Federal Register / Vol. 65, No. 124 / Tuesday, June 27, 2000 / Notices 39633

SECURITIES AND EXCHANGE

COMMISSION

[Rule 489 and Form F–N, SEC File No. 270–

361, OMB Control No. 3235–0411; Form

24F–2, SEC File No. 270–399, OMB Control

No. 3235–0456]

Submission for OMB Review;

Comment Request: Upon Written

Request, Copies Available From:

Securities and Exchange Commission,

Office of Filings and Information

Services, Washington, DC 20549

Notice is hereby given that, pursuant

to the Paperwork Reduction Act of 1995

(‘‘Act’’) [44 U.S.C. 3501 et seq.], the

Securities and Exchange Commission

(‘‘Commission’’) has submitted to the

Office of Management and Budget

(‘‘OMB’’) a request for extension of the

previously approved collections of

information discussed below.

Rule 489 under the Securities Act of

1933 [17 CFR 230.489] requires foreign

banks and foreign insurance companies

and holding companies and finance

subsidiaries of foreign banks and foreign

insurance companies that are excepted

from the definition of ‘‘investment

company’’ by virtue of Rules 3a–1, 3a–

5, and 3a–6 under the Investment

Company Act of 1940 to file Form F–N

to appoint an agent for service of

process in the United States when

making a public offering of securities.

Approximately seven entities are

required by Rule 489 to file Form F–N,

which is estimated to require an average

of one hour to complete. The estimated

annual burden of complying with the

rule’s filing requirement is

approximately eight hours, as one of the

entities has submitted multiple filings.

Under 17 CFR 270.24f–2, any openend management companies (‘‘mutual

funds’’), unit investment trusts (‘‘UITs’’)

or face-amount certificate companies

(collectively, ‘‘funds’’) that are deemed

to have registered an indefinite amount

of securities must, not later than 90 days

after the end of any fiscal year in which

it has publicly offered such securities,

file Form 24F–2 with the Commission.

Form 24F–2 is the annual notice of

securities sold by funds that

accompanies the payment of registration

fees with respect to the securities sold

during the fiscal year.

The Commission estimates that 8,203

funds file Form 24F–2 on the required

annual basis. The average annual

burden per respondent for Form 24F–2

is estimated to be one hour. The total

annual burden for all respondents to

Form 24F–2 is estimated to be 8,203

hours.

Compliance with the collection of

information required by Form 24F–2 is

mandatory. The Form 24F–2 filing that

must be made to the Commission is

available to the public.

The estimates of average burden hours

are made solely for the purposes of the

Act and are not derived from a

comprehensive or even representative

survey or study of the cost of

Commission rules and forms. An agency

may not conduct or sponsor, and a

person is not required to respond to, a

collection of information unless it

displays a currently valid control

number.

General comments regarding the

above information should be directed to

the following persons: (i) Desk Officer

for the Securities and Exchange

Commission, Office of Information and

Regulatory Affairs, Office of

Management and Budget, New

Executive Office Building, Washington,

DC 20503; and (ii) Michael E. Bartell,

Associate Executive Director, Office of

Information Technology, Securities and

Exchange Commission, 450 Fifth Street,

NW., Washington, DC 20549. Comments

must be submitted to OMB within 30

days of this notice.

Dated: June 16, 2000.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–16204 Filed 6–26–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–24505/File No. 812–12012]

Massachusetts Mutual Life Insurance

Company, et al.

June 20, 2000.

AGENCY: Securities and Exchange

Commission (the ‘‘Commission’’ or

‘‘SEC’’).

ACTION: Notice of application for an

order pursuant to Section 26(b) of the

Investment Company Act of 1940, as

amended (the ‘‘1940 Act’’), approving

substitutions of underlying fund shares

(the ‘‘Substitutions’’).

SUMMARY OF APPLICATION: Applicants

request an order approving the proposed

substitutions of the Oppenheimer

Multiple Strategies Fund/VA of the

Oppenheimer Variable Account Funds

(the ‘‘Multiple Strategies Fund’’), the

Oppenheimer Main Street Growth &

Income Fund/VA of the Oppenheimer

Variable Account Funds (the ‘‘Main

Street Fund’’), and the MML Blend

Fund of the MML Series Investment

Fund (the ‘‘MML Blend Fund,’’ and

together with the Multiple Strategies

Fund and the Main Street Fund, the

‘‘Replacement Portfolios’’) for shares of

the Panorama LifeSpan Balanced

Portfolio (the ‘‘Balanced Portfolio’’),

Panorama LifeSpan Capital

Appreciation Portfolio (the ‘‘Capital

Appreciation Portfolio’’), and Panorama

LifeSpan Diversified Income Portfolio

(the ‘‘Diversified Income Portfolio,’’)

and together with the Balanced Portfolio

and the Capital Appreciation Portfolio,

the ‘‘Eliminated Portfolios’’),

respectively. With respect to one of the

contracts funded by MassMutual

Variable Life Separate Account I, the

Multiple Strategies Fund, instead of the

MML Blend Fund, will be substituted

for the Diversified Income Portfolio.

Each of the Eliminated Portfolios is a

portfolio of the Panorama Series Fund,

Inc.

Applicants: Massachusetts Mutual

Life Insurance Company

(‘‘MassMutual’’), C.M. Life Insurance

Company (‘‘CM Life,’’ and together with

MassMutual, the ‘‘Insurance

Companies’’), MML Distributors, LLC

(‘‘MML Distributors’’), MML Investors

Services, Inc. (‘‘MML Services’’),

Massachusetts Mutual Variable Annuity

Separate Account 4 (‘‘MassMutual

Account 4’’), Massachusetts Mutual

Variable Life Separate Account I

(‘‘MassMutual Account I’’), C.M. MultiAccount A (‘‘CM Account A’’), and C.M.

Life Variable Life Separate Account I

(‘‘CM Account I,’’ and together with

MassMutual Account 4, MassMutual

Account I and CM Account A, the

‘‘Accounts,’’ the Accounts, together

with the Insurance Companies, MML

Distributors and MML Services, the

‘‘Applicants’’).

FILING DATES: The application was filed

on March 3, 2000, and amended and

restated on May 15, 2000.

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 Commission by 5:30

p.m. on July 17, 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, Securities and

Exchange Commission, 450 Fifth Street,

N.W., Washington, D.C. 20549–0609.

39634 Federal Register / Vol. 65, No. 124 / Tuesday, June 27, 2000 / Notices

1Prior to May 1, 2000, this fund was called the

Templeton Variable Products Series Fund.

2Prior to May 1, 2000, this fund was called the

BT Insurance Funds Trust.

Applicants: c/o Massachusetts Mutual

Life Insurance Company, 1295 State

Street, Springfield, MA 01111–0001,

Attn: James M. Rodolakis, Esq.

FOR FURTHER INFORMATION CONTACT: Lisa

Deitch, Senior Counsel, or Keith E.

Carpenter, 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 is

available for a fee from the SEC’s Public

Reference Branch, 450 Fifth Street,

N.W., Washington, D.C. 20549–0102

(tel. (202) 942–8090).

Applicants’ Representations

1. MassMutual is a mutual life

insurance company established under

the laws of Massachusetts on May 14,

1851. MassMutual’s home office is

located in Springfield Massachusetts.

MassMutual is currently licensed to

transact life, accident, and health

insurance in all states, the District of

Columbia, Puerto Rico, and certain

provinces of Canada.

2. CM Life is a stock life insurance

company organized in Connecticut on

April 25, 1980. CM Life’s home office is

located in Hartford, Connecticut. CM

Life is primarily engaged in the sale of

life insurance and annuities and is

licensed in all states except New York.

CM Life is a wholly-owned subsidiary of

MassMutual.

3. MassMutual Account 4 was

established as a separate account under

Massachusetts law on July 9, 1997,

pursuant to a resolution of the Board of

Directors of MassMutual. MassMutual

Account 4 is registered with the

Commission as a unit investment trust

(‘‘UIT’’) under the 1940 Act.

MassMutual Account 4 funds certain

variable annuity contracts that are

issued by MassMutual (the

‘‘MassMutual VA Contracts’’).

MassMutual Account 4 is divided into

41 ‘‘Subaccounts,’’ each of which

invests in a different investment

portfolio (‘‘Portfolio’’) of one of fourteen

underlying mutual funds: Calvert

Variable Series, Inc., INVESCO Variable

Investment Funds, Inc., Panorama

Series Fund, Inc. (‘‘Panorama Fund’’),

Oppenheimer Variable Account Funds

(‘‘Oppenheimer Funds’’), Fidelity

Variable Insurance Products Fund

(‘‘Fidelity VIP’’), Fidelity Variable

Insurance Products Fund II (‘‘Fidelity

VIP II’’), Fidelity Variable Insurance

Products Fund III (‘‘Fidelity VIP III’’),

American Century Variable Portfolios,

Inc., T. Rowe Price Equity Series, Inc.

(‘‘T. Rowe Price Fund’’), MML Series

Investment Fund (‘‘MML Series Fund’’),

Janus Aspen Series, Franklin Templeton

Variable Insurance Products,1 Deutsche

Asset Manager Management VIT

Funds,2 and MFS Variable Insurance

Trust (‘‘MFS Trust’’).

4. MassMutual Account I was

established as a separate account under

Massachusetts law on July 13, 1988,

pursuant to a resolution of the Board of

Directors of MassMutual. MassMutual

Account I is registered with the

Commission as a UIT under the 1940

Act. MassMutual has established

designated segments of MassMutual

Account I to fund certain variable life

insurance policies (the ‘‘Variable Life

Contracts’’) and variable riders to

certain fixed life insurance policies (the

‘‘Variable Rider Contracts’’) that are

issued by MassMutual. The designated

segment of MassMutual Account I

funding the Variable Life Contracts is

divided into 28 ‘‘Divisions,’’ each of

which invests in a different investment

Portfolio of one of six underlying

mutual funds: MML Series Fund,

Panorama Fund, MFS Trust, T. Rowe

Price Fund, Oppenheimer Funds, and

Goldman Sachs Variable Insurance

Trust. The designated segment of

MassMutual Account I funding the

Variable Rider Contracts is divided into

26 Divisions, each of which invests in

a different investment Portfolio of one of

six underlying mutual funds: MML

Series Fund, Panorama Fund, MFS

Trust, Fidelity VIP II, Oppenheimer

Funds, and T. Rowe Price Fund.

5. CM Account A was established as

a separate account under Connecticut

law on August 3, 1994, pursuant to a

resolution of the Board of Directors of

CM Life. CM Account A is registered

with the Commission as a UIT under the

1940 Act. CM Account A funds certain

variable annuity contracts that are

issued by CM Life (the ‘‘CMVA

Contracts’’). CM Account A is divided

into 41 Subaccounts, each of which

invests in a different investment

Portfolio of one of fourteen underlying

mutual funds. The fourteen underlying

funds and their corresponding Portfolios

are identical to those available under

MassMutual Account 4.

6. CM Account I was established as a

separate account under Connecticut law

on February 2, 1995, by the Board of

Directors of CM Life. CM Account I is

registered with the Commission as a UIT

under the 1940 Act. CM Account I funds

certain variable life insurance policies

that are issued by CM Life (the ‘‘CMVUL

Contracts,’’ together with the

MassMutual VA Contracts, Variable Life

Contracts, Variable Rider Contracts, and

CMVA Contracts, the ‘‘Contracts’’). CM

Account I is divided into 10

Subaccounts, each of which invests in a

different investment Portfolio of one of

four underlying mutual funds:

Panorama Fund, Oppenheimer Funds,

Fidelity VIP, and Fidelity VIP II.

7. The Accounts fund the respective

variable benefits under the Contracts

issued by the Insurance Companies.

Units of interest in the Accounts under

the Contracts are registered under the

Securities Act of 1933, as amended (the

‘‘1933 Act’’). The assets of each Account

are held separately from other assets of

the respective Insurance Companies and

are not chargeable with the Insurance

Companies’ liabilities incurred in any

other business operations. Accordingly,

the income, capital gains, and capital

losses incurred on the assets of each

Account are credited to or charged

against the assets of that Account,

without regard to the income, capital

gains or capital losses arising out of any

other business the respective Insurance

Company may conduct.

8. MML Distributors, a Connecticut

limited liability company, serves as the

principal underwriter for the Contracts.

MML Services, a Massachusetts

corporation, also serves as counderwriter for the Contracts. Both

MML Distributors and MML Services

are wholly-owned subsidiaries of

MassMutual, are registered with the

Commission as broker-dealers, and are

members of the National Association of

Securities Dealers, Inc.

9. The MassMutual VA Contracts are

group, flexible premium, combination

fixed and variable annuity contracts.

The MassMutual VA Contracts are sold

without an initial sales load, but have a

contingent deferred sales charge of up to

7% for any withdrawals made during

the first seven contract years that exceed

the free withdrawal amount. The

MassMutual VA Contracts’ variable

investment options consist of 41

Portfolios.

10. The Variable Life Contracts are

individual, flexible premium,

combination fixed and variable whole

life insurance contracts that are offered

by MassMutual. The Variable Life

Contracts have a front-end sales load of

up to 18% of specified premiums paid

through policy year five and up to 6%

of specified premiums paid through

policy year 6 or more, depending on

when the policies are installed on the

administration system. The Variable

Life Contracts’ variable investment

options consist of 28 Portfolios.

Federal Register / Vol. 65, No. 124 / Tuesday, June 27, 2000 / Notices 39635

11. The Variable Rider Contracts are

issued in connection with group,

flexible premium, adjustable life

insurance policies that are offered by

MassMutual. The Variable Rider

Contracts’ variable investment options

consist of 26 Portfolios.

12. The CMVA Contracts are

individual, flexible premium,

combination fixed and variable annuity

contracts. The sales load and variable

investment options of the CMVA

Contracts are identical to those of the

MassMutual VA Contracts discussed

earlier.

13. The CMVUL Contracts are

individual, flexible premium,

combination fixed and variable

universal life insurance policies. The

CMVUL Contracts have a premium

charge that is applied to premium

payments received during the first seven

policy years after issue or the effective

date of an increase in the specified

amount (the amount of insurance

coverage applied for). The maximum

premium charge applied in a policy year

will be 6% of premiums received during

that policy year, up to the annual target

premium (that varies by insured’s age,

underwriting class, and tobacco status)

for the policy. The CMVUL Contracts’

variable investment options consist of

10 Portfolios.

14. The Balanced Portfolio, the

Capital Appreciation Portfolio, and the

Diversified Income Portfolio

(collectively, the ‘‘Eliminated

Portfolio’’) of the Panorama Fund are

currently investment options under

each of the Contracts. The Panorama

Fund is an open-end management

investment company. Shares of the

Panorama Fund are sold only as

underlying investments for variable life

insurance policies and variable annuity

contracts issued by MassMutual or CM

Life. OppenheimerFunds, Inc. (‘‘OFI’’) is

the investment adviser to the Panorama

Fund.

15. Applicants state that the

Eliminated Portfolios are asset

allocation Portfolios that seek their

objectives by allocating their assets

between two asset classes—stocks and

bonds. The stock class includes all types

of equity securities, such as common

stocks, preferred stocks, warrants and

other securities convertible into

common stocks. The bond class

includes a variety of debt securities,

such as long-term and short-term

corporate and government debt

securities, mortgage-related obligations,

and notes.

16. Applicants represent that the

investment objective of the Balanced

Portfolio is to seek a blend of capital

appreciation and income. It allocates its

investments among stocks

(predominantly in common stocks and

other equity securities) and bonds

(corporate and government bonds,

including high-yield bonds), with a

slightly stronger emphasis on stocks.

Applicants also represent that the

expense ratio of the Balanced Portfolio

for the last three years was as follows:

1999: 0.91% (management fee of 0.85%

and other expenses of 0.06%); 1998:

0.93% (management fee of 0.85% and

other expenses of 0.08%); and 1997:

0.97% (management fee of 0.085% and

other expenses of 0.12%). As of

December 31, 1999, the Balanced

Portfolio had approximately $97 million

in assets, of which approximately $41.1

million represented Contract owner

money, with the balance being seed

money MassMutual provided.

17. Applicants represent that the

investment objective of the Capital

Appreciation Portfolio is to seek longterm capital appreciation; current

income is not a primary consideration.

It emphasizes investments in domestic

and foreign common stocks, as well as

some preferred stocks and other equity

securities, but also holds some corporate

bonds and notes, U.S. Government

securities, and lower-grade high-yield

securities. Applicants also represent

that the expense ratio of the Capital

Appreciation Portfolio for the last three

years was as follows: 1999: 0.93%

(management fee of 0.85% and other

expenses of 0.08%); 1998: 0.93%

(management fee of 0.85% and other

expenses of 0.08%); and 1997: 0.99%

(management fee of 0.85% and other

expenses of 0.14%). As of December 31,

1999, the Capital Appreciation Portfolio

had approximately $81 million in

assets, of which approximately $35

million represented Contract owner

money, with the balance being seed

money MassMutual provided.

18. Applicants represent that the

investment objective of the Diversified

Income Portfolio is to seek high current

income, with opportunities for capital

appreciation. It emphasizes investments

in bonds, such as U.S. Government

securities, mortgage-related and assetbacked securities, and corporate bonds,

including high-yield bonds, but holds

some common stocks. Applicants

further represent that the expense ratio

of the Diversified Income Portfolio for

the last three years was as follows: 1999:

0.83% (management fee of 0.75% and

other expenses of 0.08%); 1998: 0.84%

(management fee of 0.75% and other

expenses of 0.09%); and 1997: 0.84%

(management fee of 0.75% and other

expenses of 0.09%). As of December 31,

1999, the Diversified Income Portfolio

had approximately $46 million in

assets, of which $20 million represented

Contract owner money, with the balance

being seed money MassMutual

provided.

19. The MML Blend Fund, a separate

series of the MML Series Fund, is

currently an investment option under

the Mass Mutual VA Contracts, Variable

Life Contracts, and the CMVA Contracts,

and is the proposed substitute portfolio

for the Diversified Income Portfolio. The

MML Series Fund is a no-load, openend investment management company.

Applicants state that shares of the MML

Series Fund are sold only as underlying

investments for variable life insurance

policies and variable annuity contracts

issued by Mass Mutual, CM Life, or

another MassMutual wholly-owned

subsidiary, MML Bay State Life

Insurance Company. MassMutual serves

as the investment adviser to the MML

Series Fund. Applicants also state that

the investment objective of the MML

Blend Fund is to seek a high total rate

of return over an extended period of

time, consistent with prudent

investment risk and capital

preservation, by investing in equity,

fixed income, and money market

securities. The expense ratio of the

MML Blend Fund for the last three years

was as follows: 1999: 0.38%

(management fee of 0.37% and other

expenses of 0.01%); 1998: 0.37%

(management fee of 0.37% and other

expenses of 0.00%); and 1997: 0.38%

(management fee of 0.38% and other

expenses of 0.00%). As of December 31,

1999, the MML Blend Fund had

approximately $2.73 billion in assets.

20. The Main Street Fund and the

Multiple Strategies Fund (together with

the Main Street Fund and the MML

Blend Fund, the ‘‘Replacement

Portfolios’’) are separate series of the

Oppenheimer Funds, an open-end

diversified management in investment

company. The Main Street Fund is an

investment option under the

MassMutual VA Contracts, Variable Life

Contracts, Variable Rider Contracts, and

CMVA Contracts. The Multiple

Strategies Fund is an investment option

under the Variable Life Contracts and

the Variable Rider Contracts, and as of

May 1, 2000, is an investment option

under the MassMutual VA Contracts

and the CMVA Contracts. OFI is the

investment adviser to the Oppenheimer

Funds.

21. Applicants represent that the

investment objective of the Main Street

Fund is to seek a high total return,

which includes growth in the value of

its shares as well as current income,

from investments in mostly common

stocks and other equity securities and

some debt securities. Applicants also

39636 Federal Register / Vol. 65, No. 124 / Tuesday, June 27, 2000 / Notices

3Applicants state that, although the Balanced

Portfolio in the past year (but not since inception)

has had better historical performance returns than

the Multiple Strategies Fund, they believe the

Multiple Strategies Fund is more attractive fund

because of its lower expense ratio and larger asset

base.

represent that the expense ratio of the

Main Street Fund for the last three years

was as follows: 1999: 0.78%

(management fee of 0.73% and other

expenses of 0.05%); 1998: 0.79%

(management fee of 0.74% and other

expenses of 0.05%); and 1997: 0.83%

(management fee of 0.75% and other

expenses of 0.08%). As of December 31,

1999, the Main Street Fund had

approximately $555 million in assets.

22. Applicants state that the

investment objective of the Multiple

Strategies Fund is to seek total return,

which includes current income and

capital appreciation in the value of its

shares. It emphasizes allocation of its

investments among common stocks and

other equity securities, bonds and other

debt securities, and money market

securities. Applicants further state that

the expense ratio of the Multiple

Strategies Fund for the last three years

was as follows: 1999: 0.73%

(management fee of 0.72% and other

expenses of 0.01%); 1998: 0.76%

(management fee of 0.72% and other

expenses of 0.04%); and 1997: 0.75%

(management fee of 0.72% and other

expenses of 0.03%). As of December 31,

1999, the Multiple Strategies Fund had

approximately $580 million in assets.

23. Applicants propose to exercise

their rights to substitute the

Replacement Portfolios for the

Eliminated Portfolios as follows: (i) the

substitution of units of the Divisions of

Subaccounts investing in the MML

Blend Fund for units of the Divisions or

Subaccounts investing in the Diversified

Income Portfolio (except that, with

respect to MassMutual’s Variable Rider

Contracts funded by MassMutual

Account I, the Diversified Income

Portfolio will be substituted with the

Multiple Strategies Fund instead of the

MML Blend Fund in order to maintain

an even mix of MassMutual funds and

outside funds); (ii) the substitution of

units of the Divisions or Subaccounts

investing in the Multiple Strategies

Fund for units of the Divisions or

Subaccounts investing in the Balanced

Portfolio; and (iii) the substitution of

units of the Divisions or Subaccounts

investing in the Main Street Fund for

units of the Divisions or Subaccounts

investing in the Capital Appreciation

Portfolio. To the extent required by

applicable law, substitutions of shares

attributable to a Subaccount will not be

made unless affected contract owners

have been notified of the change and

until the Commission has approved the

change.

24. Applicants represent that the

Eliminated Portfolios were established

in 1995 to satisfy a perceived need for

asset allocation funds. Applicants also

represent that these Portfolios have not

attracted a large amount of interest from

the Insurance Companies’ variable

Contract owners, and that the Insurance

Companies have no reason to believe

Contract owner interest will adequately

increase. Much of the assets that reside

within these Portfolios consist of seed

money.

Fund name Assets at December 31, 1999

Percentage

seed money

Balanced Portfolio .................................................................................................................................................. $96,660,173.27 57.5

Capital Appreciation Portfolio ................................................................................................................................ 80,792,123.80 56.2

Diversified Income Portfolio ................................................................................................................................... 46,046,958.44 57.4

Applicants further represent that, as a

result, there are not enough assets in the

Eliminated Portfolios to provide the

portfolio management flexibility and

diversification, which benefit Contract

owners. Applicants also represent that

the performance returns for these

Portfolios have been fair at best, and the

Portfolio fees have been relatively high.

While there is still a demand for asset

allocation, Applicants believe that this

need can be satisfied best with guidance

on how to properly allocate assets

among the existing investment options

offered by each Contract rather than by

offering stand-alone asset allocation

Portfolios.

25. Applicants believe the

Substitutions will benefit Contract

owners by replacing the Eliminated

Portfolios with Replacement Portfolios

having comparable investment

objectives and policies and generally

better historical performance returns,

and which the Applicants believe are

more likely to provide Contract owners

with favorable investment performance

in the future.3 Applicants state that, in

addition, the Substitutions will benefit

Contract owners because the

Replacement Portfolios have lower

expense ratios than the Eliminated

Portfolios.

26. Applicants represent that each

Substitution will take place at the

relative accumulation unit values

determined on the date of the

Substitution in accordance with Section

22 of the Act and Rule 22c–1

thereunder, Accordingly, there will be

no immediate financial impact on any

Contract owner as a result of the

Substitutions. Applicants also represent

that each Substitution will be effected

by having each Division or Subaccount

that invests in the Eliminated Portfolio

redeem its shares of the Eliminated

Portfolio at the net asset value

calculated on the date of the

Substitutions. The Insurance Companies

would then cancel the accumulation

units of that Division of Subaccount

credited to the Contracts and credit (in

an equal dollar amount) units of the

Divisions or Subaccounts that invest in

the Replacement Portfolio. The

Insurance Companies would use the

proceeds of its redemption of shares of

the Eliminated Portfolio to purchase

shares of the Replacement Portfolio.

27. Applicants represent that the

Insurance Companies will schedule the

Substitutions to occur as soon as

practicable following the issuance of an

order by the Commission granting the

relief requested in the application.

Applicants further represent that, by

way of sticker, the prospectuses will

disclose the proposed Substitutions for

several months prior to that date.

Applicants also represent that the

stickers will inform existing Contract

owners that no additional amounts may

be allocated to the Subaccounts that

invest in the Eliminated Portfolios on or

after the date of the Substitutions. The

stickers also will inform affected

Contract owners that they will have an

opportunity to reallocate accumulation

value prior to the Substitutions, from

the Subaccounts investing in the

Eliminated Portfolios, or for 30 days

after the Substitutions, from the

Subaccounts investing in the

Replacement Portfolios, to Subaccounts

investing in other Portfolios under the

Contracts, without the imposition of any

transfer charge. Applicants also

represent that such a transfer will not

count against the number of free

transfers permitted under the Contract.

Applicants also represents that, after the

Federal Register / Vol. 65, No. 124 / Tuesday, June 27, 2000 / Notices 39637

order is issued, a second notification

will be provided to all affected Contract

owners again advising them of the

pending Substitutions and of their

ability to transfer free of charge to the

remaining investment Divisions or

Subaccounts of their choice, or remain

in the Eliminated Portfolios until the

automatic Substitutions on that date.

Applicants also state that within five

days after the Substitutions, the

Insurance Companies will send affected

Contract owners written confirmation

that the Substitutions have occurred.

28. Applicants represent that the

Insurance Companies will pay all

expenses and transactions costs of the

Substitutions; none will be borne by

Contract owners. Applicants also

represent that affected Contract owners

will not incur any fees or charges as a

result of the Substitutions, nor will their

rights or the obligations of the Insurance

Companies under the Contracts be

altered in any way. Applicants further

represent that the Substitutions will not

cause the fees and charges under the

Contracts currently being paid by

Contract owners to be greater after the

Substitutions than before the

Substitutions. Applicants also represent

that the Substitutions, will have no

adverse tax consequences to Contract

owners and will in no way alter the tax

benefits to Contract owners.

29. Applicants believe that their

request satisfies the standards for relief

of Section 26(b), as set forth below,

because: (i) each Substitution involves

Portfolios with similar investment

objectives; (ii) after each Substitution,

affected Contract owners will be

invested in a Replacement Portfolio

whose actual performance has been

better on a historical basis than that of

the Eliminated Portfolio; and (iii) after

each Substitution, affected Contract

owners will be invested in a

Replacement Portfolio whose expenses

have been less, and are expected to

continue to be less on an estimated

basis, than those of the Eliminated

Portfolio.

Applicant’s Analysis of Law

1. Section 26(b) of the 1940 Act makes

it unlawful for any depositor or trustee

of a registered UIT holding the security

of a single issuer to substitute another

security for such security unless the

Commission approves the substitution.

The Commission will approve such a

substitution if the evidence establishes

that it is consistent with the protection

of investors and the purposes fairly

intended by the policy and provisions of

the 1940 Act.

2. Section 26(b) of the 1940 Act was

enacted as part of the Investment

Company Act Amendments of 1970

(‘‘1970 Amendments’’). Prior to the

enactment of the 1970 Amendments,

Section 26(a)(4)(b) of the Act only

required that the trust instrument of a

UIT provide that the sponsor or trustee

notify the trust’s shareholders within

five (5) days after a substitution of the

underlying securities. The legislative

history of Section 26(b) describes the

underlying purpose of the amendment

to the section: ‘‘The proposed

amendment recognizes that in the case

of a unit investment trust holding the

securities of a single issuer notification

to shareholders does not provide

adequate protection since the only relief

available to the shareholders, if

dissatisfied, would be to redeem their

shares. A shareholder who redeems and

reinvests the proceeds in another unit

investment trust or in an open-end

company would under most

circumstances be subject to a new sales

load. The proposed amendment would

close this gap in shareholder protection

by providing for Commission approval

of the substitution. The Commission

would be required to issue an order

approving the substitution if it finds the

substitution consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the Act.’’

3. The legislative history makes clear

that the purpose of Section 26(b) is to

protect the expectation of investors in a

UIT that the UIT will accumulate shares

of a particular issuer by preventing

scrutinized unsubstituitons which

might, in effect, force shareholders

dissatisfied with the substituted security

to redeem their shares, thereby possibly

incurring either a loss of the sales load

deducted from initial premium

payments, an additional sales load upon

reinvestment of the redemption

proceeds, or both. Moreover, in the

issuance product context, a Contract

owner forced to redeem may suffer

adverse tax consequences. Section 26(b)

affords protection to investors by

preventing a depositor or trustee of a

UIT holding the shares of one issuer

from substituting for those shares of

another issuer, unless the Commission

approves that substitution.

4. Applicants submit that the

purposes, terms and conditions of the

Substitutions are consistent with the

principles and purposes of Section 26(b)

and do not entail any of the abuses that

Section 26(b) is designed to prevent.

Applicants assert that substitution is an

appropriate solution to the unfavorable

performance, on a relative basis, and

higher relative expenses of the

Portfolios to be eliminated. Applicants

believe that the Replacement Portfolios

will better serve Contract owner

interests because the Portfolios’

performance returns have been better

than the performance of, and their

expenses have been lower than the

expenses of, the corresponding

Eliminated Portfolios. Applicants also

submit that the Commission has

routinely approved substitutions of this

type.

5. Applicants maintain that the

Substitutions will not result in the type

of costly forced redemption that Section

26(b) was intended to guard against and,

for the following reasons, are consistent

with the protection of investors and the

purposes fairly intended by the Act: (i)

Each Substitute Portfolio has investment

objectives that are similar to those of the

corresponding Eliminated Portfolio, and

permits Contract owners continuity of

their investment objectives and

expectations; (ii) the costs of the

Substitutions, including any brokerage

costs, will be borne by the Insurance

Companies and will not be borne by

Contract owners and no charges will be

assessed to effect the Substitutions; (iii)

the Substitutions will, in all cases, be at

net asset values of the respective units,

without the imposition of any transfer

or similar charge and with no change in

the amount of any Contract owner’s

accumulation value; (iv) the

Substitutions will not cause the fees and

charges under the Contracts currently

being paid by Contract owners to be

greater after the Substitutions than

before the Substitutions; (v) the Contract

owners will be given notice prior to the

Substitutions and will have an

opportunity to reallocate accumulation

values among other available Divisions

or Subaccounts without the imposition

of any transfer charge or limitation, or

the transfer counting against any limit

on the number of permitted or chargefree transfers during a year; (vi) within

five days after the Substitutions, the

Insurance Companies will send to

affected Contract owners written

confirmation that the Substitutions have

occurred; (vii) the Substitutions will in

no way alter the insurance benefits to

Contract owners or the contractual

obligations of the Insurance Companies;

and (viii) the Substitutions will have no

adverse tax consequences to Contract

owners and will in no way alter the tax

benefits to Contract owners.

Conclusion

Applicants request an order of the

Commission pursuant to Section 26(b)

of the 1940 Act approving the proposed

Substitutions. Section 26(b), in

pertinent part, provides that the

Commission shall issue an order

approving a substitution of securities if

39638 Federal Register / Vol. 65, No. 124 / Tuesday, June 27, 2000 / Notices

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

2 17 CFR 240.19b–4.

3See Letter from Claire P. McGrath, Vice

President and Special Counsel, Derivative

Securities, Amex to Nancy Sanow, Assistant

Director, Division of Market Regulation

(‘‘Division’’), Commission, dated June 9, 2000.

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

Exchange clarified the proposed rule text and

confirmed that a member’s failure to report an

options transaction within 90 seconds would be

considered a violation of proposed Amex Rule 992.

4The Exchange represents that this is currently

an informal policy of the Exchange, which Amex

is seeking to codify by adopting Amex Rule 992, as

proposed in this filing. Voice Mail Message from

Scott G. Van Hatten, Legal Counsel, Derivative

Securities, Amex, to Melinda R. Diller, Attorney,

Division, Commisison, on March 28, 2000.

5According to the Exchange, the AODB is an

electronic order book and execution-processing

system that was adopted to replace and improve

upon what was once a paper-based specialist’s

book.

6An example of such a trade is one that does not

include either the specialist or a customer limit

order as a party to the trade.

7 In Amendment No. 1, the Amex clarified that a

failure to report a single options transaction within

90 seconds would be considered a violation of the

proposed options rule. See Amendment No. 1,

supra note 3.

8 15 U.S.C. 78f(b).

9 15 U.S.C. 78f(b)(5).

the evidence establishes that it is

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the 1940 Act. For the reasons and upon

the facts set forth above, applicants state

that the requested order meets the

standards set forth in Section 26(b) and

should, therefore, be granted.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 00–16147 Filed 6–26–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42966; File No. SR–Amex–

00–03]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the American Stock Exchange LLC

Relating to the Reporting of Options

Transactions

June 20, 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 February

22, 2000, the American Stock Exchange

LLC (‘‘Amex’’ or the ‘‘Exchange’’) filed

with the Securities and Exchange

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

the proposed rule change relating to the

reporting of options transactions. The

Amex filed Amendment 1 to this

proposal on June 12, 2000.3 The

proposed rule change, as amended, is

described in Items I, II and III below,

which Items have been prepared by the

Exchange. The Commission is

publishing this notice 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

The Exchange has filed with the

Commission a proposed rule change

adopting a new rule, Amex Rule 992, to

require the reporting of options

transactions within 90 seconds. The text

of the proposed rule change, as

amended, is set forth below. Additions

are in italics.

Trade Reporting Rules

Section 9. Miscellaneous Provisions

Applicable to Options

Rule 992.

(a) A member or member organization

initiating an options transaction,

whether acting as principal or agent,

must report or ensure the transaction is

reported within 90 seconds of the

execution to the Amex Options Market

Data System for dissemination to the

Options Price Reporting Authority.

(b) Transactions not reported within

90 seconds after execution shall be

designated as late. A pattern or practice

of late reporting without exception

circumstances may be considered

conduct inconsistent with just and

equitable principles of trade.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

Amex included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. The Amex has

prepared summaries, set forth in

Sections A, B, and C below, of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The Exchange proposes to adopt a

new rule, Amex Rule 992, to require

options transactions reporting within 90

seconds. The Amex represents that it is

Exchange policy that any member

initiating an options transaction on the

floor of the Exchange, whether acting as

principal or agent, must ensure that the

trade is properly reported or ‘‘printed on

the tape.’’ 4

The reporting of options transactions

is currently handled by the Amex

Options Display Book (‘‘AODB’’).5 The

AODB handles the execution processing

of orders routed to it both electronically

and manually. Orders routed

electronically are either executed

automatically by the Exchange’s AutoEx system or executed by the specialist

through the AODB. These options

transactions are immediately reported to

the Amex Option Market Data System,

which processes all Amex trades, and

the Options Price Reporting Authority,

which disseminates trade information to

the Amex’s members and the investing

public through vendors. Orders

manually routed to the Exchange

through a floor broker and executed in

the trading crowd are reported to the

specialist or his clerk for entry into the

AODB and processed in the same

manner as electronically routed and

executed trades.6

Although Amex estimates that 60–

70% of options transactions are

electronically routed and executed

orders that are immediately reported

and printed on the tape, the Exchange

believes that the adoption of a specific

options trade reporting rule is

appropriate, particularly for those

orders routed and executed manually.

Under the proposed rule, transactions

not reported within 90 seconds after

execution will be designated as late.

Patterns or practices of late reporting

without exceptional circumstances may

be considered conduct inconsistent with

just and equitable principles of trade.7

2. Statutory Purpose

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act,8 in general and

furthers the objectives of Section

6(b)(5),9 in particular in that it is

designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

change, to foster cooperation and

coordination with persons engaged in

facilitating transactions in securities,

and to remove impediments to and

perfect the mechanism of a free and

open market and a national market

system.