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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-17F-2
Certificate of Accounting of Securities and Similar
Investments in the Custody of
Management Investment Companies
Pursuant to Rule 17f-2[17 CFR 270.17f-2]
________________________________________________________________________________
1. Investment Company Act File Number: Date examination completed:
811-4146 5/11/99
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2. State identification Number:
AL AK AZ AR CA CO
CT DE DC FL GA HI
ID IL IN IA KS KY
LA ME MD MA MI MN
MS MO MT NE NV NH
NJ NM NY NC ND OH
OK OR PA RI SC SD
TN TX UT VT VA WA
WV WI WY PUERTO RICO
Other (specify):
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3. Exact name of investment company as specified in registration statement:
Manufacturers Investment Trust
________________________________________________________________________________
________________________________________________________________________________
4. Address of principal executive office (number, street, city, state, zip
code):
73 Tremont Street, Boston, Massachusetts 02108-3915
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INSTRUCTIONS
This Form must be completed by investment companies that have custody of
securities or similar investments.
INVESTMENT COMPANY
1. All items must be completed by the investment company.
2. Give this Form to the independent public accountant who, in compliance with
Rule 17f-2 under the Act and applicable sate law, examines securities and
similar investments in the custody of the investment company.
ACCOUNTANT
3. Submit this Form to the Securities and Exchange Commission and appropriate
state securities administrators when filing the certificate of accounting
required by Rule 17f-2 under the Act and applicable state law. File the
original and one copy with the Securities and Exchange Commission's principal
office in Washington, D.C., one copy with the regional office for the region
in which the investment company's principal business operations are
conducted, and one copy with the appropriate state administrator(s), if
applicable.
THIS FORM MUST BE GIVEN TO YOUR INDEPENDENT PUBLIC ACCOUNTANT
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INDEPENDENT AUDITOR'S REPORT
To the Board of Trustees of Manufacturers Investment Trust
Lifestyle Series Trusts:
We have examined management's assertion about the Manufacturers Investment Trust
Lifestyle Series Trusts' (the "Trusts", comprised of the Lifestyle Aggressive
1000, Lifestyle Growth 820, Lifestyle Balanced 640, Lifestyle Moderate 460, and
Lifestyle Conservative 280 Trusts) compliance with the requirements of
subsections (b) and (c) of Rule 17f-2 under the Investment Company Act of 1940
(as interpreted in the attached Response of the Office of Chief Counsel,
Division of Investment Management, Ref. No. 92-237-CC) as of May 11, 1999,
included in the accompanying Management Statement Regarding Compliance with
Certain Provisions of the Investment Company Act of 1940. Management is
responsible for the Trusts' compliance with those requirements. Our
responsibility is to express an opinion on management's assertion about the
Trusts' compliance based on our examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about the Trusts' compliance with those
requirements and performing such other procedures as we considered necessary in
the circumstances. Included among our procedures were the following tests
performed as of May 11, 1999, and with respect to agreement of security
purchases and sales, for the period from December 31, 1998 (the date of our last
examination) through May 11, 1999:
*Confirmation of the number of shares of beneficial interest of the
underlying trusts owned by each Trust and held by a securities
depository which uses the book entry method of accounting for
securities, Manufacturers Security Services, LLC without prior notice
to management;
*Reconciliation of all such shares of beneficial interest to the books
and records of the Trusts and Manufacturers Security Services, LLC.;
and
*Agreement of selected security transactions by the Trusts of shares of
beneficial interest of the underlying trusts since our last report from
the books and records of the Trusts to confirmations from Manufacturers
Security Services, LLC.
We believe that our examination provides a reasonable basis for our opinion. Our
examination does not provide a legal determination of the Trusts' compliance
with specified requirements.
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In our opinion, management's assertion that the Trusts were in compliance with
the requirements of subsections (b) and (c) of Rule 17f-2 of the Investment
Company Act of 1940 (as interpreted in the aforementioned Response of the Office
of Chief Counsel, Division of Investment Management, Ref. No. 92-237-CC) as of
May 11, 1999 with respect to securities reflected in the investment accounts of
the Trusts is fairly stated, in all material respects.
This report is intended solely for the information and use of management of the
Trusts and the Securities and Exchange Commission and should not be used for any
other purpose.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 28, 1999
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STAFF REPLY LETTER
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF INVESTMENT MANAGEMENT
OUR REF. NO. 92-237-CC
FRANKLIN INVESTORS SECURITIES TRUST
FILE NO. 811-4986
Your letter of April 15, 1992, requests our assurance that we would not
recommend any enforcement action to the Commission if Franklin Investors
Securities Trust (the "Trust"), a series investment company, acts as custodian
for one of its series, Franklin Adjustable Rate Securities Fund ("Adjustable"),
in the manner described in your letter, without strictly complying with
paragraphs (b), (e), and (f) of Rule 17f-2 of the Investment Company Act of 1940
(the "1940 Act").!1
The Trust is a registered, open-end investment company, and Adjustable is
a series of the Trust. Adjustable invests all of its assets exclusively in
shares of Adjustable Rate Securities Portfolio ("ARSP"), another registered,
open-end investment company. Franklin Administrative Services, Inc. ("FAS"), a
registered transfer agent under Section 17A of the Securities Exchange Act of
1934 (the "1934 Act"), serves as transfer agent for both Adjustable and ARSP.
The Trust proposes to maintain Adjustable's portfolio of ARSP shares in the
book-entry system of FAS. You state that the Trust, through its series
Adjustable, will be subject to Rule 17f-2 because FAS is an affiliated person of
Adjustable.!2
You state that it would be difficult and, perhaps, impossible for the
Trust to maintain ARSP securities in the safekeeping of a vault or other
depository maintained by a bank, as required by Rule 17f-2(b). ARSP does not
issue certificated shares, except upon request, and Adjustable does not intend
to request ARSP to issue certificates. Consequently, the Trust will not have
actual physical possession of any of Adjustable's shares of ARSP. In lieu of
strict compliance with Rule 17f-2(b), you propose that the Trust rely on Section
17(f) of the 1940 Act and Rule 17f-4 thereunder by treating FAS as a securities
depository.
Rule 17f-4 authorizes a registered, open-end management investment
company or its custodian to deposit securities, under certain conditions, in a
clearing agency registered under Section 17A of the 1934 Act that acts as a
securities depository. Rule 17f-4(c) specifies the conditions under which an
investment company itself may deposit its securities in a clearing agency that
acts as a securities depository, while Rule 17f-4(d) specifies the conditions
under which an investment company's custodian may make such deposits.
Although FAS is not a registered clearing agency, you assert that it is
functionally equivalent to one in its role as a transfer agent. You point out
that the staff has permitted open-end investment companies that invest in
uncertificated shares of other funds to maintain custody of those shares with
the transfer agents of the underlying funds.!3 In those letters, the investment
companies' custodians maintained the underlying funds' shares with unaffiliated
third parties. The Trust's situation is distinguishable, however, for two
principal reasons. First, the Trust proposes to maintain its securities directly
with FAS, rather than through a custodian. Second, the Trust proposes to
maintain its securities with an affiliated person rather than with an
independent third party.
To address these differences, the Trust will comply with Rule 17f-4(c) in
the following manner: (i) maintaining a system that is reasonably designed to
prevent unauthorized officers' instructions and which will provide, at least,
for the form, content, and means of giving, recording and reviewing the
instructions; (ii) requiring FAS, upon ceasing to act as transfer agent for
ARSP, to deliver Adjustable's shares of ARSP to the successor clearing agency,
custodian, or safekeeper; and (iii) causing its Board of Trustees to approve the
arrangement with FAS and review it at least annually.!4 In addition, the Trust
will implement procedures derived from paragraphs (2), (3), and (4) of Rule
17f-4(d), respectively, by requiring FAS to: (i) maintain a segregated account
representing only assets held for Adjustable; (ii) send to Adjustable copies of
all confirmations of any transfers to or from the account of Adjustable; and
(iii) send to Adjustable reports regarding FAS's system of internal accounting
control as Adjustable may reasonably request from time to time.!5
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With respect to Rule 17f-2(e), you state that since Adjustable will not
deposit or withdraw securities from FAS, strict compliance with the rule is not
practical. You point out, however, that the staff has permitted investment
companies, deemed to have self-custody, to deposit the securities of the funds
in which they invest with the underlying funds' transfer agents, without strict
compliance with the notation requirements under Rule 17f-2(e).!6 The staff's
position was based, in particular, on the following representations: (i)
limitations on the number of persons authorized to transmit instructions to the
transfer agents; (ii) use of passwords to insure that only properly authorized
persons can transmit instructions; (iii) the transfer agents' transmission of
confirmation of each transaction to persons employed by the investment companies
other than those persons who transmit investment instructions to the investment
companies; and (iv) internal accounting controls that subject all confirmations
from the transfer agents to daily proof against the investment companies'
transaction authorizations. You represent that the Trust will comply with each
of these conditions.!7
Finally, with respect to paragraph (f) of Rule 17f-2, you state that
verification of ARSP securities through physical examination by the Trust's
independent accountant is impossible. Instead, you propose that the Trust's
independent accountants conduct their examinations by comparing FAS's transfer
agent account records with the book records of Adjustable and ARSP, and
reconciling any differences. The Trust's independent accountants will perform at
least three verifications of Adjustable's investments, at least two of which
will be performed without prior notice to the Trust. You note that the staff has
permitted such verifications in the past.!8
On the basis of the facts and representations in your letter and without
necessarily agreeing with your legal analysis, we would not recommend any
enforcement action to the Commission if the Trust maintains Adjustable's
securities of ARSP in the book-entry system of FAS as described in your letter.
Because this response is based on the facts and representations in your letter,
you should note that different facts or representations might require a
different conclusion. Moreover, this response only expresses the Division's
position on enforcement action and does not purport to express any legal
conclusions on the questions presented.
JOHN K. CARTER
ATTORNEY
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!1Investment companies and their transfer agents are specifically excluded from
the definition of a "clearing agency" under Section 3(a)(23)(B)(v) and (vi) of
the Securities Exchange Act of 1934, and therefore are not required to register
as such with the Commission.
!1Rule 17f-2 sets forth conditions under which a registered management
investment company may maintain custody of its securities. Paragraphs (b), (e),
and (f) of the rule, respectively, generally provide as follows:
(1) securities must be kept in a vault or other depository maintained by a bank
or other company whose functions and physical facilities are supervised by
federal or state authorities;
(2) every person depositing or withdrawing securities from a qualified
depository or when ordering their withdrawal and delivery must sign a notation,
including (i) the date and time of each deposit, withdrawal, or order, (ii) the
title and amount of the securities deposited, withdrawn, or ordered and
identification by certificate numbers or otherwise, (iii) the manner of
acquisition of the securities deposited or the purpose for which they have been
withdrawn, and (iv) if withdrawn and delivered to another person the name of
such person; and
(3) an investment company's independent accountant must make a complete
examination of the securities and similar investments that the investment
company maintains at least three times annually, at least two of which will be
performed without prior notice to the investment company.
!2Telephone conversation with Mr. Bruce Leto, counsel to the Trust (September
21, 1992). See, e.g., The Mutual Fund Group (pub. avail. Dec. 12, 1989)
(investment company whose investment adviser is also the company's subcustodian
is subject to Rule 17f-2); Pegasus Income and Capital Fund, Inc. (pub. avail.
Dec. 1, 1977) (any arrangement between an investment company and its adviser
bank where the bank provides custodial or depository services is subject to Rule
17f-2).
!3See, e.g., American Pension Investors Trust (pub. avail. Feb. 1, 1991);
FundVest (pub. avail. Nov. 21, 1984) (collectively, the "FundVest Letters"). The
staff's responses in the FundVest Letters was conditioned on the following
representations, most of which appear to be derived from Rule 17f-4(d):
1. The investment company would maintain a system that is reasonably designed to
prevent an unauthorized officer's instructions and that would provide, at least,
for the form, content and means of giving, recording, and reviewing
instructions.
2. The custodian would maintain the securities directly with the transfer agents
of underlying funds in a separate account in its name.
3. The transfer agents would maintain segregated accounts representing any
assets held for the custodian.
4. The custodian would send to the investment company copies of all
confirmations received from the transfer agents of any transfers to or from the
account of the investment company.
5. The custodian would send to the investment company reports regarding the
custodian's system of internal accounting control as the investment company may
reasonably request from time to time.
6. The investment company, by resolution of its board of directors/trustees,
would approve the arrangement and the board would review it at least annually.
Cf. United States Trust Company of New York (pub. avail. Apr. 16, 1992) (the
staff permitted unit investment trusts that invested in uncertificated shares of
open-end investment companies to maintain custody of those shares with the
transfer agents of the underlying funds).
!4Telephone conversation with Mr. Leto (September 18, 1992).
!5These procedures are identical to representations (3), (4), and (5) in the
FundVest Letters. See supra note 3.
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!6See Gardner Fund (pub. avail. Feb. 5, 1988) ("Gardner"); AmeriTrust's
Collective Investment Retirement Fund (pub. avail. Nov. 23, 1987).
!7Telephone conversation with Mr. Leto (September 18, 1992).
!8See Gardner, supra; The Rodney Square Fund (pub. avail. June 15, 1987).
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MANAGEMENT STATEMENT REGARDING COMPLIANCE WITH CERTAIN PROVISIONS
OF THE INVESTMENT COMPANY ACT OF 1940
We, as members of management of Manufacturers Investment Trust, Lifestyle Series
Trusts (the "Trusts", comprising of the Lifestyle Aggressive 1000, Lifestyle
Growth 820, Lifestyle Balanced 640, Lifestyle Moderate 460, and Lifestyle
Conservative 280 Trusts), are responsible for complying with the requirements of
subsections (b) and (c) of Rule 17f-2, "Custody of Investments by Registered
Management Investment Companies," of the Investment Company Act of 1940 (as
interpreted in the attached Response of the Office of Chief Counsel, Division of
Investment Management, Ref. No. 92-237-CC). We are also responsible for
establishing and maintaining effective internal controls over compliance with
those requirements. We have performed an evaluation of the Trusts' compliance
with the requirements of subsections (b) and (c) of Rule 17f-2 (as interpreted
in the attached Response of the Office of Chief Counsel, Division of Investment
Management, Ref. No. 92-237-CC) as of May 11, 1999 and from December 31, 1998,
through May 11, 1999.
Based on this evaluation, we assert that the Trusts were in compliance with the
requirements of subsections (b) and (c) of Rule 17f-2 of the Investment Company
Act of 1940 (as interpreted in the attached Response of the Office of Chief
Counsel, Division of Investment Management, Ref. No. 92-237-CC) as of May 11,
1999 and from December 31, 1998, through May 11, 1999, with respect to
securities reflected in the investment account of the Trusts.
Manufacturers Investment Trust, Lifestyle Series Trusts
/s/ JAMES R. BOYLE Date: 5/28/99
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James R. Boyle
Manufacturers Investment Trust Treasurer
