[Federal Register Volume 66, Number 2 (Wednesday, January 3, 2001)]
[Notices]
[Pages 390-392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-104]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24798; 812-12230]


Securities Management and Research, Inc. and American National 
Investment Accounts, Inc.; Notice of Application

December 27, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under sections 6(c), 
12(d)(1)(J), and 17(b) of the Investment Company Act of 1940 (the 
``Act'') for exemptions from sections 12(d)(1)(A) and (B) and 17(a) of 
the Act, and under section 17(d) of the Act and rule 17d-1 under the 
Act to permit certain joint transactions.

-----------------------------------------------------------------------

    Summary of the Application: The requested order would permit 
certain registered management investment companies to invest uninvested 
cash in an affiliated money market fund in excess of the limits in 
sections 12(d)(1)(A) and (B) of the Act.
    Applicants: Securities management and Research, Inc. (the 
``Adviser''), American National Investment Accounts, Inc. (the 
``Fund''), and all existing and future portfolios of the Fund.
    Filing Dates: The application was filed on August 17, 2000.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicant with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on January 22, 2001, 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 Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicants, c/o Teresa E. Axelson, Securities Management 
and Research, Inc., 2450 Southshore Blvd., Suite 400, League City, TX 
77573.

FUR FURTHER INFORMATION CONTACT: Paula L. Kashtan, Senior Counsel, at 
(202) 942-0615, 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 at the 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. The Fund is a Maryland corporation registered under the Act as 
an open-end management investment company.\1\ The Adviser, a Florida

[[Page 391]]

corporation and a wholly-owned subsidiary of American National 
Insurance Company (``American National''), is registered as an 
investment adviser under the Investment Advisers Act of 1940.\2\ The 
Adviser serves as the investment adviser for the Fund. The Fund is the 
investment medium for premium payments received by American National 
from the sale of variable universal life insurance and variable annuity 
contracts. The Fund currently offers eight portfolios, including the 
Money Market Portfolio (the ``Portfolios''). The Money Market Portfolio 
is subject to the requirements of rule 2a-7 under the Act.
---------------------------------------------------------------------------

    \1\ Any future portfolio of the Fund that may rely on the order 
in the future will do so only in accordance with the terms and 
conditions of the application.
    \2\ For purposes of this application, the term ``Adviser'' 
includes, in addition to Securities Management and Research, Inc., 
any other person controlling, controlled by or under common control 
with Securities Management and Research, Inc., that acts in the 
future as an investment adviser for the Fund.
---------------------------------------------------------------------------

    2. Applicants state that each Investing Portfolio (as defined 
below) has, or may be expected to have, cash that has not been invested 
in portfolio securities (``Uninvested Cash''). Uninvested Cash may 
result from a variety of sources, including dividends or interest 
received on portfolio securities, unsettled securities transactions, 
strategic reserves, matured investments, proceeds from liquidation of 
investment securities, dividends payments, or money received from 
investors. A Portfolio that purchases shares of the Money Market 
Portfolio is referred to as an Investing Portfolio.
    3. Applicants request an order to permit each of the Investing 
portfolios to invest their Uninvested Cash in the Money Market 
portfolio, and to permit the Money Market Portfolio to sell shares to, 
and redeem shares from, the Investing Portfolios. Investments of 
Uninvested Cash in shares of the money market Portfolio will be made 
only to the extent that such investment is consistent with each 
investing Portfolio's investment restrictions and policies as set forth 
in the Fund's prospectus and statement of additional information. 
Applicants believe that the proposed transactions may reduce 
transaction costs, create more liquidity, increase returns, and 
diversify holdings.

Applicants' Legal Analysis

    1. Section 12(d)(1)(A) of the Act provides, in pertinent part, that 
no registered investment company may acquire securities of another 
investment company if such securities represent more than 3% of the 
acquired company's outstanding voting stock, more than 5% of the 
acquiring company's total assets, or if such securities, together with 
the securities of other acquired investment companies, represent more 
than 10% of the acquiring company's total assets. Section 12(d)(1)(B) 
of the Act, in pertinent part, provides that no registered open-end 
investment company may sell its securities to another investment 
company if the sale will cause the acquiring company to own more than 
3% of the acquired company's voting stock, or if the sale will cause 
more than 10% of the acquired company's voting stock to be owned by 
investment companies.
    2. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security, or transaction from any provision of 
section 12(d)(1) if, and to the extent that, such exemption is 
consistent with the public interest and the protection of investors. 
Applicants request relief under section 12(d)(1)(J) from the limitation 
of sections 12(d)(1)(A) and (B) to permit the Investing Portfolios to 
invest Uninvested Cash in the Money Market Portfolio.
    3. Applicants state that the proposed arrangement would not result 
in the abuses that sections 12(d)(1)(A) and (B) were intended to 
prevent. Applicants state that because the Money Market Portfolio will 
maintain a highly liquid portfolio, an Investing Portfolio will not be 
in a position to gain undue influence over the Money Market Portfolio. 
Applicants represent that the proposed arrangement will not result in 
an inappropriate layering of fees because shares of the Money Market 
Portfolio sold to the Investing Portfolios will not be subject to a 
sales load, redemption fee, distribution fee under a plan adopted in 
accordance with rule 12b-1 under the Act, or service fee (as defined in 
rule 2830(b)(9) of the National Association of Securities Dealers' 
(``NASD'') Conduct Rules). Applicants represent that the Money Market 
Portfolio will not acquire securities of any other investment company 
in excess of the limitations contained in section 12(d)(1)(A) of the 
Act.
    4. Section 17(a) of the Act makes it unlawful for any affiliated 
person of a registered investment company, or an affiliated person of 
such person, acting as principal, to sell or purchase any security to 
or from the company. Section 2(a)(3) of the Act defines an ``affiliated 
person'' of an investment company to include, among others, any person 
directly or indirectly controlling, controlled by, or under common 
control with the investment company and any investment adviser to the 
investment company. Applicants state that, because the Portfolios share 
a common investment adviser, each Portfolio may be deemed to be under 
common control with each of the other Portfolios, and thus an 
affiliated person of each of the other Portfolios. As a result, section 
17(a) would prohibit the sale of the shares of the Money Market 
Portfolio to the Investing Portfolios, and the redemption of the shares 
by the Money Market Portfolio.
    5. Section 17(b) of the Act authorizes the Commission to exempt a 
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 
policy of each investment company concerned, and the proposed 
transaction is consistent with the general purposes of the Act. Section 
6(c) of the Act permits the Commission to exempt persons or 
transactions from any provision of the Act if the 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.
    6. Applicants submit that their request for relief to permit the 
purchase and redemption of shares of the Money Market Portfolio by the 
Investing Portfolios satisfied the standards in sections 6(c) and 17(b) 
of the Act. Applicants note that shares of the Money Market Portfolio 
will be purchased and redeemed at their net asset value, the same 
consideration paid and received for these shares by any other 
shareholder. Applicants state that the Investing Portfolios will retain 
their ability to invest their Uninvested Cash directly in money market 
instruments as authorized by their respective investment objectives and 
policies if they believe they can obtain a higher rate of return, or 
for any other reason. Applicants also state that the Money Market 
Portfolio has the right to discontinue selling shares to any of the 
Investing Portfolios if the Money Market Portfolio's board of directors 
determines that such sale would adversely affect its portfolio 
management or operations.
    7. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company, acting as 
principal, from participating in or effecting any transaction in 
connection with any joint enterprise or joint arrangement in which the 
investment company participates. Applicants state that each Investing 
Portfolio, by purchasing shares of the Money Market Portfolio, the 
Adviser, by managing the

[[Page 392]]

assets of the Investing Portfolios investing in the Money Market 
Portfolio, and the Money Market Portfolio, by selling shares to the 
Investing Portfolios, could be deemed to be participants in a joint 
enterprise or arrangement within the meaning of section 17(d) of the 
Act and rule 17d-1 under the Act.
    8. Rule 17d-1 permits the Commission to approve a proposed joint 
transaction covered by the terms of section 17(d) of the Act. In 
determining whether to approve a transaction, the Commission is to 
consider whether the proposed transaction is consistent with the 
provisions, policies, and purposes of the Act, and the extent to which 
the participation is on a basis different from or less advantageous 
than that of other participants. Applicants submit that the investment 
by the Investing Portfolios in shares of the Money Market Portfolio 
would be indistinguishable from any other shareholder account 
maintained by the Money Market Portfolio and that the transactions will 
be consistent with the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Shares of the Money Market Portfolio sold to and redeemed by the 
Investing Portfolios will not be subject to a sales load, redemption 
fee, distribution fee under a plan adopted in accordance with rule 12b-
1 under the Act or a service fee (as defined in rule 2830(b)(9) of the 
NASD Conduct Rules).
    2. If the Adviser collects from the Money Market Portfolio a fee 
for acting as its investment adviser with respect to assets invested by 
the Investing Portfolios, before the next meeting of the board of 
directors of the Fund (``Board'') is held for the purpose of voting on 
an investment advisory contract under section 15 of the Act, the 
Adviser will provide the Board with specific information regarding the 
approximate cost to the Adviser for, or portion of the investment 
advisory fee under the existing advisory agreement attributable to, 
managing the assets of the Investing Portfolios that can be expected to 
be invested in the Money Market Portfolio. Before approving any 
investment advisory contract under section 15, the Board, including a 
majority of the directors who are not ``interested persons,'' as 
defined in section 2(a)(19) of the Act, shall consider to what extent, 
if any, the investment advisory fees charged to the Investing 
Portfolios by the Adviser should be reduced to account for the 
investment advisory fees indirectly paid by the Investing Portfolios 
because of the investment advisory fee paid by the Money Market 
Portfolio to the Adviser. The minute books of the Fund will record 
fully the factors considered by the Board in approving the investment 
advisory contract, including the considerations of the Board relating 
to the advisory fees referred to above.
    3. Each Investing Portfolio will invest Uninvested Cash in, and 
hold shares of, the Money Market Portfolio only to the extent that the 
Investing Portfolio's aggregate investment in the Money Market 
Portfolio does not exceed 25 percent of the total assets of the 
Investing Portfolio. For purposes of this limitation, each Investing 
Portfolio will be treated as a separate investment company.
    4. Investment in shares of the Money Market Portfolio will be in 
accordance with each Investing Portfolio's respective investment 
restrictions and policies as set forth in the Fund's prospectus and 
statement of additional information.
    5. Each Investing Portfolio and the Money Market Portfolio that may 
rely on the order will be advised by the Adviser, or a person 
controlling, controlled by, or under common control with the Adviser.
    6. The Money Market Portfolio will not acquire securities of any 
other investment company in excess of the limits contained in section 
12(d)(1)(A) of the Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 01-104 Filed 1-2-01; 8:45 am]
BILLING CODE 8010-01-M