[Federal Register Volume 65, Number 110 (Wednesday, June 7, 2000)]
[Notices]
[Pages 36177-36178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14279]



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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24487; 812-12024]


Strategist Growth Fund, Inc., et al.; Notice of Application

June 1, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 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 
series of a registered open-end management investment company to 
acquire all of the assets and stated liabilities of certain series of 
another registered open-end management investment company. Because of 
certain affiliations, applicants may not rely on rule 17a-8 under the 
Act.
    Applicants: Strategist Growth Fund, Inc. on behalf of its 
underlying series: Strategist Growth Fund, Strategist Growth Trends 
Fund and Strategist Special Growth Fund; Strategist Growth and Income 
Fund, Inc. on behalf of its underlying series: Strategist Balanced 
Fund, Strategist Equity Fund, Strategist Equity Income Fund and 
Strategist Total Return Fund; Strategist Income Fund, Inc. on behalf of 
its underlying series: Strategist Government Income Fund, Strategist 
High Yield Fund and Strategist Quality Income Fund; Strategist Tax-Fee 
Income Fund, Inc. on behalf of its underlying series, Strategist Tax-
Free High Yield Fund; Strategist World Fund, Inc. on behalf of its 
underlying series; Strategist Emerging Markets Fund, Strategist World 
Growth Fund, Strategist World Income Fund, and Strategist World 
Technologies Fund (Each series individually an ``Acquired Fund'' and 
collectively, the ``Acquired Funds''); AXP Extra Income Fund, Inc.; AXP 
Federal Income Fund, Inc.; AXP Global Series, Inc. on behalf of its 
underlying series: AXP Emerging Markets Fund, AXP Global Bond Fund, AXP 
Global Growth Fund, and AXP Innovations Fund; AXP Growth Series, Inc. 
on behalf of its underlying series; AXP Growth Fund and AXP Research 
Opportunities Fund; AXP High Yield Tax-Exempt Fund, Inc.; AXP 
Investment Series, Inc. on behalf of its underlying series; AXP 
Diversified Equity Income Fund and AXP Mutual; AXP Managed Series, Inc. 
on behalf of its underlying series, AXP Managed Allocation Fund; AXP 
New Dimensions Fund, Inc.; AXP Stock Fund, Inc.; AXP Selective Fund, 
Inc. (each series individually an ``Acquiring Fund'' and collectively, 
the ``Acquiring Funds'') (the Acquired Funds and the Acquiring Funds 
collectively, the ``Funds''); and American Express Financial 
Corporation (``AEFC'').
    Filing Dates: The application was filed on March 14, 2000 and 
amended on May 5, 2000. Applicants have agreed to file an amendment 
during the notice period, the substance of which is reflected in this 
notice.
    Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the 
Commissions's Secretary and serving applicants with a copy of the 
request, personally or by mail. Hearing request should be received by 
the Commission by 5:30 p.m. on June 26, 2000 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 Commission's Secretary.

ADDRESSES:

Secretary, Commission, 450 5th Street NW, Washington, DC 20549-0609
Acquired Funds and AEFC, c/o Eileen J. Newhouse, American Express 
Financial Corporation, IDS Tower 10, T27/52, Minneapolis, MN 55440-0010
Acquiring Funds, c/o Leslie L. Ogg, American Express Funds, 901 
Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 942-0574; or Nadya B. Roytblat, Assistant Director, 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 5th Street NW, Washington, DC 
20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. The Funds are registered under the Act as open-end management 
investment companies. Each of the Funds is a feeder fund in a master/
feeder structure. Each Acquired Fund and its corresponding Acquiring 
Fund invest in the same master fund (the ``Master Funds''). Each Master 
Fund is registered under the Act as an open-end management investment 
company.
    2. AEFC, a Delaware corporation, is registered under the Investment 
Advisers Act of 1940 and serves as the investment for each Master Fund 
and as the administrator for each Fund. AEFC is a wholly-owned 
subsidiary of the American Express Company. Currently, AEFC or American 
Express Company owns, for its own account, more than 25% of the 
outstanding shares of each Acquired Fund and one of the Acquiring 
Funds.
    3. On March 8, and 9, 2000 and March 10, 2000, the boards of 
directors of the Acquiring Funds and the Acquired Funds (the 
``Boards''), respectively, including all of the directors who are not 
interested persons of the Funds, as defined in section 2(a)(19) of the 
Act (``Independent Directors'') approved an Agreement and Plan or 
Reorganization (the ``Agreement''). Under the Agreement, each Acquiring 
Fund will acquire all of the assets and assume the stated liabilities 
of its corresponding Acquired Fund in exchange for class A shares of 
the Acquiring Fund (the ``Reorganiation''). Pursuant to the Agreement, 
each shareholder of an Acquired Fund will receive class A Shares of the 
corresponding Acquiring Fund having an aggregate net asset value equal 
to the aggregate net asset value of the Acquired Fund shares held by 
that shareholder, determined as of the close of regular trading on the 
New York Stock Exchange on the day of the closing, which is expected to 
be on or about July 14, 2000 (``Closing Date''). The valuation will be 
made in accordance with the procedure set forth in the then-current 
prospectus and statement of additional information for the Funds. Or or 
as soon as practicable after the Closing Date, the class A shares of 
the Acquiring Fund received by the Acquired Fund will be distributed 
pro rata to the shareholders of the Acquired Fund and the Acquired Fund 
will be liquidated.
    4. Each of the Acquired Funds has investment objectives, policies, 
and restrictions that are identical to those of its corresponding 
Acquiring Fund and to those of its Master Fund. The Acquired Funds have 
only one class of shares and are sold without a sales charge.\1\ Class 
A shares of the Acquiring Funds are sold with a 5% front-end sales 
charge and a .25% 12b-1 fee. No sales charge will be assessed in 
connection with the Reorganization.

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AEFC will pay the expenses of the Reorganization.
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    \1\ Each of the Acquired Funds ceased offering shares to new 
investors and terminated its .25% 12b-1 plan on October 4, 1999.
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    5. The Boards, including a majority of the Independent Directors, 
determined that participation in the Reorganization is in the best 
interests of each Fund, and that the interests of existing shareholders 
of each Fund will not be diluted as a result of the Reorganization. In 
assessing the Reorganization, the Boards considered a number of 
factors, including: (a) The terms and conditions of the Reorganization; 
(b) the tax-free nature of the Reorganization; (c) the identical 
investment objectives, policies, and restrictions of the Acquired Funds 
and the Acquiring Funds; (d) that the shareholders of the Acquired 
Funds will be able to make future purchases of shares of the Acquiring 
Funds on a no-load basis; (e) that the expense ratio for each Acquiring 
Fund will be lower than the expense ratio of each Acquired Fund; and 
(f) the costs of the Reorganization will be borne by AEFC.
    6. The Reorganization is subject to a number of conditions 
precedent, including that: (a) The shareholders of the Acquired Funds 
will have approved the Agreement; (b) the Funds will have received an 
opinion of tax counsel that the proposed Reorganization will be tax-
free for the Funds and their shareholders; (c) applicants will have 
received from the Commission any exemption necessary to carry out the 
Reorganization; and (d) a registration statement on Form N-14 will have 
been filed with the Commission and declared effective for each of the 
Acquired Funds. The Agreement and the Reorganization may be terminated 
and abandoned by resolutions of the Boards at any time prior to the 
Closing Date. The Agreement may be terminated in the event that a 
material condition is not fulfilled, a material covenant is not 
fulfilled, or there is a material breach of the Agreement. Applicants 
agree not to make any material changes to the Agreement without prior 
Commission approval.
    7. A prospectus/proxy statement was filed with the Commission on 
March 13, 2000 and was mailed to the Acquired Funds shareholders the 
week of April 17, 2000. The shareholders of the Acquired Funds 
considered and approved the Agreement on May 9, 2000.

Applicants' Legal Analysis

    1. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such a person, acting as principal, from selling any security to, or 
purchasing any security from, the company. Section 2(a)(3) of the Act 
defines an ``affiliated person'' of another person to include: (a) Any 
person directly or indirectly owning, controlling, or holding with 
power to vote 5% or more of the other person; (b) any person 5% or more 
of whose securities are directly or indirectly or indirectly owned, 
controlled, or held with power to vote by the other person; (c) any 
person directly or indirectly controlling, controlled by, or under 
common control with the other person; and (d) if the other person is an 
investment company, any investment adviser of that company. Applicants 
state that the Funds may be deemed affiliated persons and thus the 
Reorganization may be prohibited by section 17(a).
    2. Rule 17a-8 under the Act exempts from the prohibitions of 
section 17(a) mergers, considations, purchases or sales of 
substantially all of the assets of registered investment companies that 
are affiliated persons, or affiliated persons of an affiliated person, 
solely by reason of having a common investment adviser, common 
directors, and/or common officers, provided that certain conditions set 
forth in the rule are satisfied. Applicants state that they may not 
rely on rule 17a-8 because the Funds may be deemed to be affiliated for 
reasons other than those set forth in the rule. Applicants state that 
AEFC or American Express Company owns more than 25% of the outstanding 
shares of each of the Acquired Funds and one of the Acquiring Funds and 
each of these Funds is an affiliated person of AEFC. AEFC is an 
affiliated person of the Funds because of its role as investment 
adviser to the Master Funds. Thus, each of the Acquired funds might be 
deemed to be an affiliated person of an affiliated person of an 
Acquiring Fund, other than by virtue of a common investment adviser.
    3. Section 17(b) of the Act provides, in relevant part, that the 
Commission may exempt a transaction from the provisions of section 
17(a) if the evidence establishes that 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, and that the proposed transaction is consistent with 
the policy of each registered investment company concerned and with the 
general purposes of the Act.
    4. Applicants request an order under section 17(b) of the Act 
exemption them from section 17(a) of the Act to the extent necessary to 
permit applicants to complete the proposed Reorganization. Applicants 
submit that the Reorganization satisfies the standards of section 17(b) 
of the Act. Applicants state that the terms of the proposed 
Reorganization are fair and reasonable and do not involve overreaching 
and that the Funds have identical investment objectives and policies. 
Applicants also state that the Boards, including a majority of the 
Independent Directors, have found that participation in the 
Reorganization is in the best interests of each Fund, and that the 
interests of the existing shareholders will not be diluted as a result 
of the Reorganization. In addition, applicants state the Reorganization 
will be based on the Funds' relative net asset values.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-14279 Filed 6-6-00; 8:45 am]
BILLING CODE 8010-01-M