Transamerica Life Insurance Company, et al.
ADDRESSES: Commission: 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. Each Account is a "separate account" as defined by Rule 0-1(e) under the 1940 Act, and each is registered under the 1940 Act as a unit investment trust. Each Account is divided into sub-accounts, which reflect the investment performance of certain registered investment companies, including
3. The Contracts are individual and group variable annuity contracts. Each of the prospectuses for the Contracts discloses that the issuing Company reserves the right, subject to compliance with applicable law, to substitute shares of another registered open-end management investment company for shares of a registered open-end management investment company held by a sub-account of an Account.
4.
FOOTNOTE 1 Effective
5.
6. Applicants propose, as set forth below, to substitute shares of the Replacement Funds for shares of the Existing Funds ("Substitutions") to fund the Contracts:
Existing fund Replacement fundWanger USA Transamerica T. Rowe Price Small Cap VP (Initial Class).Invesco V.I. Value Opportunities Fund Transamerica Barrow Hanley Dividend (Series II) Focused VP (Initial Class).
7. The 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. Applicants also state that the investment objectives and investment strategies of each
8. The investment objectives of each
Existing fund Replacement fundWanger USA seeks long-term capital Transamerica T. Rowe Price Small Cap appreciation VP seeks long-term growth of capital by investing primarily in common stocks of small growth companies. Invesco V.I. Value Opportunities Transamerica Barrow Hanley Dividend Fund's investment objective is Focused VP seeks total return gained long-term growth of capital from the combination of dividend yield, growth of dividends and capital appreciation.
9. Applicants state that the Substitutions are designed to allow Contract owners to continue their investment in similar or better investment options without interruption and at no additional cost to them. Contract owners with sub-account balances invested through the Accounts in shares of the Replacement Funds will have the same or lower total expense ratios taking into account fund expenses (including Rule 12b-1 fees, if any). With respect to all of the proposed Substitutions, the combined management fee and Rule 12b-1 fees paid by the
10. Applicants represent that as of the effective date of the Substitutions ("Effective Date") shares of the Existing Funds will be redeemed for cash. The Companies, on behalf of each
11. The Substitutions will take place at relative net asset value (in accordance with Rule 22c-1 under the 1940 Act) with no change in the amount of any affected Contract owner's contract value, cash value, accumulation value, account value or death benefit or in dollar value of his or her investment in the applicable Accounts. /2/ No brokerage commissions or other fees will be paid by either the Existing Funds or the Replacement Funds or by the affected Contract owners in connection with the Substitutions.
FOOTNOTE 2 Applicants state that, because the Substitutions will occur at relative net asset value, and the fees and charges under the Contracts will not change as a result of the Substitutions, the benefits offered by the guarantees under the Contracts will be the same immediately before and after the Substitutions. Applicants also state that what effect the Substitutions may have on the value of the benefits offered by the Contract guarantees would depend, among other things, on the relative future performance of the Existing Funds and Replacement Funds, which Applicants cannot predict. Nevertheless, Applicants note that at the time of the Substitutions, the Contracts will offer a comparable variety of investment options with as broad a range of risk/return characteristics. END FOOTNOTE
12. The affected Contract owners will not incur any fees or charges as a result of the Substitutions nor will their rights or the Companies' obligations under the Contracts be altered in any way. The Companies or their affiliates will pay all expenses and transaction costs of the Substitutions, including brokerage, legal, accounting, and other fees and expenses. The Substitutions will not cause the Contract fees and charges currently being paid by affected Contract owners to be greater after the Substitutions than before the Substitutions. Moreover, the Substitutions will not impose any tax liability on affected Contract owners.
13. As described in the application, after notification of the Substitution and for 30 days after the Effective Date, affected Contract owners may reallocate the sub-account value of an
14. All Contract owners affected by the Substitutions will be notified of this application by means of supplements to the Contract prospectuses at least 30 days prior to the Effective Date. The notice will advise Contract owners that from the date of the notice until the Effective Date, owners are permitted to make one transfer of Contract value out of the
15. If affected Contract owners reallocate account value during this 60 day period, there will be no charge for the reallocation of accumulated value from the
16. Within five (5) business days after the Effective Date, affected Contract owners will be sent a written confirmation, which will include confirmation that the Substitutions were carried out as previously notified, a restatement of the information set forth in the pre-Substitution notice and values of the Contract owner's position in the
Applicants' Legal Analysis
1. Applicants request that the Commission issue an order pursuant to Section 26(c) of the 1940 Act approving the Substitutions. Section 26(c) requires the depositor of a registered unit investment trust holding the securities of a single issuer to obtain Commission approval before substituting the securities held by the trust. Section 26(c) requires the Commission to issue such an order if the evidence establishes that the substitution is consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the 1940 Act.
2. Applicants submit that the terms and conditions of the Substitutions meet the standards set forth in Section 26(c) and assert that the replacement of an
3. Applicants also maintain that it is in the best interests of the Contract owners to substitute the
4. Each of the prospectuses for the Contracts discloses that the issuing Company reserves the right, subject to compliance with applicable law, to substitute shares of another registered open-end management investment company for shares of an open-end management investment company held by a sub-account of an Account.
5. Applicants also assert that none of the proposed Substitutions is of the type that Section 26(c) was designed to prevent. Unlike a traditional unit investment trust 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 account values into other sub-accounts. Moreover, the Contracts will offer affected 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 Substitution, therefore, will not result in the type of costly forced redemptions that Section 26(c) was designed to prevent. Applicants also maintain that the Substitutions are unlike the type of substitutions which Section 26(c) was designed to prevent in that by purchasing a Contract, Contract owners select much more than a particular registered management open-end investment company in which to invest their account values. They also select the specific type of insurance coverage offered by the Companies under their Contracts as well as other rights and privileges set forth in the Contracts.
Applicants' Conditions
Applicants agree that any order granting the requested relief will be subject to the following conditions:
1. The proposed Substitutions will not be effected unless the Companies determine that: (a) The Contracts allow the substitution of shares of registered open-end investment companies in the manner contemplated by the application; (b) the Substitutions can be consummated as described in the application under applicable insurance laws; and (c) any regulatory requirements in each jurisdiction where the Contracts are qualified for sale have been complied with to the extent necessary to complete the Substitutions.
2. The Companies or their affiliates will pay all expenses and transaction costs of the Substitutions, including legal and accounting expenses, any applicable brokerage expenses and other fees and expenses. No fees or charges will be assessed to the Contract owners to effect the Substitutions.
3. The proposed Substitutions will be effected at the relative net asset values 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 charges by Applicants. The Substitutions will be effected without change in the amount or value of any Contracts held by affected Contract owners.
4. The proposed Substitutions will in no way alter the tax treatment of affected Contract owners in connection with their Contracts, and no tax liability will arise for affected Contract owners as a result of the Substitutions.
5. The rights or obligations of the Companies under the Contracts of affected Contract owners will not be altered in any way.
6. Affected Contract owners will be permitted to make at least one transfer of Contract value from the sub-account investing in the
7. All affected Contract owners will be notified, at least 30 days before the Effective Date about: (a) The intended substitution of Existing Funds with the Replacement Funds; (b) the intended Effective Date; and (c) information with respect to transfers as set forth in Condition 6 above. In addition, the Companies will deliver to all affected Contract owners, at least 30 days before the Effective Date, a prospectus for each applicable
8. The Companies will deliver to each affected Contract owner within five (5) business days of the Effective Date a written confirmation which will include: (a) A confirmation that the Substitutions were carried out as previously notified; (b) a restatement of the information set forth in the pre-Substitution notice; and (c) values of the Contract owner's positions in the
9. After the Effective Date the Applicants agree not to change a
10. For two years following the Effective Date the net annual expenses of each
For the Commission, by the
Assistant Secretary.
[FR Doc. 2017-06247 Filed 3-29-17;
BILLING CODE 8011-01-P
Transamerica Advisors Life Insurance Company, et al.
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