[Federal Register Volume 61, Number 220 (Wednesday, November 13, 1996)]
[Notices]
[Pages 58266-58269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29040]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22323; 812-10174]


SunAmerica Series Trust, et al.; Notice of Application

November 6, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of Application for Exemption Under the Investment 
Company Act of 1940 (the ``Act'').

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APPLICANTS: SunAmerica Series Trust (the ``Series Trust''), SunAmerica 
Equity Funds (the ``Equity Trust'' or collectively with the Series 
Trust, ``Trusts'') on behalf of SunAmerica Global Balanced Fund 
(``Global''), and SunAmerica Asset Management Corp (``SAAMCo'' or the 
``Adviser'').

RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act 
for an exemption from section 15(a) of the Act and rule 18f-2 
thereunder; and from certain disclosure requirements set forth in item 
22 of Schedule 14A under the Securities Exchange Act of 1934 (the 
``Exchange Act''); items 2, 5(b)(iii), and 16(a)(iii) of Form N-1A; 
item 3 of Form N-14; item 48 of Form N-SAR; and sections 6-07(2) (a), 
(b), and (c) of Regulation S-X.

SUMMARY OF APPLICATION: Applicants request an order permitting the 
Adviser

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to enter into or amend contracts with subadvisers without obtaining 
shareholder approval and permitting applicants to disclose only 
aggregate subadvisory fees for each portfolio in their prospectuses and 
other reports.

FILING DATES: The application was filed on May 29, 1996, and amended on 
October 31, 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 December 1, 
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 such notification by writing to 
the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants: Series Trust, P.O. Box 54299, Los Angeles, CA 90054-
0299; Equity Trust and SAAMCo, The SunAmerica Center, 733 Third Avenue, 
New York, N.Y. 10017-3204.

FOR FURTHER INFORMATION CONTACT:
Christine Y. Greenlees, Senior Counsel, at (202) 942-0581, or Mercer E. 
Bullard, 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 from 
the SEC's Public Reference Branch.

Applicants' Representations

    1. Each of the Trusts is an open-end management investment company 
registered under the Act and organized as a Massachusetts business 
trust. The Series Trust, currently composed of eighteen separate 
portfolios (each a ``Series Portfolio''), was established to provide a 
funding medium for certain annuity contracts issued by the Variable 
Separate Account and FS Variable Separate Account, which are separate 
accounts of Anchor National Life Insurance Company and First SunAmerica 
Life Insurance Company, respectively. The Equity Trust is currently 
composed of six separate portfolios (each an ``Equity Portfolio''). 
Global is the only Equity Portfolio to which the application currently 
applies (Global and each Series Portfolio are referred to herein as the 
``Portfolios'').\1\
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    \1\ Applicants also request relief with respect to any series of 
either Trust, now existing or organized in the future, and for any 
open-end management investment company or series thereof advised by 
the Adviser, or a person controlling, controlled by or under common 
control with the Adviser in the future, provided that such 
investment company or series operates in substantially the same 
manner as the Portfolios and complies with the conditions to the 
requested order.
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    2. Each Portfolio has its own investment objectives and policies 
and each is managed as though it was a separate mutual fund issuing its 
own shares. Some Portfolios benefit from discretionary advisory 
services provided by one or more separate registered investment 
advisers (``Subadvisers''), which are retained and compensated by the 
Adviser. Applicants state that the Trusts' prospectuses disclose that 
the Adviser has the authority to hire one or more Subadvisers for a 
Portfolio, and that the Adviser is responsible for monitoring the 
Subadvisers' performance and recommending replacement Subadvisers to 
the Board from time to time.
    3. The Adviser, a registered investment adviser under the 
Investment Advisers Act of 1940, as amended, has entered into an 
investment advisory agreement (``Advisory Agreement'') with each Trust. 
The Advisory Agreements provide that the Adviser shall manage the 
Trusts' investments, administer their business affairs, provide office 
space and other facilities and equipment for the management of the 
affairs of the Trusts, and pay the compensation of certain officers of 
the Trusts who are affiliated persons of SAAMCo. The Advisory 
Agreements further provide that the Adviser may delegate the management 
of a Portfolio's investments to the Subadviser of the Portfolio, if 
any. For its services, the Adviser receives from each Trust a fee based 
on the net assets of each Portfolio.
    4. SAAMCo has in turn entered into an agreement with each 
Subadviser (``Subadvisory Agreement''). The Subadvisory Agreements are 
similar in all material respects except for the names of the 
Subadvisers and the rates of compensation, which are a portion of the 
management fee that is paid by each Portfolio to SAAMCo and which 
SAAMCo pays to the Subadvisers.
    5. The Adviser, either alone or with the assistance of one or 
another of its SunAmerica corporate affiliates, is responsible for (a) 
supervising the Subadvisers' compliance with state and federal 
regulations, (b) analyzing the composition of the investment portfolios 
of the Portfolios and preparing reports thereon for the Board of 
Trustees of each Trust (the ``Trustees'' or the ``Board''), or any 
committee of the Board, (c) evaluating each Portfolio's performance in 
comparison to similar mutual funds and other market information, (d) 
conducting searches for replacement Subadvisers, and selecting, subject 
to the review and approval of the Trustees, Subadvisers who have 
distinguished themselves by able performance in their respective areas 
of responsibility and overseeing their continued performance, and (e) 
preparing presentations to shareholders analyzing the Portfolios' 
investment program and performance.
    6. Under the Subadvisory Agreements, the Subadvisers manage the 
investment and reinvestment of the assets of the respective Portfolios 
for which they are responsible. Each of the Subadvisers is independent 
of SAAMCo and discharges its responsibilities subject to the policies 
of the Trustees and the oversight and supervision of SAAMCo, which pays 
the Subadvisers' fees. Currently, SAAMCo divides the subadvisory 
services for Global between itself and a Subadviser, while the other 
Portfolios each have either a single Subadviser or are managed solely 
by SAAMCo. Applicants intend that, in the future, a Portfolio may be 
managed by a single Subadviser or may be allocated by the Adviser 
between or among more than one Subadviser. None of the Subadvisers are 
affiliated persons of the Adviser, as defined in section 2(a)(3) of the 
Act.
    7. Applicants request an exemption from section 15(a) of the Act 
and rule 18f-2 thereunder to permit the Adviser to enter into a 
Subadvisory Agreement for a Portfolio or to amend an existing 
Subadvisory Agreement without obtaining shareholder approval thereon. 
The exemption would cover new Subadvisory Agreements necessitated 
because the prior Subadvisory Agreements were terminated as a result of 
an assignment (as defined in section 2(a)(4) of the Act).
    8. Applicants also request an exemption from certain disclosure 
requirements, as described below, that may require disclosure of fees 
paid to individual Subadvisers.
    9. Item 2 of Form N-1A requires the Trusts to disclose in their 
prospectuses, as a percentage of average net assets, management fees 
paid by them. Item 5(b)(iii) of Form N-1A requires that the Trusts set 
forth in their prospectuses ``a brief description of the investment 
adviser's compensation.'' Item 16(a)(iii) of Form N-1A requires that 
the Trusts set forth in their Statements of Additional Information for 
each

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investment adviser its compensation and the method of computing the 
advisory fee.
    10. Item 3 of Form N-14, the registration form for business 
combinations involving investment companies, requires the inclusion of 
a ``table showing the current fees for the registrant and the company 
being acquired and pro forma fees, if different, for the registrant 
after giving effect to the transaction using the format prescribed'' in 
item 2 of Form N-1A.
    11. Rule 20a-1 under the Act requires proxies solicited with 
respect to an investment company to comply with Schedule 14A under the 
Exchange Act. Subparagraphs (a)(3)(iv), (c)(1)(ii) and (c)(1)(iii) of 
Item 22 of Schedule 14A and paragraphs (c)(8) and (c)(9) of Item 22 of 
Schedule 14A, taken together, require that a proxy statement on a 
shareholder meeting at which an advisory contract is to be voted upon, 
shall include, among other information, the ``rate of compensation of 
the investment adviser'' and the ``aggregate amount of the investment 
adviser's fee.''
    12. Item 48 of Form N-SAR provides that the Trusts must disclose 
the rate schedule for fees paid to their investment advisers, including 
the Subadvisers. Items 6-07(2) (a), (b), and (c) of Regulation S-X may 
be deemed to require that the Trusts' financial statements contain 
information concerning fees paid to the Subadvisers by the Adviser.
    13. Applicants propose to disclose (both as a dollar amount and as 
a percentage of the Portfolio's net assets) in each Trust's 
registration statement and other public documents only the ``Aggregate 
Fee Disclosure,'' which means: (a) the total advisory fee charged by 
the Adviser with respect to each Portfolio; (b) the aggregate fees paid 
by the Adviser to all Subadvisers managing assets of each Portfolio; 
(c) the net advisory fee retained by the Adviser with respect to each 
Portfolio after the Adviser pays all Subadvisers managing assets of the 
Portfolio; and (d) fees paid to any Subadviser who is an affiliated 
person (as defined in section 2(a)(3) of the Act) of either Trust or 
the Adviser other than by reason of serving as a Subadviser (an 
``Affiliated Subadviser'').

Applicants' Legal Analysis

    1. Section 15(a) of the Act makes it unlawful for any person to act 
as investment adviser to a registered investment company except 
pursuant to a written contract that has been approved by a majority of 
the investment company's outstanding securities. Rule 18f-2 under the 
Act provides that each series or class of stock in a series company 
affected by a matter must approve such matter if the Act requires 
shareholder approval.
    2. Applicants assert that the requested exemption will permit the 
Adviser to more efficiently perform the functions the Portfolios are 
paying it to perform: selecting and monitoring the performance of 
Subadvisers, and changing Subadvisers with Board approval. Applicants 
believe that requiring shareholders to approve each new Subadviser 
would not only result in unnecessary administrative expense to the 
Portfolios, but could also result in harmful delays in executing 
changes in Subadvisers. Applicants note that primary responsibility for 
management of the Portfolios is vested in the Adviser, subject to 
oversight by the respective Board. Applicants also note that its 
contracts with the Trusts will remain fully subject to the requirements 
of section 15(a) of the Act and rule 18f-2 thereunder, including the 
requirements for shareholder voting.
    3. Applicants also state that the Trusts' prospectuses disclose 
information concerning the identity, ownership, and qualifications of 
the Subadvisers in full compliance with Form N-1A. Further, the 
information statement described in condition 3 below would provide 
shareholders with all information regarding a new Subadviser or a 
material change in a Subadvisory Agreement to the same extent as would 
be set forth in a proxy statement. Applicants contend that investors 
therefore would be in a position to make a fully informed investment 
decision as to the purchase, redemption or retention of Portfolio 
shares. In addition, applicants assert that, if the exemptive relief is 
not granted, all shareholders would bear the higher expenses associated 
with formal proxy solicitations without receiving more meaningful 
disclosure.
    4. Because of the desire of most investment advisers to price their 
services based on ``posted'' fee rates, applicants believe that, in the 
absence of the requested relief, the Adviser, the Trusts and 
shareholders of the Portfolios may be able to obtain a specific 
Subadviser's services only by the Adviser paying higher fee rates than 
it would otherwise be able to negotiate if the rates were not disclosed 
publicly. If the Adviser must pay higher fees, applicants argue that it 
must charge the Portfolios or the shareholders higher fees to cover its 
cost of doing business. Applicants submit that the nondisclosure of 
individual Subadviser's fees is in the best interest of the Portfolios 
and their shareholders, where disclosure of such fees would increase 
costs to shareholders without an offsetting benefit.
    5. Section 6(c) of the Act provides that the SEC may exempt any 
person, security, or transaction from any provision of the Act, 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 requested relief meets this standard.

Applicants' Conditions

    Applicants agree that the order granting the requested relief shall 
be subject to the following conditions:
    1. The Adviser will provide general management and administrative 
services to the Trusts, including overall supervisory responsibility 
for the general management and investment of the Trusts' securities 
portfolios, and, subject to review and approval by each Board with 
respect to its respective Portfolios, will (a) set the Portfolios' 
overall investment strategies; (b) select Subadvisers; (c) monitor and 
evaluate the performance of Subadvisers; (d) allocate and, when 
appropriate, reallocate a Portfolio's assets among its Subadvisers in 
those cases where a Portfolio has more than one Subadviser; and (e) 
implement procedures reasonably designed to ensure that the Subadvisers 
comply with the Trusts' and the relevant Portfolio's investment 
objectives, policies, and restrictions.
    2. Before a Portfolio may rely on any order granting the requested 
relief, the operation of the Portfolio in the manner described in the 
application will be approved by a majority of its outstanding voting 
securities (or, in the case of the Series Trust, by the unitholders of 
any separate account for which the Series Trust serves as a funding 
medium), as defined in the Act, or, in the case of a new Portfolio 
whose public shareholders purchased shares on the basis of a prospectus 
containing the disclosure contemplated by condition 4 below, by the 
sole shareholder before offering of shares of such Portfolio to the 
public.
    3. Each Trust will furnish to its shareholders all information 
about a new Subadviser or Subadvisory Agreement for one of its 
Portfolios that would be included in a proxy statement, except as may 
be modified by the order with respect to the disclosure of fees paid to 
the Subadvisers (the ``Disclosure Order''). Such information will 
include disclosure as to the level of fees to be paid to the Adviser 
and each Subadviser of the Portfolio (unless the Trust is relying on 
the Disclosure Order, in

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which case it will include Aggregate Fee Disclosure) and any change in 
such disclosure caused by the addition of a new Subadviser or any 
material change in a Subadvisory Agreement. Each Trust will meet this 
condition by providing its shareholders with an informal information 
statement complying with the provisions of Regulation 14C under the 
Exchange Act and Schedule 14C thereunder. With respect to a newly 
retained Subadviser, or a change in a Subadvisory Agreement, this 
information statement will be provided to shareholders of the Portfolio 
a maximum of sixty (60) days after the addition of the new Subadviser 
or the implementation of any change in a Subadvisory Agreement. The 
information statement will also meet the requirements of Schedule 14A, 
except as may be modified by the Disclosure Order. The Series Trust 
will ensure that the information statement is furnished to the 
unitholders of any separate account for which the Series Trust serves 
as a funding medium.
    4. Each Trust will disclose in its prospectus the existence, 
substance and effect of the order.
    5. No trustee, director, or officer of a Trust or director or 
officer of the Adviser will own directly or indirectly (other than 
through a pooled investment vehicle that is not controlled by any such 
director, trustee or officer) any interest in any Subadviser except for 
(a) ownership of interests in the Adviser or any entity that controls, 
is controlled by or is under common control with the Adviser; or (b) 
ownership of less than 1% of the outstanding securities of any class of 
equity or debt of a publicly-traded company that is either a Subadviser 
or any entity that controls, is controlled by or is under common 
control with a Subadviser.
    6. The Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser without such agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Portfolio.
    7. At all times, a majority of the members of each Board will be 
persons each of whom is not an ``interested person'' of the respective 
Trust as defined in Section 2(a)(19) of the Act (``Independent 
Trustees''), and the nomination of new or additional Independent 
Trustees will be placed within the discretion of the then existing 
Independent Trustees.
    8. When a Subadviser change is proposed for a Portfolio with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
Board's minutes, that such change is in the best interests of the 
Portfolio and its shareholders (or, in the case of the Series Trust, 
the unitholders of any separate account for which the Series Trust 
serves as a funding medium) and does not involve a conflict of interest 
from which the Adviser or the Affiliated Subadviser derives an 
inappropriate advantage.
    In addition to the above conditions, applicants agree to comply 
with the following conditions prior to relying on the Disclosure Order:
    9. Each Trust will disclose both as a dollar amount and as a 
percentage of a Portfolio's net assets in its registration statement 
the respective Aggregate Fee Disclosure.
    10. The Independent Trustees shall retain and be represented by 
independent counsel knowledgeable about the Act and the duties of 
Independent Trustees. The selection of such counsel shall at all times 
be within the discretion of the Independent Trustees.
    11. The Adviser will provide the Board, no less frequently than 
quarterly, information about the Adviser's profitability on a per-
Portfolio basis. Such information will reflect the impact on 
profitability of the hiring or termination of any Subadviser during the 
applicable quarter.
    12. Whenever a Subadviser is hired or terminated, the Adviser will 
provide the Board information showing the expected impact on the 
Adviser's profitability.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-29040 Filed 11-12-96; 8:45 am]
BILLING CODE 8010-01-M