[Federal Register Volume 61, Number 139 (Thursday, July 18, 1996)]
[Notices]
[Pages 37500-37502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18175]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. 22065; File No. 812-9918]
Notice of Application for an Order Under the Investment Company
Act of 1940 (``1940 Act'')
July 11, 1996.
APPLICANTS: Golden American Life Insurance Company (``Golden
American''), Separate Account B of Golden American Life Insurance
Company (``Separate Account B''), Separate Account D of Golden American
Life Insurance Company (``Separate Account D''), The GCG Trust
(``Trust''), and Directed Services, Inc. (``Services'').
RELEVANT 1940 ACT SECTIONS AND RULE: Order requested under Sections
6(c) and 17(b) of the 1940 Act, granting exemption from Section 17(a)
of the 1940 Act, and under Sections 6(c) and 17(d) of the 1940 Act, and
Rule 17d-1 thereunder, permitting certain transactions related to a
reorganization.
SUMMARY OF APPLICATION: Applicants seek an order to permit: (1) the net
assets of Separate Account D to be transferred to a newly created
division of Separate Account B (``Division''); and (2) the simultaneous
exchange of the net assets held by the Division to the Managed Global
Series (``Series''), a corresponding, newly created series of the
Trust, for shares of the Series, all as part of the reorganization of
Separate Account D into Separate Account B (``Reorganization'').
FILING DATE: The application was filed on December 29, 1995, and was
amended on June 25, 1996.
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 SEC's Secretary and
serving Applicants with a copy of the request, personally or by mail.
Hearing requests should be received by the SEC by 5:30 p.m. on August
5, 1996, 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 requestor'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
SEC.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. Applicants, Marilyn Talman, Esq.,
Golden American Life Insurance Company, 1001 Jefferson Street, Suite
400, Wilmington, Delaware 19801.
FOR FURTHER INFORMATION CONTACT: Pamela K. Ellis, Senior Counsel, or
Wendy Finck Friedlander, Deputy Chief, at (202) 942-0670, Office of
Insurance Products (Division of Investment Management).
SUPPLEMENTARY INFORMATION: Following is a summary of the application;
the complete application may be obtained for a fee from the SEC's
Public Reference Branch.
Applicants' Representations
1. Golden American, a Delaware corporation, is a stock life
insurance company. Golden American is authorized to do business in the
District of Columbia and all states except New York. Golden American is
a wholly owned indirect subsidiary of Bankers Trust Company.\1\
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\1\ Under the terms of a stock purchase agreement dated May 3,
1996 between Equitable of Iowa Companies (``Equitable of Iowa'') and
Whitewood Properties Corp. (``Whitewood''), Equitable of Iowa has
agreed, subject to certain conditions and regulatory approvals, that
it or an affiliate will acquire 100% of BT Variable, Inc., a wholly
owned subsidiary of Whitewood (``Acquisition''). BT variable, Inc.
is the corporate parent of Golden American and Services. It
currently is anticipated that the Acquisition will be completed on
August 30, 1996. Because the Acquisition may be deemed to terminate
Separate Account D's management and portfolio management agreements,
the Board of Governors of Separate Account D will soon distribute
proxy materials soliciting contract owner approval of a management
agreement and a portfolio management agreement to become effective
following the Acquisition.
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2. Golden American created Separate Account B and Separate Account
D (collectively, ``Accounts'') as ``separate accounts'' within the
definition of Section 2(a)(37) of the 1940 Act. Currently, the Accounts
serve as funding media for certain variable annuity contracts
(``Contracts'').
3. Separate Account B is an unit investment trust registered under
the 1940 Act, and is governed by the laws of Delaware. Separate Account
B presently has fifteen investment divisions which invest primarily in
separate investment series of the Trust having distinct investment
objectives and policies.
4. Separate Account D is registered with the Commission as an open-
end management investment company, and also is governed by the laws of
Delaware. The Managed Global Account is the sole division of Separate
Account D.
5. The Trust is registered with the Commission as an open-end
management investment company, and is organized under the laws of
Massachusetts. It consists of twenty-seven series, fifteen of which are
presently operational. Shares of each of these series are sold to
Separate Account B, among others, and serve as the investment medium
for Contracts allocated through insurance company separate accounts. In
addition, shares of the Trust's series may be sold to certain qualified
pension and retirement plans.
6. Services, a New York corporation, is registered with the
Commission as an investment adviser and broker-dealer, and is a member
of the National Association of Securities Dealers, Inc. Services is a
wholly owned subsidiary of Bankers Trust Company, the indirect parent
of Golden American. Services provides investment management services to
both Separate Account D and the Trust. Services serves as manager of
The Managed Global Account and has retained Warburg, Pincus
Counsellors, Inc. (``Warburg, Pincus'') as portfolio manager of The
Managed Global Account. Services also serves as the distributor of
shares of the Trust and of the Contracts. Services serves as
distributor of the Trust without renumeration, but may receive
distribution fees in connection with the distribution of the Contracts.
7. Applicants propose that, subject to the approval of the owners
of Contracts (``Contract Owners'') having an interest in Separate
Account D, the portfolio assets of Separate Account D, a managed
separate account, will be transferred to a newly-created division of
Separate Account B, a unit investment trust. Simultaneously, the
Division will exchange its net assets for shares of the Series, all as
part of the proposed Reorganization of Separate Account D into Separate
Account B.
8. More specifically, the assets of Separate Account D, as well as
any unsatisfied liabilities incurred by Separate Account D prior to the
close of business on the business day before the closing date, will be
transferred to the Division, and from there to the Series.
[[Page 37501]]
The number of shares of the Series transferred to the Division shall be
determined by dividing the value of the assets transferred, as of the
close of business on the business day before the closing date, by the
initial per share value of the shares of the Series, which shall be
determined by the officers of the Trust. Applicants state that Contract
Owners will continue to have the same Contract unit values and numbers
of units in the Division as they had in The Managed Global Account of
Separate Account D prior to the Reorganization.
9. Following the Reorganization, for so long as required by the
Commission, voting rights exercised by Contract Owners with value
allocated to Separate Account B will consist of the right to instruct
Golden American on the exercise of voting interests in the Trust. In
contrast, Contract Owners with value allocated to Separate Account D
would vote directly on matters. Applicants represent that this
difference will not, as a practical matter, diminish Contract Owners'
existing voting rights.
10. Applicants state that the investment objective, policies, and
restrictions on the Series will not differ in any material respect from
that of Separate Account D. Therefore, neither of the Accounts nor the
Trust will incur any extraordinary costs, such as brokerage
commissions, in effecting the transfer of assets. Further, Applicants
do not anticipate that there will be any need to liquidate any
portfolio securities held by Separate Account D in order to complete
the Reorganization.
11. As a series of the trust, the Series will be managed in the
same manner as the other series of the Trust, except as noted below.
Ultimate management responsibility for the Series is vested in the
Trust's Board of Trustees, which consists of the same persons who serve
on Separate Account D's Board of Governors. Applicants presently
anticipate that four of the five persons currently serving as members
of Separate Account D's Board of Governors and the Trust's Board of
Trustees will continue to serve on the Trust's Board of Trustees
following the Reorganization. In addition, the same officers presently
manage the Trust and Separate Account D.
12. Bankers Trust Company currently serves as custodian of the
portfolio assets of The Managed Global Account of Separate Account D.
It furnishes similar custodial services to the Trust. Ernst & Young
provides auditing services to Golden American and the Accounts, as well
as the Trust. Services serves as the distributor of the Contracts and
the shares of the Trust. These service relationships are not expected
to change as a result of the Reorganization.
13. In addition, following the Reorganization, Services will
continue to serve as distributor of shares of the Trust, including
shares of the Series.
14. Service's management agreement with Separate Account D and
Warburg, Pincus' portfolio management agreement with Services and
Separate Account D, may terminate upon completion of the transactions
contemplated by the Reorganization. Under a management agreement with
the Trust as to the Series, and subject to the supervision and approval
of the Trust's Board of Trustees, it is anticipated that Services will
provide management services on terms that are substantially identical
to those of the present management agreement with Separate Account D.
It also is anticipated that Warburg, Pincus will furnish portfolio
management services to the Series pursuant to a portfolio management
agreement with the Trust and Services, the terms of which are
substantially identical to those of the present portfolio management
agreement with Services and Separate Account D that is in effect at the
time of the Reorganization.
15. Applicants state that the Reorganization will benefit Contract
Owners that currently have interests in Separate Account D, in that
they will be invested in a more viable investment vehicle, rather than
continuing to be managed as a separate, smaller portfolio of assets
allocated to Separate Account D.
Because the Trust, including the Series, also may be used as the
funding vehicle for other insurance products currently offered to or to
be offered by Golden American or other insurers, it is anticipated that
this flexibility could lead to greater asset size of the Series than
would be realized through Separate Account D. The Trust, Separate
Account B, and Contract Owners, according to Applicants, also may
benefit by increased opportunities for investment and broader
diversification of assets.
16. Golden American or Services will assume all costs to be
incurred in effecting the Reorganization. Applicants represent that the
overall level of fees and charges borne by Contract Owners with an
interest in Separate Account D will be no greater immediately after the
Reorganization than immediately before it.
17. Applicants state that Contract Owners having an interest in
Separate Account D will be fully informed of the terms of the
Reorganization through proxy materials. Golden American's Board of
Directors has authorized the restructuring of Separate Account D into a
division of Separate Account B, and has approved the plan governing the
proposed Reorganization. The Board of Governors of Account D also has
authorized the Reorganization. Finally, the Board of Trustees of the
Trust has approved the Reorganization, and has authorized all actions
necessary to effect the Reorganization.
Applicants' Legal Analysis
Sections 6(c), 17(a), and 17(b)
1. Section 6(c) of the 1940 Act authorizes the Commission, by order
upon application, to continually or unconditionally grant an exemption
from any provision, rule, or regulation of the 1940 Act to the extent
that the exemption is necessary or appropriate in the public interest
and consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the 1940 Act.
2. Section 17(a) of the 1940 Act prohibits any affiliated person of
a registered investment company, or any affiliated person of such
person, acting as principal, knowingly from selling or purchasing any
security or other property to or from such investment company.
3. Section 2(a)(3)(C) of the 1940 Act defines an ``affiliated
person'' of another as ``the person directly or indirectly controlling,
controlled by, or under common control with, such other person.'' In
addition, under Section 2(a)(3)(E) of the 1940 Act, the investment
adviser to an investment company is an ``affiliated person'' of such
company.
4. According to Applicants, each Applicant may be deemed to be an
affiliated person of each other or an affiliated person of an
affiliated person under Section 2(a)(3) of the 1940 Act, and the
Reorganization may be deemed to involve one or more purchases or sales
of securities or other property between and among Applicants involved
in the Reorganization. Section 17(a), therefore, may prohibit the
transactions required to effect the Reorganization.
5. Section 17(b) of the 1940 Act provides that the Commission may
grant exemptions from Section 17(a) if the terms of a proposed
transaction are: (1) Reasonable and fair and do not involve
overreaching on the part of any person concerned; (2) consistent with
the policy of each registered investment company concerned; and (3)
consistent with the general purposes of the 1940 Act.
6. Applicants request an exemption from Section 17(a) under Section
17(b),
[[Page 37502]]
as well as under Section 6(c), because the relief requested may be
deemed to exempt more than one transaction.
7. Applicants contend that the proposed Reorganization meets the
standards for relief under Sections 6(c) and 17(b). Applicants assert
that the terms of the transactions between Separate Account B, Separate
Account D, and the Trust are reasonable and fair and do not involve
overreaching.
8. As stated previously, Applicants assert that the proposed
Reorganization will benefit existing and future Contract Owners by
investing interests in Separate Account D in what is expected will be a
larger more viable investment vehicle. Applicants further state that
this consolidation of portfolio assets may benefit the Trust, Separate
Account B and the Contract Owners by offering increased opportunities
for investment and broader diversification of assets.
9. Applicants represent that the transfer of assets from Separate
Account D to Separate Account B, and from Separate Account B to the
Series, will be made in accordance with the terms of Section 22(c) and
Rule 22c-1 thereunder.
10. Applicants state that the combination of Separate Account D
into Separate Account B will result in Contract Owner interests which,
in practical economic terms, do not differ in any measurable way from
such interests immediately prior to the Reorganization. Applicants
assert that Contract Owners will recognize no gain or loss on the
transfer of the assets of Separate Account D to the Trust, and that
Contract Owners will pay no tax as a result of the transfer. In
addition, expenses borne by Separate Account D Contract Owners will be
no higher following the Reorganization than before the Reorganization.
11. Applicants further state that the proposed Reorganization is
consistent with the investment policies of Separate Account D and the
Series, as each will have materially similar investment objectives and
policies.
12. In addition, Applicants assert that the proposed Reorganization
is consistent with the general purposes of the 1940 Act because
Separate Account D Contract Owners will be fully informed of the
proposed Reorganization and will be entitled to approve or disapprove
the Reorganization at the meeting of Contract Owners called for this
purpose.
Sections 6(c) and 17(d), and Rule 17d-1
13. Section 17(d) of the 1940 Act prohibits an affiliated person of
a registered investment company from effecting any transaction in which
the company is a joint participant in contravention of Commission
rules.
14. Rule 17d-1(a) prohibits an affiliated person of any registered
investment company, acting as principal, from participating in or
effecting any transaction in a ``joint enterprise or other joint
arrangement'' in which the company is a participant without prior
Commission approval.
15. Rule 17d-1(b) provides that when the Commission is passing upon
exemptive applications for joint transactions, the Commission is to
``consider whether the participation * * * in such joint enterprise,
joint arrangement or profit-sharing plan on the basis proposed is
consistent with the provisions, policies and purposes of the [1940] Act
and the extent to which such participation is on a basis different from
or less advantageous than that of other participants.''
16. According to Applicants, the transactions may constitute a
joint enterprise or other joint arrangement within the meaning of
Section 17(d) of the 1940 Act and Rule 17d-1, thereunder. This is
because the Reorganization anticipates simultaneous transactions
involving a number of registered companies, and each transaction is
dependent on the others. Applicants, therefore, request that the
Commission grant an order under Sections 17(d) and 6(c) (to the extent
necessary) and Rule 17d-1 permitting the transactions.
17. Applicants assert that, for the reasons stated above in the
Section 17(b) legal arguments section, the proposed Reorganization
satisfies the standards for relief under Sections 17(d) and 6(c), and
Rule 17d-1 thereunder, because the contemplated transactions are
consistent with the provisions, policies, and purposes of the 1940 Act.
In addition, Applicants assert that they have satisfied these standards
because each party will participate in the transaction on equal terms,
and no party will be disadvantaged by the proposed transactions.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-18175 Filed 7-17-96; 8:45 am]
BILLING CODE 8010-01-M
