[Federal Register Volume 65, Number 186 (Monday, September 25, 2000)]
[Notices]
[Pages 57633-57636]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-24547]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24646; 812-10518]


Seasons Series Trust, et al.; Notice of Application

AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application for an order under section 12(d)(1)(J) of 
the Investment Company Act of 1940 (``Act'') for an exemption from 
sections 12(d)(1)(A) and (B) of the Act and under sections 6(c) and 
17(b) of the Act for an exemption from section 17(a) of the Act.

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SUMMARY OF THE APPLICATION:  The order would permit certain registered 
unit investment trusts or open-end management investment companies to 
acquire shares of registered open-end management investment companies 
both within and outside the same group of investment companies.

Applicants: Seasons Series Trust (``Seasons''), Variable Annuity 
Account Five (``Account''), Anchor National Life Insurance Company 
(``Anchor''), First SunAmerica Life Insurance Company (``SunAmerica,'' 
together with Anchor, the ``Insurance Companies''), and SunAmerica 
Asset Management Corp. (``Adviser'').

Filing Dates: The application was filed on February 4, 1997, and 
amended on September 12, 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 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 October 16, 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 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: Seasons, Account, and Anchor, One SunAmerica Center, Los 
Angeles, CA 90067-6022; SunAmerica and Adviser, the SunAmerica Center, 
733 Third Avenue, New York, NY 10017-3204.

FOR FURTHER INFORMATION CONTACT: Michael W. Mundt, Branch Chief, and 
Nadya B. Roytblat, Assistant Director, at (202) 942-0564 (Office of 
Investment Company Regulation, Division of Investment Management).

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.

Applicants' Representations

    1. The Account, a unit investment trust registered under the Act, 
is a separate account of Anchor consisting of sixteen subaccounts. 
Seasons, an open-end management investment company registered under the 
Act, serves as a funding medium for variable annuity contracts offered 
through the Account and currently consists of sixteen series. 
Applicants state that the Account and Seasons are part of the ``same 
group of investment companies,'' as that term is defined in section 
12(d)(1)(G) of the Act (the ``SunAmerica Group''). The Adviser, an 
investment adviser registered under the Investment Advisers Act of 
1940, serves as investment adviser to Seasons and is an indirect, 
wholly-owned subsidiary of Anchor. The Insurance Companies are 
indirect, wholly-owned subsidiaries of American International Group, 
Inc.
    2. Applicants request relief to permit the Account to invest (a) in 
series of Seasons and other registered open-end management investment 
companies that are part of the SunAmerica Group (``Affiliated Funds''), 
and (b) in other registered open-end management investment companies 
that are not part of the SunAmerican Group (``Unaffiliated Funds,'' and 
together with the Affiliated Funds, the ``Underlying Funds''). 
Applicants request that the relief also apply to (a) any future 
separate account that is registered under the Act as a unit investment 
trust (together with the Account, each a ``Trust of Funds'' ) and is 
established by the Insurance Companies or another insurance Company 
that is in control of, controlled by, or under common control with the 
Insurance Companies (each, a ``Sponsor'') and (b) any future separate 
account that is registered under the Act as an open-end management 
investment company and is established by the Insurance Companies or 
another insurance company that is in control of, controlled by, or 
under common control with the Insurance Companies, or any open-end 
management investment company registered under the Act that is not a 
separate account but is within

[[Page 57634]]

the SunAmerica Group (each a ``Fund of Funds'').\1\ The Trusts of Funds 
and Funds of Funds are each an ``Acquiring Company,'' and collectively, 
the ``Acquiring Companies.''
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    \1\ All investment companies that currently intend to rely on 
the requested order are named as applicants Any other investment 
company that relies on the order in the future will comply with the 
terms and conditions of the application.
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    3. Applicants state that the requested relief will enable the 
Account to offer investors the potential for additional diversification 
among an expended universe of mutual funds available as investment 
options under variable annuity contracts.

Applicants' Legal Analysis

A. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act prohibits a registered investment 
company from acquiring shares of an investment company if the 
securities represent more than 3% of the total outstanding voting stock 
of the acquired company, more than 5% of the total assets of the 
acquiring company, or, together with the securities of any other 
investment companies, more than 10% of the total assets of the 
acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company from selling its shares 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 generally.
    2. Section 12(d)(1)(G) provides, in relevant part, that section 
12(d)(1) will not apply to securities of a registered open-end 
investment company acquired by a registered open-end investment company 
or registered unit investment trust if the acquired company and the 
acquiring company are part of the same group of investment companies, 
provided that certain other requirements contained in section 
12(d)(1)(G) are met. Applicants state that they may not rely on section 
12(d)(1)(G) because an Acquiring Company will invest in Unaffiliated 
Funds in addition to Affiliated Funds.
    3. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security, or transaction, or any class or classes of 
persons, securities or transactions, from any provision of section 
12(d)(1) if the exemption is consistent with the public interest and 
the Acquiring Company to acquire shares of an Underlying Fund and to 
permit an Underlying Fund to sell shares to an Acquiring Company beyond 
the limits in sections 12(d)(1) (A) and (B).
    4. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 12(d)(1) (A) and (B), 
which include concerns about undue influence by a fund or funds over 
underlying funds, excessive layering of fees, and overly complex fund 
structures. Accordingly, applicants believe that the requested 
exemption is consistent with the public interest and the protection of 
investors.
    5. Applicants state that the proposed arrangement will not result 
in undue influence by an Acquiring Company or its affiliates under 
Underlying Funds. To limit the control that an Acquiring Company may 
have over an Unaffiliated Fund, applicants propose a condition 
prohibiting the Sponsor or Adviser, the Acquiring Company, and certain 
affiliates (individually or in the aggregate) from controlling an 
Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. To 
limit further the potential for undue influence over Unaffiliated 
Funds, applicants propose conditions 2 through 7, stated below to 
preclude an Acquiring Company and its affiliated entities from taking 
advantage of an Unaffiliated Fund with respect to transactions between 
the entities and to ensure that transactions will be on an arm's length 
basis.
    6. As an additional assurance that an Unaffiliated Fund understands 
the implications of an investment by an Acquiring Company under the 
requested order, an Acquiring Company and Unaffiliated Fund will 
execute an agreement prior to the investment stating that the 
Unaffiliated Fund understands the terms and conditions of the order and 
agrees to fulfill its responsibilities under the order. Applicants note 
that an Unaffiliated Fund may choose to reject an investment from the 
Acquiring Company.
    7. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. With respect to any investment in 
an Underlying Fund by an Acquiring Company that is not a separate 
account, the aggregate sales charges, distribution-related fees and/or 
service fees of an Acquiring Company and the Underlying Fund will not 
exceed the limits set forth in rule 2830 of the Conduct Rules of the 
National Association of Securities Dealers (``NASD Conduct Rules''). 
Applicants represent that the fees and charges of an Acquiring Company 
that is a separate account and its Underlying Funds, in the aggregate, 
will be reasonable in relation to the services rendered, expenses to be 
incurred, and risks assumed by the Sponsor.
    8. In addition, applicants note that a Trust of Funds, as a unit 
investment trust, would not pay an advisory fee, and that a Fund of 
Funds would be subject to a condition under which the board of 
directors of the Fund of Funds, including a majority of the 
disinterested directors, would be required to determine that the 
advisory fees charged to the Fund of Funds are based on services that 
are in addition to the services provided under the advisory contract of 
any Underlying Fund. Pursuant to another condition to the order, the 
Adviser to a Fund of Funds or trustee or depositor of a Trust of Funds 
will waive or offset fees otherwise payable by the Acquiring Company to 
the Adviser or trustee or depositor in an amount at least equal to any 
compensation (including fees paid pursuant to a plan adopted by an 
Unaffiliated Fund under rule 12b-1 under the Act (``12b-1 Fees'')) 
received by the Adviser or trustee or depositor, or an affiliated 
person of the Adviser or trustee or depositor, from an Unaffiliated 
Fund in connection with the investment by an Acquiring Company in the 
Unaffiliated Fund.
    9. Applicants state that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that an Underlying 
Fund will be prohibited from acquiring securities of any investment 
company in excess of he limits contained in section 12(d)(1)(A). 
Applicants also represent that an Acquiring Company's prospectus and 
sales literature will contain concise, ``plain English'' disclosure 
designed to inform investors of the unique characteristics of the 
Acquiring Company's structure, including, but not limited to, its 
expense structure and the additional expenses of investing in 
Underlying Funds.

B. Section 17(a)

    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and any 
affiliated person 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 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 outstanding voting 
securities are directly or indirectly owned, controlled, or held with 
power to vote by the other person; and (c) any person directly or 
indirectly controlling,

[[Page 57635]]

controlled by, or under common control with the other person.
    2. Applicants state that a Fund of Funds and Affiliated Funds might 
be deemed to be under the common control of the Adviser. Applicants 
also state that an Acquiring Company and an Underlying Fund might 
become affiliated persons if the Acquiring Company acquires more than 
5% of the Underlying Fund's outstanding voting securities. In light of 
these possible affiliation, section 17(a) could prevent an Underlying 
Fund from selling shares to and redeeming shares from an Acquiring 
Company.
    3. 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 fair and 
reasonable and do not involve overreaching on the part of any person 
concerned; (b) the proposed transaction is consistent with the policies 
of each registered investment company involved; and (c) the proposed 
transaction is consistent with the general purposes of the Act. Section 
6(c) of the Act permits the Commission to exempt any person or 
transactions from any provision of the Act if such 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.
    4. Applicants submit that the proposed arrangement satisfies the 
standards for relief under sections 17(b) and 6(c) of the Act. 
Applicants state that the terms of the arrangement are fair and 
reasonable and do not involve overreaching. Applicants note that the 
consideration paid for the sale and redemption of shares of the 
Underlying Funds will be based on the net asset values of the 
Underlying Funds. Applicants state that the proposed arrangement will 
be consistent with the policies of each Acquiring Company and 
Underlying Fund and with the general purposes of the Act.

Applicants' Conditions

    Applicants agree that the requested order will be subject to the 
following conditions:
    1. (a) The Sponsor or Adviser, (b) any person controlling, 
controlled by, or under common control with the Sponsor or Adviser, and 
(c) any investment company and any issuer that would be an investment 
company but for section 3(c)(1) or section 3(c)(7) of the Act sponsored 
by the Sponsor or advised by the Adviser or by any person controlling, 
controlled by, or under common control with the Sponsor or Adviser 
(collectively, the ``Group'') will not control (individually or in the 
aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) 
of the Act. If, as a result of a decrease in the outstanding voting 
securities of an Unaffiliated Fund, the Group, in the aggregate, 
becomes a holder of more than 25% of the outstanding voting securities 
of the Unaffiliated Fund, the Group (except for any member of the Group 
that is a separate account of the Insurance Companies registered under 
the Act (``Separate Account'')) will vote its shares of the 
Unaffiliated Fund in the same proportion as the vote of all other 
holders of the Unaffiliated Fund's shares. A Separate Account will seek 
voting instructions from its contractholders and vote its shares in 
accordance with the instructions received and will vote those shares 
for which no instructions were received in the same proportion as the 
shares for which instructions were received.
    2. An Acquiring Company and its Sponsor or Adviser, promoter, and 
principal underwriter, and any person controlling, controlled by, or 
under common control with any of those entities (each an ``Acquiring 
Company Affiliate'') will not cause any existing or potential 
investment by the Acquiring Company in shares of an Unaffiliated Fund 
to influence the terms of any services or transactions between the 
Acquiring Company or an Acquiring Company Affiliate and the 
Unaffiliated Fund or its investment adviser, promoter, and principal 
underwriter, and any person controlling, controlled by, or under common 
control with any of those entities (each an ``Unaffiliated Fund 
Affiliate'').
    3. The board of directors of a Fund of Funds, including a majority 
of the disinterested directors, will adopt procedures reasonably 
designed to assure that the Adviser is conducting the investment 
program of the Fund of Funds without taking into account any 
consideration received by the Fund of Funds or an Acquiring Company 
Affiliate from an Unaffiliated Fund or an Unaffiliated Fund Affiliate 
in connection with any services or transactions.
    4. Once an investment by an Acquiring Company in the securities of 
an Unaffiliated Fund exceeds the limits of section 12(d)(1)(A)(i) of 
the Act, the board of directors of the Unaffiliated Fund, including a 
majority of the disinterested directors, will determine that any 
consideration paid by the Unaffiliated Fund to an Acquiring Company or 
an Acquiring Company Affiliate in connection with any services or 
transactions: (a) Is fair and reasonable in relation to the nature and 
quality of the services and benefits received by the Unaffiliated Fund; 
(b) is within the range of consideration that the Unaffiliated Fund 
would be required to pay to another unaffiliated entity in connection 
with the same services or transactions; and (c) does not involve 
overreaching on the part of any person concerned.
    5. No Acquiring Company or Acquiring Company Affiliate will cause 
an Unaffiliated Fund to purchase a security from any underwriting or 
selling syndicate in which a principal underwriter is an officer, 
director, member of an advisory board, investment adviser, employee, or 
sponsor of the Acquiring Company, or a person of which any such 
officer, director, member of an advisory board, investment adviser, 
employee, or sponsor is an affiliated person (each an ``Underwriting 
Affiliate''). An offering during the existence of an underwriting or 
selling syndicate of which a principal underwriter is an Underwriting 
Affiliate is considered an ``Affiliated Underwriting.''
    6. The board of directors of an Unaffiliated Fund, including a 
majority of the disinterested directors, will adopt procedures 
reasonably designed to monitor any purchases by the Unaffiliated Fund 
of securities in Affiliated Underwritings once an investment by an 
Acquiring Company in the securities of the Unaffiliated Fund exceeds 
the limits of section 12(d)(1)(A)(i) of the Act, including any 
purchases made directly from an Underwriting Affiliate. The board of 
directors will review these purchases periodically, but no less 
frequently than annually, to determine whether the purchases were 
influenced by the investment by the Acquiring Company in shares of the 
Unaffiliated Fund. The board of directors should consider, among other 
things, (a) whether the purchases were consistent with the investment 
objectives and policies of the Unaffiliated Fund; (b) how the 
performance of securities purchased in an Affiliated Underwriting 
compares to the performance of comparable securities purchased during a 
comparable period of time in underwritings other than Affiliated 
Underwritings or to a benchmark such as a comparable market index; and 
(c) whether the amount of securities purchased by the Unaffiliated Fund 
in Affiliated Underwritings and the amount purchased directly from 
Underwriting Affiliates have changed significantly from prior years. 
The board of directors shall take any appropriate

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actions based on its review, including, if appropriate, the institution 
of procedures designed to assure that purchases of securities from 
Affiliated Underwritings are in the best interests of shareholders.
    7. The Unaffiliated Fund shall maintain and preserve permanently in 
an easily accessible place a written copy of the procedures described 
in the preceding condition, and any modifications, and shall maintain 
and preserve for a period not less than six years from the end of the 
fiscal year in which any purchase from an Affiliated Underwriting 
occurred, the first two years in an easily accessible place, a written 
record of each purchase made once an investment by an Acquiring Company 
in the securities of an Unaffiliated Fund exceeds the limits of section 
12(d)(1)(A)(i) of the Act, setting forth from whom the securities were 
acquired, the identity of the underwriting syndicate's members, the 
terms of the purchase, and the information or materials upon which the 
board's determinations were made.
    8. Prior to an investment in an Unaffiliated Fund in excess of the 
limit in section 12(d)(1)(A)(i), the Acquiring Company and the 
Unaffiliated Fund will execute an agreement stating, without 
limitation, that the Unaffiliated Fund understands the terms and 
conditions of the order and agrees to fulfill its responsibilities 
under the order. At the time of its investment in shares of an 
Unaffiliated Fund in excess of the limit in section 12(d)(1)(A)(i), an 
Acquiring Company will notify the Unaffiliated Fund of the investment. 
At such time, the Acquiring Company also will transmit to the 
Unaffiliated Fund a list of the names of each Acquiring Company 
Affiliate and Underwriting Affiliate. The Acquiring Company will notify 
the Unaffiliated Fund of any changes to the list as soon as reasonably 
practicable after a change occurs. The Unaffiliated Fund and the 
Acquiring Company will maintain and reserve a copy of the order, the 
agreement, and the list with any updated information for a period not 
less than 6 years from the end of the fiscal year in which any 
investment occurred, the first 2 years in an easily accessible place.
    9. Prior to approving any advisory contract under section 15 of the 
Act, the board of directors of each Fund of Funds, including a majority 
of the disinterested directors, must find that the advisory fees 
charged under the contract are based on services that are in addition 
to, rather than duplicative of, services provided to Underlying Funds 
in which the Fund of Funds will invest. This finding and the basis upon 
which the finding was made, will be recorded fully in the minute books 
of the Fund of Funds.
    10. The Adviser to a Fund of Funds or trustee or depositor of a 
Trust of Funds will waive or offset fees otherwise payable by the 
Acquiring Company to the Adviser or trustee or depositor in an amount 
at least equal to any compensation (included 12b-1 Fees) received by 
the Adviser or trustee or depositor, or an affiliated person of the 
Adviser or trustee or depositor, from an Unaffiliated Fund in 
connection with the investment by an Acquiring Company in the 
Unaffiliated Fund.
    11. With respect to any investment in an Underlying Fund by an 
Acquiring Company that is not a separate account, any sales charges, 
distribution-related fees, and/or services fees charged with respect to 
shares of an Acquiring Company, when aggregated with any sales charges, 
distribution-related fees, and/or service fees paid by the Acquiring 
Company with respect to its acquisition, holding, or disposition of 
shares of an Underlying Fund, will not exceed the limits set forth in 
rule 2830 of the NASD Conduct rules.
    12. No Underlying Fund will acquire securities of any other 
investment company in excess of the limits contained in section 
12(d)(1)(A) of the Act.

    For the SEC, by the Division of Investment Management, pursuant 
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-24547 Filed 9-22-00; 8:45 am]
BILLING CODE 8010-01-M