-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OJgM6bJLarGOUmfy7dNJUjm9LO3HejJSsj17X0trlC1Yo6+uxIrCwL+NFjPxgILr awZFnBrvX2OJaJrvIR5RCA== 0000913849-09-000105.txt : 20090209 0000913849-09-000105.hdr.sgml : 20090209 20090209152011 ACCESSION NUMBER: 0000913849-09-000105 CONFORMED SUBMISSION TYPE: 40-APP/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20090209 DATE AS OF CHANGE: 20090209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Allstate Institutional Advisors LLC CENTRAL INDEX KEY: 0001433156 FILING VALUES: FORM TYPE: 40-APP/A SEC ACT: 1940 Act SEC FILE NUMBER: 812-13523-01 FILM NUMBER: 09581085 BUSINESS ADDRESS: STREET 1: 3100 SANDERS ROAD STREET 2: SUITE J5B CITY: NORTHBROOK STATE: IL ZIP: 60062 MAIL ADDRESS: STREET 1: 3100 SANDERS ROAD STREET 2: SUITE J5B CITY: NORTHBROOK STATE: IL ZIP: 60062 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Allstate Financial Investment Trust CENTRAL INDEX KEY: 0001422509 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 40-APP/A SEC ACT: 1940 Act SEC FILE NUMBER: 812-13523 FILM NUMBER: 09581086 BUSINESS ADDRESS: STREET 1: 3100 SANDERS ROAD STREET 2: SUITE J5B CITY: NORTHBROOK STATE: IL ZIP: 60062-7154 BUSINESS PHONE: 847-402-2532 MAIL ADDRESS: STREET 1: 3100 SANDERS ROAD STREET 2: SUITE J5B CITY: NORTHBROOK STATE: IL ZIP: 60062-7154 40-APP/A 1 f40appa_020909.htm THIRD AMENDED AND RESTATED APPLICATION f40appa_020909.htm
 
As filed with the Securities and Exchange Commission on February 9, 2009
 

UNITED STATES OF AMERICA
 
before the
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
In the matter of:
 
Allstate Financial Investment Trust
and
Allstate Institutional Advisors, LLC
(the “Applicants”)

File No. 812-13523
 

 
THIRD AMENDED AND RESTATED APPLICATION FOR AN ORDER UNDER SECTION 12(d)(1)(J) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE “ACT”), FOR EXEMPTIONS FROM SECTIONS 12(d)(1)(A) and 12(d)(1)(B) OF THE ACT AND SECTIONS 6(c) AND 17(b) OF THE ACT EXEMPTING CERTAIN TRANSACTIONS FROM SECTION 17(a) OF THE ACT
 
 

Please send all communications, notices and orders to:
Renee M. Hardt, Esq.
Vedder Price P.C.
222 N. LaSalle Street
Chicago, Illinois 60601
(312) 609-7616 (phone)
(312) 609-5005 (fax)
 
Copies to:
 
Joseph P. Rath, Esq.
Allstate Institutional Advisors LLC
3100 Sanders Road – Suite J5B
Northbrook, IL 60062-7154
 
 
 
THIS DOCUMENT CONTAINS 30 PAGES.


 
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UNITED STATES OF AMERICA
 
BEFORE THE
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
In the matter of:
 
Allstate Financial Investment Trust
Allstate Institutional Advisors, LLC
 
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THIRD AMENDED AND RESTATED APPLICATION FOR AN ORDER UNDER SECTION 12(d)(1)(J) OF THE INVESTMENT COMPANY ACT OF 1940 FOR EXEMPTIONS FROM SECTIONS 12(d)(1)(A) and 12(d)(1)(B) OF THE ACT AND SECTIONS 6(c) AND 17(b) OF THE ACT EXEMPTING CERTAIN TRANSACTIONS FROM SECTION 17(a) OF THE ACT.
     

I.           INTRODUCTION
Allstate Financial Investment Trust (the “Trust”) and Allstate Institutional Advisors, LLC (the “Adviser”) (collectively with the Trust, the “Applicants”) hereby apply for an order of the Securities and Exchange Commission (the “Commission”) as described below.  Applicants request that the order also extend to any future series of the Trust, and any other existing or future registered open-end management investment companies and any series thereof that are part of the same group of investment companies, as defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended (the “Act”), as the Trust and are, or may in the future be, advised by the Adviser or any other investment adviser controlling, controlled by, or under common control with the Adviser (together with the existing series of the Trust, the “Funds”).
 
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Applicants request that the Commission issue an order under Section 12(d)(1)(J) of the Act, exempting them from the limitations set forth in Sections 12(d)(1)(A) and (B) of the Act to the extent necessary to permit: (1) a Fund (each a “Fund of Funds,” and collectively, the “Funds of Funds”) to acquire shares of registered open-end management investment companies (the “Unaffiliated Investment Companies”) and unit investment trusts (“UITs”) that are not part of the “same group of investment companies,” as defined in Section 12(d)(1)(G)(ii) of the Act, as the Funds of Funds (the “Unaffiliated Trusts,” together with the Unaffiliated Investment Companies, the “Unaffiliated Funds”); (2) the Unaffiliated Funds, their principal underwriters and any broker or dealer registered under the Securities Exchange Act of 1934, as amended (the “1934 Act”) (“Broker”) to sell shares of the Unaffiliated Funds to the Funds of Funds; (3) the Funds of Funds to acquire shares of Allstate Large Cap Index Fund, a Fund of the Trust, and other Funds in the “same group of investment companies,” as defined in Section 12(d)(1)(G)(ii) of the Act, as the Funds of Funds (the “Affiliated Funds,” together with the Unaffiliated Funds, the “Underlying Funds”); and (4) the Affiliated Funds, their principal underwriters and any Broker to sell shares of the Affiliated Funds to the Funds of Funds.  Applicants also request that the Commission issue an order under Sections 6(c) and 17(b) exempting the transactions in (1) through (4) above from Section 17(a) to the extent necessary to permit such purchases and redemptions by the Funds of Funds of shares of the Underlying Funds and to permit sales and redemptions by the Underlying Funds of their shares in transactions with the Funds of Funds, as described in this application.
Certain of the Unaffiliated Funds may be registered under the Act as either UITs or open-end management investment companies and have obtained exemptions from the Commission necessary to permit their shares to be listed and traded on a national securities exchange at
 
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negotiated prices (“ETFs”).  In addition to investing in Underlying Funds, each Fund of Funds may invest in other securities and financial instruments that are not issued by registered investment companies and that are consistent with its investment objective and restrictions (“Other Investments”).
The Trust is the only registered investment company that currently intends to rely on the requested order.  Any other entity that relies on the order in the future will comply with the terms and conditions set forth herein.
II.           THE APPLICANTS
 
A.
Allstate Financial Investment Trust
The Trust is a Delaware Statutory Trust registered as an open-end management investment company under the Act.  Under Delaware law and the Trust’s Declaration of Trust, the Trust is managed under the direction of its board of trustees.  The Trust is a series trust which currently offers eight Funds, each of which has its own investment objectives and policies.  Seven Funds, Allstate ClearTarget 2005 Retirement Fund, Allstate ClearTarget 2010 Retirement Fund, Allstate ClearTarget 2015 Retirement Fund, Allstate ClearTarget 2020 Retirement Fund, Allstate ClearTarget 2030 Retirement Fund, Allstate ClearTarget 2040 Retirement Fund and Allstate ClearTarget 2050 Retirement Fund intend to invest in the Underlying Funds and in Other Investments and intend to rely on the requested order.1  Shares of each of the Funds of the Trust are registered under the Securities Act of 1933, as amended (the “1933 Act”).
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1    The other Fund, the Allstate Large Cap Index Fund, currently is the only Affiliated Fund.  The Funds of Funds may also invest in any future Affiliated Fund.
 
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B.
Allstate Institutional Advisors, LLC
The Adviser is Allstate Institutional Advisors, LLC, a Delaware Limited Liability Company which is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).  The Adviser is a wholly-owned subsidiary of Allstate Life Insurance Company, which is an indirect, wholly-owned subsidiary of The Allstate Corporation (“Allstate”), a personal lines insurer.  The Adviser serves as the investment adviser to the Funds.  As adviser, it administers the business and affairs of the Funds and selects, contracts with, compensates and monitors the performance of any sub-adviser that manages the investment and reinvestment of the assets of the Funds.  The Adviser currently employs AllianceBernstein L.P. to manage the Funds of Funds and Allstate Investment Management Company (“AIMCO”), an affiliated company, to manage the Affiliated Fund.  AIMCO is a wholly-owned subsidiary of Allstate Non-Insurance Holdings, Inc., which is a wholly-owned subsidiary of Allstate.  AllianceBernstein L.P. and AIMCO are, and any future sub-adviser will be, registered as investment advisers under the Advisers Act.
III.           APPLICABLE LAW AND LEGAL ANALYSIS
 
A.
Section 12(d)(1)
 
(1)
Explanation of Section 12(d)(1)
Section 12(d)(1) of the Act generally makes it unlawful for a registered investment company to purchase or otherwise acquire any security issued by another investment company except in accordance with the limits set forth in that Section.  Section 12(d)(1) of the Act was enacted to prevent unregulated pyramiding of investment companies and the abuses that are perceived to arise from such pyramiding such as:
·           duplicative costs;
·           the exercise of undue influence or control over the underlying funds; and
 
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·           the complexity of such arrangements.2
Specifically, Section 12(d)(1)(A) of the Act prohibits a registered investment company from acquiring the securities of any other investment company if, immediately after the acquisition:  (a) the acquiring company owns more than 3% of the total outstanding voting stock of the acquired company, (b) the value of the securities of the acquired company exceeds 5% of the total assets of the acquiring company, or (c) the aggregate value of those securities and the securities of all other investment companies owned by the acquiring company exceeds 10% of its total assets.
Section 12(d)(1)(B) of the Act prohibits a registered open-end investment company, its principal underwriter and any broker or dealer from selling or otherwise disposing of any of the shares of the investment company to another investment company if immediately after such sale:  (a) more than 3% of the total outstanding voting stock of the acquired company is owned by the acquiring company and any company or companies controlled by it, or (b) more than 10% of the total outstanding voting stock of the acquired company is owned by the acquiring company and other investment companies and companies controlled by them.
 
(2)
Request for an Order of Exemption Pursuant to Section 12(d)(1)(J)
Section 12(d)(1)(J) 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 Section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors.  Therefore, the Applicants request an exemption under Section 12(d)(1)(J) of the Act from the limitations of Sections 12(d)(1)(A) and (B) to the extent
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2    See Report of the SEC on the Public Policy Implications of Investment Company Growth, in H.R. Rep. No. 2337, at 311-24 (1966).
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necessary to permit:  (i) the Funds of Funds to acquire shares of Underlying Funds in excess of the limits set forth in Section 12(d)(1)(A) of the Act; and (ii) the Underlying Funds, their principal underwriters and any Broker to sell shares of the Underlying Funds to the Funds of Funds in excess of the limits set forth in Section 12(d)(1)(B) of the Act.
For the reasons discussed below the proposed arrangement will not give rise to the policy concerns, each discussed specifically below, which underlie Sections 12(d)(1)(A) and (B).  Accordingly, the Applicants believe that the requested exemptions are consistent with the public interest and protection of investors.
 
(3)
No Undue Influence
Applicants submit that the proposed structure will not result in the exercise of undue influence by a Fund of Funds or its affiliated persons over the Underlying Funds.  The concern about undue influence does not arise in connection with a Fund of Funds’ investment in the Affiliated Funds, since they are part of the same group of investment companies.  Each Unaffiliated Investment Company will operate independently as determined by its own board of directors or trustees and management.  Additionally, to limit the control a Fund of Funds or its affiliated persons may have over an Unaffiliated Fund, Applicants submit that:
 
·
the Adviser and any person controlling, controlled by or under common control with the Adviser, and any investment company and any issuer that would be an investment company but for Section 3(c)(1) or Section 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 (collectively, the “Group”), and
 
 
·
any other investment adviser within the meaning of Section 2(a)(20)(B) of the Act to a Fund of Funds (“Sub-Adviser”) and any person controlling, controlled by or under common control with the Sub-Adviser, and 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 by the Sub-Adviser or any person controlling, controlled by or under common control with the Sub-Adviser (collectively, the “Sub-Adviser Group”) will not control
 
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·
 (individually or in the aggregate) an Unaffiliated 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 Unaffiliated Fund, the Group or the Sub-Adviser Group, each in the aggregate, becomes a holder of more than 25% of the outstanding voting securities of the Unaffiliated Fund, it will vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund’s shares.  This condition will not apply to the Sub-Adviser Group with respect to an Unaffiliated Fund for which the Sub-Adviser or a person controlling, controlled by or under common control with the Sub-Adviser acts as the investment adviser within the meaning of Section 2(a)(20)(A) of the Act (in the case of an Unaffiliated Investment Company) or as the sponsor (in the case of an Unaffiliated Trust).
To further limit the potential for undue influence by a Fund of Funds and/or its affiliated persons over an Unaffiliated Fund, Condition 2 precludes a Fund of Funds or the Adviser, any Sub-Adviser, promoter or principal underwriter of a Fund of Funds, as well as any person controlling, controlled by or under common control with any of those entities (each, a “Fund of Funds Affiliate”) from taking advantage of an Unaffiliated Fund with respect to transactions between a Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated Fund or its investment adviser(s), sponsor, promoter and principal underwriter and any person controlling, controlled by, or under common control with any of those entities (each, an “Unaffiliated Fund Affiliate”).  No Fund of Funds or Fund of Funds Affiliate will cause any existing or potential investment by the Fund of Funds in shares of an Unaffiliated Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
 
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In seeking to limit the potential for undue influence and conflicts of interest, prior to investing in Unaffiliated Funds, the board of directors or trustees (“Board”) of each Fund of Funds, including a majority of the trustees who are not “interested persons” as defined in Section 2(a)(19) of the Act (the “Independent Trustees”), will adopt procedures reasonably designed to assure that the Adviser and any Sub-Adviser to the Fund of Funds are conducting the investment program of the Fund of Funds without taking into account any consideration the Fund of Funds or a Fund of Funds Affiliate receives from an Unaffiliated Fund or an Unaffiliated Fund Affiliate in connection with any services or transactions.  Once an investment by a Fund of Funds in the securities of an Unaffiliated Investment Company exceeds the limit of Section 12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment Company, including a majority of the Independent Trustees, will determine that any consideration paid by the Unaffiliated Investment Company to the Fund of Funds or a Fund of Funds Affiliate in connection with any services or transactions:  (a) is fair and reasonable in relation to the nature and quality of services and benefits received by the Unaffiliated Investment Company; (b) is within the range of consideration that the Unaffiliated Investment Company 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 will not apply with respect to any services or transactions between an Unaffiliated Investment Company and its investment adviser, or any person controlling, controlled by, or under common control with such investment adviser.
Additionally, no Fund of Funds or Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Investment Company or sponsor to an Unaffiliated Trust) will cause an Unaffiliated Fund to purchase a security in an
 
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offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an officer, director, trustee, advisory board member, investment adviser, sub-adviser or employee of the Fund of Funds, or a person of which any such officer, director, trustee, investment adviser, sub-adviser, member of an advisory board or employee is an affiliated person (each, an “Underwriting Affiliate,” except any person whose relationship to the Unaffiliated Fund is covered by Section 10(f) of the Act is not an Underwriting Affiliate).  An offering of securities during the existence of an underwriting or selling syndicate of which a principal underwriter is an Underwriting Affiliate is referred to as an “Affiliated Underwriting.”
Prior to an investment by a Fund of Funds in the securities of an Unaffiliated Investment Company exceeding the limit of Section 12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment Company, including a majority of the Independent Trustees, will adopt procedures reasonably designed to monitor any purchases of securities by the Unaffiliated Investment Company in an Affiliated Underwriting, including any purchases made directly from an Underwriting Affiliate.  The Board of the Unaffiliated Investment Company will review these procedures periodically, but no less frequently than annually, to determine whether the purchases were influenced by the Fund of Funds’ investment in the Unaffiliated Investment Company.  The Board of the Unaffiliated Investment Company will consider, among other things:  (a) whether the purchases were consistent with the investment objectives and policies of the Unaffiliated Investment Company; (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
 
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purchased by the Unaffiliated Investment Company in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years.  The Board of the Unaffiliated Investment Company will 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.
The Unaffiliated Investment Company will also keep records concerning its purchases in Affiliated Underwritings.  Specifically, the Unaffiliated Investment Company will maintain and preserve permanently, in an easily accessible place, a written copy of the procedures described above, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase occurred, the first two years in an easily accessible place, a written record of each such purchase made once an investment by a Fund of Funds in the securities of an Unaffiliated Investment Company 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 determinations of the Board of the Unaffiliated Investment Company were made.
To further assure that an Unaffiliated Investment Company understands and appreciates the implications of a Fund of Funds’ investment under the requested exemptive relief, prior to its investment in the shares of an Unaffiliated Investment Company in excess of the limit of Section 12(d)(1)(A)(i) of the Act, a Fund of Funds and the Unaffiliated Investment Company will 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 (the “Participation Agreement”).  At the time of its investment
 
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in shares of an Unaffiliated Investment Company in excess of the limit in Section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Investment Company of the investment.  At such time, the Fund of Funds also will transmit to the Unaffiliated Investment Company a list of the names of each Fund of Funds Affiliate and Underwriting Affiliate.  The Fund of Funds will notify the Unaffiliated Investment Company of any changes to the list of names as soon as reasonably practicable after a change occurs.  The Unaffiliated Investment Company and the Fund of Funds will maintain and preserve a copy of the order, the Participation 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.  An Unaffiliated Fund (other than an ETF whose shares are purchased by a Fund of Funds in the secondary market) will retain its right at all times to reject any investment by a Fund of Funds.3
 
(4)
No Excessive Layering of Fees
Based on the proposed structure, the Applicants do not believe the arrangement will result in excessive layering of fees because the arrangement includes safeguards designed to address this issue.  Within the structure, the Underlying Funds may pay advisory fees to their adviser.  In addition, the Underlying Funds will pay fees to their service providers for all other services relating to their operations, including custody, transfer agency and fund administration (e.g., compliance and fund accounting).  Underlying Funds may also impose Rule 12b-1 fees or service fees from which payments are made to third parties for providing administrative, sub-transfer agency or other services beneficial to shareholders.  Shareholders of each Fund of Funds indirectly will pay their proportionate share of any Underlying Fund fees and expenses.
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3    An Unaffiliated Fund (including an ETF) would retain its right to reject any initial investment by a Fund of Funds in excess of the limits in Section 12(d)(1)(A)(i) of the Act by declining to execute the Participation Agreement with the Fund of Funds.

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Each Fund of Funds will also pay its own advisory, administrative, custody, transfer agency, legal, accounting and other expenses.  Such services to the Funds of Funds are different from the services provided to the Underlying Funds because each Fund of Funds is a separate entity with its own advisory, administrative, compliance, record keeping, and custody needs.
To assure that the investment advisory or management fees are not duplicative, prior to reliance on the requested order and subsequently in connection with the approval of any investment advisory or management contract under Section 15 of the Act, the Board of each Fund of Funds, including a majority of the Independent Trustees, will find that the management or advisory fees charged under a Fund of Funds’ advisory contract(s) 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 the finding was made, will be recorded fully in the minute books of the appropriate Fund of Funds.
In addition, the Adviser will waive fees otherwise payable to it by a Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Investment Company pursuant to Rule 12b-1 under the Act) received from an Unaffiliated Fund by the Adviser, or an affiliated person of the Adviser, other than any advisory fees paid to the Adviser or an affiliated person of the Adviser by the Unaffiliated Investment Company in connection with the investment by the Fund of Funds in the Unaffiliated Fund.  Any Sub-Adviser for a Fund of Funds will waive fees otherwise payable to the Sub-Adviser, directly or indirectly, by the Fund of Funds in an amount at least equal to any compensation received by the Sub-Adviser or an affiliated person of the Sub-Adviser from an Unaffiliated Fund, other than any advisory fees paid to the Sub-Adviser or an affiliated person by
 
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the Unaffiliated Investment Company, in connection with the investment by the Fund of Funds in the Unaffiliated Fund made at the direction of the Sub-Adviser.  In the event that the Sub-Adviser waives fees, the benefit of the waiver will be passed through to the Fund of Funds.
With respect to investments in a Fund of Funds, any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to funds of funds set forth in the National Association of Securities Dealers (“NASD”) Conduct Rule 2830.
 
(5)
Structure is not Overly Complex
The proposed arrangement will not create an overly complex fund structure that would confuse investors, because no Underlying Fund will acquire securities of any other 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) of the Act, except to the extent that such Underlying 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) 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 such Underlying Fund to:  (i) acquire securities of one or more investment companies for short-term cash management purposes or (ii) engage in inter-fund borrowing and lending transactions.
Additionally, the proposed arrangement will not confuse investors because the Funds of Funds’ prospectus and sales literature will contain clear, concise “plain English” disclosure designed to inform investors about the unique characteristics of the proposed arrangement, including, but not limited to, the expense structure and the additional expenses of investing in Underlying Funds.
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B.
Section 17(a)
 
Section 17(a) of the Act prohibits the purchase or sale of securities between a registered investment company and its affiliated persons or affiliated persons of such persons.  An “affiliated person” of another person is defined in Section 2(a)(3) of the Act as:
(A) any person directly or indirectly owning, controlling or holding with power to vote, 5 per centum or more of the outstanding voting securities of such other person; (B) any person, 5 per centum or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other person; (C) any person directly or indirectly controlling, controlled by, or under common control with, such other person; (D) any officer, director, partner, copartner, or employee of such other person; (E) if such other person is an investment company, any investment adviser thereof or any member of an advisory board thereof; and (F) if such other person is an unincorporated investment company not having a board of directors, the depositor thereof.
 
The sale of shares by the Underlying Funds to the Funds of Funds and the purchase of those shares from the Funds of Funds by the Underlying Funds (through redemptions) could be deemed to be principal transactions between an affiliated person of a registered investment company and that company under Section 17(a).4  For example, because the Adviser serves as investment adviser to the Fund of Funds and to the Affiliated Fund, the Funds of Funds and the Affiliated Fund may be deemed to be under the common control of the Adviser and therefore affiliated persons of one another.  The Funds of Funds and the Underlying Funds may also be
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4    Applicants acknowledge that receipt of any compensation by (a) an affiliated person of a Fund of Funds, or an affiliated person of such person, for the purchase by the Fund of Funds of shares of an Underlying Fund or (b) an affiliated person of an Underlying Fund, or an affiliated person of such person, for the sale by the Underlying Fund of its shares to a Fund of Funds may be prohibited by Section 17(e) of the Act.  The Participation Agreement also will include this acknowledgement.  
 
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deemed to be affiliated persons of one another if a Fund of Funds owned 5% or more of one or more of such Underlying Funds’ outstanding voting securities.
Section 17(b), however, permits the Commission to grant an order permitting such transactions as otherwise might be prohibited under Section 17(a) if the Commission finds that:  (1) 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; (2) the proposed transaction is consistent with the policy of each registered investment company concerned; and (3) the proposed transaction is consistent with the general purposes of the Act.
Additionally, Section 6(c) provides that:  “the Commission by rule or regulations, upon its own motion, or by order upon application, may conditionally or unconditionally exempt any person, security, or transaction, or any class or classes of persons, securities or transactions, from any provisions of this title or of any rule or regulation thereunder, if and to the extent that 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.”
Applicants believe that the proposed transactions satisfy the requirements for relief under both Sections 17(b) and 6(c) as the terms are fair and reasonable and do not involve overreaching.  The terms upon which an Underlying Fund will sell its shares to or purchase its shares from a Fund of Funds will be based on the net asset value of each Underlying Fund.5  Finally, the proposed transactions will be consistent with the policies of each Fund of Funds and
 
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5    Applicants note that a Fund of Funds generally would purchase and sell shares of an Unaffiliated Fund that operates as an ETF through secondary market transactions rather than through principal transactions with the Unaffiliated Fund.  To the extent that a Fund of Funds purchases or redeems shares from an ETF that is an Affiliated Person of the Fund of Funds in exchange for a basket of specified securities as described in the application for exemptive order upon which the ETF relies, Applicants also request relief from Section 17(a) of the Act for those transactions.
 
 
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Underlying Fund, and with the general purposes of the Act.  The investment by a Fund of Funds in shares of the Underlying Funds and the issuance of shares of the Underlying Funds to a Fund of Funds will be effected in accordance with the investment policies contained in the registration statement of such Fund of Funds.
IV.           PRECEDENTS IN SUPPORT OF THE REQUEST FOR EXEMPTION
The Commission has granted exemptive orders to other mutual fund complexes to establish funds of funds arrangements with affiliated and unaffiliated investment companies.  See Schwab Capital Trust, et al (“Schwab”) Investment Company Act Rel. No. 24067 (October 1, 1999) (Notice) and Investment Company Act Rel. No. 23113 (October 27, 1999) (Order) (the “Schwab Order”).  Schwab requested an exemption under Section 12(d)(1)(J) of the Act from Sections 12(d)(1)(A) and (B) of the Act to permit certain series of the Schwab trusts (“Schwab Trusts”) to invest (a) in other series of the Schwab Trusts and other registered open-end management investment companies that are part of the same “group of investment companies” as defined in Section 12(d)(1)(G) of the Act, and (b) in other registered open-end investment companies that are not part of the same group of investment companies as the Schwab Trusts.  The Schwab Order also permits the Schwab Trusts to make direct investments in stocks, bonds, and any Other Investments which are consistent with their investment objective(s).6
Applicants also note that substantially similar relief was granted in Members Mutual Funds, et al., Investment Company Act Rel. No. 27598 (December 13, 2006) (Notice) and Investment Company Act Rel. No. 27657 (January 9, 2007) (Order); John Hancock Trust, et al., Investment Company Act Rel. No. 27848; (May 30, 2007) (Notice) and Investment Company
 
___________________
 
6          See also, MetLife Investors USA Insurance Company, et al., Inv. Co. Act Rel. No. 27059 (Sept 7, 2005) (order); Inv. Co. Act Rel. No. 27028 (Aug. 11, 2005) (notice).
 
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Act Rel. No. 27873 (June 26, 2007) (Order); Northern Institutional Funds, et al., Investment Company Act Rel. No. 28119 (January 16, 2008) (Notice) and Investment Company Act Rel. No. 28149 (February 12, 2008) (Order); and Goldman Sachs Trust, et al., Investment Company Act Rel. No. 28347 (July 31, 2008) (Notice) and Investment Company Act Rel. No. 28366 (August 26, 2008) (Order).
V.           CONCLUSIONS
Based upon the foregoing, Applicants believe that it is 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 to issue an order (i) pursuant to Sections 6(c) and 17(b) for an exemption from the provisions of Section 17(a) and (ii) pursuant to Section 12(d)(1)(J) for an exemption from the provisions of Sections 12(d)(1)(A) and 12(d)(1)(B).
VI.           APPLICANT’S CONDITIONS
Applicants agree that the order granting the requested relief shall be subject to the following conditions:
 
(1)
The members of the Group will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of Section 2(a)(9) of the Act.  The members of a Sub-Adviser Group will not control (individually or in the aggregate) an Unaffiliated 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 Unaffiliated Fund, the Group or a Sub-Adviser Group, each in the aggregate, becomes a holder of more than 25% of the outstanding voting securities of the Unaffiliated Fund, then the Group or the Sub-Adviser Group will vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund’s
 

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     shares.  This condition will not apply to a Sub-Adviser Group with respect to an Unaffiliated Fund for which the Sub-Adviser or a person controlling, controlled by, or under common control with the Sub-Adviser acts as the investment adviser within the meaning of Section 2(a)(20)(A) of the Act (in the case of an Unaffiliated Investment Company) or as the sponsor (in the case of an Unaffiliated Trust).
 
(2)
No Fund of Funds or Fund of Funds Affiliate will cause any existing or potential investment by the Fund of Funds in an Unaffiliated Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
 
(3)
The Board of each Fund of Funds, including a majority of the Independent Trustees, will adopt procedures reasonably designed to assure that its Adviser and any Sub-Adviser to the Fund of Funds are conducting the investment program of the Fund of Funds without taking into account any consideration received by the Fund of Funds or Fund of Funds Affiliate from an Unaffiliated Fund or an Unaffiliated Fund Affiliate in connection with any services or transactions.
 
(4)
Once an investment by a Fund of Funds in the securities of an Unaffiliated Investment Company exceeds the limit of Section 12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment Company, including a majority of the Independent Trustees, will determine that any consideration paid by the Unaffiliated Investment Company to a Fund of Funds or a Fund of Funds 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
 

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Unaffiliated Investment Company; (b) is within the range of consideration that the Unaffiliated Investment Company 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 Unaffiliated Investment Company and its investment adviser(s), or any person controlling, controlled by, or under common control with such investment adviser(s).
 
(5)
No Fund of Funds or Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Investment Company or sponsor to an Unaffiliated Trust) will cause an Unaffiliated Fund to purchase a security in any Affiliated Underwriting.
 
(6)
The Board of an Unaffiliated Investment Company, including a majority of the Independent Trustees, will adopt procedures reasonably designed to monitor any purchases of securities by the Unaffiliated Investment Company in an Affiliated Underwriting once an investment by a Fund of Funds in the securities of the Unaffiliated Investment Company exceeds the limit of Section 12(d)(1)(A)(i) of the Act, including any purchases made directly from an Underwriting Affiliate.  The Board of the Unaffiliated Investment Company will review these procedures periodically, but no less frequently than annually, to determine whether the purchases were influenced by the investment by the Fund of Funds in the Unaffiliated Investment Company.  The Board of the Unaffiliated Investment Company will consider, among other things:  (a) whether the purchases were
 

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     consistent with the investment objectives and policies of the Unaffiliated Investment Company; (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 Unaffiliated Investment Company in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years.  The Board of the Unaffiliated Investment Company will 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 interest of shareholders.
 
(7)
Each Unaffiliated Investment Company will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase from an Affiliated Underwriting occurred, the first two years in an easily accessible place, a written record of each purchase of securities in an Affiliated Underwriting once an investment by a Fund of Funds in the securities of an Unaffiliated Investment Company exceeds the limit of Section 12(d)(1)(A)(i) of the Act, setting forth (1) the party from whom the securities were acquired, (2) the identity of the underwriting syndicate’s members,
 

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     (3) the terms of the purchase, and (4) the information or materials upon which the determinations of the Board of the Unaffiliated Investment Company were made.
 
(8)
Prior to its investment in shares of an Unaffiliated Investment Company in excess of the limit set forth in Section 12(d)(1)(A)(i) of the Act, the Fund of Funds and the Unaffiliated Investment Company will execute a Participation 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.  At the time of its investment in shares of an Unaffiliated Investment Company in excess of the limit set forth in Section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Investment Company of the investment.  At such time, the Fund of Funds will also transmit to the Unaffiliated Investment Company a list of the names of each Fund of Funds Affiliate and Underwriting Affiliate.  The Fund of Funds will notify the Unaffiliated Investment Company of any changes to the list as soon as reasonably practicable after a change occurs.  The Unaffiliated Investment Company and the Fund of Funds will maintain and preserve a copy of the order, the Participation 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)
Before approving any advisory contract under Section 15 of the Act, the Board of each Fund of Funds, including a majority of the Independent Trustees, shall find that the advisory fees charged under the advisory contract are based on services provided that are in addition to, rather than duplicative of, services provided under
 
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     the advisory contract(s) of any Underlying Fund in which the Fund of Funds may invest.  Such finding, and the basis upon which the finding was made, will be recorded fully in the minute books of the appropriate Fund of Funds.
 
(10)
The Adviser will waive fees otherwise payable to it by a Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Investment Company pursuant to Rule 12b-1 under the Act) received from an Unaffiliated 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 Unaffiliated Investment Company, in connection with the investment by the Fund of Funds in the Unaffiliated Fund.  Any Sub-Adviser will waive fees otherwise payable to the Sub-Adviser, directly or indirectly, by the Fund of Funds in an amount at least equal to any compensation received by the Sub-Adviser, or an affiliated person of the Sub-Adviser, from an Unaffiliated Fund, other than any advisory fees paid to the Sub-Adviser or its affiliated person by the Unaffiliated Investment Company in connection with the investment by the Fund of Funds in the Unaffiliated Fund made at the direction of the Sub-Adviser.  In the event that the Sub-Adviser waives fees, the benefit of the waiver will be passed through to the Fund of Funds.
 
(11)
Any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to funds of funds set forth in NASD Conduct Rule 2830.
 
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(12)
No Underlying Fund will acquire securities of any other 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) of the Act, except to the extent that such Underlying 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) of the Act); (b) acquires (or is deemed to have acquired) securities of another investment company pursuant to exemptive relief from the Commission permitting such Underlying Fund to: (i) acquire securities of one or more investment companies, for short-term cash management purposes or (ii) engage in inter-fund borrowing and lending transactions.
VII.           PROCEDURAL MATTERS
All actions necessary to authorize the execution and filing of this application have been taken and the persons signing and filing this application are authorized to so sign and file the same.  The resolutions of each of the Applicants as required by Rule 0-2(c) under the Act authorizing the filing of this application are attached as Exhibit B to this application.
The Applicants request that the Commission issue an order without a hearing pursuant to Rule 0-5 under the Act.
The Applicants request that any questions regarding this application be directed to Renee M. Hardt, Esq. at Vedder Price P.C., 222 N. LaSalle, Suite 2600, Chicago, Illinois 60601, telephone (312) 609-7616.
 
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VIII.                      REQUEST FOR ORDER OF EXEMPTION
For the foregoing reasons, Applicants request that the Commission enter an order pursuant to Sections 6(c), 12(d)(1)(J) and 17(b) of the Act granting the relief sought by this application.  Applicants submit that the requested exemption is necessary or appropriate in the public interest, consistent with the protection of investors, and consistent with the purposes fairly intended by the policy and provisions of the Act.
[Signature Page Follows]
 

 
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  ALLSTATE FINANCIAL INVESTMENT TRUST  
       
 
By:
/s/ William P. Marshall  
    Name:  William P. Marshall  
    Title:    Chief Administrative Officer  
       
 
  ALLSTATE INSTITUTIONAL ADVISORS, LLC  
       
 
By:
/s/ Joseph P. Rath     
    Name:    Joseph P. Rath  
   
Title:  Vice President and General
       Counsel
  
       

 
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LIST OF ATTACHMENTS AND EXHIBITS  
 
Exhibit A
 
1.           Verification of Allstate Financial Investment Trust
 
2.           Verification of Allstate Institutional Advisors, LLC
 
Exhibit B – Resolutions
 
 
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Exhibit A-1
 
STATE OF ILLINOIS
COUNTY OF COOK
 
VERIFICATION
 
The undersigned states that he has duly executed the attached application, dated February 9, 2009, for and on behalf of Allstate Financial Investment Trust (the “Trust”); that he is the Chief Administrative Officer of the Trust; and that all action by shareholders, Trustees and other bodies necessary to authorize the undersigned to execute and file such instrument has been taken.  The undersigned further states that he is familiar with such instrument, and the contents thereof, and the facts therein set forth are true to the best of his knowledge, information and belief.
 
     
       
 
 
 /s/ William P. Marshall   
    Name:  William P. Marshall  
    Title:    Chief Administrative Officer  
       

 
 
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Exhibit A-2
 
STATE OF ILLINOIS
COUNTY OF COOK
 
VERIFICATION
 
The undersigned states that he has duly executed the attached application, dated February 9, 2009, for and on behalf of Allstate Institutional Advisors, LLC (the “Company”); that he is the Vice President and General Counsel of the Company; and that all action by shareholders, Directors and other bodies necessary to authorize the undersigned to execute and file such instrument has been taken.  The undersigned further states that he is familiar with such instrument, and the contents thereof, and the facts therein set forth are true to the best of his knowledge, information and belief.
 
     
       
 
 
 /s/ Joseph P. Rath  
    Name:  Joseph P. Rath  
    Title:    Vice President and General
             Counsel		  
       

 
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Exhibit B
 

 
Allstate Financial Investment Trust (the “Trust”)
 
RESOLVED, that the filing with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the “1940 Act”), of a request for an exemptive order, pursuant to Sections 6(c), 17(b) and 12(d)(1)(J), relating to relief from Sections 17(a), 12(d)(1)(A) and 12(d)(1)(B) of the 1940 Act is hereby approved to permit among other things, the Trust to invest in non-affiliated investment companies; and it is
 
FURTHER RESOLVED, that the officers of the Trust are hereby authorized and directed on behalf the Trust to take all actions deemed necessary or desirable in their judgment and discretion to carry out the foregoing resolution, including filing any further amendment to the application for the order.
 


 
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