Federal Register / Vol. 63, No. 141 /Thursday, July 23, 1998 / Notices 39603

8. A prehearing conference in this

docket shall be held on Friday, August

14, 1998, at 9:30 a.m. in the

Commission’s hearing room.

9. The Secretary shall cause this

notice and order to be published in the

Federal Register.

Dated: July 20, 1998.

By the Commission.

Cyril J. Pittack,

Acting Secretary.

[FR Doc. 98–19666 Filed 7–22–98; 8:45 am]

BILLING CODE 7710–FW–P

SECURITIES AND EXCHANGE

COMMISSION

[Release No. IC–23317; File No. 812–10896]

Equitable Life Insurance Company of

Iowa, et al.; Notice of Application

July 16, 1998.

AGENCY: Securities and Exchange

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

ACTION: Notice of application for an

order of approval pursuant to Section

26(b) of the Investment Company Act of

1940 (the ‘‘1940 Act’’) and an order

granting exemptive relief pursuant to

Section 17(b) of the 1940 Act.

SUMMARY OF APPLICATION: Applicants

seek an order pursuant to Section 26(b)

of the 1940 Act approving the

substitution of shares of certain

portfolios of the GCG Trust for shares of

certain portfolios of the ESS Trust.

Applicants also seek an order, pursuant

to Section 17(b) of the 1940 Act,

granting exemptions from Section 17(a)

to permit Applicants to carry out the

substitutions by means of in-kind

redemption and purchase transactions,

and to permit Applicants to combine

certain subaccounts holding shares of

the same substitute fund after the

substitutions.

APPLICANTS: Equitable Life Insurance

Company of Iowa (‘‘Equitable’’),

Equitable Life Insurance Company of

Iowa Separate Account A (‘‘Equitable

Separate Account A’’), Golden

American Life Insurance Company

(‘‘Golden American’’), Golden American

Life Insurance Company Separate

Account A (‘‘Golden American Separate

Account A’’), Golden American Life

Insurance Company Separate Account B

(‘‘Golden American Separate Account

B’’), First Golden American Life

Insurance Company of New York (‘‘First

Golden’’), First Golden American Life

Insurance Company of New York

Separate Account NY–B (‘‘First Golden

Separate Account NY–B’’), The GCG

Trust (‘‘GCG Trust’’), and the EquiSelect Series Trust (‘‘ESS Trust’’)

(collectively, ‘‘Applicants’’).

FILING DATES: The application was filed

on December 15, 1997, and amended

and restated on March 18, 1998, and

July 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 SEC’s

Secretary 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 August 10, 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 request should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

N.W., Washington, DC 20549.

Applicants, Marilyn Talman, Esquire,

Golden American Life Insurance

Company, 1001 Jefferson Street, Suite

400, Wilmington, DE 19801.

FOR FURTHER INFORMATION CONTACT:

Megan Dunphy, Attorney, or Mark C.

Amorosi, 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

may be obtained for a fee from the SEC’s

Public Reference Branch, 450 Fifth

Street, N.W., Washington, DC 20549 (tel.

(202) 942–8090).

Applicants’ Representations

1. Equitable and Golden American are

stock life insurance companies

organized under the insurance laws of

Iowa and Delaware, respectively. Each

is authorized to write variable annuity

and variable life insurance policies in at

least 48 states and the District of

Columbia. First Golden is a stock life

insurance company organized under the

insurance laws of the state of New York,

and is authorized to write variable

annuity contracts in New York.

Equitable, Golden American and First

Golden (collectively, ‘‘Applicant

Insurance Companies’’) are indirect

wholly owned subsidiaries of ING

Groep, N.V. (‘‘ING’’), a global financial

services holding company.

2. Equitable Separate Account A,

Golden American Separate Account A,

Golden American Separate Account B

and First Golden Separate Account NY–

B (collectively ‘‘Applicant Separate

Accounts’’) are separate accounts for

which one of the Applicant Insurance

Companies serves as the sponsor and

depositor. Equitable serves as sponsor

and depositor of Equitable Separate

Account A; Golden American serves as

sponsor and depositor of Golden

American Separate Account A and

Golden American Separate Account B;

First Golden serves as the sponsor and

depositor of First Golden Separate

Account NY–B. Each Applicant

Separate Account is a segregated asset

account of its insurance company

sponsor and each is registered under the

1940 Act as a unit investment trust.

3. Each Applicant Separate Account

serves as a funding vehicle for certain

variable annuity or variable life

insurance contracts (collectively,

‘‘Variable Contracts’’) issued by the

Applicant Insurance Company of which

it is a part. Applicant Separate Accounts

are divided into separate subaccounts,

each dedicated to owning shares of a

designated investment portfolio of

either the GCG Trust (the ‘‘GCG

Subaccounts’’) or the ESS Trust (‘‘ESS

Subaccounts’’). Holders of any Variable

Contracts (‘‘Contractholders’’) may

select one or more of the investment

options available under the Variable

Contract held by allocating premiums

payable under such contract to that

subaccount of the relevant Applicant

Separate Account that corresponds to

the investment option desired.

4. The ESS Trust is registered under

the 1940 Act as an open-end,

management, services investment

company and currently offers nine

investment portfolios. Of these

portfolios, five—Growth & Income,

OTC, Total Return, Value+Growth and

Research Portfolios—invest primarily in

equity securities. The remaining

portfolios—Advantage, MortgageBacked Securities, International Fixed

Income and Money Market Portfolios—

invest primarily in fixed income

securities. Overall management services

are provided to the ESS Trust and each

of its individual series by Directed

Services, Inc. (‘‘DSI’’), an indirect,

wholly owned subsidiary of ING. DSI is

an investment adviser registered under

the Investment Advisers Act of 1940

(‘‘Advisers Act’’) and a broker-dealer

registered under the Securities

Exchange Act of 1934.

5. The GCG Trust is registered under

the 1940 Act as an open-end,

management, series investment

company. The GCG Trust offers shares

of twenty two separate investment

series, including six new investment

series created in anticipation of the
39604 Federal Register / Vol. 63, No. 141 /Thursday, July 23, 1998 / Notices

issuance of the Commission order

requested in the application and two

existing investment series that also will

be involved in the substitutions

described in the application. The new

series include (1) five series the

investment objectives and policies of

which will be identical to those of the

Growth & Income, Total Return,

Value+Growth, Research and

International Fixed Income Portfolios

currently offered by ESS Trust; and (2)

a new series, MidCap Growth Series,

that will have investment objectives and

policies substantially similar to those of

the OTC Portfolio currently offered by

the ESS Trust. The existing series

include the Liquid Asset Series and the

Limited Maturity Bond Series.

Applicants state that these series have

investment objectives and policies

similar to those of the portfolios which

they will replace.

6. Overall management services are

provided to the GCG Trust by DSI.

Under the terms of an investment

advisory agreement between GCG Trust

and DSI (‘‘GCG Trust Management

Agreement’’), DSI manages the business

and affairs of each of the several series

of the GCG Trust, subject to the control

of the Board of Trustees. Under the GCG

Trust Management Agreement, DSI is

entitled to receive a fee (‘‘Unified Fee’’)

for its services from each series of the

GCG Trust from which fee DSI pays the

fees of any subadviser or other service

providers. The Unified Fee is calculated

for each GCG Series on a percentage of

assets basis and in accordance with

schedules that provide, for some of the

GCG Series, fee reductions at specified

asset levels or ‘‘break points.’’ On

feature of the Unified Fee is that certain

of the GCG Series are grouped together

for the purpose of determining whether

a break point has been reached. As a

result, a GCG Series that is part of a

designated fee group is likely to realize

a reduction in the fee payable to DSI

more quickly than might otherwise be

the case.

7. Applicant Insurance Companies

have approved a proposal whereby the

ESS Subaccounts would substitute for

securities issued by each portfolio of the

ESS Trust (each, a ‘‘Replaced ESS

Portfolio’’), securities of a designated

series of the GCG Trust (each, a

‘‘Substitute GCG Series’’). Following

these transactions (collectively, the

‘‘Substitutions’’), Equitable Separate

Account A will have two subaccounts

holding shares of the GCG Limited

Maturity Bond Series and will combine

these subaccounts by transferring shares

at net asset value on the same date from

one subaccount to the other. The several

Substitutions are set forth in Table 1.

TABLE 1

ESS replaced portfolio Substitue GCG series

1 Growth & Income Portfolio ............................................................................................................................... Growth & Income Series.

2 Research Portfolio ............................................................................................................................................ Research Series.

3 Total Return Portfolio ....................................................................................................................................... Total Return Series.

4 Value+Growth Portfolio .................................................................................................................................... Value+Growth Series.

5 International Fixed Income Portfolio ................................................................................................................ Global Fixed Income Series.

6 OTC Portfolio .................................................................................................................................................... Mid-Cap Growth Series.

7 Money Market Portfolio .................................................................................................................................... Liquid Assets Series.

8 Mortgage-Backed Securities Portfolio .............................................................................................................. Limited Maturity Bond Series.

9 Advantage Portfolio .......................................................................................................................................... Limited Maturity Bond Series.

8. Applicants state that, for each of

the Substitutions numbers 1–5 in Table

1 above, the respective Substitute GCG

Series are ‘‘mirror’’ series of the

respective Replaced ESS Portfolios.

Applicants have concluded that, with

respect to each Substitution, the

investment objectives and policies of

the Substitute GCG Series are either

identical to, or sufficiently similar to,

those of the Replaced ESS Portfolios to

assure that the essential objectives and

risk expectations of Contractholders

with interests in any ESS Subaccount

(‘‘Affected Contractholders’’) can

continue to be met. Additionally,

Applicants state that each Substitute

GCG Series will be provided with

portfolio management services by the

same investment advisory organization

that currently serves the Replaced ESS

Portfolio.

9. Applicants state that the

Substitutions and the related

combination of subaccounts are part of

an overall business plan of Applicant

Insurance Companies to make their

respective products, including the

Variable Contracts, more competitive

and more efficient to administer and

oversee. Applicants state that, while DSI

currently provides virtually identical

management services to ESS Trust and

GGG Trust, performance of these

services are governed by two different

agreements. Service provided to ESS

Trust are performed pursuant to the ESS

Trust Management Contract, which

requires the Trust (not DSI) to pay for

services provided by third-party service

organizations, such as custody, fund

accounting, and transfer agency fees and

fees for legal and auditing expenses. In

contrast, services provided by DSI under

the GGG Trust Management Agreement

are offered under the Unified Fee

arrangement under which DSI is

responsible for paying virtually all of

the expenses associated with managing

GGG Trust, including the fees of thirdparty service organizations.

10. Applicant Insurance Companies

represent that the Substitutions are

appropriate for the following reasons:

(1) The implementation of the Unified

Fee, with respect to each of the

Substitute GGG Series, is likely to result

in certain economies of scale, which

savings will insure to the benefit of the

Affected Contractholders generally and,

in the case of seven of the nine ESS

Portfolios involved in the Substitutions,

will result in an immediate reduction in

the fees currently borne by Affected

Contractholders; (2) the Substitutions

will eliminate certain portfolios with

insufficient assets to remain cost

efficient; and (3) the Substitutions will

reduce the overlap among the

investment options associated with the

variable insurance products offered by

Applicant Insurance Companies and

thus reduce the potential for confusion

among Contractholders and prospective

investors.

11. Applicants state that, as of the

effective date of the Substitutions

(‘‘Effective Date’’), each Substitution

will be effected by the Applicant

Insurance Companies by redeeming

shares of the Replaced ESS Portfolios at

net asset value and using the proceeds

of such redemptions, which will be

effected in-kind, to purchase the

appropriate number of shares of the

Substitute GGG Series at net asset value.

Applicant Insurance Companies state

that they will bear the costs of the

Substitutions, including any legal,

accounting, brokerage, and other fees
Federal Register / Vol. 63, No. 141 /Thursday, July 23, 1998 / Notices 39605

and expenses relating to the

Substitutions, and that Affected

Contractholders will not incur any

additional fees or charges as a result of

the Substitutions, nor will their rights or

the obligations under any of the

Variable Contracts diminish in any way.

Applicants state that all redemptions of

shares of the Replaced ESS Portfolios

and purchases of shares of the

Substitute GGG Series will be effected

in accordance with Rule 22c–1 under

the 1940 Act. Applicants further state

that the Substitutions will not result in

any adverse tax consequences to the

Affected Contractholders, any change in

the economic interest or contract values

of any Affected Contractholder or any

change in the dollar value of any

Variable Contract held by an Affected

Contractholder.

12. Applicants state that Affected

Contractholders have been notified of

this Application by means of prospectus

supplements. Applicants represent that

prior to the Effective Date, each Affected

Contractholder will be furnished with a

copy of a prospectus relating to each of

the Substitute GGG Series, if one has not

already been forwarded to Affected

Contractholders, and a notice setting

forth the Effective Date for the

Substitutions. The notice will also

advise Affected Contractholders that

contract values attributable to

investments in the Replaced ESS

Portfolios may be transferred to any

other available subaccount without

charge, either prior to, or within 30 days

after the Effective Date.

13. Applicants state that each

Applicant Insurance Company will

furnish Affected Contractholders with a

confirmation of the substitutions within

five business days of the Substitution

that shows before and after account

values and details the transactions

effected on behalf of the respective

Affected Contractholder in connection

with the Substitutions.

14. Applicants maintain that the

combination of the two subaccounts of

Equitable Separate Account A that hold

shares of the Limited Maturity Bond

Series will not have any impact on the

value of the Variable Contracts

involved, the fees or rights of the

Affected Contractholders, or diminish in

any way the obligations of Equitable or

any other Applicant Insurance Company

under any Variable Contract. Equitable

will bear the costs of such combination,

including any legal or accounting fees

relating to them, and the Affected

Contractholders will not incur any fees

or charges as a result of such

combination. In addition, the

subaccount combination will not result

in any adverse tax consequences to the

Affected Contractholders, or any change

in the economic interest or contract

values of any Affected Contractholder.

Terms of the Substitutions and Related

Transactions

The significant terms of the

Substitutions described in the

application include:

1. The Substitute GGG Series have

objective and policies sufficiently

similar to the objectives and policies of

the Replaced ESS Portfolio so that the

objective of the Affected

Contractholders can continue to be met.

2. With one exception, the expense

ratios of the Substitute GGG Series will,

immediately following the Effective

Date, not exceed the expense ratios of

the Replaced ESS Portfoios (‘‘ESS

Expenses Level’’), absent significant

decreases in the asset levels of such

series. In the case of any Substitute GGG

Series the expense ratio of which

exceeds the ESS Expense Level

immediately following the Effective

Date, DSI will waive its fees and/or

reimburse the expenses of the relevant

Substitute GGG Series such that its

expense ratio does not exceed the ESS

Expense Level. DSI will continue to

waive its fees and/or reimburse

expenses, for each such Substitute GGG

Series as necessary in accordance with

this undertaking until December 31,

1999.

3. Affected Contractholders may

transfer assets from any ESS Subaccount

to any other subaccount available under

the Variable Contract held without

charge from the date of the notice that

the ESS Portfolios will be substituted

through a date at least 30 days following

the Effective Date. Affected

Contractholders may also withdraw

amounts under any contract held or

terminate their interest in any such

contract, in accordance with the terms

and conditions of any such contract,

including but not limited to payment of

any applicable surrender charge.

4. The Substitutions will be effected

at the net asset value of the respective

shares in conformity with Section 22(c)

of the 1940 Act and rule 22c–1

thereunder, without the imposition of

any transfer or similar charge by

Applicants.

5. The Substitutions will take place at

respective net asset value without

change in the amount or value of any

Variable Contract held by Affected

Contractholders. Affected

Contractholders will not incur any fees

or charges as a result of the

Substitutions, nor will their rights or the

obligations of Applicant Insurance

Companies under such Variable

Contracts be altered in any way. All

expenses incurred in connection with

the Substitutions, including legal,

accounting and other fees and expenses,

will be borne by Applicant Insurance

Companies or their subsidiaries.

6. Redemptions in kind will be

handled in a manner consistent with the

investment objectives, policies and

diversification requirements of the GCG

Substitute Series. Consistent with Rule

17a–7(d) under the 1940 Act, no

brokerage commissions, fees (except

customary transfer fees) or other

remuneration will be paid by the ESS

Replaced Portfolios, GCG Substitute

Series, or Affected Contractholders in

connection with the in-kind

transactions.

7. The Substitutions will not be

counted as transfers in determining the

limit on the total number of transfers

that Affected Contractholders are

permitted to make under the Variable

Contracts.

8. Neither the Substitutions nor the

subsequent transactions will alter in any

way the annuity, life or tax benefits

afforded under the Variable Contracts

held by any Affected Contractholder.

9. Each Applicant Insurance Company

will send to its Affected Contractholders

within five (5) business days of the

Substitutions a written confirmation

showing the before and after values

(which will not have changed as a result

of the Substitutions) and detailing the

transactions effected on behalf of the

respective Affected Contractholder with

regard to the Substititions.

Conditions of the Substitutions and

Related Transactions

Applicants state that the Substitutions

and related transactions described in the

application will not be completed

unless all of the following conditions

are met:

1. The Commission shall have issued

an order (i) approving the Substitutions

under Section 26(b) of the 1940 Act; and

(ii) exempting the in-kind redemptions

and the combination of subaccounts

from the provisions of Section 17(a) of

the 1940 Act as necessary to carry out

the transactions described in the

application.

2. Each Affected Contractholder will

have been sent (i) a copy of the effective

prospectus relating to each of the

Substitute GCG Series and any

necessary amendments to the

prospectuses relating to the Variable

Contracts; and (ii) as soon as reasonably

possible after the order has been issued

and prior to the Effective Date, a notice

describing the terms of the Substitutions

and the rights of the Affected

Contractholders in connection with the

Substitutions.
39606 Federal Register / Vol. 63, No. 141 /Thursday, July 23, 1998 / Notices

1All existing entities that currently intend to rely

on the order are named as applicants and any

Upper Tier Fund that may rely on this order in the

future will do so only in accordance with the terms

and conditions of the application.

3. Applicant Insurance Companies

shall have satisfied themselves, that (i)

the Variable Contracts allow the

substitution of investment in the

manner contemplated by the

Substitutions and related transactions

described herein; (ii) the transactions

can be consummated as described in the

application under applicable insurance

laws; and (iii) that any regulatory

requirements in each jurisdiction where

the Variable Contracts are qualified for

sale, have been complied with to the

extent necessary to complete the

transactions.

Applicants’ Legal Analysis

1. Section 26(b) of the 1940 Act

prohibits any depositor or trustee of a

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. Section 26(b) of the

1940 Act also provides that the

Commission shall issue an order

approving such substitution if the

evidence establishes that the

substitution is consistent with the

protection of investors and the purposes

fairly intended by the policies and

provisions of the 1940 Act.

2. Applicants request an order

pursuant to Section 26(b) of the 1940

Act approving the substitutions.

Applicants maintain that the

Substitutions, if implemented, would

not raise any of the concerns that

Congress sought to address when the

1940 Act was amended to include this

provision (e.g., that a substitution might

force shareholders dissatisfied with the

substituted security to redeem their

shares, thereby possibly incurring

additional sales or surrender charges.)

Applicants also maintain that, subject to

the terms and conditions summarized in

this notice, the Substitution is

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the 1940 Act.

3. Section 17(a)(1) and (2) of the 1940

Act generally prohibits an affiliated

person of a registered investment

company, or an affiliated person of an

affiliated person, from selling to or

purchasing a security from such

registered investment company.

Applicants may be deemed to be

affiliates of one another based upon the

definition of ‘‘affiliated person’’ in

Section 2(a)(3) of the 1940 Act. Because

the Substitutions and subsequent

combination of subaccounts will be

effected by means of an in-kind

redemption and purchase, Applicants

state that the Substitutions may be

deemed to involve one or more

purchases or sales of securities or

property between a registered

investment company and its affiliates.

4. Applicants request an order

pursuant to Section 17(b) of the 1940

Act exempting the Substitutions and

related transactions from the provisions

of Section 17(a) of the 1940 Act. Section

17(b) of the 1940 Act provides that the

Commission may grant an order

exempting proposed transactions from

the prohibition of Section 17(a) if: (i)

The terms of the proposed transaction,

including the consideration to be paid

and received, are reasonable and fair

and do not involve overreaching on the

part of any person concerned; (ii) the

proposed transaction is consistent with

the policy of each registered investment

company concerned; and (iii) the

proposed transaction is consistent with

the general purposes of the 1940 Act.

5. Applicants represent that the terms

of the proposed transactions, including

the consideration to be paid and

received, are reasonable and fair and do

not involve overreaching on the part of

any person concerned. Applicants

maintain that the interests of

Contractholders will not be diluted and

that the Substitutions will not effect any

change in economic interest, contract

value, or the dollar value of any

Variable Contract held by an Affected

Contractholder.

6. Applicants also state that the

Substitutions will take place in

accordance with procedures, adopted by

the Board of Trustees of each of the GCG

Trust and the ESS Trust, respectively,

designed to meet the requirements

enumerated in Rule 17a–7 under the

1940 Act, except that transactions be

effected in cash. Although the relief

afforded by Rule 17a–7 is not available

in connection with the Substitutions,

Applicants submit that structuring the

Substitutions to comply with the

requirements of that rule provides a

strong basis upon which the

Commission may base a finding that the

standards necessary to grant an order of

exemption pursuant to Section 17(b) of

the 1940 Act have been satisfied.

7. Applicants represent that the

transactions are consistent with the

investment policy of each investment

company involved, as recited in the

current prospectus relating to each

investment company, and the general

purposes of the 1940 Act, and 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 Substitutions and related

transactions should be granted.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 98–19651 Filed 7–22–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. IC–23318; 812–11104]

The RBB Fund, Inc. and BEA

Associates; Notice of Application

July 16, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under section 12(d)(1)(J) of the

Investment Company Act of 1940

(‘‘Act’’) for an exemption from section

12(d)(1)(G)(i)(II) of the Act.

SUMMARY OF APPLICATION: Applicants

request an order that would permit a

fund of funds relying on section

12(d)(1)(G) to invest directly in

securities and other instruments.

APPLICANTS: The RBB Fund, Inc. (the

‘‘Company’’) and BEA Associates

(‘‘BEA’’). The requested order also

would extend to any existing or future

open-end management investment

company or series thereof advised by

BEA (an ‘‘Upper Tier Fund’’) that

wishes to invest in a registered openend management investment company

or series thereof that is advised by BEA

and is part of the same ‘‘group of

investment companies’’ (as defined in

section 12(d)(1)(G)(ii) of the Act)

(together with the series of the Company

excluding the BEA Long-Short Equity

Fund, the ‘‘Underlying Funds’’) as the

investing Upper Tier Fund.1

FILING DATES: The application was filed

on April 15, 1998. Applicants have

agreed to file an amendment during the

notice period, the substance of which is

included in this notice.

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