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Code · REGISTER · 2005-04-13 · SECURITIES AND EXCHANGE COMMISSION · Rules and Regulations

Rules and Regulations. Notice of application for an order pursuant to Section 26(c) of the Investment Company 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

24,026 words·~109 min read·/register/2005/04/13/05-7435·

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 6325-49-P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549. Extension: Complaint & Question Forms; SEC File No. 270-485; OMB Control No. 3235-0547. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ) the Securities and Exchange Commission (“Commission”) has submitted to the Office of Management and Budget a request for extension of the previously approved collection of information discussed below.
The titles of the forms are: Enforcement Complaint Form; Investor Complaint Form; Financial Privacy Notice Complaint Form; and Questions and Feedback Form. Each year, the SEC receives more than 250,000 contacts from investors who have complaints or questions on a wide range of investment-related issues. These contacts generally fall into the following three categories:
(a)Complaints against SEC-regulated individuals or entities;
(b)Questions concerning the federal securities laws, companies or firms that the SEC regulates, or other investment-related questions; and
(c)Tips concerning potential violations of the federal securities laws. Investors who submit complaints, ask questions, or provide tips do so voluntarily. To make it easier for investors to contact the agency electronically, the SEC created a series of investor complaint and question Web forms. Investors can access these forms through the SEC Center for Complaints and Enforcement Tips at *http://www.sec.gov/complaint.shtml* . Although the SEC's complaint and question forms provide a structured format for incoming investor correspondence, the SEC does not require that investors use any particular form or format when contacting the agency. To the contrary, investors may submit complaints, questions, and tips through a variety of other means, including telephone, letter, facsimile, or e-mail. Approximately 20,000 investors each year voluntarily choose to use the complaint and question forms, and approximately 98 percent of those investors submit the forms electronically through the Internet (as opposed to printing and mailing or faxing the forms). Investors who choose not to use the complaint and question forms receive the same level of service as those who do. The dual purpose of the forms is to make it easier for the public to contact the agency with complaints, questions, tips, or other feedback and to streamline the workflow of the SEC staff who handle those contacts. The SEC has used—and will continue to use—the information that investors supply on the complaint and question forms to review and process the contact (which may, in turn, involve responding to questions, processing complaints, or, as appropriate, initiating enforcement investigations), to maintain a record of contacts, to track the volume of investor complaints, and to analyze trends. The complaint forms ask investors to provide information concerning, among other things, their names, how they can be reached, the names of the individuals or entities involved, the nature of their complaint or tip, what documents they can provide, and what, if any, legal actions they have taken. The question form asks investors to provide their names, e-mail addresses, and questions. The SEC's online complaint and question forms automatically route the investor's complaint, question, or tip to the appropriate division or office—specifically, to either the Division of Enforcement or the Office of Investor Education and Assistance. Many questions on the online complaint and questions forms appear in multiple-choice format or employ drop-down boxes so that the investor can provide information by simply checking a box or selecting a pre-loaded option. Moreover, three of the four forms—specially the Investor Complaint Form, the Financial Privacy Notice Complaint Form, and the Questions and Feedback Form—map directly to the correspondence management system that the Office of Investor Education and Assistance uses, thus significantly reducing the need for SEC staff to enter manually the data that the investor already provided. Investors who use the Enforcement Complaint Form receive an automatic response from the Division of Enforcement. In addition, investors who use the Investor Complaint Form, the Financial Privacy Notice Complaint Form, and the Questions and Feedback Form not only receive an immediate, online confirmation of their submissions, but they also receive custom responses via e-mail from the Office of Investor Education and Assistance which include an automatically generated file number. Investor use of the SEC's complaint and question forms is strictly voluntary. Moreover, the SEC does not require investors to submit complaints, questions, tips, or other feedback. Absent the forms, investors would still have several ways to contact the agency, including telephone, facsimile, letters, and e-mail. Nevertheless, the SEC created its complaint and question forms to make it easier for investors to contact the agency with complaints, questions, or tips. The forms further streamline the workflow of SEC staff who record, process, and respond to investor contacts. The staff of the SEC estimates that the total reporting burden for using the complaint and question forms is 5,000 hours. The calculation of this estimate depends on the number of investors who use the forms each year and the estimated time it takes to complete the forms: 20,000 respondents × 15 minutes = 5,000 burden hours. Responses to the complaint and question forms are subject to the Freedom of Information Act (FOIA), which generally allows the SEC to make information available to the public upon request. An investor who submits a complaint or question form may request that his or her information not be released to the public by writing a letter asking that the information remain confidential under one of the exemptions described in FOIA (see 5 U.S.C. 552). The SEC determines whether the investor's claim of an exemption is valid when someone requests the investor's information under FOIA. The SEC often makes its files available to other governmental agencies, particularly United States Attorneys, state securities regulators, and state prosecutors. There is a likelihood that information supplied by investors will be made available to such agencies where appropriate. Whether or not the SEC makes its files available to other governmental agencies is, in general, a confidential matter between the SEC and such other governmental agencies. The document retention period for the correspondence management system used by the Office of Investor Education and Assistance is four years. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Written comments regarding the above information should be directed to the following persons:
(i)Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or send an e-mail to: *David_Rostker@omb.eop.gov* ; and
(ii)R. Corey Booth, Director/Chief Information Officer, Office of Information Technology, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. Comments must be submitted to OMB within 30 days of this notice. Dated: April 4, 2005. Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-1736 Filed 4-12-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. IC-26829; File No. 812-13158] MetLife Investors Insurance Company, et al.; Notice of Application April 7, 2005. AGENCY: The Securities and Exchange Commission (“Commission”). ACTION: Notice of application for an order pursuant to Section 26(c) of the Investment Company 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. Applicants: MetLife Investors Insurance Company (“MetLife Investors”), MetLife Investors Variable Annuity Account One (“VA Account One”), MetLife Investors Variable Life Account One (“VL Account One”), MetLife Investors Variable Life Account Eight (“VL Account Eight”), First MetLife Investors Insurance Company (“First MetLife Investors”), First MetLife Investors Variable Annuity Account One (“First VA Account One”), MetLife Investors Insurance Company of California (“MetLife Investors of California”), MetLife Investors Variable Annuity Account Five (“VA Account Five”), MetLife Investors Variable Life Account Five (“VL Account Five”), General American Life Insurance Company (“General American”), General American Separate Account Seven (“Separate Account Seven”), General American Separate Account Eleven (“Separate Account Eleven”), General American Separate Account Thirty Three (“Separate Account Thirty Three”), General American Separate Account Fifty Eight (“Separate Account Fifty Eight”), General American Separate Account Fifty Nine (“Separate Account Fifty Nine”), New England Life Insurance Company (“New England”), New England Variable Life Separate Account (“NEVL Separate Account”), New England Variable Life Separate Account Four (“NEVL Separate Account Four”), New England Variable Life Separate Account Five (“NEVL Separate Account Five”), Metropolitan Life Insurance Company (“MetLife”) (together with MetLife Investors, First MetLife Investors, MetLife Investors of California, General American and New England, the “Insurance Companies”), Metropolitan Life Separate Account DCVL (“Separate Account DCVL”), Security Equity Separate Account Thirteen (“Separate Account Thirteen”), Security Equity Separate Account Nineteen (“Separate Account Nineteen”) (together with VA Account One, VL Account One, VL Account Eight, First VA Account One, VA Account Five, VL Account Five, Separate Account Seven, Separate Account Eleven, Separate Account Thirty Three, Separate Account Fifty Eight, Separate Account Fifty Nine, NEVL Separate Account, NEVL Separate Account Four, NEVL Separate Account Five, Separate Account DCVL and Separate Account Thirteen, the “Separate Accounts”), Met Investors Series Trust (“MIST”) and Metropolitan Series Fund, Inc. (“Met Series Fund”) (MIST and Met Series Fund are the “Investment Companies”). The Insurance Companies and the Separate Accounts are the “Substitution Applicants.” The Insurance Companies, the Separate Accounts and the Investment Companies are the “Section 17 Applicants.” Filing Date: The application was filed on January 24, 2005, and amended on April 5, 2005. Applicants represent that they will file an amendment to the application during the notice period to conform to the representations set forth herein. Summary of Application: Applicants request an order to permit certain unit investment trusts to substitute
(a)shares of Lord Abbett Growth & Income Portfolio for shares of AIM V.I. Premier Equity Fund, VIP Contrafund, VP Income and Growth Fund, Goldman Sachs Growth and Income Fund;
(b)shares of Neuberger Berman Real Estate Portfolio for shares of Alliance Bernstein Real Estate Investment Portfolio;
(c)shares of Janus Aggressive Growth Portfolio for shares of AllianceBernstein Premier Growth Portfolio;
(d)shares of MFS Research International Portfolio for shares of VP International Fund, Putnam VT International Equity Fund;
(e)shares of MetLife Stock Index Portfolio for shares of Dreyfus Stock Index Portfolio;
(f)shares of Oppenheimer Capital Appreciation Portfolio for shares of MFS Investors Trust Series, Oppenheimer Capital Appreciation Fund/VA;
(g)shares of Lord Abbett Bond Debenture Portfolio for shares of VIP High Income Portfolio, MFS High Income Fund;
(h)shares of T. Rowe Price Large Cap Growth Portfolio for shares of MFS Research Series, MFS Emerging Growth Series;
(i)shares of Met/AIM Small Cap Growth Portfolio for shares of MFS New Discovery Series;
(j)shares of PIMCO Total Return Portfolio for shares of Oppenheimer Strategic Bond Fund/VA; and
(k)shares of Third Avenue Small Cap Value Portfolio for shares of SVS Dreman Small Cap Value Portfolio. The shares are held by certain of the Separate Accounts to fund certain group and individual variable annuity contracts and variable life insurance policies (collectively, the “Contracts”) issued by the Insurance Companies (defined below). 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 April 28, 2005 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 issued 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, NW., Washington, DC 20549-0609. Applicants: Richard C. Pearson, Esq., MetLife Investors Insurance Company, 22 Corporate Plaza Drive, Newport Beach, California 92660, and Robert N. Hickey, Esq., Sullivan & Worcester LLP, 1666 K Street, NW., Washington, DC 20006. FOR FURTHER INFORMATION CONTACT: Robert Lamont, Senior Counsel at 202-551-6758 or, Lorna MacLeod, Branch Chief, at 202-551-6795, Office of Insurance Products, Division of Investment Management. SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee from the Public Reference Branch of the Commission, 450 Fifth Street, NW., Washington, DC 20549 (tel. 202-942-8090). Applicants' Representations 1. MetLife Investors is a stock life insurance company organized under the laws of Missouri. MetLife Investors is a wholly-owned subsidiary of MetLife, Inc. MetLife Investors is the depositor and sponsor of VA Account One, VL Account One and VL Account Eight. 2. VA Account One is registered under the Act as a unit investment trust. The assets of VA Account One support certain Contracts. Security interests in the Contracts have been registered under the Securities Act of 1933. 3. VA Account One is currently divided into 78 sub-accounts, 43 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 35 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with VA Account One (except, that, in some instances, VA Account One may own more than 5% of such investment company). 4. VL Account One is registered under the Act as a unit investment trust. The assets of VL Account One support certain Contracts. Security interests in the Contracts have been registered under the Securities Act of 1933. 5. VL Account One is currently divided into 47 sub-accounts, 31 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 16 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with VL Account One (except, that, in some instances, VL Account One may own more than 5% of such investment company). 6. VL Account Eight serves as a separate account funding vehicle for certain Contracts that are exempt from registration under Section 4(2) of the Securities Act of 1933 and Regulation D thereunder. 7. VL Account Eight is currently divided into 20 sub-accounts, 3 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 17 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with VL Account Eight (except, that, in some instances, VL Account Eight may own more than 5% of such investment company). 8. First MetLife Investors is a stock life insurance company organized under the laws of New York. First MetLife Investors is an indirect wholly-owned subsidiary of MetLife, Inc. First MetLife Investors is the depositor and sponsor of First VA Account One. 9. First VA Account One is registered under the Act as a unit investment trust. The assets of First VA Account One support certain Contracts. Security interests in the Contracts have been registered under the Securities Act of 1933. 10. First VA Account One is currently divided into 72 sub-accounts, 43 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 29 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with First VA Account One (except, that, in some instances, First VA Account One may own more than 5% of such investment company). 11. MetLife Investors of California is a stock life insurance company organized under the laws of California. MetLife Investors of California is an indirect wholly-owned subsidiary of MetLife, Inc. MetLife Investors of California is the depositor and sponsor of VA Account Five and VL Account Five. 12. VA Account Five is registered under the Act as a unit investment trust. The assets of VA Account Five support certain Contracts. Security interests under the Contracts have been registered under the Securities Act of 1933. 13. VA Account Five is currently divided into 84 sub-accounts, 48 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 36 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with VA Account Five (except, that, in some instances, VA Account Five may own more than 5% of such investment company). 14. VL Account Five is registered under the Act as a unit investment trust. The assets of VL Account Five support certain Contracts. Security interests in the Contracts have been registered under the Securities Act of 1933. 15. VL Account Five is currently divided into 47 sub-accounts, 31 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 16 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with VL Account Five (except, that, in some instances, VL Account Five may own more than 5% of such investment company). 16. General American is a stock life insurance company organized under the laws of Missouri. General American is an indirect wholly-owned subsidiary of MetLife, Inc. General American is the depositor and sponsor of Separate Account Seven and Separate Account Eleven. 17. Separate Account Seven serves as a separate account funding vehicle for certain Contracts that are exempt from registration under Section 4(2) of the Securities Act of 1933 and Regulation D thereunder. 18. Separate Account Seven is currently divided into 58 sub-accounts, 20 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 38 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with Separate Account Seven (except, that, in some instances, Separate Account Seven may own more than 5% of such investment company). 19. Separate Account Eleven is registered under the Act as a unit investment trust. The assets of Separate Account Eleven support certain Contracts. Security interests under the Contracts have been registered under the Securities Act of 1933. 20. Separate Account Eleven is currently divided into 50 sub-accounts, 34 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 16 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with Separate Account Eleven (except, that in some instances, Separate Account Eleven may own more than 5% of such investment company). 21. Separate Account Thirty Three serves as a separate account funding vehicle for certain Contracts that are exempt from registration under Section 4(2) of the Securities Act of 1933 and Regulation D thereunder. 22. Separate Account Thirty Three is currently divided into 58 sub-accounts, 20 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 38 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with Separate Account Thirty Three (except, that, in some instances, Separate Account Thirty Three may own more than 5% of such investment company). 23. Separate Account Fifty Eight serves as a separate account funding vehicle for certain Contracts that are exempt from registration under Section 4(2) of the Securities Act of 1933 and Regulation D thereunder. 24. Separate Account Fifty Eight is currently divided into 34 sub-accounts, 26 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 8 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with Separate Account Fifty Eight (except, that, in some instances, Separate Account Fifty Eight may own more than 5% of such investment company). 25. Separate Account Fifty Nine serves as a separate account funding vehicle for certain Contracts that are exempt from registration under Section 4(2) of the Securities Act of 1933 and Regulation D thereunder. 26. Separate Account Fifty Nine is currently divided into 34 sub-accounts, 26 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 8 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with Separate Account Fifty Nine (except, that, in some instances, Separate Account Fifty Nine may own more than 5% of such investment company). 27. New England is a stock life insurance company organized under the laws of Delaware and re-domesticated in Massachusetts. General American is an indirect wholly-owned subsidiary of MetLife, Inc. New England is the depositor and sponsor of NEVL Separate Account, NEVL Separate Account Four and NEVL Separate Account Five. 28. NEVL Separate Account is registered under the Act as a unit investment trust. The assets of NEVL Separate Account support certain Contracts. Security interests under the Contracts have been registered under the Securities Act of 1933. 29. NEVL Separate Account is currently divided into 47 sub-accounts, 41 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 6 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with NEVL Separate Account (except, that in some instances, NEVL Separate Account may own more than 5% of such investment company). 30. NEVL Separate Account Four serves as a separate account funding vehicle for certain Contracts that are exempt from registration under Section 4(2) of the Securities Act of 1933 and Regulation D thereunder. 31. NEVL Separate Account Four is currently divided into 28 sub-accounts, 20 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 8 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with NEVL Separate Account Four (except, that, in some instances, NEVL Separate Account Four may own more than 5% of such investment company). 32. NEVL Separate Account Five serves as a separate account funding vehicle for certain Contracts that are exempt from registration under Section 4(2) of the Securities Act of 1933 and Regulation D thereunder. 33. NEVL Separate Account Nine is currently divided into 28 sub-accounts, 20 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 8 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with NEVL Separate Account Five (except, that, in some instances, NEVL Separate Account Five may own more than 5% of such investment company). 34. MetLife is a stock life insurance company organized under the laws of New York. MetLife is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. MetLife is the depositor and sponsor of MetLife Separate Account DCVL. 35. Separate Account DCVL serves as a separate account funding vehicle for certain Contracts that are exempt from registration under Section 4(2) of the Securities Act of 1933 and Regulation D thereunder. 36. Separate Account DCVL is currently divided into 50 sub-accounts, 20 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 30 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with Separate Account DCVL (except that in some instances, Separate Account DCVL may own more than 5% of such investment company). 37. Separate Account Thirteen is registered under the Act as a unit investment trust. The assets of Separate Account Thirteen support certain Contracts. Security interests under the Contracts have been registered under the Securities Act of 1933. 38. Separate Account Thirteen is currently divided into 18 sub-accounts, 3 of which reflect the investment performance of a corresponding series of MIST or Met Series Fund, and 15 of which reflect the performance of registered investment companies managed by advisers that are not affiliated with Separate Account Thirteen (except that in some instances, Separate Account Thirteen may own more than 5% of such investment company). 39. Separate Account Nineteen serves as a separate account funding vehicle for certain Contracts that are exempt from registration under Section 4(2) of the Securities Act of 1933 and Regulation D thereunder. 40. Separate Account Nineteen is currently divided into 1 sub-account, 0 of which reflects the investment performance of a corresponding series of MIST or Met Series Fund, and 1 of which reflects the performance of a registered investment company managed by an adviser that is not affiliated with Separate Account Nineteen (except that in some instances, Separate Account Nineteen may own more than 5% of such investment company). 41. MIST and Met Series Fund are each registered under the Act as open-end management investment companies of the series type, and their securities are registered under the Securities Act of 1933. 42. Under the Contracts, the Insurance Companies reserve the right to substitute shares of one fund with shares of another. 43. Each Insurance Company, on its behalf and on behalf of the Separate Accounts, proposes to make certain substitutions of shares of eighteen funds (the “Existing Funds”) held in sub-accounts of its respective Separate Accounts for certain series (the “Replacement Funds”) of MIST and Met Series Fund. The proposed substitutions are as follows:
(a)Shares of Lord Abbett Growth and Income Portfolio for shares of AIM V.I. Premier Equity Fund, VIP Contrafund, VP Income & Growth Fund, Goldman Sachs Growth and Income Fund;
(b)shares of Neuberger Berman Real Estate Portfolio for shares of AllianceBernstein Real Estate Investment Portfolio;
(c)shares of Janus Aggressive Growth Portfolio for shares of AllianceBernstein Premier Growth Portfolio;
(d)shares of MFS Research International Portfolio for shares of VP International Fund, Putnam VT International Equity Fund;
(e)shares of MetLife Stock Index Portfolio for shares of Dreyfus Stock Index Portfolio;
(f)shares of Oppenheimer Capital Appreciation Portfolio for shares of MFS Investors Trust Series, Oppenheimer Capital Appreciation Fund/VA;
(g)shares of Lord Abbett Bond Debenture Portfolio for shares of VIP High Income Portfolio, MFS High Income Fund;
(h)shares of T. Rowe Price Large Cap Growth Portfolio for shares of MFS Research Series, MFS Emerging Growth Series;
(i)shares of Met/AIM Small Cap Growth Portfolio for shares of MFS New Discovery Series;
(j)shares of PIMCO Total Return Portfolio for shares of Oppenheimer Strategic Bond Fund/VA; and
(k)shares of Third Avenue Small Cap Value Portfolio for shares of SVS Dreman Small Cap Value Portfolio. 44. The investment objectives, policies and restrictions of the Replacement Funds are in each case substantially the same as or sufficiently similar to the investment objectives, policies and restrictions of the respective Existing Funds. Set forth below is a description of the investment objectives and principal investment policies of each Existing Fund and its corresponding Replacement Fund. Existing fund Replacement fund AIM V.I. Premier Equity Fund—seeks to achieve long-term growth of capital. Income is a secondary objective. The Fund normally invests at least 80% of its net assets in equity securities. The Fund may also invest in preferred stocks and debt instruments that have prospects for growth of capital and may invest up to 25% of its total assets in foreign securities. The portfolio managers focus on undervalued equity securities. Lord Abbett Growth and Income Portfolio—seeks long-term growth of capital and income without excessive fluctuation in market value. The Portfolio normally invests 80% of its net assets in equity securities of large (at least $5 billion of market capitalization), seasoned U.S. and multinational companies that are believed to be undervalued. The Portfolio may also invest in foreign securities. VIP Contrafund Portfolio—seeks long-term capital appreciation. The Portfolio invests primarily in common stocks of large companies believed to be undervalued. The Portfolio may invest in both domestic and foreign securities. VP Income & Growth Fund—seeks to achieve capital growth by investing in common stocks. Income is a secondary objective. The portfolio managers select stocks primarily from the largest 1,500 publicly traded U.S. companies. Securities are ranked by their value as well as growth potential. The Fund seeks to provide better returns than the S&P 500 without taking on significant additional risks. The portfolio managers attempt to create a dividend yield for the Fund that will be greater than that of the S&P 500. Goldman Sachs Growth and Income Fund—seeks long-term growth of capital and growth of income. Normally, the Fund invests at least 65% of its total assets in equity securities that have favorable prospects for capital appreciation and/or dividend-paying ability. Up to 25% of the Fund's assets may be invested in foreign securities including securities of issuers in emerging market countries. The Fund may invest up to 35% of its total assets in fixed income securities. AllianceBernstein Real Estate Investment Portfolio 1 —seeks total return from long-term growth of capital and from income. The Portfolio invests, normally, at least 80% of its net assets in equity securities of real estate investment trusts and other real estate industry companies. The Portfolio seeks to invest in real estate companies whose underlying portfolios are diversified geographically and by property type. The Portfolio may invest up to 20% of its net assets in mortgage-backed securities. Neuberger Berman Real Estate Portfolio 1 —seeks total return through investment in real estate securities, emphasizing both capital appreciation and current income. The Portfolio invests, normally, at least 80% of its assets in equity securities of real estate investment trusts and other securities issued by real estate companies. The Portfolio may invest up to 20% of its assets in investment grade or non-investment grade (minimum rating of B) debt securities. AllianceBernstein Premier Growth Portfolio 2 —seeks growth of capital by pursuing aggressive investment policies. The Portfolio invests primarily in the securities of a small number of U.S. companies. The Portfolio looks for companies with superior growth prospects. The Portfolio may invest up to 20% of its assets in foreign securities and up to 20% of its assets in convertible securities which may be below investment grade. Janus Aggressive Growth Portfolio 2 —seeks long-term growth of capital. The Portfolio invests primarily in common stocks selected for their growth potential. Investments may be made in companies of any size. The Portfolio may invest without limit in foreign securities and up to 35% of its assets in high yield/high risk debt securities. VP International Fund 3 —seeks capital growth. The portfolio managers look for companies with earnings and revenue growth. The Fund's assets will be primarily invested in common stocks companies in at least three developed countries (excluding the U.S.). MFS Research International Portfolio3—seeks capital appreciation. Normally, at least 65% of the Portfolio's net assets are invested in common stocks and related securities of foreign companies (including up to 25% of its net assets in emerging market issuers) located in at least five countries. The Portfolio seeks companies of any size with favorable growth prospects and attractive valuations. Putnam VT International Equity Fund—seeks equity capital appreciation. The Fund invests mainly in common stocks of companies outside the U.S. Under normal circumstances, at least 80% of the Fund's net assets are invested in equity securities. The Fund invests mainly in mid- and large-sized companies, although it can invest in companies of any size. The Fund emphasizes investments in developed countries, although it can also invest in emerging market countries. Dreyfus Stock Index Portfolio—seeks to match the total return of the S&P 500 Index. The Fund generally invests in all 500 securities of the S&P 500 Index proportion to their weighting in the S&P 500 Index. MetLife Stock Index Portfolio—seeks to equal the performance of the S&P 500 Index. The Portfolio purchases the common stocks of all the companies in the S&P 500 Index. MFS Investors Trust Series 4 —seeks mainly to provide long-term growth of capital and secondarily reasonable current income. Normally, the Series invests at least 65% of its net assets in common stocks and related equity securities. While the Series may invest in companies of any size, the Series generally focuses on companies with large market capitalizations believed to have substantial growth prospects and attractive valuations based on current and expected earnings and cash flow. The Series will also seek to generate gross income equal to approximately 90% of the dividend yield of the S&P 500 Index. The Series may invest in foreign equity securities. Oppenheimer Capital Appreciation Portfolio 4 —seeks capital appreciation. The Portfolio mainly invests in common stocks of growth companies of any market capitalization. The Portfolio currently focuses on the securities of mid-cap and large-cap companies. The Portfolio may also purchase the securities of foreign issuers. Oppenheimer Capital Appreciation Fund/VA—seeks capital appreciation. The Fund invests mainly in common stocks of growth companies of any market capitalization. The Fund currently focuses on the securities of mid-cap and large-cap domestic companies, but buys foreign stocks as well. VIP High Income Portfolio—seeks a high level of current income, while also considering growth of capital. The Portfolio normally invests primarily in income-producing debt securities, preferred stocks and convertible securities, with an emphasis on lower-quality debt securities. The Portfolio may invest in domestic and foreign issuers. Lord Abbett Bond Debenture Portfolio—seeks to provide high current income and the opportunity for capital appreciation to produce a high total return. The Portfolio normally invests substantially all of its net assets in high yield and investment grade debt securities. Up to 80% of the Portfolio' total assets may be invested in junk bonds. At least 20% of the Portfolio's assets must be invested in any combination of investment grade debt securities, U.S. government securities and cash equivalents. Up to 20% of the Portfolio's assets may be invested in foreign securities. MFS High Income Series—seeks high current income by investing primarily in a managed diversified portfolio of fixed income securities, some of which may involve equity features. Normally, the Series invests at least 80% of its net assets in high income fixed income securities (junk bonds). The Series may also invest in foreign securities (including emerging market securities.) MFS Emerging Growth Series—seeks to provide long-term growth of capital. Normally the Series invests at least 65% of its net assets in common stocks and related securities of emerging growth companies of any size (currently invests primarily in large-cap companies). The Series may invest in foreign securities including emerging market securities. T. Rowe Price Large Cap Growth Portfolio—seeks long-term growth of capital and, secondarily, dividend income. Normally, the Portfolio invests at least 80% of its assets in the common stocks and other securities of large capitalization growth companies ( *i.e.* , those within the market capitalization range of the Russell 1000 Index). The investment adviser seeks companies that have the ability to pay increasing dividends through strong cash flow. MFS Research Series—seeks to provide long-term growth of capital and future income. The Series invests at least 80% of its net assets in common stocks and related securities. The Series focuses on large cap companies believed to have favorable prospects for long-term growth, attractive valuations and superior management. The Series may invest in companies of any size, in debt securities rated below investment grade, and in foreign securities, including emerging market securities. MFS New Discovery Series—seeks capital appreciation. The Series normally invests at least 65% of its net assets in equity securities of emerging growth companies. The Series generally focuses on smaller capitalization companies that have market capitalizations within the range of companies in the Russell 2000 Index at the time of purchase. The Series may also invest in foreign securities. Met/AIM Small Cap Growth Portfolio—seeks long-term growth of capital. The Portfolio normally invests at least 80% of its net assets in equity related securities of small-cap companies. To be a small-cap company it will have a market capitalization at the time of purchase, no larger than the largest capitalized company included in the Russell 2000 Index. The Portfolio may invest up to 20% of its net assets in equity securities of issuers whose capitalizations are outside the range of market capitalization of company included in the Russell 2000 Index, in investment grade non-convertible debt securities and U.S.-government securities. The Portfolio may invest up to 25% of its total assets in foreign securities. Oppenheimer Strategic Bond Fund/VA—seeks a high level of current income principally derived from interest on debt securities. The Fund invests in debt securities of issuers in three market sectors: foreign governments and companies (including emerging market issuers); U.S. government securities; and lower-grade, high yield securities of U.S. and foreign companies. The Fund may invest in securities of any maturity and may invest without limit in junk bonds. PIMCO Total Return Portfolio—seeks maximum total return, consistent with the preservation of capital and prudent investment management. The Portfolio normally invests at least 65% of its assets in a diversified portfolio of fixed income instruments of varying maturities. The Portfolio invests primarily in investment grade debt obligations, U.S. government securities and commercial paper and other short-term obligations. Up to 20% of the Portfolio's net assets may be invested in securities denominated in foreign currencies and the Portfolio may invest beyond that limit in U.S. dollar-denominated securities of foreign issuers. SVS Dreman Small Cap Value Portfolio 5 —seeks long-term capital appreciation. Normally, the Portfolio invests at least 80% of its net assets in undervalued stocks of small U.S. companies, which the Portfolio defines as companies that are similar in market value to those in the Russell 2000 Value Index. The Portfolio may also invest up to 20% of its net assets in securities of foreign companies in the form of dollar-denominated American Depositary Receipts. Third Avenue Small Cap Value Portfolio 5 —seeks long-term capital appreciation. Normally, the Portfolio, which is non-diversified, invests at least 80% of its net assets in equity securities of small companies. The Portfolio considers a “small company” to be one whose market capitalization is no greater than or less than the range of capitalizations of companies in the Russell 2000 Index or the S&P Small Cap 600 Index at the time of the investment. The Portfolio seeks to acquire common stocks of well-financed companies at a substantial discount to what the investment adviser believes is their true value. 1 As of December 31, 2004, neither AllianceBernstein Real Estate Investment Portfolio nor Neuberger Berman Real Estate Portfolio had any investments in mortgage-backed securities or debt securities including in non-investment grade debt securities. Each Portfolio had over 92% of its assets invested in real estate investment trusts, with the balance in cash or common stock equities. 2 With respect to AllianceBernstein Premier Growth Portfolio and Janus Aggressive Growth Portfolio, although there is no restriction on Janus Aggressive Growth Portfolio's investment in foreign securities, normally the Portfolio does not invest more than approximately 20% of its assets in foreign securities. With respect to investments in high yield/high risk debt securities, neither Portfolio currently invests more than a minimal amount in such securities. 3 As of December 31, 2004 MFS Research International Portfolio and VP International Fund had 2.8% and 0%, respectively, of their assets invested in emerging market issuers. 4 With respect to MFS Investors Trust Series and Oppenheimer Capital Appreciation Portfolio, the S&P 500 Index is the benchmark for both Portfolios. Although income is not a stated objective of Oppenheimer Capital Appreciation Portfolio, approximately 72% of the Portfolio's assets are invested in dividend paying securities. Moreover, at December 31, 2003, 14 of the top 25 securities held by Oppenheimer Capital Appreciation Portfolio are held by MFS Investors Trust Series. Oppenheimer Capital Appreciation Portfolio's current yield as of December 31, 2003 was 1.1%. MFS Investors Trust Series' current yield as of December 31, 2003 was 1.6%. 5 Although Third Avenue Small Cap Value Portfolio is classified as a non-diversified fund, its investments are similar to a diversified fund. As of December 31, 2004, Third Avenue Small Cap Portfolio's top ten holdings amounted to 21.32% of its portfolio with no holding in excess of 2.63%. SVS Dream Small Cap Value Portfolio's top ten holdings at December 31, 2004 amounted to 18.4% of its portfolio with no holding in excess of 3.1%. It is anticipated that the Third Avenue Small Cap Value Portfolio will continue to be managed as a diversified fund. 45. The following tables compare the total operating expenses of the Existing Fund and the Replacement Fund for each proposed substitution. The comparative expenses are based on actual expenses, including waivers, for the year ended December 31, 2003. In some cases, the expense caps for certain Replacement Funds were decreased effective May 1, 2004, and the management fee was reduced effective January 1, 2005. In such cases the expenses of each Fund as of December 31, 2003, have been restated to reflect the expense cap in effect as of May 1, 2004, or revised management fee, as the case may be. Where a Fund has multiple classes of shares involved in the proposed substitution, the expenses of each class are presented. AIM V.I. Premier Equity Fund (Class 1) (percent) Lord Abbett Growth and Income Portfolio (Class A) (percent) Management Fee 0.61 0.56 12b-1 Fee Other Expenses 0.24 0.06 Total Expenses 0.85 0.62 Waivers Net Expenses 0.85 0.62 AllianceBernstein Premier Growth Portfolio (Class A) (percent) Janus Aggressive Growth Portfolio (Class A) * (percent) Management Fee 1.00 0.70 12b-1 Fee Other Expenses 0.05 0.12 Total Expenses 1.05 0.82 Waivers Net Expenses 1.05 0.82 * Restated to reflect lowered management fee. AllianceBernstein Real Estate Investment Portfolio Class A (percent) Class B (percent) Neuberger Berman Real Estate Portfolio Class A (percent) Class B (percent) Management Fee 0.90 0.90 0.70 0.70 12b-1 Fee 0.25 0.25 Other Expenses 0.34 0.34 0.41 0.41 Total Expenses 1.24 1.49 1.11 1.36 Waivers 0.25 0.35 0.21 0.21 Net Expenses 0.89 1.14 0.90 1.15 VP Income & Growth Fund (Class 1) (percent) Lord Abbett Growth and Income Portfolio (Class A) (percent) Management Fee 0.70 0.56 12b-1 Fee Other Expenses 0.06 Total Expenses 0.70 0.62 Waivers Net Expenses 0.70 0.62 VP International Fund (Class 1) (percent) MFS Research International Portfolio (Class A) (percent) Management Fee 1.33 0.80 12b-1 Fee Other Expenses 0.01 0.31 Total Expenses 1.34 1.11 Waivers 0.02 Net Expenses 1.34 1.09 Dreyfus Stock Index Fund Initial (percent) Service (percent) MetLife Stock Index Fund Class A (percent) Class B (percent) Management Fee 0.25 0.25 0.25 0.25 12b-1 fee 0.25 0.25 Other Expenses 0.02 0.02 0.06 0.06 Total Expenses 0.27 0.52 0.31 0.56 Waivers Net Expenses 0.27 0.52 0.31 0.56 VIP High Income Portfolio Initial (percent) Service 2 (percent) Lord Abbett Bond Debenture Portfolio * Class A (percent) Class B (percent) Management Fee 0.58 0.58 0.53 0.53 12b-1 Fee 0.25 0.25 Other Expenses 0.11 0.12 0.07 0.06 Total Expenses 0.69 0.95 0.60 0.84 Waivers Net Expenses 0.69 0.95 0.60 0.84 * Restated to reflect lowered management fee. VIP Contrafund Portfolio (Initial) (percent) Lord Abbett Growth and Income (Class A) (percent) Management Fee 0.58 0.56 12b-1 Fee Other Expenses 0.09 0.06 Total Expenses 0.67 0.62 Waivers Net Expenses 0.67 0.62 Goldman Sachs Growth and Income Fund (percent) Lord Abbett Growth and Income (Class A) (percent) Management Fee 0.75 0.56 12b-1 Fee Other Expenses 0.45 0.06 Total Expenses 1.20 0.62 Waivers 0.30 Net Expenses 0.90 0.62 MFS High Income Series Initial (percent) Service (percent) Lord Abbett Bond Debenture Portfolio * Class A (percent) Class B (percent) Management Fee 0.75 0.75 0.53 0.53 12b-1 Fee 0.25 0.25 Other Expenses 0.15 0.15 0.07 0.06 Total Expenses 0.90 1.15 0.60 0.84 Waivers Net Expenses 0.90 1.15 0.60 0.84 * Restated to reflect lowered management fee. MFS Emerging Growth Series (Initial) (percent) T. Rowe Price Large Cap Growth Portfolio (Class A) (percent) Management Fee 0.75 0.63 12b-1 Fee Other Expenses 0.12 0.16 Total Expenses 0.87 0.79 Waivers Net Expenses 0.87 0.79 MFS Research Series (Initial) (Percent) T. Rowe Price Large Cap Growth Portfolio (Class A) (Percent) Management Fee 0.75 0.63 12b-1 Fee Other Expenses 0.12 0.16 Total Expenses 0.87 0.79 Waivers Net Expenses 0.87 0.79 MFS New Discovery Series Initial (Percent) Service (Percent) Met/AIM Small Cap Growth Portfolio Class A (Percent) Class B (Percent) Management Fee 0.90 0.90 0.90 0.90 12b-1 Fee 0.25 0.25 Other Expenses 0.14 0.14 0.26 0.21 Total Expenses 1.04 1.29 1.16 1.36 Waivers 0.12 0.06 Net Expenses 1.04 1.29 1.04 1.30 MFS Investors Trust Series (Initial) (Percent) Oppenheimer Capital Appreciation Portfolio (Class A) (Percent) Management Fee 0.75 0.63 12b-1 Fee Other Expenses 0.12 0.12 Total Expenses 0.87 0.75 Waivers 0.03 Net Expenses 0.87 0.72 Oppenheimer Strategic Bond Fund/VA (Class A) (percent) PIMCO Total Return Portfolio (Class A) (percent) Management Fee 0.72 0.50 12b-1 Fee Other Expenses 0.05 0.09 Total Expenses 0.77 0.57 Waivers 0.02 Net Expenses 0.75 0.59 Oppenheimer Capital Appreciation Fund/VA (Class A) (Percent) Oppenheimer Capital Appreciation Portfolio (Class A) (Percent) Management Fee 0.65 0.63 12b-1 Fee Other Expenses 0.02 0.12 Total Expenses 0.67 0.75 Waivers 0.03 Net Expenses 0.67 0.72 Putnam VT International Equity Fund Class A (Percent) Class B (Percent) MFS Research International Portfolio Class A (Percent) Class B (Percent) Management Fee 0.80 0.80 0.80 0.80 12b-1 Fee 0.25% 0.25 Other Expenses 0.22 0.22 0.31 0.34 Total Expenses 1.02 1.27 1.11 1.39 Waivers 0.02 0.06 Net Expenses 1.02 1.27 1.09 1.33 SVS Dreman Small Cap Value Portfolio Class A (Percent) Class B (Percent) Third Avenue Small Cap Value Portfolio Class A (Percent) Class B (Percent) Management Fee 0.75 0.75 0.75 0.75 12b-1 Fee 0.25 0.25 Other Expenses 0.05 0.19 0.18 0.18 Total Expenses 0.80 1.19 0.93 1.18 Waivers Net Expenses 0.80 1.19 0.93 1.18 46. Met Advisers, LLC or Met Investors Advisory, LLC is the adviser of each of the Replacement Funds. Each Replacement Fund currently offers up to three classes of shares, two of which, Class A and Class B, are involved in the substitutions. No Rule 12b-1 Plan has been adopted for any Replacement Fund's Class A shares. Each Replacement Fund's Class B shares has adopted a Rule 12b-1 distribution plan whereby up to 0.50% of a Fund's assets attributable to its Class B shares may be used to finance the distribution of the Fund's shares. Currently, payments under the plan are limited to 0.25% for Class B shares. 47. Met Investors Advisory, LLC has entered into agreement with MIST whereby, for the period ended April 30, 2006, and any subsequent year in which the agreement is in effect, the total annual operating expenses of the following Replacement Funds (excluding interest, taxes, brokerage commissions and Rule 12b-1 fees) will not exceed the amounts stated. These expense caps may be extended by the investment adviser from year to year as follows: Percent Met/AIM Small Cap Growth Portfolio 1.05 Third Avenue Small Cap Value Portfolio 0.95 MFS Research International Portfolio 1.00 Oppenheimer Capital Appreciation Portfolio 0.75 Janus Aggressive Growth Portfolio 0.90 Neuberger Berman Real Estate Portfolio 0.90 48. The annuity contracts are individual flexible premium fixed and variable deferred and immediate annuity contracts. Many of the annuity contracts provide that a maximum of 12 transfers can be made every year without charge or that a $10 contractual limit charge will apply or that no transfer charge will apply. During the accumulation period, Contract owners may transfer between the variable account options or from the variable account options to the fixed account option without limitation. Some of the Contracts have no contractual limitation on transfers during the accumulation period. Some Contract owners may make transfers from the fixed account option subject to certain minimum transfer amounts ($500 or the total interest in the account) and maximum limitations. Some of the Contracts have additional restrictions on transfers from the fixed account to the variable account. During the income period or under the immediate annuity, Contract owners may currently make unlimited transfers among investment portfolios and from investment portfolios to the fixed account option. No fees or other charges are currently imposed on transfers for most of the Contracts. Under certain annuity contracts, the Insurance Companies reserve the right to impose additional restrictions on transfers. Any transfer limits will be suspended in connection with the substitutions. 49. Under the life insurance policies, policy owners may allocate account value among the General Account and the available investment portfolios. All or part of the account value may be transferred from any investment portfolio to another investment portfolio, or to the General Account. Generally, for Contracts that are exempt from registration under Section 4(2) of the Securities Act of 1933, there is no General Account. The minimum amount that can be transferred is the lesser of the minimum transfer amount (which currently ranges from $1 to $500), or the total value that is an investment portfolio or the General Account. Certain policies provide that twelve transfers in a policy year can be made without charge. A transfer fee of $25 is payable for additional transfers in a policy year, but these fees are not currently charged. Other policies do not currently limit the number of transfers; however, the Insurance Companies reserve the right to limit transfers to four or twelve (depending on the policy) per policy year end and to impose a $25 charge on transfers in excess of 12 per year or on any transfer. Under the policies, the Insurance Companies reserve the right to impose additional restrictions on transfers. All transfer limits will be suspended in connection with the substitutions. 50. The substitutions are expected to provide significant benefits to Contract owners, including improved selection of portfolio managers and simplification of fund offerings through the elimination of overlapping offerings. The Substitution Applicants believe that the sub-advisers to the Replacement Funds overall are better positioned to provide consistent above-average performance for their Funds than are the advisers or sub-advisers of the Existing Funds. At the same time, Contract owners will continue to be able to select among a large number of funds, with a full range of investment objectives, investment strategies, and managers. 51. In addition, there will be significant savings to Contract owners because certain costs, such as the costs of printing and mailing lengthy periodic reports and prospectuses for the Existing Funds will be substantially reduced. Further, many of the Existing Funds are smaller than their respective Replacement Funds. As a result, various costs such as legal, accounting, printing and trustee fees are spread over a larger base with each Contract owner bearing a smaller portion of the cost than would be the case if the Fund were smaller in size. (More detailed information regarding the amount of each Fund's assets can be found in the Application). 52. In addition, Contract owners with sub-account balances invested in shares of the Replacement Funds will, except as follows, have a lower total expense ratios taking into account fund expenses (including Rule 12b-1 fees, if any) and current fee waivers. In the following substitutions, the total operating expense ratios of the Replacement Funds are higher because expenses, other than the management fee, are somewhat higher. • AllianceBernstein Real Estate Investment Portfolio/Neuberger Berman Real Estate Portfolio—total expenses of Class A and Class B shares are 1 basis point higher than those of AllianceBernstein Real Estate Investment Portfolio; • Dreyfus Stock Index Fund/MetLife Stock Index Portfolio—total expenses of Class A and Class B shares are 4 basis points higher than those of Dreyfus Stock Index Fund; • MFS New Discovery Series/Met/AIM Small Cap Growth Portfolio—total expenses of Class B shares are 1 basis point higher than those of MFS New Discovery Series—Class A expenses are the same; • Oppenheimer Capital Appreciation Portfolio/VA/Oppenheimer Capital Appreciation Portfolio—total expenses of Class A and Class B shares are 5 basis points higher than those of Oppenheimer Capital Appreciation Portfolio/VA; • Putnam VT International Equity Fund/MFS Research International Portfolio—total expenses of Class A and Class B shares are 7 basis points and 6 basis points, respectively, higher than those of Putnam VT International Equity Fund; and • SVS Dreman Small Cap Value Portfolio/Third Avenue Small Cap Value Portfolio—total expenses of Class A and Class B shares are 13 basis points higher than those of SVS Dreman Small Cap Value Portfolio—Class B expenses of Third Avenue Small Cap Value are lower. Except as stated above for Contract owners with account balances in certain classes of 6 of the 18 funds involved in the substitutions, the substitutions will result in decreased expense ratios (ranging from 1 basis point to 31 basis points). Moreover, there will be no increase in Contract fees and expenses, including mortality and expense risk fees and administration and distribution fees charged to the Separate Accounts as a result of the substitutions. 53. The share classes of the Existing Funds and the Replacement Funds are identical with respect to the imposition of Rule 12b-1 fees currently imposed. While each Replacement Fund's Class B Rule 12b-1 fees can be raised to 0.50% of net assets by the Fund's Board of Trustees/Directors, the Rule 12b-1 fees of 0.25% of the Existing Funds' shares cannot be raised by the Fund's Board of Trustees, without shareholder approval, except as follows: AllianceBerstein Real Estate Investment Portfolio can be raised by the Board 0.50%; Putnam VT International Equity Fund can be raised by the Board up to 0.35%. Met Series Fund and MIST represent that, except as set forth in the following sentence, Rule 12b-1 fees for the Replacement Funds' Class B shares issued in connection with the proposed substitutions will not be raised above 0.25% of net assets without approval of a majority in interest of those Contract owners whose shares were involved in the proposed substitutions. The foregoing representation shall apply to the following substitutions only if the Rule 12b-1 fees for the Replacement Funds' Class B shares exceed 0.35% or 0.50% of net assets as indicated: AllianceBernstein Real Estate Investment Portfolio/Neuberger Berman Real Estate Portfolio—0.50%; Putnam VT International Equity Fund/MFS Research International Portfolio—0.35%. 54. Further, in addition to any Rule 12b-1 fees, the investment advisers or distributors of the Existing Funds pay the Insurance Companies or one of the affiliates from 5 to 30 basis points for Class A (or their equivalent) shares sold to the Separate Accounts and, for Class B (or their equivalent) shares, Rule 12b-1 fees of 25 basis points plus additional amounts ranging from 5 to 25 basis points. Following the substitutions, these payments will not be made on behalf of the Existing Funds. Rather, 25 basis points in Rule 12b-1 fees (with respect to Class B shares) and profit distributions to members, if any, from the Replacement Funds' advisers will be available to the Insurance Companies. These amounts from investment advisory fees may be more or less than the fees being paid by the Existing Funds. 55. The Insurance Companies considered the performance history of each Fund and determined that no Contract owners would be materially adversely affected as a result of the substitutions. (More detailed information regarding the Funds' comparative performance histories can be found in the Application). 56. By a supplement to the prospectuses for the Contracts and the Separate Accounts, each Insurance Company will notify all owners of the Contracts of its intention to take the necessary actions, including seeking the order requested by this Application and to substitute shares of the funds as described herein. The supplement will advise Contract owners that from the date of the supplement until the date of the proposed substitution, owners are permitted to make one transfer of Contract value (or annuity unit exchange) out of the Existing Fund sub-account, to another sub-account without the transfer (or exchange) being treated as one of a limited number of permitted transfers (or exchanges) or a limited number of transfers (or exchanges) permitted without a transfer change. The supplement also will inform Contract owners that for at least 30 days following the proposed substitutions, the Insurance Companies will permit Contract owners affected by the substitutions to make one transfer of Contract value (or annuity unit exchange) out of the Replacement Fund sub-account to another sub-account without the transfer (or exchange) being treated as one of a limited number of permitted transfers (or exchanges) or a limited number of transfers (or exchanges) permitted without a transfer charge. 57. The proposed substitutions will take place at relative net asset value with no change in the amount of any Contract owner's Contract value, cash value, or death benefit or in the dollar value of his or her investment in the Separate Accounts. 58. The process for accomplishing the transfer of assets from each Existing Fund to its corresponding Replacement Fund will be determined on a case-by-case basis. In most cases, it is expected that the substitutions will be effected by redeeming shares of an Existing Fund for cash and using the cash to purchase shares of the Replacement Fund. 59. In certain other cases, it is expected that the substitutions will be effected by redeeming the shares of an Existing Fund in-kind; those assets will then be contributed in-kind to the corresponding Replacement Fund to purchase shares of that Fund. All in-kind redemptions from an Existing Fund of which any of the Substitution Applicants is an affiliated person will be effected in accordance with the conditions set forth in the Commission's no-action letter issued to *Signature Financial Group, Inc.* (available December 28, 1999). If an Existing Fund has not adopted the appropriate procedures set forth in *Signature* , redemptions will be in cash. In light of this fact, the Section 17 Applicants are not requesting relief with respect to those in-kind redemptions. 60. Contract owners will not incur any fees or charges as a result of the proposed substitutions, nor will their rights or an Insurance Company's obligations under the Contracts be altered in any way. All expenses incurred in connection with the proposed substitutions, including brokerage, legal, accounting, and other fees and expenses, will be paid by the Insurance Companies. In addition, 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. No fees will be charged on the transfers made at the time of the proposed substitutions because 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. 61. In addition to the prospectus supplements distributed to owners of Contracts, within five business days after the proposed substitutions are completed, Contract owners will be sent a written notice informing them that the substitutions were carried out and that they may make one transfer of all Contract value or cash value under a Contract invested in any one of the sub-accounts on the date of the notice to another sub-account available under their Contract at no cost and without regard to the usual limit on the frequency of transfers from the variable account options to the fixed account options. The notice will also reiterate that the Insurance Company will not exercise any rights reserved by it under the Contracts to impose additional restrictions on transfers or to impose any charges on transfers (other than with respect to “market timing” activities) until at least 30 days after the proposed substitutions. The Insurance Companies will also send each Contract owner current prospectuses for the Replacement Funds involved to the extent that they have not previously received a copy. 62. The Substitution Applicants agree that, to the extent that the annualized expenses of each Replacement Fund exceeds, for each fiscal period (such period being less than 90 days) during the twenty-four months following the substitutions, the 2003 net expense level of the corresponding Existing Fund, the Insurance Companies will, for each Contract outstanding on the date of the proposed substitutions, make a corresponding reduction in separate account (or sub-account) expenses on the last day of such fiscal period, such that the amount of the Replacement Fund's net expenses, together with those of the corresponding separate account (or sub-account) will, on an annualized basis, be no greater than the sum of the net expenses of the Existing Fund and the expenses of the separate account (or sub-account) for the 2003 fiscal year. 63. The Substitution Applicants further agree that the Insurance Companies will not increase total separate account charges (net of any reimbursements or waivers) for any existing owner of the Contracts on the date of the substitutions for a period of two years from the date of the substitutions. Applicants' Legal Analysis 1. Section 26(c) of the Act requires the depositor of a registered unit investment trust holding the securities of a single issuer to obtain Commission approval before substituting the securities held by the trust. Specifically, Section 26(c) states: It 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. The Commission shall issue an order approving such substitution if the evidence establishes that it is consistent with the protection of investors and the purposes fairly intended by the policy and provision of this title. 2. The Substitution Applicants state that the proposed substitutions appear to involve substitutions of securities within the meaning of Section 26(c) of the Act. The Substitution Applicants, therefore, request an order from the Commission pursuant to Section 26(c) approving the proposed substitutions. 3. The Contracts expressly reserve to the applicable Insurance Company the right, subject to compliance with applicable law, to substitute shares of another investment company for shares of an investment company held by a sub-account of the Separate Accounts. The prospectuses for the Contracts and the Separate Accounts contain appropriate disclosure of this right. 4. Applicants request an order of the Commission pursuant to Section 26(c) of the Act approving the proposed substitutions by the Insurance Companies. The Applicants assert that the proposed substitutions are consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. 5. The Substitution Applicants represent that with respect to each proposed substitution, the Replacement Fund will have the same or lower management fee and current 12b-1 fee. In addition, Contract owners with balances invested in the Replacement Fund will have, taking into effect any applicable expense waivers, a lower expense ratio in many cases and, for others, a similar expense ratio. However, the Substitution Applicants propose to limit Contract charges attributable to Contract value invested in the Replacement Funds following the proposed substitutions, to a rate that would offset the expense ratio difference between the Existing Funds' 2003 net expense ratios and the net expense ratios for the Replacement Funds. The proposed Replacement Fund for each Existing Fund has an investment objective that is at least substantially similar to that of the Existing Fund. Moreover, the principal investment policies of the Replacement Funds are similar to those of the corresponding Existing Funds. The Insurance Companies believe that the new sub-adviser will, over the long-term, be positioned to provide at least comparable performance to that of the Existing Fund's sub-adviser. 6. In addition, a number of the Existing Funds are currently either not available as investment options under any Contract previously or currently offered by the Insurance Companies or, if available, are available only for additional contributions and/or transfers from other investment options under Contracts not currently offered. The Substitution Applicants submit that, with respect to those Existing Funds with limited or no current availability, there is little likelihood additional significant assets, if any, will be allocated to such Funds, and, therefore, because of the costs of maintaining such Funds as investment options under the Contracts, it is in the interest of shareholders to substitute the applicable Replacement Funds which are currently being offered as investment options by the Insurance Companies. 7. The Substitution Applicants anticipate that Contract owners will be better off with the array of sub-accounts offered after the proposed substitutions than they have been with the array of sub-accounts offered prior to the substitutions. 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 Contract values and cash values between and among approximately the same number of sub-accounts as they could before the proposed substitutions. Moreover, the elimination of the costs of printing and mailing prospectuses and periodic reports of the Existing Funds will benefit Contract owners. 8. The Substitution Applicants assert that none of the proposed substitutions is of the type that Section 26(c) 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 Contract or cash values into other sub-accounts. Moreover, the Contracts will offer Contract owners the opportunity to transfer amounts out of the affected sub-accounts into any of the remaining sub-accounts without cost or other disadvantage. The proposed substitutions, therefore, will not result in the type of costly forced redemption which Section 26(c) was designed to prevent. 9. The Substitution Applicants assert that the proposed substitutions also are unlike the type of substitution which Section 26(c) 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 an Insurance Company under their Contract as well as numerous other rights and privileges set forth in the Contract. Contract owners may also have considered each Insurance Company's size, financial condition, relationship with MetLife, and its reputation for service in selecting their Contract. These factors will not change as a result of the proposed substitutions. 10. 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 company. 11. 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 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; * * *
(E)if such other person is an investment company, any investment adviser thereof. * * * Section 2(a)(9) of the Act states that any person who owns beneficially, either directly or through one or more controlled companies, more than 25% of the voting securities of a company shall be presumed to control such company. 12. Because shares held by a separate account of an insurance company are legally owned by the insurance company, the Insurance Companies and their affiliates collectively own of record substantially all of the shares of MIST and Met Series Fund. Therefore, MIST and Met Series Fund and their respective funds are arguably under the control of the Insurance Companies notwithstanding the fact that Contract owners may be considered the beneficial owners of those shares held in the Separate Accounts. If MIST and Met Series Fund and their respective funds are under the control of the Insurance Companies, then each Insurance Company is an affiliated person or an affiliated person of an affiliated person of MIST and Met Series Fund and their respective funds. If MIST and Met Series Fund and their respective funds are under the control of the Insurance Companies, then MIST and Met Series Fund and their respective funds are affiliated persons of the Insurance Companies. 13. Regardless of whether or not the Insurance Companies can be considered to control MIST and Met Series Fund and their respective funds, because the Insurance Companies own of record more than 5% of the shares of each of them and are under common control with each Replacement Fund's investment adviser, the Insurance Companies are affiliated persons of both MIST and Met Series Fund and their respective funds. Likewise, their respective funds are each an affiliated person of the Insurance Companies. In addition, the Insurance Companies, through their separate accounts own more than 5% of the outstanding shares of certain Existing Funds. 14. Because the substitutions may be effected, in whole or in part, by means of in-kind redemptions and purchases, the substitutions may be deemed to involve one or more purchases or sales of securities or property between affiliated persons. The proposed transactions may involve a transfer of portfolio securities by the Existing Funds to the Insurance Companies; immediately thereafter, the Insurance Companies would purchase shares of the Replacement Funds with the portfolio securities received from the Existing Funds. Accordingly, as the Insurance Companies and the Replacement Funds could be viewed as affiliated persons of one another under Section 2(a)(3) of the Act, it is conceivable that this aspect of the substitutions could be viewed as being prohibited by Section 17(a). Accordingly, the Section 17 Applicants have determined that it is prudent to seek relief from Section 17(a) in the context of this Application for the in-kind purchases and sales of the Replacement Fund shares. 15. 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:
(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. 16. The Section 17 Applicants submit that the terms of the proposed in-kind purchase transactions, including the consideration to be paid and received by each fund involved, are reasonable, fair and do not involve overreaching principally because the transactions will conform with all but two of the conditions enumerated in Rule 17a-7. The proposed transactions will take place at relative net asset value in conformity with the requirements of Section 22(c) of the Act and Rule 22c-1 thereunder with no change in the amount of any Contract owner's contract value or death benefit or in the dollar value of his or her investment in any of the Separate Accounts. Contract owners will not suffer any adverse tax consequences as a result of the substitutions. The fees and charges under the Contracts will not increase because of the substitutions. Even though the Separate Accounts, the Insurance Companies, MIST and Met Series Fund may not rely on Rule 17a-7, the Section 17 Applicants submit that the Rule's conditions outline the type of safeguards that result in transactions that are fair and reasonable to registered investment company participants and preclude overreaching in connection with an investment company by its affiliated persons. 17. The boards of MIST and Met Series Fund have adopted procedures, as required by paragraph (e)(1) of Rule 17a-7, pursuant to which the series of each may purchase and sell securities to and from their affiliates. The Section 17 Applicants will carry out the proposed Insurance Company in-kind purchases in conformity with all of the conditions of Rule 17a-7 and each series' procedures thereunder, except that:
(1)The consideration paid for the securities being purchased or sold may not be entirely cash, and;
(2)the boards of MIST and Met Series Fund will not separately review each portfolio security purchased by the Replacement Funds. Nevertheless, the circumstances surrounding the proposed substitutions will be such as to offer the same degree of protection to each Replacement Fund from overreaching that Rule 17a-7 provides to them generally in connection with their purchase and sale of securities under that Rule in the ordinary course of their business. In particular, the Insurance Companies (or any of their affiliates) cannot effect the proposed transactions at a price that is disadvantageous to any of the Replacement Funds. Although the transactions may not be entirely for cash, each will be effected based upon
(1)the independent market price of the portfolio securities valued as specified in paragraph
(b)of Rule 17a-7, and
(2)the net asset value per share of each fund involved valued in accordance with the procedures disclosed in its respective Investment Company's registration statement and as required by Rule 22c-1 under the Act. No brokerage commission, fee, or other remuneration will be paid to any party in connection with the proposed transactions. 18. The Section 17 Applicants submit that the sale of shares of the Replacement Funds for investment securities, as contemplated by the proposed Insurance Company in-kind purchases, is consistent with the investment policy and restrictions of the Investment Companies and the Replacement Funds because
(1)the shares are sold at their net asset value, and
(2)the portfolio securities are of the type and quality that the Replacement Funds would each have acquired with the proceeds from share sales had the shares been sold for cash. To assure that the second of these conditions is met, Met Investors Advisory LLC, MetLife Advisers, LLC and the sub-adviser, as applicable, will examine the portfolio securities being offered to each Replacement Fund and accept only those securities as consideration for shares that it would have acquired for each such fund in a cash transaction. 19. The Section 17 Applicants submit that the proposed Insurance Company in-kind purchases, as described herein, are consistent with the general purposes of the Act as stated in the Findings and Declaration of Policy in Section 1 of the Act. The proposed transactions do not present any of the conditions or abuses that the Act was designed to prevent. The Section 17 Applicants submit that the abuses described in Sections 1(b)(2) and
(3)of the Act will not occur in connection with the proposed in-kind purchases. Conclusion Applicants assert that for the reasons summarized above the proposed substitutions and related transactions meet the standards of Section 26(c) of the Act and are consistent with the standards of Section 17(b) of the Act and that the requested orders should be granted. For the Commission, by the Division of Investment Management pursuant to delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-1737 Filed 4-12-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. IC-26830; File No. 812-13130] John Hancock Life Insurance Company (U.S.A.), et al., Notice of Application April 7, 2005. AGENCY: Securities and Exchange Commission (“Commission”). ACTION: Notice of application for an order pursuant to Section 26(c) of the Investment Company Act of 1940 (the “Act”), approving the substitution of securities. Applicants: John Hancock Life Insurance Company (U.S.A.) (“JHLICO USA”) (formerly The Manufacturers Life Insurance Company (U.S.A.)), John Hancock Life Insurance Company (U.S.A.) Separate Account A (“JHLICO USA Account A”) (formerly The Manufacturers Life Insurance Company (U.S.A.) Separate Account A), John Hancock Life Insurance Company (U.S.A.) Separate Account H (“JHLICO USA Account H”) (formerly The Manufacturers Life Insurance Company (U.S.A.) Separate Account H) (JHLICO USA Accounts A and H are collectively referred to herein as the “JHLICO USA Accounts”), John Hancock Life Insurance Company of New York (“JHLICO New York”) (formerly The Manufacturers Life Insurance Company of New York) and John Hancock Life Insurance Company of New York Separate Account A (“JHLICO NY Account A” and collectively with the JHLICO USA Accounts, the “Separate Accounts”) (formerly The Manufacturers Life Insurance Company of New York Separate Account A) (JHLICO USA, the JHLICO USA Accounts, JHLICO New York and JHLICO NY Account A are collectively referred to herein as “Applicants”). Summary of Application: Applicants seek an order approving each of the following substitutions of shares of series of John Hancock Trust (“JHT”) (formerly Manufacturers Investment Trust) (the “Substitutions”):
(1)Shares of JHT 500 Index Trust for shares of each of the following series of JHT:
(a)Select Growth Trust and
(b)Core Value Trust;
(2)shares of JHT Mid Cap Index Trust for shares of each of the following series of JHT:
(a)Small-Mid Cap Trust and
(b)Small-Mid Cap Growth Trust;
(3)shares of JHT International Equity Index Trust A for shares of each of the following series of JHT:
(a)International Equity Select Trust and
(b)Global Equity Select Trust;
(4)shares of JHT Investment Quality Bond Trust for shares of the following series of JHT: High Grade Bond Trust; and
(5)shares of JHT U.S. Global Leaders Growth Trust for shares of the following series of JHT: Great Companies—America Trust. Filing Date: The Application was filed on October 19, 2004 and amended and restated on April 1, 2005 and April 5, 2005. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in this notice. 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 must be received by the Commission by 5:30 p.m. on April 28, 2005, 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 natures of the requester's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Secretary of the Commission. ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Applicants, c/o John W. Blouch, Esq., Dykema Gossett, PLLC, 1300 I Street NW., Suite 300 West, Washington, DC 20005. FOR FURTHER INFORMATION CONTACT: Jeffrey Foor, Staff Attorney, or Zandra Bailes, Branch Chief, Office of Insurance Products, Division of Investment Management, at
(202)551-6795. 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, NW., Washington, DC 20549-0102 (202-942-8090). Applicants' Representations 1. JHLICO USA is a stock life insurance company incorporated in Maine in 1955 and re-domesticated under the laws of Michigan in 1992. It is authorized to transact a life insurance and annuity business in the District of Columbia and all states except New York. JHLICO USA is a wholly-owned subsidiary of The Manufacturers Life Insurance Company (“Manulife”), a stock life insurance company organized under the laws of Canada. Manulife Financial Corporation, a publicly-traded company based in Toronto, Canada, is the holding company of Manulife and its subsidiaries, collectively known as “Manulife Financial.” For purposes of the Act, JHLICO USA is the depositor and sponsor of the JHLICO USA Accounts as those terms have been interpreted by the Commission with respect to variable life insurance and variable annuity separate accounts. 2. JHLICO New York is a stock life insurance company organized under the laws of New York in 1992. It is authorized to transact a life insurance and annuity business in New York. JHLICO New York is a wholly-owned subsidiary of Manulife. For purposes of the Act, JHLICO New York is the depositor and sponsor of JHLICO NY Account A as those terms have been interpreted by the Commission with respect to variable life insurance and variable annuity separate accounts. 3. JHLICO USA Account A was established in 1986 to fund variable life insurance contracts and is registered under the Act as a unit investment trust (File No. 811-4834). 4. JHLICO USA Account H was established in 1984 to fund variable annuity contracts and is registered under the Act as a unit investment trust (File No. 811-4113). 5. JHLICO NY Account A was established in 1992 to fund variable annuity contracts and is registered under the Act as a unit investment trust (File No. 811-6584). 6. JHT is organized as a Massachusetts business trust and is registered under the Act as an open-end management investment company (File No. 811-4146). JHT is a series investment company, as defined by Rule 18f-2 under the Act, and currently offers 79 separate series or portfolios, each of which has its own investment objectives and policies. The application relates to 13 of these portfolios (the “JHT Portfolios”). Shares of JHT are registered on Form N-1A under the Securities Act of 1933 Act (“1933 Act”) (File No. 2-94157). 7. Shares of JHT are not offered directly to the public. Rather, they are offered to separate accounts of JHLICO USA and JHLICO New York as the underlying investment medium for variable contracts issued by such companies, including the Contracts, and to qualified pension and retirement plans within the meaning of Treasury Regulation 1.817-5(f)(3)(iii) (“Qualified Plans”) and may in the future be offered to certain other eligible persons described in Treasury Application 1.817-5(f)(3) (“Other Eligible Persons”). JHT does not impose sales charges on purchases of its shares. All dividends and other distributions with respect to a portfolio's shares are reinvested in full and fractional shares of that portfolio. 8. John Hancock Investment Management Services, LLC (“JHIMS”) (formerly, Manufacturers Securities Services, LLC), a wholly-owned subsidiary of JHLICO USA, serves as the investment adviser to JHT with respect to each of the JHT Portfolios. JHIMS is a Delaware limited liability company which is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). 9. Pursuant to investment subadvisory agreements, JHIMS has retained a subadviser to provide day-to-day investment management services for each of the JHT Portfolios. The subadvisers to each of the JHT Portfolios are identified below. Each is registered as an investment adviser under the Advisers Act unless exempt from such registration. One of the subadvisers, MFC Global Investment Management (U.S.A.) Limited, a Canadian corporation (“MFC Global (U.S.A.)”), is a wholly-owned subsidiary of Manulife and an affiliate of JHIMS. 10. John Hancock Variable Series Trust I (“JH VST”) is organized as a Massachusetts business trust and is registered under the Act as an open-end management investment company (File No. 811-04490). JH VST is a series investment company, as defined by Rule 18f-2 under the Act, and currently offers 30 separate series or portfolios, each of which has its own investment objectives and policies. Shares of JH VST are registered on Form N-1A under the 1933 Act (File No. 33-2081). 11. Shares of JH VST are not offered directly to the public. Rather, they are offered only to insurance companies as the underlying investment medium for variable contracts issued by such companies and to Qualified Plans and to certain Other Eligible Persons. 12. John Hancock Life Insurance Company (“JHLICO”) serves as the investment adviser to JH VST with respect to its portfolios and is registered as an investment adviser under the Advisers Act. JHLICO is a wholly-owned subsidiary of John Hancock Financial Services, Inc. (“John Hancock”). John Hancock became a wholly-owned subsidiary of Manulife Financial Corporation, effective April 28, 2004. In its capacity as investment adviser to JH VST, JHLICO recommends subadvisers for the JH VST portfolios and oversees and evaluates the performance of subadvisers. 13. There are seven kinds of variable insurance contracts affected by the application (the “Contracts”). One of the Contracts is a flexible premium variable life insurance policy (the “VL Contract”); six of the Contracts are variable annuity contracts (the “VA Contracts”). Purchase payments for the VL Contracts are allocated to JHLICO USA Account A. Purchase payments for the VA Contracts are allocated to JHLICO USA Account H or JHLICO NY Account A. 14. Contract owners may allocate purchase payments to one or more subaccounts (“Subaccounts”) of a Separate Account. Each Subaccount invests in shares of a portfolio of JHT, JH VST or PIMCO Variable Insurance Trust (“PIMCO VIT”) (the “Underlying Portfolios”). The only Subaccounts affected by the application are those which invest in the portfolios of JHT identified below as Replaced Portfolios or Substituted Portfolios. 15. The following table identifies
(i)each Contract affected by the application,
(ii)the file number under the 1933 Act for each Contract, and
(iii)the total number of investment options available under each Contract and the number of those investment options provided by JHT, JH VST and PIMCO VIT. Investment Options Contract File No. Total JHT JH VST PIMCO VIT VL Contract EPVUL 333-85284 19 18 1 0 VA Contracts Vantage 333-71072 73 71 1 1 Ven 20-21 333-70728 73 71 1 1 Venture III 333-70850 73 71 1 1 Vision 25 333-71074 73 71 1 1 NY Ven 24 33-79112 73 71 1 1 Ven 9 33-46217 73 71 1 1 16. After the Substitutions, the total number of Investment Options available to the VL Contract and to each of the VA Contracts will be 73. 17. The application covers eight Replaced Portfolios. Of these, seven were created expressly for and were sold only to Subaccounts used to fund the VL Contract. The VL Contract was created at the request of, and has been sold as a proprietary product exclusively by, an entity that is not affiliated with Applicants. Applicants understand that this unaffiliated entity has ceased to actively market the VL Contract. At December 30, 2004, there were 85 VL Contracts and 25 VA Contracts. 18. JHT stopped selling shares of the Great Companies—America Trust on May 1, 2004 and shares of Select Growth Trust, Core Value Trust, Small-Mid Cap Trust, Small-Mid Cap Growth Trust and Global Equity Select Trust on November 29, 2004. 19. Applicants seek an order permitting substitutions of Substituted Portfolios for Replaced Portfolios as indicated in the following table. Great Companies—America Trust has only Series II shares outstanding, and Series II shares of U.S. Global Leaders Growth Trust will be substituted for those shares. Each of the other Replaced Portfolios has only Series I shares outstanding, and Series I shares of the corresponding Substituted Portfolio will be substituted for those shares. Substitution Replaced portfolio Substituted portfolio One Select Growth Trust 500 Index Trust. Two Core Value Trust 500 Index Trust. Three Small-Mid Cap Trust Mid Cap Index Trust. Four Small-Mid Cap Growth Trust Mid Cap Index Trust. Five High Grade Bond Trust Investment Quality Bond Trust. Six Global Equity Select Trust International Equity Index Trust A. Seven International Equity Select Trust International Equity Index Trust A. Eight Great Companies—America Trust U.S. Global Leaders Growth Trust. All of the Replaced and Substituted Portfolios are existing portfolios of JHT, except for the International Equity Index Trust A, which will be a newly created portfolio of JHT. It will have the same investment objective, policies and risks and the same subadviser as the International Equity Index Fund of JH VST (“JH VST International Equity Index Fund”) and, subject to the approval of the shareholders of that JH VST International Equity Index Fund, will succeed to all the assets and liabilities of that portfolio at the same time that the Substitution is effective. 20. The following table identifies the subadviser for each of the JHT Portfolios: Portfolio Subadviser Select Growth Trust Roxbury Capital Management, LLC. Core Value Trust Rorer Asset Management, LLC. Small-Mid Cap Trust Kayne Anderson Rudnick Investment Management, LLC. Small-Mid Cap Growth Trust Navellier Management, Inc. High Grade Bond Trust Allegiance Capital, Inc. Global Equity Select Trust Lazard Asset Management LLC. International Equity Select Trust Lazard Asset Management LLC. Great Companies—America Trust Great Companies, L.L.C. 500 Index Trust MFC Global (U.S.A.). Mid Cap Index Trust MFC Global (U.S.A.). Investment Quality Bond Trust Wellington Management Company, LLP. International Equity Index Trust A MFC Global SSgA Funds Management, Inc. U.S. Global Leaders Growth Trust Sustainable Growth Advisers, L.P. 21. Select Growth Trust's investment objective is to seek long-term growth of capital. It invests primarily in large cap equity securities. The subadviser defines large cap equity securities as securities of companies with at least $2 billion in market cap. The portfolio may also invest up to 20% of its assets in mid cap securities and in securities of any market cap where the subadviser believes there are prospects for significant appreciation in the price of the security. Core Value Trust's investment objective is to seek long-term capital appreciation. Under normal market conditions, the portfolio invests primarily in equity and equity-related securities of companies with market capitalization greater than $5 billion at the time of purchase. 500 Index Trust's investment objective is to seek to approximate the aggregate total return of a broad U.S. domestic equity market index. It invests, under normal market conditions, at least 80% of its net assets (plus any borrowing for investment purposes) in
(a)the common stocks that are included in the S&P 500 Index and
(b)securities (which may or may not be included in the S&P 500 Index) that its subadviser believes as a group will behave in a manner similar to the index. 22. Small-Mid Cap Trust's investment objective is to achieve long-term capital appreciation, with dividend income as a secondary consideration. Under normal market conditions, the portfolio invests at least 80% of its assets (plus any borrowing for investment purposes) in small and mid cap companies that the subadviser believes are of high quality (small and mid cap companies are those whose market cap does not exceed the market cap of the largest company included in the Russell 2500 Index at the time of purchase by the portfolio). Small-Mid Cap Growth Trust's investment objective is to seek long-term growth of capital. The portfolio invests primarily in equity securities of fast growing companies that offer innovative products, services, or technologies to a rapidly expanding marketplace. Under normal market conditions, the portfolio will invest at least 80% of its assets (plus any borrowings for investment purposes) in securities of small to mid cap companies, currently defined as companies with $2 billion to $10 billion in market capitalization at the time of purchase. Mid Cap Index Trust's investment objective is to seek to approximate the aggregate total return of a mid cap U.S. domestic equity market index. Under normal market conditions, the portfolio invests 80% of its net assets (plus any borrowings for investment purposes) in
(a)the common stocks that are included in the S&P 400 Index and
(b)securities (which may or may not be included in the S&P 400 Index) that the subadviser believes as a group will behave in a manner similar to the index. 23. High Grade Bond Trust's investment objective is to maximize total return, consistent with the preservation of capital and prudent investment management. Under normal market conditions, the portfolio invests at least 80% of its net assets (plus any borrowings for investment purposes) in investment grade, fixed income securities of varying maturities. Investment Quality Bond Trust's investment objective is to provide a high level of current income consistent with the maintenance of principal and liquidity. Under normal market conditions, the portfolio invests at least 80% of its net assets (plus any borrowings for investment purposes) in investment grade bonds. The portfolio tends to focus on corporate bonds and U.S. government bonds with intermediate to longer term maturities. 24. Global Equity Select Trust's investment objective is to seek long-term capital appreciation. Under normal market conditions, the portfolio generally invests at least 80% of its total assets (plus any borrowings for investment purposes) in equity securities, including American and Global Depository Receipts and common stocks of relatively large U.S. and non-U.S. companies with market capitalizations in the range of the Morgan Stanley Capital International World I Index that its subadviser believes are undervalued based on their earnings, cash flow or asset values. International Equity Select Trust's investment objective is to seek long-term capital appreciation. Under normal market conditions, it invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities. The portfolio will invest primarily in American Depository Receipts and common stocks, of relatively large non-U.S. companies with market capitalization in the range of the Morgan Stanley Capital International Europe, Australia and Far East Index. International Equity Index Trust A's investment objective is to seek to track the performance of a broad-based equity index of foreign companies primarily in developed countries and, to a lesser extent, in emerging market countries. The portfolio seeks to invest more than 80% of its assets in securities included in the Morgan Stanley Capital International All Country World Excluding U.S. Index, an international stock market index that, as of December 31, 2004, included approximately 1,892 securities listed on the stock exchanges of 49 developed and emerging market countries (but not the United States). 25. Great Companies—America Trust's investment objective is to seek long-term growth of capital. It is non-diversified. The portfolio invests principally in large cap stocks, generally those with a market cap in excess of $15 billion. U.S. Global Leaders Growth Trust's investment objective is to seek long-term growth of capital. It is non-diversified. Under normal market conditions, the portfolio invests at least 80% of its assets primarily in stocks of U.S. Companies with multinational operations that exhibit sustainable growth characteristics. The subadviser to U.S. Global Leaders Growth Trust seeks to identify companies with superior long-term earnings prospects. The portfolio invests in large capitalization companies (companies in the capitalization range of the S&P 500 Index). 26. The following table contains information about the net assets of the portfolios as of December 31, 2004: Replaced portfolio Total net assets ($) Net assets attributable to contracts ($) Substituted portfolio Total net assets Select Growth Trust 3,550,498 639,800 500 Index Trust $1,263,351,026 Core Value Trust 3,590,295 697,594 500 Index Trust 1,263,351,026 Small-Mid Cap Trust 2,503,291 376,745 Mid Cap Index Trust 247,296,621 Small-Mid Cap Growth Trust 2,991,474 243,506 Mid Cap Index Trust 247,296,621 High Grade Bond Trust 5,884,918 733,261 Investment Quality Bond Trust 472,243,219 Global Equity Select Trust 3,550,498 103,319 International Equity Index Trust A * International Equity Select Trust 2,871,718 492,787 International Equity Index Trust A * Great Companies—America Trust 2,587,538 306,364 U.S. Global Leaders Growth Trust 397,513,438 * The International Equity Index Trust A will be a newly created protfolio of JHT, and will, subject to the approval of sharehlders of JH VST International Equity Index Fund, succeed to all the assets and liabilities of that portfolio attributable to its Series I and II shares (“JH VST Combination”). As of December 31, 2004, total net assets of the JH VST International Equity Fund were $103,030,000. The shareholders of each of the Replaced Portfolios are their Subaccounts and JHLICO USA. 27. The shareholders of the Strategic Growth Trust, another portfolio of JHT, with net assets of $387,915,360 at December 31, 2004, have approved its combination with U.S. Global Leaders Growth Trust as of the effective time of the Substitution. 28. The following tables set forth the expense ratios for the shares of each of the Replaced and Substituted Portfolios affected by the Substitutions (as a percentage of average net assets) for the year ended December 31, 2004. Select Growth Trust (Series I Shares) (percent) Core Value Trust (Series I Shares) (percent) 500 Index Trust (Series I Shares) (percent) Management Fees 0.80 0.80 0.38 Distribution (12b-1) Fees 0.15 0.15 0.15 Other Expenses 0.88 0.61 0.03 Total Annual Expenses 1.83 1.56 0.56 Fee Waiver/Expense Reimbursement (0.59) (0.39) (0.00) Net Annual Expenses 1.24 1.17 0.56 Small-Mid Cap Trust (Series I Shares) (percent) Small-Mid Cap Growth Trust (Series I Shares) (percent) Mid Cap Index Trust (Series I Shares) (percent) Management Fees 0.95 0.80 0.38 Distribution (12b-1) Fees 0.15 0.15 0.15 Other Expenses 0.13 1.02 0.04 Total Annual Expenses 1.23 1.97 0.57 Fee Waiver/Expense Reimbursement (0.00) (0.56) (0.00) Net Annual Expenses 1.23 1.41 0.57 High Grade Bond Trust (Series I Shares) (percent) Investment Quality Bond Trust (Series I Shares) (percent) Management Fees 0.56 0.50 Distribution (12b-1) Fees 0.15 0.15 Other Expenses 0.17 0.09 Total Annual Expenses 0.88 0.74 Fee Waiver/Expense Reimbursement (0.07) (0.00) Net Annual Expenses 0.81 0.74 Global Equity Select Trust (Series I Shares) (percent) International Equity Index Trust A (Series I Shares) (percent) JH VST International Equity Index Fund JHT International Equity Index Trust A (estimated) Management Fees 0.90 0.15 0.55 Distribution (12b-1) Fees 0.15 0.40 0.05 Other Expenses 0.75 0.17 0.06 Total Annual Expenses 1.80 0.72 0.66 Fee Waiver/Expense Reimbursement (0.45) (0.00) (0.00) Net Annual Expense 1.35 0.72 0.66 International Equity Select Trust (Series I Shares) (percent) International Equity Index Trust A (Series I Shares) (percent) JH VST International Equity Index Fund JHT International Equity Index Trust A (estimated) Management Fees 0.90 0.15 0.55 Distribution (12b-1) 0.15 0.40 0.05 Fees: Other Expenses 0.26 0.17 0.06 Total Annual Expenses 1.31 0.72 0.66 Fee Waiver/Expense Reimbursement (0.11) (0.00) (0.00) Net Annual Expenses 1.20 0.72 0.66 Great Companies—America Trust (Series II Shares) (percent) U.S. Global Leaders Growth Trust (Series II Shares) (percent) Management Fees 0.75 0.61 Distribution (12b-1) 0.35 0.35 Fees: Other Expenses 1.02 0.73 Total Annual Expenses 2.12 1.69 Fee Waiver/Expense Reimbursement (0.19) (0.23) Net Annual Expenses 1.93 1.46 29. The following table contains performance information for the indicated periods ended December 31, 2004 for the shares of each of the Replaced and Substituted Portfolios affected by the Substitutions, except that in the case of the International Equity Index Trust A, the performance shown is for the NAV shares of JH VST International Equity Index Fund. Series I shares of JH VST International Equity Index Fund were not offered prior to May 3, 2004. The performance of the Series I shares of JH VST International Equity Index Fund will be lower than the performance of the NAV shares because of its 12b-1 Fee. JH VST International Equity Index Fund will be the accounting survivor of the JH VST Combination. Portfolio One year (percent) Five year (percent) Ten year (percent) Life of portfolic (percent) Date first available Select Growth Trust (Series I Shares) 2.62 N/A N/A −4.54 07/16/01 Core Value Trust (Series I Shares) 3.27 N/A N/A −1.05 07/16/01 500 Index Trust (Series I Shares) 10.26 N/A N/A −3.02 05/01/00 Small-Mid Cap Trust (Series I Shares) 7.15 N/A N/A 1.13 07/16/00 Small-Mid Cap Growth Trust (Series I Shares) 13.70 N/A N/A −2.50 07/16/01 Mid Cap Index Trust (Series I Shares) 15.83 N/A N/A 7.35 05/01/00 High Grade Bond Trust (Series I Shares) 2.77 N/A N/A 5.20 07/16/01 Investment Quality Bond Trust (Series I Shares) 4.81 7.74 7.63 N/A 06/18/85 Global Equity Select Trust (Series I Shares) 11.86 N/A N/A 4.09 07/16/01 International Equity Select Trust 18.94 N/A N/A 7.71 07/16/01 JH VST International Equity Index Fund NAV Shares 20.24 −0.95 5.38 N/A 05/02/88 Series I Shares N/A N/A N/A 18.45 05/03/2004 Great Companies—America Trust (Series II Shares) 1.81 N/A N/A 9.82 08/04/2003 U.S. Global Leaders Growth Trust (Series II Shares) N/A N/A N/A 5.68 05/03/2004 30. Applicants represent that each of the Substitutions will better serve the interests of the Contract owners because it will provide those owners with an investment option that:
(i)Permits them to pursue an investment option that is comparable to their current investment option in terms of pursuing long-term investment goals without becoming subject to greater overall risks;
(ii)is much larger;
(iii)has a lower advisory fee and overall expense ratio; and
(iv)has better overall or short-term historical performance. 31. Applicants anticipate that each of the Substitutions will be effected by having each Subaccount that invests in a Replaced Portfolio redeem its shares of that Portfolio for cash at the net asset value calculated on the Substitution Date and purchase shares of the Substituted Portfolio for cash at net asset value at the same time. Because each of the Substitutions will take place at the relative net asset values determined on the Substitution Date in accordance with Section 22(c) of the Act and Rule 22c-1 thereunder, it will have no financial impact on any Contract owner. In connection with the completion of each of the Substitutions, JHLICO USA will withdraw its seed money from each of the Replaced Portfolios in which it has seed money, and JHT will terminate those Portfolios. 32. Applicants filed with the Commission on October 22, 2004, and provided to Contract owners, a prospectus supplement that described the Substitutions and explained that Applicants had filed with the Commission an application for an order approving the Substitutions, that, if the order is issued, will take place as of the close of regularly scheduled trading on the New York Stock Exchange on April 29, 2005 (the “Substitution Date”) and that the Contract owners affected by the Substitutions will be sent written confirmations (described below) informing them of the Substitutions. 33. The disclosure advised Contract owners affected by the Substitutions that they may transfer Contract values, prior to the Substitutions, from Subaccounts investing in the Replaced Portfolios to Subaccounts investing in other investment options available under the applicable Contract, and for 30 days following the Substitution Date, from Subaccounts investing in the Substituted Portfolios to Subaccounts investing in other investment options available under the applicable Contract. The disclosure further advised Contract owners that such transfers may be made without the imposition of any transfer charges, will not be counted for purposes of determining the numbers of permitted transfers or permitted free transfers under a Contract or the Disruptive Short-Term Trading Policy and will not be subject to any maximum amount limitations otherwise applicable under a Contract or the Disruptive Short-Term Trading Policy. A second prospectus supplement filed with the Commission in March 2005 provided Contract owners with substantially the same updated information. 34. Applicants represent that all expenses in connection with the Substitutions, including any brokerage commissions and legal, accounting and other fees and expenses, will be paid by JHLICO USA and JHLICO New York and will not be borne, directly or indirectly, by the Replaced Portfolios, the Substituted Portfolios or Contract owners. Affected Contract owners will not incur any fees or charges as a result of the Substitutions. The Substitutions will not cause the fees and charges under the Contracts currently being paid by Contract owners to be greater after the Substitutions than they were before the Substitutions. 35. Applicants further represent the Substitutions will not have any impact on the insurance benefits that JHLICO USA and JHLICO New York are obligated to provide under the Contracts or on the rights of Contract owners and the other obligations of JHLICO USA and JHLICO New York under the Contracts. The Substitutions will not have a tax impact on Contract owners. 36. Applicants also represent that the Substitutions involving the International Equity Index Trust A will not be effected if the JH VST Combination is not approved by shareholders of JH VST International Equity Index Fund. Applicants' Legal Analysis 1. Applicants request an order pursuant to Section 26(c) of the Act approving each of the Substitutions. Section 26(c) of the Act makes it 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 approves the substitution. The Commission will approve such a substitution if the evidence establishes that it is consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. 2. Applicants assert that the purposes, terms and conditions of the Substitutions are consistent with the principles and purposes of Section 26(c) and do not entail any of the abuses that Section 26(c) is designed to prevent. Substitution is an appropriate solution to the lack of Contract owner interest in and higher relative expenses of the Replaced Portfolios. Applicants do not expect that any Substitution will have a significant impact on the expense ratio of the Substituted Portfolio and believe that each Substituted Portfolio will serve Contract owner interests better than the Replaced Portfolio because it provides a comparable investment option while being larger and having a lower expense ratio. Each of the Contracts reserves to JHLICO USA or JHLICO New York, as the case may be, the right to effect such substitutions, and each of JHLICO USA and JHLICO New York has made disclosure of this reserved right in the prospectuses for the Contracts. 3. Applicants submit that the Substitutions will not result in the type of costly forced redemptions that Section 26(c) was intended to guard against and, for the following reasons, are consistent with the protection of investors and the purposes fairly intended by the Act:
(a)The Substitutions will make available under the Contracts continuity of investment objectives and expectations.
(b)Contract owners who have allocated Contract values to one or more of the Replaced Portfolios will be provided with advance notice of the Substitutions and will have the opportunity, from the date of such advance notice until 30 days after the Substitution Date, to transfer Contract values to which a Substitution applies from a Subaccount investing in a Replaced Portfolio or a Substituted Portfolio to other available investment options under a Contract. Such transfers may be made without the imposition of any transfer charges, will not be counted for purposes of determining the numbers of permitted transfers or permitted free transfers under a Contract or applicable short-term trading policy and will not be subject to any maximum amount limitations otherwise applicable under a Contract or applicable short-term trading policy.
(c)The Substitutions will be effected at the respective net asset values of the shares of the Replaced Portfolios and their corresponding Substituted Portfolios in conformity with Section 22(c) of the Act and Rule 22c-1 thereunder, without the imposition of any transfer or similar charge by Applicants and with no change in the amount of any Contract owner's Contract value.
(d)The expenses of the Substitutions will be paid by JHLICO USA and JHLICO New York and will not be borne, directly or indirectly, by the Replaced Portfolios, the Substituted Portfolios or Contract owners.
(e)The Substitutions will not have any impact on the insurance benefits that JHLICO USA and JHLICO New York are obligated to provide under the Contracts or on the rights of Contract owners and the other obligations of JHLICO USA and JHLICO New York under the Contracts.
(f)The Substitutions will not cause the fees and charges under the Contracts currently being paid by Contract owners to be greater after than before the Substitutions and will not have any tax impact on Contract owners.
(g)Within five days after a Substitution, JHLICO USA and JHLICO New York will send to Contract owners written confirmation that the Substitution has occurred.
(h)For each fiscal period (not to exceed a fiscal quarter) during the 24 months following the date of each Substitution, JHLICO USA or JHLICO NY, as appropriate, will adjust the Contract values invested in the Substituted Portfolio as a result of the Substitution, to the extent necessary to effectively reimburse the affected Contract owners for their proportionate share of any amount by which the annual rate of the Substituted Portfolio's total operating expenses (after any expense waivers or reimbursements) for that fiscal period, as a percentage of the Portfolio's average daily net assets, plus the annual rate of any asset-based charges (excluding any such charges that are for premium taxes) deducted under the terms of the owner's Contract for that fiscal period, exceed the sum of the annual rate of the corresponding Replaced Portfolio's total operating expenses, as a percentage of such replaced Portfolio's average daily net assets, for the twelve months ended December 31, 2004, plus the annual rate of any asset-based charges (excluding any such charges that are for premium taxes) deducted under that Contract for such twelve months. Conclusion For the reasons and upon the facts set forth in the application, Applicants submit that the requested order meets the standards set forth in Section 26(c) and respectfully request that the Commission issue an order pursuant to Section 26(c) of the Act approving the Substitutions. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-1745 Filed 4-12-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 35-27957; International Series Release No. 1284] Filings Under the Public Utility Holding Company Act of 1935, as Amended (“Act”) April 7, 2005. Notice is hereby given that the following filing(s) has/have been made with the Commission pursuant to provisions of the Act and rules promulgated under the Act. All interested persons are referred to the application(s) and/or declaration(s) for complete statements of the proposed transaction(s) summarized below. The application(s) and/or declaration(s) and any amendment(s) is/are available for public inspection through the Commission's Branch of Public Reference. Interested persons wishing to comment or request a hearing on the application(s) and/or declaration(s) should submit their views in writing by May 2, 2005, to the Secretary, Securities and Exchange Commission, Washington, DC 20549-0609, and serve a copy on the relevant applicant(s) and/or declarant(s) at the address(es) specified below. Proof of service (by affidavit or, in the case of an attorney at law, by certificate) should be filed with the request. Any request for hearing should identify specifically the issues of facts or law that are disputed. A person who so requests will be notified of any hearing, if ordered, and will receive a copy of any notice or order issued in the matter. After May 2, 2005, the application(s) and/or declaration(s), as filed or as amended, may be granted and/or permitted to become effective. Scottish Power plc and Dornoch International Insurance Limited (70-10261) Scottish Power plc (“ScottishPower”), a foreign registered holding company, 1 Atlantic Quay, Glasgow G2 8SP, Scotland, UK, and Dornoch International Insurance Limited (“DIIL”), 38/39 Fitzwilliam Square, Dublin 2, Ireland, a new captive insurance company subsidiary of ScottishPower, (collectively, “Applicants”), have filed an application-declaration, as amended (“Application”), under sections 12(b), 13(b), and 33(c) of the Act and rules 45, 54, 89, 90 and 91 under the Act. ScottishPower Investments Limited (“ScottishPower Investments”) is the direct parent of ScottishPower Insurance Limited (“SPIL”), an indirect insurance company subsidiary of ScottishPower. ScottishPower Investments is a wholly-owned direct subsidiary of ScottishPower UK, plc (“SPUK”), a foreign utility subsidiary of ScottishPower. SPIL operates as an insurance company domiciled in the Isle of Man and serves as a captive insurer for the UK-based members of the ScottishPower system. SPIL currently is authorized to provide property damage, general liability, employer's liability, motor own damage, and motor liability insurance. DIIL is also a wholly-owned direct subsidiary of ScottishPower Investments. 1 1 DIIL was originally incorporated as Dornoch Risk International Limited (“DRIL”) on June 30, 2004. DRIL changed its name to DIIL by resolution at its December 10, 2004 board meeting and this was effected by the Irish Registrar of Companies on Jan. 20, 2005. Applicants are seeking approval to operate DIIL. DIIL will assume the insurance duties currently performed by SPIL on behalf of ScottishPower and also begin to provide insurance services to PacifiCorp, the U.S.-based public utility subsidiary of the ScottishPower system. On an annual basis, ScottishPower system companies spend approximately $40 million for the purchase of commercial insurance and related services. Under the current insurance program, system companies maintain commercial insurance policies with underlying deductibles of $1 million per event for general liability coverage and $7.5 million for property coverage. Losses below these deductibles are self-insured by system companies whereas losses in excess of these deductibles are paid by the commercial insurance. ScottishPower may from time to time choose to purchase commercial insurance in place of, or to reduce, the deductible or self-insurance to meet their strategic goals and objectives. Commercial premiums and the deductibles and self-insured retained risks are then allocated to subsidiaries owning a given risk based on such factors as number of automobiles, payroll, revenues, total property values, product throughput, as well as loss history. ScottishPower intends that SPIL would eventually be dissolved after DIIL operates for approximately one year. DIIL intends to provide property damage and liability insurance coverage of all or significant portions of the deductibles in many of PacifiCorp's current insurance policies, and to provide coverage for activities which the commercial insurance industry carriers will no longer provide, *e.g.,* overhead distribution and transmission line property damage insurance. Premiums for the proposed expansion of the insurance program for the first year were determined to equal the aggregate losses for system companies plus administrative expenses. Aggregate losses for general liability were estimated using actuarial methods. DIIL would continue to analyze the commercial insurance bought by the ScottishPower system companies, and coordinate the coverage it provides to minimize the risk of loss to the system. Supplementing its primary role of underwriting system retained risk, DIIL may also replace or reduce certain insurance sold to ScottishPower system companies by traditional insurance providers in the areas of property damage and general liability. An actuarial analysis will be performed to determine the proper premiums consistent with methods used to determine the retained risk premium. To the extent traditional insurance programs are reduced, DIIL may attempt to obtain equal levels of loss protection and coverage in the reinsurance market. Applicants state that DIIL will apply stringent credit standards to all reinsurance counterparties. DIIL will not be operated to generate profits beyond what is necessary to maintain adequate reserves. To the extent that premiums and interest earned exceed current claims and expenses, an appropriate reserve would be accumulated to respond in years when claims and expenses exceed premiums. To the extent that losses over the long term are lower than projected, DIIL could correspondingly lower premiums, thereby reducing the premium expenses that would otherwise by paid to DIIL. ScottishPower would make an initial equity contribution to DIIL of approximately $40-60 million. Beyond the initial equity contribution and funding of DIIL, ScottishPower may provide any subsequently required capital contributions through additional equity and or debt purchases exempt from the Act. PacifiCorp is not being asked to provide any capital for DIIL's operations. DIIL would set premiums and operate pursuant to rules 90 and 91 under the Act. Premium costs would closely track loss experience and be sufficient to cover DIIL's underwriting costs and future claim payments. The returns from the investment of this capital would be used to pay for DIIL's operating costs and can be used to reduce future premium costs. Applicants maintain that with maturation DIIL may also be able to provide coverage to a wider number of PacifiCorp activities beyond property damage and general liability. For example, DIIL may seek to provide Workers Compensation coverage. ScottishPower requests a reservation of jurisdiction over the underwriting of additional insurance activities, *i.e.,* other than for property damage and general liability, pending completion of the record. DIIL will be domiciled in Dublin, Ireland and managed by a professional captive management company, Aon Insurance Managers (Dublin) Ltd, which will perform all the management and administrative services for DIIL. Aon Insurance Managers (Dublin) Ltd is a wholly-owned indirect subsidiary of insurance broker Aon Corporation and is not an affiliate of PacifiCorp or ScottishPower. DIIL would be licensed by the Irish Financial Services Regulatory Authority (“IFSRA”). To receive this license, DIIL has had to meet numerous IFSRA standards including submission of a satisfactory business plan, financial projections, risk management measures and corporate governance standards. DIIL must also meet numerous ongoing IFSRA standards to continue in good standing, including the meeting of established solvency margin, technical reserves and annual audit of financial results requirements. PNM Resources, Inc., et al. (70-10285) PNM Resources, Inc. (“PNM Resources”), Alvarado Square, Albuquerque, NM 87158, a registered holding company, Cascade Investment, L.L.C. (“Cascade”), 2365 Carillon Point, Kirkland, WA 98033, a limited liability company formed under the laws of the State of Washington, and William H. Gates III (“Mr. Gates”), One Microsoft Way, Redmond, WA 98052, Cascade's sole member (collectively, “Applicants”), have filed an application-declaration (“Application”) under sections 6(a), 7, 9(a)(1), 9(a)(2), 10, 11, 12(e) and 13(b) of the Act and rules 51, 54, 62-65, 90 and 91 under the Act. PNM Resources proposes to acquire all of the outstanding voting securities of TNP Enterprises, Inc. (“TNP Enterprises”), a public utility holding company claiming exemption by rule 2 under the Act (the acquisition is referred to as the “Transaction”). TNP Enterprises has subsidiary electric utility operations in Texas and New Mexico conducted by Texas-New Mexico Power Company (“TNMP”), its public utility subsidiary. Further, as described below Cascade currently owns about 8.68% of the outstanding common stock of PNM Resources. As a result of this preexisting stock ownership, Cascade and Mr. Gates will indirectly acquire 5% or more of the outstanding voting securities of TNMP in the Transaction. Accordingly, Cascade and Mr. Gates also seek approval under Sections 9(a)(2) and 10 of the Act for their participation in the Transaction. 2 2 A notice in this matter was previously issued by the Commission concerning PNM Resources' proposal to amend its restated articles of incorporation (“Amendment”). In the same release, the Commission also issued an order authorizing PNM Resources to solicit proxies relating to the Amendment. *PNM Resurces, Inc.,* Holding Co. Act Release No. 27954 (March 30, 2005). I. Parties to the Transaction A. PNM Resources and Its Subsidiaries PNM Resources became an exempt public utility holding company on December 31, 2001, and conducts its operations consistent with the order of the New Mexico Public Regulation Commission (“NMPRC”) which authorized the holding company structure. Except for certain corporate support services provided to its subsidiaries at cost pursuant to that order, PNM Resources conducts no business operations other than as a holding company. PNMR Services Company (“Services”) is a subsidiary service company, which provides services at cost to the subsidiaries of PNM Resources. PNM Resources filed a notice of registration under the Act on December 30, 2004, and transferred its service functions to Services on January 1, 2005. PNM Resources reported operating revenues of $1,604,792,000 and operating income of $112,898,000, for the year ended December 31, 2004; PNM Resources had assets of $3,487,635,000 as of December 31, 2004. PNM Resources' only public utility company subsidiary is Public Service Company of New Mexico (“PNM”), a New Mexico corporation. PNM is an electric and gas public utility company. It is engaged in the generation, transmission, and distribution of electric energy at retail in the State of New Mexico and makes sales for resale (“wholesale” sales) of electricity in interstate commerce. PNM is also engaged in the distribution of natural gas in the State of New Mexico, which includes some off-system wholesale sales of natural gas. PNM had electric revenues for 2004 of $558,412,000, excluding wholesale sales. Its 2004 electric wholesale sales were $554,634,000; natural gas operating revenues for 2004 were $490,921,000. Through two of its subsidiaries, Luna Power Company LLC, a Delaware limited liability company, and PNMR Development & Management Corporation, a New Mexico corporation, PNM Resources owns a one-third interest in the Luna Energy power generation facility under development near Deming, New Mexico. When complete the project will consist of a 570 MW combined cycle gas-fired generating plant. PNM Resources' current nonutility activities are conducted through Avistar, Inc. (“Avistar”), a company engaged solely in developing and marketing power system technologies. PNM Resources has the following inactive direct nonutility subsidiaries: EIP Refunding Corporation, PNM Electric & Gas Services, Inc., Sunbelt Mining Co. Inc., Sunterra Gas Gathering Company, and Sunterra Gas Processing Company. PNM Resources also has the following indirect inactive nonutility subsidiaries: Gas Company of New Mexico (directly owned by Sunbelt Mining Co. Inc.), Meadows Resources, Inc. (directly owned by PNM) and its subsidiaries, Bellamah Associates, Ltd., Bellamah Community Development, Bellamah Holding Company, Bellamah Investors Ltd., MCB Financial Group and Republic Holding Company. PNM also factors its receivables through a financing subsidiary, PNM Receivables Corporation, but does not offer the service to non-affiliates. PNM is subject to the jurisdiction of the NMPRC with respect to its retail electric and gas rates, service, accounting, issuance of securities, construction of major new generation and transmission facilities and other matters regarding retail utility services provided in New Mexico. PNM's principal business segments are wholesale operations and utility operations. Utility operations include Electric Services (“Electric”), Transmission Services (“Transmission”) and Gas Services (“Gas”). In addition, PNM owns Merchant Plant (authorized power generation facilities that are not certified by the NMPRC to provide service to New Mexico retail customers and thus are not included in rate base) that is subject to a settlement agreement approved by the NMPRC, described below. PNM serves approximately 471,000 natural gas customers and 413,000 electric customers in New Mexico. PNM's wholesale operations consist of the generation and sale of electricity into the wholesale market based on three product lines that include long-term contracts, forward sales and short-term sales. The source of these sales is supply created by selling energy not needed at the time by retail customers as well as the capacity of PNM's generating plant investment excluded from retail rates. The “regulated generation” (generation in rate base), “unregulated generation” (certain generation excluded from rate base) and “Merchant Plant” (including certain generation excluded from rate base) are jointly dispatched. Electric consists of the distribution and generation of electricity for retail electric customers in New Mexico. PNM provides retail electric service to a large area of north central New Mexico, including the cities of Albuquerque and Santa Fe, and certain other areas of New Mexico. PNM owns or leases generation located in the States of Arizona and New Mexico within the Western Electricity Coordinating Council (“WECC”) 3 region, a National Electric Reliability Council region including much of the Western United States and portions of Canada and Mexico. PNM is also interconnected with the Southwest Power Pool. PNM experienced a peak electrical demand on its system of 1655 MW in 2004. PNM owns or leases 1729 MW of generating capacity. Additional capacity is purchased from third parties under certain power purchase agreements that may be accounted for as leases, for a total of 2417 MW available capacity. 3 The WECC was formed on April 18, 2002 by the merger of the Western Systems Coordinating Council, the Southwest Regional Transmission Council and the Western Regional Transmission Association. It coordinates and supports electric system reliability and open power transmission access throughout its service area, encompassing 1.8 million square miles. Transmission consists of the transmission of electricity over transmission lines owned or leased by PNM, interconnected with other utilities in New Mexico and south and east into Texas, west into Arizona and north into Colorado and Utah. PNM owns or leases approximately 2,900 circuit miles of transmission lines. PNM owns and operates in excess of 8400 miles of distribution lines excluding street lighting in New Mexico. The PNM Gas segment includes the transportation and distribution of natural gas to end users, including end users in most of the major communities in New Mexico, including two of New Mexico's three largest metropolitan areas, Albuquerque and Santa Fe. The Gas Segment operates as an integrated system and includes approximately 11,840 miles of natural gas distribution lines. Applicants state that the Merchant Plant owned by PNM constitutes utility assets within the meaning of the Act, 4 and will be available through joint dispatch to support service to the retail customers of PNM. PNM's Merchant Plant activities are governed by a Global Electric Settlement Agreement (“Global Settlement”) that was entered into on October 10, 2002, among PNM, the NMPRC staff, the New Mexico Attorney General, and other consumer groups. 5 4 PNM Resources to date has no aggregate investment in any exempt wholesale generators or foreign utility companies”), as defined in sections 32 and 33 of the Act, respectively. Applicants state that in *PNM Resources, Inc.* , Holding Co. Act Release No. 27934 (December 30, 2004) (“December Order”), the Commission found the electric utility assets of PNM to constituted an integrated system. 5 The Global Settlement provides for, among other things, the following:
(1)Joint support for the repeal of a majority of the New Mexico Electric Utility Industry Restructuring Act of 1999;
(2)PNM's retail electric rates through 2007;
(3)generation resources for retail loads; and
(4)PNM's participation and financing of Merchant Plant activities and the eventual transfer of Merchant Plant out of PNM. B. TNP Enterprises and Its Subsidiaries TNP Enterprises was organized as a holding company in 1983 and transacts business through its subsidiaries. On April 7, 2000, under an Agreement and Plan of Merger among TNP Enterprises, ST Acquisition Corp. (“ST Corp.”) and SW Acquisition, the parent of ST Corp., ST Corp. merged with and into TNP Enterprises (the “Merger”). TNP Enterprises is the surviving corporation in the Merger, and is wholly-owned by SW Acquisition. TNP Enterprises' principal operations are conducted through two wholly-owned subsidiaries: Texas-New Mexico Power Company (“TNMP”) and First Choice Power Special Purpose, L.P. 6 TNMP is a state regulated utility operating in Texas and New Mexico. In Texas, TNMP provides regulated transmission and distribution services under legislation that established retail competition in Texas. For the years ending December 31, 2004, TNP reported operating revenues were $718,880,000 and operating income of $109,216,000; TNP Enterprises reported assets of $1,291,937,000 as of December 31, 2004. 6 First Choice Power Special Purpose, L.P. is a bankruptcy remote special purpose entity certificated retail electric provider (“REP”) in Texas to which the original REP certificate of First Choice Power, Inc. and its price to beat customers were transferred under the order of the Public Utility Commission of Texas. A new certicate was granted to First Choice Power, Inc., which is now First Choice Power, L.P., also a direct subsidiary of TNP Enterprises. These entities are collectively referred to as “First Choice.” In New Mexico, TNMP provides electricity service that includes transmitting, distributing, purchasing, and selling electricity to its New Mexico customers. The TNMP utility assets located in New Mexico are connected with the PNM system and operate as a sub-area of the PNM control area. Wholesale power transactions involving the TNMP New Mexico assets are scheduled through PNM's control center. TNMP's Texas operations lie entirely within the Electric Reliability Council of Texas (“ERCOT”) region. ERCOT is the independent system operator that is responsible for maintaining reliable operations of the bulk electric power supply system in the ERCOT region, which is located entirely within Texas and serves about 85% of the electrical load in Texas. First Choice was organized in 2000 to act as TNMP's affiliated retail electric provider, as required by the Texas restructuring legislation that requires competitive access to electricity supplies. TNMP has two inactive subsidiaries: Texas Generating Company, LP (“TGC”), a Texas limited partnership, and Texas Generating Company II, LLC (“TGC II”), a Texas limited liability company. TNMP formed TGC and TGC II as Texas corporations to finance construction of TNP One, formerly its sole generation facility. Until May 2001, TNMP owned TNP One together with TGC and TGC II. At that time, TNMP converted TGC and TGC II to their present forms and consolidated the ownership of TNP One into TGC to comply with restructuring legislation. Neither TNMP nor TNP Enterprises any longer owns, directly or indirectly, any interest in generating plants. PNM Resources proposes to retain these subsidiaries in their present inactive status. TNP Enterprises reported a net loss for calendar year 2004 of $75,603 and negative shareholder equity of $29,680,000. Effective January 1, 2002, Texas restructuring legislation established retail competition in the Texas electricity market. Prior to January 1, 2002, TNMP operated as an electric utility in Texas, generating, transmitting and distributing electricity to customers in its Texas service territory. As required by the Texas restructuring legislation, and in accordance with a plan approved by the Public Utility Commission of Texas (“PUCT”), TNMP separated its Texas utility operations into three components: *Retail Sales Activities.* First Choice assumed the activities related to the sale of electricity to retail customers in Texas, and, on January 1, 2002, TNMP's customers became customers of First Choice, unless they chose a different retail electric provider. First Choice and other retail electric providers now perform all activities with Texas retail customers, including acquiring new customers, setting up accounts, billing customers, acquiring power for resale to customers, handling customer inquiries and complaints, and acting as a liaison between the transmission and distribution companies and the retail customers. *Power Transmission and Distribution.* TNMP continues to operate its regulated transmission and distribution business in Texas. *Power Generation.* TGC became the unregulated entity performing TNMP's generation activities in Texas. However, in October 2002, TNMP and TGC sold TNP One to Sempra Energy Resources. As a result of the sale, TGC and TGC II neither own property nor engage in any operating activities, and neither TNMP nor any of its affiliates are currently in the power generation business. TNMP serves smaller-to medium-sized communities. TNMP provides electric service, either directly or through retail electric providers, to approximately 256,000 customers in 85 Texas and New Mexico municipalities and adjacent rural areas. Only three of the 85 communities in TNMP's service territory have populations exceeding 50,000. TNMP's service territory is organized into two operating areas: Texas and New Mexico. In most areas that TNMP serves, it is the exclusive provider of transmission and distribution services. First Choice had approximately 219,000 customers in Texas as of December 31, 2004. TNP Enterprises also wholly-owns several small subsidiaries which are inactive: TNP Technologies, LLC (a Texas limited liability company for real property acquisition in New Mexico); TNP Operating Company (inactive Texas corporation for real property acquisition in Texas and New Mexico); Facility Works, Inc. (inactive Texas corporation formerly engaged in heating, ventilating, and air conditioning service); TNP Enterprises-Magnus, L.L.C. (inactive Texas limited liability company intended for exempt business development). Applicants propose to retain these subsidiaries as inactive subsidiaries solely for winding up their affairs, absent further Commission authorization. C. Cascade Cascade is a limited liability company formed under the laws of the State of Washington. Mr. Gates is Cascade's sole member. Cascade was formed in 1995 to make and hold certain investment securities for Mr. Gates. Cascade invests in and holds the securities of numerous publicly and privately held companies; it does not conduct any business operations of its own. By order dated July 17, 2001 (Holding Co. Act Release No. 27427) (the “Cascade Order”), the Commission authorized Cascade and Mr. Gates to acquire 5% or more (but less than 10%) of the outstanding voting securities of three public utility or holding companies: PNM Resources, Otter Tail Corporation (“Otter Tail”), which provides electric service in portions of Minnesota, North Dakota and South Dakota, and Avista Corporation (“Avista”), which provides electric and gas service in portions of Washington, Idaho, Oregon and California. Cascade currently holds 5,541,150 shares (or approximately 8.68%) of the outstanding common stock of PNM Resources and 2,389,299 shares (or approximately 8.2 %) of the outstanding common stock of Otter Tail. Subsequent to the issuance of the Cascade Order, Cascade reduced its ownership interest in Avista's common stock to below 5% of the total outstanding and is therefore no longer an “affiliate” of Avista. In connection with the proposed Transaction, Cascade has agreed to purchase $100 million in equity-linked securities of PNM Resources to enable PNM Resources to finance a portion of the purchase price for TNP Enterprises. Applicants state that Cascade and Mr. Gates are joined as Applicants in this Application because they will indirectly acquire 5% or more of the voting securities of TNP Enterprises by virtue of Cascade's existing ownership of common stock in PNM Resources. Applicants state that in all other respects, the terms and conditions of the Cascade Order will remain in effect and undisturbed. II. Requested Authority A. TNP Acquisition PNM Resources and SW Acquisition, L.P. (“SW Acquisition”), 7 the holder of all of the shares of common stock (no par value per share) of TNP Enterprises, entered into a stock purchase agreement (“SPA”) dated as of July 24, 2004. Pursuant to the SPA, PNM Resources agreed to purchase an aggregate of 100 shares of common stock, no par value per share, of TNP Enterprises. These shares constitute all of the issued and outstanding shares of common stock of TNP Enterprises. The closing of the Transaction will occur on the third business day following the receipt of all regulatory approvals and the satisfaction of other conditions precedent. 7 SW Acquisition is a Texas limited partnership that presently holds 100% of the voting securities of TNP Enterprises. The General Partner of SW Acquisition is SWI Acquisition G.P., L.P. SWI Acquisition G.P., L.P. is comprised of Laurel Hill Capital Partners, LLC and SWI II Acquisition, L.C. The Limited Partners of SW Acquisition are: Caravellel Investment Fund, LLC, CIBC WG Argosy Merchant Fund 2, LLC, Co-Investment Merchant Fund 3, LLC, Continental Casualty Company, Laurel Hill Capital Partners, LLC, Carlyle High Yield Partners, LP, 75 Wall Street Associates, LLC, Dresdner Kleinwort Capital Partners 2001, L.P., American Securities Partners II, LP, and American Securities Partners II(B), LP. These entities own all of the beneficial equity interest in TNP Enterprises. The general partner and the limited partners have approved the proposed acquisition, including the compensation that TNP Enterprises' shareholders will receive as a result of the acquisition. The aggregate purchase price that PNM Resources is to pay to acquire the TNP Enterprises stock held by SW Acquisition, consisting of all the voting securities of TNP Enterprises, is $189,100,000, subject to certain adjustments specified in the SPA. The purchase price that PNM Resources will pay to SW Acquisition will comprise
(i)a cash amount equal to 50% of the purchase price and
(ii)a number of shares of common stock, no par value, of PNM Resources by the Per Share Amount (the Per Share Amount is $20.20, subject to certain conditions). No later than five business days prior to the closing, the chief financial officer of TNP Enterprises will deliver to PNM Resources a written statement of the estimated purchase price including all adjustments. It is estimated that the PNM Resources common stock acquired by SW Acquisition will equal 4.7 million newly issued shares, or 6% of the outstanding voting securities of PNM Resources, which will be held by SW Acquisition in a purely custodial role pending imminent distribution to its constituent partners. Pursuant to the SW Acquisition limited partnership agreement, the consideration for the sale, including the common stock received, will be divided proportionally in accordance with each partners' economic interest. The largest interests, those of Continental Casualty Company and CIBC WG Argosy Merchant Fund 2, L.L.C., account for 35% and 21.93% of the PNM Resources shares received as consideration, respectively. As a result, following the closing of the Transaction, no partner in SW Acquisition will own, with power to vote, 5% or more of the voting securities of PNM Resources. In order to finance a portion of the acquisition cost, PNM Resources will issue and sell 4,000,000 units of its 6.625% Hybrid Income Term Security Units (the “Units”) to Cascade Investment, L.L.C. (“Cascade”), a limited liability company formed under the laws of the State of Washington, in consideration for $100,000,000. Each Unit will have a stated amount of $25.00. The proceeds of the sale of the Units will be used by PNM Resources to finance a portion of the cash consideration paid in the Transaction and for refinancing the debt and preferred securities of TNP Enterprises. The Units will be sold pursuant to the terms of a Unit Purchase Agreement, dated August 13, 2004, between PNM Resources and Cascade (the “UPA”). B. Post-Transaction Operations In the December Order, the Commission authorized PNM Resources to issue various types of equity and debt securities, including equity-linked securities in the form of stock purchase units. The financing plan that provided the basis for the authority extended by the Commission in the December Order included the acquisition of TNP Enterprises and no new financing authorizations are required. PNM Resources plans to retain TNP Enterprises; however, TNP Enterprises will exist only as a conduit, with no active operations or financial obligations, and will retain no personnel or operational authority. PNM Resources also proposes to include TNP Enterprises, TNMP and First Choice as client companies of PNMR Services, a subsidiary service company that provides the following support services: Accounting, Audit, Business Ethics and Compliance, Business Excellence (including Business Process Improvement), Corporate Communications, Community Affairs, Corporate Governance, Economic Development, Environmental Management, Environmental Policy, Executive Management, General Services, Governmental Regulations, Health and Safety, Human Resources, Information Technology, Investor Relations, Legal, Organization Development, Purchasing, Regulatory Affairs, Risk Management, and Treasury. PNM Resources will integrate the support services functions that currently exist at TNMP into Services. Applicants state that the consolidation of the support services functions into Services is expected to result in reduced costs for the affiliate companies through reductions in corporate and headquarters staffing, reduced corporate and administrative programs, and purchasing savings through economies of scale. Services will also establish common processes and systems and centralized expertise. Under the program of restructuring implemented by the State of Texas pertaining to the ERCOT System of TNP Enterprises, affiliates of TNMP are able to access certain shared services, such as billing, accounting, and payroll systems. Applicants propose to maintain these arrangements in place where such is consistent with economical operations and to comply with both state and Federal Energy Regulatory Commission affiliate transaction regulation and the applicable rules of the Commission, including rules 90 and 91. First Choice is a firm engaged in domestic energy marketing and Avistar is a firm engaged in the domestic marketing of energy technologies. Applicants maintain that First Choice qualifies as an energy-related company under rule 58 under the Act. PNM Resources proposes to retain FirstChoice. PNM Resources also proposes to retain the nonutility subsidiaries of TNP Enterprises which are currently inactive. PNM Resources also proposes to retain a limited partnership interest in National Corporate Tax Credit Fund XII, an investment qualifying for low income housing tax credits. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-1748 Filed 4-12-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51503; File No. SR-Amex-2004-65] Self-Regulatory Organizations; American Stock Exchange LLC; Order Granting Approval to Proposed Rule Change, and Amendments No. 1 and 2 Thereto, Relating to Revisions to Amex Rule 21, Appointment of Floor Officials On August 10, 2004, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 a proposed rule change to amend Amex Rule 21, Appointment of Floor Officials. On December 22, 2004, the Amex filed Amendment No. 1 to the proposed rule change. 3 On February 3, 2005, the Amex filed Amendment No. 2 to the proposed rule change. 4 The proposed rule change, as amended, was published for comment in the **Federal Register** on March 8, 2005. 5 The Commission received no comments on the proposal. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1 the Amex revised the text of the proposed rule. 4 In Amendment No. 2 the Amex further revised the text of the proposed rule. 5 *See* Securities Exchange Act Release No. 51279 (March 1, 2005), 70 FR 11279. The Exchange proposed the following amendments to Amex Rule 21:
(1)Eliminate the requirement that an Exchange Official who is appointed as a senior Floor Official must have previously served as a member of the Exchange's Board of Governors (“Board”); 6
(2)provide that an Exchange Official who has been appointed as a Senior Floor Official shall have the same authority and responsibilities as a Floor Governor with respect to matters that arise on the trading floor and require review or action by a Floor Governor or Senior Floor Official; 7 and
(3)clarify that an Exchange Official who is appointed as a Senior Floor Official may not participate in meetings of the Board unless the Board invites such person to attend its meetings. 8 6 The proposal would retain the requirement that any such Exchange Official must spend a substantial part of his or her time on the Exchange's floor. 7 The Exchange has represented that an Exchange Official who makes a ruling on the floor would not be permitted to review such ruling while later acting as a Senior Floor Official or in place of a Floor Governor. Telephone conversation among William Floyd-Jones, Assistant General Counsel, Amex, Susie Cho, Special Counsel, Division of Market Regulation (“Division”), Commission, and Geraldine Idrizi, Attorney, Division, Commission, on January 31, 2005. A number of Amex rules provide for Floor Governor or Senior Floor Official action or review with respect to matters that arise on the trading floor. The Amex noted that these rules may change with future Amex rule changes. Under the amendment to Amex Rule 21, Exchange Officials appointed as Senior Floor Officials would be able to act in place of Floor Governors with respect to these responsibilities. The following is a list of Amex rules that call for action or review by Floor Governors or Senior Floor Officials: Rule 1 (Hours of Business), Rule 22 (Authority of Floor Officials), Rule 25 (Cabinet Trading of Equity and Derivative Securities), Rule 26 (Performance Committee), Rule 27 (Allocations Committee), Rule 118 (Trading in Nasdaq National Market Securities), Rule 119 (Indications, Openings and Reopenings), Rule 128A (Automatic Execution), Rule 170 (Registration and Functions of Specialists), Rule 590 (Minor Rule Violation Fine System), Rule 904 (Position Limits), Rule 918 (Trading Rotations, Halts and Suspensions), Rule 933 (Automatic Execution of Option Orders), Rule 959 (Accommodation Transactions), Rule 918C (Trading Rotations, Halts and Suspensions), Rule 933-ANTE (Automatic Matching and Execution of Options Orders). 8 Article II, Section 3 of the Amex Constitution (The Board of Governors—Powers, Duties and Procedures) currently allows the Board to invite persons who are not members of the Board to participate in meetings of the Board. In relevant part, Article II, Section 3 provides: “The Board may invite a person, not a member thereof, to attend its meetings and to participate in its deliberations, but such person shall not have the right to vote.” The Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange 9 and, in particular, the requirements of Section 6(b) of the Act 10 and the rules and regulations thereunder. The Commission finds specifically that the proposed rule change, as amended, is consistent with Section 6(b)(5) of the Act, 11 in that the proposed rule change, as amended, is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest; and is not designed to permit unfair discrimination between customers, issuers, brokers or dealers. 9 In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). The Commission notes that the proposed rule change, as amended, is designed to facilitate the supervision of trading activity on the Exchange's trading floor. The proposal would expand the pool of Exchange Officials who could be appointed to serve as Senior Floor Officials by eliminating the requirement that such Exchange Officials previously must have served as an Exchange Governor. Further, the proposal specifies that Exchange Officials who are appointed as Senior Floor Officials would have the same authority and responsibilities as a Floor Governor with respect to matters that arise on the floor and require review or action by a Floor Governor or Senior Floor Official. The Commission also notes that the proposed rule change would clarify the status of Exchange Officials who are appointed as Senior Floor Officials by specifying that these officials may not participate in Board meetings except to the extent that they are invited to attend such meetings. The Commission finds that the proposed rule change, as amended, is consistent with Section 6(b) of the Act. 12 12 15 U.S.C. 78f(b). *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 13 that the proposed rule change (SR-Amex-2004-65), as amended, be, and hereby is, approved. 13 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated Authority. 14 14 17 CFR 200.30,-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. 05-7435 Filed 4-12-05; 8:45 am]
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2 references not yet in our index
  • 17 CFR 240.19
  • 17 CFR 200.30
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Rules and Regulations
Notice of application for an order pursuant to Section 26(c) of the Investment Company 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
U.S.C.§ 3501
U.S.C.§ 552
U.S.C.§ 78s
U.S.C.§ 78c
U.S.C.§ 78f
Cite17 CFR 240.19
Cite17 CFR 200.30
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