63574 Federal Register / Vol. 62, No. 230 / Monday, December 1, 1997 / Notices

pursuant to section 57(i) and rule 17d–

1 to permit them to participate in the

liquidation transactions and possible

follow-on investments with Venture

and/or Technology, to the extent that

the transactions may otherwise be

prohibited by section 57(a)(4) and rule

17d–1.

4. Applicants believe that the

transactions satisfy rule 17d–1(b)’s

standard, as described above, and that

the Co-investing Conditions are

unnecessary, because ACC, the parent of

the SBIC and SSBIC Subsidiaries, will

be internally managed; Venture and

Technology are in the process of

liquidation and will not be engaging in

a broad range of transactions; and

Venture and Technology and the SBIC

and SSBIC Subsidiaries will be treated

on an equal basis in any transaction.

Applicants also contend that the relief

is consistent with rule 57b–1, which

exempts from section 57(a)(4) any

transactions in which the BDC controls

the relevant affiliate. Applicants asset

that the SBIC and SSBIC Subsidiaries

should be deemed to control Venture

and Technology, for purposes of rule

57b–1, because they are wholly-owned

subsidiaries of ACC.

Applicants’ Conditions

Applicants agree that the order

granting the requested relief will be

subject to the following conditions:

1. ACC will at all times own and hold,

beneficially and of record, all of the

outstanding voting capital stock of the

Subsidiaries.

2. No person will serve or act as

investment adviser to any Subsidiary

unless the directors and stockholders of

ACC will have taken the action with

respect thereto also required to be taken

by the directors and sole stockholder of

the Subsidiary.

3. The Consolidation will not be

consummated unless it has been

approved by the holders of a majority of

outstanding common stock of Allied I,

Allied II, and Allied Lending.

4. ACC will: (a) file with the

Commission, on behalf of itself and the

Subsidiaries, all information and reports

required to be filed with the SEC under

the Exchange Act and other applicable

federal securities laws, including

information and financial statements

prepared solely on a consolidated basis

as to ACC and the Subsidiaries, these

reports to be in satisfaction of any

separate reporting obligations of the

Subsidiaries; and (b) provide to its

stockholders the information and

reports required to be disseminated to

ACC’s stockholders, including

information and financial statements

prepared solely on a consolidated basis

as to ACC and the Subsidiaries, these

reports to be in satisfaction of any

separate reporting obligations of the

Subsidiaries. Notwithstanding anything

in this condition, ACC will not be

relieved of any of its reporting

obligations, including, but not limited

to, any consolidating statement setting

forth the individual statements of the

Subsidiaries required by rule 6–03(c) of

Regulation S–X.

5. ACC and the Subsidiaries may file

on a consolidated basis under condition

4 above only so long as the amount of

ACC’s total consolidated assets invested

in assets other than (a) securities issued

by the Subsidiaries or (b) securities

similar to those in which the

Subsidiaries invest, does not exceed ten

percent.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–31395 Filed 11–28–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22901; File No. 812–10788]

The Western National Life Insurance

Company, et al.; Notice of Application

November 21, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’).

ACTION: Notice of application for an

order under Section 26(b) of the

Investment Company Act of 1940

(‘‘1940 Act’’) approving the proposed

substitution of securities.

SUMMARY OF APPLICATION: Applicants

request an order approving the

substitution of shares of the Salomon

Brothers U.S. Government Securities

Portfolio of WNL Series Trust (the

‘‘Salomon Portfolio’’) for shares of the

Black Rock Managed Bond Portfolio of

WNL Series Trust (the ‘‘BlackRock

Portfolio’’) to fund individual fixed and

variable deferred annuity contracts (the

‘‘Contracts’’) issued by Western National

Life Insurance Company (‘‘Western

National’’).

APPLICANTS: Western National and WNL

Separate Account A (the ‘‘Account’’).

FILING DATE: The application was filed

on September 17, 1997.

HEARING OR NOTIFICATION OF HEARING:

And 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

16, 1997, and 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,

N.W., Washington, D.C. 20549.

Applicants, c/o Raymond A. O’Hara III,

Esq., Blazzard, Grodd & Hasenauer, PC.,

943 Post Road East, Westport,

Connecticut 06880.

FOR FURTHER INFORMATION CONTACT:

Laura A. Novack, Senior Attorney, 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 SEC’s Public

Reference Branch, 450 Fifth Street,

N.W., Washington, D.C. 20549 (tel. (202)

942–8090).

Applicants’ Representations

1. Western National, a stock life

insurance company incorporated in

Texas, is a wholly-owned subsidiary of

Western National Corporation.

American General Life Insurance

Company (‘‘AG Life’’), a Missouridomiciled life insurer, owns

approximately 40% of Western National

Corporation. In turn, AG Life is a

wholly-owned subsidiary of American

General Corporation, also a Texas

corporation. Western National is the

depositor of the Account.

2. The Board of Directors of Western

National authorized the Account on

November 9, 1994. The Account is

registered under the 1940 Act as a unit

investment trust for the purpose of

funding the Contracts. Security interests

under the Contracts have been

registered under the Securities Act of

1933 (‘‘Securities Act’’) (File No. 33–

86464). The Account currently is

divided into eight sub-accounts, each of

which reflects the investment

performance of a corresponding

portfolio of WNL Series Trust (the

‘‘Trust’’).

3. The Trust was organized as a

Massachusetts business trust on

December 12, 1994. It is registered

under the 1940 Act as an open-end

management investment company. The
Federal Register / Vol. 62, No. 230 / Monday, December 1, 1997 / Notices 63575

Trust is a series investment company

that is currently comprised of eight

portfolios, two of which are the

BlackRock and Salomon Portfolios.

WNL Investment Advisory Services, Inc.

(‘‘WNL Advisory’’), a subsidiary of

Western National Corporation, is the

investment adviser to the Trust.

4. WNL Advisory has engaged subadvisors for each of the portfolios of the

Trust. The Sub-Advisor for the

BlackRock Portfolio is BlackRock

Financial Management. The SubAdviser for the Salomon Portfolio is

Salomon Brothers Asset Management,

Inc.

5. The BlackRock Portfolio seeks to

provide a high total return consistent

with moderate risk of capital and

maintenance of liquidity by investing

primarily in the broad sector of the

fixed-income market, including U.S.

government and agency securities,

corporate securities, private placements,

and asset-backed and mortgage-related

securities, including residential and

commercial mortgage-backed securities.

The Salomon Portfolio seeks a high

level of current income by investing a

substantial portion of its assets in debt

obligations and mortgage-backed

securities issued or guaranteed by the

U.S. government and its agencies or

instrumentalities and collateralized

mortgage obligations backed by such

securities.

6. Since their inception, WNL

Advisory has voluntarily waived all or

a portion of its advisory fees from the

BlackRock and Salomon Portfolios.

Currently, until May 1, 1998, WNL

Advisory has undertaken to waive those

portions of its advisory fees which are

in excess of the amounts payable by it

to the Sub-Advisors for the BlackRock

and Salomon Portfolios. In addition,

since inception, Western National has

reimbursed portions of the expenses of

the BlackRock and Salomon Portfolios.

Currently, Western National has

undertaken to bear until May 1, 1998,

all operating expenses of both

portfolios, excluding the compensation

of WNL Advisory, that exceed .12% of

the portfolios’ average daily net assets.

WNL Advisory is under no legal

obligation to continue waiving its

advisory fees nor is Western National

under any obligation to continue

reimbursing expenses. State Street Bank

and Trust Company, the Trust’s

custodian and sub-administrator, also

has waived certain fees with respect to

both portfolios.

7. As a result of these fee waivers and

expense limitation agreements, the

expense ratio (annualized) for the

BlackRock Portfolio for the year ending

December 31, 1996 (from the date of

inception of January 2) was .28%. In the

absence of these waivers and expense

limitation agreements, the expense ratio

would have been 3.93%. For the sixmonth period ended June 30, 1997, the

expense ratio (annualized) was .42%. In

the absence of the waivers and expense

limitation agreements, it would have

been 4.38%. The (non-annualized) total

returns for the BlackRock Portfolio for

these twelve-month and six-month

periods were 3.76% and 3.20%,

respectively. In the absence of the fee

waivers and expense limitation

agreements, the total returns would

have been lower.

8. As a result of the fee waivers and

expense limitation agreements, the

expense ratio (annualized) for the

Salomon Portfolio for the year ending

December 31, 1996 (from the date of

inception of February 6) was .22%. In

the absence of the fee waivers and

expense limitation agreements, it would

have been 5.26%. For the six-month

period ended June 30, 1997, the expense

ratio (annualized) was .35%. In the

absence of these waivers and expense

limitation agreements, it would have

been 5.59%. The (non-annualized) total

returns for the Salomon Portfolio for

these twelve-month and six-month

periods were 3.40% and 3.35%,

respectively. These numbers would

have been lower absent the fee waivers

and expense limitation agreements.

9. As of June 30, 1997, the BlackRock

Portfolio and Salomon Portfolio had

$3.6 million and $2.5 million in net

assets, respectively.

10. Applicants state that the

BlackRock Portfolio is quite small when

compared with many other similar

investment portfolios of open-end

management companies available as

investment vehicles for variable annuity

contracts. Furthermore, after

experiencing slow sales, management of

Western National determined that it was

unlikely that the BlackRock Portfolio

would grow to a sufficient size to

promote consistent investment

performance or to absorb operating

expenses. As of September 30, 1997,

shares of the BlackRock Portfolio were

no longer available for sale and no

transfers could be made into the

BlackRock Portfolio Sub-Account

(however, dollar cost averaging transfers

to the BlackRock Portfolio Sub-Account

will be permitted until the date of

substitution).

11. Applicants propose that Western

National substitute shares of the

Salomon Portfolio for shares of the

BlackRock Portfolio, by redeeming

shares of the BlackRock Portfolio in

cash and purchasing with the proceeds

shares of the Salomon Portfolio.

12. The proposed substitution 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 Account. Contract owners will

not incur any fees or charges as a result

of the proposed substitution nor will

their rights or Western National’s

obligations under the Contracts be

altered in any way. All expenses

incurred in connection with the

proposed substitution, including legal,

accounting and other fees and expenses,

will be paid by Western National. In

addition, the proposed substitution will

not result in the imposition of any tax

liability on Contract owners. The

proposed substitution will cause the

Contract fees and charges currently

being paid by existing Contract owners

to be greater after the proposed

substitution than before the proposed

substitution.

13. By supplements to the prospectus

for the Account dated September 25,

1997, all owners and prospective

owners were notified of the Applicants’

intention to take the necessary actions,

including seeking the order requested

by the Applicants, to affect the

substitution described herein. The

supplement also apprised Contract

owners that, from the date of the

supplement until the date of the

proposed substitution, owners may

transfer any or all of their Contract value

under a Contract invested in the SubAccount for the BlackRock Portfolio to

another Sub-Account of the Account,

without that transfer counting as one of

a limited number of transfers permitted

in a Contract year free of charge. In

addition, the supplement will inform

Contract owners that for a period of 30

days following the proposed

substitution, Western National will

permit transfers of the cash value under

a Contract invested in the Sub-Account

for the Salomon Portfolio to any other

Sub-Account of the Account without

any limitation or charge being imposed.

14. In addition to the prospectus

supplements distributed to owners and

prospective owners of Contracts, within

5 days after the proposed substitution,

all owners who were affected by the

substitution will be sent a written notice

informing them that the substitution

was carried out and reiterating their

right to make transfers from the SubAccount for the Salomon Portfolio to

any other Sub-Account of the Account

for a period of 30 days without any

limitation or charge being imposed.

Applicants’ Legal Analysis

1. Section 26(b) of the 1940 Act

provides in pertinent part that ‘‘it shall
63576 Federal Register / Vol. 62, No. 230 / Monday, December 1, 1997 / Notices

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See Exchange Act Rel. No. 38571 (May 5, 1997),

62 FR 25682 (May 9, 1997) (Commission order

approving a change in the minimum increment to

1⁄16 for securities listed on the American Stock

Exchange); Exchange Act Rel. No. 38678 (May 27,

1997), 62 FR 30363 (June 3, 1997) (Commission

order approving a change in the minimum

increment to 1⁄16 for Nasdaq-listed securities); and

Exchange Act Rel. No. 38897 (Aug. 1, 1997), 62 FR

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

legislative history of Section 26(b)

provides that the Commission will

approve a substitution if it is consistent

with the protection of investors and the

purposes fairly intended by the policy

and provisions of the Act. The purpose

of Section 26(b) 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 incurring either a loss of

the sales load deducted from initial

proceeds, an additional sales load upon

reinvestment of the redemption

proceeds, or both. Section 26(b) affords

protection to investors by preventing a

depositor or trustee of a unit investment

trust holding shares of one issuer from

substituting for those shares the shares

of another issuer, unless the

Commission approves that substitution.

2. Applicants state that Western Life

has reserved the right to substitute

securities held by the Sub-Accounts of

the Account and that this right is

disclosed in the Contracts and

prospectus for the Contracts.

3. Applicants represent that the

Salomon Portfolio is a suitable and

appropriate investment vehicle for

Contract owners. Applicants assert that

the Salomon Portfolio has a lower

advisory fee and a lower expense ratio

than the BlackRock Portfolio.

Applicants also assert that the Salomon

Portfolio has a similar investment

objective, and to date has experienced

an investment return comparable to the

BlackRock Portfolio. Applicants

anticipate that after the proposed

substitution, the Salomon Portfolio will

provide Contract owners with

comparable or more favorable

investment results than would be the

case if the proposed substitution did not

take place.

4. Applicants represent that the

Salomon Portfolio has similar

investment policies to the BlackRock

Portfolio, with each investing in many

of the same types of fixed income

securities.

5. Applicants generally submit that

the proposed substitution meets the

standards that the Commission and its

staff have applied to substitutions that

have been approved by the Commission.

Conclusion

Applicants submit that, for the

reasons summarized above, the

proposed substitution is consistent with

the protection of investors and the

purposes fairly intended by the policy

and provisions of the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–31396 Filed 11–28–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39347; File No. SR–Amex–

97–41]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the American Stock Exchange, Inc.

Relating to Trading Differentials for

Options Contracts

November 21, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Exchange Act’’ or ‘‘Act’’),1 and Rule

19b–4 thereunder,2 notice is hereby

given that on November 3, 1997, the

American Stock Exchange, Inc.

(‘‘Amex’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by the self-regulatory

organization. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to amend

Rules 952 and 951C to adopt a

procedure that would allow the

Exchange to establish the minimum

fractional change (or trading

increments) for options. The text of the

proposed rule change is available at the

Office of the Secretary, Amex and at the

Commission.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission the

self-regulatory organization included

statements concerning the purpose of

and basis for the proposed rule change

and discussed any comments it received

on the proposed rule change. The text

of these statements may be examined at

the places specified in Item IV below.

The self-regulatory organization has

prepared summaries, set forth in

Sections A, B, and C below, of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

Currently, Exchange Rule 952

provides that the minimum fractional

change for stock options trading at $3.00

or higher shall be one-eighth and for

stock options trading under $3.00 shall

be one-sixteenth. Additionally, Rule

951C provides that the minimum

fractional change for stock index

options shall be one-eighth for stock

index options trading at a premium

greater than $300.00 and stock index

options less than $300.00 shall be one

sixteenth. The Exchange now proposes

to amend Rules 952 and 951C to give

the Board of Governors the authority to

establish the minimum fractional

changes for options. Until such time as

the Board determines to use its

authority to change the minimum

fractional changes the current rules

described above will apply. The

proposal will allow the Exchange to

revise its minimum fractional changes

quickly in response to changes adopted

in the underlying stock markets and at

the other options exchanges. When the

Board of Governors has determined to

change the minimum trading

increments, the Exchange will designate

such a change as a stated policy,

practice, or interpretation with respect

to the administration of Rules 952 and

951C within the meaning of

subparagraph (3)(A) of subsection 19(b)

of the Exchange Act and will file a rule

change for effectiveness upon filing

with the Commission.

As derivatives securities, the prices of

options are determined in reference to

the prices of the underlying securities.

Consequently, the Exchange believes

that where practicable, the Exchange

should have minimum increments

comparable to those applicable to the

securities underlying its options.3