[Federal Register Volume 63, Number 227 (Wednesday, November 25, 1998)]
[Notices]
[Pages 65268-65270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31442]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23541; 812-11336]
SunAmerica Asset Management Corp., et al.; Notice of Aapplication
November 19, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under Section 6(c) of the
Investment Company Act of 1940 (the ``Act'') from Section 15(a) of the
Act.
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SUMMARY OF APPLICATION: The requested order would permit the
implementation, without prior shareholder approval, of new investment
advisory and sub-advisory agreements (the ``New Agreements'') for a
period of not more than 120 days beginning on the later of the date on
which the acquisition by American International Group (``AIG'') of
SunAmerica Inc. (``SunAmerica'') is consummated or the date on which
the requested order is issued and continuing through the date the New
Agreements are approved or disapproved by the shareholders (but in no
event later than April 30, 1999) (``Interim Period''). The order would
also permit payment of all fees earned under the New Agreements during
the Interim Period following shareholder approval.
APPLICANTS: SunAmerica Asset Management Corp. (``Adviser''), SunAmerica
Series Trust, Anchor Series Trust, Seasons Series Trust, Style Select
Series, Inc., SunAmerica Equity Funds, SunAmerica Income Funds,
SunAmerica Money Market Funds, Inc. (each a ``Fund'', collectively, the
``Funds''), each on behalf of its separate portfolios (each a
``Portfolio'', collectively the ``Portfolios'').
FILING DATES: The application was filed on October 2, 1998, and amended
on November 9, 1998, and November 18, 1998.
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 14,
1998, 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.
FOR FURTHER INFORMATION CONTACT:
Bruce R. MacNeil, Staff Attorney, at (202) 942-0634, or Edward P.
Macdonald, 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, 450 Fifth Street, NW, Washington, DC
20549 (tel. no. 202-942-8090).
Applicants' Representations
1. Each Fund is an open-end management investment company
registered under the Act. SunAmerica Series Trust is comprised of
twenty-five Portfolios,\1\ Anchor Series Trust is comprised of twelve
Portfolios,\2\ Style Select Series, Inc. is comprised of nine
Portfolios, Seasons Series Trust and SunAmerica Equity Funds each are
comprised of six Portfolios, SunAmerica Income Funds is comprised of
five Portfolios, and SunAmerica Money Market Funds, Inc. is comprised
of one Portfolio. SunAmerica Money Market Funds and Style Select
Series, Inc. are organized as Maryland corporations. All other Funds
are organized as Massachusetts business trusts.
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\1\ Three of the SunAmerica Series Trust Portfolios, the Equity
Income Portfolio, the Equity Index Portfolio, and the Small Company
Value Portfolio are newly organized and have not yet commenced
offering shares to the public. Applicants do not seek relief with
respect to these Portfolios.
\2\ One Portfolio of Anchor Series Trust, the Target `98
Portfolio, was liquidated as of November 15, 1998. Applicants do not
seek relief with respect to this Portfolio.
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2. The Adviser, an indirect wholly-owned subsidiary of SunAmerica,
is registered under the Investment Advisers Act of 1940 (``Advisers
Act''). The Adviser manages the assets of each Fund pursuant to an
investment advisory contract between each Fund, on behalf of each of
its Portfolios, and the Adviser (``Existing Management Agreements'').
3. Certain Portfolios of SunAmerica Series Trust, Anchor Series
Trust, Seasons Series Trust, and Style Select Series, Inc. are
subadvised by one or more investment advisers registered under the
Advisers Act (each a ``Sub-Adviser'', collectively, the ``Sub-
Advisers''). The Sub-Advisers serve pursuant to separate agreements
(the ``Existing Sub-Advisory Agreements'').
4. On August 19, 1998, SunAmerica and AIG entered into an agreement
pursuant to which SunAmerica will merge with and into AIG, with AIG as
the surviving entity (``Transaction''). As a result of the consummation
of the Transaction, the Adviser will become a wholly-owned subsidiary
of AIG. The Transaction is expected to be consummated on or about
December 15, 1998 (``Closing Date''). Applicants state that the
Transaction will result in an assignment, and thus automatic
termination, of the Existing Advisory Agreements and the Existing Sub-
Advisory Agreements.
5. Applicant's request an exemption to permit (a) the
implementation during the Interim Period, prior to obtaining
shareholder approval, of the New Agreements between the Funds and the
Adviser and Sub-Advisers, and (b) the Adviser and Sub-Advisers to
receive
[[Page 65269]]
from each Fund, upon approval of the applicable Portfolio's
shareholders, any and all fees payable under the New Agreements during
the Interim Period. The requested exemption would cover the Interim
Period of not more than 120 days beginning on the later of the Closing
Date or the date the requested order is issued and continuing, with
respect to each Portfolio, through the date the New Agreements are
approved or disapproved by the shareholders of the Portfolio (but in no
event later than April 30, 1999).\3\ The New Agreements will contain
terms and conditions identical to those of the Existing Advisory
Agreements and Existing Sub-Advisory Agreements, except for the
effective and termination dates and escrow provisions described below.
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\3\ Applicants state that if the Closing Date precedes the
issuance of the requested order, the Adviser, and if applicable the
Subadvisers, will serve after the Closing Date and prior to the
issuance of the order in a manner consistent with their fiduciary
duty to provide investment advisory services to the Portfolios even
though approval of the New Agreements has not been secured from the
Portfolios' respective shareholders. Applicants also state that the
Adviser, and if applicable the Subadviser, will be entitled to
receive from each Portfolio with respect to the period from the
Closing Date until the issuance of the order no more than the actual
out-of-pocket cost to the Adviser, and if applicable the
Subadvisers, for providing investment advisory services to the
Portfolios.
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6. On October 15, 1998 and October 20, 1998 the boards of directors
or trustees of the Funds (the ``Boards''), including a majority of the
directors who are not ``interested persons'' within the meaning of
section 2(a)(19) of the Act (the ``Independent Board Members''), voted
in accordance with section 15(c) of the Act to approve the New
Agreements and to submit them to the Funds' shareholders. The
shareholders meetings are scheduled to be held on or about December 30,
1998.
7. Applicants propose to enter into an escrow arrangement with an
unaffiliated escrow agent. The fees earned by the Adviser and Sub-
Advisers during the Interim Period under the New Agreements would be
paid into an interest-bearing escrow account. The amounts in the escrow
account with respect to a Portfolio (including any interest earned)
will be paid (a) to the Adviser and Sub-Advisers, if any, only if
shareholders of the Portfolio approve the applicable New Agreements or
(b) to the Portfolio if the Interim Period has ended and shareholders
have not approved the applicable New Agreements. Before any such
payment is made, the Board of the relevant Fund will be notified.
Applicant's 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 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 the investment company. Section 15(a)
further requires that the 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
controlling block of the assignor's outstanding voting securities by a
security holder of the assignor. Applicants state that the Transaction
will result in an ``assignment'' of the Existing Advisory Agreements
and Existing Sub-Advisory Agreements, and that the Agreements will
terminate by their terms and in accordance with the Act.
2. Rule 15a-4 under the Act provides, in pertinent part, that if an
investment advisory contract with an investment company is terminated,
the adviser may continue to serve for up to 120 days under a written
contract that has not been approved by the investment company's
shareholders, provided that: (a) the new contract is approved by the
board of directors (including a majority of the non-interested
directors); (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 adviser nor any controlling person of the
adviser ``directly or indirectly receives money or other benefit'' in
connection with the transaction. Applicants state that they may not
rely on rule 15a-4 because of the benefits arising to SunAmerica, the
Adviser's parent, in connection with the Transaction.
3. 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 the exemption is necessary or appropriate in the public
interest and consistent with the protection of investors and the
purposes fairly intended by the policies and provisions of the Act.
4. Applicants state that the requested relief satisfies this
standard. Applicants assert that the structure and timing of the
Transaction were determined by AIG and SunAmerica in response to a
number of factors beyond the scope of the Act and substantially
unrelated to the Funds. Applicants further assert that the requested
relief would permit continuity of investment management for the Funds
following the Transaction. Applicants state that the Funds should
receive, during the Interim Period, the same advisory services,
provided in the same manner, at the same fee level, by substantially
the same personnel, as they received prior to the Transaction.
Applicants state that if the personnel providing material services
pursuant to the New Agreements materially change, the Adviser will
apprise and consult with the applicable Board to ensure that the
Directors (including a majority of the Independent Board Members) are
satisfied that the services provided by the Adviser and Sub-Advisers,
if any, will not be diminished in scope or quality.
5. Applicants submit that to deprive the Adviser and Sub-Advisers
of fees earned during the Interim Period would be an unduly harsh
result and unreasonable penalty. Applicants also state that such fees
will be released to the Adviser and Sub-Advisers only after shareholder
approval of the New Agreements.
Applicants' Conditions
Applicants agree that any order of the SEC granting the requested
relief will be subject to the following conditions:
1. Each New Agreement that is in effect during the Interim Period
will have substantially the same terms and conditions as the
corresponding Existing Management Agreement and Existing Sub-Advisory
Agreement, except for their respective effective and termination dates
and escrow provisions.
2. Fees earned by the Advisers and the Sub-Advisers in respect of
the New Agreements during the Interim Period will be maintained in an
interest-bearing escrow account, and amounts in the account (including
interest earned on such paid fees) will be paid (a) to the Adviser and
Sub-Advisers in accordance with the New Agreements, only after the
requisite shareholder approvals are obtained, or (b) to the respective
Portfolio, in the absence of such approvals with respect to such
Portfolio.
3. Each Fund will convene a meeting of the shareholders to vote on
approval of the applicable New Agreement on or before the 120th day
following the termination of the Existing Management Agreements and
Existing Sub-Advisory Agreements (but in no event later than April 30,
1999).
4. Either AIG or the Adviser will bear the costs of preparing and
filing this application and the costs relating to the solicitation of
shareholder approval of
[[Page 65270]]
the Portfolios necessitated by the Transaction.
5. The Adviser will, and will cause the Sub-Advisers to, take all
appropriate steps so that the scope and quality of the advisory and
other services provided to the Portfolios during the Interim Period
will be at least equivalent, in the judgment of each Board, including a
majority of the Independent Board Members, to the scope and quality of
service previously provided. If personnel providing material services
during the Interim Period change materially, the Adviser will apprise
and consult with the appropriate Board to assure that the Board,
including a majority of the Independent Board Members, are satisfied
that the services provided will not be diminished in scope or quality.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-31442 Filed 11-24-98; 8:45 am]
BILLING CODE 8010-01-M