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[Federal Register Volume 62, Number 24 (Wednesday, February 5, 1997)]
[Notices]
[Pages 5498-5501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2782]

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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-22485; File No. 812-10286]

The Mutual Life Insurance Company of New York, et al.

January 29, 1997.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of Application for Exemption under the Investment 
Company Act of 1940 (``1940 Act'').

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APPLICANTS: The Mutual Life Insurance Company of New York (``MONY''), 
MONY Life Insurance Company of America (``MONY America,'' and 
collectively with MONY, ``the Companies'') and MONY America Variable 
Account A (``MONY America Account,'' and collectively with the MONY 
Account, ``the Accounts'').

RELEVANT 1940 ACT SECTIONS: Order requested pursuant to Section 26(b) 
of the 1940 Act approving a proposed substitution of securities and 
pursuant to Section 17(b) of the 1940 Act granting exemptions from the 
provisions of Sections 17(a)(1) and 17(a)(2) of the 1940 Act.

SUMMARY OF APPLICATION: Applicants seek an order approving the 
substitution of shares of the U.S. Government Series (``U.S. Government 
Portfolio'') of OCC Accumulation Trust (``Trust'') for shares of the 
Bond Series (``Bond Portfolio'') of the Trust. Applicants also seek an 
exemption from Section 17(a)(1) and 17(a)(2) of the 1940 Act to the 
extent necessary to permit Applicants to carry out the above referenced 
substitution in part by redeeming shares of the Bond Portfolio in-kind 
and using the redemption proceeds to purchase shares of the U.S. 
Government Portfolio.

FILING DATE: The application was filed on August 7, 1996.

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 SEC 
and serving the applicants with a copy of the request, personally or by 
mail. Hearing requests must be received by the Commission by 5:30 p.m., 
on February 24, 1997, 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. Any 
person may request notification of a hearing by writing to the 
Secretary of the SEC.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants, c/o Frederick C. Tedeshi,

[[Page 5499]]

Esq., The Mutual Life Insurance Company of New York, 500 Frank W. Burr 
Blvd., Teaneck, N.J. 07666-6888.

FOR FURTHER INFORMATION CONTACT: Joyce Merrick Pickholz, Senior 
Counsel, or Patrice M. Pitts, Branch Chief, Office of Insurance 
Products (Division of Investment Management) at (202) 942-0670.

SUPPLEMENTARY INFORMATION: Following is a summary of the application. 
The complete application is available for a fee from the Public 
Reference Branch of the Commission.

Applicants' Representations

    1. MONY is a mutual life insurance company organized in the state 
of New York. MONY America, a wholly owned subsidiary of MONY, is a 
stock insurance company organized in the state of Arizona.
    2. MONY established the MONY Account on November 28, 1990, and MONY 
America established the MONY America Account on March 27, 1987, in 
accordance with the laws of the States of New York and Arizona, 
respectively. The Accounts are segregated asset accounts registered 
with the Commission as unit investment trusts pursuant to the 
provisions of the 1940 Act and are used to fund certain individual and 
group flexible payment variable annuity contracts issued by the 
Companies and sold under the name ``ValueMaster'' (``ValueMaster 
Contracts'').
    3. The Accounts currently are divided into various sub-accounts 
(``Sub-Accounts''), five of which are available to owners of 
ValueMaster Contracts (``ValueMaster Contractowners'') and which 
reflect the investment performance of the Bond, Equity, Managed, Money 
Market and Small Cap Series of the Trust. ValueMaster Contractowners 
may transfer account values among the Sub-Accounts without any charge 
up to four times a year. For any additional transfers, a transfers, a 
transfer charge is not imposed currently. However, the Companies 
reserve the right to impose a charge. As of June 30, 1996, 3.7% of the 
total assets invested in the Accounts by ValueMaster Contractowners 
were allocated to the Bond Portfolio.
    4. The ValueMaster Contracts are offered exclusively by agents of 
Oppenheimer Life Agency, Ltd., (``Oppenheimer Life''), an affiliate of 
OpCap Advisors, a registered investment adviser and the Trust's 
investment manager. Oppenheimer Life is no longer actively selling the 
ValueMaster Contracts.
    5. The Trust was established on May 12, 1994, and is a registered 
open-end management investment company consisting of seven separate 
series (``Portfolios'') with differing investment objectives, policies 
and restrictions. All five of the Portfolios of the Trust supporting 
the ValueMaster Contract commenced operations on September 16, 1994, 
when a predecessor registered investment company (the ``Old Trust'') 
with portfolios corresponding to five of the current seven portfolios 
of the Trust was effectively reorganized into twin investment 
companies, the Old Trust and the Trust. Before September 16, 1994, the 
portfolios of the Old Trust had acted as the funding vehicles for the 
ValueMaster Contracts. The Trust currently also offers shares of its 
Portfolios to accounts of other unaffiliated life insurance companies, 
to serve as the investment vehicle for their respective variable 
annuity and variable life insurance contracts.
    6. The Bond Portfolio seeks a high level of current income 
consistent with moderate risk of capital and maintenance of liquidity 
and, under normal market conditions, invests in U.S. Government 
securities and short- and intermediate-term, investment grade corporate 
bond and debt obligations. Performance returns ranked the Bond 
Portfolio 21st out of 33, 31st out of 34, and last out of 26 in its 
peer group, as reported by Lipper Variable Insurance Products 
Performance Analysis Service (``Lipper Universe Peer Group''), for the 
six-month, and the one- and five-year period ending June 30, 1996.
    7. As of June 30, 1996, the Bond Portfolio had assets of 
$4,794,283, of which $2,563,131 were attributable to fewer than 100 
ValueMaster Contractowners. The only other shareholder of the Bond 
Portfolio besides the Accounts is a segregated account of an 
unaffiliated insurance company, which account is exempt from 
registration under the 1940 Act (the ``unregistered account''). 
According to OpCap Advisors, the unregistered account intends to redeem 
its shares of the Bond Portfolio. For the six months ending June 30, 
1996, and for calendar year 1995, net redemptions by the Accounts of 
shares of the Bond Portfolio, exclusive of dividend or capital gain 
reinvestments, total $293,852 and $1,232,852, respectively.
    8. The U.S. Government Portfolio commenced investment operations on 
January 3, 1995, at which time OpCap Advisors contributed $300,000 in 
seed capital to that Portfolio. Like the Bond Portfolio, the U.S. 
Government Portfolio seeks a high level of current income and the 
protection of capital by investing exclusively in debt obligations, 
including a variety of U.S. government securities. Under normal 
conditions the U.S. Government Portfolio invests at least 65 percent of 
its total assets in U.S. government securities. Performance returns 
ranked the U.S. Government Portfolio 2nd out of 30, and 6th out of 30 
in its Lipper Universe Peer Group for the first six months of 1996, and 
the one-year period ending June 30, 1996.
    9. As of June 30, 1996, the U.S. Government Portfolio had assets of 
$2,544,472, which included OpCap Advisors' seed capital contribution. 
Shares of the U.S. Government Portfolio currently also are offered by 
two unaffiliated insurance companies as a funding vehicle for their 
variable products. For the six months ending June 30, 1996, and for 
calendar year 1995, net sales of shares of the U.S. Government 
Portfolio, exclusive of dividend or capital gain reinvestments, totaled 
$1,104,391 and $1,046,574, respectively.
    10. Under the Investment Advisory Agreement (``Advisory 
Agreement'') between the Trust and OpCap Advisors, OpCap Advisors 
provides management and investment advisory services to the Trust and 
its Portfolios and is compensated by the Trust for services rendered to 
the Bond and U.S. Government Portfolios on a monthly basis at the 
annual rate of .50 percent of the average daily net assets of the Bond 
Portfolio and .60 percent of the average daily net assets of the U.S. 
Government Portfolio. Under the Advisory Agreement, OpCap Advisors has 
agreed to limit the total expenses of these Portfolios to 1.25 percent 
of their respective average daily net assets. Moreover, under a 
provision of the Advisory Agreement, OpCap Advisors guarantees that the 
total expenses of the Portfolios, in any fiscal year, exclusive of 
taxes, interest, brokerage fees and distribution expense 
reimbursements, shall not exceed the most restrictive state law 
provisions in effect in any state. In addition, OpCap Advisors has 
voluntarily agreed to limit the total expenses of the Bond and the U.S. 
Government Portfolios, through April 30, 1997, to 1.00 percent of their 
respective average daily net assets. As of June 30, 1996, the actual 
total expenses of both the Bond and the U.S. Government Portfolios 
exceeded both the voluntary expense limitation of 1.00 percent and the 
operative contractual expense limitation of 1.25 percent (Bond 
Portfolio at 1.45 percent and U.S. Government Portfolio at 3.33 
percent). OpCap Advisors waived its fees and reimbursed both the Bond 
and the U.S. Government Portfolios so that the net expenses of those 
Portfolios remained at

[[Page 5500]]

1.00 percent of their respective average daily net assets.

The Proposed Substitution

    11. Applicants propose to substitute shares of the U.S. Government 
Portfolio for all shares of the Bond Portfolio attributable to the 
ValueMaster Contracts (``Substitution''). The ValueMaster 
Contractowners will not bear any expenses and transaction costs of the 
proposed Substitution, including any applicable brokerage commissions; 
any such expenses will be borne by OpCap Advisors. Soon after the 
filing of this application for exemptive relief, the prospectuses for 
the Accounts will be supplemented to reflect the proposed Substitution 
and distributed to all ValueMaster Contractowners. The Substitution 
will occur as soon as practicable after receipt of an order. As of the 
effective date of the Substitution, the Companies will redeem shares of 
the Bond Portfolio. Simultaneously, the Companies will use the proceeds 
to purchase the appropriate number of shares of the U.S. Government 
Portfolio. The Substitution will take place at relative net asset 
values of the Bond and U.S. Government Portfolios, with no change in 
the amount of any ValueMaster Contractowner's account values.
    12. To the extent the Bond Portfolio incurs brokerage fees and 
expenses in connection with the redemption by the Companies of its 
shares, these expenses would be charged to the applicable Portfolio, 
but borne by OpCap Advisors. To alleviate the impact of any such 
brokerage fees and expenses upon the Bond Portfolio and ultimately 
OpCap Advisors, the Trust and OpCap Advisors propose that the 
redemption of the Bond Portfolio shares be accomplished, in part, by 
``in kind'' transactions. Under the Proposal, the Trust would transfer 
to the Companies their proportionate interest in cash and/or securities 
held by the Bond Portfolio on the date of the Substitution, and the 
Companies will then use such cash and/or securities to purchase shares 
of the U.S. Government Portfolio. The valuation of any ``in kind'' 
transfers will be on a basis consistent with the normal valuation 
procedures of the Bond and U.S. Government Portfolios.
    13. Within five days after the Substitution, the Companies will 
send to ValueMaster Contractowners written notice of the Substitution 
stating that shares of the Bond Portfolio have been eliminated and that 
shares of the U.S. Government Portfolio have been substituted. The 
Companies will include in such mailing a second supplement to the 
prospectuses of the Accounts which discloses that the Substitution has 
occurred. The notice will advise ValueMaster Contractowners that for a 
period of thirty days from the mailing of the notice, the ``Free 
Transfer Period,'' they may transfer all assets, as substituted, to any 
other available Sub-Account, without limitation and without the 
transfer being deemed a transfer for purposes of determining any 
transfer charge. Following the Substitution, ValueMaster Contractowners 
will be afforded the same contract rights, including surrender and 
other transfer rights, as they currently have. Any applicable surrender 
(or contingent deferred sales) charges will continue to be imposed, but 
will not be affected in any way by the Substitution.

Applicants' Legal Analysis and Conditions

    1. Section 26(b) of the 1940 Act provides, in pertinent part, that 
``[i]t shall be unlawful for any depositor or trustee of a registered 
unit investment trust holding the security of a single issuer to 
substitute another security for such security unless the Commission 
shall have approved such substitution.'' Applicants assert that the 
purpose of Section 26(b) is to protect the expectation of investors in 
a unit investment trust that the unit investment trust will accumulate 
the shares of a particular issuer, and to prevent unscrutinized 
substitutions which might, in effect, force investors dissatisfied with 
the substituted security to redeem their shares, thereby possibly 
incurring a loss of the sales load deducted from initial purchase 
payments, an additional sale load upon reinvestment of the redemption 
proceeds, or both. Section 26(b) affords this protection to investors 
by preventing a depositor or trustee of a unit investment trust holding 
the shares of one issuer from substituting for those shares the shares 
of another issuer, unless the Commission approves that substitution.
    2. Section 17(a)(1) of the 1940 Act prohibits an affiliated person 
of a registered investment company or an affiliated person of such 
person, acting as principal, from selling any security or other 
property to such registered investment company. Section 17(a)(2) of the 
1940 Act prohibits any such affiliated person, acting as principal, 
from purchasing any security or other property from such registered 
investment company. Applicants state that the transfer of proceeds 
emanating from the in-kind redemption of shares of the Bond Portfolio 
from the Bond Sub-Account to the U.S. Government Sub-Account could be 
deemed to involve a purchase and sale between the Bond Sub-Account and 
U.S. Government Sub-Account, each of which is an affiliated person of 
the other.
    3. Section 17(b) of the 1940 Act provides that the Commission may 
grant an order exempting a proposed transaction from the provisions of 
Section 17(a) provided: (a) 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; (b) 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 1940 Act; and (c) 
the proposed transaction is consistent with the general purpose of the 
1940 Act.
    4. Applicants submit that the purposes, terms and conditions of the 
proposed Substitution are consistent with the principles and purposes 
of Section 26(b) of the 1940 Act and do not entail any of the abuses 
that Section 26(b) is designed to prevent. Applicants assert that a 
Substitution is an appropriate solution to the limited ValueMaster 
Contractowner interest or investment in the Bond Portfolio, which 
currently is, and in the future may be, of insufficient size to promote 
consistent investment performance or to reduce operating expenses. 
Applicants further assert that the proposed Substitution will not cause 
the fees and charges currently being paid by ValueMaster Contractowners 
to be greater after the Substitution than before the Substitution.
    5. Applicants represent that the Substitution will not result in 
the type of costly forced redemption that Section 26(b) was intended to 
guard against, and is consistent with the protection of investors and 
the purposes fairly intended by the 1940 Act for the following reasons: 
(a) The objectives, policies, and restrictions of the Bond Portfolio 
are substantially similar to the objectives, policies, and restrictions 
of the U.S. Government Portfolio; (b) OpCap Advisors voluntarily agreed 
to limit the total operating expenses of both the U.S. Government and 
Bond Portfolios, through April 30, 1997, to 1.00 percent of their 
respective average daily net assets; (c) if a ValueMaster Contractowner 
so requests during the Free Transfer Period, Contract value affected by 
the Substitution will be reallocated for investment in any other 
available Sub-Account selected by the ValueMaster Contractowner; (d) 
the Substitution will be a net asset value of the respective Portfolio 
shares, without

[[Page 5501]]

imposition of any transfer or similar charge; (e) OpCap Advisors will 
assume any expenses and transaction costs relating to the Substitution, 
including legal and accounting fees and any brokerage commissions; (f) 
the Substitution will not alter the insurance benefits or contractual 
obligations of the Companies to ValueMaster Contractowners, or the tax 
benefits and consequences to ValueMaster Contractowners; and (g) the 
Substitution is expected to confer certain modest economic benefits to 
ValueMaster Contractowners by virtue of the possible enhanced asset 
size of the U.S. Government Portfolio, and to avoid the detriments 
associated with investment in the Bond Portfolio, whose assets are 
declining. In this regard, Applicants also note that, within five days 
after the Substitution, the Companies will send to ValueMaster 
Contractowners written notice of the Substitution stating that shares 
of the Bond Portfolio have been eliminated and that shares of the U.S. 
Government Portfolio have been substituted therefor. The Companies will 
include in such mailing a second supplement to the prospectuses of the 
Accounts which discloses that the Substitution has occurred. For the 
reason cited above, Applicants also contend that the terms of the 
proposed Substitution meet the standards of Section 17(b).
    6. Applicants assert that the decreasing asset base of the Bond 
Portfolio, the impending redemption of Bond Portfolio shares by the 
unregistered account, and the mediocre performance results of the Bond 
Portfolio have made it difficult for that Portfolio to retain current 
investors and attract new investors. Moreover, Oppenheimer Life 
Agency's limited effort in selling the ValueMaster Contract, coupled 
with a constant amount of fixed costs incurred by the Bond Portfolio, 
can reasonably be expected to lead to an increase in the actual 
expenses of the Bond Portfolio in the future. In contrast, the actual 
expenses of the U.S. Government Portfolio can reasonably be expected to 
decrease in the future: net sales of U.S. Government Portfolio shares 
from its inception to date suggest that the asset base of that 
Portfolio will continue to grow; superior performance results should 
assist the U.S. Government Portfolio in retaining existing investors 
and attracting new investors; and the use of the U.S. Government 
Portfolio in various variable products should increase distribution 
capabilities.
    7. Applicants also note that the continuous accumulation of assets 
of the U.S. Government Portfolio and positive reaction of investors of 
that Portfolio has persuaded OpCap Advisors to extend its voluntary 
agreement to limit the operating expenses of the U.S. Government 
Portfolio to 1.00 percent of its average daily net assets past April 
30, 1997, to at least April 30, 1998. OpCap Advisors has not assured 
the Companies that it will do the same for the Bond Portfolio. 
Therefore, the total expense ratio of the Bond Portfolio may increase 
after April 30, 1997, whereas, through April 30, 1998, the total 
expenses of the U.S. Government Portfolio are guaranteed not to exceed 
1.00 percent of its average daily net assets.
    8. Applicants contend that the relatively small asset size of the 
Bond Portfolio hampers the ability to maintain optimal diversification 
of its investments. In contrast, increasing asset size will permit the 
U.S. Government Portfolio to purchase attractive portfolio securities. 
Consequently the U.S. Government Portfolio can be expected to achieve 
greater portfolio diversification and to react more readily to changes 
in market conditions. Applicants assert that ValueMaster Contractowners 
will benefit through the more effective management of a potentially 
larger asset base with more diversified portfolio securities, such as 
that available through the U.S. Government Portfolio.
    9. Applicants submit that the ValueMaster Contracts reserve to the 
Companies the right to replace the shares of the Portfolios held by the 
Accounts with shares of another portfolio, such as the U.S. Government 
Portfolio, if: (a) shares of a Portfolio should no longer be available 
for investment by the Accounts; or (b) in the judgment of the 
Companies, further investment in a Portfolio should become 
inappropriate in view of the purpose of the ValueMaster Contracts. Any 
such substitution must be approved by the Commission and must comply 
with applicable rules and regulations. The Companies believe that 
further investment in shares of the Bond Portfolio is no longer 
appropriate in view of the purposes of the ValueMaster Contracts.

Conclusion

    Applicants assert that for the reasons and upon the facts set forth 
above, the proposed Substitution meets the standards set forth in 
Sections 26(b) and 17(b) of the 1940 Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-2782 Filed 2-4-97; 8:45 am]
BILLING CODE 8010-01-M
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