[Federal Register Volume 64, Number 206 (Tuesday, October 26, 1999)]
[Notices]
[Pages 57671-57673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27885]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-24091; File No. 812-11694]
Sentry Life Insurance Company, et al.
October 20, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for approval pursuant to Section 26(b)
the Investment Company Act of 1940 (the ``1940 Act'') approving the
proposed substitutions of securities.
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SUMMARY OF APPLICATION: Applicants seek an order pursuant to Section
26(b) of the 1940 Act approving the substitution of securities issued
by certain registered management investment companies for securities
issued by certain other registered management investment companies
currently held by separate accounts of Sentry Life Insurance Company
and Sentry Life Insurance Company of New York to support variable
annuity contracts and variable life insurance policies.
APPLICANTS: Sentry Life Insurance Company (``Sentry Life''), Sentry
Life Insurance Company of New York (``Sentry Life of New York'' and,
together with Sentry Life, the ``Companies''), and their respective
separate accounts, Sentry Variable Account II (``Variable Account
II''), Sentry Variable Life Account I (``Variable Life Account I''),
and Sentry Variable Account I (``Variable Account I'' and together with
Variable Account II and Variable Life Account I, the ``Accounts'').
FILING DATES: The application was filed on July 9, 1999, and amended
and restated on September 29, 1999. Applicants represent that they will
file an amended and restated application during the notice period to
conform to the representations set forth herein.
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 on the application by writing to the
Secretary of the Commission and serving Applicants with a copy of the
request, in person or by mail. Hearing requests must be received by the
Commission by 5:30 p.m. on November 15, 1999, and must be accompanied
by proof of service on the Applicants in the form of an affidavit or,
for lawyers, a certificate of service. Hearing requests should state
the nature of the requester'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, Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549. Applicants, c/o Blazzard, Grodd & Hasenauer, P.C., 943 Post
Road, East, Westport, CT 06880, Attention: Lynn K. Stone, Esq.
FOR FURTHER INFORMATION CONTACT: Lorna MacLeod, Attorney, or Kevin
Kirchoff, Branch Chief, Office of Insurance Products, Division of
Investment Management, at (202) 942-0670.
SUPPLEMENTARY INFORMATION: 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, N.W., Washington,
D.C. 20549 (tel. (202) 942-8090).
Applicants' Representations
1. Sentry Life of New York, a New York corporation, is a wholly-
owned subsidiary of Sentry Life, a Wisconsin corporation. Sentry Life
is a wholly-owned subsidiary of Sentry Insurance a Mutual Company, also
a Wisconsin corporation.
2. Sentry Variable Account I is a separate account of Sentry Life
of New York. Sentry Variable Account II and Sentry Variable Life
Account I are separate accounts of Sentry Life. Each of the Accounts is
registered under the 1940 Act as a unit investment trust. The assets of
each Account support variable annuity contracts and, with respect to
Variable Life Account I, variable life insurance policies (the
``Contracts''). Interests in each of the Accounts offered through the
Contracts are registered under the Securities Act of 1933 on Form N-4
or Form S-6.
3. The variable annuity contracts permit Contract owners to make
four transfers in any year before the income date and one transfer in
any year after the income date. The variable life contracts permit
owners to make four transfers in any Contract year. All the Contracts
reserve the right to effect substitutions in compliance with applicable
law or undertake to provide notice to the extent required by the 1940
Act.
4. Each of the Accounts is divided into four subaccounts. Each
subaccount invests exclusively in shares representing an interest in a
separate corresponding series (each, a ``Portfolio'') of Neuberger
Berman Advisers Management Trust, a series-type investment company
which is registered under the 1940 Act as a diversified open-end
management investment company.
5. Neuberger Berman Advisers Management Trust is currently
comprised of nine Portfolios, the following four of which are involved
in the proposed substitution: AMT Liquid Asset Portfolio; AMT Limited
Maturity Bond Portfolio; AMT Balanced Portfolio; and AMT Growth
Portfolio. Neuberger Berman Management is the investment manager,
administrator and distributor for all four of the Portfolios. It
engages Neuberger Berman, LLC as sub-adviser for each of the four
Portfolios and to provide management and related services.
[[Page 57672]]
6. Applicants propose that the Companies carry out the following
substitution of shares held by corresponding subaccounts of the
Accounts: (a) shares of the Prime Reserve Portfolio of T. Rowe Price
Fixed Income Series, Inc. for shares of the Liquid Asset Portfolio of
Neuberger Berman Advisers Management Trust; (b) shares of the Limited-
Term Bond Portfolio of T. Rowe Price Fixed Income Series, Inc. for
shares of the Limited Maturity Bond Portfolio of Neuberger Berman
Advisers Management Trust; (c) shares of the Personal Strategy Balanced
Portfolio of T. Rowe Price Equity Series, Inc. for shares of the
Balanced Portfolio of Neuberger Berman Advisers Management Trust; and
(d) shares of the Aggressive Growth Portfolio of Janus Aspen Series for
shares of the Growth Portfolio of Neuberger Berman Advisers Management
Trust.
7. T. Rowe Price Fixed Income Series, T. Rowe Price Equity Series
and Janus Aspen Series are each series type investment companies that
are registered under the 1940 Act as open-end management investment
companies. T. Rowe Price Fixed Income Series consists of two series,
both of which are involved in the substitution. Each series is managed
by an Investment Advisory Committee that develops and executes its
investment program. T. Rowe Price Personal Strategy Balanced Portfolio
is one of four series of the T. Rowe Price Equity Series, which are
managed by two committees. The Asset Allocation Committee determines
the asset allocation among stock, bonds and money market securities.
The Investment Advisory Committee has day-to-day responsibility for
management of investments. The Aggressive Growth Portfolio is one of
eleven series of the Janus Aspen Series. The portfolio is advised by
the Janus Capital Corporation.
8. The substitute portfolios have investment objectives that are
similar to or comparable to those of the replaced portfolios. The Prime
Reserve Portfolio, like the AMT Liquid Asset Portfolio, is a money
market fund, which invests in high quality money market securities and
maintains a stable $1.00 per share price. The Limited Term Bond
Portfolio, like the AMT Limited Maturity Bond Portfolio, invests mainly
in investment grade bonds and other securities from US Government and
corporate issuers. The Personal Strategy Balanced Portfolio, like the
AMT Balanced Portfolio, invests approximately 60 percent of its assets
in growth stocks and the balance in senor fixed income securities. The
Janus Aspen Series Aggressive Growth Portfolio, like the AMT Growth
Portfolio, invests principally in the stocks of medium-sized companies
that are selected for their growth potential.
9. The following table shows that the fees and expenses of the
substituted funds are consistently lower than the replaced funds:
Neuberger Berman T. Rowe Price Fixed Income Series,
Inc.
AMT Liquid Asset Portfolio Prime Reserve Portfolio
Management Fee: .65% Management Fee: .55%
Expenses: .49% Expenses: *
AMT Limited Maturity Bond Portfolio Limited-Term Bond Portfolio
Management Fee: .65% Management Fee: .70%
Expenses: .11% Expenses: *
T. Rowe Price Equity Series, Inc.
AMT Balanced Portfolio Personal Strategy Balanced
Portfolio
Management Fee: .85% Management Fee: .90%
Expenses: .18% Expenses: *
Janus Aspen Series
AMT Growth Portfolio Aggressive Growth Portfolio
Management Fee: .83% Management Fee: .72%
Expenses: .09% Expenses: .03%
* T. Rowe Price structures its management fee to include all expenses
related to the portfolio.
10. The following table shows that, with one exception, the average
annual returns of the substituted funds are higher than the replaced
funds:
Neuberger Berman T. Rowe Price Fixed Income, Inc.
AMT Liquid Assets Prime Reserve
1996 3.3% 1996 N/A
1997 3.5% 1997 5.33%
1998 3.4% 1998 5.29%
AMT Limited Maturity Bond Limited-Term Bond
1996 3.1% 1996 3.26%
1997 5.5% 1997 6.74%
1998 3.1% 1998 7.28%
T. Rowe Price Equity Series, Inc.
AMT Balanced Personal Strategy Balanced
1996 5.6% 1996 14.20%
1997 18.0% 1997 18.04%
1998 10.9% 1998 14.32%
Janus Aspen Fund
AMT Growth Aggressive Growth
1996 7.8% 1996 8.0%
1997 27.5% 1997 12.7%
1998 14.2% 1998 34.3%
11. The proposed substitutions will take place at relative net
asset value with no change in the amount of any Contract owner's
Contract value or in the dollar value of his or her investment in the
Accounts. The substitutions will be effected by redeeming shares of the
replaced portfolios on the date of substitution at net asset value and
using the proceeds to purchase shares of the substitute portfolios at
net asset value on the same date. At all times all
[[Page 57673]]
Contract values will remain unchanged and fully invested. Contract
owners will not incur any fees or charges as a result of the proposed
substitutions nor will their rights under the Contracts be altered in
any way. All expenses incurred in connection with the proposed
substitutions, including legal, brokerage, accounting and other fees
and expenses, will be paid by the Companies. In addition, the proposed
substitutions will not impose any tax liability on Contract owners. The
proposed substitutions will not cause the Contract fees and charges
currently being paid by existing Contract owners to be greater after
the proposed substitutions than before the proposed substitutions.
12. By supplements to the prospectuses for the Contracts and
Accounts, all owners of Contracts have been notified of the Companies'
intention to take the necessary actions, including seeking the order
requested by the Application, to carry out the proposed substitutions.
The supplements inform Contract owners that following the substitution,
for a period of 30 days, the Life Companies will permit transfers from
any subaccounts to any other subaccount without any limitation or
charge being imposed and without the transfer counting against the
number of transfers permitted each Contract year.
13. Additionally, within 5 days after the proposed substitutions
are completed, all Contract owners will be sent a written notice
informing them that the substitutions were completed and reiterating
their right to make transfers to any other subaccount for a period of
30 days from the date of the notice without any limitation or charge
being imposed and without the transfer counting against the number of
transfers permitted each year. The Companies will include in such
mailing the supplements to the prospectuses of the Accounts which
describe the substitutions.
14. The Companies will provide Contract owners with copies of the
substitute portfolios' prospectuses prior to the substitution or with
the confirmation of the substitution.
Applicants' Legal Analysis
1. Applicants request an order pursuant to Section 26(b) of the
1940 Act approving the proposed substitutions. Section 26(b) provides,
in pertinent part, 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.'' Section 26(b)
also provides that the Commission will approve the substitution if the
evidence establishes that the substitution is consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the 1940 Act.
2. Applicants asset that the purposes, terms and conditions of the
proposed substitutions are consistent with the principles and purposes
of Section 26(b) and do not entail any of the abuses that the section
is designed to prevent. Applicants further assert that the proposed
substitutions will not result in the type of costly forced redemption
that Section 26(b) was intended to guard against.
3. Applicants maintain that each of the substitute portfolios is a
suitable and appropriate investment vehicle for Contract owners. Each
of the substitute portfolios has a similar or comparable investment
objective as the portfolio it is replacing.
4. The average annual returns of the substitute portfolios for the
past three years, with one exception, have exceeded the average annual
returns of the replaced portfolios. The investment management and
administrative fees and related expenses charged to the Accounts by the
substitute portfolios are less than those fees and expenses charged to
the Accounts by the replaced portfolios. Applicants, therefore, assert
that the substitute portfolios will provide Contract owners with more
favorable investment results than would be the case if the proposed
substitutions do not take place.
5. Applicants assert that the proposed substitutions meet the
standards that the Commission and its staff have applied to
substitutions that have been approved in the past in that: (a) the
investment objectives of the substitute portfolios are similar to or
comparable to those of the replaced portfolios; (b) the substitutions,
in all cases, will be effected at the net asset value of the respective
shares in conformity with Section 22(c) of the Act and Rule 22c-1
thereunder, without imposition of any transfer or similar charge; (c)
the Companies have undertaken to assume the expenses and transaction
costs, including among others, legal, brokerage and accounting fees and
any other expenses, relating to the substitutions; (d) the
substitutions will in no way alter the insurance benefits to Contract
owners or the contractual obligations of the Life Companies; (e) the
substitutions will in no way alter tax benefits to Contract owners; and
(f) Contract owners may choose to simply withdraw amounts credited to
them following the substitutions under the conditions that currently
exist without incurring any charges (other then applicable withdrawal
charges).
16. Applicants assert that the transactions are consistent with the
policies of the portfolios as recited in the current registration
statements and reports filed under the 1940 Act; and that the proposed
substitution is consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the 1940 Act.
Conclusion
Applicants assert that, for the reasons summarized above, the
requested order approving the substitutions should be granted.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-27885 Filed 10-25-99; 8:45 am]
BILLING CODE 8010-01-M