[Federal Register Volume 64, Number 120 (Wednesday, June 23, 1999)]
[Notices]
[Pages 33531-33532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15966]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23873; 812-11520]
Salomon Brothers Series Funds Inc., et al.; Notice of Application
June 17, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
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 THE APPLICATION: Applicants request an order to permit
Salomon Brothers Small Cap Growth Fund, series of Salomon Brothers
Series Funds Inc., to acquire all of the assets and liabilities of the
Smith Barney Special Equities Fund, a series of Smith Barney Investment
Funds Inc. Because of certain affiliations, applicants may not rely on
rule 17a-8 under the Act.
Applicants: Salomon Brothers Series Funds Inc. (``Salomon Brothers
Fund''), Smith Barney Investment Funds Inc. (``Smith Barney Fund''),
Salomon Brothers Asset Management Inc (``SBAM''), and SSBC Fund
Management Inc. (``SSBC,'' together with SBAM, the ``Advisers'').
FILING DATES: The application was filed on February 16, 1999.
Applicants have agreed to file and amendment to the application 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 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 July 8,
1999, 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
SEC's Secretary.
ADDRESSES: Scretary, SEC, 450 Fifth Street, NW., Washington, DC 20549-
0609. Applicants, 7 World Trade Center, 38th Floor, New York, New York
10048.
FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Staff Attorney,
(202) 942-0634, or Michael W. Mundt, 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 from
the SEC's Public Reference Branch, 450 Fifth Street, NW, Washington DC
20549-0102 (telephone (202) 942-8090).
Applicant's Representations
1. Salomon Brothers Fund, a Maryland corporation, is registered
under the Act as an open-end management investment company and is
currently comprised of multiple series, including Salomon Brothers
Small Cap Growth Fund (the ``Acquiring Fund''). Smith Barney Fund, a
Maryland corporation, is registered under the Act as an open-end
management investment company. Smith Barney Special Equities Fund (the
``Acquired Fund,'' together with the Acquiring Fund, the ``Funds'') is
a series of the Smith Barney Fund.
2. SBAM is registered under the Investment Advisers Act of 1940
(``Advisers Act'') and is the investment adviser to the Acquiring Fund.
SBAM is wholly-owned by Salomon Brothers Holding Company (``SBHC''),
which is wholly-owned by Salomon Smith Barney Holdings Inc.
(``Holdings''). As of April 23, 1999, SBHC owned approximately 31.6% of
the outstanding shares of the Acquiring Fund. SSBC is registered under
the Advisers Act and is the investment adviser to the Acquired Fund.
SSBC is wholly-owned by Holdings.
3. On January 7, 1999, and January 11, 1999, the boards of
directors of Salomon Brothers Fund and Smith Barney Fund (``Boards''),
including a majority of the directors who are not ``interested
persons,'' as defined in section 2(a)(19) of the Act (``Independent
Directors''), respectively, approved a Plan of Reorganization
(``Plan''). Under the Plan, on the closing date as defined in the Plan
(``Closing Date''), the Acquiring Fund will acquire all of the assets
and liabilities of the acquired Fund in exchange for shares in the
Acquiring Fund (``the Reorganization''). Following the Reorganization,
each Acquired Fund shareholder will receive shares of a corresponding
class of the Acquiring Fund that have an aggregate net asset value
(``NAV'') equal to the aggregate
[[Page 33532]]
NAV of the Acquired Fund's shares held by that shareholder on the
Closing Date. Applicants anticipate that the Closing Date will be on or
around July 9, 1999.
4. Applicants state that the investment objectives and policies of
the Acquiring and Acquired Funds are generally similar. In addition,
applicants state that the characteristics of there respective classes
of the Acquiring Fund are substantially the same as those of the
corresponding classes of the Acquired Fund. The Acquiring Fund offers
Class A shares, Class B shares, Class 2 shares, and Class O shares. The
Acquired Fund offers Class A shares, Class B shares, Class L shares,
and Class Y shares. The Acquired Fund currently has no Class Y
shareholders. Class A, Class B, and Class L shareholders of the
Acquired Fund will receive Class A, Class B, and Class 2 shares,
respectively, of the Acquiring Fund. Class A shares of the Acquiring
and Acquired Fund are generally subject to a maximum front-end sales
charge of 5.75% and 5.00%, respectively. Class B shares of the
Acquiring Fund are subject to a maximum contingent deferred sales
charge (``CDSC'') of 5.00%, declining to zero seven years after
purchase. Class B shares of the Acquired Fund are subject to a maximum
DCSC of 5.00%, declining to zero five years after purchase. Class B
shares of the Acquiring Fund received in exchange for Class B shares of
the Acquired Fund as a result of the Reorganization will continue to be
subject to the DCSC schedule in effect for the Acquired Fund at the
time of purchase. Class 2 shares of the Acquiring Fund and Class L
shares of the Acquired Fund are sold with a front-end sales charge of
1.00% and are subject to a CDSC if redeemed within one year of
purchase. For purposes of calculating the CDSC, shareholders of the
Acquired Fund will be deemed to have held shares of the corresponding
class of the Acquiring Fund since the date the shareholders initially
purchased the shares of the Acquired Fund. No sales charge will be
imposed in connection with the Reorganization.
5. The Boards, including all of the independent Directors,
determined, after considering relevant factors, that the Reorganization
is in the best interests of the Acquired Fund's and Acquiring Fund's
shareholders, and that the interests of the existing shareholders would
not be diluted by the Reorganization. In approving the Plan, the Bonds
considered factors including (a) the benefits of managing the Funds as
a single Fund; (b) the tax free-nature of the Reorganization; (c)
increased operational efficiencies; (d) shareholder expenses after the
Reorganization; and (e) the potential benefits to Fund affiliates,
including SSBC and SBAM. SBAM will be responsible for expenses incurred
in connection with the Reorganization.
6. The Reorganization is subject to a number of conditions
precedent, including that: (a) The Acquiring and Acquired Funds receive
opinions of counsel that the Reorganization will be tax-free for each
Fund and its shareholders; (b) the Acquired Fund's shareholders approve
the Plan; and (c) applicants receive from the SEC an exemption from
section 17(a) of the Act for the Reorganization. The Plan may be
terminated by mutual agreement of the parties at any time prior to the
Closing Date. In addition, either party may terminate the Plan if (a)
the other party materially breaches a representation, warranty, or
agreement contained in the Plan or (b) a condition precedent to the
terminating party's obligations cannot be met.
7. Definitive proxy solicitation materials have been filed with the
SEC and were mailed to the Acquired Fund's shareholders on April 12,
1999. A special meeting of the Acquired Fund's shareholders was held on
May 28, 1999, and the Plan was approved.
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.
2. 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, 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.
3. Applicants believe that they may not rely on rule 17a-8 in
connection with the Reorganization because the Funds may be deemed to
be affiliated by reasons other than having a common investment adviser,
common directors, and/or common officers. Applicants state that the
Acquiring Fund may be deemed to be an affiliated person of SBHC because
SBHC owns more than 25% of the outstanding voting securities of the
Acquiring Fund. Additionally, SBAM and SBHC are under the common
ownership and control of Holdings. because of this ownership, the
Acquiring Fund may be deemed an ``affiliated person of an affiliated
person'' of the Acquired Fund.
4. Section 17(b) of the Act provides that the SEC 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, 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.
5. Applicants request an order under section 17(b) of the Act
exempting them from section 17(a) to the extent necessary to consummate
the Reorganization. Applicants believe that the terms of the
Reorganization are fair and reasonable and do not involve overreaching.
Applicants state that the Reorganization will be based on the relative
NAVs of the Acquiring and Acquired Funds' shares. Further, applicants
state that the Funds have similar investment objectives and policies.
Finally, applicants state that the Boards, including all of the
Independent Directors, determined that the Reorganization is in the
best interests of each Fund and that the interests of the shareholders
of the Funds will not be diluted.
For the SEC, by the Division of Investment Management, under
designed authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-15966 Filed 6-22-99; 8:45 am]
BILLING CODE 8010-01-M
