SEC Company Response from TRANSAMERICA SERIES TRUST (CIK 0000778207) — Apr 22, 2020
TRANSAMERICA SERIES TRUST (CIK 0000778207)
Date: April 22, 2020 · CIK: 0000778207 · Accession: 0001683863-20-004681
AI Filing Summary & Sentiment
File numbers found in text: 811-04419
Letter
VIA EDGAR CORRESPONDENCE United States Securities and Exchange Commission Division of Investment Management Washington, DC 20549-0102 Re: Transamerica Series Trust (the "Registrant") (File Nos. 033-00507; 811-04419)
Dear Mr. Cowan:
On behalf of the Registrant, we are filing this letter to respond in writing to the Staff's comments on the post-effective amendment to the Registrant's Registration Statement on Form N-1A (the "Amendment") (Accession Number: 0001193125- 20-052962) filed with the Securities and Exchange Commission (the "Commission" or the "SEC") under Rule 485(a) of the Securities Act of 1933, as amended (the "1933 Act"), on February 27, 2020 to, among other things, update disclosure related to changes to the sub-adviser, investment objective, and certain investment strategies and risks of Transamerica Morgan Stanley Global Allocation VP (the "Underlying Portfolio") and changes to certain investment strategies and risks of Transamerica Morgan Stanley Global Allocation Managed Risk – Balanced VP (the "Portfolio" and, together with the Underlying Portfolio, the "Portfolios"). The Staff's comments were conveyed to the Registrant in writing on March 30, 2020.
The Staff noted that all comments to the Portfolios' respective summary prospectuses also generally apply to the corresponding disclosure in the sections of the statutory prospectus titled "More on Each Portfolio's Strategies and Investments" and "More on the Risks of Investing in Each Portfolio."
Below are the Staff's comments on the Amendment and the Registrant's responses thereto.
General Summary Prospectus Comments:
1.Fees and Expenses – Annual Fund Operating Expenses: Please provide the completed fee tables for the Portfolios in the response letter to these comments at least five days prior to the Portfolios' Rule 485(b) filing.
Response: The completed fee tables are attached hereto as Appendix A.
2.Fees and Expenses – Example: Please revise the sentence below as noted:
The Example assumes that you invest $10,000 in the portfolio for the time periods indicated and then redeem or hold all shares at the end of those periods.
Response: The Registrant respectfully declines to make the requested change as the Registrant believes the current Expense Example disclosure is consistent with the requirements of Item 3 of Form N-1A.
3.Principal Investment Strategies: The Staff notes that the Portfolios' names includes the term "global." Please expressly describe how the Portfolios will "invest [their] assets in investments that are tied economically to a number of countries throughout the world." See Investment Company Names, Investment Company Act Release No. 24828, at n. 42 (Jan. 17, 2001). For example, each Portfolio could include a policy that, under normal market conditions, it will invest significantly (e.g., at least 40% of its assets, unless market conditions are not deemed favorable, in which case the Portfolio would invest at least 30% of its assets) in companies organized or located in multiple countries outside the United States or doing a substantial amount of business in multiple countries outside the United States.
Response: The Registrant has made changes in response to the Staff's comment.
4.Principal Investment Strategies: In the Portfolios' principal investment strategies, please (i) clarify that the Underlying Portfolio's equity portion may invest in companies of all market capitalizations (small, mid and large) as indicated in the Principal Risks section and (ii) with respect to the portion of the Underlying Portfolio's assets invested in fixed income securities, disclose whether there are any criteria as to credit quality, maturity or duration.
Response: The Registrant has made changes in response to the Staff's comment.
5.Principal Investment Strategies/Principal Risks: The Staff notes that the Underlying Portfolio invests in convertible securities. Please confirm supplementally whether the Underlying Portfolio invests or intends to invest in contingent convertible securities ("CoCos"), and provide the amount of the Underlying Portfolio's current investment in CoCos. If the Underlying Portfolio invests or intends to invest in CoCos, the Registrant should consider what, if any, disclosure is appropriate. The type and location of such disclosure will depend on, among other things, the extent to which the Underlying Portfolio invests in CoCos, and the characteristics of the CoCos, (e.g., the credit quality, the conversion triggers). If CoCos are or will be a principal type of investment for the Underlying Portfolio, the Portfolios' principal investment strategies should describe the CoCos in which it will invest and the Portfolios' principal risks should include appropriate risk disclosure.
Response: The Registrant confirms that the Underlying Portfolio does not invest or intend to invest in CoCos.
6.Principal Investment Strategies: Please disclose the Underlying Portfolio's allocation between equity and fixed income investments.
Response: The Registrant has made changes in response to the Staff's comment.
7.Principal Investment Strategies/Principal Risks: If investment in floating rate loans is a principal investment strategy of the Underlying Portfolio, please provide a specific floating rate risk in Item 4 and Item 9 for each Portfolio, and also disclose whether the expected discontinuation of LIBOR is a principal risk for the Portfolios. If the floating rate loans in which the Underlying Portfolio invests include covenant lite loans, please specify and include related risks. The floating rate loans risk disclosure should also disclose the fact that investments in bank loans may not be securities and therefore may not have the protections afforded by the federal securities laws, and that settlement could take longer than seven days.
Response: The Registrant has removed floating rate loans from the principal investment strategies of the Portfolio and Underlying Portfolio. The Registrant notes that floating rate loans remain in the Item 9 strategy disclosure for both Portfolios. The Registrant further notes that risks associated with floating rate loans are addressed in the "Floating Rate Loans" risk included in Item 9, and that risks associated with the expected discontinuation of the use of LIBOR, including as such risks relate to floating rate loans, are addressed in both the "LIBOR" risk and the "Floating Rate Loans" risk included in Item 9. It is also noted that the "Floating Rate Loans" risk in Item 9 discloses that certain courts have determined that floating rate loans are not securities and, therefore, purchasers may not be entitled to the anti-fraud protections of the federal securities laws. The Registrant confirms that the Underlying Portfolio does not invest in covenant lite loans or bank loans, but it has made changes to the Item 9 "Floating Rate Loans" and "Loans" risks in response to the Staff's comment, as certain other series of the Registrant that will be included in the combined prospectus may invest in such loans.
8.Principal Investment Strategies/Principal Risks: Please clarify whether "mortgage-related securities" include: non- investment grade, private (i.e., non-agency) MBS (residential or commercial), particularly lower-rated tranches. If
the Underlying Portfolio may invest significantly (> 15%) in such securities, given the liquidity profile of these investments, please explain how the Underlying Portfolio determined that its investment strategy is appropriate for the open-end structure. Your response should include general market data on these types of investments and information concerning the relevant factors referenced in the release adopting Rule 22e-4 under the 1940 Act. Investment Company Liquidity Risk Management Programs, Investment Company Act Release No. 32315 (Oct. 13, 2016) at pp. 154-155.
Response: The Registrant confirms that "mortgage-related securities" include non-investment grade, private (i.e., non-agency) and MBS (residential or commercial), and notes that investments in such instruments will not exceed 15% of the Underlying Portfolio's net assets. The Registrant believes that such limited investments in these instruments are appropriate for the Underlying Portfolio.
9.Principal Investment Strategies/Principal Risks: In the principal investment strategy for each Portfolio, please add ", commonly referred to as 'junk' bonds" to the end of the sentence that currently reads "The portfolio may invest a portion of its assets in below investment grade fixed-income securities." Please also specify what portion of the Underlying Portfolio's assets will be invested in such instruments. If a significant portion of the Underlying Portfolio's fixed income investments will be invested in securities that are below investment grade or at the lower ranges of investment grade, please revise the Portfolios' principal investment strategies to clarify this and tailor risk disclosure to address the risks of these investments.
Response: The Registrant has removed below grade fixed-income securities from the Portfolios' principal investment strategies and risks. The Registrant notes that below grade fixed-income securities remain in each Portfolio's Item 9 strategy disclosure, and that the Registrant has made the requested addition to the sentence in question.
10.Principal Investment Strategies/Principal Risks: Significant market events have occurred since this post-effective amendment was filed as a result of the COVID-19 pandemic. Please consider whether the Portfolios' disclosures, including risk disclosures, should be revised based on how these events are affecting both debt and equity markets.
Response: The Registrant has supplemented certain disclosures in light of recent events.
11.Principal Investment Strategies/Principal Risks: While the Portfolios may alphabetize principal risks after the most significant ones are shown first, please delete the disclosure suggesting there are "key risks." Also, please consider whether risks should be prioritized differently for the Underlying Portfolio and the Portfolio, as the risk ordering for each is currently the same.
Response: The Staff's comment regarding the use of the phrase "key risks" is noted and will be considered in connection with a future update. With respect to the Staff's comment regarding risk prioritization, the Registrant notes that the risks have been re-ordered to reflect their priority in relation to each Portfolio.
12.Principal Investment Strategies/Principal Risks: For any controlled foreign corporations ("CFC"), including any subsidiary(ies) of the CFC, please disclose the following:
∙Disclose that the Underlying Portfolio complies with the provisions of the Investment Company Act of 1940, as amended (the "1940 Act") governing investment policies (Section 8) and capital structure and leverage (Section 18) on an aggregate basis with the CFC.
Response: The Registrant confirms that the Underlying Portfolio complies with the provisions of Section 8 of the 1940 Act governing investment policies and the capital structure and leverage restrictions set forth in Section 18 of the 1940 Act, in each case on an aggregate basis with the Underlying Portfolio's CFC. However, the Registrant respectfully submits that disclosure to this effect is not necessary.
∙Disclose that each investment adviser to the CFC complies with provisions of the 1940 Act relating to investment advisory contracts (Section 15) as an investment adviser under Section 2(a)(20) of the 1940 Act. The investment advisory agreement between the CFC and its investment adviser is a material contract that should be included as an exhibit to the registration statement. If the same person is the adviser to both the Underlying Portfolio and the CFC, then, for purposes of complying with Section 15(c), the reviews of the Underlying Portfolio's and the CFC's investment advisory agreements may be combined.
Response: The Registrant respectfully submits that the CFC is not a registered investment company under the 1940 Act, and therefore is not required to comply with the requirements of the 1940 Act applicable to registered investment companies, including Section 15. However, the investment manager and sub-adviser to the CFC have been approved by the Underlying Portfolio's Board of Trustees in accordance with Section 15 of the 1940 Act. In addition, the Registrant considers the investment management and sub-advisory agreements with the CFC not to be material contracts of the Portfolio. Accordingly, the Registrant has not included those agreements as exhibits to the Registrant's registration statement.
∙Disclose that the CFC complies with provisions relating to affiliated transactions and custody (Section 17). Identify the custodian of the CFC.
Response: The Registrant respectfully submits that the CFC is not a registered investment company under the 1940 Act, and therefore is not required to comply with the requirements of the 1940 Act applicable to registered investment companies, including Section 17. However, the Registrant applies the provisions relating to affiliated transactions and custody set forth in Section 17 of the 1940 Act and/or the rules thereunder to the CFC. The CFC has the same custodian as the Underlying Portfolio, State Street Bank and Trust Company. However, the Registrant respectfully submits that disclosure to this effect is not necessary.
∙If the Underlying Portfolio has not received a private letter ruling, state its basis for determining that such undistributed income is qualifying income, such as an opinion of counsel.
Response: The Registrant notes that the Underlying Portfolio has not received a private letter ruling, but has received an opinion of counsel
In addition, please confirm in correspondence that (i) the financial statements of the CFC will be consolidated with those of the Underlying Portfolio, (ii) the CFC's management fee (including any performance fee) will be included in "Management fees" and the CFC's expenses will be included in "Other expenses" in the Underlying Portfolio's prospectus fee table, (iii) the CFC and its board of directors will agree to designate an agent for service of process in the United States, and (iv) the CFC and its board of directors will agree to inspection by the Staff of the CFC's books and records, which will be maintained in accordance with Section 31 of the Investment Company Act and the rules thereunder.
Response: The Registrant so confirms.
13.Principal Risks: Tailor the Item 4 Derivatives disclosure to derivatives instruments in which each Portfolio invests (i.e., futures, options, swaps, and foreign currency forward exchange contracts) and provide more detail in the corresponding Item 9 "Derivatives" risk.
Response: The Registrant considers the current risk disclosure appropriate.
14.Principal Investment Strategies/Principal Risks: Please disclose if frequent trading is a principal investment strategy of the Underlying Portfolio.
Response: The Registrant believes the current disclosure is appropriate as the Underlying Portfolio is actively managed and tactically allocates its assets, and may purchase and sell securities without regard to the length of time held.
15.Principal Invest
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1801 California Street, Suite 5200
Denver, Colorado 80202
April 22, 2020
VIA EDGAR CORRESPONDENCE
Mr. Mark Cowan
United States Securities and Exchange Commission
Division of Investment Management
100 F Street, NE
Washington, DC 20549-0102
Re:
Transamerica Series Trust (the "Registrant")
(File Nos. 033-00507; 811-04419)
Dear Mr. Cowan:
On behalf of the Registrant, we are filing this letter to respond in writing to the Staff's comments on the post-effective amendment to the Registrant's Registration Statement on Form N-1A (the "Amendment") (Accession Number: 0001193125- 20-052962) filed with the Securities and Exchange Commission (the "Commission" or the "SEC") under Rule 485(a) of the Securities Act of 1933, as amended (the "1933 Act"), on February 27, 2020 to, among other things, update disclosure related to changes to the sub-adviser, investment objective, and certain investment strategies and risks of Transamerica Morgan Stanley Global Allocation VP (the "Underlying Portfolio") and changes to certain investment strategies and risks of Transamerica Morgan Stanley Global Allocation Managed Risk – Balanced VP (the "Portfolio" and, together with the Underlying Portfolio, the "Portfolios"). The Staff's comments were conveyed to the Registrant in writing on March 30, 2020.
The Staff noted that all comments to the Portfolios' respective summary prospectuses also generally apply to the corresponding disclosure in the sections of the statutory prospectus titled "More on Each Portfolio's Strategies and Investments" and "More on the Risks of Investing in Each Portfolio."
Below are the Staff's comments on the Amendment and the Registrant's responses thereto.
General Summary Prospectus Comments:
1.Fees and Expenses – Annual Fund Operating Expenses: Please provide the completed fee tables for the Portfolios in the response letter to these comments at least five days prior to the Portfolios' Rule 485(b) filing.
Response: The completed fee tables are attached hereto as Appendix A.
2.Fees and Expenses – Example: Please revise the sentence below as noted:
The Example assumes that you invest $10,000 in the portfolio for the time periods indicated and then redeem or hold all shares at the end of those periods.
Response: The Registrant respectfully declines to make the requested change as the Registrant believes the current Expense Example disclosure is consistent with the requirements of Item 3 of Form N-1A.
3.Principal Investment Strategies: The Staff notes that the Portfolios' names includes the term "global." Please expressly describe how the Portfolios will "invest [their] assets in investments that are tied economically to a number of countries throughout the world." See Investment Company Names, Investment Company Act Release No. 24828, at n. 42 (Jan. 17, 2001). For example, each Portfolio could include a policy that, under normal market conditions, it will invest significantly (e.g., at least 40% of its assets, unless market conditions are not deemed favorable, in which case the Portfolio would invest at least 30% of its assets) in companies organized or located in multiple countries outside the United States or doing a substantial amount of business in multiple countries outside the United States.
Response: The Registrant has made changes in response to the Staff's comment.
4.Principal Investment Strategies: In the Portfolios' principal investment strategies, please (i) clarify that the Underlying Portfolio's equity portion may invest in companies of all market capitalizations (small, mid and large) as indicated in the Principal Risks section and (ii) with respect to the portion of the Underlying Portfolio's assets invested in fixed income securities, disclose whether there are any criteria as to credit quality, maturity or duration.
Response: The Registrant has made changes in response to the Staff's comment.
5.Principal Investment Strategies/Principal Risks: The Staff notes that the Underlying Portfolio invests in convertible securities. Please confirm supplementally whether the Underlying Portfolio invests or intends to invest in contingent convertible securities ("CoCos"), and provide the amount of the Underlying Portfolio's current investment in CoCos. If the Underlying Portfolio invests or intends to invest in CoCos, the Registrant should consider what, if any, disclosure is appropriate. The type and location of such disclosure will depend on, among other things, the extent to which the Underlying Portfolio invests in CoCos, and the characteristics of the CoCos, (e.g., the credit quality, the conversion triggers). If CoCos are or will be a principal type of investment for the Underlying Portfolio, the Portfolios' principal investment strategies should describe the CoCos in which it will invest and the Portfolios' principal risks should include appropriate risk disclosure.
Response: The Registrant confirms that the Underlying Portfolio does not invest or intend to invest in CoCos.
6.Principal Investment Strategies: Please disclose the Underlying Portfolio's allocation between equity and fixed income investments.
Response: The Registrant has made changes in response to the Staff's comment.
7.Principal Investment Strategies/Principal Risks: If investment in floating rate loans is a principal investment strategy of the Underlying Portfolio, please provide a specific floating rate risk in Item 4 and Item 9 for each Portfolio, and also disclose whether the expected discontinuation of LIBOR is a principal risk for the Portfolios. If the floating rate loans in which the Underlying Portfolio invests include covenant lite loans, please specify and include related risks. The floating rate loans risk disclosure should also disclose the fact that investments in bank loans may not be securities and therefore may not have the protections afforded by the federal securities laws, and that settlement could take longer than seven days.
Response: The Registrant has removed floating rate loans from the principal investment strategies of the Portfolio and Underlying Portfolio. The Registrant notes that floating rate loans remain in the Item 9 strategy disclosure for both Portfolios. The Registrant further notes that risks associated with floating rate loans are addressed in the "Floating Rate Loans" risk included in Item 9, and that risks associated with the expected discontinuation of the use of LIBOR, including as such risks relate to floating rate loans, are addressed in both the "LIBOR" risk and the "Floating Rate Loans" risk included in Item 9. It is also noted that the "Floating Rate Loans" risk in Item 9 discloses that certain courts have determined that floating rate loans are not securities and, therefore, purchasers may not be entitled to the anti-fraud protections of the federal securities laws. The Registrant confirms that the Underlying Portfolio does not invest in covenant lite loans or bank loans, but it has made changes to the Item 9 "Floating Rate Loans" and "Loans" risks in response to the Staff's comment, as certain other series of the Registrant that will be included in the combined prospectus may invest in such loans.
8.Principal Investment Strategies/Principal Risks: Please clarify whether "mortgage-related securities" include: non- investment grade, private (i.e., non-agency) MBS (residential or commercial), particularly lower-rated tranches. If
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the Underlying Portfolio may invest significantly (> 15%) in such securities, given the liquidity profile of these investments, please explain how the Underlying Portfolio determined that its investment strategy is appropriate for the open-end structure. Your response should include general market data on these types of investments and information concerning the relevant factors referenced in the release adopting Rule 22e-4 under the 1940 Act. Investment Company Liquidity Risk Management Programs, Investment Company Act Release No. 32315 (Oct. 13, 2016) at pp. 154-155.
Response: The Registrant confirms that "mortgage-related securities" include non-investment grade, private (i.e., non-agency) and MBS (residential or commercial), and notes that investments in such instruments will not exceed 15% of the Underlying Portfolio's net assets. The Registrant believes that such limited investments in these instruments are appropriate for the Underlying Portfolio.
9.Principal Investment Strategies/Principal Risks: In the principal investment strategy for each Portfolio, please add ", commonly referred to as 'junk' bonds" to the end of the sentence that currently reads "The portfolio may invest a portion of its assets in below investment grade fixed-income securities." Please also specify what portion of the Underlying Portfolio's assets will be invested in such instruments. If a significant portion of the Underlying Portfolio's fixed income investments will be invested in securities that are below investment grade or at the lower ranges of investment grade, please revise the Portfolios' principal investment strategies to clarify this and tailor risk disclosure to address the risks of these investments.
Response: The Registrant has removed below grade fixed-income securities from the Portfolios' principal investment strategies and risks. The Registrant notes that below grade fixed-income securities remain in each Portfolio's Item 9 strategy disclosure, and that the Registrant has made the requested addition to the sentence in question.
10.Principal Investment Strategies/Principal Risks: Significant market events have occurred since this post-effective amendment was filed as a result of the COVID-19 pandemic. Please consider whether the Portfolios' disclosures, including risk disclosures, should be revised based on how these events are affecting both debt and equity markets.
Response: The Registrant has supplemented certain disclosures in light of recent events.
11.Principal Investment Strategies/Principal Risks: While the Portfolios may alphabetize principal risks after the most significant ones are shown first, please delete the disclosure suggesting there are "key risks." Also, please consider whether risks should be prioritized differently for the Underlying Portfolio and the Portfolio, as the risk ordering for each is currently the same.
Response: The Staff's comment regarding the use of the phrase "key risks" is noted and will be considered in connection with a future update. With respect to the Staff's comment regarding risk prioritization, the Registrant notes that the risks have been re-ordered to reflect their priority in relation to each Portfolio.
12.Principal Investment Strategies/Principal Risks: For any controlled foreign corporations ("CFC"), including any subsidiary(ies) of the CFC, please disclose the following:
∙Disclose that the Underlying Portfolio complies with the provisions of the Investment Company Act of 1940, as amended (the "1940 Act") governing investment policies (Section 8) and capital structure and leverage (Section 18) on an aggregate basis with the CFC.
Response: The Registrant confirms that the Underlying Portfolio complies with the provisions of Section 8 of the 1940 Act governing investment policies and the capital structure and leverage restrictions set forth in Section 18 of the 1940 Act, in each case on an aggregate basis with the Underlying Portfolio's CFC. However, the Registrant respectfully submits that disclosure to this effect is not necessary.
∙Disclose that each investment adviser to the CFC complies with provisions of the 1940 Act relating to investment advisory contracts (Section 15) as an investment adviser under Section 2(a)(20) of the 1940 Act. The investment advisory agreement between the CFC and its investment adviser is a material contract that should be included as an exhibit to the registration statement. If the same person is the adviser to both the Underlying Portfolio and the CFC, then, for purposes of complying with Section 15(c), the reviews of the Underlying Portfolio's and the CFC's investment advisory agreements may be combined.
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Response: The Registrant respectfully submits that the CFC is not a registered investment company under the 1940 Act, and therefore is not required to comply with the requirements of the 1940 Act applicable to registered investment companies, including Section 15. However, the investment manager and sub-adviser to the CFC have been approved by the Underlying Portfolio's Board of Trustees in accordance with Section 15 of the 1940 Act. In addition, the Registrant considers the investment management and sub-advisory agreements with the CFC not to be material contracts of the Portfolio. Accordingly, the Registrant has not included those agreements as exhibits to the Registrant's registration statement.
∙Disclose that the CFC complies with provisions relating to affiliated transactions and custody (Section 17). Identify the custodian of the CFC.
Response: The Registrant respectfully submits that the CFC is not a registered investment company under the 1940 Act, and therefore is not required to comply with the requirements of the 1940 Act applicable to registered investment companies, including Section 17. However, the Registrant applies the provisions relating to affiliated transactions and custody set forth in Section 17 of the 1940 Act and/or the rules thereunder to the CFC. The CFC has the same custodian as the Underlying Portfolio, State Street Bank and Trust Company. However, the Registrant respectfully submits that disclosure to this effect is not necessary.
∙If the Underlying Portfolio has not received a private letter ruling, state its basis for determining that such undistributed income is qualifying income, such as an opinion of counsel.
Response: The Registrant notes that the Underlying Portfolio has not received a private letter ruling, but has received an opinion of counsel
In addition, please confirm in correspondence that (i) the financial statements of the CFC will be consolidated with those of the Underlying Portfolio, (ii) the CFC's management fee (including any performance fee) will be included in "Management fees" and the CFC's expenses will be included in "Other expenses" in the Underlying Portfolio's prospectus fee table, (iii) the CFC and its board of directors will agree to designate an agent for service of process in the United States, and (iv) the CFC and its board of directors will agree to inspection by the Staff of the CFC's books and records, which will be maintained in accordance with Section 31 of the Investment Company Act and the rules thereunder.
Response: The Registrant so confirms.
13.Principal Risks: Tailor the Item 4 Derivatives disclosure to derivatives instruments in which each Portfolio invests (i.e., futures, options, swaps, and foreign currency forward exchange contracts) and provide more detail in the corresponding Item 9 "Derivatives" risk.
Response: The Registrant considers the current risk disclosure appropriate.
14.Principal Investment Strategies/Principal Risks: Please disclose if frequent trading is a principal investment strategy of the Underlying Portfolio.
Response: The Registrant believes the current disclosure is appropriate as the Underlying Portfolio is actively managed and tactically allocates its assets, and may purchase and sell securities without regard to the length of time held.
15.Principal Invest