[Federal Register Volume 66, Number 209 (Monday, October 29, 2001)]
[Notices]
[Pages 54554-54557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27127]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-25221; File No. 812-12464]


Golden American Life Insurance Company, et al.

October 23, 2001.
Agency: The Securities and Exchange Commission (``SEC'' OR 
``Commission'').

Summary of the Application

    Applicants seek an order pursuant to Section 26(b) of the 
Investment Company Act of 1940 (``1940 Act''), approving substitution 
of shares of one registered management investment company with shares 
of another registered management investment company or transfer in-kind 
of securities held by one registered management investment company. 
Applicants also seen an order, pursuant to Section 17(b) of the 1940 
Act, granting exemptions from Section 17(a) to permit Applicants to 
carry out the above-reference substitution by means of in-kind 
redemption and purchase.

Applicants: Golden American Life Insurance Company (``Golden 
American''), Golden American Life Insurance Company Separate Account B 
(``Golden Separate Account B''), Equitable Life Insurance Company of 
Iowa (``Equitable''), Equitable Life Insurance Company of Iowa Separate 
Account A (``Equitable Separate Account A''), United Life and Annuity 
Insurance Company (``United''), United Life and Annuity Insurance 
Company Account One (``United Separate Account One''), and The GCG 
Trust (the ``GCG Trust'') (collectively, the ``Applicants'').

Filing Date: The application (``Application'') was filed originally on 
March 1, 2001. It was subsequently amended and restated on September 
26, 2001.

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 November 19, 2001, 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: For the Commission: Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. For 
Applicants: Marilyn Talman, Esquire, Golden American Life Insurance 
Company, 1475 Dunwoody Drive, West Chester, Pennsylvania 19380.

FOR FURTHER INFORMATION CONTACT: Alison Toledo, Staff Attorney, or 
Lorna MacLeod, Branch Chief, Division of Investment Management, Office 
of Insurance Products, at 202-942-0670.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
Application. The complete Application

[[Page 54555]]

is available for a fee from the Public Reference Branch of the 
Commission.

Applicants' Representations

    1. Golden American, Equitable and United are stock life insurance 
companies organized under the insurance laws of Delaware, Iowa, and 
Texas, respectively. Each is authorized to write variable annuity 
contracts in at least 47 states and the District of Columbia. Golden 
American, Equitable and United (collectively, ``Applicant Insurance 
Companies'') are wholly owned subsidiaries of ING Groep N.V. (``ING''), 
a global financial services holding company.
    2. Golden Separate Account B, Equitable Separate Account A and 
United Separate Account One (collectively ``Applicant Separate 
Accounts'') are separate accounts for which one of the Applicant 
Insurance Companies serves as the sponsor and depositor. Golden 
American serves as sponsor and depositor of Golden Separate Account B; 
Equitable serves as sponsor and depositor of Equitable Separate Account 
A; United serves as the sponsor and depositor of United Separate 
Account One. Each Applicant Separate Account is a segregated asset 
account of its insurance company sponsor and each is registered under 
the 1940 Act as a unit investment trust. Each Applicant Separate 
Account is administered and accounted for as part of the general 
business of the Applicant Insurance Company of which it is a part. The 
income, gains or losses of such Separate Accounts are credited to or 
charged against the assets of each such separate account, without 
regard to income, gains or losses of such Applicant Insurance Company.
    3. Each Applicant Separate Account serves as a funding vehicle for 
certain variable annuity and/or variable life contracts 
(``collectively, Variable Contracts'') written by the respective 
Applicant Insurance Companies. Applicant Separate Accounts are divided 
into separate subaccounts, each dedicated to owning shares of one of 
the investment options available under the Variable Contracts. The 
Variable Contracts are structured such that holders of any of the 
Variable Contracts (``Contractholders'') may select one or more of the 
investment options available under the contract held by allocating 
premiums payable under such contract to that subaccount of the relevant 
Applicant Separate Account that corresponds to the investment option 
desired. Thereafter, Contractholders accumulate funds, on a tax-
deferred basis, based on the investment experience of the selected 
subaccount(s). Contractholders may, during the life of the contract, 
make unlimited transfers of accumulation values among the subaccounts 
available under the contract held, subject to any applicable 
administrative and/or transfer fees.
    4. The Credit Suisse Warburg Pincus Trust, formerly the Warburg 
Pincus Trust, is registered under the 1940 Act as an open-end, 
management, series investment company. As of the date of the 
Application, the Credit Suisse Warburg Pincus Trust offers shares of 
four separate investment series, which are included in separate 
prospectuses each dated May 1, 2001.
    5. The GCG Trust is registered under the 1940 Act as an open-end, 
management, series investment company. As of the date of the 
Application, the GCG Trust offers shares of 27 separate investment 
series, which are included in prospectuses dated May 1, 2001.
    6. Under the terms of an investment advisory agreement between the 
GCG Trust and Directed Services, Inc. (``DSI'') (``Trust Management 
Agreement''), DSI manages the business and affairs of each of the 
several series of the Trust, subject to the control of the Board of 
Trustees. Under the Trust Management Agreement, DSI is authorized to 
exercise full investment discretion and make all determinations with 
respect to the investment of the assets of the respective series, but 
may, at its own cost and expense, retain portfolio managers for the 
purpose of making investment decisions and research information 
available to the Trust. DSI has retained ING Pilgrim Investments, Inc. 
(``ING Pilgrim'') as portfolio manager of the International Equity 
Series of the GCG Trust.
    7. Pursuant to the Trust Management Agreement, DSI is responsible 
for providing the GCG Trust (or arranging and paying for the provision 
to the Trust) a comprehensive package of administrative and other 
services necessary for the ordinary operation of certain selected 
series of the GCG Trust, including the International Equity Series. 
This fee (``Unified Fee'') is calculated for the participating GCG 
Trust series based on a percentage of assets basis and in accordance 
with schedules that provide, for some of the GCG Trust series, 
including the International Equity Series, fee reductions at specified 
asset levels or ``break points.''
    8. Applicant Insurance Companies have approved a proposal whereby 
the International Equity subaccounts would substitute securities issued 
by the International Equity Series of the GCG Trust for securities 
issued by the International Equity Portfolio of the Credit Suisse 
Warburg Pincus Trust, and the GCG Trust Board of Trustees has approved 
the transfer in-kind of portfolio securities from the International 
Equity Portfolio of the Credit Suisse Warburg Pincus Trust to the 
International Equity Series of the GCG Trust. Redemptions in kind will 
be handled in a manner consistent with the investment objectives, 
policies and diversification requirements of the International Equity 
Series of the GCG Trust. Consistent with Rule 17a-7(d) under the 1940 
Act, no brokerage commissions, fees or other remuneration will be paid 
by the International Equity Portfolio of the Credit Suisse Warburg 
Pincus Trust, the International Equity Series of the GCG Trust, or 
Affected Contractholders in connection with the in-kind transactions.
    9. Applicants state that although not identical, the investment 
objective and policies of the International Equity Portfolio of the 
Credit Suisse Warburg Pincus Trust best fit with those of the 
International Equity Series of the GCG Trust, as opposed to any other 
GCG Trust series, to assure that the essential objectives of Affected 
Contractholders can continue to be met. The International Equity 
Portfolio of the Credit Suisse Warburg Pincus Trust has a primary 
investment objective of long-term capital appreciation and the 
International Equity Series of the GCG Trust has a virtually identical 
primary investment objective of long-term growth of capital. Both 
portfolios are managed as diversified portfolios as defined under the 
1940 Act. The International Equity Portfolio of the Credit Suisse 
Warburg Pincus Trust and the International Equity Series of the GCG 
Trust have substantially similar investment strategies of at least 65% 
of net assets in equity securities of issuers located in countries 
outside of the United States. Both may be invested significantly in 
securities of emerging markets. Applicant Insurance Companies have, 
therefore, concluded that the overall investment objectives of the 
International Equity Portfolio of the Credit Suisse Warburg Pincus 
Trust and the International Equity Series of the GCG Trust are 
sufficiently similar such that the International Equity Series of the 
GCG Trust is appropriate for substitution.
    10. Applicants state that the Substitution is part of an overall 
business plan of Applicants to make its products, including the 
Variable Contracts, more competitive and more efficient to administer 
and oversee.

[[Page 54556]]

Applicants represent that the Substitution is appropriate because it 
will allow the Applicants to eliminate a portfolio with poor 
performance and place Contractholders in a position to participate in a 
portfolio with much better performance and lower overall expenses.
    11. Applicants state that, as of the effective date of the 
Substitution (``Effective Date''), shares of the International Equity 
Portfolio of the Credit Suisse Warburg Pincus Trust held by the 
applicable subaccounts will be redeemed for cash or in-kind by 
Applicant Insurance Companies as follows: Applicant Insurance Companies 
on behalf of the international Equity Division of Applicant Separate 
Accounts will simultaneously place a redemption request with the 
International Equity Portfolio of the Credit Suisse Warburg Pincus 
Trust and a purchase order with the International Equity Series of the 
GCG Trust so that the purchase will be for the exact amount of the 
redemption proceeds. As a result, monies attributable to 
Contractholders currently invested in the International Equity 
Portfolio of the Credit Suisse Warburg Pincus Trust will be fully 
invested. Applicant Insurance Companies state that the Applicant 
Insurance Companies or their affiliates will pay all expenses and 
transactional costs related to the Substation, including brokerage fees 
which may arise from sales of portfolio securities by the International 
Equity Portfolio of the Credit Suisse Warburg Pincus Trust and 
purchases of new portfolio investments made by the International Equity 
Series of the GCG Trust with the proceeds from the Substitution which 
brokerage fees would normally be borne by the Fund and/or the Series, 
any legal and/or accounting fees. Affected Contractholders will not 
incur any additional fees or charges as a result of the Substitution, 
nor will their rights or the obligations under any of the Variable 
Contracts diminish in any way. Applicants further state that all 
redemption of shares of the International Equity Portfolio of the 
Credit Suisse Warburg Pincus Trust and purchases of shares of the 
International Equity Series of the GCG Trust will be effected at net 
asset value and in accordance with Rule 22c-1 under the 1940 Act.
    12. Applicants state that shareholders of the affected Variable 
Contracts were mailed a prospectus supplement notifying them of the 
Applicants' filing of the Application. Prior to the Effective Date, 
each Affected Contractholder will be furnished with a second supplement 
setting forth the Effective Date and advising Affected Contractholders 
of their right to reconsider the Substitution and, if they so chose, at 
any time prior to the Effective Date, they may reallocate or withdraw 
amounts under their affected Variable Contract or otherwise terminate 
their interest thereof in accordance with the terms and conditions of 
their Variable Contract. All current Contractholders have received a 
prospectus containing a description of the International Equity Series 
of the GCG Trust and upon request another copy will be forwarded any 
Contractholder who requests one. Within five days after the Effective 
Date, Affected Contractholders will receive a notice (``Substitution 
Notice'') stating that shares of the International Equity Portfolio of 
the Credit Suisse Warburg Pincus Trust have been redeemed and that the 
shares of the International Equity Series of the GCG Trust have been 
substituted. The Substitution Notice will include a written 
confirmation showing the before and after accumulation values (which 
will not have changed as a result of the substitution) and detailing 
the transactions effected on behalf of the Affected Contractholder.

Terms of the Substitution

    1. The International Equity Series of the GCG Trust has objectives 
and policies sufficiently similar to the objectives and policies of the 
International Equity Portfolio of the Credit Suisse Warburg Pincus 
Trust so that the objective of the Affected Contractholders can 
continue to be met.
    2. The expense ratio of the International Equity Series of the GCG 
Trust will, immediately following the Effective Date and for a period 
of at least two years following the Effective Date, not exceed 1.28% of 
the average daily assets of the GCG Fund, which is 0.02% below the 2000 
expense ratio of the Warburg Fund.
    3. Affected Contractholders may reallocate, without incurring a 
reallocation charge or adding to their number of reallocations, or 
withdraw amounts under any affected variable Contract held or otherwise 
terminate their interest thereof at any time prior to the Effective 
Date, or within 30 days after the Effective Date, in accordance with 
the terms and conditions of such Variable Contract.
    4. The Substitution will be effected at the net asset value of the 
respective shares in conformity with section 22(c) of the 1940 Act and 
Rule 22c-1 thereunder, without the imposition of any transfer or 
similar charge by Applicants.
    5. The Substitution will take place at respective net asset value 
without change in the amount or value of any Variable Contract held by 
Affected Contractholders. Affected Contractholders will not incur any 
fees or charges as a result of the Substitution, nor will their rights 
or the obligations of Applicant Insurance Companies under such Variable 
Contracts be altered in any way. In addition, the Applicant Insurance 
Companies will not increase the Contract fees and charges currently 
being assessed by the Variable Contracts for a period of at least two 
years following the Substitutions.
    6. The Substitution will be effected so that investment of 
securities will be consistent with the investment objectives, policies 
and diversification requirements of the International Equity Series of 
the GCG Trust. The International Equity Series of the GCG Trust will 
not be responsible for any brokerage commissions and fees for purchase 
of investments for the portfolio, except for those fees and commissions 
from purchase or sales of investment securities not directly related to 
the Substitution. No brokerage commissions, fees or other remuneration 
will be paid by the International Equity Series of the GCG Trust or the 
International Equity Portfolio of the Credit Suisse Warburg Pincus 
Trust or Affected Contractholders in connection with the Substitution.
    7. Neither the Substitution nor the subsequent transactions will 
alter in any way the annuity, life or tax benefits afforded under the 
Variable Contracts held by any Affected Contractholder.
    8. Applicant Insurance Companies will send to its Affected 
Contractholders within five (5) business days of the Substitution a 
copy of the Substitution Notice which will include a written 
confirmation showing the before and after accumulation values (which 
will not have changed as a result of the Substitution) and detailing 
the transactions effected on behalf of the respective Affected 
Contractholder with regard to the Substitution.

Applicants' Legal Analysis

    1. Section 26(b) of the 1940 Act prohibits any depositor or trustee 
of a unit investment trust that invests exclusively in the securities 
of a single issuer from substituting the securities of another issuer 
without the approval of the Commission. Section 26(b) provides that 
such approval shall be granted by order of the Commission, if the 
evidence establishes that the substitution is consistent with the 
protection of

[[Page 54557]]

investors and the purposes of the 1940 Act.
    2. Applicants request an order pursuant to section 26(b) of the 
1940 Act approving the Substitution and related transactions. 
Applicants assert that the purposes, terms, and conditions of the 
proposed Substitution and related transactions are consistent with the 
protection of investors and the purposes fairly intended by the 1940 
Act. Applicants further assert that the Substitution will not result in 
the type of costly forced redemption against which section 26(b) was 
intended to guard.
    3. Section 17(a)(1) of the 1940 Act prohibits any affiliated person 
of a registered investment company, or an affiliated person of an 
affiliated person, from selling any security or other property to such 
registered investment company. Section 17(a)(2) of the 1940 Act 
prohibits any of the persons described above, from purchasing any 
security or other property from such registered investment company.
    4. If Substitution is effected through an in-kind transfer of 
securities from the International Equity Portfolio of the Credit Suisse 
Warburg Pincus Trust to the International Equity Series of the GCG 
Trust through transfers to and from the Separate Accounts, the 
International Equity Portfolio of the Credit Suisse Warburg Pincus 
Trust could be said to be selling portfolio securities to an affiliate 
and the International Equity Series of the GCG Trust could be said to 
be purchasing portfolio securities from an affiliate.
    5. Applicants request an order pursuant to section 17(b) of the 
1940 Act exempting said redemptions and purchases or the in-kind 
transfer of portfolio securities from the provision of section 17(a) of 
that Act. Section 17(b) of the 1940 Act provides that the Commission 
may grant an order exempting a proposed transaction from section 17(a) 
if evidence establishes that; (i) the terms of the proposed 
transaction, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned; (ii) the proposed transaction is consistent with the 
investment policy of each registered investment company concerned; and 
(iii) the proposed transaction is consistent with the general purposes 
of the 1940 Act.
    6. Applicants represent that the terms of the redemptions and 
purchases or the in-kind transfer are reasonable and fair and do not 
involve overreaching on the part of any person concerned and that the 
interest of Contractholders will not be diluted. The redemptions and 
purchases or the in-kind transfer will be done at values consistent 
with the policies of both the International Equity Portfolio of the 
Credit Suisse Warburg Pincus Trust and the International Equity Series 
of the GCG Trust. Applicant Insurance Companies and DSI will review all 
asset transfers to assure that the assets meet the objectives of the 
International Equity Series of the GCG Trust and that they are valued 
under the appropriate valuation procedures of the Series. The 
Applicants represent that the transactions are consistent with Rule 
17a-7(d) under the 1940 Act, no brokerage commissions, fees or other 
remuneration will be paid by the International Equity Portfolio of the 
Credit Suisse Warburg Pincus Trust or the International Equity Series 
of the GCG Trust or Affected Contractholders in connection with the 
transactions, and that the 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 section 17(b) of 
the 1940 Act.
    7. Applicants represent that the purchase and sale transactions 
described in the Application will be effected based on the net asset 
value of the investment company shares held in the subaccounts and the 
value of the units of the subaccount involved. Therefore, there will be 
no change in value to any Contractholder.

Applicants' Conditions

    The Substitution and related transactions described in the 
Application will not be completed unless all of the following 
conditions are met.
    1. The Commission shall have issued an order (i) approving the 
Substitution under section 26(b) of the 1940 Act; and (ii) exempting 
the in-kind redemptions from the provisions of section 17(a) of the 
1940 Act as necessary to carry out the transactions described in this 
Application.
    2. Each Affected Contractholder will have been sent a copy of (i) a 
supplement informing shareholders of the Application; (ii) a prospectus 
for the International Equity Series of the GCG Trust; and (iii) a 
second supplement setting forth the Effective Date and advising 
Affected Contractholders of their right to reconsider the Substitution 
and, if they so choose, any time prior to the Effective Date, they may 
reallocate or withdraw amounts under their affected Variable Contract 
or otherwise terminate their interest thereof in accordance with the 
terms and conditions of their variable Contract.
    3. Applicant Insurance Companies shall have satisfied themselves, 
that (i) the Variable Contracts allow the substitution of investment in 
the manner contemplated by the Substitution and related transactions 
described herein; (ii) the transactions can be consummated as described 
in this Application under applicable insurance laws; and (iii) that any 
regulatory requirements in each jurisdiction where the Variable 
Contracts are qualified for sale, have been complied with to the extent 
necessary to complete the transactions.
    Within five business days of the Effective Date of the 
Substitutions, the Applicants will forward to Affected Contractholders 
a copy of the Substitution Notice.

Conclusion

    Applicants assert that, for the reasons summarized above, the 
requested order approving the Substitution and related transactions 
involving redemptions should be granted.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-27127 Filed 10-26-01; 8:45 am]
BILLING CODE 8010-01-M