[Federal Register Volume 64, Number 227 (Friday, November 26, 1999)]
[Notices]
[Pages 66519-66520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30708]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24145; 812-11466]


SunAmerica Asset Management Corp., et al,; Notice of Application

November 19, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 6(c) and 17(b) 
of the Investment Company Act of 1940 (the ``Act'') for an exemption 
from section 17(a) of the Act.

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    Summary of Application: Applicants request an order to permit 
certain open-end management investment companies to settle claims that 
may arise under a directors' and officers'/errors and omission 
insurance policy provided by an affiliated insurance company.
    Applicants: SunAmerica Asset Management Corp. (``Adviser''); Anchor 
Pathway Fund, Anchor Series Trust, Season Series trust, Style Select 
Series, Inc., SunAmerica Equity Funds, SunAmerica Income Funds, 
SunAmerica Money Market Funds, Inc., SunAmerica Series Trust, and 
SunAmerica Strategic Investment Series, Inc. (each a ``Fund,'' and 
collectively, the ``Funds'').
    Filing Date: The application was filed on January 13, 1999. 
Applicants have agreed to file an amendment to the application, the 
substance of which is reflected in this notice, during the notice 
period.
    Hearing or Notification of Hearing: An order granting the applicant 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on December 14, 1999, and should be accompanied by proof and 
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 Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicants, 733 Third Avenue, New York, New York 10017-
3204.

FOR FURTHER INFORMATION CONTACT: Michael W. Mundt, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, 
DC 20549-0102, (202) 942-8090.

Applicant's Representations

    1. Each fund is registered under the Act as an open-end management 
investment company. The Adviser is registered as an investment adviser 
under the Investment Adviser Act of 1940 (``Advisers Act'') and advises 
each of the Funds other than Anchor Pathway Fund. Anchor Pathway Fund 
is advised by Capital Research and Management Company, an investment 
adviser registered under the Advisers Act. All of the outstanding 
shares of Anchor Pathway Fund are held by a separate account of Anchor 
National Life Insurance Company, an indirect wholly owned subsidiary of 
SunAmerica Inc. (``SunAmerica''). The

[[Page 66520]]

Adviser is also an indirect wholly owned subsidiary of SunAmerica.
    2. The Funds the Adviser, and certain other SunAmerica entities are 
joint insured under a directors' and officer's/errors and omissions 
insurance policy provided by National Union fire Insurance Company 
(``National Union''). The Funds first obtained this type of insurance 
from National Union in 1995. The currently policy (``Existing Policy'') 
was issued in 1996 and expires on September 1, 2000. Applicants state 
that after the expiration of the Existing Policy, applicants will not 
obtain insurance coverage from National Union.
    3. National Union is an indirect, wholly owned subsidiary of 
American International Group, Inc. (``AIG''). On January 1, 1999, AIG 
acquired SunAmerica. As a result of the merger, the Adviser has become 
an indirect wholly owned subsidiary of AIG, and applicants state that 
National Union has become an affiliated person of the Adviser and an 
affiliated person of an affiliated person (``second-tier affiliate'') 
of the Funds. In light of these new affiliations, applicants request 
relief so that a Fund may settle insurance claims with National Union 
under the Existing Policy.

Applicant's Legal Analysis

    1. Section 17(a) generally prohibits sales or purchases of 
securities or property between a registered investment company and any 
affiliated person or second-tier affiliate of the company. Section 
2(a)(3) of the Act defines an ``affiliated person'' of another person 
to include (a) any person directly or indirectly controlling, 
controlled by, or under common control with the other person, and (b) 
if the other person is an investment company, any investment adviser of 
that company.
    2. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise prohibited by section 17(a) if 
it finds that (a) the terms of the proposed transaction are reasonable 
and fair and do not involve overreaching on the part of any person 
concerned; (b) the proposed transaction is consistent with the policy 
of each registered investment company concerned; and (c) the proposed 
transaction is consistent with the general purposes of the Act. Section 
6(c) of the Act authorizes the Commission to exempt persons or 
transactions from the provisions of the Act to the extent that such 
exemptions are 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.
    3. Applicants request an order under section 6(c) and 17(b) of the 
Act for an exemption from section 17(a) of the Act to permit a Fund and 
National Union to settle claims arising under the Existing Policy. 
Applicants state that section 17(a) prohibits the settlement of claims 
under an insurance policy where the insurer is an affiliated person or 
second-tier affiliate of the insured investment company because the 
settlement of a claim under an insurance policy entails the release of 
a property right (i.e., of a right to sue under the policy with respect 
to the claim). Applicants state that the Adviser is an affiliated 
person of the Funds by virtue of being investment adviser to the Funds. 
Because National Union is under common control with the Adviser, 
applicants state that National Union may be deemed a second-tier 
affiliate of the Funds.
    4. Applicants submit that the interests of the Funds would be best 
served by permitting extra-judicial settlement of claims because Funds 
will be able to resolve claims promptly without incurring additional 
costs of litigation. Applicants note that any settlement would be 
subject to the approval of a majority of a Fund's board of directors 
(``Board''), including a majority of the directors who are not 
``interested persons'' of the Fund, the Adviser, or AIG within the 
meaning of section 2(a)(19) of the Act (Independent Board Members''). 
In addition, applicants state that in negotiating the amount of any 
extra-judicial settlement under the Existing Policy on behalf of a 
Fund, the Adviser has an interest in maximizing the Fund's recovery 
because its advisory fees are based on Fund assets. Applicants state 
that even though the Adviser and National Union are both subsidiaries 
of AIG, each is a separately operated entity with different directors 
and officers, and each entity is in a separate profit center within the 
AIG corporate structure.

Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The officers of each Fund will report all losses potentially 
covered under the Existing Policy to the Fund's Board. The Board, 
including the Independent Board Members, will evaluate the loss, and a 
majority of the Board, including a majority of the Independent Board 
Members, will determine whether to submit a claim to National Union and 
the amount of any claim. If National Union makes a settlement offer for 
less than the amount submitted, the adequacy of the settlement offer 
will be evaluated by the Board, including the Independent Board 
Members. The settlement may be accepted if a majority of the Board, 
including a majority of the Independent Board Members (upon the advice 
of independent counsel), determines that the settlement offer meets the 
standards specified in section 17(b) of the Act and is in the best 
interest of the Fund and its shareholders.
    2. Each Board will record and preserve a description of all 
transactions with National Union, its findings, the information or 
materials upon which its findings are based and the basis for the 
findings. All such records will be maintained for a period of not less 
than six years, the first two years in an easily accessible place, and 
will be available for inspection by the staff of the Commission.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-30708 Filed 11-24-99; 8:45 am]
BILLING CODE 8010-01-M