[Federal Register Volume 69, Number 27 (Tuesday, February 10, 2004)]
[Notices]
[Pages 6343-6344]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-2762]


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SECURITIES AND EXCHANGE COMMISSION

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


FFTW Funds, Inc. et al.; Notice of Application

February 4, 2004.
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.

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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

[[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\
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    \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. 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\
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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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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.
[FR Doc. 04-2762 Filed 2-9-04; 8:45 am]
BILLING CODE 8010-01-P