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###### Securities and Exchange Commission

          - [Investment Company Act Release No. 26346; 812-12610]

# AGECNCY:

Securities and Exchange Commission (“Commission”). 

# ACTION:

Notice of an application under section 12(d)(1)(J) of the Investment Company Act of 1940 (“Act”) for an exemption from section 12(d)(1)(G)(i)(II) of the Act.

# Summary of Application:

Applicants request an order to permit funds of funds relying on section 12(d)(1)(G) of the Act to invest in securities and other financial instruments.

# Applicants:

FFTW Funds, Inc. (the “Fund”) and Fischer Francis Trees & Watts, Inc. (the “Manager”).

# Filing Dates:

The application was filed on August 15, 2001, and amended on February 3, 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 March 1, 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 5th Street, NW., Washington, DC 20549-0609; Applicants, c/o Robin Meister, Chief Risk and Legal Officer, Fischer Francis Trees & Watts, Inc., 200 Park Ave., New York, NY 10166.

# FOR FURTHER INFORMATION CONTACT:

                        Marilyn Mann, Senior Counsel, at (202) 942-0582, or Mary Kay Frech, Branch                               ( print page 6344)                            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 5th Street, NW., Washington, DC 20549-0102 (telephone (202) 942-8090).

## Applicants' Representations

                    1. The Fund is registered under the Act as an open-end management investment company and is organized as a Maryland corporation. The Fund consists of the following nine active portfolios (“Portfolios”): U.S. Short-Term Portfolio, Limited Duration Portfolio, Mortgage-Backed Portfolio, Worldwide Portfolio, Worldwide Core Portfolio, International Portfolio, Emerging Markets Portfolio, U.S. Inflation-Indexed Portfolio, and Global Inflation-Indexed Hedged Portfolio. It is expected that Worldwide Portfolio, Worldwide Core Portfolio, International Portfolio and Limited Duration Portfolio (the “Acquiring Portfolios”) would each acquire shares of one or more of the following Portfolios: U.S. Short-Term Portfolio, Emerging Markets Portfolio, Mortgage-Backed Portfolio, U.S. Inflation-Indexed Portfolio and Global Inflation-Indexed Hedged Portfolio (the “Underlying Funds”). The Acquiring Portfolios would also invest in certain debt and equity securities or other financial instruments (“Other Securities”).[1] 

2. The Manager is registered as an investment adviser under the Investment Advisers Act of 1940, and is a wholly-owned subsidiary of Charter Atlantic Corporation. The Manager serves as investment adviser for each Portfolio. Applicants request that each registered open-end management investment company, or series thereof, that, currently or in the future, is part of the same “group of investment companies” as the Fund, as defined in section 12(d)(1)(G)(ii) of the Act, and is advised by the Manager or any entity controlling, controlled by or under common control with the Manager, be permitted to rely on the order (included in the terms “Acquiring Portfolios” and “Underlying Funds”).

                    3. Applicants believe that the proposed structure will provide a more efficient way for each Acquiring Portfolio to allocate investment risk of portions of a particular index by investing a portion of its assets in an Underlying Fund that focuses on that asset class.[2] 

## Applicants' Legal Analysis

1. Section 12(d)(1)(A) of the Act provides that no registered investment company (“acquiring company”) may acquire securities of another investment company (“acquired company”) if such securities represent more than 3% of the acquired company's outstanding voting stock or more than 5% of the acquiring company's total assets, or if such securities, together with the securities of other investment companies, represent 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 cause more than 10% of the acquired company's voting stock to be owned by investment companies.

2. Section 12(d)(1)(G) of the Act provides that section 12(d)(1) will not apply to 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) of the Act by a securities association registered under section 15A of the Securities Exchange Act of 1934 or by the Commission; and (iv) the acquired company has a policy that prohibits it from acquiring securities of registered open-end management investment companies or registered unit investment trusts 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 each Acquiring Portfolio may invest a portion of its assets directly in securities other than those specified in section 12(d)(1)(G)(i)(II).

3. Section 12(d)(1)(J) of the Act provides that the Commission may exempt persons or transactions from any provision of section 12(d)(1) if, and to the extent that, the exemption is consistent with the public interest and the protection of investors. Applicants request an order under section 12(d)(1)(J) exempting them from section 12(d)(1)(G)(i)(II). Applicants assert that permitting the Acquiring Portfolios to invest in Other Securities as described in the application would not raise any of the concerns that the requirements of section 12(d)(1)(G) were designed to address.

## Applicants' Conditions

Applicants agree that the order granting the requested relief will be subject to the following conditions:

1. Before approving any advisory contract under section 15 of the Act, the board of directors of the Fund, with respect to an Acquiring Portfolio, including a majority of the directors who are not “interested persons” as defined in section 2(a)(19) of the Act, will find that advisory fees, if any, charged under the contract to the Acquiring Portfolio are based on services provided that are in addition to, rather than duplicative of, services provided pursuant to any Underlying Fund's advisory contract. Such finding, and the basis upon which it was made, will be recorded fully in the minute books of the Acquiring Portfolio.

2. Applicants 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 any Acquiring Portfolio from investing in Other Securities as described in the application.

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

Margaret H. McFarland,

Deputy Secretary.

# Footnotes

1.                             These investments will not include shares of any registered investment companies that are not in the same group of investment companies as the Acquiring Portfolios.                    
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2.                             Applicants state that in the event an Underlying Fund is organized in a master-feeder structure, the Acquiring Portfolio would not invest in shares of the feeder fund, but in shares of the master portfolio. In all such cases, the master portfolio would be part of the same group of investment companies as the Acquiring Portfolio. Such master portfolio is included in the term Underlying Fund. All existing entities that currently intend to rely on the order are named as applicants. Any Acquiring Portfolio and any Underlying Fund that may rely on the order in the future will do so only in accordance with the terms and conditions of the application.                    
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[FR Doc. 04-2762 Filed 2-9-04; 8:45 am]

BILLING CODE 8010-01-P