[Federal Register Volume 62, Number 171 (Thursday, September 4, 1997)]
[Notices]
[Pages 46784-46785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23390]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-22802; File No. 812-10566]
Great-West Life & Annuity Insurance Company, et al.
August 27, 1997.
AGENCY: The Securities and Exchange Commission (``Commission'')
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (``1940 Act'').
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APPLICANTS: Great-West Life & Annuity Insurance Company (``GWL&A''),
Retirement Plan Series Account (the ``Separate Account''), Maxim Series
Fund, Inc. (``Maxim'') and One-Orchard Equities, Inc. (``Orchard'').
RELEVANT 1940 ACT SECTIONS: Order requested pursuant to sections 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 section 17(b) of the 1940 Act exempting related
transactions from section 17(a) of the 1940 Act.
FILING DATE: The application was filed on March 12, 1997, and amended
on April 18, 1997, July 29, 1997 and August 20, 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 September 17, 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, NW., Washington, DC 20549. Applicants, c/o Josephine Cicchetti,
Esq., Jorden Burt Berenson & Johnson, LLP, 1025 Thomas Jefferson
Street, NW., Suite 400 East, Washington, DC 20007-0805.
FOR FURTHER INFORMATION CONTACT: Ethan D. Corey, Senior Counsel or
Kevin M. Kirchoff, 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.
Applicants Representations
1. GWL&A, a Colorado stock life insurance company, does business in
the District of Columbia, Puerto Rico, and in 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 Colorado
law, is registered with the Commission as a unit investment trust. The
Separate Account acts as a funding vehicle for certain individual
flexible premium deferred contracts (the ``Contracts''). The Separate
Account currently has fifteen investment divisions, each of which
invest exclusively in one of the corresponding portfolios of Maxim, an
open-end management investment company.
4. Orchard, 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 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 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 exercise its contractual right to substitute shares of the
Maxim Series Fund Blue Chip Portfolio (``Substituted Portfolio'') for
respective shares of the Maximum Series Fund Total Return Portfolio
(``Eliminated Portfolio'') (the ``Substitution''). Applicants believe
the Substitution will benefit the Contract owners by eliminating a
portfolio with below average historical returns and consolidating
Contract owners investments in the Substituted Portfolio, which has
investment objectives similar to the Eliminated Portfolio.
7. The Substituted Portfolio has been in existence since May 1,
1997, and does not have a performance record. However, the Substituted
Portfolio has the same investment objective and the same investment
strategy as the Founders Blue Chip Portfolio, which has consistently
provided better total returns than the Eliminated Portfolio. In
addition, the Substituted Portfolio is sub-advised by the same
portfolio manager that advises the Founders Blue Chip Portfolio.
8. Contract owners will be advised that they can transfer their
shares in the Eliminated Portfolio to the remaining portfolios of Maxim
or leave their shares in the Eliminated Portfolios until the date of
the Substitution. As of the date of the Substitution, all Contract
values allocated to the Eliminated Portfolio will be automatically
reallocated to the Substituted Portfolio. Maxim intends to cease
offering shares of the Eliminated Portfolio after the date of the
Substitution. Contract owners can always exercise their own judgment as
to the most appropriate alternative investment and transfer their
Contract values from the Substituted Portfolio to any one of the
remaining thirteen investment divisions. No sales load deductions or
transfer charges will be assessed in connection with any transfers
among the portfolios because of the Substitution or otherwise.
9. Applicants represent that the total expenses of the Substituted
Portfolio will be 1.15% while the total expenses of the Eliminated
Portfolio are 0.60%. Should Contract owners with current
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allocations in the Eliminated Portfolio determine that another
investment is more appropriate due to the change in portfolio expenses,
such Contract owners can transfer their Contract value to any of the
remaining thirteen investment divisions.
Applicants Legal Analysis And Conditions
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. 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 or
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 a portfolio with below average historical
returns which, due to its small size, is difficult to manage in
compliance with applicable diversification requirements. Applicants
represent that the Eliminated Portfolio, when compared to funds with
similar objectives, has been performing below average and Maxim Series
Fund, Inc. plans to cease offering the Eliminated Portfolio. Its one,
five and since inception returns of 19.77%, 12.56%, and 10.15%
respectively, have been below average compared to similar funds. GWL&A
proposes to provide Contract owners with an investment in the
Substituted Portfolio which has similar investment objectives to the
Eliminated Portfolio. The Substitution will effectively remove a poorly
performing portfolio from the Separate Account while the similarity in
investment objectives provides a means for Contract owners to continue
their current investment goals and risk expectations.
3. Applicants represent that the Substitution will be effected at
net asset value in conformity with sections 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 Portfolios, 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. Either 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 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 as described above from purchasing any security or
other property from such registered investment company.
6. 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.
7. Applicants request an order pursuant to section 17(b) of the
1940 Act exempting the Related Transactions from the provisions of
sections 17(a) of the 1940 Act.
8. 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. All
in-kind redemptions will be conducted in a manner conforming with the
conditions of Rule 17a-7 under the 1940 Act.
9. Applicants represent that the Substitution and 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 section 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. 97-23390 Filed 9-3-97; 8:45 am]
BILLING CODE 8010-01-M