[Federal Register Volume 65, Number 54 (Monday, March 20, 2000)]
[Notices]
[Pages 15030-15032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6752]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-24337; 812-11798]
Colchester Street Trust, et al.; Notice of Application
March 13, 2000.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').
ACTION: Notice of application for an order under sections 6(c),
12(d)(1)(J) and 17(b) of the Investment Company Act of 1940 (the
``Act'') for an exemption from sections 12(d)(1) and 17(a).
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SUMMARY OF APPLICATION: Applicants request an order that would amend a
prior order (``Prior Order'') \1\ that permits a fund of funds
arrangement. The order also would permit purchases by a fund of funds
of shares of an underlying fund in-kind and the purchase and sale of
portfolio securities between the fund of funds and the underlying funds
in accordance with rule 17a-7 under the Act.
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\1\ Daily Money Fund, et al., Investment Company Act Release
Nos. 22107 (July 29, 1996) (notice) and 22171 (Aug. 26, 1996)
(order).
APPLICANTS: Colchester Street Trust, Fidelity Aberdeen Street Trust,
Fidelity Advisor Series I, Fidelity Advisor Series II, Fidelity Advisor
Series III, Fidelity Advisor Series IV, Fidelity Advisor Series V,
Fidelity Advisor Series VI, Fidelity Advisor Series VII, Fidelity
Advisor Series VIII, Fidelity Beacon Street Trust, Fidelity Boston
Street Trust, Fidelity California Municipal Trust, Fidelity California
Municipal Trust II, Fidelity Capital Trust, Fidelity Charles Street
Trust, Fidelity Commonwealth Trust, Fidelity Concord Street Trust,
Fidelity Congress Street Fund, Fidelity Contrafund, Fidelity Court
Street Trust, Fidelity Court Street Trust II, Fidelity Covington Trust,
Fidelity Destiny Portfolios, Fidelity Devonshire Trust, Fidelity
Exchange Fund, Fidelity Financial Trust, Fidelity Fixed-Income Trust,
Fidelity Hastings Street Trust, Fidelity Hereford Street Trust,
Fidelity Income Fund, Fidelity Investment Trust, Fidelity Magellan
Fund, Fidelity Massachusetts Municipal Trust, Fidelity Money Market
Trust, Fidelity Mt. Vernon Street Trust, Fidelity Municipal Trust,
Fidelity Municipal Trust II, Fidelity New York Municipal Trust,
Fidelity New York Municipal Trust II, Fidelity Oxford Street Trust,
Fidelity Phillips Street Trust, Fidelity Puritan Trust, Fidelity Revere
Street Trust, Fidelity School Street Trust, Fidelity Securities Fund,
Fidelity Select Portfolios, Fidelity Summer Street Trust, Fidelity
Trend
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Fund, Fidelity Union Street Trust, Fidelity Union Street Trust II,
Newbury Street Trust, Variable Insurance Products Fund, Variable
Insurance Products Fund II, Variable Insurance Products Fund III;
Fidelity Management & Research Company (``FMR''); Fidelity Management
Trust Company (``FMTC''); Fidelity Service Company, Inc. (``FSC'');
Fidelity Investments Institutional Operations Company, Inc.
(``FIIOC''); Fidelity Distributors Corporation (``FDC''); National
Financial Services Corporation (``NFSC''); Strategic Advisers, Inc.
(``SAI''); and all other registered open-end investment companies and
series thereof that are (a) advised by FMR, FMTC, or SAI, or a person
controlling, controlled by, or under common control with FMR
(collectively, the ``Adviser'') or (b) distributed by FDC or NFSC, or a
person controlling, controlled by, or under common control with FDC or
NFSC (collectively the future and current investment companies and
their series are, the ``Fidelity Funds'').\2\
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\2\ All existing registered open-end investment companies that
currently intend to rely on the requested order are named as
applicants. Any other existing and future registered open-end
investment company will rely on the requested order only in
accordance with the terms and conditions of the application.
FILING DATES: The application was filed on October 4, 1999. Applicants
have agreed to file an amendment, the substance of which is reflected
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in this notice, during the notice period.
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 April 7, 2000,
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 SEC's
Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549-0609. Applicants, 82 Devonshire Street, Boston, Massachusetts
02109.
FOR FURTHER INFORMATION CONTACT: Elaine M. Boggs, Senior Counsel, at
(202) 942-0572, or Nadya B. 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
SEC's Public Reference Branch, 450 5th Street, N.W., Washington, D.C.
20549-0102 (tel. (202) 942-8090).
Applicant's Representations
1. Each Fidelity Fund is registered under the Act as an open-end
management investment company and currently is organized as either a
Massachusetts or Delaware business trust. Certain of the Fidelity Funds
are organized as series investment companies. FMR, FMTC, or SAI act as
each Fidelity Fund's investment adviser. FMR and SAI are investment
advisers registered under the Investment Advisers Act of 1940 (the
``Advisers Act''). FMTC is excluded from the definition of an
investment adviser under the Advisers Act. Any other Adviser will be
registered under the Advisers Act or exempt from registration. FDC and
NFSC serve as distributors of the Fidelity Funds. FSC and FIIOC serve
as transfer and dividend paying agents for the Fidelity Funds. FMR,
FMTC, SAI, FDC, NFSC, FSC, and FIIOC are direct or indirect
subsidiaries of FMR Corp.
2. The Prior Order permits Fidelity Funds that are funds of funds
(``FOFs'') to invest in shares of other Fidelity Funds (``Underlying
Funds''). In addition to investing in shares of Underlying Funds, the
FOFs may make direct investments in stocks, bonds, and money market
instruments.\3\ Applicants request an order amending the Prior Order to
update certain conditions. Applicants also request relief to permit
purchases by the FOFs of shares of the Underlying Funds in-kind and to
permit the purchase and sale of portfolio securities between the FOFs
and the Underlying Funds in accordance with rule 17a-7 under the Act.
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\3\ The Prior Order also permits the FOFs, the Underlying Funds,
and their transfer agent to enter into a ``special servicing
agreement'' with respect to the payment of administrative expenses.
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Applicant's Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act provides, in relevant part, that
no investment company may acquire securities of a registered investment
company if such securities represent more than 3% of the acquired
company's outstanding voting stock, more than 5% of the acquiring
company's total assets, or if such securities, together with the
securities of other acquired investment companies, represent more than
10% of the acquiring company's outstanding 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 the
investment company and other investment companies and companies
controlled by them. Applicants state that the investment by the FOFs in
shares of the Underlying Funds is subject to the limits in sections
12(d)(1)(A) and (B).
2. Section 12(d)(1)(G) of the Act provides that section 12(d)(1)
shall not apply to the securities of an acquired company purchased by
an acquiring company if: (i) The acquiring company and the acquired
company are part of the same group of investment companies; (ii) 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; (iii) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not
excessive under rules adopted pursuant to section 22(b) or section
22(c) by a securities association registered under section 15A of the
Securities Exchange Act of 1934, or the Commission; and (iv) the
acquired company has a policy that prohibits it from acquiring
securities of registered open-end investment companies or registered
unit investment trusts in reliance on sections 12(d)(1)(F) or (G).
Section 12(d)(1)(G)(ii) defines the term ``group of investment
companies'' to mean any two or more registered investment companies
that hold themselves out to investors as related companies for purposes
of investment and investor services. Applicants state that the proposed
transactions would comply with section 12(d)(1)(G) but for the fact
that the FOFs may invest directly in stock, bonds, and other financial
instruments, in addition to investing in the Underlying Funds.\4\
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\4\ These other investments will not include shares of
registered investment companies that are not Fidelity Funds.
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3. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt, conditionally or unconditionally , any person, security, or
transaction from any provision of section 12(d)(1) if and to the extent
that
[[Page 15032]]
such exemption is consistent with the public interest and the
protection of investors. Applicants request relief pursuant to section
12(d)(1)(J) to update the conditions of the Prior Order.
B. Section 17(a)
1. Section 17(a) of the Act makes it unlawful for any affiliated
person of a registered investment company, or any affiliated person of
such affiliated person (``second-tier affiliate''), acting as
principal, to sell or purchase any security to or from such investment
company. Section 2(a)(3) of the Act defines an affiliated person to
include any person directly or indirectly (a) controlling, controlled
by, or under common control with, the other person; or (b) owning,
controlling, or holding with power to vote 5% or more of the
outstanding voting securities of the other person. Because the FOFs and
the Underlying Funds are advised by the Adviser, they may be deemed to
be under ``common control'' and therefore affiliated persons of each
other. In addition, because of FOF may own more than 5% of an
Underlying Fund, the FOF and the Underlying Fund may be deemed to be
affiliated persons of one another. As a result, applicants state that
section 17(a) would prohibit purchases by the FOFs of shares of the
Underlying Funds in-kind as well as the purchase and sale of portfolio
securities between the FOFs and the Underlying Funds.
2. Rule 17a-7 under the Act generally provides an exemption from
section 17(a) for a purchase or sale transaction between a registered
investment company and an affiliated person (or second-tier affiliate),
provided certain conditions are met, including that the transaction
must be for no consideration other than cash. In addition, the
affiliation between the registered investment company and the
affiliated person or second-tier affiliate must exist solely by reason
of the entities having a common investment adviser, common directors
and/or common officers. Applicants state that the FOFs and the
Underlying Funds may be unable to rely on rule 17a-7 because some of
the FOFs may own more than 5% of the outstanding voting securities of
an Underlying Fund. In addition, the in-kind purchases of shares of an
Underlying Fund would not meet the cash payment requirement of rule
17a-7(a).
3. Section 17(b) of the Act authorizes the SEC to 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, the proposed transaction is consistent with the
policy of each registered investment company concerned, and the
proposed transaction is consistent with the general policy of the Act.
Section 6(c) under the Act permits the SEC to exempt any person or
transaction 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
policies of the Act.
4. Applicants submit that the requested relief satisfies the
standards for relief in sections 6(c) and 17(b). Applicants state that,
with respect to the in-kind purchases, the consideration paid by the
FOFs for shares of the Underlying Funds will be based on the net asset
value of the Underlying Funds. With respect to the purchase and sale of
portfolio securities between the FOFs and the Underlying Funds,
applicants state that the price paid for the securities will be the
current market price of the securities. Further, applicants state that
any in-kind purchase will comply with the requirements of rule 17a-7(b)
through (f) and any purchase and sale transaction will comply with
requirements of rule 17a-7(a) through (f).
Applicants' Conditions
Applicants agree that the amended order will be subjected to the
following conditions:
1. Each FOF and each Underlying Fund 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 will acquire securities of any investment
company in excess of the limits contained in section 12(d)(1)(A) of the
Act, except to the extent that the Underlying Fund (a) receives
securities of another investment company as a dividend or as a result
of a plan of a 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 the Underlying Fund to (i) acquire securities of one or more
affiliated investment companies for short-term cash management purposes
or (ii) lend cash to another fund.
3. Prior to approving any advisory contract under section 15 of the
Act, the board of trustees of each FOF, including a majority of the
trustees who are not ``interested persons'' of the FOF, as that term is
defined in section 2(a)(19) of the Act, shall find that the advisory
fees charged under the contract are based on services that will be in
addition to, rather than duplicative of, services provided under the
contract of any Underlying Fund in which the FOF may invest; provided,
however, that no finding will be necessary if (a) the FOF pays no
advisory fee; or (b) the FOF pays an advisory fee and either (i) the
Underlying Fund pays no advisory fee or (ii) the advisory fee paid by
the FOF is reduced by the proportional amount of the advisory fee paid
by the Underlying Fund with respect to the shares held by the FOF. If a
finding is necessary, the finding, and the basis upon which the finding
was made, will be recorded fully in the minute books of the FOF.
4. Any sales charges, distribution-related fees, and service fees
relating to the shares of an FOF, when aggregated with any sales
charges, distribution-related fees, and services fees paid by the FOF
relating to its acquisition, holding, or disposition of shares of the
Underlying Funds, will not exceed the limits set forth in rule 2830 of
the National Association of Securities Dealers' Rules of Conduct.
5. Any in-kind purchase of shares of the Underlying Funds by the
FOFs will be effected in accordance with the terms of rule 17a-7(b)
through (f). Any purchase or sale of portfolio securities between the
FOFs and the Underlying Funds will be effected in accordance with the
terms of rule 17a-7(a) through (f).
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-6752 Filed 3-17-00; 8:45 am]
BILLING CODE 8010-01-M