[Federal Register Volume 62, Number 99 (Thursday, May 22, 1997)]
[Notices]
[Pages 28079-28080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13455]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 22664; 812-10658]


USLIFE Income Fund, Inc., et al.; Notice of Application

May 16, 1997.
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: USLIFE Income Fund, Inc. (the ``Fund'') and USLIFE 
Advisers, Inc. (the ``Adviser'').

RELEVANT ACT SECTIONS: Order requested under section 6(c) granting an 
exemption from section 15(a).

SUMMARY OF APPLICATION: USLIFE Corporation (``USLIFE''), the parent of 
the Adviser, has agreed to merge with a wholly-owned sudsidiary of 
American General Corporation (``American General''). The indirect 
change in control of the Adviser will result in the assignment, and 
thus the termination, of the existing investment advisory agreement 
(``Existing Advisory Agreement'') between the Fund and the Adviser. The 
order would permit the implementation, without shareholder approval, of 
a new investment advisory agreement (the ``New Advisory Agreement'') 
for a period of up to 120 days following the date of the change in 
control of USLIFE (but in no event later than October 15, 1997) (the 
``Interim Period''). The order also would permit the Adviser to receive 
all fees earned under the New Advisory Agreement following shareholder 
approval.

FILING DATE: The application was filed on May 12, 1997.

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 June 10, 1997 
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 may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549. 
Applicants: 125 Maiden Lane, New York, NY 10038.

FOR FURTHER INFORMATION CONTACT:
John K. Forst, Attorney-Adviser, at (202) 942-0569, or Mary Kay Frech, 
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. The Fund is a Maryland corporation registered under the Act as a 
closed-end, management investment company. The Adviser, a registered 
investment adviser under the Investment Advisers Act of 1940, serves as 
the investment adviser for the Fund pursuant to the Existing Advisory 
Agreement.
    2. On February 13, 1997, USLIFE, a life insurance holding company, 
announced its agreement to merge with a wholly owned subsidiary of 
American General (the ``Merger''). As a result of the Merger, USLIFE 
will become a 100% owned subsidiary of American General. The Merger is 
subject to the satisfaction of certain conditions, including approval 
by the shareholders of both USLIFE and American General. Applicants 
expect the Merger to be consummated on or about June 17, 1997.
    3. Applicants request an exemption to permit implementation, prior 
to receiving shareholder approval, of the New Advisory Agreement 
between the Fund and the Adviser. The requested exemption will cover 
the Interim Period of not more than 120 days beginning on the date on 
which USLIFE and a wholly owned subsidiary of American General 
consummate the Merger and continuing through the date the New Advisory 
Agreement is approved or disapproved by the shareholders of the Fund 
(but in no event later than October 15, 1997). It is anticipated that 
the New Advisory Agreement will contain identical terms and conditions 
as the Fund's Existing Advisory Agreement, except for its effective 
date and escrow provisions. The aggregate contractual rate chargeable 
for advisory services will remain the same as in the Existing Advisory 
Agreement. The Fund proposes to implement the New Advisory Agreement 
during the Interim Period, subject to the conditions contained in the 
application.
    4. The Fund's board of directors is scheduled to meet in-person on 
May 14, 1997 for the purpose of considering the New Advisory Agreement 
in accordance with section 15(c) of the Act. The board will receive 
such information as the directors deem necessary to evaluate whether 
the terms of the New Advisory Agreement are in the best interests of 
the Fund and its shareholders. The Fund expects to prepare the required 
proxy materials and schedule a shareholder meeting as soon as 
reasonably practicable. Applicants believe that the Interim Period is 
reasonable and in the best interest of the Fund's shareholders because 
it will allow sufficient time for preparation, mailing, consideration, 
and return of proxy materials in order to obtain shareholder approval.
    5. Applicants also request an exemption to permit the Adviser to 
receive from the Fund all fees earned under the New Advisory Agreement 
implemented during the Interim Period if the New Advisory Agreement is 
approved by the shareholders of the Fund. The fees to be paid during 
the Interim Period are at the same rate as the fees currently payable 
by the Fund.
    6. Applicants propose to enter into an escrow arrangement with an 
unaffiliated financial institution that will serve as escrow agent. The 
fees payable to the Adviser during the Interim Period will be paid into 
an interest-bearing escrow account maintained by the escrow agent. 
Amounts in the escrow account (including interest earned on such fees) 
will be paid to the Adviser only if shareholders of the Fund approve 
the New Advisory Agreement. If shareholders of the Fund fail to approve 
the New Advisory Agreement, the escrow agent will pay to the Fund the

[[Page 28080]]

escrow funds (including interest earned). The escrow agent will release 
the escrow funds only upon receipt of a certificate from an officer of 
the Fund who is not an interested person of the Adviser stating, if the 
escrow funds are to be delivered to the Adviser, that the New Advisory 
Agreement has received the requisite Fund shareholder vote, or, if the 
escrow funds are to be delivered to the Fund, that the Interim Period 
has ended, and the New Advisory Agreement has not been approved by the 
requisite shareholder vote. Before any such certificate is sent, the 
directors of the Fund would be notified.

Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in pertinent part, that it 
shall be unlawful for any person to serve or act as an investment 
adviser of a registered investment company, except pursuant to a 
written contract that has been approved by the vote of a majority of 
the outstanding voting securities of such investment company. Section 
15(a) further requires that such written contract provide for automatic 
termination in the event of its assignment. Section 2(a)(4) of the Act 
defines ``assignment'' to include any direct or indirect transfer of a 
contract by the assignor or the transfer of a controlling block of the 
assignor's outstanding voting securities by a security holder of the 
assignor. Beneficial ownership of more than 25% of a company's voting 
securities is presumed to constitute control.
    2. Applicants state that, upon completion of the Merger, American 
General will own 100% of the voting securities of USLIFE, the Adviser's 
parent. Applicants therefore believe that the Merger will result in an 
``assignment'' of the Existing Advisory Agreement between the Fund and 
the Adviser within the meaning of section 2(a)(4).
    3. Rule 15a-4 provides, in pertinent part, that if an investment 
advisory contract with an investment company is terminated by 
assignment, the adviser may continue to act as such for 120 days under 
a written contract that has not been approved by the company's 
shareholders, only to the extent that (a) the new contract is approved 
by the company's board of directors (including a majority of directors 
that are not ``interested persons'' of the investment company), (b) the 
compensation to be paid under the new contract does not exceed the 
compensation which would have been paid under the contract most 
recently approved by shareholders of the investment company, and (c) 
neither the investment adviser nor any controlling person of the 
investment adviser ``directly or indirectly receives money or other 
benefit'' in connection with the assignment. Applicants state that they 
cannot rely on rule 15a-4 because of the benefits to USLIFE and its 
shareholders arising from the Merger.
    4. Section 6(c) 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.
    5. Applicants contend that the Fund will prepare the required proxy 
materials as expeditiously as possible and shareholder meetings are 
expected to be held as soon as reasonably practicable. Applicants 
believe that the timing of the shareholder meetings may not provide an 
adequate solicitation period to obtain approval of the New Advisory 
Agreement by the Fund's shareholders prior to effecting the Merger.
    6. Applicants believe that the requested relief is necessary, as it 
would permit continuity of investment management services to the Fund 
during the Interim Period. Applicants submit that the scope and quality 
of services provided to the Fund during the Interim Period will not be 
diminished. During the Interim Period, the Fund would operate under the 
New Advisory Agreement, which is anticipated to be identical to the 
Existing Advisory Agreement, except for its effective date and escrow 
provisions. Applicants believe that the level of service will remain 
the same.
    7. Applicants represent that the best interests of the Fund's 
shareholders would be served if the Adviser receives fees for services 
during the Interim Period as provided herein. In addition, applicants 
believe that it would be unjust to deprive the Adviser of fees due to a 
change in control of the Adviser's parent. Finally, the fees to be paid 
during the Interim Period are at the same rate as the fees currently 
payable by the Fund under the Existing Advisory Agreement.

Applicant's Conditions

    Applicants agree as conditions to the issuance of the exemptive 
order requested by the application that:
    1. The New Advisory Agreement will have the identical terms and 
conditions as the Existing Advisory Agreement, except for provisions 
relating to when such agreement will be effective and provisions 
necessary to effectuate the escrow arrangement.
    2. The investment advisory fees payable by the Fund to the Adviser 
during the Interim Period will be maintained in an interest-bearing 
escrow account, and amounts in the account (including interest earned 
on such amounts) will be paid (a) to the Adviser in accordance with the 
New Advisory Agreement, after the requisite approval is obtained, or 
(b) to the Fund, in the absence of such approval.
    3. The Fund will hold a meeting of shareholders to vote on approval 
of the New Advisory Agreement on or before the 120th day following the 
termination of the Existing Advisory Agreement (but in no event later 
than October 15, 1997).
    4. The Fund will not bear the costs of preparing and filing the 
application. The fund will not bear any costs relating to the 
solicitation of shareholder approval of the Fund's shareholders 
necessitated by consummation of the Merger.
    5. The Adviser will take all appropriate steps so that the scope 
and quality of advisory services provided to the Fund during the 
Interim Period will be at least equivalent, in the judgment of the 
Funds's board of directors, including a majority of the non-interested 
directors, to the scope and quality of services previously provided. If 
personnel providing material services during the Interim Period change 
materially, the Adviser will apprise and consult with the board of 
directors of the Fund to assure that it, including a majority of the 
non-interested board members, is satisfied that the services provided 
will not be diminished in scope or quality.
    6. The board of directors of the Fund, including a majority of the 
non-interested directors, will have approved the New Advisory Agreement 
in accordance with the requirement of section 15(c) of the Act prior to 
termination of the Existing Advisory Agreement.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-13455 Filed 5-21-97; 8:45 am]
BILLING CODE 8010-01-M