[Federal Register Volume 66, Number 206 (Wednesday, October 24, 2001)]
[Notices]
[Pages 53814-53816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26754]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-25213; File No. 812-12140]
United Life & Annuity Insurance Company, et al.
October 17, 2001.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').
ACTION: Notice of application for an order pursuant to Section 26(c) of
the Investment Company Act of 1940 (``1940 Act'').
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APPLICANTS: United Life & Annuity Insurance Company (``United Life'')
and United Life & Annuity Separate Account One (``Separate Account
One'', and together with United Life, ``Applicants'').
SUMMARY OF APPLICATION: Applicants seek an order approving the
substitution of shares of the Limited Maturity Bond Portfolio of
Neuberger Berman Advisers Management Trust for shares of the Fixed
Income Portfolio of Credit Suisse Warburg Pincus Trust II held by
Separate Account One to find certain variable annuity contracts and
certificates (``Contracts'') issued by United Life.
Filing Date: The application was filed on June 26, 2000, and amended on
April 4, 2001 and October 9, 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 13, 2001, and 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 requester'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, NW, Washington, DC 20549-0609. Applicants, Linda E. Senker,
United Life & Annuity Insurance Company, c/o ING Variable Annuities,
1475 Dunwoody Drive, West Chester, PA 19380.
FOR FURTHER INFORMATION CONTACT: Kenneth C. Fang, Attorney, or Keith E.
Carpenter, Branch Chief, at (202) 942-0670, Office of Insurance
Products, Division of Investment Management.
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, 450 Fifth Street, NW,
Washington, DC 20549-0102 (tel. (202) 942-8090).
Applicant's Representations
1. United Life is a stock life insurance company organized in 1955.
United Life was originally domiciled in Louisiana. On December 18,
1998, United Life was re-domesticated to Texas. United Life is
authorized to conduct business in 47 states, the District of Columbia
and Puerto Rico. On July 24, 1996, Pacific Life and Accident Insurance
Company (PLAIC) acquired one hundred percent ownership of United Life.
PLAIC is a wholly-owned subsidiary of PennCorp Financial Group, Inc. On
April 30, 1999, ING America Insurance Holdings, Inc. (``ING America'')
acquired United Life. ING America's ultimate parent is ING Groep N.V.
(The Netherlands) (``ING''). ING, based in the Netherlands, is a global
financial services holding company.
[[Page 53815]]
2. Separate Account One is a separate account of United Life which
was authorized by United Life's Board of Directors under Louisiana
insurance law on November 2, 1994. Separate Account One is registered
as a unit investment trust under the 1940 Act (File No. 811-09026) for
the purpose of funding the Contracts that invest in the Neuberger
Berman Advisers Management Trust, Credit Suisse Warburg Pincus Trust II
and other underlying mutual funds. Security interests under the
Contracts have been registered under the Securities Act of 1933 (``1933
Act'') (File Nos. 33-91362 and 33-95778).
3. Separate Account One is currently divided into sub-accounts,
each of which reflects the investment performance of a corresponding
portfolio of the Neuberger Berman Advisers Management Trust, Credit
Suisse Warburg Pincus Trust II and other underlying mutual funds.
4. The Fixed Income Portfolio is a portfolio of the Credit Suisse
Warburg Pincus Trust II (formerly, Warburg Pincus Trust II), a
registered open-end management company. The Fixed Income Portfolio's
investment objective is to seek total return consistent with prudent
investment management. The Fixed Income Portfolio invests primarily in
fixed-income securities. The Fixed Income Portfolio normally maintains
a weighted average portfolio maturity of 10 years or less.
5. Credit Suisse Asset Management, LLC (``CSAM''(, 466 Lexington
Avenue, New York, NY 10017, a registered investment adviser and
indirect wholly-owned U.S. subsidiary of Credit Suisse Group, provides
overall management of the investment strategies and policies of the
Fixed Income Portfolio as investment adviser to the Credit Suisse
Warburg Pincus Trust II.
6. CSAM receives an annual management fee of .50% of the Fixed
Income Portfolio's average daily net assets (before any waivers). The
total expenses, after all expense reimbursements for the Fixed Income
Portfolio for the year ended December 31, 2000 were 1.29% of its
average net assets. Without regard to such expense reimbursements or
credits, the total expenses for the year ended December 31, 2000 were
3.11%.
7. On December 31, 2000, the Fixed Income Portfolio had
approximately $1,572,000 in net assets.
8. The Limited Maturity Bond Portfolio's investment objective is to
seek the highest current income consistent with liquidity and low risk
to principal. Total return is a secondary goal. The Limited Maturity
Bond Portfolio invests primarily in investment-grade bonds and other
debt securities from U.S. government and corporate issuers such as
mortgage- and asset-backed securities.
9. Neuberger Berman Management Inc., (``NBM''), 605 Third Avenue,
2nd Floor, New York, New York 10158, a registered investment adviser,
is the overall adviser to Neuberger Berman Advisers Management Trust.
Neuberger Berman LLC, 605 Third Avenue, New York, New York 10158, is
the sub-adviser of the Limited Maturity Bond Portfolio. Neuberger
Berman LLC is an affiliate of NBM. United Life is not affiliated with
the Limited Maturity Bond Portfolio of Neuberger Berman Advisers
Management Trust, NBM or Neuberger Berman LLC.
10. NBM receives an annual fee of 0.65% of the Limited Maturity
Bond Portfolio's average net assets. The total expenses of the Limited
Maturity Bond Portfolio for the year ended December 31, 2000 were 0.76%
of its average net assets.
11. On December 31, 2000 the Limited Maturity Bond Portfolio had
approximately $214,400,000 in net assets.
12. For those Contract Owners who continue to have any of their
Contract Values invested in shares of the Fixed Income Portfolio on the
effective date of the Substitution, United Life proposes to substitute
shares of the Limited Maturity Bond Portfolio for shares of the Fixed
Income Portfolio on the following basis. As of the effective date of
the Substitution, United Life would redeem the shares of the Fixed
Income Portfolio representing Contract values. On the same day, United
Life would use the proceeds to purchase the appropriate number of
shares of the Limited Maturity Bond Portfolio. The Substitution will be
a cash transaction (i.e., no securities will be exchanged in the
transaction). The Substitution will take place at relative net asset
values of the Portfolios, with no change in the amount of any Contract
Owner's Contract values or in the dollar value of his or her investment
in Separate Account One.
13. United Life will pay all expenses and transactions costs of the
Substitution, including any applicable brokerage commissions. United
Life will schedule the Substitution to occur as soon as practicable
following the issuance of the Order so as to maximize the benefits to
be realized from the Substitution. Within five (5) days after the
completion of the Substitution pursuant to the Order of the Commission
approving the Substitution, United Life will send to the affected
Contract Owners written notice of the Substitution (the ``Notice'')
stating that shares of the Fixed Income Portfolio have been eliminated
and that the shares of the Limited Maturity Bond Portfolio have been
substituted. United Life will include in such mailing the supplement to
the prospectuses of Separate Account One, which describes the
Substitution.
14. Contract Owners will be advised in the Notice that for a period
of thirty (30) days from the mailing of the Notice, they may transfer
all assets, as substituted, to any other available subaccount, without
limitation and without charge. The period from the date of the
supplement to thirty (30) days from the mailing of the Notice is
referred to as the ``Free Transfer Period.'' Transfers made by Contract
Owners during the Free Transfer Period will not count in determining
the transfer fee. Following the Substitution, Contract Owners will be
afforded the same Contract rights, including surrender and other
transfer rights with regard to amounts invested under the Contracts, as
they currently have.
Applicant's Legal Analysis and Conditions
1. Section 26(c) (formerly, Section 26(b)) of the 1940 Act
provides, in pertinent part, that ``[i]t 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.''
The purpose of Section 26(c) is to protect the expectation of investors
in a unit investment trust that the unit investment trust will
accumulate the shares of a particular issuer and to prevent
unscrutinized substitutions which might, in effect, force shareholders
dissatisfied with the substituted security to redeem their shares,
thereby possibly incurring either a loss of the sales load deducted
from initial purchase payments, an additional sales load upon
reinvestment of the redemption proceeds, or both. Section 26(c) affords
this protection to investors by preventing a depositor or trustee of a
unit investment trust holding the shares of one issuer from
substituting for those shares the shares of another issuer, unless the
Commission approves that substitution.
2. The purposes, terms and conditions of the Substitution are
consistent with the principles and purposes of Section 26(c) and do not
entail any of the abuses that Section 26(c) is designed to prevent.
Warburg Pincus notified United Life that it intends to close the Fixed
Income Portfolio once there is no
[[Page 53816]]
longer Contract Owner money invested in it. United Life has no other
choice but to effect a Substitution.
3. The Substitution will not result in the type of costly forced
redemption that Section 26(c) was intended to guard against and is
consistent with the protection of investors and the purposes fairly
intended by the 1940 Act for the following reasons: (a) The
Substitution is of shares of the Limited Maturity Bond Portfolio whose
objectives, policies, and restrictions are similar to the objectives,
policies, and restrictions of the Fixed Income Portfolio so as to
continue fulfilling the Contract Owners' objectives and risk
expectations; (b) the total annual expenses of the Limited Maturity
Bond Portfolio as a percentage of net assets are lower than the Fixed
Income Portfolio; (c) if a Contract Owner so requests, during the Free
Transfer Period, assets will be reallocated for investment in a
Contract Owner-selected sub-account; (d) the Substitution will, in all
cases, be effected at net asset value of the respective shares, without
the imposition of any transfer or similar charge; (e) United Life has
undertaken to assume the expenses and transaction costs, including
among others, legal and accounting fees and any brokerage expenses,
relating to the Substitutions in a manner that attributes transaction
costs to United Life; (f) the Substitution will in no way alter the
insurance benefits to Contract Owners or the contractual obligations of
United Life; (g) the Substitution will in no way alter the tax benefits
to Contract Owners; (h) Contract Owners may choose simply to withdraw
amounts credited to them following the Substitution under the
conditions that currently exist, subject to any applicable contingent
deferred sales charge; and (i) the Substitution is expected to confer
certain economic benefits to Contract Owners by virtue of the enhanced
asset size and lower total expenses, as described below.
4. United Life, on the basis of the following facts and
circumstances, has determined that it is in the best interests of
Contract Owners to substitute shares of the Limited Maturity Bond
Portfolio for shares of the Fixed Income Portfolio:
(a) The investment objectives and programs of the Limited Maturity
Bond Portfolio and the Fixed Income Portfolio are sufficiently similar
so as to continue fulfilling the Contract Owner's objectives and risk
expectations.
(b) The total expenses of the Limited Maturity Bond Portfolio are
lower than the total expenses of the Fixed Income Portfolio.
(c) On December 31, 2000, the Fixed Income Portfolio had
approximately $1,572,000 in net assets. On December 31, 2000, the
Limited Maturity Bond Portfolio had approximately $214,400,000 in net
assets.
(d) The larger size of the Limited Maturity Bond Portfolio lends
itself to greater flexibility in purchasing attractive investments and
consequently the Limited Maturity Bond Portfolio can more readily react
to changes in market conditions. Contract Owners would benefit in the
long run through the more effective management of a larger portfolio
such as the Limited Maturity Bond Portfolio.
5. United Life does not currently receive (and will not receive for
3 years from the date of the Commission order requested herein) any
direct or indirect benefit from the Limited Maturity Bond Portfolio of
Neuberger Berman Advisers Management Trust or Neuberger Berman
Management Inc. (and their affiliates including Neuberger Berman LLC
and its affiliates) that would exceed the amount that United Life had
received from the Fixed Income Portfolio of the Credit Suisse Warburg
Pincus Trust II or Credit Suisse Asset Management LLC (or their
affiliates), including without limitations, 12b-1, shareholder service,
administrative or other service fees, revenue sharing or other
arrangements, either with respect to specific reference to the Limited
Maturity Bond Portfolio or as part of an overall business arrangement.
Conclusion
Applicants submit, for all of the reasons stated herein, that the
requested Order under Section 26(c) of the 1940 Act meets the standards
of that section.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-26754 Filed 10-23-01; 8:45 am]
BILLING CODE 8010-01-M