[Federal Register Volume 66, Number 202 (Thursday, October 18, 2001)]
[Notices]
[Pages 52952-52954]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26273]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25209; 812-12594]


American International Group, et al.; Notice of Application

October 12, 2001.

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 registered open-end management investment companies 
to acquire all of the assets and liabilities of certain corresponding 
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: American International Group, Inc. (``AIG''), North 
American Funds (``NA Trust''), SunAmerica Equity Funds (``Equity 
Trust''), SunAmerica Income Funds (``Income Trust''), SunAmerica Money 
Market Funds, Inc. (``Money Market Corp.''), SunAmerica Style Select 
Series, Inc. (``Style Select Series''), SunAmerica Strategic Investment 
Series, Inc. (``Strategic Investment Series''), The Variable Annuity 
Life Insurance Company (``VALIC''), American General Corporation 
(``American General''), and Sun America Asset Management Corp. 
(SAAMCo).
    Filing Dates: The application was filed on August 9, 2001. 
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 
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 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 November 6, 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 Margery K. Neale, Esq., Shearman & 
Sterling, 599 Lexington Avenue, New York, New York 10022-6069.

FOR FURTHER INFORMATION CONTACT: Lidian Pereira, Senior Counsel, at 
(202) 942-0524 or Mary Kay Frech, Branch Chief, at (202) 952-0564 
(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 (telephone (202) 942-8090).

Applicants' Representations

    1. NA Trust, a business trust organized under the laws of the 
Commonwealth of Massachusetts, is registered under the Act as an open-
end management investment company. NA Trust offers twenty-four series 
(``NA Funds''), seventeen of which are involved in the proposed 
transactions for which exemptive relief is sought,

[[Page 52953]]

and are collectively referred to as the ``Acquired Funds.'' \1\
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    \1\ International Equity Portfolio of SunAmerica Style Select 
Series will be reorganizing into the newly created Shell, 
International Equity Fund of Equity Trust, and is also referred to 
as an ``Acquired Fund.''
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    2. Equity Trust and Income Trust, each a business trust organized 
under the laws of the Commonwealth of Massachusetts, are registered 
under the Act as open-end management investment companies. Equity Trust 
will have seven series at the time of the proposed transactions, three 
of which are involved in the proposed transactions. Income Trust will 
have six series at the time of the proposed transactions, four of which 
are involved in the proposed transactions. Money Market Corp., Style 
Select Series and Strategic Investment Series, each a corporation 
organized under the laws of the State of Maryland, are registered under 
the Act as open-end management investment companies. Money Market Corp. 
will have two series at the time of the proposed transactions, one of 
which is involved in the proposed transactions. Style Select Series 
will have thirteen series at the time of the proposed transactions, two 
of which are involved in the proposed transactions. Strategic 
Investment Series will have seven series at the time of the proposed 
transactions, five of which are involved in the proposed transactions. 
The series of Equity Trust, Income Trust, Money Market Corp., Style 
Select Series, and Strategic Investment Series are collectively 
referred to as the ``SunAmerica Funds.'' The fifteen SunAmerica Funds 
involved in the proposed transactions are collectively referred to as 
the ``Acquiring Funds'' (the Acquiring Funds and the Acquired Funds 
together, the ``Funds'').\2\ Nine of the Acquiring Funds are newly 
organized series which were created to facilitate the proposed 
transactions (``Shells'').\3\
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    \2\ The Acquired Funds and the corresponding Acquiring Funds 
are: (i) The Balanced Fund and Equity Trust; Balanced Assets Fund; 
(ii) Mid Cap Growth Fund and Equity Trust; Growth Opportunities 
Fund; (iii) Global Equity Fund and Equity Trust; International 
Equity Fund; (iv) International Equity Fund and Equity Trust; 
International Equity Fund; (v) International Small Cap Fund and 
Equity Trust; International Equity Fund; (vi) Core Bond Fund and 
Income Trust; Core Bond fund; (vii) High Yield Bond Fund and Income 
Trust High Yield Bond Fund; (viii) Municipal Bond Fund and Income 
Trust: Tax Exempt Insured Fund; (ix) Strategic Income Fund and 
Income Trust: Strategic Bond Fund; (x) Municipal Money Market Fund 
and Money Market Corp.; Municipal Money market Fund; (xi) Small Cap 
Growth Fund and Style Select Series; Small Cap Growth Portfolio; 
(xii) Mid Cap Value Fund and Style Select Series; Multi-Cap Value 
Portfolio; (xiii) Science and Technology Fund and Strategic 
Investment Series; Science & Technology Fund; (xiv) Stock Index Fund 
and Strategic Investment Series; Stock Index Fund; (xv) Aggressive 
Growth LifeStyle Fund and Strategic Investment Series: Aggressive 
Growth LifeStage Fund; (XVI) Conservative Growth LifeStyle Fund and 
Strategic Investment Series; Conservative Growth LifeStage Fund; 
(xvii) Moderate Growth Lifestyle Fund and Strategic Investment 
Series: Moderate Growth LifeStage Fund; and (xviii) Style Select: 
International Equity Portfolio and Equity Trust: International 
Equity Fund.
    \3\ The Shells are Equity Trust: International Equity Fund; 
income Trust: Core Bond Fund; Style Select Series: Small Cap Growth 
Portfolio; Strategic Investment Series: Stock Index Fund, Science & 
Technology Fund, Aggressive Growth LifeStage Fund, Moderate Growth 
LifeStage Fund, and Conservative Growth LifeStage Fund; and Money 
Market Corp.: Municipal Money Market Fund.
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    3. American General is a general business corporation and successor 
to American General Insurance Company, an insurance company 
incorporated under the laws of the State of Texas. American General 
Asset Management Corp. (``AGAM''), an investment adviser registered 
under the Investment Advisers Act of 1940 (``Advisers Act''), serves as 
the investment adviser to the NA Trust, and is wholly owned subsidiary 
of American General. American General's employee pension plan, the 
American General Retirement Plan (``Affiliated Plan'') owns 5% (and in 
some cases 25%) or more of the outstanding voting securities of certain 
Acquired Funds. The Affiliated Plan holds the securities in a fiduciary 
capacity and does not have a direct economic interest in the shares. 
VALIC, an investment adviser registered under the Advisers Act, is a 
stock life insurance company that is an indirect wholly owned 
subsidiary of American General. VALIC owns 5% (and in some cases 25%) 
or more of the outstanding voting securities of twelve of the Acquired 
Funds. On August 29, 2001, AIG acquired American General and, as a 
result, American General, VALIC and AGAM became direct or indirect 
wholly owned subsidiaries of AIG.
    4. SAAMCo, a corporation organized under the laws of the State of 
Delaware, is an indirect wholly owned subsidiary of AIG. SAAMCo is an 
investment adviser registered under the Advisers Act and serves as the 
investment adviser to the SunAmerica Funds. SAAMCo will own all of the 
outstanding voting securities of the Shells.
    5. On August 2, 2001 and August 23, 2001, the board of trustees of 
the NA Trust (the ``NA Board'') and the board of directors/trustees of 
the SunAmerica Funds (together with the NA Board, the ``Boards''), 
respectively, including in each case a majority of the directors/
trustees who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act (the ``Independent Trustees''), approved agreements 
and plans of reorganization (each, a ``Plan'' and collectively, the 
``Plans'') for the Funds. Under the Plans, each Acquiring Fund will 
acquire all of the assets and liabilities of the corresponding Acquired 
Fund in exchange for shares of designated classes of the Acquiring Fund 
(each, a ``Reorganization'' and collectively, the ``Reorganizations''). 
The shares of the respective class of the Acquiring Fund exchanged will 
have an aggregate net asset value equal to the aggregate net asset 
value of the corresponding class of the Acquired Fund's shares 
determined as of the close of regular trading on the New York Stock 
Exchange on the closing date of each Reorganization (each a ``Closing 
Date''), currently anticipated to occur on or about November 9, 2001. 
The net asset value of the Acquiring Funds and the value of the assets 
of the Acquired Funds will be determined according to the Acquired and 
Acquiring Funds' current prospectuses and statements of additional 
information. Upon consummation of the Reorganizations, each Acquired 
Fund will be liquidated by the distribution of the corresponding 
Acquiring Fund's shares pro rata to the shareholders of record of the 
Acquired Fund.
    6. Applicants state that the investment objectives and policies of 
each Acquired Fund are generally similar to those of its corresponding 
Acquiring Fund. Applicants state that the rights and obligations of 
each class of shares of the Acquired Funds are similar to those of the 
corresponding class of shares of the Acquiring Funds. For purposes of 
calculating the contingent deferred sales charges on shares of an 
Acquired Fund that currently have a deferred sales charge, the amount 
of time a shareholder held shares of the Acquired Fund will be added to 
the amount of time the shareholder holds shares of the applicable 
Acquiring Fund. No sales charges will be imposed in connection with the 
Reorganizations. AIG or an affiliated person of AIG (but not the Funds) 
will bear the costs associated with the Reorganizations.
    7. Each Board, including a majority of the Independent Trustees, 
determined that the participation of each Fund in the respective 
Reorganization was in the best interests of the Fund and its 
shareholders, and that the interests of the shareholders of the Fund 
would not be diluted as a result of the Reorganization. In approving 
the Reorganizations, the Boards considered various factors, including: 
(a) The terms and conditions of the Reorganization; (b) the effect of 
the Reorganizations on

[[Page 52954]]

the Acquired Funds' shareholders and the value of their interests; (c) 
the fact that the Reorganizations would likely provide economies of 
scale over time that could reduce some Fund expenses; (d) the fact that 
AIG or an affiliated person thereof will bear the expenses relating to 
the Reorganizations; (e) the anticipated tax-free nature of the 
Reorganizations; and (f) the investment experience, expertise and 
resources of SAAMCo.
    8. The Reorganizations are subject to a number of conditions 
precedent, including: (a) The shareholders of each Acquired Fund will 
have approved the Reorganization; (b) the Funds will have received 
opinions of counsel concerning the tax-free nature of each 
Reorganization; and (c) applicants will have received exemptive relief 
from the Commission to permit the Reorganizations. Each Plan may be 
terminated prior to the Closing Date by the mutual agreement of the 
Boards on behalf of the Acquiring Funds and the Acquired Funds. 
Applicants agree not to make any material changes to the Plans that 
affect the application without prior Commission approval.
    9. A registration statement on Form N-14 with respect to each 
Reorganization, containing a prospectus/proxy statement, was filed with 
the Commission on August 17, 2001, and became effective on October 3, 
2001. Solicitation materials related to the Reorganizations were mailed 
to shareholders of the Acquired Funds on or about October 5, 2001. A 
special meeting of shareholders of each Acquired Fund is scheduled to 
be held on November 7, 2001.

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 outstanding voting securities of the 
other person; (b) any person 5% or more of whose securities are 
directly 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 Reorganizations may be prohibited by section 
17(a).
    2. Rule 17a-8 under the Act exempts from the prohibitions of 
section 17(a) certain mergers, consolidations, and 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 believe that rule 17a-8 may 
not be available in connection with the Reorganizations because certain 
of the Funds may be deemed to be affiliated for reasons other than 
those set forth in the rule. Applicants state that because the 
Affiliated Plan and VALIC each own 5% or more (and in some cases more 
than 25%) of the outstanding voting securities of certain Acquired 
Funds, those Funds may be deemed to be affiliated persons of an 
affiliated person (AIG) of the Acquiring Fund to which they propose to 
sell their assets. Applicants state that because SAAMCo will own all of 
the outstanding voting securities of the Shells, those Acquiring Funds 
may be deemed to be affiliated persons of an affiliated person (AIG) of 
the Acquired Funds from which the Acquiring Funds propose to purchase 
assets in connection with the Reorganizations.
    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 
exempting them from section 17(a) of the Act to the extent necessary to 
complete the Reorganizations. Applicants submit that the 
Reorganizations satisfy the standards of section 17(b) of the Act. 
Applicants state that the terms of the proposed Reorganizations are 
fair and reasonable and do not involve overreaching. Applicants also 
state that the Boards, including a majority of the Independent 
Trustees, have determined that the participation of the Funds in the 
Reorganizations is in the best interests of each Fund and that such 
participation will not dilute the interests of the existing 
shareholders of each Fund. In addition, applicants state that the 
Reorganizations will be on the basis of 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. 01-26273 Filed 10-17-01; 8:45 am]
BILLING CODE 8010-01-M