Federal Register / Vol. 5, No. 11 / Tuesday, January 18, 2000 / Notices 2651

Form #(s) Annual

responses

Estimated

completion

time (min)

Burden (hrs)

G–421f ..................................................................................................................................................... 300 5 25

ADDITIONAL INFORMATION OR COMMENTS:

To request more information or to

obtain a copy of the information

collection justification, forms, and/or

supporting material, please call the RRB

Clearance Officer at (312) 751–3363.

Comments regarding the information

collection should be addressed to

Ronald J. Hodapp, Railroad Retirement

Board, 844 N. Rush Street, Chicago,

Illinois 60611–2092. Written comments

should be received within 60 days of

this notice.

Chuck Mierzwa,

Clearance Officer.

[FR Doc. 00–1117 Filed 1–14–00; 8:45 am]

BILLING CODE 7905–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. IC–24237; File No. 812–11638]

Pacific Life Insurance Company, et al.;

Notice of Application

January 11, 2000.

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 ‘‘Act’’) and an order granting

exemptive relief pursuant to Section

17(b) of the Act from the provisions of

section 17(a) of the Act.

SUMMARY OF APPLICATION: Applicants

seek an order under Section 26(b) for

the Act to permit each subaccount of

Pacific Life Insurance Company

(‘‘Pacific Life’’) that serves as a funding

vehicle for the Pacific Innovations Trust

variable annuity contracts (‘‘Variable

Contracts’’), to replace shares of each

portfolio of Pacific Innovations Trust

with shares of a designated portfolio of

Pacific Select Fund. Applicants also

seek an exemption from Section 17(a) of

the Act to the extent necessary: (i) To

permit the consolidation of Pacific Life

Insurance Company Separate Account A

(‘‘Separate Account A’’), a segregated

asset account of Pacific Life that serves

as a funding vehicle for certain variable

annuity contracts issued by Pacific Life,

and Separate Account B (collectively,

the ‘‘Accounts’’), by transferring the

assets and liabilities of Separate

Account B to Separate Account A; and

(ii) to permit Applicants to carry out the

substitutions described herein by way of

in-kind redemptions and purchases.

Applicants: Pacific Life Insurance

Company, Pacific Life Insurance

Company Separate Account A, Pacific

Life Insurance Company Separate

Account B, Pacific Select Fund (‘‘Select

Fund’’), and Pacific Innovations Trust

(‘‘Innovations Trust’’).

Filing Dates: The application was

filed on May 28, 1999, and was

amended and restated on December 9,

1999.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the Commission orders a

hearing. Interested persons may request

a hearing by writing to the Secretary of

the Commission and serving Applicants

with a copy of the request, personally or

by mail. Hearing requests should be

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

February 2, 2000, and should be

accompanied by proof of service on

Applicants, in the form of an affidavit,

or, for lawyers, a certificate of service.

Hearing requests should state the nature

of the 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 Secretary of the

Commission.

ADDRESSES: Secretary, Commission, 450

Fifth Street, N.W., Washington, DC

20549–0609. Applicants, c/o Robin

Yonis Sandlaufer, Esq., Vice President

and Investment Counsel, Pacific Life

Insurance Company, 700 Newport

Center Drive, Newport Beach, CA

92660.

FOR FURTHER INFORMATION CONTACT: Paul

G. Cellupica, Senior Counsel, or Susan

M. Olson, 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

(202–942–8090).

Applicant’s Representations

1. Pacific Life is a life insurance

company that is domiciled in California.

Its operations include both life

insurance and annuity products as well

as financial and retirement services. As

of December 31, 1998, Pacific Life

managed $290 billion in assets. Pacific

Life is authorized to conduct a life

insurance and annuity business in the

District of Columbia and all states

except New York. Pacific Life was

originally organized on January 2, 1868,

under the name ‘‘Pacific Manual Life

Insurance Company of California’’ and

reincorporated as ‘‘Pacific Mutual Life

Insurance Company’’ on July 22, 1936.

On September 1, 1997, it converted from

a mutual life insurance company to a

stock life insurance company ultimately

controlled by a mutual holding

company. Pacific Life is the depositor

for the Accounts.

2. Separate Account A is a segregated

asset account of Pacific Life and is

registered under the Act as a unit

investment trust. Separate Account A

serves as a funding vehicle for variable

annuity contracts issued by Pacific Life

known as ‘‘Pacific Portfolios,’’ ‘‘Pacific

One,’’ and ‘‘Pacific Value.’’ Separate

Account A currently has 20

subaccounts, each investing in a

portfolio of the Select Fund.

3. Separate Account B is a segregated

asset account of Pacific Life and is

registered under the Act as a unit

investment trust. Separate Account B

was established by Pacific Life and

serves as a funding vehicle for the

Variable Contracts. Separate Account B

is divided into seven subaccounts each

of which invests in a separate portfolio

of Innovations Trust.

4. Innovations Trust is registered as

an open-end management investment

company under the Act and currently

offers seven investment portfolios

(‘‘Innovations Portfolios’’). Other than

shares purchased by an affiliate of

Pacific Life in connection with the

initial capitalization of Innovations

Trust, shares of the Innovations

Portfolios are sold to and held only by

Separate Account B.

5. Select Fund is a registered openend management investment company

that currently offers 20 separate

portfolios (the ‘‘Select Portfolios’’)

which are available to Separate Account

A Contractholders. Shares of Select

Fund currently are offered only to

Pacific Life separate accounts for the

purpose of serving as an investment

vehicle for variable annuity and variable

life insurance contracts offered or

administered by Pacific Life.

2652 Federal Register / Vol. 5, No. 11 / Tuesday, January 18, 2000 / Notices

6. Pacific Mutual Distributors

(‘‘PMD’’) serves as Distributor for the

Variable Contracts. PMD is an indirect

subsidiary of Pacific Life and is

registered as a broker-dealer with the

Commission. Pursuant to selling

agreements with Pacific Life and PMD,

broker-dealers that are affiliated with or

closely related to Bank of America

Corporation (‘‘Broker-Dealers’’) have

been appointed to solicit and/or accept

applications for the Variable Contracts.

The Broker-Dealers are the sole brokerdealers that are appointed to solicit and/

or accept applications for the Variable

Contracts. Bank of America Corporation

recently merged with NationsBank

Corporation to form a new bank holding

company called BankAmerica

Corporation. PMD and Pacific Life have

been informed that the Broker-Dealers

no longer intend to actively market the

Variable Contracts.

7. Innovations Trust has no source of

incoming assets other than the Variable

Contracts. At present, Pacific Life does

not intend to seek other potential sellers

for the Variable Contracts other than the

Broker-Dealers. Thus, the risk is

presented that Innovations Trust will

not grow, and indeed may shrink, and

a question is presented as to whether

Innovations Trust is an appropriate

investment medium for the Variable

Contracts.

8. The Substitutions reflect a

determination by Pacific Life to ensure

that owners of the Variable Contracts

(‘‘Contractholders’’) have available

under their Variable Contracts a viable

mutual fund with good prospects for

growth so that Contractholders will

have an appropriate investment vehicle

to help meet their investment goals

under the Variable Contracts.

9. Accordingly, pursuant to its

authority under the respective Variable

Contracts and the prospectuses

describing the same, and subject to the

approval of the Commission under

Section 26(b) of the Act, Pacific Life has

determined that each subaccount of

Separate Account B will replace

securities issued by each Innovations

Portfolio with securities of a designated

Select Portfolio that in each case has

investment objectives and policies that

are sufficiently similar to those of the

corresponding Innovations Portfolio so

that Contractholders will have

reasonable continuity in investment and

risk expectations. Each replacement of

an Innovations Portfolio by a designated

Select Portfolio is indicated below:

Current innovations

portfolio

Replacement select

portfolio

Money Market Fund .. Money Market Portfolio

Managed Bond Fund Managed Bond Portfolio

Capital Income Fund Multi-Strategy Portfolio

Blue Chip Fund ......... Equity Portfolio

Mid-Cap Equity Fund Growth LT Portfolio

Aggressive Growth

Fund.

Aggressive Equity

Portfolio

International Fund ..... International Portfolio

The Select Portfolios that would

receive monies or in-kind securities

from the Innovations Portfolios as a

result of the proposed substitutions

(‘‘Substitutions’’) are referred to herein

as ‘‘Affected Select Portfolios.’’ Other

Select Portfolios (‘‘Additional

Portfolios’’) will be available after the

substitution is effected as options for

Contractholders.

10. Applicants believe that replacing

the current Innovations Portfolios with

the Select Portfolios is appropriate and

in the best interests of Contractholders,

who will benefit from an underlying

fund with approximately $10 billion in

assets. The proposed Substitutions also

provide Contractholders with: (1)

Underlying portfolios having lower

expense ratios with the expectation that

after the Substitutions, the ratios will

remain lower; (2) competitive historical

portfolio performance; (3) a competitive

lineup of adviser and subadvisers; (4)

investment in a fund that underlies

Pacific Life’s proprietary variable

annuity and life insurance contracts,

and therefore in a fund to which Pacific

Life has a very strong commitment; and

(5) an expanded array of variable

investment options for Contractholders.

11. The replacement of the

Innovations Money Market Fund with

the Select Money Market Portfolio will

provide Contractholders with a

substantially similar money market

vehicle. The following table compares

the respective asset levels, performance

and annual net expense ratios of these

two portfolios as of December 31, 1998.

Portfolio Fund manager Asset levels Expense

ratios Performance (total return)

Select Money Market Portfolio .................... Pacific Life ................ $479,687,524 0.43% • 1 YEAR: 5.29%.

• 3 YEAR: 5.22%.

• 5 YEAR: 4.99%.

Innovations Money Market Fund ................. Bank of America ....... 6,790,573 0.60% • 1 YEAR: 5.07%.

• 3 YEAR: N/A.

• 5 YEAR: N/A.

12. Although not identical, the

investment objectives, policies and

strategies of the Innovations Managed

Bond Fund are comparable to those of

the Select Managed Bond Portfolio. The

following table compares the respective

asset levels, performance and annual net

expense ratios of these two portfolios as

of December 31, 1998.

Portfolio Fund manager Asset levels Expense

ratios Performance (total return)

Select Managed Bond Portfolio .................. PIMCO ...................... $861,137,477 0.66% • 1 YEAR: 9.20%.

• 3 YEAR: 7.76%.

• 5 YEAR: 7.34%.

Innovations Managed Bond Fund ............... Scudder Kemper Investments, Inc.18,489,218 0.75% • 1 YEAR: 6.89%.

• 3 YEAR: N/A.

• 5 YEAR: N/A.

13. Although not identical, the

investment objectives, policies and

strategies of the Innovations Capital

Income Fund are sufficiently similar to

those of the Select Multi-Strategy

Portfolio so that Contractholders will

Federal Register / Vol. 5, No. 11 / Tuesday, January 18, 2000 / Notices 2653

have reasonable continuity in

investment and risk expectations. The

following table compares the respective

asset levels, performance and annual net

expense ratios of these two portfolios as

of December 31, 1998.

Portfolio Fund manager

Asset levels Performance Expense ratios

Select Multi-Strategy Portfolio ......... J.P. Morgan Investment .................. $599,329,997 0.71% •–1 YEAR: 18.17%.

•–3 YEAR: 16.75%.

•–5 YEAR: 14.44%.

Innovations Capital Income Fund .... Bank of America .............................. 26,075,616 0.87%. •–1 YEAR: 7.06%.

•–3 YEAR: N/A.

•–5 YEAR: N/A.

14. Although not identical, the

investment objectives, policies, and

strategies of the Innovations Blue Chip

Fund are comparable to those of the

Select Equity Portfolio. The following

table compares the respective asset

levels, performance and annual net

expense ratios of these two portfolios as

of December 31, 1998.

Portfolio Fund manager Asset levels Expense

ratios Performance

Select Equity Portfolio ..................... Goldman Sachs Asset Management $503,822,368 0.71% •–1 YEAR: 30.28%. 1

•–3 YEAR: 25.36%.

•–5 YEAR: 18.84%.

Innovations Blue Chip Fund ............ Bank of America .............................. 36,412,256 0.94% •–1 YEAR 27.80%.

•–3 YEAR: N/A.

•–5 YEAR: N/A.

1GSAM began serving as Portfolio Manager on May 1, 1998. Prior to that, a different firm served as Portfolio Manager.

15. Although not identical, the

investment objectives, policies, and

strategies of the Innovations Mid-Cap

Equity Fund are comparable to those of

the Select Growth LT Portfolio. The

following table compares the respective

asset levels, performance and annual net

expense ratios of these two portfolios as

of December 31, 1998.

Portfolio Fund manager Asset levels Expense

ratios Performance

Select Growth LT Portfolio .......................... Janus ........................ $1,312,741,866 0.80% • 1 YEAR: 58.29%.

• 3 YEAR: 27.45%.

• 5 YEAR: N/A.

Innovations Mid-Cap Equity Fund ............... Bank of America ....... 16,588,510 0.94% • 1YEAR: 17.18%.

• 3 YEAR: N/A.

• 5 YEAR: N/A.

16. Although not identical, the

investment objectives, policies and

strategies of the Innovations Aggressive

Growth Fund are comparable to those of

the Select Aggressive Equity Portfolio.

The following table compares the

respective asset levels, performance and

annual net expense ratios of these two

portfolios as of December 31, 1998.

Portfolio Fund manager Asset levels Expense

ratios Performance

Select Aggressive Equity Portfolio .............. Alliance Capital ........ $219,402,961 0.89% • 1 YEAR: 13.22%.

• 3 YEAR: N/A.

• 5 YEAR: N/A.

Innovations Aggressive Growth Fund ......... Bank of America ....... 11,069,644 1.02% • 1 YEAR: (1.77%).

• 3 YEAR: N/A.

• 5 YEAR: N/A.

1Alliance Capital Management began serving as Portfolio Manager on May 1, 1998. Prior to that date, another firm served as Portfolio

Manager.

17. Although not identical, the

investment objectives, policies, and

strategies of the Innovations

International Fund are comparable to

those of the Select International

Portfolio. The following table compares

the respective asset levels, performance

and annual net expense ratios of the two

portfolios as of December 31, 1998.

2654 Federal Register / Vol. 5, No. 11 / Tuesday, January 18, 2000 / Notices

Portfolio Fund manager Asset levels Expense

ratios Performance

Select International Portfolio 1 .............. Morgan Stanley Asset Management ... $997,300,194 1.00% • 1 YEAR: 5.60%. 2

• 3 YEAR: 12.04%.

• 5 YEAR: 9.88%.

Innovations International Fund ............. Wellington Management Company,

LLP.

11,127,372 1.24% • 1 YEAR: 11.63%.

• 3 YEAR: N/A.

• 5 YEAR: N/A.

1Effective January 1, 2000, the name of the International Portfolio was changed to the ‘‘International Value Portfolio.’’ The Portfolio’s investment objective and policies remain the same. 2 Morgan Stanley Asset Management began serving as the Portfolio Manager on June 1, 1997. Prior to that date, other firms served as Portfolio Manager.

18. As of the effective date of the

Substitutions (‘‘Effective Date’’), shares

of the Innovations Portfolios will be

redeemed in cash and in-kind by Pacific

Life. The proceeds of such redemptions

will then be used to purchase shares of

the Affected Select Portfolios, either by

cash or in-kind purchase, with each

subaccount of Separate Account B

investing the proceeds of its redemption

from the Innovations Portfolio in the

corresponding Affected Select Portfolio.

The Substitutions will take place at

respective net asset values. The contract

value of any affected Contractholder

immediately after the Substitutions

shall be the same as the value

immediately before the Substitutions.

19. Pacific Life will bear the costs of

any legal or accounting fees of the

Substitutions and transactional

expenses, including brokerage

commissions, in liquidating the assets of

the Innovations Portfolios to be able to

make payment to Separate Account B in

connection with the Substitutions.

Contractholders will not incur any

additional fees or charges as a result of

the Substitutions, nor will their rights or

obligations under any of the Variable

Contracts diminish in any way.

20. Contractholders were notified of

the application by means of a

supplement to the prospectus for the

Variable Contracts that discloses that

Applicants would be filing the

application and are seeking approval for

the Substitutions.

21. Following the date on which the

order requested by the application is

issued, but before the Effective Date of

the Substitutions, a notice

(‘‘Substitution Notice’’), in the form of

an additional supplement to the

prospectuses for the Variable Contracts,

will be mailed to Contractholders

setting forth the scheduled Effective

Date of the Substitutions and advising

Contractholders that contract values

attributable to investments in the

Innovations Portfolios will be

transferred to the subaccounts

corresponding to the Affected Select

Portfolio, without charge, on the

Effective Date.

22. The Substitution Notice will state

that Contractholders may make transfers

of contract value among the variable

investment options without limit and

without any charge for a period of at

least 60 days from the Effective Date,

and that an exchange of subaccount

annuity units may be made during such

period in addition to the four that are

permitted in a 12-month period.

23. In light of the fact that Applicants

intend, through the Substitutions, for

Separate Account B to invest in shares

of the same underlying mutual fund

portfolios in which the subaccounts of

Separate Account A now invest, Pacific

Life may determine that no valid

business purpose would be served by

maintaining two distinct separate

accounts investing in the same

underlying fund. Accordingly, to avoid

the duplication that would result and to

save the cost of maintenance of Separate

Account B, Pacific Life seeks an

exemption to the extent necessary to

permit the consolidation of the

Accounts by transferring the assets and

liabilities of Separate Account B to

Separate Account A (such transfer is

referred to hereing as the ‘‘Proposed

Transaction’’). Separate Account A

would continue to exist. The effect of

the foregoing transaction would be that,

as of the closing date for the Proposed

Transaction, Separate Account A would

support the Variable Contracts (e.g.,

those currently funded by Separate

Account B), as well as the variable

contracts designated as Pacific

Portfolios, Pacific One and Pacific

Value.

24. The Proposed Transaction would

be effected with no change in the

aggregate value of the subaccount units

(both accumulation and annuity units)

involved. There would be no change in

the Contractholders’ contract value and

no charges would be imposed or other

deductions made in connection

therewith. The transaction would be

effected by transferring the assets and

corresponding liabilities of a subaccount

of Separate Account B to the

corresponding subaccount of Separate

Account A, which will be the

subaccount that invests in the Select

Portfolio that will have previously been

substituted for the Innovations Portfolio.

Applicant’s Legal Analysis

1. Section 26(b) of the Act makes it

unlawful for any depositor or trustee of

a unit investment trust that invests

exclusively in the securities of a single

issuer from substituting the securities of

another issuer without the approval of

the Commission. Section 26(b) provides

such approval shall be granted by order

of the Commission, if the evidence

establishes that it is consistent with the

protection of investors and the purposes

of the Act.

2. Section 26(b) was intended to

provide for Commission scrutiny of

proposed substitutions which could, in

effect, force shareholders with the

substitute security to redeem their

shares, thereby possibly incurring a loss

of the sales load deducted from initial

purchase payments, an additional sales

load upon reinvestment of the proceeds

of redemption, or both. The section was

designed to forestall the ability of a

depositor to present holders of interest

in a unit investment trust with

situations in which a holder’s only

choice would be to continue an

investment in an unsuitable security, or

to elect a costly and, in effect, forced

redemption. For the reasons described

below, Applicants submit that the

Substitutions meet the standards set

forth in Section 26(b) and that, if

implemented, the Substitutions would

not raise any of the aforementioned

concerns that Congress intended to

address when the Act was amended to

include this provision.

3. Applicants assert that the

replacement of each of the Innovations

Portfolios with each of the

corresponding Select Portfolios is

appropriate and in the interests of

Contractholders and, thus, meets the

standards necessary to support an order

pursuant to Section 26(b) of the Act.

The Select Portfolios have comparable

investment objectives and policies as

those of the Innovations Portfolios.

Federal Register / Vol. 5, No. 11 / Tuesday, January 18, 2000 / Notices 2655

4. Apart from the Substitution of the

underlying investment vehicle, the

rights of the Contractholders and the

obligations of Pacific Life under the

Variable Contracts would not be altered

by the Substitutions except, of course,

that Contractholders will not have the

right to retain their beneficial interest in

the Innovations Portfolios.

Contractholders will not incur any

additional tax liability as a result of the

Substitutions. Also, the rights and

obligations of Pacific Life under the

Variable Contracts will not be altered in

any way in connection with the

Substitution. As previously noted,

Contractholders will not incur any

additional fees or charges as a result of

the Substitutions, including any legal or

accounting fees of the Substitutions and

transactional expenses, including

brokerage commissions, in liquidating

the assets of the Innovations Portfolios

to be able to make payments to Separate

Account B with the Substitutions.

5. In accordance with procedures to

be implemented by Applicants,

Contractholders will have the right to

transfer cash values among the

subaccounts invested in the Select

Portfolios, including the Additional

Portfolios under their Variable

Contracts, without incurring any

additional fees or charges with respect

to the transfer until at least 60 days after

the Effective Date of the Substitutions.

For purposes of the restriction on

exchanges after annuitization, an

exchange of subaccount annuity units

during such 60-day period will not

count as an exchange for purposes of the

limit of four such exchanges in a twelvemonth period. Each Contractholder has

received a prospectus supplement and

will, prior to the Effective Date, receive

a Substitution Notice (in the form of an

additional prospectus supplement)

regarding the Substitutions, together

with information about other available

investment options and a prospectus for

Select Fund.

6. Applicants assert that the

procedures to be implemented are

sufficient to assure that Contractholders’

accounts values immediately before the

Substitutions shall be equal to the

account values immediately after the

Substitutions, and that Substitutions

will not affect the value of the interests

of those owners of Pacific Life variable

contracts who currently have contract

value allocated to any of the Select

Portfolios. Applicants state that any inkind redemptions and purchases for

purposes of the Substitution will be

effected in a manner consistent with the

investment objectives and policies of

the respective underlying funds. Pacific

Life or the Portfolio Managers of the

Select Fund will review the in-kind

redemptions to assure that assets to be

transferred are a suitable investment for

the substitute Select Portfolios in the

overall context of such fund’s

investment objectives and policies.

Securities to be paid out as redemption

proceeds and subsequently contributed

to the respective substitute Select

Portfolios to effect the contemplated inkind purchases of shares, will be valued

based on the normal valuation

procedures of the redeeming and

purchasing funds and, consistent with

Rule 17a–7(d) under the Act, no

brokerage commission, fees or other

remuneration will be paid in connection

with the in-kind transactions.

Applicants submit that, for all the

reasons stated above, and particularly to

ensure that a viable mutual fund is

available as an investment vehicle for

the Variable Contracts, the Substitutions

are consistent with the protection of

investors and the purposes faily

intended by the policy of the Variable

Contracts and provisions of the Act.

7. 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 a person, acting as principal, from

knowingly selling any securities or

other property to such registered

investment company. Section 17(a)(2) of

the Act generally prohibits such persons

from knowingly purchasing any security

or other property from the registered

investment company.

8. Section 17(b) of the Act provides

that any person may apply for an order

of exemption from the provisions of

Section 17(a) in connection with a

transaction prohibited by that section,

and that the Commission shall grant

such an application if evidence

establishes that: (i) the terms of the

proposed transaction, including the

consideration to be paid or 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, as recited in its registration

statement and reports filed under the

Act; and (iii) the proposed transaction is

consistent with the general of the Act.

9. Applicants asserts that the terms

under which the in-kind redemptions

and purchases will be effected are

reasonable and fair and do not involve

overreaching on the part of any person

because the Substitutions will not dilute

the interests of any affected

Contractholder. The proposed

Substitutions will result in situations

where in-kind redemptions and

purchases are more efficient and where

a Select Portfolio elects to accept/

purchase a security held by the

Innovations Portfolio. The use of inkind redemptions of such subaccounts

are intended to reduce costs and thereby

benefit contractholders. The in-kind

redemptions and purchases will be done

at values consistent with the policies of

both the Innovations Portfolios and the

Affected Select Portfolios. Both Pacific

Life and the Portfolio Manager of each

Affected Select Portfolio will review the

securities holdings of the Innovations

Portfolio and determine whether in-kind

redemptions and purchases would be a

suitable investment for the Affected

Select Portfolio in the overall context of

such fund’s investment objectives and

policies and consistent with their

management of the Affected Select

Portfolio. Applicants state that

securities to be paid out as redemption

proceeds and subsequently contributed

to the respective Affected Select

Portfolios to effect the contemplated inkind purchases of shares, will be valued

based on the normal valuation

procedures of the redeeming and

purchasing Portfolios. Any

inconsistences in valuation procedures

between the Innovations Portfolio and

the Affected Select Portfolio will be

reconciled so that the redeeming and

purchasing values are the same.

Therefore, there will be no change in

value to any Contractholder as a result

of the Substitutions.

10. Applicants believe that the terms

of the Proposed Transaction described

in the application, including the

consideration to be paid or received, are

reasonable and fair and do not involve

overreaching; and are consistent with

the general purpose of the Act; and

therefore meet the conditions for

receiving exemptive relief under Section

17(b). The Commission has previously

granted exemptions from Section 17(a)

to permit the combination or

consolidation of separate accounts

registered as unit investment trusts, and

has also granted numerous exemptions

from section 17(a) to permit the

consolidation of subaccounts of a

separate account registered as a unit

investment trust in connection with a

substitution. In addition, the

Commission has granted exemptions

from Section 17(a) to permit in-kind

redemptions and purchases to carry out

substitutions.

Applicants’ Conditions

For purposes of the approval sought

pursuant to Section 26(b) of the Act, the

Substitutions described in the

application will not be completed,

unless all of the following conditions

are met:

2656 Federal Register / Vol. 5, No. 11 / Tuesday, January 18, 2000 / Notices

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See letter from Gary L. Goldsholle, Assistant

General Counsel, NASD Regulation, to Katherine A.

England, Assistant Director, Division of Market

Regulation, Commission, dated December 20, 1999

(‘‘Amendment No. 1’’). In Amendment No. 1, NASD

Regulation makes certain technical amendments to

the proposed rule change.

1. The Commission shall have issued

an order (i) approving the Substitutions

under Section 26(b) of the Act; (ii)

exempting the consolidation of Separate

Account A and Separate Account B

from the provisions of Section 17(a) of

the Act; and (ii) exempting any in-kind

redemptions and purchases from the

provisions of Section 17(a) of the Act as

necessary to carry out the transactions

described in the application.

2. Each Contract holder will have

been sent: (i) A copy of the effective

prospectus relating to each of the

Affected Select Portfolios and any

necessary amendments to the

prospectuses relating to the Variable

Contracts; and (ii) as soon as reasonable

possible after order has been issued and

prior to the Effective Date of the

Substitutions, a notice describing the

terms of the Substitutions and the rights

of the Contractholders in connections

with the substitutions.

3. Pacific Life shall have satisfied

itself, that: (i) The Variable Contracts

allow the substitution of portfolios 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 (ii) that any applicable

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.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–1057 Filed 1–14–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

Sunshine Act Meeting; Notice

Notice is hereby given, pursuant to

the provisions of the Government in the

Sunshine Act, Pub. L. 94–409, that the

Securities and Exchange Commission

will hold the following meeting during

the week of January 17, 2000.

A closed meeting will be held on

Thursday, January 20, 2000 at 11:00

a.m.

Commissioners, Counsel to the

Commissioners, the Secretary to the

Commission, and recording secretaries

will attend the closed meeting. Certain

staff members who have an interest in

the matters may also be present.

The General Counsel of the

Commission, or his designee, has

certified that, in his opinion, one or

more of the exemptions set forth in 5

U.S.C. 552b(c)(4), (8), (9)(A) and (10)

and 17 CFR 200.402(a)(4), (8), (9)(A) and

(10), permit consideration for the

scheduled matters at the closed meeting.

Commissioner Johnson, as duty

officer, voted to consider the items

listed for the closed meeting in a closed

session.

The subject matters of the closed

meeting scheduled for Thursday,

January 20, 2000, will be:

A litigation matter;

Institution and settlement of

injunctive actions; and

Institution and settlement of

administrative proceedings of an

enforcement nature.

At times, changes in Commission

priorities require alterations in the

scheduling of meeting items. For further

information and to ascertain what, if

any, matters have been added, deleted

or postponed, please contact:

The office of the Secretary at (202)

942–7070.

Dated: January 11, 2000.

Jonathan G. Katz,

Secretary.

[FR Doc. 00–1124 Filed 1–12–00; 4:19 pm]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42325; File No. SR–NASD–

99–60]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to Trading in Hot

Equity Offerings

January 10, 2000.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on October

15, 1999, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its wholly

owned subsidiary NASD Regulation,

Inc. (‘‘NASD Regulation’’), filed with the

Securities and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change as described in Items I, II,

and III below, which Items have been

prepared by NASD Regulation. On

December 21, 1999, NASD Regulation

submitted Amendment No. 1 to the

proposed rule change.3 The Commission

is publishing this notice of the rule

change, as amended, to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

NASD Regulation proposes to

establish Rule 2790, Trading in Hot

Equity Offerings, to replace the FreeRiding and Withholding Interpretation,

IM–2110–1. Below is the text of the

proposed rule change. Proposed Rule

2790 contains all new language. In the

other proposed changes, additions are

italicized and deletions are bracketed.

IM–2110–1. [‘‘Free-Riding and

Withholding’’[

Deleted in its entirety and replaced

with:

Reserved.

* * * * *

IM–2750. Transactions with Related

Persons

A member who is acting, or plans to

act, as sponsor of a unit investment trust

will not violate Rule 2750 if it

accumulates securities with respect to

which the member has acted as a

syndicate member, selling group

member or reallowance dealer in an

account of the member or related person

of the member if, at the time of

accumulation, the member in good faith

intends to deposit the securities into the

unit investment trust at the public

offering price and intends to make a

bona fide public offering of the

participation units of that trust.

Members engaged in such activity,

however, will continue to be subject to

Rule 2790. [IM–2110–1, ‘‘Free-Riding

and Withholding.’’]

Rule 2790. Trading in Hot Equity

Offerings

(a) Definitions

(1) ‘‘Affiliate’’ shall have the same

meaning as in Rule 2720(b)(1).

(2) ‘‘Beneficial interest’’ means any

ownership or other direct financial

interest.

(3) ‘‘Collective investment account’’

means any hedge fund, investment

partnership, investment corporation, or

any other collective investment vehicle

that manages assets of other persons.

Collective investment account shall not

include any entity in which the decision

to buy or sell securities is made jointly