[Federal Register Volume 60, Number 228 (Tuesday, November 28, 1995)]
[Notices]
[Pages 58705-58707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28930]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21524; 812-9730]
State Street Research Tax-Exempt Fund, et al.; Notice of
Application
November 20, 1995.
AGENCY: Securities and Exchange Commission (the ``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: State Street Research Tax-Exempt Fund (the ``Acquiring
Fund''), State Street Research California Tax-Free Fund (the
``California Fund''), State Street Research Florida Tax-Free Fund (the
``Florida Fund''), State Street Research Pennsylvania Tax-Free Fund
(the ``Pennsylvania Fund'') (collectively, the California, Florida and
Pennsylvania Funds are the ``Acquired Funds'' and the Acquiring and
Acquired Funds are the ``Funds''), and State Street Research &
Management Company (``State Street'').
RELEVANT ACT SECTIONS: Order requested under section 17(b) of the Act
to exempt applicants from the provisions of section 17(a). Applicants
further request an order pursuant to rule 17d-1 under the Act to permit
certain joint transactions otherwise prohibited by section 17(d) and
rule 17d-1.
SUMMARY OF APPLICATION: Applicants seek an order to permit applicants
to effectuate a reorganization between the Acquiring and Acquired
Funds.
FILING DATES: The application was filed on August 21, 1995, and amended
on November 1, 1995.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on December 15,
1995, 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 SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, D.C.
20549. Applicants, One Financial Center, Boston, Massachusetts 02111.
FOR FURTHER INFORMATION CONTACT:
Elaine M. Boggs, Staff Attorney, at (202) 942-0572, or C. David
Messman, 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
SEC's Public Reference Branch.
Applicants' Representations
1. The Funds are series of State Street Research Tax-Exempt Trust
(the
[[Page 58706]]
``Trust''), a Massachusetts business trust registered under the Act as
a diversified, open-end management investment company. Each Fund offers
four classes of shares. The classes of shares of the Acquiring Fund
have identical arrangements with respect to the imposition of initial
and contingent deferred sales charges and distribution and service fees
as the comparable classes of shares of each of the Acquired Funds. As
of July 31, 1995, Metropolitan Life Insurance Company (``Met Life'')
held with power to vote 10.8%, 43.9%, and 29.4% of the outstanding
shares of the California, Florida, and Pennsylvania Funds,
respectively.
2. State Street serves as each Fund's investment adviser and State
Street Research Investment Services, Inc. (the ``Distributor'') serves
as the distributor for each of the Funds. State Street and the
Distributor are both indirect wholly-owned subsidiaries of Met Life.
3. The investment objective of the Acquiring Fund is to seek a high
level of interest income exempt from federal income taxes. The
Acquiring Fund invests primarily in investment grade tax-exempt debt
obligations. The investment objective of the California, Florida, and
Pennsylvania Funds is to seek a high level of interest income exempt
from federal income taxes and income or property taxes of their
eponymous states. The California, Florida, and Pennsylvania Funds
invest primarily in investment grade securities issued by or on behalf
of their eponymous states.
4. The board of trustees of the Trust has approved agreements and
plans of reorganization and liquidation providing for the transfer of
all of the assets of each of the Acquired Funds to the Acquiring Funds
in exchange for Acquiring Fund shares. The reorganization is subject to
the assumption by the Acquiring Fund of all of the liabilities of each
of the Acquired Funds.
5. As a result of the reorganization, shareholders of each Acquired
Fund will receive, in exchange for his or her shares of an Acquired
Fund, shares of the corresponding class of the Acquiring Fund with an
aggregate value equal to the value of such shareholder's shares of the
Acquired Fund, calculated as of the close of business on the business
day immediately prior to the closing for each Fund. Each Acquired Fund
will liquidate and distribute shares of the Acquiring Fund to their
respective shareholders at or as soon as practicable after the relevant
closing.
6. At or prior to the relevant closing, each of the Acquired Funds
shall declare a dividend or dividends which shall have the effect of
distributing to the shareholders of each Acquired Fund all of the
respective Fund's investment company taxable income for all taxable
years ending on or prior to the respective closing (computed without
regard to any deduction for dividends paid) and all of its net capital
gain realized in all taxable years ending on or prior to the respective
closing (after reduction for any capital loss carry-forward).
7. The board of trustees of the Acquired Funds, including the
trustees who are not ``interested persons'' as such term is defined by
the Act, have concluded that the reorganizations would be in the best
interest of the Acquired and Acquiring Funds and that the interests of
the existing shareholders of the respective Funds will not be diluted
as a consequence thereof. In making this determination, the trustees
considered a number of factors, including the smaller size and higher
expenses of each of the Acquired Funds compared to the Acquiring Fund
and, in each case, the efficiencies resulting from combining the
operations of two separate funds with the same investment manager, the
same multiple class structure, the same sales load structure, and
similar investment ohjectives and policies.
8. The proposed reorganization is subject to approval by the
holders of a majority (as defined in the Act) of the outstanding shares
of each Acquired Fund. Approval will be solicited pursuant to a
prospectus/proxy statement, which was sent to shareholders of each
Acquired Fund on or about October 20, 1995. Each prospectus/proxy
statement includes pertinent financial information and projected
expense ratios of the combined funds based primarily upon the advisory
agreement as it applies to the Acquiring Fund.
9. The expenses of each reorganization, whether or not each
reorganization is consummated, will be apportioned between the
Distributor and the Funds. Expenses will be allocated to the Acquiring
and the applicable Acquired Fund in an appropriate manner on the basis
of identifiable direct costs or otherwise on the basis of relative net
assets. The Distributor will assume the liability for and pay one-half
of each Fund's expenses incurred in connection with each
reorganization.
10. The consummation of each reorganization is subject to certain
conditions, including that the parties shall have received from the SEC
the order requested herein, and the receipt of an opinion of tax
counsel to the effect that upon consummation of each reorganization and
the transfer of substantially all the assets of each Acquired Fund, no
gain or loss will be recognized by the Acquired or Acquiring Funds or
their shareholders as a result of the reorganization. Applicants will
not make any material changes adversely affecting the rights of
shareholders that affect the application without the prior approval of
the SEC staff.
Applicants' Legal Analysis
1. Section 17(a) of the Act provides, in pertinent part, that it is
unlawful for any affiliated person of a registered investment company,
or any affiliated person of such an affiliated person, acting as
principal, knowingly to sell or purchase securities to or from such
registered company.
2. Section 2(a)(3) of the Act defines the term ``affiliated
person'' of another person to include, in pertinent part, (a) any
person directly or indirectly owning, controlling, or holding with
power to vote 5% or more of the outstanding voting securities of such
other person, (b) any person directly or indirectly controlling,
controlled by, or under common control with such other person, and (c)
if such other person is an investment company, any investment adviser
thereof.
3. Rule 17a-8 under the Act exempts from the prohibitions of
section 17(a) mergers, consolidations, or purchases or sales of
substantially all of the assets of registered investment companies that
are affiliated persons 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. Met Life
indirectly owns 100% of the outstanding voting shares of State Street,
the adviser to each Fund. Met Life also owns with power to vote more
than 5% of the outstanding shares of each of the Acquiring Funds.
Accordingly, the Acquiring Fund may be deemed an affiliated person of
an affiliated person of each of the Acquired Funds, and vice versa, for
reasons not based solely on their common adviser.
4. Section 17(b) of the Act provides that the SEC may exempt a
transaction from the prohibitions of section 17(a) if evidence
establishes that the terms of the proposed transaction, including the
consideration to be paid, 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 the registered investment
company concerned and with the general purposes of the Act.
[[Page 58707]]
5. Applicants believe that the reorganizations are consistent with
the policies and purposes of the Act. In addition, applicants state
that the exchange of assets will be based on each Fund's relative net
asset values. Further, applicants state that the trustees, including
the non-interested trustees, have concluded that any potential benefits
to Met Life, State Street, the Distributor, and their affiliates as a
result of the reorganizations are on balance outweighed by the
potential benefits to each Fund and its shareholders. Although income
from the Acquiring Fund will be subject to taxation at the state level,
whereas income from each Acquired Fund is exempt from taxation in the
eponymous state, the trustees have determined that the benefits of the
reorganization substantially offset the loss of this tax benefit to the
shareholders of each Acquired Fund.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-28930 Filed 11-27-95;8:45am]
BILLING CODE 8010-01-M
