[Federal Register Volume 64, Number 226 (Wednesday, November 24, 1999)]
[Notices]
[Pages 66219-66221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30584]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC- 24142; File No. 812-11586]
Great-West Life & Annuity Insurance Company, et al.; Notice of
Application
November 18, 1999.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').
ACTION: Notice of Application for approval under Section 26(b) of the
Investment Company Act of 1940, as amended (the ``1940 Act'').
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SUMMARY OF APPLICATION: Applicants seek an order approving the
substitutions of shares of the Maxim INVESCO ADR Portfolio for shares
of the Foreign Equity Portfolio of the Maxim Series Fund, Inc.
APPLICANTS: Great-West Life & Annuity Insurance Company (``GWL&A''),
Retirement Plan Series Account of GWL&A (the ``Separate Account'') and
One Orchard Equities, Inc. (``Orchard'') (hereinafter all parties are
collectively referred to as the ``Applicants'').
FILING DATE: The application was filed on April 20, 1999, and amended
and restated on July 9, 1999.
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 December 13, 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 Secretary of the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, NW., Washington, DC 20549-0609. Applicants, c/o Jorden Burt
Boros Cicchetti Berenson & Johnson, LLP, 1025 Thomas Jefferson Street,
NW., Suite 400 East, Washington, DC 20007-0805; Attention: Thomas C.
Mira, Esq.
FOR FURTHER INFORMATION CONTACT: Michael Pappas, Senior Counsel, or
Susan Olson, Branch Chief, Office of Insurance Products, Division of
Investment Management, at (202) 942-0670.
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, 450 Fifth Street NW.,
Washington, DC 20549-0102 (tel. (202) 942-8090).
Applicant's Representations
1. GWL&A is a stock life insurance company organized under the laws
of the State of Colorado. 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 ultimately controlled by Power Corporation of
Canada. GWL&A is principally engaged
[[Page 66220]]
in offering life insurance, annuity contracts, and accident and health
insurance and is admitted to do business in the District of Columbia,
Puerto Rico, Guam and in all states of the United States, except New
York.
2. The Separate Account has fourteen investment divisions each of
which invests exclusively in one of the corresponding portfolios of
Maxim Series Fund, Inc. (``Maxim Series Fund'' or ``Maxim'') an open-
end management investment company. The assets of the Separate Account
are kept separate from the other assets of GWL&A. The income, gains,
and losses of the Separate Account, whether or not realized, are
credited to or charged against the Separate Account without regard to
other income, gains, or losses of any other Separate Account or arising
out of any other business GWL&A may conduct.
3. The Separate Account is a unit investment trust (``UIT'') and
has filed a registration statement on Form N-4 (Registration Nos. 33-
83928 and 811-8762) for the purpose of registering the Separate Account
under the 1940 Act and the Contracts as securities under the Securities
Act of 1933, as amended (the ``1933 Act'').
4. Orchard is the principal underwriter and distributor of the
Contracts. Orchard is registered with the Commission under the
Securities Exchange Act of 1934, as amended, as a broker/dealer and is
a member of the National Association of Securities Dealers, Inc.
5. The Contracts are individual, flexible premium, variable annuity
contracts designed for Individual Retirement Annuity (``IRA'')
programs. The Contracts can be purchased only in connection with IRA
programs in one of three ways: with rollover proceeds from qualified
plans, such as 401(k) plans; with rollover proceeds from other eligible
rollover sources; or with earned income.
6. The Contracts have no front-end or contingent deferred sales
load. If the Contract is surrendered in part or whole within the first
twelve months, the Contracts have an administrative surrender fee.
There are no limits on the number of transfers that a Contract owner
can make and there are no transfer charges for transfers among the
investment divisions offered in the Contract.
7. The Contracts expressly reserve GWL&A's right, 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 portfolios for other in which its investment
divisions are invested or for a new underlying portfolio.
8. GWL&A, on its own behalf and on behalf of the Separate Account,
purposes to exercise its contractual right to eliminate the Foreign
Equity Portfolio (``Foreign Equity Portfolio'' or the ``Eliminated
Portfolio'') as a funding option under the Contracts. GWL&A proposes to
substitute shares of the Maxim INVESCO ADR Portfolio (``ADR Portfolio''
or the ``Substituted Portfolio'') for the Foreign Equity Portfolio. The
proposed transaction will be referred to as the ``Substitution.''
9. Maxim Series Fund, the underlying fund, is affiliated with GWL&A
and the Separate Account. No other underlying fund is used in
connection with the Contracts.
10. Applicants believe the Substitution will benefit the Contract
owners by eliminating a portfolio which, in the Applicants' view, has
had poor historical performance returns. The Applicants also believe
the Substitution will benefit Contract owners by replacing the
Eliminated Portfolio with a portfolio having comparable investment
objectives and policies and better historical performance returns, and
which the Applicants believe is more likely to provide Contract owners
with favorable investment performance in the future. The Substitution
will not result in a reduction of variable investment options available
under the Contracts. Fourteen options would remain in the Contracts.
11. GWL&A will schedule the Substitution to occur on the Automatic
Selection Date. Such date will be as soon as practicable following the
issuance of an order by the Commission granting the relief requested in
the Application. By way of sticker, the prospectus will disclose the
proposed Substitution for several months prior to the Automatic
Selection Date. After the Order is issued, a second notification will
be provided to all Contract owners who have amounts allocated to the
Eliminated Portfolio again advising them of the pending Substitution
and of their ability to transfer free of charge to the remaining
investment division(s) of their choice (or remain in the Eliminated
Portfolio until the automatic substitution on the Automatic Selection
Date).
12. The affected Contract owners will also receive a confirmation
of the Substitution transaction that will be mailed within five days of
the Automatic Selection Date. The confirmation will contain a remainder
that the Contract owner may effect transfers from the investment
division corresponding to the Substituted Portfolio, to any other
investment division without incurring any charges.
13. In an effort to provide continuity of investment choice to
Contract owners after the Substitution, GWL&A has determined to replace
the Eliminated Portfolio with an underlying portfolio that has
investment objectives and policies that are comparable with those of
the Eliminated Portfolio. After thoroughly comparing and contrasting
all other Maxim profolios with the Eliminated Portfolio, GWL&A
represents that it has determined the ADR Portfolio is the most
appropriate replacement for the Foreign Equity Portfolio within the
Maxim family of funds.
14. The investment objective of the Foreign Equity Portfolio is to
seek total return from long-term growth of capital and dividend income
by investing its assets primarily in equity securities of issuers
headquartered outside the United States. The ADR Portfolio's investment
objective is to seek a high total return through capital appreciation
and current income, while reducing risk through diversification. This
portfolio invests primarily in foreign securities that are issued in
the form of American Depository Receipts (``ADRs'') or foreign stocks
that are registered with the Commission and traded in the United
States. Therefore, after the Substitution, Contract owners who have
allocated value to an investment division which invests in the Foreign
Equity Portfolio will continue to have their value allocated to an
investment division which invests in an underlying portfolio that
invests primarily in foreign securities.
15. Applicants represent that, for the most recent fiscal year of
the Eliminated and Substituted Portfolios, the comparative total
expenses (after waivers and reimbursements) of the ADR Portfolio were
1.30%, which were the same as the 1.30% current total expenses (after
waivers and reimbursements) of the Foreign Equity Portfolio. The total
expenses before waiver or reimbursement for the 1998 fiscal year were
1.32% for the ADR Portfolio and 1.31% for the Foreign Equity Portfolio.
Applicants state that the ADR Portfolio's expenses are capped at 1.30%
while the Foreign Equity Portfolio expenses are capped at 1.50%. The
average annual total returns for the one year and since inception
periods ending December 31, 1998 for the ADR Portfolio were 10.64% and
13.82%, respectively, compared to the Foreign Equity Portfolio, which
had returns of 7.67% and 2.13% for the same periods. Both Portfolios
commenced operations on November 1, 1994. Based on the foregoing
historical performance data,
[[Page 66221]]
Applicants submit that the ADR Portfolio has substantially outperformed
the Foreign Equity Portfolio. Moreover, the total expenses of the
Substituted Portfolio will not rise above the current level of 1.30% as
can the Foreign Equity Portfolio's expenses. Should Contract owners
with current allocations in the Eliminated Portfolio determine that
another investment is more appropriate, they will be able to transfer
their Contract value to any of the remaining investment divisions
available under the Contract without incurring any charges.
16. The Substitution (1) Will be effected by redeeming shares of
the Eliminated Portfolio on the Automatic Selection Date at net asset
value and using the proceeds to purchase shares of the Substituted
Portfolio as net asset value on the same date: (2) Contract owners will
not incur any fees or charges as a result of the transfer of account
values from the Eliminated Portfolio; (3) All Contract values will
remain unchanged and fully invested; (4) The Substitution will not
increase Contract or Separate Account fees and charges after the
Substitution; (5) Contract owners' rights and GWL&A's obligations under
the Contracts will not be altered in any way; and (6) All expenses
incurred in connection with the Substitution, including legal,
according and other expenses, will not be borne by Contract owners as
they will be paid by either GWL&A or GW Capital Management, LLC. The
Substitution will be effected as net asset value in conformity with
section 22 of the 1940 Act and Rule 22c-1 thereunder. In addition, as
of the date of filing this amended and restated Application, Applicants
represent that to the best of their knowledge, the Substitution will
not result in any adverse federal income tax consequences to Contract
owners.
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; and 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.
2. Applicants request an order pursuant to Section 26(b) of the
1940 Act approving the substitution of securities.
3. Applicants represent that the purposes, terms and conditions of
the Substitution are consistent with the protections for which Section
26(b) was designed and will not result in any of the harms which
Section 26(b) was designed to prevent.
4. Any Contract owner who does not want his or her assets allocated
to the Substituted Portfolio would be able to transfer assets to any
one of the other investment divisions available under his/her Contract
without charge. Such transfers could be made prior to or after the
Automatic Selection Date.
Conclusion
In light of the foregoing facts and representations, Applicants
believe that the request to allow the Substitution meets the applicable
standards of an order under Section 26(b) of the 2940 Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-30584 Filed 11-23-99; 8:45 am]
BILLING CODE 8010-01-M