67426 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices

4The two classes of Select Fund will be

reorganized into one class of Firstar REIT Fund,

which, unlike the classes of Select Fund, is not

subject to a distribution or shareholder servicing

plan.

similar to those of the corresponding

class of shares of the Acquiring Funds

into which they will be reorganized.4

For purposes of calculating the deferred

sales charges of shares of Acquiring

Fund classes that charge a contingent

deferred sales load, shareholders of the

Acquired Funds will be deemed to have

held the shares of the corresponding

Acquiring Fund since the date the

shareholders initially purchased the

shares of the Acquired Fund.

6. Applicants state that the

investment objectives, policies, and

restrictions of each Acquiring Fund are

substantially similar to those of its

corresponding Acquired Fund. No sales

charge will be imposed in connection

with the Reorganizations. The Plans

provide that Acquiring Fund shares will

be distributed pro rata to the

shareholders of record in the applicable

Acquired Fund class, determined as of

the close of business immediately prior

to the Effective Time, in complete

liquidation of each Acquired Fund.

Applicants anticipate that the

Reorganizations will be completed on or

about November 27, 2000.

7. The Boards, including the

Independent Directors, unanimously

found that participation in the

Reorganizations is in the best interest of

each Fund and its shareholders and that

the interests of existing shareholders of

the Funds will not be diluted as a result

of the Reorganizations. In approving the

Reorganizations, the Boards considered,

among other things, (a) the potential

effect of the Reorganizations; (b) the

expense ratios of the Acquiring Funds

and the Acquired Funds; (c) the

compatibility of the investment

objectives and investment strategies of

the Acquiring Funds and the Acquired

Funds; (d) the terms and conditions of

the Plans; and (e) the tax-free nature of

the Reorganizations. FIRMCO or one of

its affiliates (not the Funds) will assume

all expenses incurred by the Funds in

connection with the Reorganizations.

8. The Plans may be terminated by

mutual written consent of the Acquiring

Funds and Acquired Funds at any time

prior to the Effective Time. In addition,

either party may terminate the Plans in

writing without liability to the

terminating party if certain conditions

are not satisfied prior to the Effective

Time.

9. The registration statement on Form

N–14 for Firstar (which contains a

combined prospectus/proxy statement

for each of Stellar and Mercantile) was

filed with the Commission on

September 7, 2000, and the registration

statement was declared effective on

October 7, 2000. The combined

prospectus/proxy statements contained

in the N–14 registration statement were

mailed to shareholders of Stellar and

Mercantile on October 23, 2000. The

definitive proxy materials for Select

were filed with the Commission on

October 6, 2000, and were sent to the

shareholders of Select on October 11,

2000. A special meeting of shareholders

of Select to consider the Reorganizations

is to be held on November 8, 2000, and

special meetings of the shareholders of

Stellar and Mercantile are to be held on

November 24, 2000.

10. The consummation of the

Reorganizations is subject to certain

conditions, including: (a) A registration

statement under the Securities Act of

1933 for the Acquiring Funds will have

become effective; (b) the Acquired Fund

shareholders will have approved the

Plans; (c) applicants will have received

exemptive relief from the Commission

to permit the Reorganizations; (d) the

Funds will have received an opinion of

counsel concerning the tax-free nature

of the Reorganizations; and (e) each

Acquired Fund that is not reorganizing

into a corresponding Shell Acquiring

Fund will have declared a dividend to

distribute substantially all of its

investment company taxable income

and net capital gain, if any, to its

shareholders. Applicants agree not to

make any material changes to the Plans

that affect the application without prior

Commission approval.

Applicants’ Legal Analysis

1. Section 17(a) of the Act generally

prohibits an affiliated person of a

registered investment company, or an

affiliated person of such a person, acting

as principal, from selling any security

to, or purchasing any security from, the

company. Section 2(a)(3) of the Act

defines an ‘‘affiliated person’’ of another

person to include (a) any person that

directly or indirectly owns, controls, or

holds with power to vote 5% or more

of the outstanding voting securities of

the other person; (b) any person 5% or

more of whose outstanding voting

securities are directly or indirectly

owned, controlled, or held with power

to vote by the other person; and (c) any

person directly or indirectly controlling,

controlled by, or under common control

with the other person.

2. Rule 17a–8 under the Act exempts

from the prohibitions of section 17(a)

mergers, consolidations, or purchases or

sales of substantially all of the assets of

registered investment companies that

are affiliated persons, or affiliated

persons of an affiliated person, solely by

reason of having a common investment

adviser, common directors/trustees,

and/or common officers, provided that

certain conditions set forth in the rule

are satisfied.

3. Applicants state that the Firstar

Group holds of record more than 5%

(and in some cases more than 25%) of

the outstanding voting securities of

certain Funds. Because of this

ownership, applicants state that these

Funds may be deemed affiliated persons

for reasons other than those set forth in

rule 17a–8 and therefore unable to rely

on the rule. Applicants request an order

pursuant to section 17(b) of the Act

exempting them from section 17(a) to

the extent necessary to consummate the

Reorganizations.

4. Section 17(b) of the Act provides

that the Commission may exempt a

transaction from the provisions of

section 17(a) if evidence establishes that

the terms of the proposed transaction,

including the consideration to be paid,

are reasonable and fair and do not

involve overreaching on the part of any

person concerned, and that the

proposed transaction is consistent with

the policy of each registered investment

company concerned and with the

general purposes of the Act.

5. Applicants submit that the terms of

the Reorganizations satisfy the

standards set forth in section 17(b).

Applicants note that the Boards,

including all of the Independent

Directors, found that participation in the

Reorganizations is in the best interests

of each Fund and its shareholders and

that the interests of the existing

shareholders of each Fund will not be

diluted as result of the Reorganizations.

Applicants also note that the

Reorganizations will be based on the

Funds’ relative net asset value.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–28795 Filed 11–8–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–24728; File No. 812–12068]

National Life Insurance Company, et

al.; Notice of Application

November 3, 2000.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’).

ACTION: Notice of Application for an

order under the Investment Company

Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices 67427

Act of 1940 (the ‘‘Act’’) approving

certain substitutions of securities and an

order of exemption pursuant to Section

17(b) of the Act from Section 17(a) of

the Act.

Summary of Application: Applicants

seek an order approving the substitution

of securities issued by certain

management investment companies

(each a ‘‘Management Company’’) and

held by either the Annuity Account or

the Life Account (each, an ‘‘Account,’’

together, the ‘‘Accounts’’) to support

variable annuity contracts or variable

life insurance contracts (collectively, the

‘‘Contracts’’) issued by NLIC. Applicants

also seek an order of the Commission

pursuant to Section 17(b) of the Act

exempting them, Market Street Fund,

Inc. (‘‘MSF’’) and sentinel Variable

Products Trust (‘‘SVPT’’), and certain

investment portfolios of each (each, a

‘‘Portfolio’’ or ‘‘Fund,’’ as appropriate),

from Section 17(a) of the Act to the

extent necessary to permit NLIC to carry

out certain of the above-referenced

substitutions of securities by redeeming

shares issued by MSF in kind and using

the proceeds to purchase shares issued

by SVPT.

Applicants: National Life Insurance

Company (‘‘NLIC’’), National Variable

Annuity Account II (‘‘Annuity

Account’’), and National Variable Life

Insurance Account (‘‘Life Account’’).

Filing Date: The application was filed

on April 20, 2000, and was amended

and restated on November 3, 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 November 24, 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 may request notification of a

hearing by writing to the Secretary of

the Commission.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

N.W., Washington, D.C. 20549.

Applicants, c/o D. Russell Morgan, Esq.,

National Life Insurance Company,

National Life Drive, Montpelier, VT

05604.

FOR FURTHER INFORMATION CONTACT:

Keith A. O’Connell, Senior Counsel,

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

Commission’s Public Reference Branch,

450 Fifth Street, N.W., Washington, D.C.

20549–0102 (telephone (202) 942–8090).

Applicants’ Representations

1. NLIC is a stock life insurance

company, all of the outstanding stock of

which is indirectly owned by National

Life Holding Company, a mutual

insurance holding company, established

under Vermont law in 1999. NLIC is

authorized to transact life insurance and

annuity business in Vermont and in 50

other jurisdictions. As of December 31,

1999, NLIC had consolidated assets of

approximately $10 billion. For purposes

of the Act, NLIC is the depositor and

sponsor of the Annuity Account and the

Life Account as those terms have been

interpreted by the Commission with

respect to variable life insurance and

variable annuity separate accounts. Each

Account is a ‘‘separate account’’ as

defined by Rule 0–1(e) under the 1940

Act, and is registered with the

commission as an unit investment trust.

2. The Annuity Account is divided

into twenty-seven subaccounts. Each

subaccount invests exclusively in a

Fund of one of eleven series-type

Management Companies. The assets of

the Annuity Account support variable

annuity Contracts, and interests in the

Account offered through each Contracts

have been registered under the

Securities Act of 1933 (the ‘‘1933 Act’’)

on Form N–4.

3. The Life Account is divided into

forty-eight subaccounts. Each

subaccount invests exclusively in shares

representing an interest in a separate

corresponding Fund of one of eight

series-type Management Companies.

The assets of the Life Account support

variable life insurance Contracts, and

interests in this Account offered through

such Contracts have been registered

under the 1933 Act on Form S–6.

4. MSF is registered under the Act as

an open-end diversified management

investment company. MSF is a series

investment company as defined by Rule

18f–2 under the Act and currently

comprises twelve Portfolios. MSF issues

a separate series of shares of stock in

connection with each Portfolio and has

registered these shares under the 1933

Act on Form N–1A. Providemutual

Investment Management Company

(‘‘PIMC’’) serves as investment adviser

to the MSF International Portfolio and

The Boston Company Asset

Management, Inc. serves as its

subadviser. Sentinel Advisors Company

serves as investment adviser to the MSF

Growth Portfolio, Sentinel Growth

Portfolio, Aggressive Growth Portfolio

and Money Market Portfolio.

The investment objective of the

International Portfolio is long-term

growth of capital primarily through

investments in a diversified portfolio of

marketable equity securities of

established foreign corporate issuers

and companies organized in the U.S. but

having their principal activities and

interests outside the U.S. This Portfolio

also may invest in securities of other

foreign issuers such as foreign

governments or agencies or

instrumentalities of foreign

governments.

The investment objective of the

Growth Portfolio is intermediate and

long-term growth of capital. A

reasonable level of income is an

important secondary objective. This

Portfolio invests primarily in common

stocks of companies that its investment

adviser believes offer above-average

intermediate and long-term growth

potential. The Portfolio purchases

securities only of companies that have

profitable operations and an annual

minimum level of sales or revenues of

at least $50 million.

The investment objective of the

Sentinel Growth Portfolio is long-term

growth of capital through equity

participation in companies having

growth potential believed by its

investment adviser to be more favorable

than the U.S. economy as a whole, with

a focus on relatively well-established

companies.

The investment objective of the

Aggressive Growth Portfolio is to seek a

high level of long-term capital

appreciation. This Portfolio invests

primarily in securities of companies in

new or emerging industries and

securities of small capitalization

companies and/or unseasoned

companies.

The investment objective of the

Money Market Portfolio is maximum

current income consistent with capital

preservation and liquidity. This

Portfolio invests exclusively in dollardenominated money market instruments

that present minimal credit risks.

5. SVPT is registered under the Act as

an open-end diversified management

investment company. SVPT is a series

investment company as defined by Rule

18f–2 under the Act and currently

comprises five Funds. SVPT will issue

a separate series of shares of beneficial

interest in connection with each Fund

and has registered these shares under

the 1933 Act on Form N–1A. National

67428 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices

Life Investment Management Company,

Inc. will serve as investment adviser to

each of the Funds.

The investment objective of the

Sentinel Variable Products Common

Stock Fund is to seek a combination of

growth of capital, current income,

growth of income and relatively low risk

as compared with the stock market as a

whole. This Fund invests mainly in a

diverse group of common stocks of wellestablished companies, most of which

pay regular dividends. The Fund’s

investment adviser tries to select stocks

of leading companies that are

financially strong and are selling at

attractive prices in relation to their

values.

The investment objective of Sentinel

Variable Products Mid Cap Growth

Fund is growth of capital, by focusing

its investments on common stock of

mid-sized growing companies. The

Fund invests in securities of issuers that

its investment adviser believes have

favorable growth potential with

attractive pricing in relation to this

growth potential as well as experienced

and capable management. The Fund

invests at least 65% of its assets in

stocks whose market capitalization is

within the range of these comprising the

Standard & Poor’s 400 Midcap Index.

The investment objective of Sentinel

Variable Products Small Company Fund

is growth of capital, by investing mainly

in common stocks of small and medium

companies that its investment adviser

believes have attractive growth potential

and are attractively valued. The Fund

invests at least 65% of its assets in

stocks of companies with market

capitalizations of less than $2 billion,

and the median market capitalization of

the Fund’s holdings is less than $1

billion.

The investment objective of Sentinel

Variable Products Money Market Fund

is to seek as high a level of current

income as is consistent with stable

principal values an liquidity by

investing exclusively in dollardenominated money market

instruments, including U.S. government

securities, bank obligations, repurchase

agreements, commercial paper, and

other corporate debt obligations.

6. Goldman Sachs Variable Insurance

Trust (‘‘GSVIT’’). GSVIT is registered

under the Act as an open-end

diversified management investment

company. GSVIT is a series investment

company as defined by Rule 18f–2

under the Act and currently comprises

nine funds. GSVIT issues a separate

series of shares of beneficial interest in

connection with each fund and has

registered these shares under the 1933

Act on Form N–1A. Goldman Sachs

Asset Management International, an

affiliate of Goldman, Sachs & Co., serves

as investment adviser to the GSVIT

International Equity Fund and Goldman

Sachs Asset Management, a unit of the

Investment Management Division of

Goldman, Sachs & Co., serves as

investment adviser to the other GSVIT

funds whose shares are held by the

Accounts.

The investment objective of the

International Equity Fund is long-term

capital appreciation. Under normal

circumstances, the Fund invests

substantially all, and at least 65% of its

total assets in equity securities of

companies that are organized outside

the U.S. or whose securities are

primarily traded outside the U.S. The

Fund may allocate its assets among

countries selected by its investment

adviser, provided that its assets are

invested in at least three foreign

countries. The Fund expects to invest a

substantial portion of its assets in the

securities of issuers located in the

developed countries of Western Europe

and in Japan.

The investment objective of the

Global Income Fund is high total return

emphasizing current income. The Fund

invests primarily in high quality fixedincome securities of U.S. and foreign

issuers and enters into transactions in

foreign currency. Under normal market

conditions, the Fund has at least 30% of

its total assets denominated in U.S.

dollars and invests in at least three

countries. Except for issuers located in

Canada, Germany, Japan, the United

Kingdom, and the U.S., not more than

25% of the Fund’s total assets is

invested in securities of issuers in any

single country.

The investment objective of the CORE

Small Cap Entity Fund is long-term

growth of capital. The Fund seeks this

objective through a broadly diversified

portfolio or equity securities of U.S.

issuers that are included in the Russell

2000 Index at the time of investment.

Under normal circumstances, the Fund

invests at least 90% of its total assets in

equity securities of U.S. issuers,

including foreign issuers whose

securities are traded in the U.S.

The investment objective of the Mid

Cap Value Fund is long-term capital

appreciation. Under normal

circumstances, the Fund invests

substantially all of its assets in equity

securities and at least 65% of its total

assets in equity securities of mid-cap

companies with public stock market

capitalizations within the range of

market capitalizations of companies

comprising the Russell Midcap Index at

the time of investment. The Fund also

may invest up to 25% of its total assets

in foreign securities, including

securities of issuers in emerging

countries and securities quoted in

foreign currencies.

7. Fidelity Variable Insurance

Products Fund and Fidelity Variable

Insurance Products Fund II (together,

‘‘FVIP’’). Fidelity Variable Insurance

Products Fund and Fidelity Variable

Insurance Products Fund II are each

registered under the Act as an open-end

diversified management investment

company. Each also is a series

investment company as defined by Rule

18f–2 under the Act and issues a

separate series of shares of beneficial

interest in connection with each

Portfolio and has registered these shares

under the 1933 Act on Form N–1A.

Fidelity Management & Research

Company serves as investment adviser

to the FVIP Investment Grade Bond

Portfolio and Overseas Portfolio.

The investment objective of FVIP

Investment Grade Bond Portfolio is to

seek as high a level of current income

as is consistent with the preservation of

capital. The Portfolio normally invests

its assets in U.S. dollar-denominated

investment-grade bonds. The Portfolio’s

investment adviser manages it to have

similar overall interest rate risk to the

Lehman Brothers Aggregate Bond Index.

The investment adviser allocates the

Portfolio’s assets among different market

sectors and different maturities based on

its view of the relative value of each

sector or maturity.

The investment objective of FVIP

Overseas Portfolio is long-term growth

of capital. The Portfolio invests at least

65% of its total assets in foreign

securities. It invests primarily in

common stocks.

8. Van Eck Worldwide Insurance

Trust (‘‘VEWIT’’). VEWIT is registered

under the Act as an open-end

diversified management investment

company. VEWIT is a series investment

company as defined by Rule 18f–2

under the Act and currently comprises

four Funds. VEWIT issues a separate

series of shares of beneficial interest in

connection with each Fund and has

registered these shares under the 1933

Act on Form N–1A. Van Eck Associates

Corporation serves as investment

adviser to the VEWIT Worldwide Bond.

The investment objective of the

Worldwide Bond Fund is high total

return by investing globally, primarily

in a variety of debt securities. The

Fund’s assets generally consist of debt

securities rated B or better by Standard

& Poor’s or Moody’s Investor’s Service,

but it may hold up to 25% of its assets

in lower-rated debt issued by

governments or government agencies.

The Fund’s investment adviser expects

Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices 67429

the Fund’s average maturity to range

from three to ten years. There is no limit

on the amount that the Fund may invest

in one country or in securities

denominated in a single currency.

Under normal conditions, the Fund’s

assets will be invested in at least three

countries other than the U.S.

9. American Century Variable

Portfolios, Inc. (‘‘ACVP’’). ACVP is

registered under the Act as an open-end

diversified management investment

company. ACVP is a series investment

company as defined by Rule 18f–2

under the Act and currently comprises

six Funds. ACVP issues a separate series

of shares of stock in connection with

each Fund and has registered these

shares under the 1933 Act on Form N–

1A. American Century Investment

Management, Inc. serves as investment

adviser to the ACVP Value Fund.

The investment objective of the ACVP

Value Fund is long-term growth. Income

is a secondary objective. The Fund’s

investment adviser seeks for the Fund

stocks of medium to large companies

that it believes are undervalued at the

time of purchase. The investment

adviser follows a value strategy that

looks for companies that are temporarily

out of favor in the market.

10. The Contracts are flexible

premium variable life insurance

contracts and individual flexible

premium deferred variable annuity

contracts. Under each of the Contracts,

NLIC reserves the right to substitute

shares of one Fund or Portfolio for

shares of another, including a Fund or

Portfolio of a different Management

Company.

11. Under the variable life insurance

Contracts, a Contract owner may make

unlimited transfers of accumulated

value in a Contract year between and

among the subaccounts of the relevant

Account and NLIC’s general account.

Currently there is no charge for

transfers; however, NLIC reserves the

right to assess a $25 charge for each

transfer in excess of twelve in any

Contract year. Under the variable

annuity Contracts, a Contract owner

may make unlimited transfers of

contract value between and among the

subaccounts of the relevant Account

and NLIC’s general account. Currently

there is no charge for transfers, however,

NLIC reserves the right to assess a $25

charge for each transfer in excess of

twelve in any Contract year.

12. NLIC, on its behalf and on behalf

of the Accounts, proposes to make the

following substitutions of shares held in

those Accounts: (1) Shares of SVPT

Common Stock Fund for shares of MSF

Growth Portfolio, (2) shares of SVPT

Mid Cap Growth Fund for shares of

MSF Sentinel Growth Portfolio, (3)

shares of SVPT Small Company Fund

for shares of MSF Aggressive Growth

Portfolio, (4) shares of FVIP Overseas

Portfolio for shares of MSF International

Portfolio, (5) shares of SVPT Money

Market Fund for shares of MSF Money

Market Portfolio, (6) shares of FVIP

Investment Grade Bond Portfolio for

shares of VEWIT Worldwide Bond

Fund, (7) shares of FVIP Overseas

Portfolio for shares of GSVIT

International Equity Fund, (8) shares of

FVIP Investment Grade Bond Portfolio

for shares of GSVIT Global Income

Fund, (9) shares of SVPT Small

Company Fund for shares of GSVIT

CORE Small Cap Equity Fund, and (10)

shares of ACVP Value Portfolio for

shares of GSVIT Mid Cap Value Fund.

NLIC believes that by making the

proposed substitutions in each of the

Accounts, they can better serve the

interests of owners of the Contracts.

13. Proposed substitution of shares of

SVPT Common Stock Fund for shares of

MSF Growth Portfolio, shares of SVPT

Mid Cap Growth Fund for shares of MSF

Sentinel Growth Portfolio, shares of

SVPT Small Company Fund for shares

of MSF Aggressive Growth Portfolio,

shares of FVIP Overseas Portfolio for

shares of MSF International Portfolio,

and shares of SVPT Money Market Fund

for shares of MSF Money Market

Portfolio. Sentinel Advisors Company

(‘‘SAC’’) serves as the investment

manager and adviser to the MSF Growth

Portfolio, Sentinel Growth Portfolio,

Aggressive Growth Portfolio and Money

Market Portfolio. SAC is a general

partnership owned and controlled by

four entities: (1) National Retirement

Plan Advisors, Inc., an indirect whollyowned subsidiary of NLIC, (2)

Providentmutual Management Co., Inc.,

an indirect wholly-owned subsidiary of

Provident Mutual Life Insurance

Company (‘‘PMLIC’’), (3) HTK of

Delaware, Inc., a wholly-owned

subsidiary of The Penn Mutual Life

Insurance Company (‘‘Penn Mutual’’),

and (4) Sentinel Management Company

(a partnership of wholly-owned

subsidiaries of NLIC, PMLIC and Penn

Mutual), which is SAC’s managing

general partner. NLIC, PMLIC and Penn

Mutual are not affiliated persons of each

other. Although a joint venture among

the three principal controlling parties

(NLIC, PMLIC and Penn Mutual) who

each maintain a financial interest in

SAC, SAC’s officers and investment

personnel are all employees of NLIC or

its affiliates. The ownership percentages

of the partners fluctuate as a function of

the assets (managed by SAC)

contributed by each partner. As of

December 31, 1999, the percentages

were: NLIC, 62.238%, PMLIC, 33.924%;

and Penn Mutual, 3.839%. SAC is

located at NLIC’s premises, in

Montpelier, Vermont.

14. PIMC, an indirect wholly-owned

subsidiary of PMLIC, serves as the

investment manager and adviser of the

MSF International Portfolio. PIMC has

engaged The Boston Company Asset

Management, Inc. as an investment

subadviser to carry out day-to-day

portfolio management. PIMC also serves

as the investment manager and adviser

to five other MSF investment portfolios

that are not used by NLIC as investment

options in any of its variable life

insurance or annuity contracts and

which would not be involved in the

proposed substitutions.

15. PMLIC and NLIC have discussed

the possibility of ending their joint use

of MSF as an investment vehicle for

both companies’ variable life insurance

and variable annuity contracts

(including the Contracts). NLIC has

determined that the manner of

accomplishing this separation which

would involve the least confusion and

disruption to owners of the Contracts

would be for it to substitute shares of

new Funds or Portfolios for those of

MSF Portfolios held by the Accounts.

Once the Accounts no longer held

shares of MSF’s Growth Portfolio,

Sentinel Growth Portfolio, Aggressive

Growth Portfolio and Money Market

Portfolio, SAC would be willing to step

down as investment manager and

adviser to MSF. Applicants assert that

this would permit MSF to make

whatever new investment management

arrangements (and related changes, if

any, in Portfolio investment policies) it

desires for PMLIC contract owners

invested in the foregoing Portfolios and

would avoid the possibility that MSF

may propose changes which NLIC and

PMLIC could not agree on. The

Applicants state that such a

disagreement could create unnecessary

expense and confusion for owners of

both the Contracts and PMLIC contracts,

and could result in one or more material

irreconcilable conflicts between the

interests of Contract owners and owners

of PMLIC contracts.

16. The Applicants state that except

for the Sentinel Growth Portfolio, most

of the assets in these Portfolios belong

to owners of variable annuity and

variable life insurance contracts issued

by PMLIC and its affiliates and only

small portions of each consist of assets

beneficially owned by owners of the

Contracts.

17. NLIC believes that most of the

owners of the Contracts wanted (and

still want) to invest in Funds managed

67430 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices

or advised by SAC or an affiliate

organization or, failing that, in Funds or

Portfolios selected by NLIC and over

which NLIC has some influence. To

facilitate what it believes are the desires

of Contract owners, NLIC asked

National Life Investment Management

Company, Inc. (‘‘NLIMC’’) to create

SVPT with the four Funds that it

proposes to substitute for the MSF

Growth, Sentinel Growth, Aggressive

Growth and Money Market Portfolios.

The Applicants state that these Funds

are designed to be substantially

identical to the MSF Portfolios that they

would replace. The investment

objectives are substantially the same.

Although the investment policies of the

Funds (other than the Money Market

Fund) are articulated somewhat

differently than those of their MSF

counterparts, NLIMC intends to manage

the Funds exactly as SAC has managed

the MSF Portfolios. Indeed, in recent

years, SAC generally managed each of

these MSF Portfolios in tandem with a

Sentinel Fund of the same type; each of

the four Funds has identical investment

objectives and policies as those of the

appropriate corresponding Sentinel

Fund.

18. NLIC believes that the four

proposed SVPT Funds will have

investment performance substantially

similar to that which the corresponding

MSF Portfolio would have had if SAC

had continued to manage the

corresponding MSF Portfolios. Projected

expense levels for the SVPT Funds are

the same as those experienced in recent

years by the MSF Portfolios because

each will be capped by NLIC for two

years at levels equal to the percentage

expense levels experienced by its

corresponding MSF Portfolio for the

1999 Fiscal year. Likewise, the

management fee rates (including

breakpoints) of each SVPT Fund are the

same as that of its corresponding MSF

Portfolio (for the SVPT Small Company

Fund, the corresponding rates will be

those of the MFS Aggressive Growth

Portfolio). Accordingly, the expense

limits for the SVPT Funds for a period

of 24 months following the date of the

substitution are as follows:

SVPT portfolio

Expense

limit

(percent)

SVPT Common Stock Fund ..... .48

SVPT Mid Cap Growth Fund ... .71

SVPT Small Company Fund .... .57

SVPT Money Market Fund ....... .40

In addition, for those Contract owners

who were Contract owners on the date

of the substitution, NLIC will not

increase Account or Contract expenses

for a period of 24 months following the

date of the substitution. Also, NLIC

believes it likely that most or all of the

MSF Portfolios will experience

increases in expense levels in the

foreseeable future. Moreover, NLIMC

expects to earn lower profits managing

the Funds than it derived from its share

of SAC’s profits from managing the

corresponding MSF Portfolios. Thus,

Applicants assert that NLIC is not

proposing to substitute its proprietary

Funds for those of MSF in order to

increase its profits. The Applicants state

that NLIC is merely trying to respond to

a management change for MSF by

replacing existing proprietary Portfolios

with substantially identical proprietary

Funds.

19. The Applicants state that, because

NLIMC is not currently in a position to

manage an international equity

portfolio, NLIC has determined to

replace the MSF International Portfolio

with the FVIP Overseas Portfolio. NLIC

believes that the FVIP Overseas

Portfolio is an excellent choice in

keeping with what its Contract owners

expect.

20. NLIC believes that it would be

beneficial to Contract owners invested

in the foregoing MSF Portfolios to have

their investments withdrawn prior to a

major restructuring of the management

arrangements for the Portfolios. The

Applicants state that this is because

most of these Contract owners would

likely not favor the proposed

management changes while most

owners of PMLIC contracts invested in

the MSF Portfolios would likely favor

such changes. Thus, at any meetings of

MSF Portfolio shareholders, Applicants

assert that management changes

proposed by PMLIC would almost

certainly be approved and NLIC would

then desire to carry out the proposed

substitutions. Applicants assert that

nothing would be gained by waiting

until after such shareholder meetings to

carry out the proposed substitutions.

21. The Applicants state that in light

of the significant beneficial ownership

position of PMLIC (and affiliate)

contract owners, Contract owners and

future NLIC contract owners cannot

expect to command a majority voting

position in any of the Portfolios (except

Sentinel Growth Portfolio) in the event

that they, as a group, desire that a

Portfolio move in a direction different

from that generally desired by owners of

PMLIC (or its affiliates;) contracts. In

addition, because MSF is unlikely to

offer shares of the Portfolios to any

insurer not affiliated with either NLIC or

PMLIC, unless the growth in the number

of Contracts or the assets supporting

them increases at a much greater rate

than those of similar contracts issued by

PMLIC and its affiliates, owners of

Contracts have no prospects of

influencing the future direction of these

Portfolios.

22. Similarly, to the extent that NLIC

can influence a MSF Portfolio (i.e., its

board) or the Portfolio’s investment

adviser, such influence would likely

diminish substantially after PIMC

becomes the investment adviser.

23. Proposed substitution of shares of

FVIP Investment Grade Bond Portfolio

for shares of VEWIT Worldwide Bond

Fund, shares of FVIP Overseas Portfolio

for shares of GSVIT International Equity

Fund, shares of FVIP Investment Grade

Bond Portfolio for shares of GSVIT

Global Income Fund, shares of SVPT

Small Company Fund for shares of

GSVIT CORE Small Cap Equity Fund,

and shares of ACVP Value Portfolio for

shares of GSVIT Mid Cap Value Fund.

The Applicants state that the VEWIT

Worldwide Bond Fund and the GSVIT

International Equity Fund, GSVIT

Global Income Fund, GSVIT CORE

Small Cap Equity Fund, and GSVIT Mid

Cap Value Fund have proved unpopular

with Contract owners. There are

currently 40,964 Contractor owners;

only 535 of these are invested in these

five Funds. Out of a total of 58,511

Contract owners who have ever invested

in the 27 currently offered subaccounts,

only 665 have ever invested in

subaccounts for these five Funds.

24. NLIC does not believe that

Contract owners’ interest in these Funds

will increase significantly in the

foreseeable future. The Applicants state

that although performance and expense

levels in these Funds have generally

been reasonable, both the GSVIT and

VEWIT Funds have remained small and

have attracted almost no interest from

Contract owners. In light of the practical

limits on the number of investment

options that it can offer in the Contracts,

NLIC believes that Contract owners’ best

interests would be served by replacing

these Funds with other, larger and

potentially more appealing Funds or

Portfolios.

25. In each case, NLIC believes that

the new Portfolio proposed for

substitution is an excellent choice in

keeping with what its Contract owners

expect. The Applicants state that except

for the substitution of FVIP Investment

Grade Bond Portfolio for both the

VEWIT Worldwide Bond Fund and the

GSVIT Global Income Fund, the

investment objectives and policies of

the new Portfolios are substantially the

same as those of the Fund that each

would replace. As for the VEWIT

Worldwide Bond Fund and the GSVIT

Global Income Fund, NLIC’s experience

Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices 67431

has been that very few Contract owners

have an interest in global or

international income Funds or

Portfolios. NLIC believes that FVIP

Investment Grade Bond Portfolio is a

sound fixed-income alternative for

Contract owners currently invested in

VEWIT Worldwide Bond Fund and the

GSVIT Global Income Fund which

entails lower risk than would other

possible alternatives.

26. In the event that the FVIP

Overseas Portfolio, FVIP Investment

Grade Bond Portfolio or ACVP Value

Portfolio has operating expenses (taking

into account expense waivers and

reimbursements) for any fiscal period

(not to exceed a fiscal quarter) during

the 24 months following the date of the

proposed substitutions equal on an

annualized basis to an amount greater

than 0.98%, 1.15% and 1.05%,

respectively, NLIC will make

adjustments to the Account expenses of

those subaccounts that invest in the

FVIP Overseas Portfolio, FVIP

Investment Grade Bond Portfolio, and

ACVP Value Portfolio for those Contract

owners who were Contract owners on

the date of the substitution. These

adjustments will limit those Contract

owners expenses so that the amount of

the new Portfolio’s operating expenses

together with the corresponding

subaccount’s Account expenses paid

during such period on an annualized

basis will be no greater than the sum of

the replaced Portfolio’s expenses (i.e.,

0.98%, 1.15%, or 1.05%, as the case

may be) together with the corresponding

subaccount’s Account expenses during

the fiscal year preceding the proposed

substitution, which were as follows:

Variable contract Account expense limit*

Sentinel Advantage VA ............ 1.40

Sentinel Estate Provider VLI .... .90

VariTrak VLI .............................. .90

Sentinel Benefit Provider VLI ... .32

* As a percentage of the average daily net

asset account value on an annual basis.

In addition, as stated above, for those

Contract owners who were Contract

owners on the date of the substitutions,

NLIC will not increase Account or

Contract expenses for a period of 24

months following the date of the

substitutions.

27. The following charts show the

approximate annual management fees,

other expenses and total expenses of

each of the Funds or Portfolios involved

in the proposed substitutions both

before and after any reimbursement or

fee waivers. The charts also show

revenue-sharing that NLIC expects to

receive from the investment manager or

distributor of various unaffiliated Funds

or Portfolios on an annual basis after the

proposed substitutions are carried out.

Revenue sharing paid to NLIC by the

investment manager or distributor of a

Fund or Portfolio (as a percentage of

NLIC’s share of the average daily net

assets of the Fund or Portfolio) is to

reimburse NLIC for some of the

expenses of administering the Contracts.

For the Funds and Portfolios other than

the GSVIT Funds, the management fees

and expenses shown are those for the

1999 fiscal year. For the GSVIT Funds,

the management fees and expenses

shown are those projected for those

funds for the 2000 fiscal year.

Fund

Before

reimbursement

or fee waiver

(percent)

After

reimbursement

or fee waiver

(percent)

Revenue

sharing

percentage

MSF Growth ................................................................................................................................. 0.32 0.32 N/A

0.16 0.16 ........................

0.48 0.48 ........................

SVPT Common Stock .................................................................................................................. 0.50 0.48 N/A

0.52 0.00 ........................

1.02 0.48 ........................

MSF Sentinel Growth .................................................................................................................. 0.50 0.50 N/A

0.21 0.21 ........................

0.71 0.71 ........................

SVPT Mid Cap Growth ................................................................................................................ 0.50 0.50 N/A

0.52 0.21 ........................

1.02 0.71 ........................

MSF Aggressive Growth .............................................................................................................. 0.41 0.41 N/A

0.16 0.16 ........................

0.57 0.57 ........................

SVPT Small Company ................................................................................................................. 0.50 0.50 N/A

0.52 0.07 ........................

1.02 0.57 ........................

MSF International ........................................................................................................................ 0.75 0.75 N/A

0.23 0.23 ........................

0.98 0.98 ........................

FVIP Overseas ............................................................................................................................ 0.73 0.73 0.10

0.18 0.14 ........................

67432 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices

Fund

Before

reimbursement

or fee waiver

(percent)

After

reimbursement

or fee waiver

(percent)

Revenue

sharing

percentage

0.91 0.87 ........................

MSF Money Market ..................................................................................................................... 0.25 0.25 N/A

0.15 0.15 ........................

0.40 0.40 ........................

SVPT Money Market ................................................................................................................... 0.25 0.25 N/A

0.72 0.15 ........................

0.97 0.40 ........................

VEWIT Worldwide Bond .............................................................................................................. 1.00 1.00 0.15

0.22 0.22 ........................

1.22 1.22 ........................

FVIP Investment Grade Bond ..................................................................................................... 0.43 0.43 0.10

0.11 0.11 ........................

0.54 0.54 ........................

GSVIT International ..................................................................................................................... 1.00 1.00 0.20

0.77 0.35 ........................

1.77 1.35 ........................

FVIP Overseas ............................................................................................................................ 0.73 0.73 0.10

0.18 0.14 ........................

0.91 0.87 ........................

GSVIT Global Income .................................................................................................................. 0.90 0.90 0.20

1.78 0.25 ........................

2.68 1.15 ........................

FVIP Investment Grade Bond ..................................................................................................... 0.43 0.43 0.10

0.11 0.11 ........................

0.54 0.54 ........................

GSVIT CORE Small Cap ............................................................................................................. 0.75 0.75 0.20

0.75 0.25 ........................

1.50 1.00 ........................

SVPT Small Company ................................................................................................................. 0.50 0.50 N/A

0.52 0.07 ........................

1.02 0.57 ........................

GSVIT Mid Cap Value ................................................................................................................. 0.80 0.80 0.20

0.42 0.25 ........................

1.22 1.05 ........................

American Century Value .............................................................................................................. 1.00 1.00 0.20

0.00 0.00 ........................

1.00 1.00 ........................

28. The Applicants state that by

disclosure added to the various May 1,

2000 prospectuses for the Contracts and

the Accounts (and possibly by

additional subsequent supplements to

such prospectuses), all owners of the

Contracts have been or will be notified

of NLIC’s intention to take the necessary

actions, including seeking the order

requested by this application, to

substitute shares of the Portfolios and

Funds as described herein.

29. The Applicants state that the

additional prospectus disclosure (and

any subsequent supplements) about the

proposed substitutions will advise

Contract owners that from May 1 (or the

date of any supplement) until the date

of the proposed substitution, owners are

permitted to make one transfer of all

amounts under a Contract invested in

Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices 67433

any one of the affected subaccounts on

May 1 (or on the date of the

supplement) to another subaccount

available under a Contract other than

one of the other affected subaccounts

without that transfer counting as a

‘‘free’’ transfer permitted under a

Contract. The Applicants state that the

prospectus disclosure also informs (and

any subsequent supplements will

inform) Contract owners that NLIC will

not exercise any rights reserved under

any Contract to impose additional

restrictions on transfers until at least 30

days after the proposed substitutions.

30. The proposed substitutions will

take place at relative net asset value

with no change in the amount of any

Contract owner’s account value or death

benefit or in the dollar value of his or

her investment in any of the Accounts.

Contract owners will not incur any fees

or charges as a result of the proposed

substitutions, nor will their rights or

NLIC’s obligations under the Contracts

be altered in any way. All expenses

incurred in connection with the

proposed substitutions, including legal,

accounting and other fees and expenses,

will be paid by NLIC. In addition, the

Applicants state that the proposed

substitutions will not impose any tax

liability on Contract owners. The

proposed substitutions will not cause

the Contract fees and charges currently

being paid by existing Contract owners

to be greater after the proposed

substitutions than before the proposed

substitutions. The proposed

substitutions will not be treated as a

transfer for the purpose of assessing

transfer charges or for determining the

number of remaining permissible

transfers in a Contract year. NLIC will

not exercise any right it may have under

the Contracts to impose additional

restrictions on transfers under any of the

Contracts for a period of at least 30 days

following the substitutions.

31. The Applicants state that in

addition to the prospectus disclosure

(and supplements) distributed to owners

of Contracts, within five days after the

proposed substitutions, any Contract

owners who were affected by the

substitution will be sent a written notice

informing them that the substitutions

were carried out and that they may

make one transfer of all accumulation or

contract value under a Contract invested

in any one of the affected subaccounts

on the date of the notice to another

subaccount available under their

Contract without that transfer counting

as one of a limited number transfers

permitted in a Contract year free of

charge. The notice will also reiterate the

fact that NLIC will not exercise any

rights reserved by it under any of the

Contracts to impose additional

restrictions on transfers until at least 30

days after the proposed substitutions.

The notice as delivered in certain states

also may explain that, under the

insurance regulations in those states,

Contract owners who are affected by the

substitutions may exchange their

Contracts for fixed-benefit life insurance

contracts or annuity contracts, as

applicable, issued by NLIC during the

60 days following the proposed

substitutions. Current prospectuses for

the new Funds or Portfolios will

precede or accompany the notices. NLIC

also is seeking approval of the proposed

substitutions from any state insurance

regulators whose approval may be

necessary or appropriate.

Applicants’ Legal Analysis

1. Section 26(b) of the Act requires the

depositor of a registered unit investment

trust holding the securities of a single

issuer to receive Commission approval

before substituting the securities held by

the trust. The Investment Company

Amendments of 1970 added Section

26(b) to the Act. The Applicants state

that prior to the enactment of the 1970

amendments, a depositor of a unit

investment trust could substitute new

securities for those held by the trust by

notifying the trust’s security holders of

the substitution within five days of the

substitution. In 1966, the Commission,

concerned with the high sales charges

then common to most unit investment

trusts and the disadvantageous position

in which such charges placed investors

who did not want to remain invested in

the substituted fund, recommended that

Section 26 be amended to require that

a proposed substitution of the

underlying investments of a trust

receive prior Commission approval.

Congress responded to the

Commission’s concerns by enacting

Section 26(b) to require that the

Commission approve all substitutions

by the depositor of investments held by

unit investment trusts.

2. The Applicants state that the

proposed substitutions appear to

involve substitutions of securities

within the meaning of Section 26(b) of

the Act. Applicants therefore request an

order from the Commission pursuant to

Section 26(b) approving the proposed

substitutions.

3. The Applicants state that the

Contracts expressly reserve for NLIC the

right, subject to compliance with

applicable law, to substitute shares of

one Portfolio or Fund held by

subaccount of an Account for another.

The prospectuses for the Contracts and

the Accounts contain appropriate

disclosure of this right. NLIC reserved

this right of substitution both to protect

themselves and their Contract owners in

situations where either might be harmed

or disadvantaged by circumstances

surrounding the issuer of the shares

held by one or more of their separate

accounts and to afford the opportunity

to replace such shares where to do so

could benefit itself and Contract owners.

4. The Applicants state that in the

case of the proposed substitutions of

shares of the four SVPT Funds for those

of MSF Portfolios, each MSF Portfolio

would be replaced by a Fund with

substantially the same investment

objectives but which is managed by the

investment management team that

Contract owners selected.

5. Applicants also state that in the

case of the proposed substitution of

shares of FVIP Overseas Portfolio for

shares of MSF International Portfolio,

the interests of Contract owners will be

better served primarily because the new

Portfolio would more closely resemble

the Portfolio that such owners are

currently invested in than would the

same MSP Portfolio after the proposed

management changes. The Applicants

state that this investment option under

the Contracts would each be replaced by

a Portfolio with substantially the same

investment objectives.

6. Moreover, with regard to all of the

proposed substitutions of MSF

Portfolios, the Applicants state that

Contract owners would avoid the likely

experience of having their current

investment option significantly changed

and would become invested in

Portfolios that are less likely to become

controlled by owners of variable

contracts issued by a competitor of

NLIC.

7. Finally, in the case of the remaining

proposed substitutions, the Applicants

state that Contract owners will be better

served because available subaccounts

would represent a broader range of

popular investment choices than is

currently the case. The Applicants state

that these Portfolios are each larger and

have both comparable performance and

greater marketing appeal than the

Portfolios or Funds that they would

replace.

8. In addition to the foregoing,

Applicants generally submit that the

proposed substitutions meet the

standards that the Commission and its

staff have applied to similar

substitutions that have been approved

in the past.

9. Applicants anticipate that Contract

owners will be at least as well off with

the proposed array of subaccounts

offered after the proposed substitutions

as they have been with the array of

subaccounts offered prior to the

67434 Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices

substitutions. The Applicants state that

the proposed substitutions retain for

Contract owners the investment

flexibility which is a central feature of

the Contracts. If the proposed

substitutions are carried out, all

Contract owners will be permitted to

allocate purchase payments and transfer

accumulated values and contract values

between and among the same number of

subaccounts as they could before the

proposed substitutions.

10. The Applicants state that each of

the proposed substitutions is not the

type of substitution which Section 26(b)

was designed to prevent. Unlike

traditional unit investment trusts where

a depositor could only substitute an

investment security in a manner which

permanently affected all the investors in

the trust, the Contracts provide each

Contract owner with the right to

exercise his or her own judgment and

transfer accumulation and contract

values into other subaccounts.

Moreover, the Contracts will offer

Contract owners the opportunity to

transfer amounts out of the affected

subaccounts into any of the remaining

subaccounts without cost or other

disadvantage. The Applicants state that

the proposed substitutions, therefore,

will not result in the type of costly

forced redemption which Section 26(b)

was designed to prevent.

11. The Applicants state that the

proposed substitutions also are unlike

the type of substitution which Section

26(b) was designed to prevent in that by

purchasing a Contract, Contract owners

select much more than a particular

investment company in which to invest

their account values. They also select

the specific type of insurance coverage

offered by NLIC under their Contract as

well as numerous other rights and

privileges set forth in the Contract. The

Applicants state that Contract owners

may also have considered NLIC’s size,

financial condition, type and its

reputation for service in selecting their

Contract. These factors will not change

as a result of the proposed substitutions.

12. Applicants request an order of the

Commission pursuant to Section 26(b)

of the Act approving the proposed

substitutions by NLIC. Applicants

submit that, for all the reasons stated

above, the proposed substitutions are

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the Act.

13. Applicants request an order under

Section 17(b) exempting them from the

provisions of Section 17(a) to the extent

necessary to permit NLIC to carry out

the following substitutions by

redeeming MSF shares in kind and

using the redemption proceeds to

purchase SVPT shares; shares of SVPT

Common Stock Fund for shares of MSF

Growth Portfolio, shares of SVPT Mid

Cap Growth Fund for shares of MSF

Sentinel Growth Portfolio, shares of

SVPT Small Company Fund for shares

of MSF Aggressive Growth Portfolio,

shares of SVPT Money Market Fund for

shares of MSF Money Market Portfolio.

14. 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 person, acting as principal, from

knowingly selling any security or other

property to that company. Section

17(a)(2) of the Act generally prohibits

the persons described above, acting as

principals, from knowingly purchasing

any security or other property from the

registered investment company.

15. Section 2(a)(3) of the Act defines

the term ‘‘affiliated person of another

person’’ in relevant part as:

(A) any person directly or indirectly

owning, controlling, or holding with power

to vote, 5 per centum or more of the

outstanding voting securities of such other

person; (B) any person 5 per centum or more

of whose outstanding voting securities are

directly or indirectly owned, controlled, or

held with power to vote, by such person; (C)

any person directly or indirectly controlling,

controlled by, or under common control

with, such other person;***

16. The Applicants state that because

shares held by a separate account of an

insurance company are owned by the

insurance company, NLIC owns of

record all of the shares of MSF Sentinel

Growth Portfolio. The Applicants state

that, therefore, MSF and Sentinel

Growth Portfolio is arguably under the

control of NLIC notwithstanding the fact

the Contract owners may be considered

the beneficial owners of those shares

held in the Accounts. If MSF and one

or more of its Portfolios is under NLIC’s

control, then NLIC, any person

controlling NLIC or any person under

common control with NLIC, is an

affiliated person of MSF, Sentinel

Growth Portfolio and, arguably, other

MSF Portfolios. The Applicants state

that, similarly, if MSF and one or more

of its Portfolios are under NLIC’s

control, then MSF, Sentinel Growth

Portfolio, and, arguably, other MSF

Portfolios are affiliated persons of NLIC

and of any persons that control NLIC or

are under common control with NLIC.

17. The Applicants state that

regardless of whether or not NLIC can

be considered to control MSF or

Sentinel Growth Portfolio or both (or

other MSF Portfolios), because NLIC

owns of record more than 5% of the

shares of MSF Money Market Portfolio,

Growth Portfolio, Bond Portfolio,

Managed Portfolio, Aggressive Growth

Portfolio, Sentinel Growth Portfolio and

International Equity Portfolio, it is an

affiliated person of MSF and each of the

foregoing Portfolios. Applicants also

state that MSF and each of the foregoing

Portfolios is an affiliated person of NLIC

and also is an affiliated person of an

affiliated person of any person that

controls NLIC or is under common

control with NLIC.

18. In addition, the Applicants state

that because the investment adviser of

each of the foregoing MSF Portfolios is

controlled by NLIC or persons

controlling NLIC and the investment

adviser of each SVPT Fund is controlled

by NLIC or persons controlling NLIC,

the investment advisers of MSF and

SVPT are under common control.

Although the Applicants state that they

do not believe that this would, by itself,

result in MSF (or any of its Portfolios)

and SVPT (or any of its Funds) being

under common control, to remove any

doubt about status of possible

transactions involving MSF (or any of

its Portfolios) and SVPT (or any of its

Funds), Applicants assume, for the

purposes of this application, the MSF

and SVPT and their Portfolios or Funds

could be under common control. Based

on the foregoing, MSF and SVPT and

the Funds of each may be affiliated

persons of each other or affiliated

persons of affiliated persons of each

other. The Applicants state that each

also may be an affiliated person of NLIC

or an affiliated person of an affiliated

person of NLIC.

19. The Applicants state that the

proposed substitutions by NLIC, which

may entail the indirect purchase of

shares of SVPT Funds with portfolio

securities of MSF Portfolios and the

indirect sale of portfolio securities of

MSF Portfolios for shares of SVPT

Funds, therefore may also entail the

purchase or sale of such securities by

each of the Portfolios or Funds

involved, acting as principal, to one of

the other Portfolios or Funds and

therefore may be in contravention of

Section 17(a). In addition, the

Applicants state that the participation of

NLIC in such purchase and sale

transactions could be viewed as

entailing the purchase of such securities

from MSF Portfolios and the sale of

such securities to SVPT Funds by NLIC,

acting as principal, and therefore may

be in contravention of Section 17(a).

20. Section 17(b) of the Act provides

that the Commission may, upon

application, grant an order exempting

any transaction from the prohibitions of

Section 17(a) if the evidence establishes

that:

Federal Register / Vol. 65, No. 218 / Thursday, November 9, 2000 / Notices 67435

(1) 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;

(2) The proposed transaction is

consistent with the policy of each

registered investment company

concerned, as recited in its registration

statement and records filed under the

Act; and

(3) The proposed transaction is

consistent with the general purposes of

the Act.

21. Rule 17a–7 under the Act exempts

from the prohibitions of Section 17(a),

subject to certain enumerated

conditions, a purchase or sale

transaction between registered

investment companies or separate series

or registered investment companies,

which are affiliated persons, or affiliated

persons of affiliated persons, of each

other, between separate series of a

registered investment company, or

between a registered investment

company or a separate series of a

registered investment company and a

person which is an affiliated person of

such registered investment company (or

affiliated person of such person) solely

by reason of having a common

investment adviser or investment

advisers which are affiliated persons of

each other, common directors, and/or

common officers. The Applicants state

that NLIC, MSF, and SVPT (as well as

the Portfolios and Funds of MSF and

SVPT) cannot, however, rely on Rule

17a–7 in connection with their

participation as principals in the

proposed MSF/SVPT substitutions

because they would not necessarily be

affiliated persons of each other solely by

reason of having a common investment

adviser or affiliated investment advisers,

common directors, and/or common

officers. Moreover, one of the conditions

enumerated in the rule is that the

transaction be a purchase or a sale for

no consideration other than cash

payment against prompt delivery of a

security for which market quotations are

readily available. The Applicants state

that the proposed purchase of SVPT

shares with MSF investment securities,

however, entails the purchase and sale

of securities for securities (albeit ones

for which market quotations are readily

available).

22. Applicants submit that the terms

of the proposed substitutions by NLIC,

including the consideration to be paid

and received, as described in this

application, are reasonable and fair and

do not involve overreaching on the part

of any person concerned. Applicants

also submit that the proposed

substitutions by NLIC are consistent

with the policies of: (1) MSF and of its

Growth Portfolio, Sentinel Growth

Portfolio, Aggressive Growth Portfolio

and Money Market Portfolio; and (2)

SVPT and its Common Stock Fund, Mid

Cap Growth Fund, Small Company

Fund and Money Market Fund, as

recited in the current registration

statements and reports filed by each

under the Act. Finally, Applicants

submit that the proposed substitutions

are consistent with the general purposes

of the Act.

Conclusion

Applicants assert that, for the reasons

stated above, the registered order

approving the substitutions and

exempting in-kind redemptions should

be granted.

For the Commission, by Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–28794 Filed 11–8–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

Sunshine Act Meeting; Agency

Meeting

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 November 13, 2000.

An open meeting will be held on

Wednesday, November 15, 2000 at 10

a.m. in Room 6600.

The subject matter of the open

meeting scheduled for Wednesday,

November 15, 2000 will be:

The Commission will consider

adopting rule amendments to its auditor

independence requirements. The rule

amendments are intended to modernize

the Commission’s regulations regarding:

(1) Investments by auditors and

members of their families;

(2) Auditors’ employment

relationship; and

(3) The scope of services provided by

audit firms to their audit clients.

In addition, the rules would require

companies to disclose in their annual

proxy statements certain information

about non-audit services provided by

their auditors during the last fiscal year.

For further information, contact: John

Morrissey, or Sam Burke, Office of the

Chief Accountant at (202) 942–4400.

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: November 6, 2000.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–28873 Filed 11–6–00; 4:28 pm]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

Sunshine Act Meeting

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 consider two additional agenda

items during the open meeting on

Wednesday, November 15, 2000 at 10:00

a.m. Additionally, notice is hereby

given that this meeting will be held in

Room 1C30, the William O. Douglas

Room, not Room 6600 as previously

announced.

The subject matters of the additional

agenda items will be:

(1) The Commission will consider

adopting two rules that would require

greater disclosure of order execution

and order routing practices by market

centers and brokers.

For further information, contact: Susie

Cho, Division of Market Regulation at

(202) 942–0748; and

(2) Consideration will be given to

adopting rules regarding the quotation

obligations of options exchanges and

market makers, and disclosure by

broker-dealers of executions of customer

options orders at prices inferior to the

best available quote.

For further information contact:

Heather Traeger, Division of Market

Regulation at (202) 942–0763.

At times, changes in Commission

priorities require alternations 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: November 7, 2000.

Jonathan G. Katz,

Secretary.

[FR Doc. 00–29010 Filed 11–7–00; 4:00 pm]

BILLING CODE 8010–01–M