[Federal Register Volume 61, Number 141 (Monday, July 22, 1996)]
[Notices]
[Pages 37945-37946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18455]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22074/812-10168]


Aetna Series Fund, Inc., et al.; Notice of Application

July 16, 1996.
AGENCY: Securities and Exchange Commission (``SEC``).

ACTION: Notice of application for exemption under the Investment 
Company Act of 1940 (the ``Act'').

-----------------------------------------------------------------------

APPLICANTS: Aetna Series Fund, Inc. (the ``Fund''), on behalf of the 
Aetna Asian Growth Fund (the ``Asian Growth Fund'') and the Aetna 
International Growth Fund (the ``International Growth Fund''), Aetna 
Life Insurance and Annuity Company (``ALIAC''), and Aetna Life 
Insurance Company (``ALIC'').

RELEVANT ACT SECTIONS: Order requested under section 17(b) for an 
exemption from section 17(a).

SUMMARY OF APPLICATION: Applicants request an order to permit the 
International Growth Fund to acquire substantially all of the assets of 
the Asian Growth Fund. Because of certain affiliations, the 
International Growth Fund and the Asian Growth Fund may not rely on 
rule 17a-8 under the Act.

FILING DATE: The application was filed on May 23, 1996, and amended on 
July 11, 1996.

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 August 12, 1996, 
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, NW., Washington, DC 20549. 
Applicants, 151 Farmington Avenue, Hartford, Connecticut 06156-3124.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Staff Attorney, at 
(202) 942-0574, or Robert A. Robertson, Branch 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 
SEC's Public Reference Branch.

Applicants' Representations

    1. The Fund is a Maryland corporation registered under the Act as 
an open-end management investment company. The International Growth 
Fund and the Asian Growth Fund are each a series of the Fund. The 
International Growth Fund and the Asian Growth Fund are referred to 
herein as the ``Portfolios.''
    2. ALIAC is the adviser and administrator for the Portfolios, and 
principal underwriter for the Fund. ALIAC and ALIC are indirect wholly-
owned subsidiaries of Aetna Life and Casualty Company (together with 
ALIAC and ALIC, ``Aetna''). As of May 31, 1996, Aetna in the aggregate 
owned 49.99% of the outstanding shares of the International Growth Fund 
and 91.59% of the outstanding shares of the Asian Growth Fund.
    3. Each Portfolio offers two classes of shares: Adviser Class 
shares, which are offered primarily to the general public, and Select 
Class shares, which are offered principally to institutions. Adviser 
Class shares are normally subject to a contingent deferred sales charge 
(``CDSC'') of 1%, declining to 0% after 4 years from the date of 
initial purchase. The adviser Class shares are subject to a rule 12b-1 
distribution fee and a service fee at an annual rate of 0.50% and 
0.25%, respectively. Select Class shares are not subject to any sales 
charge, CDSC, distribution fee or service fee.
    4. The investment objectives, policies and restrictions of the 
International Growth Fund and the Asian Growth Fund are similar. Both 
seek long-term capital growth by investing in a diversified portfolio 
of common stocks principally traded in countries outside of North 
America. While the Asian Growth Fund's principal investments are 
limited to countries in Asia excluding Japan, the International Growth 
Fund may invest principally in a broader range of countries, which 
includes countries in which the Asian Growth Fund may currently invest.
    5. The International Growth Fund proposes to acquire all or 
substantially all of the assets and certain liabilities of the Asian 
Growth Fund in exchange for shares of the International Growth Fund 
pursuant to an agreement and plan of reorganization and liquidation 
(the ``Plan''). The shares of the International Growth Fund to be 
issued (the ``New Shares'') will have an aggregate net asset value 
equal to the value of the assets of the Asian Growth Fund transferred 
less the liabilities assumed, determined as of the close of regular 
trading on the New York Stock Exchange on the business day next 
preceding the closing (the ``Valuation Date''). As soon as practicable 
after the closing, the New Shares will be distributed to the Asian 
Growth Fund shareholders in exchange for the shares of the Asian Growth 
Fund, each such shareholder to receive the number of New Shares that is 
equal in dollar amount to the value of shares of stock of the Asian 
Growth Fund held by such shareholder on the Valuation Date. After such 
distribution, the Asian Growth Fund will be terminated. For a 30-day 
period following the reorganization, the CDSC applicable to the Adviser 
Class shares will be waived for all Asian Growth Fund shareholders who 
redeem their newly issued shares of the International Growth Fund.
    6. On April 30, 1996, at a meeting of the board, the Plan was 
approved by the directors of the Fund, including a majority of the 
directors who are not ``interested persons'' of ALIAC or the Portfolios 
(the ``disinterested directors''). In approving the Plan, the board, 
including the disinterested directors, found that participation in the 
reorganization is in the best interests of each Portfolio and that the 
interest of existing shareholders of each Portfolio will not be diluted 
as a result of the reorganization. The factors considered by the board 
included, among other things: (a) Recent and anticipated asset and 
expense levels of the Portfolios and future prospects of each 
Portfolio; (b) the similarity of the investment advisory, distribution 
and administration arrangements, the fact that the Portfolios have the 
same custodian, transfer agent, dividend disbursing agent and 
independent accounts, and the fact that the Portfolios expect the 
reorganization to realize savings in fixed expenses; (c) alternative 
options to the reorganization; (d) the potential benefits to Aetna; (e) 
the terms and conditions of the reorganization; (f) the similarity of 
the investment objectives; policies and restrictions of the two 
Portfolio; (g) the representation

[[Page 37946]]

that Aetna would bear the costs of the reorganization; and (h) the tax 
consequences expected to result from the reorganization. The board also 
considered ALIAC's proposal for managing the assets of the Portfolios, 
whereby after the reorganization, ALIAC and its affiliate, Aeltus 
Investment Management, Inc., would be the investment adviser and 
subadviser, respectively, to the International Growth Fund, subject to 
shareholder approval.
    7. Applicants contemplate that the Plan will be submitted for 
approval by the shareholders of the Asian Growth Fund at a meeting 
scheduled to be held on or about August 28, 1996. A registration 
statement containing a combined prospectus/proxy statement has been 
filed with the SEC. The prospectus/proxy statement will be sent to 
shareholders of the Asian Growth Fund on or about July 25, 1996. 
Shareholders of the Select Class and Adviser Class shares of the Asian 
Growth Fund will vote together as a single class. Assuming that the 
required shareholder vote is obtained at the shareholders' meeting, the 
closing is expected to be held August 30, 1996.
    8. Applicants agree not to make any material changes to the Plan 
that affect representations in the application without the prior 
approval of the SEC.

Applicants' Legal Analysis

    1. Section 17(a), in pertinent part, prohibits an affiliated person 
of a registered investment company, acting as principal, from selling 
to or purchasing from such registered company, any security or other 
property.
    2. Section 2(a)(3) of the Act defines the term ``affiliated 
person'' of another person to include, among other persons, any person 
directly or indirectly owning, controlling, or holding with power to 
vote, 5% or more of the outstanding voting securities of such other 
person; any person directly or indirectly controlling, controlled by, 
or under common control with, such other person; and, if such other 
person is an investment company, any investment adviser thereof.
    3. Section 17(b) provides that the SEC may exempt a transaction 
from section 17(a) if evidence establishes that the terms of the 
proposed transaction, including the consideration to be paid, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, and that the proposed transaction is consistent with 
the policy of the registered investment company concerned and with the 
general purposes of the Act.
    4. Rule 17a-8 under the Act exempts from section 17(a) mergers, 
consolidations, or purchases or sales of substantially all the assets 
involving registered investment companies that may be affiliated 
persons solely by reason of having a common investment adviser, common 
directors, and/or common officers provided that certain conditions are 
satisfied. The reorganization may not be exempt from the prohibitions 
of section 17(a) by reason of rule 17a-8 because Aetna owns 5% or more 
of the outstanding voting securities of each Portfolio. Consequently, 
applicants are requesting an order under section 17(b) exempting the 
transactions from section 17(a) to the extent necessary to consummate 
the reorganization.
    5. Applicants believe that the reorganization is consistent with 
the policies of the Portfolios and that the participation of Aetna in 
the reorganization would not be on a basis that is more advantageous 
than that of the Portfolios. Applicants believe that the terms of the 
proposed reorganization satisfy the standards set forth in section 
17(b).

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-18455 Filed 7-19-96; 8:45 am]
BILLING CODE 8010-01-M