MetLife Insurance Company of Connecticut, et al.; Notice of Application
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Notice of application for an order approving the substitution of certain securities pursuant to Section 26(c) of the Investment Company Act of 1940, as amended (the "1940 Act" or "Act") and an order of exemption pursuant to Section 17(b) of the Act from Section 17(a) of the Act.
Citation: "79 FR 18937"
Document Number: "Release No. IC-31000; File No. 812-14221"
"Notices"
APPLICANTS:MetLife of CT Separate Account Eleven for Variable Annuities ("Separate Account Eleven"),
The Insurance Companies and the Separate Accounts are referred to herein collectively as the "Substitution Applicants." The Insurance Companies, the Separate Accounts and the Investment Companies are referred to in this notice as the "Section 17 Applicants."
SUMMARY: Summary of Application: The Substitution Applicants seek an order pursuant to Section 26(c) of the 1940 Act, approving the substitution of certain shares of the Trust for shares of other registered investment companies unaffiliated with the Substitution Applicants (the "Substitutions") each of which is currently used as an underlying investment option for certain variable annuity contracts (collectively, the "Contracts"). The Section 17 Applicants seek an order pursuant to Section 17(b) of the 1940 Act exempting them from Section 17(a) of the Act to the extent necessary to permit them to engage in certain in-kind transactions ("In-Kind Transfers") in connection with the Substitutions.
DATES: Filing Date: The application was filed on
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 the Applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by
ADDRESSES: Secretary,
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission's Web site by searching for the file number, or for an applicant using the Company name box, at http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1.
2. Separate Account Eleven, Fund UL, Fund UL III, Separate Account One, Separate Account A, Separate Account UL, Separate Account II, and Separate Account Twenty-Seven are registered under the Act as unit investment trusts for the purpose of funding the Contracts. Security interests under the Contracts have been registered under the Securities Act of 1933.
3. Separate Account QPN is exempt from registration under the Act. Security interests under the Contracts have been registered under the Securities Act of 1933.
4. Separate Account CPPVUL1 serves as a separate account funding vehicle for certain Contracts that are exempt from registration under Section 4(2) of the Securities Act of 1933 and Regulation D thereunder.
5. Although Separate Account QPN and Separate Account CPPVUL1 are exempt from registration under the Act, they would be subject to the investment limitations of Section 12 but for the exclusion contained in Section 12(d)(1)(E) of the Act. To rely on such exclusion, an investment company that is not a registered investment company must, among other things, agree to refrain from substituting a security unless the Commission approves the substitution in the manner provided in Section 26 of the Act.
6.
7.
8. The Contracts permit the applicable
9.
The Substitution Applicants request an order from the Commission pursuant to Section 26(c) of the 1940 Act approving the proposed Substitutions of shares of the following series of the Trust, the Replacement Funds, for shares of the corresponding third party, unaffiliated underlying mutual funds, the Existing Funds, as shown in the following table:
Existing fund Replacement fund DWS Capital Growth VIP (Class B) Jennison Growth Portfolio (Class B). DWS Global Growth VIP (Class B) Oppenheimer Global Equity Portfolio (Class B).Invesco V.I. American Franchise Fund T. Rowe Price Large Cap Growth (Series I and Series II) Portfolio (Class A and Class B).Invesco V.I. American Value Fund Invesco Mid Cap Value Portfolio (Series II) (currently known as Lord Abbett Mid Cap Value Portfolio)(Class B).Invesco V.I. Global Real Estate Fund Clarion Global Real Estate Portfolio (Series I and Series II) (Class A and Class B).Invesco V.I. Growth and Income Fund Invesco Comstock Portfolio (Class A (Series I and Series II) and Class B). ClearBridge Variable All Cap Value T. Rowe Price Large Cap Value Portfolio (Class I) Portfolio (Class E). UIF U.S. Real Estate Portfolio (Class Clarion Global Real Estate Portfolio I) (Class B). Pioneer Disciplined Value VCT MFS(R) Value Portfolio (Class B). Portfolio (Class II) Pioneer Emerging Markets VCT Portfolio MFS(R) Emerging Markets Equity (Class II) Portfolio (Class A and Class B). Pioneer Equity Income VCT Portfolio Invesco Comstock Portfolio (Class B). (Class II) Pioneer Ibbotson Growth Allocation VCT MetLife Moderate to Aggressive Portfolio (Class II) Allocation Portfolio (Class B). Pioneer Ibbotson Moderate Allocation MetLife Moderate Allocation Portfolio VCT Portfolio (Class II) (Class B).
For Existing Funds and Replacement Funds with multiple classes, the application specifies which class of the
10. The following tables compare the fees and expenses of the
Fee and Expense Data as ofDecember 31, 2012 Existing fund Replacement fund DWS Capital Jennison Growth Growth VIP Portfolio (Class B) (Class B) Management Fee 0.37% 0.61% 12b-1 Fee 0.25% 0.25% Other Expenses 0.21% 0.03% Total Expenses 0.83% 0.89% Waivers 0.00% 0.07% Net Expenses 0.83% 0.82%
Existing fund Replacement fund DWS Global Oppenheimer Growth VIP Global Equity (Class B) Portfolio (Class B) Management Fee 0.92% 0.67% 12b-1 Fee 0.25% 0.25% Other Expenses 0.59% 0.09% Total Expenses 1.76% 1.01% Waivers 0.37% 0.02% Net Expenses 1.39% 0.99%
Existing fund Existing fund Replacement Replacement Invesco V.I. Invesco V.I. fund fund American American T. Rowe Price T. Rowe Price Franchise Fund Franchise Fund Large Cap Large Cap (Series I) (Series II) Growth Growth Portfolio Portfolio (Class A) (Class B) Management Fee 0.68% 0.68% 0.60% 0.60% 12b-1 Fee 0.00% 0.25% 0.00% 0.25% Other Expenses 0.30% 0.30% 0.04% 0.04% Total Expenses 0.98% 1.23% 0.64% 0.89% Waivers 0.08% 0.08% 0.01% 0.01% Net Expenses 0.90% 1.15% 0.63% 0.88%
Existing fund Replacement fund Invesco V.I. Invesco Mid Cap American Value Fund Value Portfolio (Series II) (Class B)+ Management Fee 0.72% 0.65% 12b-1 Fee 0.25% 0.25% Other Expenses 0.28% 0.04% Acquired Expenses 0.00% 0.06% Total Expenses 1.25% 1.00% Waivers 0.00% 0.02% Net Expenses 1.25% 0.98%
Existing fund Existing fund Replacement Replacement Invesco V.I. Invesco V.I. fund Clarion fund Clarion Global Real Global Real Global Real Global Real Estate Fund Estate Fund Estate Estate (Series I) (Series II) Portfolio Portfolio (Class A) (Class B) Management Fee 0.75% 0.75% 0.60% 0.60% 12b-1 Fee 0.00% 0.25% 0.00% 0.25% Other Expenses 0.39% 0.39% 0.06% 0.06% Total Expenses 1.14% 1.39% 0.66% 0.91% Waivers 0.00% 0.00% 0.00% 0.00% Net Expenses 1.14% 1.39% 0.66% 0.91%
Existing fund Existing fund Replacement Replacement Invesco V.I. Invesco V.I. fund Invesco fund Invesco Growth and Growth and Comstock Comstock Income Fund Income Fund Portfolio Portfolio (Series I) (Series II) (Class A) (Class B) Management Fee 0.56% 0.56% 0.57% 0.57% 12b-1 Fee 0.00% 0.25% 0.00% 0.25% Other Expenses 0.28% 0.28% 0.03% 0.03% Total Expenses 0.84% 1.09% 0.60% 0.85% Waivers 0.06% 0.06% 0.02% 0.02% Net Expenses 0.78% 1.03% 0.58% 0.83%
Existing fund Replacement fund T. Rowe ClearBridge Price Variable All Large Cap Cap Value Value Portfolio Portfolio (Class I) (Class E) Management Fee 0.75% 0.57% 12b-1 Fee 0.00% 0.15% Other Expenses 0.06% 0.02% Total Expenses 0.81% 0.74% Waivers 0.00% 0.00% Net Expenses 0.81% 0.74%
Existing fund Replacement fund UIF U.S. Clarion Global Real Estate Real Estate Portfolio Portfolio (Class I) (Class B) Management Fee 0.80% 0.60% 12b-1 Fee 0.00% 0.25% Other Expenses 0.30% 0.06% Total Expenses 1.10% 0.91% Waivers 0.00% 0.00% Net Expenses 1.10% 0.91%
Existing fund Replacement fund Pioneer MFS(R) Disciplined Value Value VCT Portfolio Portfolio (Class B) (Class II) Management Fee 0.70% 0.70% 12b-1 Fee 0.25% 0.25% Other Expenses 0.08% 0.03% Total Expenses 1.03% 0.98% Waivers 0.03% 0.13% Net Expenses 1.00% 0.85%
Existing Replacement Replacement fund fund fund Pioneer MFS(R) MFS(R) Emerging Emerging Emerging Markets Markets Markets VCT Equity Equity Portfolio Portfolio Portfolio (Class II) (Class A) (Class B) Management Fee 1.15% 0.91% 0.91% 12b-1 Fee 0.25% 0.00% 0.25% Other Expenses 0.30% 0.16% 0.16% Acquired Expenses 0.01% 0.00% 0.00% Total Expenses 1.71% 1.07% 1.32% Waivers 0.00% 0.02% 0.02% Net Expenses 1.71% 1.05% 1.30%
Existing fund Replacement fund Pioneer Invesco Comstock Equity Income Portfolio VCT Portfolio (Class B) (Class II) Management Fee 0.65% 0.57% 12b-1 Fee 0.25% 0.25% Other Expenses 0.10% 0.03% Total Expenses 1.00% 0.85% Waivers 0.00% 0.02% Net Expenses 1.00% 0.83%
Existing fund Replacement fund Pioneer MetLife Moderate Ibbotson Growth to Aggressive Allocation Allocation VCT Portfolio Portfolio (Class II) (Class B) Management Fee 0.17% 0.06% 12b-1 Fee 0.25% 0.25% Other Expenses 0.05% 0.01% Acquired Fund Fees and 0.84% 0.67% Expenses Acquired Management Fees 0.63% 0.63% * Total Expenses 1.31% 0.99% Waivers 0.00% 0.00% Net Expenses 1.31% 0.99% * This amount is the estimated amount of acquired fund fees and expenses attributable to the management fees of the underlying funds.
Existing fund Replacement fund Pioneer Ibbotson MetLife Moderate Moderate Allocation Allocation Portfolio VCT Portfolio (Class B) (Class II) Management Fee 0.17% 0.06% 12b-1 Fee 0.25% 0.25% Other Expenses 0.08% 0.00% Acquired Fund Fees 0.80% 0.63% and Expenses Acquired 0.58% 0.58% Management Fees * Total Expenses 1.30% 0.94% Waivers 0.02% 0.00% Net Expenses 1.28% 0.94% * This amount is the estimated amount of acquired fund fees and expenses attributable to the management fees of the underlying funds.
11.
12. The Substitution Applicants believe the Substitutions will provide significant benefits to Contract owners, including improved selection of sub-advisers and simplification of fund offerings through the elimination of overlapping offerings.
13. Based on generally better performance records and lower total expenses of the Replacement Funds, the Substitution Applicants believe that the sub-advisers to the Replacement Funds overall may provide more consistent performance for their Funds than the advisers or sub-advisers of the Existing Funds (other than those advisers or sub-advisers that manage both the
14. As a result of the Substitutions, the number of investment options offered under the Contracts may change slightly. That number, which currently ranges from three to 122, will range from three to 120 following the Substitutions. For the Contracts that will experience a reduction in the number of available investment options, the Applicants assert that none will be reduced by more than two investment options and all will have at least 15 available investment options after the Substitutions. With respect to products with fewer than 20 open investment options, only one product's investment options will be reduced, moving from 16 to 15 investment options.
15. The Substitutions will replace investment options advised by investment advisers that are not affiliated with the Substitution Applicants with funds for which
16. With respect to all of the proposed Substitutions, except for the DWS Capital Growth VIP/Jennison Growth Portfolio and
17. The Applicants assert the Substitutions will result in decreased net expense ratios, after waivers, ranging from 0.01% to 0.66%. Moreover, there will be no increase in Contract fees and expenses, including mortality and expense risk fees and administration and distribution fees charged to the Separate Accounts as a result of the Substitutions. The Substitution Applicants believe that the Replacement Funds have investment objectives, policies and risk profiles, as described in their prospectuses, that are substantially the same as, or sufficiently similar to, the corresponding Existing Funds to make those Replacement Funds appropriate candidates as substitutes. The Insurance Companies considered the performance history of the Existing Funds and the Replacement Funds and determined that no Contract owners would be materially adversely affected as a result of the Substitutions.
18. The share classes of the Replacement Funds are either identical to or less than the share classes of the Existing Funds with respect to the imposition of Rule 12b-1 fees currently imposed, except with respect to the substitution of ClearBridge Variable All Cap Value Portfolio/T. Rowe Price Large Cap Value Portfolio (Class E) and UIF U.S. Real Estate Portfolio/Clarion Global Real Estate Portfolio (Class B). However, the total expenses for the T. Rowe Price Large Cap Value Portfolio will be seven basis points lower than the total expenses of the
19.
Legal Analysis and Conditions
1. The Substitution Applicants request that the Commission issue an order pursuant to Section 26(c) of the Act approving the proposed substitutions.
2. Applicants represent that the Contracts permit the applicable
3. By a supplement to the prospectuses for the registered Contracts and Separate Accounts and private placement memoranda for the unregistered Contracts and Separate Accounts, each
4. The proposed Substitutions will take place at relative net asset value with no change in the amount of any Contract owner's Contract value, cash value, or death benefit or in the dollar value of his or her investment in the Separate Accounts.
5. The process for accomplishing the transfer of assets from each
6. Contract owners will not incur any fees or charges as a result of the proposed Substitutions, nor will their rights or an
7. In addition to the prospectus supplements distributed to owners of Contracts, within five business days after the proposed Substitutions are completed, Contract owners will be sent a written notice informing them that the Substitutions were carried out and that they may make one transfer of all Contract value or cash value under a Contract invested in any one of the sub-accounts on the date of the notice to one or more other sub-accounts available under their Contract at no cost and without regard to the usual limit on the frequency of transfers among sub-accounts or from the variable account options to the fixed account options. The written notice will also reiterate that (other than with respect to "market timing" activity) the
8.
9. The Substitution Applicants agree that for those who were Contract owners on the date of the proposed Substitutions, the Insurance Companies will reimburse, on the last business day of each fiscal period (not to exceed a fiscal quarter) during the twenty-four months following the date of the proposed Substitutions, those Contract owners whose sub-account invests in the
10. With respect to the ClearBridge Variable All Cap Value Portfolio/T. Rowe Price Large Cap Value Portfolio, DWS Capital Growth VIP/Jennison Growth Portfolio,
11. The Substitution Applicants further agree that, except with respect to the ClearBridge Variable All Cap Value Portfolio/T. Rowe Price Large Cap Value Portfolio, DWS Capital Growth VIP/Jennison Growth Portfolio,
12. With respect to the ClearBridge Variable All Cap Value Portfolio/T. Rowe Price Large Cap Value Portfolio, DWS Capital Growth VIP/Jennison Growth Portfolio,
13. In each case, the applicable Insurance Companies believe that it is in the best interests of the Contract owners to substitute the
14. The Substitution Applicants assert that Contract owners will be better off with the array of sub-accounts offered after the proposed Substitutions than they have been with the array of sub-accounts offered prior to the substitutions.
15. The Substitution Applicants represent that none of the proposed Substitutions is of the type that Section 26(c) was designed to prevent. Unlike traditional unit investment trusts where a depositor could only substitute an investment security in a manner which permanently affected all the investors in the trust, the Contracts provide each Contract owner with the right to exercise his or her own judgment and transfer Contract or cash values into other sub-accounts. Moreover, the Insurance Companies will offer Contract owners the opportunity to transfer amounts out of the affected sub-accounts into any of the remaining sub-accounts without cost or other disadvantage. The proposed Substitutions, therefore, will not result in the type of costly forced redemption which Section 26(c) was designed to prevent.
Section 17(b) Relief
1. The Section 17 Applicants request an order under Section 17(b) exempting them from the provisions of Section 17(a) to the extent necessary to permit the Insurance Companies to carry out each of the proposed Substitutions.
2. Section 17(a)(1) of the Act, in relevant part, prohibits any affiliated person of a registered investment company, or any affiliated person of such person, acting as principal, from knowingly selling any security or other property to that company. Section 17(a)(2) of the Act generally prohibits the persons described above, acting as principals, from knowingly purchasing any security or other property from the registered company.
3. Shares held by a separate account of an insurance company are legally owned by the insurance company, the Insurance Companies and their affiliates collectively own of record substantially all of the shares of
4. The Section 17 Applicants submit that the In-Kind Transactions, as described in the application, meet the conditions set forth in Section 17(b) of the 1940 Act.
5. Section 17 Applicants maintain that the terms of the proposed in-kind purchase transactions, including the consideration to be paid and received by each Fund involved, are reasonable, fair and do not involve overreaching principally because the transactions will conform with all but one of the conditions (that the consideration paid for the securities being purchased or sold may not be entirely cash) enumerated in Rule 17a-7 of the 1940 Act. The proposed transactions will take place at relative net asset value in conformity with the requirements of Section 22(c) of the Act and Rule 22c-1 thereunder with no change in the amount of any Contract owner's contract value or death benefit or in the dollar value of his or her investment in any of the Separate Accounts. The Applicants assert that Contract owners will not suffer any adverse tax consequences as a result of the substitutions, and the fees and charges under the Contracts will not increase because of the substitutions.
6. The Boards of Trustees of
7. The sale of shares of Replacement Funds for investment securities, as contemplated by the proposed
8. The Section 17 Applicants represent that the proposed in-kind purchases meet all of the requirements of Section 17(b) of the Act and that an exemption should be granted, to the extent necessary, from the provisions of Section 17(a).
Conclusion
Applicants assert that for the reasons summarized above that the proposed substitutions and related transactions meet the standards of Section 26(c) of the Act and are consistent with the standards of Section 17(b) of the Act and that the requested orders should be granted.
For the Commission, by the
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-07512 Filed 4-3-14;
BILLING CODE 8011-01-P
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