[Federal Register Volume 62, Number 50 (Friday, March 14, 1997)]
[Notices]
[Pages 12259-12261]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6473]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22549; 812-10328]
Great-West Life & Annuity Insurance Company, et al.
March 10, 1997.
AGENCY: The Securities and Exchange Commission (``Commission'').
[[Page 12260]]
ACTION: Notice of application for an order pursuant to the Investment
Company Act of 1940 (``1940 Act'').
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APPLICANTS: Great-West Life & Annuity Insurance Company (``GWL&A''),
FutureFunds Series Account (``Separate Account''), and BenefitsCorp
Equities, Inc. (``BCE'').
RELEVANT 1940 ACT SECTIONS: Order requested pursuant to Sections 6(c),
17(b), and 26(b).
SUMMARY OF APPLICATION: Applicants request an order pursuant to Section
26(b) of the 1940 Act approving a proposed substitution of securities,
and pursuant to Sections 6(c) and 17(b) of the 1940 Act exempting
related transactions from Section 17(a) of the 1940 Act.
FILING DATE: The application was filed on September 6, 1996, and
amended on January 10, 1997.
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 Secretary of the
Commission 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 April 4, 1997, 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 Secretary of the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, N.W. Washington, D.C. 20549. Applicants, c/o W. Randolf
Thompson, Esq., Jorden Burt Berenson & Johnson, LLP, 1025 Thomas
Jefferson Street, N.W., Suite 400 East, Washington, D.C. 20007-0805.
FOR FURTHER INFORMATION CONTACT: Kevin M. Kirchoff, Branch Chief,
Office of Insurance Products (Division of Investment Management), at
(202) 942-0672.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application is available for a fee from the
Public Reference Branch of the Commission.
Applicants' Representations
1. GWL&A, a Colorado stock life insurance company, does business in
the District of Columbia, Puerto Rico, and all states of the United
States except New York.
2. GWL&A is wholly-owned by The Great-West Life Assurance Company,
which is a subsidiary of Great-West Lifeco Inc., an insurance holding
company. Great-West Lifeco Inc. is a subsidiary of Power Financial
Corporation of Canada, which is controlled by Power Corporation of
Canada.
3. The Separate Account, established by GWL&A pursuant to Kansas
law, is registered with the Commission as a unit investment trust. The
Separate Account acts a funding vehicle for certain group variable
flexible premium deferred annuity contracts (``Contracts''). The
Separate Account currently has seventeen investment divisions, each of
which invests exclusively in one of the corresponding portfolios of
three open-end management investment companies.
4. BCE, the principal underwriter of the Contracts, is registered
as a broker-dealer pursuant to the Securities Exchange Act of 1934, and
is a member of the National Association of Securities Dealers, Inc.
5. The Contracts expressly reserve the right of GWL&A, both on its
own behalf and on behalf of the Separate Account, to eliminate
investment divisions, combine two or more investment divisions, or
substitute one or more underlying funds for others in which its
investment divisions are invested.
6. GWL&A, on its own behalf and on behalf of the Separate Account,
proposes to substitute shares of the Maxim Series Fund Maxim INVESCO
Balanced Portfolio (``Substituted Portfolio''), for shares of the Maxim
Series Fund Total Return Portolio and the TCI Balanced Portfolio
(``Eliminated Portfolios'') (the ``Substitution''). Applicants
represent that the Substitution will benefit the participants by
eliminating two portfolios with below average historical returns and
consolidating participants' investments in the Substituted Portfolio,
which has investment objectives similar to the Eliminated Portfolios.
7. Participants will be advised that they can transfer their shares
in the Eliminated Portfolios to the remaining portfolios of the
Separate Account or leave their shares in the Eliminated Portfolios
until the date of the Substitution. No Eliminated Portfolio will accept
additional premium payments (i.e., new money or transfers) on or after
the date of the Substitution. No sales load deductions or transfer
charges will be assessed in connection with any transfers among the
portfolios because of the Substitution.
8. Applicants represent that the total expenses of the Substituted
Portfolio currently are 1.00%, which are greater than those of the
Maxim Series Fund Total Return Portfolio, the total expenses of which
are .60%, but the same as the total expenses of the TCI Balanced
Portfolio.
Applicants' Legal Analysis
1. Section 26(b) of the 1940 Act provides that it shall be unlawful
for any depositor or trustee of a registered unit investment trust
holding the security of a single issuer to substitute another security
for such security unless the Commission shall have approved such
substitution. The Commission shall issue an order approving such
substitution if the evidence establishes that it is consistent with the
protection of investors and the purposes fairly intended by the
policies and provisions of the 1940 Act. Section 26(b) protects the
expectation of investors that the unit investment trust will accumulate
shares of a particular issuer and is intended to insure that
unnecessary or burdensome sales loads, additional reinvestment costs,
other charges will not be incurred due to unapproved substitutions of
securities.
2. Applicants request an order pursuant to Section 26(b) of the
1940 Act approving the Substitution. Applicants represent that the
purposes, terms, and conditions of the Substitution are consistent with
Section 26(b). Applicants believe the Substitution will benefit the
participants by eliminating two portfolios with below average
historical returns. Applicants represent that the Maxim Series Fund
Total Return Portfolio, when compared to funds in its asset class, has
performed below average for at least five quarters. In addition, its
one, three, and five year returns of 10.62%, 8.65%, and 10.40% have
been below average compared to funds within the same asset class.
Applicants represent that the same is true of the TCI Balanced
Portfolio which, when compared to other balanced funds, has been
performing poorly for at least seven quarters. In addition, its one,
three, and five year returns of 10.65%, 9.42%, and 9.08% also are below
the average of balanced funds. GWL&A proposes to consolidate
participants' investments in the Substituted Portfolio, which has
similar investment objectives to the Eliminated Portfolios. The
Substitution will remove poorly performing portfolios from the Separate
Account while the similarity in investment objectives provides a means
for Contract owners and/or all participants to continue their current
investment goals and risk expectations.
[[Page 12261]]
3. Applicants represent that the Substitution will be effected at
net asset value in conformity with Section 22(c) and 22(g) of the 1940
Act and Rule 22c-1 thereunder. The Substitution may be effected
primarily for cash, but also may involve partial redemptions in-kind of
securities (``Related Transactions''). The use of in-kind redemptions
in conformity with Section 22(g) of the 1940 Act would alleviate the
impact of the brokerage fees and expenses upon GWL&A or the investment
adviser or sub-adviser of the Substituted Portfolio, as these entities
will bear all expenses related to the Substitution. The Related
Transactions will be effected to the extent consistent with the
investment objectives and any applicable diversification requirements.
4. GWL&A or the investment adviser of the Substituted Portfolio
will assume the transfer and custodial expenses and legal and
accounting fees incurred with respect to the Substitution. Participants
will not incur any fees or charges as a result of the transfer of
account values from any portfolio. Applicants represent that there will
be no increase in the Contract or Separate Account fees and charges
after the Substitution. Applicants further represent that the
Substitution is designed to avoid any adverse federal tax impact to the
Contract owners or participants.
5. Section 6(c) of the 1940 Act authorizes the Commission to exempt
any person, security, or transaction for any class or classes of
persons, securities, or transactions from the provisions of the 1940
Act, if and to the extent that such exemption is necessary or
appropriate in the public interest and consistent with the protection
of investors and purposes fairly intended by the policy and provisions
of the 1940 Act.
6. Section 17(a)(1) of the 1940 Act prohibits any affiliated
person, or an affiliate of an affiliated person, of a registered
investment company, from selling any security or other property to such
registered investment company. Section 17(a)(2) of the 1940 Act
prohibits any affiliated person from purchasing any security or other
property from such registered investment company.
7. Section 17(b) of the 1940 Act authorizes the Commission to issue
an order exempting a proposed transaction from Section 17(a) if: (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 policy of each registered
investment company concerned; and (c) the proposed transaction is
consistent with the general purposes of the 1940 Act.
8. Applicants request an order pursuant to Sections 6(c) and 17(b)
of the 1940 Act exempting the Related Transactions from the provisions
of Sections 17(a) of the 1940 Act.
9. Applicants represent that the terms of the Substitution are
reasonable and fair and do not involve overreaching on the part of any
person concerned. The Substitution will be effected at the net asset
value of the securities involved and the interests of Contract owners
will not be diluted. In-kind redemptions will alleviate some of the
expenses involved with the Substitution and only will be used to the
extent they are consistent with the investment objectives and
applicable diversification requirements of the affected portfolios.
10. The Applicants represent that the Substitution and the Related
Transactions are consistent with the policies of each investment
company involved and the general purposes of the 1940 Act, and comply
with the requirements of both Section 6(c) and 17(b).
Conclusion
Applicants assert that, for the reasons summarized above, the
requested order approving the Substitution and Related Transactions
should be granted.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-6473 Filed 3-13-97; 8:45 am]
BILLING CODE 8010-01-M