Federal Register / Vol. 62, No. 58 / Wednesday, March 26, 1997 / Notices 95

custodian for U.S. Investment

Companies and MIC Custodians

pursuant to the terms of the exemptive

order requested by the application. The

Subcustodian Agreement will explicitly

provide that U.S. Investment Companies

or MIC Custodians that have entered

into an Agency Custody Agreement with

Citibank will be third party,

beneficiaries of the Subcustodian

Agreement, will be entitled to enforce

the terms thereof, and will be entitled to

seek relief directly against Citibank T/O

or against Citibank.

5. The Subcustodian Agreement

between Citibank and Citibank T/O will

be governed by New York law; or, if it

were governed by the local law of the

Russian Federation, Citibank shall

obtain an opinion of counsel form

Russian counsel opining as to the

enforceability of the rights of a third

party beneficiary under the laws of such

foreign jurisdiction.

6. MIC Securities and MIC Cash of

U.S. Investment Companies and MIC

Custodians entering into Direct Custody

Arrangements with Citibank T/O will be

maintained with Citibank T/O only in

accordance with a Direct Custody

Agreement, required to remain in effect

at all times during which Citibank T/O

fails to satisfy the requirements of rule

17f–5 relating to shareholders’ equity.

7. The Direct Custody Agreement will

be among (i) each U.S. Investment

Company or MIC Custodian for which

Citibank T/O serves as custodian or

subcustodian, (ii) Citibank T/O, (iii)

Citibank, and (iv) Citicorp. The Direct

Custody Agreement will provide the

following:

(a) confirmation by Citibank T/O that it

will act as the custodian or subcustodian, as

the case may be, of the MIC Securities and

MIC Cash pursuant to the requested order;

(b) Citicorp will be liable, in accordance

with the terms of the Guarantee, for losses of

MIC Securities and/or MIC Cash resulting

from the bankruptcy or insolvency of

Citibank T/O; and

(c) Citibank will be liable for any loss

resulting from the performance of Citibank

T/O, except such loss as may result from (i)

political risk (e.g., exchange control

restrictions, confiscation, expropriation,

nationalization, insurrection, civil strife, or

armed hostilities) and (ii) other risks of loss

for which Citibank T/O would not be liable

under rule 17f–5.

8. Under the Direct Custody

Arrangements, U.S. Investment

Companies or MIC Custodians, as the

case may be, will be entitled to seek

relief directly against Citibank or

Citibank T/O.

9. The dollar value of the Guarantee

applicable to the Exemptive Order

Network Members shall be at least equal

to the aggregate value of the MIC

Securities and MIC Cash held in the

custody of such Exemptive Order

Network Members pursuant to the

Direct Custody Agreements and the

Agency Custody Agreements, calculated

at the close of the previous calendar

month. The value of MIC Securities and

MIC Cash held in the custody of the

Exemptive Order Network Members, as

Citibank’s subcustodians, will be

calculated by Citibank based on records

maintained by Citibank and reports by

such Exemptive Order Network

Members as at the end of each calendar

month, and such amount will be

reported to Citicorp. In addition, each

Exemptive Order Network Member will

submit to Citibank, as agent for Citicorp,

monthly its calculation, and the basis on

which it was made, of the market value

of MIC Securities and MIC Cash held in

custody by it under Direct Custody

Agreements. After reviewing the results

of the monthly monitoring, Citicorp will

take such steps as may be necessary to

adjust the amount of the Guarantee to

cover the aggregate value of the MIC

Securities and MIC Cash held by

Exemptive Order Network Members,

under Agency and Direct Custody

Agreements. In the event of the

insolvency of an Exemptive Order

Network Member at a time when the

aggregate value of MIC Securities and

MIC Cash held by such Exemptive

Order Network Member is in excess of

the amount of MIC Securities and MIC

Cash which such Exemptive Order

Network Member held at the prior

calendar month’s end, Citicorp will

immediately take such steps (if any) as

may be necessary to increase the size of

the Guarantee to cover the amount of

such excess.

10. Citibank currently satisfies and

will continue to satisfy the Qualified

U.S. Bank requirement set forth in rule

17f–5(c)(3).

For the Commission, by the Division of

Investment Management, under delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7647 Filed 3–25–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. IC–22576; File No. 812–10462]

Cova Financial Services Life Insurance

Company, et al.

March 20, 1997.

AGENCY: Securities and Exchange

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

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘1940 Act’’).

APPLICANTS: Cova Financial Services

Life Insurance Company (‘‘Cova Life’’)

and Cova Variable Annuity Account

One (‘‘Variable Account One’’)

RELEVANT 1940 ACT SECTIONS: Order

requested pursuant to Section 26(b)

approving the proposed substitution of

securities.

SUMMARY OF APPLICATION: Applicants

seek an order approving the proposed

substitution of shares of the

International Equity Portfolio of Cova

Series Trust (‘‘Cova Trust’’) for shares of

the Global Equity Portfolio of Lord

Abbett Series Fund, Inc. (‘‘Lord Abbett

Fund’’) which currently are held by

Variable Account One to fund certain

single purchase payment and flexible

purchase payment variable annuity

contracts (‘‘Contracts’’) issued by Cova

Life.

FILING DATE: The application was filed

on December 13, 1996, and amended

and restated on march 18, 1997.

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 April 14, 1997, 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 requester’s interest, the reason for

the request, and the issue contested.

Persons may request notification of a

hearing by writing to the Secretary of

the SEC.

ADDRESSES: SEC, Secretary, 450 Fifth

Street, NW., Washington, D.C. 20549.

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

Blazzard, Grodd & Hasenauer, P.C., P.O.

Box 5108, Westport, Connecticut,

06881. Copies to Jeffery K. Hoelzel, Esq.,

Senior Vice President, General Counsel

and Secretary, Cova Financial Services

Life Insurance Company, One Tower

Lane, Suite 3000, Oakbrook Terrace, Il

60181–4644.

FOR FURTHER INFORMATION CONTACT:

Megan L. Dunphy, Staff Attorney, or

Patrice M. Pitts, 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 may be obtained

for a fee from the Public Reference

Branch of the SEC.
96 Federal Register / Vol. 62, No. 58 / Wednesday, March 26, 1997 / Notices

Applicants’ Representations

1. Cova Life originally was

incorporated on August 17, 1981, as

Assurance Life Company, a Missouri

corporation, and changed its name to

Xerox Financial Services Life Insurance

Company in 1985. On June 1, 1995 a

wholly-owned subsidiary of General

American Life Insurance Company

purchased Cova Life from Xerox

Financial Services, Inc. The acquisition

of Cova Life included related

companies. On June 1, 1995, Cova Life

changed its name to Cova Financial

Services Life Insurance Company. Cova

Life presently is licensed to do business

in the District of Columbia and in all

states except California, Maine, New

Hampshire, New York and Vermont.

2. Variable Account One is a separate

account registered under the 1940 Act

as a unit investment trust and

established for the purpose of funding

certain variable annuity contracts,

including the Contracts. Variable

Account One currently is divided into

twelve sub-accounts, each of which

reflects the investment performance of a

corresponding portfolio of Cova Trust,

Lord Abbett Fund and another

registered mutual fund.

3. The Lord Abbett Fund currently

offers shares of its portfolios to

corresponding sub-accounts of Variable

Account One and to separate accounts

of other insurance companies. Lord

Abbett Fund was incorporated under

the laws of Maryland on August 28,

1989, and is registered under the 1940

Act as an open-end management

investment company of the series type.

Lord Abbett Fund currently is

comprised of three Portfolios, only one

of which—the Global Equity Portfolio—

is relevant herein.

4. The investment objective of the

Global Equity Portfolio is long-term

growth of capital and income consistent

with reasonable risk. The production of

current income is a secondary

consideration for the portfolio. The

Global Equity Portfolio normally invests

primarily in common stocks (including

securities convertible into common

stocks) of domestic and foreign

companies in sound financial condition,

which common stocks are expected to

show above-average price appreciation.

Under normal circumstances, the

portfolio will invest its total assets in

domestic and foreign securities with at

least 65% of such assets invested in

equity securities primarily traded in at

least three countries, including the

United States.

5. Lord, Abbett & Co. (‘‘Lord Abbett’’)

is the investment manager of the Lord

Abbett Fund. Lord Abbett retains

Dunedin Fund Managers Limited as a

sub-adviser to the Global Equity

Portfolio. Lord Abbett receives a

monthly management fee, based on

average daily net assets for each month,

at an annual rate of .75 of 1%. Since

inception of the Global Equity Portfolio,

Lord Abbett has voluntarily waived this

management fee and reimbursed a

portion of the expenses of the portfolio.

Lord Abbett is under no legal obligation

to continue fee waivers and expense

reimbursements.

6. The shares of Cova Trust are sold

exclusively to separate accounts of Cova

Life (including Variable Account One)

and its affiliated insurance companies to

fund benefits under the Contracts and

certain other variable annuity contracts

issued by affiliates of Cova Life. Cova

Trust is an unincorporated business

trust that was established under

Massachusetts law by a Declaration of

Trust dated July 9, 1987. Cova Trust is

registered under the 1940 Act as an

open-end management investment

company of the series type. Cova Trust

currently offers eleven portfolios, only

one of which—the International Equity

Portfolio—is relevant herein.

7. The investment objective of the

International Equity Portfolio is to

provide a high total return from a

portfolio of equity securities of foreign

corporations. In normal circumstances,

the International Equity Portfolio should

be essentially fully invested with at

least 65% of the value of its total assets

in equity securities of foreign issuers,

consisting of common stocks and other

securities with equity characteristics

such as preferred stock, warrants, rights

and convertible securities.

8. Cova Investment Advisory

Corporation (‘‘Cova Advisory’’) is the

investment adviser for Cova Trust. Cova

Advisory is a wholly-owned subsidiary

of Cova Life Management Company,

which is a wholly-owned subsidiary of

Cova Corporation, which is a whollyowned subsidiary of General American

Life Insurance Company. Cova Advisory

has engaged J.P. Morgan Investment

Management Inc., a wholly-owned

subsidiary of J.P. Morgan & Co., Inc., as

sub-adviser to the International Equity

Portfolio. The maximum management

fee Cova Advisory receives is .85% of

the net assets of the International Equity

Portfolio. Cova Advisory has undertaken

to pay the expenses of the International

Equity Portfolio until May 1, 1998, to

the extent that expenses of the portfolio,

other than investment advisory fees,

exceed the annual rate of 10% of the

portfolio’s average net assets.

9. The Global Equity Portfolio

commenced operations on April 9,

1990. After experiencing slow sales of

portfolio shares the management of

Cova Life and the management of Lord

Abbett determined that it was unlikely

that the Global Equity Portfolio would

grow to a sufficient size to promote

consistent investment performance or to

reduce operating expenses. The sale of

shares of the Global Equity Portfolio to

Variable Account One was discontinued

on May 1, 1992 (except for the

acceptance of certain additional

purchase payments received after that

date in connection with dollar cost

averaging program of Cova Life).

10. International Equity Portfolio

began selling its shares to Variable

Account One on May 1, 1996. As of

December 31, 1996, the portfolio had

$15,619,255 in net assets, more than six

times the asset size of the Global Equity

Portfolio. Management of Cova Life

believes that the International Equity

Portfolio will continue to grow at a

steady pace. In addition to sales to

Variable Account One, Cova Life

anticipates commencing sales of the

International Equity Portfolio to

additional separate accounts of Cova

Life and its affiliates in the near future;

that should result in a further increase

in the net assets of the International

Equity Portfolio.

11. Applicants propose to substitutes

shares of the International Equity

Portfolio of Cova Trust (the ‘‘substitute

fund’’) for shares of the Global Equity

Portfolio of Lord Abbett Fund (the

‘‘removed fund’’). The prospectuses for

the Contracts will be amended by

supplement to describe the proposed

substitution. The supplement will be

distributed to all Contract owners.

12. Affected Contract owners will not

incur any fees or charges as a result of

the substitution, nor will their rights or

the obligations of Cova Life under the

Contracts be altered in any way.

13. From the date of the supplement

until the date of the proposed

substitution, Contract owners may

transfer any or all of their respective

Contract value invested in the Global

Equity sub-account to another subaccount of Variable Account One

without any limitation or charge. For

the 30-day period following the

substitution, Cova Life will permit

transfers from the International Equity

sub-account to any other sub-account of

Variable Account One without any

limitation or charge being imposed. The

proposed substitution will not be

considered a ‘‘transfer’’ for purposes of

calculating any transfer fee that may

otherwise be payable under a Contract.

14. The proposed substitution will

take place at net asset value with no

change in the amount of any Contract

owner’s Contract value or in the dollar
Federal Register / Vol. 62, No. 58 / Wednesday, March 26, 1997 / Notices 97

value of his or her investment in

Variable Account One. Cova life will

redeem shares of the Global Equity

Portfolio in cash and purchase shares of

the International Equity Portfolio with

the proceeds.

15. Contract owners will not incur

any fees or charges as a result of the

proposed substitution, nor will their

rights 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 Cova Life. The proposed

substitution will not 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.

16. Within five days of the

substitution, affected Contract owners

will receive written notice of the

substitution reiterating their right to

make transfers from the International

Equity sub-account to any other subaccount of Variable Account One for a

period of 30 days from the date of the

notice without any limitation or charge

being imposed. Cova Life will include

in such mailing a supplement to the

prospectus of Variable Account One

which describes the substitution.

17. 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.

Applicants’ Legal Analysis and

Conditions

1. 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.’’

Applicants assert that 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 in effect might 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(b) affords

this protection to investors by

preventing a depositor or trustee of a

unit investment trust holding the shares

of one issuer from substitution for those

shares the shares of another issuer,

unless the Commission approves that

substitution.

2. Applicants maintain that the

purposes, terms and conditions of the

Substitution are consistent with the

principles and purposes of Section 26(b)

and do not entail any of the abuses that

Section 26(b) is designed to prevent.

Applicant assert that the substitute fund

is a suitable and appropriate investment

vehicle for Contract owners. Applicants

further assert that effecting the proposed

substitution will not result in greater

(aggregate) fees and charges under the

Contracts.

3. Applicants represent that the

proposed substitution will not result in

the type of costly forced redemption

that section 26(b) 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: prior to the

substitution and for a period of thirty

(30) days thereafter, Contract owners

may transfer Global Equity sub-account

values to any other sub-account of

Variable Account One without any

limitation or charge being imposed; the

investment objective of the substitute

fund is similar to that of the removed

fund; the substitution will be at the net

asset value of the respective portfolio

shares, with no change in a Contract

owner’s contract value or in the dollar

value of the Contract owner’s

investment in Variable Account One;

Contract owners will not incur any fees

or charges as a result of the proposed

substitution, nor will their rights 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 Cova Life; the

proposed substitution will not impose

any tax liability on Contract owners;

Contract owners may choose to

withdraw amounts credited to them

following the substitution under the

conditions that currently exist, subject

to any applicable deferred sales charge.

4. Applicants assert that the substitute

fund is substantially larger than the

removed fund, and that the substitute

fund should grow further. Applicants

anticipate that, after the proposed

substitution, the substitute fund will

provide Contract owners with

comparable or more favorable

investment results than would be the

case if the proposed substitution did not

take place.

5. Applicants also note that within 5

days after the proposed substitution,

any affected Contract owners will be

sent a written notice informing them

that shares of the International Equity

Portfolio have been substituted for

shares of the Global Equity Portfolio.

Cova Life will include in such a mailing

a supplement to the prospectus of

Variable Account one which describes

the substitution.

Conclusion

For the reasons set forth above,

Applicants represent that the order

requested, approving the proposed

substitution, is necessary and

appropriate in the public interest and

consistent with the protection of

investors and purposes fairly intended

by the policy and provisions of the 1940

Act and should be granted.

For the Commission, by the Division of

Investment management, pursuant to

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7645 Filed 3–25–97; 8:45 am]

BILLING CODE 8010–01–M

[Investment Company Act Release No.

22574; 811–7854]

The U.S. Stock Portfolio; Notice of

Application

March 20, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

deregistration under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: The U.S. Stock Portfolio.

RELEVANT ACT SECTION: Section 8(f).

SUMMARY OF APPLICATION: Applicant

requests an order declaring that it has

ceased to be an investment company.

FILING DATE: The application has filed on

February 21, 1997.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

April 14, 1997, and should be

accompanied by proof of service on the

applicant, 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 SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW., Washington, DC 20549.

Applicant, Elizabethan Square, Shedden