investing Fund or Investing Fund Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to an 
Other Group Fund) will cause an Other Group Fund to purchase a security 
in any Affiliated Underwriting.
    6. The board of directors or trustees of an Other Group Fund, 
including a majority of the Independent Trustees, will adopt procedures 
reasonably designed to monitor any purchases of securities by the Other 
Group Fund in Affiliated Underwritings once an investment by an 
Investing Fund in the securities of the Other Group Fund exceeds the 
limit of section 12(d)(1)(A)(i) of the Act, including any purchases 
made directly from an Underwriting Affiliate. The board will review 
these purchases periodically, but no less frequently than annually, to 
determine whether the purchases were influenced by the investment by an 
Investing Fund in shares of the Other Group Fund. The board should 
consider, among other things, (a) whether the purchases were consistent 
with the investment objectives and policies of the Other Group Fund, 
(b) how the performance of securities purchased in an Affiliated 
Underwriting compares to the performance of comparable securities 
purchased during a comparable period of time in underwritings other 
than Affiliated Underwritings or to a benchmark such as a comparable 
market index, and (c) whether the amount of securities purchased by the 
Other Group Fund in Affiliated Underwritings and the amount purchased 
directly from an Underwriting Affiliate have changed significantly from 
prior years. The board shall take any appropriate actions based on its 
review, including, if appropriate, the institution of procedures 
designed to assure that purchases of securities in Affiliated 
Underwritings are in the best interests of shareholders.
    7. Each Other Group Fund shall maintain and preserve permanently in 
an easily accessible place a written copy of the procedures described 
in the preceding condition, and any modifications, and shall maintain 
and preserve for a period not less than six years from the end of the 
fiscal year in which any purchase in an Affiliated Underwriting 
occurred, the first two years in an easily accessible place, a written 
record of each purchase of securities in Affiliated Underwritings once 
an investment by an Investing Fund in the securities of the Other Group 
Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting 
forth from whom the securities were acquired, the identity of the 
underwriting syndicate's members, the terms of the purchase and the 
information or materials upon which the board's determinations were 
made.
    8. Prior to its investment in shares of an Other Group Fund in 
excess of the limit set forth in section 12(d)(1)(A)(i), an Investing 
Fund and the Other Group Fund will execute an agreement stating, 
without limitation, that their boards of directors or trustees and 
their investment advisers understand the terms and conditions of the 
order and agree to fulfill their responsibilities under the order. At 
the time of its investment in shares of an Other Group Fund in excess 
of the limit set forth in section 12(d)(1)(A)(i), an Investing Fund 
will notify the Other Group Fund of the investment. At such time the 
Investing Fund will also transmit to the Other Group Fund a list of 
names of each Investing Fund Affiliate and Underwriting Affiliate. The 
Investing Fund will notify the Other Group Fund of any changes to the 
list of names as soon as reasonably practicable after a change occurs. 
The Other Group Fund and the Investing Fund will maintain and preserve 
a copy of the order, the agreement, and the list with any updated 
information for the duration of the investment and for a period of not 
less than six years thereafter, the first two years in an easily 
accessible place.
    9. Prior to reliance on the requested order, the Board of each 
Investing Fund, including a majority of the Independent Trustees, shall 
find that the advisory

[[Page 57109]]

fees, if any, charged under an Investing Fund's advisory contract(s) 
are based on services provided that are in addition to, rather than 
duplicative of, services provided pursuant to any Same Group Fund's and 
Other Group Fund's advisory contract(s). Such finding, and the basis 
upon which the finding was made, will be recorded fully in the minute 
books of the appropriate Investing Fund; provided, however, that no 
such determination shall be necessary where either (a) the Adviser to 
the Investing Fund waives the advisory fees payable by the Investing 
Fund in an amount that offsets the amount of advisory fees incurred by 
the Investing Fund as a result of investing in the Same Group Fund or 
Other Group Fund or (b) advisory fees are only charged at either the 
Investing Fund level, the Other Group Fund level or the Same Group Fund 
level. In addition, in connection with the approval of any investment 
advisory contract pursuant to section 15 of the Act subsequent to such 
initial determination, the Board of each Investing Fund, including a 
majority of the Independent Trustees, shall find that the advisory 
fees, if any, charged under the Investing Fund's advisory contract(s) 
are based on services provided that are in addition to, rather than 
duplicative of, services provided pursuant to any Same Group Fund's and 
Other Group Fund's advisory contract(s). Such finding, and the basis 
upon which the finding was made, will be recorded fully in the minute 
books of the appropriate Investing Fund; provided, however, that no 
such determination shall be necessary where either (a) the Adviser to 
the Investing Fund waives the advisory fees payable by the Investing 
Fund in an amount that offsets the amount of advisory fees incurred by 
the Investing Fund as a result of investing in the Same Group Fund or 
Other Group Fund or (b) advisory fees are only charged at either the 
Investing Fund level, the Other Group Fund level or the Same Group Fund 
level.
    10. Each Adviser will waive fees otherwise payable to the Adviser 
by an Investing Fund in an amount at least equal to any compensation 
(including 12b-1 Fees) received from an Other Group Fund by the 
Adviser, or an affiliated person of the Adviser, other than any 
advisory fees paid to the Adviser or its affiliated person by the Other 
Group Fund, in connection with the investment by the Investing Fund in 
the Other Group Fund. Any Subadviser will waive fees otherwise payable 
to the Subadviser, directly or indirectly, by an Investing Fund in an 
amount at least equal to any compensation received from an Other Group 
Fund by the Subadviser, or an affiliated person of the Subadviser, 
other than any advisory fees paid to the Subadviser or its affiliated 
person by the Other Group Fund, in connection with the investment by 
the Investing Fund in the Other Group Fund made at the direction of the 
Subadviser. In the event that the Subadviser waives fees, the benefit 
of any waiver will be passed through to the Investing Fund.
    11. Any sales charges and/or service fees (as defined in Rule 2830) 
charged with respect to shares of an Investing Fund will not exceed the 
limits applicable to funds of funds set forth in Rule 2830.
    12. No Same Group Fund or Other Group Fund will acquire securities 
of any investment company or company relying on section 3(c)(1) or 
3(c)(7) of the Act in excess of the limits contained in section 
12(d)(1)(A), except to the extent that such Same Group Fund or Other 
Group 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)), or 
(b) acquires (or is deemed to have acquired) securities of another 
investment company pursuant to exemptive relief from the Commission 
permitting such Same Group Fund or Other Group 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.
    B. With respect to Investing Funds that purchase shares of Other 
Group Funds in compliance with section 12(d)(1)(F), except that the 
Investing Fund may charge a sales load in excess of the limitation in 
section 12(d)(1)(F)(ii):
    1. The Investing Funds will comply with section 12(d)(1)(F) in all 
respects, except for the sales load limitation of section 
12(d)(1)(F)(ii).
    2. Any sales charges and/or service fees (as defined in Rule 2830) 
charged with respect to shares of an Investing Fund will not exceed the 
limits applicable to funds of funds set forth in Rule 2830.
    3. Prior to reliance on the requested order, the Board of each 
Investing Fund, including a majority of the Independent Trustees, shall 
find that the advisory fees, if any, charged under an Investing Fund's 
advisory contract(s) are based on services provided that are in 
addition to, rather than duplicative of, services provided pursuant to 
any Other Group Fund's advisory contract(s). Such finding, and the 
basis upon which the finding was made, will be recorded fully in the 
minute books of the appropriate Investing Fund; provided, however, that 
no such determination shall be necessary where either (a) the Adviser 
to the Investing Fund waives the advisory fees payable by the Investing 
Fund in an amount that offsets the amount of advisory fees incurred by 
the Investing Fund as a result of investing in the Other Group Fund or 
(b) advisory fees are only charged at either the Investing Fund level 
or Other Group Fund level. In addition, in connection with the approval 
of any investment advisory contract pursuant to section 15 of the Act 
subsequent to such initial determination, the Board of each Investing 
Fund, including a majority of the Independent Trustees, shall find that 
the advisory fees, if any, charged under the Investing Fund's advisory 
contract(s) are based on services provided that are in addition to, 
rather than duplicative of, services provided pursuant to any Other 
Group Fund's advisory contract(s). Such finding, and the basis upon 
which the finding was made, will be recorded fully in the minute books 
of the appropriate Investing Fund; provided, however, that no such 
determination shall be necessary where either (a) the Adviser to the 
Investing Fund waives the advisory fees payable by the Investing Fund 
in an amount that offsets the amount of advisory fees incurred by the 
Investing Fund as a result of investing in the Other Group Fund or (b) 
advisory fees are only charged at either the Investing Fund level or 
Other Group Fund level.
    4. No Other Group Fund will acquire securities of any investment 
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in 
excess of the limits contained in Section 12(d)(1)(A), except to the 
extent that such Other Group 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)), or (b) acquires (or is deemed to have 
acquired) securities of another investment company pursuant to 
exemptive relief from the Commission permitting such Other Group 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.
    C. With respect to Investing Funds that purchase shares of Same 
Group Funds in compliance with section 12(d)(1)(G), except that the 
Investing Fund will also invest in Direct Investments:

[[Page 57110]]

    1. The Investing Fund will comply with all provisions of section 
12(d)(1)(G), except for section 12(d)(1)(G)(i)(II) to the extent that 
it restricts Investing Funds from investing in Direct Investments as 
described in the application.
    2. Prior to reliance on the requested order, the Board of each 
Investing Fund, including a majority of the Independent Trustees, shall 
find that the advisory fees, if any, charged under an Investing Fund's 
advisory contract(s) are based on services provided that are in 
addition to, rather than duplicative of, services provided pursuant to 
any Same Group Fund's advisory contract(s). Such finding, and the basis 
upon which the finding was made, will be recorded fully in the minute 
books of the appropriate Investing Fund; provided, however, that no 
such determination shall be necessary where either (a) the Adviser to 
the Investing Fund waives the advisory fees payable by the Investing 
Fund in an amount that offsets the amount of advisory fees incurred by 
the Investing Fund as a result of investing in the Same Group Fund or 
(b) advisory fees are only charged at either the Investing Fund level 
or Same Group Fund level. In addition, in connection with the approval 
of any investment advisory contract pursuant to section 15 of the Act 
subsequent to such initial determination, the Board of each Investing 
Fund, including a majority of the Independent Trustees, shall find that 
the advisory fees, if any, charged under the Investing Fund's advisory 
contract(s) are based on services provided that are in addition to, 
rather than duplicative of, services provided pursuant to any Same 
Group Fund's advisory contract(s). Such finding, and the basis upon 
which the finding was made, will be recorded fully in the minute books 
of the appropriate Investing Fund; provided, however, that no such 
determination shall be necessary where either (a) the Adviser to the 
Investing Fund waives the advisory fees payable by the Investing Fund 
in an amount that offsets the amount of advisory fees incurred by the 
Investing Fund as a result of investing in the Same Group Fund or (b) 
advisory fees are only charged at either the Investing Fund level or 
Same Group Fund level.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-2347 Filed 9-22-04; 8:45 am]
BILLING CODE 8010-01-P