[Federal Register Volume 63, Number 236 (Wednesday, December 9, 1998)]
[Notices]
[Pages 67954-67956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32597]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23584; File No. 812-11228]
Western-Southern Life Assurance Company; et al.; Notice of
Application
December 2, 1998.
AGENCY: The Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order pursuant to Section 26(b) of
the Investment Company Act of 1940 (the ``1940 Act'') approving certain
substitutions of securities, and pursuant to Section 17(b) of the 1940
Act exempting related transactions from Section 17(a) of the 1940 Act.
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SUMMARY OF APPLICATION: Applicants request an order to permit certain
registered unit investment trusts to substitute shares of certain
registered open-end investment companies for shares of certain
registered investment companies currently held by those unit investment
trusts, and to permit certain in-kind redemptions of portfolio
securities in connection with the substitutions.
APPLICANTS: For purposes of the order requested pursuant to Section
26(b), Western-Southern Life Assurance Company, (``WSLAC''), Western-
Southern Life Assurance Company Separate Account 1 (``Separate Account
1''), and Western-Southern Life Assurance Company Separate Account 2
(``Separate Account 2'') (collectively, the ``Section 26(b)
Applicants''). For purposes of the order pursuant to Section 17(b), the
Section 26(b) applicants, the Western and Southern Life Insurance
Company (``WSLIC''), and The Western and Southern Life Insurance
Company Separate Account A (``Separate Account A'') (collectively, the
``Section 17(b) Applicants'').
FILING DATE: The application was filed on July 20, 1998, and amended
and restated on October 2, 1998.
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 28, 1998, 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 may request notification of a hearing 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 Donald J.
Wuebbling, Esq., Western-Southern Life Assurance Company, The Western
and Southern Life Insurance Company, 400 Broadway, Cincinnati, Ohio
45202. Copies to Mark H. Longenecker, Esq. and Karen M. McLaughlin,
Esq., Frost & Jacobs LLP, 2500 PNC Center, 201 East Fifth Street,
Cincinnati, Ohio 45202.
FOR FURTHER INFORMATION CONTACT: Ethan D. Corey, Senior Counsel, at
(202) 942-0675, or Kevin M. Kirchoff, Branch Chief, at (202) 942-0672,
Office of Insurance Products, Division of Investment Management.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application; the complete application may be obtained for a fee from
the Public Reference Branch of the Commission, 450 5th Street, N.W.,
Washington, D.C. 20549 (tel. (202) 942-8090).
Applicants Representations
1. WSLAC is an Ohio stock life insurance company. WSLAC is the
depositor and sponsor of Separate Account 1 and Separate Account 2,
separate investment accounts established under Ohio law (collectively,
the ``WSLAC Accounts'').
2. WSLAC is a wholly owned subsidiary of WSLIC, a mutual life
insurance company originally organized under Ohio law. WSLIC owns of
record the assets of Separate Account A, a separate investment account
established under Ohio law, which holds the assets of WSLIC's defined
benefit employee pension plan.
3. Each of the WSLAC Accounts is registered with the Commission as
a unit investment trust. The assets of the WSLAC Accounts support
certain individual and group flexible premium deferred variable annuity
contracts (collectively, the ``Contracts''). Each of the WSLAC Accounts
is divided into eight sub-accounts. Each sub-account invests
exclusively in shares representing an interest in a separate
corresponding portfolio (each, a ``Portfolio'') of one of two
registered open-end diversified management investment companies, Select
Advisors Portfolios (``SA Trust'') and Select Advisors Variable
Insurance Trust (``VIT''). Two new VIT Portfolios, Touchstone Growth
and Income Portfolio and Touchstone Bond Portfolio (collectively, the
``New Touchstone Portfolios'') will be established in connection with
the transactions described below.
4. Separate Account A also invests in shares representing an
interest in certain Portfolios of the SA Trust. Separate Account A is
not registered as an investment company under the 1940 Act pursuant to
the exemption provided under Section 3(c)(11) of the 1940 Act.
5. SA Trust has proposed a reorganization in which the master-
feeder structure currently employed by SA Trust and its spoke funds,
Select Advisors Trust A (``Trust A'') and Select Advisors Trust C, will
be replaced with a multi-class structure within Trust A (the
``Reorganization'').
6. As a part of the Reorganization, the Board of Trustees of SA
Trust has notified Separate Account 1, Separate Account 2 and Separate
Account A (collectively, the ``Accounts'') that it intends to dissolve
the SA Trust Growth & Income II Portfolio and the SA Trust Bond II
Portfolio (collectively, the ``SAT II Portfolios''). Therefore, the SAT
II Portfolios will no longer be available as investment options for the
Accounts. Currently, the Accounts are the only interest holders in the
SAT II Portfolios.
7. All of the Contracts expressly reserve WSLAC's right, subject to
compliance with applicable law, to substitute shares of another open-
end management investment company for shares of an open-end management
investment company held by a sub-account.
8. In response to the Reorganization, WSLAC, on its own behalf and
on behalf of Separate Account 1 and Separate Account 2, and WSLIC, on
its own behalf and on behalf of Separate Account A, propose to
substitute: (a) shares of VIT Touchstone Growth & Income Portfolio for
shares of SA Trust Growth & Income II Portfolio currently held by
corresponding sub-accounts of Separate Account 1 and Account 2 and
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by Separate Account A; and (b) shares of VIT Touchstone Bond Portfolio
for shares of SA Trust Bond II Portfolio currently held by
corresponding sub-accounts of Separate Account 1 and Separate Account 2
and by Separate Account A (the ``Substitution''). Applicants assert
that the Substitution will benefit the Contract owners and Separate
Account because it is designed to provide the affected Contract owners
and Separate Account A with an opportunity to continue their investment
programs without interruption. In addition, the Substitution will
consolidate in VIT all of the investment options related to the sub-
accounts of the WSLAC Accounts, thereby permitting WSLAC to present
information to Contract owners in a simpler and more concise manner.
9. VIT Touchstone Growth & Income Portfolio will have a
substantially identical investment objective, investment policies and
investment risks as those of the SA Trust Growth & Income II Portfolio,
and will have the same investment adviser and employ the same
investment techniques. VIT Touchstone Bond Portfolio will have a
substantially identical investment objective, investment policies and
investment risks as those of the SA Trust Bond II Portfolio, and will
have the same investment adviser and employ the same investment
techniques.
10. The total expenses of the SA Trust Growth & Income II Portfolio
currently are 0.85%. Likewise, the total expenses of the VIT Touchstone
Growth & Income Portfolio are 0.85%. The total expenses of the SA Trust
Bond II Portfolio are 0.70%. Likewise, the total expenses of the VIT
Touchstone Bond Portfolio are 0.70%.
11. By supplements to the various prospectuses for the Contracts
(``Supplements''), all Contract owners will be notified of WSLAC's
intention to take the necessary actions, including seeking the order
requested by the application, to carry out the Substitution. The
Supplements will advise Contract owners that (a) from the date of the
Supplement until the date of Substitution, owners will be permitted to
make one transfer of all amounts under a Contract invested in the
Growth & Income sub-account or the Bond sub-account to another sub-
account (except the Bond sub-account or Growth & Income sub-account),
(b) such transfer will not count as the one transfer permitted in any
30-day period and (c) such transfer may be in an amount less than the
$250 normally required to effect a transfer. The Supplements will also
inform Contract owners that WSLAC will not exercise any rights reserved
under any Contract to impose additional restrictions on transfers until
at least 30 days after the Substitution.
12. WSLAC, on behalf of itself and on behalf of Separate Account 1
and Separate Account 2, states that, within 5 days after the
Substitution, it will send to any Contract owner who was affected by
the Substitution a written notice informing him or her that the
Substitution was carried out. The notice will repeat the information
contained in the Supplement about the special rules for transfers from
the Growth & Income sub-accounts and/or the Bond sub-accounts. The
notice will repeat that WSLAC will not exercise any rights reserved by
it under any of the Contracts to impose additional restrictions on
transfers until at least 30 days after the Substitution. The notice
will explain how to obtain the current VIT prospectus.
13. The Substitution will not result in any change to the Contract
fees and charges currently being paid by existing Contract owners.
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. The Section 26(b) 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 the protection for which Section 26(b) was
designed. The Section 26(b) Applicants believe the Substitution will
benefit Contract owners by: (a) minimizing the impact of the
Reorganization on Contract owners; and (b) consolidating in VIT all of
the investment options related to the sub-accounts of the WSLAC
Accounts, thereby permitting WSLAC to present information to Contract
owners in a simpler and more concise manner.
3. Contract owners who do not want their assets allocated to the
New Touchstone Portfolios would be able to transfer assets to any one
of the other sub-accounts available under their Contract without charge
prior to or after the Substitution.
4. WSLAC, on behalf of itself and on behalf of Separate Account 1
and Separate Account 2, represents that the Substitution and related
redemptions in kind and purchases by WSLAC will not change the dollar
value of any Contract owner's investment in either Separate Account 1
or Separate Account 2, the value of any Contract, the accumulation
value accredited to any Contract or the death benefit payable under any
Contract. Contract owners will not incur any fees, expenses or charges
as a result of the proposed transactions nor will their rights or
WSLAC's obligations under the Contracts be altered in any way. In
addition, Contract owners will not incur any adverse tax consequences
because of the proposed substitutions. Furthermore, the proposed
transactions will not result in any change to the Contract fees and
charges currently being paid by existing Contract owners.
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 such
affiliated persons 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. The Section 17(b) Applicants request an order pursuant to
Section 17(b) of the 1940 Act exempting them from the provisions of
Section 17(a) to the extent necessary to carry out the proposed
redemptions in kind from the SAT II Portfolios and subsequent purchases
of shares of the New Touchstone Portfolios (the ``In Kind
Transactions'').
8. The Section 17(b) Applicants assert that the proposed In Kind
Transactions, including the consideration to be paid
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and received, are reasonable and fair and do not involve overreaching
on the part of any person concerned. As part of the In Kind
Transactions, the purchase and sale of the shares of SA Trust and VIT
will be effected at the respective net asset value. The In Kind
Transactions will not have a material financial impact on the Contract
owners or Separate Account A. The Section 17(b) Applicants also state
that the transactions will conform substantially with the conditions
enumerated in Rule 17a-7. To the extent that the In Kind Transactions
do not comply fully with the provisions of paragraphs (a) and (b) of
Rule 17a-7, the Section 17(b) Applicants assert that the terms of the
proposed In Kind Transactions provide the same degree of protection to
the participating companies and their shareholders as if the In Kind
Transactions satisfied all of the conditions enumerated in Rule 17a-7.
The Section 17(b) Applicants can also assert that the proposed In Kind
Transactions by WSLAC and WSLIC do not involve overreaching on the part
of any person concerned. Furthermore, the Section 17(b) Applicants
represent that the proposed substitutions will be consistent with the
policies of: (a) VIT and the New Touchstone Portfolios; and (b) SA
Trust and the SAT II Portfolios, as is, or will be, stated in the
registration statement or reports filed under the 1940 Act by each.
9. The Section 17(b) Applicants assert that the In Kind
Transactions are consistent with the general purposes of the 1940 Act
and that the In Kind Transactions do not present any of the conditions
or abuses that the 1940 Act was designed to prevent.
Conclusion
Applicants assert that, for the reasons summarized above, the
requested order approving the Substitution and In Kind Transactions
should be granted.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 98-32597 Filed 12-8-98; 8:45 am]
BILLING CODE 8010-01-M
