[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