[Federal Register Volume 62, Number 175 (Wednesday, September 10, 1997)]
[Notices]
[Pages 47709-47711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23952]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22807; 812-10714]
Style Select Series, Inc., et al.; Notice of Application
September 3, 1997.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an exemption under section 17(b) of
the Investment Company Act of 1940 (the ``Act'') from section 17(a) of
the Act.
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SUMMARY OF APPLICATION: Applicants request an order to permit a series
of the
[[Page 47710]]
Style Select Series, Inc. to acquire all of the assets and assume all
of the liabilities of a series of SunAmerica Equity Funds.
APPLICANTS: Style Select Series, Inc. (the ``Company''), on behalf of
International Equity Portfolio (the ``Acquiring Fund''), and SunAmerica
Equity Funds (the ``Trust''), on behalf of SunAmerica Global Balanced
Fund (the ``Acquired Fund'').
FILING DATES: The application was filed on July 3, 1997, and amended on
August 28, 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 September 24,
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 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, The SunAmerica Center, 733 Third Avenue, New York, New York
10017-3204.
FOR FURTHER INFORMATION CONTACT: Lawrence W. Pisto, Senior Counsel, at
(202) 942-0527, or Christine Y. Greenlees, Branch Chief, at (202) 942-
0564 (Office of Investment Company Regulation, Division of Investment
Management).
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, 450 Fifth Street, NW., Washington, DC
20549 (tel. (202) 942-8090).
Applicants' Representations
1. The Company, a Maryland corporation, is registered under the Act
as an open-end management investment company. The Acquiring Fund is one
of four series of the Company. The Trust, a Massachusetts business
trust, is registered under the Act as an open-end management investment
company. The Acquired is one of six series of the Trust. The Acquiring
Fund and the Acquired Fund may be referred to individually as a
``Fund'' and collectively as the ``Funds.'' SunAmerica Asset Management
Corp. (``SAAMCo''), an investment adviser registered under the
Investment Advisers Act of 1940 and indirect wholly-owned subsidiary of
SunAmerica Inc., serves as investment adviser to both Funds.
2. Each Fund offers Class A and Class B shares.\1\ Class A and
Class B shares of the Acquiring Fund are subject to sales charges and
distribution fees on identical terms as Class A and Class B shares,
respectively, of the Acquired Fund. Class A shares of each Fund are
sold at the respective net asset value plus a sales charge imposed at
the time of purchase, and Class B shares of each Fund are sold at the
respective net asset value subject to a contingent deferred sales
charge (``CDSC'') if redeemed within six years of the date of purchase.
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\1\ The Acquiring Fund also offers Class C shares, but they will
not be issued in connection with the Reorganization (as defined
below).
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3. On the Effective Date (as defined below) of the proposed
reorganization (the ``Reorganization''), all of the assets and
liabilities of the Acquired Fund will be transferred to the Acquiring
Fund in exchange for Class A and Class B shares of the Acquiring Fund
(the ``Issued Shares'') on the basis of relative net asset value. The
Funds are seeking to consummate the Reorganization on or about
September 12, 1997, and in any event no later than September 30, 1997,
the fiscal year end of the Acquired Fund (the ``Effective Date'').
4. No sales charge will be imposed on the Issued Shares. Class B
shares of each Fund automatically convert to Class A shares
approximately seven years after purchase. A shareholder's holding
period for Class B shares of the Acquiring Fund received in the
Reorganization will include the shareholder's holding period for the
Class B shares of the Acquired Fund exchanged therefor in the
Reorganization, for purposes of determining any applicable CDSC upon
redemption of such shares as well as when such shares convert to Class
A shares.
5. SunAmerica Capital Services, Inc. (``SACS'' or the
``Distributor''), an affiliated person of SAAMCo, serves as distributor
of both Funds. Each Fund has adopted distribution plans with respect to
Class A and Class B shares (hereinafter referred to as the ``Class A
Plans'' and the ``Class B Plans,'' and collectively, the ``Distribution
Plans''). Under the Class A Plans, the Distributor may receive payments
from a Fund at an annul rate of up to 0.10% of average daily net assets
of such Fund's Class A shares. Under the Class B Plans, the Distributor
may receive payments from a Fund at the annual rate of up to 0.75% of
the average daily net assets of such Fund's Class B shares. It is
possible that in any given year, the amount paid to the Distributor
under the Class A plans or Class B Plans May exceed the Distributor's
distribution costs as described above. The Distribution Plans provide
that each class of shares of each Fund may also pay the Distributor an
account maintenance and service fee of up to 0.25% of the aggregate
average daily net assets of such class of shares.
6. The Acquiring Fund seeks long-term growth of capital by
investing in equity securities of issuers in countries other than the
United States. The Acquiring Fund will invest, under normal
circumstances, at least 65% of its total assets in equity securities of
issuers in at least three countries other than the United States. The
Acquired Fund seeks capital appreciation while conserving principal by
maintaining at all times a balanced portfolio of domestic and foreign
stocks and bonds. Under normal circumstances, the Acquired Fund will
invest at least: (a) 25% of its assets in global fixed-income senior
securities; (b) 10% of its assets in domestic equity securities; and
(c) 45% of its assets in foreign equity securities. In addition, it is
anticipated that, under normal circumstances, the Acquired Fund will
invest its assets in at least 10 countries at any time, although it is
only required, under such circumstances, to maintain investments in at
least three countries (one of which may be the United States).
7. Immediately after the Effective Date, (a) the Issued Shares
received by the Acquired Fund pursuant to the Agreement and Plan of
Reorganization (the ``Agreement'') will be distributed to the
shareholders of the Acquired Fund in exchange for their Class A and
Class B shares (``Exchange Shares'') in the Acquired Fund, such that
each shareholder of the Acquired Fund will receive a number of full and
fractional Issued Shares of the same class as, and having, at the
Effective Date, an aggregate net asset value equal to the aggregate net
asset value of the Exchanged Shares held by such shareholder on
Effective Date at the time at which the Acquiring Fund ordinarily
determines its net asset value (computed as of close of regular trading
on the New York Stock Exchange), and (b) the Exchanged Shares will
thereupon be canceled on the books of the Trust. The net asset value of
the Issued Shares and of the Exchanged Shares will be calculated in
accordance with the description of the net asset value in the then-
current prospectus of the
[[Page 47711]]
Acquiring Fund and Acquired Fund, respectively.
8. The distribution of the Issued Shares to the shareholders of the
Acquired Fund will be accomplished by the establishment of an open
account on the share records of the Acquiring Fund in the name of each
shareholder of the Acquired Fund and representing the respective pro
rata number of Issued Shares of the same class as, and equal in value
to the value of, the Exchanged Shares held by such shareholder at the
Effective Date. Exchanged Shares held in an open account with the
transfer agent of the Acquired Fund will automatically become the
number of Issued Shares provided for above and be held in an open
account with the transfer agent of the Acquiring Fund.
9. The Agreement provides that the Acquired Fund will make one or
more distributions to shareholders prior to the Effective Date which,
together with all previous distributions, will have the effect of
distributing to its Class A and B shareholders all of its net
investment income and capital gains for the period from the close of
its last fiscal year to the close of business on the Effective Date and
any undistributed amounts thereof from the last fiscal year.
10. On May 22, 1997, the board of directors of the Company and the
board of trustees of the Trust (collectively, the ``Boards''),
including their disinterested directors and trustees, respectively,
unanimously approved the Agreement. In deciding to approve the
Agreement, the Boards concluded that the Reorganization would operate
in the best interests of the relevant Fund and its shareholders and
that the interests of the shareholders of each Fund would not be
diluted as a result of the Reorganization.
11. In deciding to approve the Agreement and recommend it to the
shareholders of the Acquired Fund, the Board of the Trust reviewed
information related to the following factors: (1) Performance of the
Funds; (2) Funds' fees and expenses; (3) Funds' growth rate and
economies of scale; (4) the similarities of the Funds; (5) the tax-free
nature of the transaction; and (6) lack of dilution of the interests of
the Acquired Fund shareholders.
12. All costs of the Reorganization, including the costs of
printing and mailing the prospectus/proxy statement and the costs of
the special meeting of shareholders of the Acquired Fund scheduled for
September 5, 1997 (the ``Meeting''), will be borne by SAAMCo and not by
either Fund.
13. A definitive prospectus/proxy statement relating to the Meeting
was filed with the SEC on July 8, 1997. Applicants sent the prospectus/
proxy statement to shareholders of the Acquired Fund on July 8, 1997,
for their approval at the Meeting.
14. The Agreement sets forth certain conditions to the consummation
of the Reorganization, including the approval of the Reorganization by
shareholders of the Acquired Fund, receipt of an opinion of counsel as
to tax matters, and receipt of the SEC order requested in the
application.
15. The Agreement and the Reorganization may be terminated by
either Board notwithstanding approval by the shareholders of the
Acquired Fund at any time prior to the Effective Date if circumstances
should develop that, in the opinion of either Board, make proceeding
with the Agreement inadvisable. Applicants agree not to make any
material changes to the Agreement without prior SEC approval.
Applicants' Legal Analysis
1. Section 17(a) generally prohibits an affiliated person of a
registered investment company, or any affiliated person of such person,
from selling any security to or purchasing any security from the
company. Section 2(a)(3)(C) defines the term ``affiliated person'' of
another person to include any person controlling, controlled by, or
under common control with such person.
2. Rule 17a-8 exempts from the prohibitions of section 17(a)
mergers, consolidations, or purchases or sales of substantially all of
the assets of registered investment companies that are affiliated
persons solely by reason of having a common investment adviser, common
directors/trustees, and/or common officers, provided that certain
conditions are satisfied.
3. Applicants believe that they may not rely on rule 17a-8 in
connection with the Reorganization because the Acquiring Fund and the
Acquired Fund may be affiliated for reasons other than those set forth
in the rule. Specifically, SunAmerica Inc. indirectly owns 100% of the
outstanding voting securities of each of SAAMCo and SACS, the adviser
to and distributor of, respectively, both Funds. As of June 30, 1997,
the record date for the Meeting, SunAmerica Inc. also owns with the
power to vote approximately 32% of the outstanding shares of the
Acquiring Fund.\2\ Because of this ownership, applicants believe that
the Acquiring Fund may be deemed an affiliated person of an affiliated
person of the Acquired Fund, and vice versa, for reasons not based
solely on their common adviser.
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\2\ SunAmerica Inc. does not own any of the outstanding shares
of the Acquired Fund as of June 30, 1997.
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4. Section 17(b) authorizes the SEC to exempt a proposed
transaction from section 17(a) if 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; the proposed transaction is consistent with the
policies of each registered investment company concerned and the
general purposes of the Act.
5. Applicants submit that the terms of the Reorganization satisfy
the standards set forth in section 17(b), in that the terms are fair
and reasonable and do not involve overreaching on the part of any
person concerned. Applicants note that each Board, including the non-
interested trustees and directors, as applicable, reviewed the terms of
the Reorganization as set forth in the Agreement, including the
consideration to be paid or received, and found that participation in
the Reorganization as contemplated by the Agreement is in the best
interests of the Company, the Trust, and each Fund, and that the
interests of existing shareholders of each Fund will not be diluted as
a result of the Reorganization. Applicants also note that the exchange
of the Acquired Fund's assets and liabilities for the shares of the
Acquiring Fund will be based on the Funds' relative net asset values.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-23952 Filed 9-9-97; 8:45 am]
BILLIING CODE 8010-01-M