Business Men's Assurance Company of America, et al.; Notice of Application, 36414-36426 [E5-3257]
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36414
Federal Register / Vol. 70, No. 120 / Thursday, June 23, 2005 / Notices
Ronald J. Hodapp, Railroad Retirement
Board, 844 North Rush Street, Chicago,
Illinois 60611–2092 or
Ronald.Hodapp@rrb.gov and to the
OMB Desk Officer for the RRB, at the
Office of Management and Budget,
Room 10230, New Executive Office
Building, Washington, DC 20503.
National Environmental Policy Act
(NEPA).
Written comments may be forwarded
to:
ADDRESSES: Dr. Craig B. Foltz, Program
Officer, National Science Foundation,
Division of Astronomical Sciences, 4201
Wilson Blvd., Room 1045, Washington,
DC 22230. Telephone: (703) 292–4909.
Fax: (703) 292–9034. E-mail:
cfoltz@nsf.gov.
after the scoping meetings or within 30
days after publication in the Bulletin of
the State of Hawaii Office of
Environmental Quality Control,
whichever is later. Written comments
may be submitted to Dr. Craig B. Foltz
at the address above.
Dated: June 6, 2005.
Craig B. Foltz,
Program Officer.
[FR Doc. 05–11970 Filed 6–22–05; 8:45 am]
Proposed
alternatives to be considered may
include, but not be limited to, the
following:
(1) Alternative 1: (Proposed Action):
Undeveloped site East of Mees
Observatory.
(2) Alternative 2: Former radio
telescope site known as Reber Circle.
(3) Alternative 3: No-Action. The
National Science Foundation will not
construct the Advanced Technology
Solar Telescope on Maui.
Publication of the NOI does not
foreclose consideration of any courses of
actions or possible decisions addressed
by the National Science Foundation in
its Final Environmental Impact
Statement (FEIS). No final decisions
will be made regarding construction of
the ATST prior to completion and
signature of the Record of Decision for
the proposed action.
Scoping Process: Federal, State and
local agencies and the public are invited
to participate in the scoping process for
the completion of this EIS. The scoping
process will help identify potential
impacts and key issues to be analyzed
in the EIS.
Scoping meetings will be held at the
following locations on the island of
Maui, Hawai’i, with notification of the
times and locations published in the
local newspapers.
(1) J. Walter Cameron Center—
Auditorium, 95 Mahalani Street,
Wailuku, HI 96793; Tuesday, July 12,
2005, 5 p.m. to 9:30 p.m.
(2) Kula Community Center, Lower
Kula Road, Kula, HI 96790; Wednesday,
July 13, 2005, 6 p.m. to 10 p.m.
(3) Mayor Hannibal Tavares
Community Center—Room 2, 91
Pukalani Street, Pukalani, HI 96788;
Thursday, July 14, 2005 6 p.m. to 10
p.m.
Written comments identifying
potential impacts to be analyzed in the
EIS will be accepted within 30 days
Charles Mierzwa,
Clearance Officer.
[FR Doc. 05–12473 Filed 6–22–05; 8:45 am]
BILLING CODE 7555–01–M
BILLING CODE 7905–01–M
SUPPLEMENTARY INFORMATION:
Separate account
BMA
BMA
BMA
BMA
VA
VL
VA
VL
.......
.......
.......
.......
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RAILROAD RETIREMENT BOARD
Agency Forms Submitted for OMB
Review
In accordance with the
Paperwork Reduction Act of 1995 (44
U.S.C. Chapter 35), the Railroad
Retirement Board (RRB) has submitted
the following proposal(s) for the
collection of information to the Office of
Management and Budget for review and
approval.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–26909; File No. 812–13170]
SUMMARY:
Summary of Proposal(s)
(1) Collection title: Employee Noncovered Service Pension Questionnaire.
(2) Form(s) submitted: G–209.
(3) OMB Number: 3220–0154.
(4) Expiration date of current OMB
clearance: 09/30/2005.
(5) Type of request: Extension of a
currently approved collection.
(6) Respondents: Individuals or
households.
(7) Estimated annual number of
respondents: 500.
(8) Total annual responses: 500.
(9) Total annual reporting hours: 55.
(10) Collection description: Under
Section 3 of the Railroad Retirement
Act, the Tier I portion of an employee
annuity may be subjected to a reduction
for benefits received based on work not
covered under the Social Security Act or
Railroad Retirement Act. The
questionnaire obtains the information
needed to determine if the reduction
applies and the amount of such
reduction.
ADDITIONAL INFORMATION OR COMMENTS:
Copies of the forms and supporting
documents can be obtained from
Charles Mierzwa, the agency clearance
officer at (312–751–3363) or
Charles.Mierzwa@rrb.gov.
Comments regarding the information
collection should be addressed to
Existing portfolios
Business Men’s Assurance Company
of America, et al.; Notice of Application
June 17, 2005.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order pursuant to Section 26(c) of the
Investment Company Act of 1940, as
amended (the ‘‘Act’’), approving certain
substitutions of securities.
AGENCY:
Business Men’s Assurance
Company of America (‘‘BMA’’), BMA
Variable Annuity Account A (‘‘BMA VA
Account’’), BMA Variable Life Account
A (‘‘BMA VL Account’’), Fidelity
Security Life Insurance Company
(‘‘Fidelity Security’’), and FSL Separate
Account M (‘‘FSL Account’’).
FILING DATE: The application was filed
on February 28, 2005, and amended on
June 16, 2005.
SUMMARY OF APPLICATION: The
Applicants request an order pursuant to
Section 26(c) of the Act to permit
certain unit investment trusts to
substitute shares of certain portfolios of
various unaffiliated funds
(‘‘Replacement Portfolios’’) for shares of
certain portfolios of Investors Mark
Series Fund, Inc. (‘‘IMSF’’), which are
currently held by those unit investment
trusts (‘‘Existing Portfolios’’). The shares
are held by the unit investment trusts to
fund certain variable annuity contracts
and variable life insurance policies
(collectively, the ‘‘Contracts’’) issued by
the BMA and Fidelity Security.
Specifically, Applicants propose to
make the following substitutions:
APPLICANTS:
Replacement portfolio
IMSF Intermediate Fixed Income ............................
Fidelity VIP II Investment Grade Bond (Initial Shares).
IMSF Money Market ................................................
Fidelity VIP Money Market (Initial Shares).
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Federal Register / Vol. 70, No. 120 / Thursday, June 23, 2005 / Notices
Separate account
Existing portfolios
FSL ..............
BMA VA .......
BMA VL .......
BMA VA .......
BMA VL .......
All ................
BMA VA .......
BMA VL .......
FSL ..............
BMA VA .......
BMA VL .......
All ................
BMA VA .......
BMA VL .......
IMSF Money Market ................................................
IMSF Global Fixed Income .....................................
Federated Prime Money Fund II.
Fidelity VIP II Investment Grade Bond (Initial Shares).
IMSF Mid Cap Equity ..............................................
Fidelity VIP III Mid Cap (Initial Shares).
IMSF Small Cap Equity ...........................................
IMSF Large Cap Growth .........................................
Dreyfus Emerging Leaders (Initial Class).
T. Rowe Price Blue Chip Growth.
IMSF Large Cap Growth .........................................
IMSF Large Cap Value ...........................................
Universal Institutional Funds Equity Growth (Class I Shares).
Lord Abbett Growth and Income (Class VC Share).
IMSF Growth and Income .......................................
IMSF Balanced ........................................................
36415
Lord Abbett Growth and Income (Class VC Shares).
T. Rowe Price Personal Strategy Balanced.
An
order granting the amended and restated
application will be issued unless the
Commission orders a hearing. Interested
persons may request a hearing by
writing to the Secretary of the
Commission and serving Applicants
with a copy of the request personally or
by mail. Hearing requests should be
received by the Commission by 5:30
p.m. on July 12, 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 issues contested.
Persons may request notification of a
hearing by writing to the Secretary of
the Commission.
HEARING OR NOTIFICATION OF HEARING:
Secretary, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549. Applicants:
Raymond A. O’Hara III, Blazzard, Grodd
& Hasenauer, P.C., 943 Post Road East,
Westport, CT 06880. Copy to Michael K.
Deardorff, Business Men’s Assurance
Company of America, 2300 Main Street,
Suite 450, Kansas City, MO 64108.
ADDRESSES:
Thu
Ta, Senior Counsel, or Lorna J.
MacLeod, Branch Chief, at (202) 551–
6795, Office of Insurance Products,
Division of Investment Management.
FOR FURTHER INFORMATION CONTACT:
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, 100 F Street, NE.,
Washington, DC 20549 (tel. (202) 551–
5850).
SUPPLEMENTARY INFORMATION:
Replacement portfolio
Applicants’ Representations
1. BMA was incorporated on July 1,
1909, under the laws of the State of
Missouri. As of December 31, 2003,
BMA became a South Carolina
domiciled insurance company. BMA is
licensed to do business in the District of
Columbia and in all States except New
York. BMA is a wholly owned
subsidiary of Liberty Life Insurance
Company, which is an insurance
company domiciled in the State of
South Carolina.
2. Fidelity Security is a stock life
insurance company. Fidelity Security
was originally incorporated on January
17, 1969, as a Missouri corporation. It is
principally engaged in the sale of life
insurance and annuities. Fidelity
Security is licensed in the District of
Columbia and in all States except New
York, where it is only admitted as a
reinsurer. Fidelity Security is majority
owned by Richard F. Jones (an
individual).
3. BMA and Fidelity Security
(collectively, the ‘‘Insurance
Companies’’) are not affiliates. However,
through their collective ownership of all
of the shares of the Existing Portfolios,
they are affiliates of the Existing
Portfolios.
4. BMA VA Account is a separate
investment account of BMA established
pursuant to a resolution of its Board of
Directors on September 6, 1996, under
Missouri law to fund variable annuity
contracts issued by BMA. BMA VA
Account is registered under the Act as
a unit investment trust. The variable
annuity contracts issued through BMA
VA Account are registered on Form N–
4 under the Securities Act of 1933 (the
‘‘1933 Act’’).
5. BMA VL Account is a separate
investment account of BMA established
pursuant to a resolution of its Board of
Directors on December 1, 1998, under
Missouri law to fund variable life
insurance policies issued by BMA. BMA
VL Account is registered under the Act
as a unit investment trust. The variable
life insurance policies issued through
BMA VL Account are registered on
Form N–6 under the 1933 Act.
6. FSL Account is a separate
investment account of Fidelity Security
established pursuant to a resolution of
its Board of Directors on August 25,
1998, pursuant to Missouri law to fund
variable annuity contracts issued by
Fidelity Security. FSL Account is
registered under the Act as a unit
investment trust. The variable annuity
contract issued through FSL Account is
registered on Form N–4 under the 1933
Act.
7. Each of the BMA VA Account, BML
VL Account, and FSL Account meets
the definition of ‘‘separate account’’
contained in Section 2(a)(37) of the Act.
8. IMSF is an open-end management
investment company that was
incorporated in Maryland in 1997.
Currently, there are nine Portfolios
offered in IMSF, each of which is
involved in the Substitution. IMSF is
registered under the Act as an open-end
management investment company and
its securities are registered under the
1933 Act. Investors Mark Advisor LLC
(‘‘IMA’’) is the investment adviser for
each of the Existing Portfolios. IMA has
hired sub-advisers for each of the
Existing Portfolios. The sub-advisers
are:
Portfolio
Sub-adviser
Intermediate Fixed Income Portfolio ........................................................
Money Market Portfolio ............................................................................
Global Fixed Income Portfolio ..................................................................
Mid Cap Equity Portfolio ...........................................................................
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Standish Mellon Asset Management Company LLC.
Standish Mellon Asset Management Company LLC.
Standish Mellon Asset Management Company LLC.
The Boston Company Asset Management LLC.
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36416
Federal Register / Vol. 70, No. 120 / Thursday, June 23, 2005 / Notices
Portfolio
Sub-adviser
Small Cap Equity Portfolio .......................................................................
Large Cap Growth Portfolio ......................................................................
Large Cap Value Portfolio ........................................................................
Growth & Income Portfolio .......................................................................
Balanced Portfolio ....................................................................................
9. The BMA Separate Accounts invest
in all nine Portfolios of IMSF. The FSL
Account invests in four Portfolios of
IMSF: Money Market Portfolio, Small
Cap Equity Portfolio, Large Cap Growth
Portfolio and Growth & Income
Portfolio.
10. Each of the Replacement
Portfolios is a portfolio of a registered
open-end management investment
company, and their securities are
registered under the 1933 Act. The
Investment Grade Bond Portfolio is a
portfolio of Fidelity Variable Insurance
Products Fund II. The Mid Cap Portfolio
is a portfolio of the Fidelity Variable
Insurance Products Fund III. Money
Market Portfolio is a portfolio of Fidelity
Variable Insurance Products Fund.
Fidelity Management & Research
Company (‘‘FMR’’) serves as the adviser
for each of these Fidelity portfolios. The
Federated Prime Money Fund II is a
portfolio of Federated Insurance Series.
Federated Investment management
Company serves as adviser to the
Federated Prime Money Fund II. T.
Rowe Price Blue Chip Growth Portfolio
and T. Rowe Price Personal Strategy
Balanced Portfolio are portfolios of the
T. Rowe Price Equity Series, Inc. T.
Rowe Price Associates, Inc. serves as the
investment manager for each of these T.
Rowe Price portfolios. Equity Growth
Portfolio is a portfolio of the Universal
Institutional Funds, Inc. Morgan Stanley
Investment Management, Inc. serves as
the adviser for the Equity Growth
Portfolio. The Growth and Income
Portfolio is a portfolio of the Lord
Abbett Series Fund, Inc. Lord, Abbett &
Co., LLC serve as adviser to the Growth
and Income Portfolio. The Emerging
Leaders Portfolio is a portfolio of the
Dreyfus Investment Portfolios. The
Dreyfus Corporation serves as adviser to
the Emerging Leaders Portfolio. None of
the Replacement Portfolios is affiliated
with either of the Insurance Companies.
11. Each of the Contracts permits its
owners to allocate the Contract’s
accumulated value among numerous
available Subaccounts, each of which
invests in a different investment
portfolio of an underlying mutual fund.
Each of the BMA Contracts will have at
least 21 different Subaccounts (and
corresponding portfolios) available for
this purpose. The FSL Contract will
have 17 different Subaccounts (and
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Columbia Management Advisors, Inc.
Columbia Management Advisors, Inc.
Babson Capital Management LLC.
Lord, Abbett & Co. LLC.
Kornitzer Capital Management, Inc.
corresponding portfolios) available for
this purpose.
12. Each Contract permits its owner to
transfer the Contract’s accumulated
value from one Subaccount to another
Subaccount of the issuing Separate
Account at any time, subject to certain
potential restrictions and charges. The
only charges on such transfers are flat
dollar amounts that may be assessed to
help defray the administrative costs of
effecting these transfers. Each of the
Contracts permits up to a specified
number of free transfers in a Contract
year, before any such transfer charge
may be imposed.
13. To the extent that the Contracts
contain restrictions or limitations on an
owner’s right to transfer, such
restrictions and limitations will be
suspended in connection with
substitution-related transfers as
described in further detail elsewhere
herein.
14. BMA or Fidelity Security, as
applicable, reserves the right to make
certain changes, including the right to
substitute, for the shares held in any
Subaccount, the shares of another Fund
or the shares of another underlying
mutual fund, as stated in each
prospectus for the Contracts contained
in the applicable Form N–6 or Form N–
4 registration statement.
15. BMA and Fidelity Security, on
each of its behalf and on behalf of the
Separate Accounts, propose to make
certain substitutions of shares of the
Replacement Portfolio for shares of the
Existing Portfolios held in sub-accounts
of their respective Separate Accounts.
The proposed substitutions are as
follows:
(a) Shares of the Investment Grade
Bond Portfolio (Initial Class) of Fidelity
Variable Insurance Products Fund II for
shares of the Intermediate Fixed Income
Portfolio and Global Fixed Income
Portfolio of IMSF, with respect to the
BMA VA Account and BMA VL
Account only.
(b) Shares of the Mid Cap Portfolio
(Initial Class) of Fidelity Variable
Insurance Products Fund III for shares
of the Mid Cap Equity Portfolio of IMSF,
with respect to the BMA VA Account
and BMA VL Account only.
(c) Shares of the Money Market
Portfolio (Initial Class) of Fidelity
Variable Insurance Products Fund for
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shares of the Money Market Portfolio of
IMSF, with respect to the BMA VA
Account and BMA VL Account only.
(d) Shares of the Federated Prime
Money Fund II of Federated Insurance
Series for shares of the Money Market
Portfolio of IMSF, with respect to the
FSL Account only.
(e) Shares of the T. Rowe Price Blue
Chip Growth Portfolio of T. Rowe Price
Equity Series, Inc. for shares of the
Large Cap Growth Portfolio of IMSF,
with respect to the BMA VA Account
and BMA VL Account only.
(f) Shares of the Equity Growth
Portfolio (Class I) of The Universal
Institutional Funds, Inc. for shares of
the Large Cap Growth Portfolio of IMSF,
with respect to the FSL Account only.
(g) Shares of the T. Rowe Price
Personal Strategy Balanced Portfolio of
T. Rowe Price Equity Series, Inc. for
shares of the Balanced Portfolio of
IMSF, with respect to the BMA VA
Account and BMA VL Account only.
(h) Shares of the Growth and Income
Portfolio (Class VC Shares) of Lord
Abbett Series Fund, Inc. for shares of
the Growth & Income Portfolio and,
with respect to the BMA VA Account
and BMA VL Account only, the Large
Cap Value Portfolio of IMSF.
(i) Shares of the Emerging Leaders
Portfolio (Initial Class) of Dreyfus
Investment Portfolios for shares of the
Small Cap Equity Portfolio of IMSF.
16. The substitutions are expected to
provide significant benefits to Contract
owners, including improved selection of
portfolio managers. The Applicants
believe that the advisers and
subadvisers of the Replacement
Portfolios overall are better positioned
to provide consistent above-average
performance for their funds than are the
adviser and sub-advisers of the Existing
Portfolios. 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.
17. Applicants believe that the
Replacement Portfolios have investment
objectives, policies, and risk profiles
that are substantially the same as, or
sufficiently similar to, the
corresponding Existing Portfolios to
make those Replacement Portfolios
appropriate candidates as substitutes.
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Federal Register / Vol. 70, No. 120 / Thursday, June 23, 2005 / Notices
Set forth below is a description of the
investment objectives and principal
investment policies of each Existing
36417
Portfolio and its corresponding
Replacement Portfolio.
Existing Portfolio
Replacement Portfolio
IMSF Intermediate Fixed Income Portfolio—primarily seeks to
achieve a high level of current income consistent with preserving
capital and liquidity. Secondarily, the Portfolio seeks capital appreciation when changes in interest rates or other economic conditions indicate that capital appreciation may be available without significant risk
to principal. During normal market conditions, the Portfolio will invest
at least 80% of its total net assets in investment grade fixed income
securities. The Portfolio may invest up to 20% of its total net assets
in fixed income securities of foreign corporations and foreign governments and their political subdivisions, including securities of issuers
located in emerging markets. No more than 10% of the Portfolio’s
total net assets will be invested in foreign securities not subject to
currency hedging transactions back into U.S. dollars. The Portfolio
may invest up to 20% of its total net assets in below-investment
grade securities (junk bonds).
Fidelity VIP II Investment Grade Bond Portfolio (BMA Substitution
only)—seeks as high a level of current income as is consistent with
the preservation of capital. The Portfolio normally invests at least
80% of its assets in investment-grade debt securities (those of medium and high quality) of all types and repurchase agreements for
those securities. The Portfolio may invest up to 10% of the Portfolio’s assets in lower-quality (those of less than investment-grade
quality) debt securities. The Portfolio is managed to have similar
overall interest rate risk to an index, which, as of December 31,
2004, was the Lehman Brothers Aggregate Bond Index. The Portfolio’s assets are allocated across different market sectors and maturities.
IMSF Mid Cap Equity Portfolio—seeks to achieve long-term growth of
capital through investment primarily in equity and equity-related securities of companies which appear to be undervalued. The Portfolio invests primarily in equity securities of mid capitalization companies.
Under normal conditions, the Portfolio will invest at least 80% of its
assets in securities issued by mid capitalization companies, which
are those companies whose equity market capitalizations at the time
of investment are similar to the market capitalizations of companies
in the Standard & Poor’s MidCap 400 Index (‘‘S&P MidCap 400
Index’’).
Fidelity VIP III Mid Cap Portfolio (BMA Substitution only)—seeks
long-term growth of capital. The Portfolio normally invests primarily
in common stocks. The Portfolio will normally invest at least 80% of
its assets in securities of companies with medium market capitalizations (which, for purposes of this Portfolio, are those companies with
market capitalizations similar to companies in the Russell Midcap
Index or the S&P MidCap 400 Index. The Portfolio may invest in
domestic and foreign issuers; in either ‘‘growth’’ or ‘‘value’’ stocks;
and in companies with smaller or larger market capitalizations.
IMSF Global Fixed Income Portfolio—seeks maximum total return
while realizing a market level of income consistent with preserving
capital and liquidity. During normal market conditions, the Portfolio
will invest at least 80% of its total net assets in fixed income securities of foreign governments or their political subdivisions and companies located in at least three countries around the world, including
the United States. Usually the Portfolio will invest in no fewer than
eight foreign countries. The Portfolio invests primarily in investment
grade fixed income securities or those determined by the sub-adviser
to be of comparable quality, but it may invest up to 15% of its total
net assets in below-investment grade securities (junk bonds).
Fidelity VIP II Investment Grade Bond Portfolio (BMA Substitution
only)—seeks as high a level of current income as is consistent with
the preservation of capital. The Portfolio normally invests at least
80% of its assets in investment-grade debt securities (those of medium and high quality) of all types and repurchase agreements for
those securities. The Portfolio may invest up to 10% of the Portfolio’s assets in lower-quality (those of less than investment-grade
quality) debt securities. The Portfolio is managed to have similar
overall interest rate risk to an index, which, as of December 31,
2004, was the Lehman Brothers Aggregate Bond Index. The Portfolio’s assets are allocated across different market sectors and maturities.
IMSF Money Market Portfolio—seeks to obtain the highest level of
current income which is consistent with the preservation of capital
and maintenance of liquidity. The Portfolio invests in obligations of
the U.S. Government and its agencies and instrumentalities. The
Portfolio may also invest in other obligations and instruments common to money market funds.
Fidelity VIP Money Market Portfolio (BMA Substitution only)—
seeks as high a level of current income as is consistent with preservation of capital and liquidity. The Portfolio invests in U.S. dollar-denominated money market securities of domestic and foreign issuers
and repurchase agreements. The Portfolio may invest more than
25% of its total assets in the financial services industries and may
enter into reverse repurchase agreements.
IMSF Money Market Portfolio—seeks to obtain the highest level of
current income which is consistent with the preservation of capital
and maintenance of liquidity. The Portfolio invests in obligations of
the U.S. Government and its agencies and instrumentalities. The
Portfolio may also invest in other obligations and instruments common to money market funds.
Federated Prime Money Fund II (Fidelity Security Substitution
only)—seeks to maintain a stable net asset value of $1.00 per
share. The Fund’s investment objective is to provide current income
consistent with stability of principal and liquidity. The Fund invests
primarily in a portfolio of short-term, high-quality fixed income securities issued by banks, corporations and the U.S. Government.
IMSF Large Cap Growth Portfolio—seeks long-term capital appreciation. During normal market conditions, the Portfolio will invest at least
80% of its total net assets in common stocks and other equity-type
securities of companies exceeding $10 billion in market capitalization
at the time of purchase. The sub-adviser will focus on companies
that it believes have long-term appreciation possibilities. The Portfolio
may invest in investment grade debt securities of corporate and government issuers. The Portfolio also may invest up to 25% of its total
net assets in foreign securities. The Portfolio may invest in options,
futures contracts and futures options.
T. Rowe Price Blue Chip Growth Portfolio (BMA Substitution
only)—seeks to provide long-term capital growth. Income is a secondary objective. The Portfolio will normally invest at least 80% of its
net assets in the common stocks of large and medium-sized blue
chip growth companies, which in the adviser’s view, are well established in their industries and have the potential for above-average
earnings growth. The average market capitalization of the companies in which the Portfolio was invested as of December 31, 2004
was approximately $83 billion. As of that same date, approximately
7.1% of the Portfolio was invested in companies with a market capitalization of less than $10 billion. The Portfolio may also invest in
foreign stocks, futures and options.
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36418
Federal Register / Vol. 70, No. 120 / Thursday, June 23, 2005 / Notices
Existing Portfolio
Replacement Portfolio
IMSF Large Cap Growth Portfolio—seeks long-term capital appreciation. During normal market conditions, the Portfolio will invest at least
80% of its total net assets in common stocks and other equity-type
securities of companies exceeding $10 billion in market capitalization
at the time of purchase. The sub-adviser will focus on companies
that it believes have long-term appreciation possibilities. The Portfolio
may invest in investment grade debt securities of corporate and government issuers. The Portfolio also may invest up to 25% of its total
net assets in foreign securities. The Portfolio may invest in options,
futures contracts and futures options.
Equity Growth Portfolio of The Universal Institutional Funds, Inc.
(Fidelity Security Substitution only)—seeks long-term capital appreciation by investing primarily in growth-oriented equity securities
of large capitalization companies. The Portfolio invests primarily in
growth-oriented equity securities of U.S. and, to a limited extent, foreign companies that are listed on U.S. exchanges or traded in U.S.
markets. Under normal circumstances, at least 80% of the Portfolio’s
assets will be invested in equity securities. The Portfolio invests primarily in companies with market capitalizations of generally $10 billion or more that the adviser believes exhibit, among other things,
strong free cash flow and compelling business strategies.
IMSF Balanced Portfolio—seeks long-term capital growth and high
current income. The Portfolio seeks to achieve long-term capital
growth primarily by investment in common stocks and secondarily by
investment in convertible bonds and convertible preferred stocks. The
sub-adviser seeks to achieve high current income by investing in:
Corporate bonds; government bonds; mortgage-backed securities;
convertible bonds; preferred stocks; and/or convertible preferred
stocks. The Portfolio may invest up to 75% of its total net assets in
corporate bonds; convertible bonds; preferred stocks; and/or convertible preferred stocks. The Portfolio may invest in below-investment
grade debt securities (junk bonds).
T. Rowe Price Personal Strategy Balanced Portfolio (BMA Substitution only)—seeks the highest total return over time consistent
with an emphasis on both capital appreciation and income. The Portfolio pursues its objective by investing in a diversified portfolio typically consisting of approximately 60% stocks, 30% bonds, and 10%
money market securities. Under normal conditions, allocations for
the Portfolio can vary by 10% above or below these ranges, based
on the adviser’s outlook for the economy and the financial markets.
The Portfolio will invest at least 25% of its total assets in senior
fixed-income securities. The Portfolio may invest in below-investment grade debt securities (junk bonds) and in other securities, including futures, options and swaps.
IMSF Growth & Income Portfolio—seeks to provide long-term growth
of capital and income without excessive fluctuation in market value.
The Portfolio intends to keep its assets invested in those securities
which are selling at reasonable prices in relation to value. During normal market conditions, the Portfolio will invest in common stocks (including securities convertible into common stocks) of large, U.S. and
multinational companies that the sub-adviser believes are undervalued. A large company is a company having a market capitalization
at the time of purchase that falls within the market capitalization
range of companies in the Russell 1000 Index (which at 1/31/05 was
$471 million–$382 billion).
Lord Abbett Growth and Income Portfolio (BMA and Fidelity Security Substitutions)—seeks long-term growth of capital and income
without excessive fluctuations in market value. The Portfolio primarily purchases equity securities of large, seasoned U.S. and multinational companies that the adviser believes are undervalued. Under
normal circumstances, the Portfolio will invest at least 80% of its net
assets in equity securities of large companies. Large companies are
companies with a market capitalization at the time of purchase that
falls within the market capitalization range of companies in the Russell 1000 Index ($471 million to $382 billion as of 1/31/05).
IMSF Large Cap Value Portfolio—seeks long-term growth of capital
and income by investing principally in a diversified portfolio of common stocks which are considered to be undervalued in relation to
earnings, dividends and/or assets. The Portfolio invests, under normal circumstances, at least 90% of its net assets, plus any borrowings for investment purposes, in common stocks that are considered to be undervalued in relation to earnings, dividends and/or assets.
Lord Abbett Growth and Income Portfolio (BMA Substitution
only)—seeks long-term growth of capital and income without excessive fluctuations in market value. The Portfolio primarily purchases
equity securities of large, seasoned U.S. and multinational companies that the adviser believes are undervalued. Under normal circumstances, the Portfolio will invest at least 80% of its net assets in
equity securities of large companies. Large companies are companies with a market capitalization at the time of purchase that falls
within the market capitalization range of companies in the Russell
1000 Index.
IMSF Small Cap Equity Portfolio—seeks long-term capital appreciation. During normal market conditions, the Portfolio will invest at least
80% of its total net assets in a diversified portfolio of common stocks
and equity-type securities of companies with market capitalization, at
the time of purchase, equal to or less than the capitalization of the
largest stock in the Standard & Poor’s Small Cap 600 Index. The
Portfolio may invest up to 20% of its total net assets in debt securities of corporate and governmental issuers, primarily investment
grade. The Portfolio may also invest up to 25% of its total net assets
in foreign securities, and the Portfolio may invest in options, futures
contracts and futures options.
Dreyfus Emerging Leaders Portfolio (BMA and Fidelity Security
Substitutions)—seeks capital growth. To pursue this goal, the Portfolio normally invests at least 80% of its assets in stocks of companies that the adviser believes to be emerging leaders. Based on current market conditions, the Portfolio primarily invests in companies
with market capitalizations of less than $2 billion at the time of purchase. The Portfolio may invest up to 25% of its assets in foreign
securities. The Portfolio’s investments may include common stocks,
preferred stocks and convertible securities, including those issued in
initial public offerings (IPOs) or shortly thereafter. The Portfolio may,
but is not required to, use derivatives, such as futures and options,
as a substitute for taking a position in an underlying asset, to increase returns or as part of a hedging strategy. The Portfolio also
may engage in short-selling, typically for hedging purposes, such as
to limit exposure to a possible market decline in the value of its portfolio securities. However, short sales in the Portfolio are extremely
rare. Since the Portfolio’s inception, the Portfolio managers have engaged in very few short sales, and there is no intent to increase the
use of short sales in the future.
18. Contract owners with sub-account
balances invested in shares of the
Replacement Portfolios will, in most
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cases, based on current expenses, have
lower total expense ratios than they
currently have in the Existing Portfolios.
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of the Replacement Portfolios are
currently higher than those of the
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Existing Portfolios, this is not expected
to remain so. IMA and its affiliates have
been heavily subsidizing each of the
Existing Portfolios since their inception
in 1997 through an expense
reimbursement arrangement. None of
the Existing Portfolios has ever been out
of the expense reimbursement mode. As
disclosed in a supplement to each
Insurance Company’s product
prospectuses, the adviser’s current
contractual obligation to reimburse the
Existing Portfolios’ expenses expired on
May 1, 2005. As further disclosed in the
supplement, IMA subsequently agreed
to voluntarily continue the
reimbursement arrangement until July 1,
2005. IMA has now determined that,
effective July 1, 2005, it is discontinuing
the expense reimbursement of the IMSF
Money Market, Large Cap Growth and
Small Cap Equity Portfolios. IMA may
determine to voluntarily continue
subsidizing the expenses of the other
Portfolios after July 1, 2005.
36419
19. The following tables compare the
total operating expenses of the Existing
Portfolio and the Replacement Portfolio
for each proposed substitution. The
comparative fund expenses are
generally based on actual expenses,
including waivers, for the year ended
December 31, 2004. For the IMSF
Money Market, Large Cap Growth and
Small Cap Equity Portfolios, expenses
have been restated to reflect the
expenses of those funds without the
waivers.
Existing portfolio: IMSF
Intermediate Fixed Income Portfolio
(percent)
Replacement portfolio:
Fidelity VIP II Investment Grade Bond Portfolio
(Initial class)
(percent)
Management Fee .....................................................................................................................
12b–1 Fee ................................................................................................................................
Other Expenses .......................................................................................................................
0.60
None
2.16
0.43
None
0.13
Total Expenses .................................................................................................................
Waivers ....................................................................................................................................
2.76
*1.96
0.56
**0
Net Expenses ...................................................................................................................
0.80
0.56
* The adviser has voluntarily agreed to reimburse certain expenses of the Portfolio until July 1, 2005 so that the annual expenses do not exceed 0.80%.
** Effective February 1, 2005, the adviser has voluntarily agreed to reimburse the Initial Class to the extent that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions, and extraordinary expenses), as a percentage of the Initial
Class’ average net assets, exceed 0.58%.
Existing portfolio: IMSF
Mid Cap Equity Portfolio
(percent)
Replacement portfolio
Fidelity VIP III Mid Cap
Portfolio
(Initial class)
(percent)
Management Fee .....................................................................................................................
12b–1 Fee ................................................................................................................................
Other Expenses .......................................................................................................................
0.80
None
1.93
0.57
None
0.14
Total Expenses .................................................................................................................
Waivers ....................................................................................................................................
2.73
*1.83
0.71
**0
Net Expenses ...................................................................................................................
0.90
0.71
*The adviser has voluntarily agreed to reimburse certain expenses of the Portfolio until July 1, 2005 so that the annual expenses do not exceed 0.90%.
** Effective February 1, 2005, the adviser has voluntarily agreed to reimburse the Initial Class to the extent that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions, and extraordinary expenses), as a percentage of the Initial
Class’ average net assets, exceed 0.85%.
Existing portfolio: IMSF
Global Fixed Income
Portfolio
(percent)
Replacement portfolio:
Fidelity VIP II Investment Grade Bond Portfolio
(Initial class)
(percent)
Management Fee .....................................................................................................................
12b–1 Fee ................................................................................................................................
Other Expenses .......................................................................................................................
0.75
None
1.85
0.43
None
0.13
Total Expenses .................................................................................................................
Waivers ....................................................................................................................................
2.60
* 1.60
0.56
** 0
Net Expenses ...................................................................................................................
1.00
0.56
* The
adviser has voluntarily agreed to reimburse certain expenses of the Portfolio until July 1, 2005 so that the annual expenses do not exceed 1.00%.
** Effective February 1, 2005, the adviser has voluntarily agreed to reimburse the Initial Class to the extent that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions, and extraordinary expenses), as a percentage of the Initial
Class’ average net assets, exceed 0.58%.
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36420
Federal Register / Vol. 70, No. 120 / Thursday, June 23, 2005 / Notices
Existing portfolio: IMSF
Money Market Portfolio
(percent)
Replacement portfolio:
Fidelity VIP Money Market Portfolio
(Initial class)
(percent)
Management Fee .....................................................................................................................
12b–1 Fee ................................................................................................................................
0.40
None
0.20
None
Other Expenses .......................................................................................................................
Total Expenses .................................................................................................................
Waivers ....................................................................................................................................
3.07
3.47
0*
0.09
0.29
0
Net Expenses ...................................................................................................................
3.47
**0.29
* Effective July 1, 2005 an expense reimbursement arrangement currently in effect will terminate.
** Effective February 1, 2005, the adviser has voluntarily agreed to reimburse the Initial Class to the extent that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions, and extraordinary expenses), as a percentage of the Initial
Class’ average net assets, exceed 0.40%.
Existing portfolio: IMSF
Money Market portfolio
(percent)
Replacement portfolio:
Federated Prime Money
Fund II
(percent)
Management Fee .....................................................................................................................
12b–1 Fee ................................................................................................................................
Shareholder Services Fee .......................................................................................................
Other Expenses .......................................................................................................................
0.40
None
None
3.07
** 0.50
None
*** 0.25
**** 0.30
Total Expenses .................................................................................................................
Waivers ....................................................................................................................................
3.47
*0
1.05
0.40
Net Expenses ...................................................................................................................
3.47
0.65
* Effective July 1, 2005 an expense reimbursement arrangement currently in effect will terminate.
** The adviser has voluntarily waived a portion of the management fee. The adviser can terminate this voluntary waiver at any time. The management fee paid by the Fund (after the voluntary waiver) was 0.38% for the fiscal year ended December 31, 2004.
*** The Fund did not pay or accrue the shareholder services fee during the fiscal year ended December 31, 2004. The Fund has no present intention of paying or accruing the shareholder services fee during the fiscal year ending December 31, 2005.
**** The administrator voluntarily waived a portion of its fee. The administrator can terminate this voluntary waiver at any time. Total other expenses paid by the Fund (after the voluntary waiver) were 0.27% for the fiscal year ended December 31, 2004.
Existing portfolio: IMSF
Large Cap Growth Portfolio
(percent)
Replacement portfolio:
T. Rowe Price Blue Chip
Growth Portfolio
(percent)
Management Fee .....................................................................................................................
12b–1 Fee ................................................................................................................................
Other Expenses .......................................................................................................................
0.80
None
2.01
0.85
None
0
Total Expenses .................................................................................................................
Waivers ....................................................................................................................................
2.81
*0
0.85
0
Net Expenses ...................................................................................................................
2.81
0.85
* Effective July 1, 2005 an expense reimbursement arrangement currently in effect will terminate.
Existing portfolio: IMSF
Large Cap Growth Portfolio
(percent)
Replacement portfolio:
Equity Growth Portfolio
(Class I)
(percent)
Management Fee .....................................................................................................................
12b–1 Fee ................................................................................................................................
Other Expenses .......................................................................................................................
0.80
None
2.01
0.50
None
0.35
Total Expenses .................................................................................................................
Waivers ....................................................................................................................................
2.81
*0
0.85
**
Net Expenses ...................................................................................................................
2.81
0.85
* Effective July 1, 2005 an expense reimbursement arrangement currently in effect will terminate.
** The adviser has voluntarily agreed to reduce its advisory fee and/or reimburse the fund so that total annual operating expenses, excluding
certain investment related expenses, will not exceed 0.85%.
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36421
Existing Portfolio: IMSF
Balanced Portfolio
(percent)
Replacement Portfolio:
T. Rowe Price Personal
Strategy Balaned Portfolio
(percent)
Management Fee .....................................................................................................................
12b–1 Fee ................................................................................................................................
Other Expenses .......................................................................................................................
0.80
None
1.78
0.90
None
0
Total Expenses .................................................................................................................
Waivers ....................................................................................................................................
2.58
* 1.68
0.90
........................................
Net Expenses ...................................................................................................................
0.90
** 0.90
* The adviser has voluntarily agreed to reimburse certain expenses of the fund until July 1, 2005 so that the annual expenses do not exceed
0.90%.
** Actual expenses paid were 0.87% due to a credit received from investing in the T. Rowe Price Institutional High Yield Fund.
Existing Portfolio: IMSF
Growth & Income Portfolio
(percent)
Replacement Portfolio:
Lord Abbett Growth and
Income Portfolio (Class
VC shares)
(percent)
Management Fee .....................................................................................................................
12b–1 Fee ................................................................................................................................
Other Expenses .......................................................................................................................
0.80
None
1.46
0.50
None
0.39
Total Expenses .................................................................................................................
Waivers ....................................................................................................................................
2.26
* 1.36
0.89
0
Net Expenses ...................................................................................................................
0.90
0.89
* The adviser has voluntarily agreed to reimburse certain expenses of the Portfolio until July 1, 2005 so that the annual expenses do not exceed 0.90%.
Existing Portfolio: IMSF
Large Cap Value Portfolio
(percent)
Replacement Portfolio:
Lord Abbett Growth and
Income Portfolio (Class
VC shares)
(percent)
Management Fee .....................................................................................................................
12b–1 Fee ................................................................................................................................
Other Expenses .......................................................................................................................
0.80
None
2.04
0.50
None
0.39
Total Expenses .................................................................................................................
Waivers ....................................................................................................................................
2.84
*1.94
0.89
0
Net Expenses ...................................................................................................................
0.90
0.89
* The adviser has contractually agreed to reimburse certain expenses of the Portfolio until July 1, 2005 so that the annual expenses do not
exceed 0.90%.
Existing Portfolio: IMSF
Small Cap Equity Portfolio
(percent)
Replacement Portfolio:
Dreyfus Emerging Leaders Portfolio (Initial
class)
(percent)
Management Fee .....................................................................................................................
12b–1 Fee ................................................................................................................................
Other Expenses .......................................................................................................................
0.95
None
2.16
0.90
None
0.23
Total Expenses .................................................................................................................
Waivers ....................................................................................................................................
3.11
*0
1.13
**.04
Net Expenses ...................................................................................................................
3.11
1.09
* Effective July 1, 2005 an expense reimbursement arrangement currently in effect will terminate.
** The adviser’s parent has agreed, until December 31, 2005, to waive receipt of its fees and/or assume the expenses of the Portfolio so that
the expenses of the Class (excluding taxes, brokerage commissions, extraordinary expenses, interest expenses and commitment fees on borrowings) do not exceed 1.50%.
20. The T. Rowe Price Blue Chip
Growth Portfolio and the T. Rowe Price
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Personal Strategy Balanced Portfolio
each has higher management fees than
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its corresponding Existing Portfolio
(higher by .05% and .10%,
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36422
Federal Register / Vol. 70, No. 120 / Thursday, June 23, 2005 / Notices
respectively). However, each of the two
T. Rowe Price Portfolios has a ‘‘unified’’
management fee which requires that
many of the fund expenses be paid by
the adviser out of its fee rather than be
charged directly to the fund. Thus,
under the unified fee arrangement, the
overall expenses of the two T. Rowe
Price Portfolios are largely reflected by
each Portfolio’s management fee.
Specifically, each T. Rowe Price
Portfolio’s management fee pays for
investment management services and
ordinary, recurring operating expenses,
but does not cover interest, taxes,
brokerage, nonrecurring and
extraordinary items or fees and
expenses for the fund’s independent
directors. The investment adviser of the
T. Rowe Price Portfolios has represented
to Applicants that the ordinary,
recurring operating expenses covered by
the management fee of the T. Rowe
Price Blue Chip Growth and T. Rowe
Price Personal Strategy Balanced
Portfolios have exceeded .05% and
0.10%, respectively, for each of the past
three years. Effectively, therefore, this
makes the management fees of each of
the two T. Rowe Price Portfolios lower
than the management fees of each of
their corresponding Existing Portfolios.
21. The Federated Prime Money Fund
II also has a higher management fee than
its corresponding Existing Portfolio
(higher by .10%) as well as higher
overall current total expenses. However,
effective July 1, 2005, the expense
reimbursement arrangement for the
Existing Portfolio will be discontinued.
When that occurs, the expenses of the
IMSF Money Market Portfolio will
increase significantly. In fact, the total
expenses of the IMSF Money Market
Portfolio are anticipated to be more than
double those of the Federated Prime
Money Fund II when the waiver with
respect to the IMSF Money Market
Portfolio is discontinued.
22. In summary, with respect to Fund
expenses, given the anticipated
discontinuation of the expense
reimbursement arrangement for the
Existing Portfolios, there will be a
dramatic increase in each Existing
Portfolio’s total expenses resulting in a
significant increase in overall expenses
to the Contract owners. Without the
expense reimbursement arrangement in
place for the Existing Portfolios, the
total expenses of each Existing Portfolio
are substantially higher in all cases than
those of the corresponding Replacement
Portfolios, even without taking into
account any fee waiver/expense
reimbursement arrangements of the
Replacement Portfolios.
23. The Insurance Companies also
considered the performance history of
the Existing Portfolios and the
Replacement Portfolios and determined
that no Contract owners would be
materially adversely affected as a result
of the substitutions. The following
tables compare the performance history
of the Existing Portfolio and the
Replacement Portfolio for each
proposed substitution.
Existing portfolio: IMSF
Intermediate Fixed Income Portfolio
Average annual total returns
(For years or periods ended December 31, 2004)
One Year .................................................................................................................................
Five Years ................................................................................................................................
Ten Years ................................................................................................................................
Life of Fund ..............................................................................................................................
Fund Inception Date ................................................................................................................
4.50
6.98
N/A
5.75
11/13/97
Existing portfolio: IMSF
Mid Cap Equity
(percent)
Average annual total returns
(For years or periods ended December 31, 2004)
One Year .................................................................................................................................
Five Years ................................................................................................................................
Life of Fund ..............................................................................................................................
Fund Inception Date ................................................................................................................
16.94
11.11
9.80
11/13/97
Existing portfolio: IMSF
Global Fixed Income
Portfolio
Average annual total returns
(For years or periods ended December 31, 2004)
One Year .................................................................................................................................
Five Years ................................................................................................................................
Ten Years ................................................................................................................................
Life of Fund ..............................................................................................................................
Fund Inception Date ................................................................................................................
Average annual total returns
(For years or periods ended December 31, 2004)
3.71
5.86
N/A
5.31
11/13/97
Existing portfolio: IMSF
Money Market Portfolio
One Year .................................................................................................................................
Five Years ................................................................................................................................
Ten Years ................................................................................................................................
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0.85
2.50
N/A
23JNN1
Replacement portfolio:
Fidelity VIP II Investment Grade Bond Portfolio
(Initial class)
(percent)
4.46
7.90
7.60
Replacement portfolio:
Fidelity VIP III Mid Cap
Portfolio
(Initial class)
(percent)
24.92
15.11
20.74
12/28/98
Replacement portfolio:
Fidelity VIP II Investment Grade Bond Portfolio
(Initial class)
(percent)
4.46
7.90
7.60
........................................
........................................
Replacement portfolio:
Fidelity VIP Money Market Portfolio
(Initial class)
(percent)
1.21
2.86
4.16
36423
Federal Register / Vol. 70, No. 120 / Thursday, June 23, 2005 / Notices
Average annual total returns
(For years or periods ended December 31, 2004)
Existing portfolio: IMSF
Money Market Portfolio
Life of Fund ..............................................................................................................................
Fund Inception Date ................................................................................................................
Average annual total returns
(For years or periods ended December 31, 2004)
3.20
11/13/97
Existing portfolio: IMSF
Money Market Portfolio
One Year .................................................................................................................................
Five Years ................................................................................................................................
Ten Years ................................................................................................................................
Life of Fund ..............................................................................................................................
Fund Inception Date ................................................................................................................
0.82
2.50
3.69
Replacement portfolio:
T. Rowe Price Blue Chip
Growth Portfolio
(percent)
¥1.96
¥10.00
0.89
11/13/97
8.69%
N/A
¥2.12
12/29/00
Existing portfolio: IMSF
Large Cap Growth Portfolio
(percent)
Average annual total returns
(For years or periods ended December 31, 2004)
Average annual total returns
(For years or periods ended December 31, 2004)
Existing
portfolio:
IMSF Balanced
Portfolio
One Year .................................................................................................................
Five Years ...............................................................................................................
Ten Years ................................................................................................................
Life of Fund .............................................................................................................
Fund Inception Date ................................................................................................
Replacement
portfolio; T.
Rowe Price
Personal Strategy Balanced
Portfolio
(percent)
20.30% ...
9.80% .....
N/A .........
7.05%.
11/13/97.
12.80
5.95
11.12
One Year .................................................................................................................................
Five Years ................................................................................................................................
Ten Years ................................................................................................................................
Life of Fund ..............................................................................................................................
Fund Inception Date ................................................................................................................
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12.60%
5.58%
N/A
8.49%
11/13/97
23JNN1
7.77
¥6.16
6.14
1/2/97
Custom
Benchmark
(percent)
Existing portfolio: IMSF
Growth & Income Portfolio
Average annual total returns
(For years or periods ended December 31, 2004)
Replacement portfolio:
Equity Growth Portfolio
(Class I)
(percent)
¥1.96
¥10.00
0.89
11/13/97
One Year .................................................................................................................................
Five Years ................................................................................................................................
Life of Fund ..............................................................................................................................
Fund Inception Date ................................................................................................................
Jkt 205001
Replacement portfolio:
Federated Prime Money
Fund II
(percent)
0.85%
2.50%
N/A
3.20%
11/13/97
One Year .................................................................................................................................
Five Years ................................................................................................................................
Life of Fund ..............................................................................................................................
Fund Inception Date ................................................................................................................
18:40 Jun 22, 2005
........................................
........................................
Existing portfolio: IMSF
Large Cap Growth Portfolio
(percent)
Average annual total returns
(For years or periods ended December 31, 2004)
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Replacement portfolio:
Fidelity VIP Money Market Portfolio
(Initial class)
(percent)
9.70
2.12
9.67
Merrill LynchWilshire Capital Market
Index
(percent)
9.54
1.23
10.11
Replacement portfolio:
Lord Abbett Growth and
Income Portfolio
(Class VC shares)
(percent)
12.65
5.49
12.77
36424
Federal Register / Vol. 70, No. 120 / Thursday, June 23, 2005 / Notices
Average annual total returns
(For years or periods ended December 31, 2004)
Existing portfolio: IMSF
Large Cap
Value Portfolio
One Year ........................................................................................................................................
Five Years ......................................................................................................................................
Ten Years .......................................................................................................................................
Life of Fund ....................................................................................................................................
Fund Inception Date .......................................................................................................................
Replacement
portfolio: Lord
Abbett Growth
and Income
Portfolio
(Class VC
shares)
(percent)
15.77% ........
6.25% ..........
N/A ..............
4.75%.
11/13/97.
Existing portfolio: IMSF
Small Cap Equity Portfolio
(percent)
Average annual total returns
(For years or periods ended December 31, 2004)
One Year .................................................................................................................................
Five Years ................................................................................................................................
Life of Fund ..............................................................................................................................
Fund Inception Date ................................................................................................................
24. Applicants acknowledge with
respect to the IMSF Balanced
Portfolio—T. Rowe Price Personal
Strategy Balanced Portfolio substitution,
that the IMSF Balanced Portfolio has
had one-year and five-year average
annual total returns exceeding those of
the T. Rowe Price Personal Strategy
Balanced Portfolio. The Applicants
believe, however, that the substitution is
appropriate and in the best interests of
Contract owners even given the superior
performance of the IMSF Balanced
Portfolio. The IMSF Balanced Portfolio
has not attracted sufficient assets to
make it a viable fund. The IMSF
Balanced Portfolio’s operating expenses
have been heavily subsidized by IMA
and its affiliates since inception. As
discussed elsewhere in the Application,
IMA anticipates discontinuing the
reimbursement arrangement with
respect to the IMSF Balanced Portfolio
in the near future, possibly as early as
July 1, 2005. Once the expense
reimbursement arrangement is
discontinued, the Portfolio’s annual
operating expenses will more than
double which will result in a substantial
decrease in performance. Further, the
Replacement Portfolio has significantly
outperformed its benchmarks over each
of the one year, five year and ten year
periods ended December 31, 2004.
25. Applicants acknowledge with
respect to the IMSF Large Cap Value
Portfolio—Lord Abbett Growth and
Income Portfolio substitution, that the
IMSF Large Cap Value Portfolio has had
one-year and five-year average annual
total returns exceeding those of the Lord
Abbett Growth and Income Portfolio.
The Applicants believe, however, that
the substitution is appropriate and in
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Jkt 205001
the best interests of Contract owners
even given the superior performance of
the IMSF Large Cap Value Portfolio. The
IMSF Large Cap Value Portfolio has not
attracted sufficient assets to make it a
viable fund. The operating expenses of
the IMSF Large Cap Value Portfolio
have been heavily subsidized by IMA
and its affiliates since inception. As
discussed elsewhere in this Application,
IMA anticipates discontinuing the
expense reimbursement arrangement
with respect to the IMSF Large Cap
Value Portfolio in the near future,
possibly as early as July 1, 2005. Once
the expense reimbursement arrangement
is discontinued, the Portfolio’s annual
operating expenses will more than triple
which will result in a substantial
decrease in performance. Further, the
Replacement Portfolio has outperformed
the S&P 500 Index, one of its
benchmarks, over each of the one year,
five year and ten year periods ended
December 31, 2004.
26. Finally, in all cases, the assets of
the Replacement Portfolios are
substantially larger than those of the
Existing Portfolios. It would be
anticipated, therefore, that expenses of
the Replacement Portfolios would have
a greater likelihood going forward to be
lower than those of the Existing
Portfolios due to greater economies of
scale and efficiencies of operation of the
Replacement Portfolios. In addition, the
Existing Portfolios have failed to attract
sufficient assets to make them viable
going forward, particularly in light of
the anticipated discontinuation of the
expense reimbursement arrangement.
The Board of Directors of IMSF, in light
of the above, has expressed its view that
the Existing Portfolios should be
PO 00000
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Fmt 4703
Sfmt 4703
10.86
1.06
4.75
11/13/97
12.65
5.49
12.77
S&P 500
Index
(percent)
10.85
¥2.30
12.07
Replacement portfolio:
Dreyfus Emerging Leaders Portfolio
(Initial Shares)
(percent)
14.42
14.15
15.65
12/15/99
liquidated as soon as possible by way of
the proposed substitutions.
27. The proposed substitutions will
take place at relative net asset value
with no change in the amount of any
Contract owner’s Contract value,
accumulation value, or death benefit or
in the dollar value of his or her
investment in the Separate Accounts.
28. It is expected that the
substitutions will be effected by
redeeming shares of an Existing
Portfolio for cash and using the cash to
purchase shares of the Replacement
Portfolio.
29. There will be no increase in
Contract fees and expenses, including
mortality and expense risk fees and
administration fees charged to the
Separate Accounts as a result of the
substitutions. 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 IMA
or an affiliate thereof. 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
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23JNN1
Federal Register / Vol. 70, No. 120 / Thursday, June 23, 2005 / Notices
for determining the number of
remaining permissible transfers in a
Contract year.
30. The Applicants agree that the
Insurance Companies will not increase
total separate account charges with
respect to the Replacement Portfolio
sub-accounts for any outstanding
Contracts involved in the proposed
substitution on the date of the
substitutions for a period of two years
from the date of the substitutions.
31. In connection with assets held
under variable annuity and variable life
insurance contracts affected by the
substitutions, BMA will not receive, for
three years from the date of the
substitutions, any direct or indirect
benefits from the Replacement
Portfolios, their advisors, or
underwriters (or their affiliates) at a rate
higher than that which BMA or IMA,
IMSF’s adviser and an affiliate of BMA,
had received from the IMSF Portfolios
or their advisors, underwriters or
affiliates, including without limitation,
12b–1, shareholder service, advisory,
administration or other service fees,
revenue sharing or other arrangements
in connection with such assets. BMA
represents that the substitutions and the
selection of Replacement Portfolios
were not motivated by any financial
consideration paid or to be paid by the
Replacement Portfolios, their advisors
or underwriters, or their respective
affiliates.
32. In connection with assets held
under variable annuity contracts
affected by the substitutions, Fidelity
Security will not receive, for three years
from the date of the substitutions, any
direct or indirect benefits from the
Replacement Portfolios, their advisors,
or underwriters (or their affiliates) at a
rate higher than that which Fidelity
Security had received from the IMSF
Portfolios, their advisors or
underwriters (or their affiliates),
including without limitation, 12b–1,
shareholder service, administration or
other service fees, revenue sharing or
other arrangements in connection with
such assets. Fidelity Security represents
that the substitutions and the selection
of the Replacement Portfolios were not
motivated by any financial
consideration paid or to be paid by the
Replacement Portfolios, their advisors
or underwriters, or their respective
affiliates.
33. Each Insurance Company also will
seek approval of the proposed
substitutions from any state insurance
regulators whose approval may be
necessary or appropriate.
34. By a supplement to the
prospectuses for the Contracts and the
Separate Accounts, each Insurance
VerDate jul<14>2003
18:40 Jun 22, 2005
Jkt 205001
Company will notify all owners of the
Contacts of its intention to take the
necessary actions, including seeking the
order requested by this Application, to
substitute share 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 transfers of Contract
value out of the Existing Portfolio subaccount 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 charge. The
supplement will also advise 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 transfers of
Contract value out of the Replacement
Portfolio sub-account to another subaccount 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 charge.
35. In addition to the prospectus
supplements distributed to owners of
Contracts, within five business days
after the proposed substitutions,
Contract owners will be sent a written
notice informing them that the
substitutions were carried out and that
they may transfer all Contract value or
accumulation value under a Contract
invested in any one of the sub-accounts
on the date of the notice to another subaccount 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 Insurance
Companies will also send each Contract
owner current prospectuses for the
Replacement Portfolios involved.
Applicants’ Legal Analysis
1. Section 26(c) (formerly, Section 26
(b)) of the Act provides that ‘‘[i]t shall
be unlawful for any depositor or trustee
of a registered unit investment trust
holding the security of a single issuer to
substitute another security for such
security unless the [SEC] shall have
approved such substitution.’’ Section
26(b) of the Act (now Section 26 (c)) was
enacted as part of the Investment
Company Act Amendments of 1970.
Prior to the enactment of these
amendments, a depositor of a unit
investment trust could substitute new
securities for those held by the trust by
notifying the trust’s security holders of
the substitution within five (5) days
PO 00000
Frm 00059
Fmt 4703
Sfmt 4703
36425
after the substitution. In 1966, the SEC,
concerned with the high sales charges
then common to most unit investment
trusts and the disadvantageous position
in which such charges placed investors
who did not want to remain invested in
the substituted security, recommended
that Section 26 be amended to require
that a proposed substitution of the
underlying investments of a trust
receive prior SEC approval.
2. Congress responded to the SEC’s
concerns by enacting Section 26(b) (now
Section 26 (c)) to require that the SEC
approve all substitutions by the
depositor of investments held by unit
investment trusts. As the legislative
history makes clear, Congress intended
Section 26(b) to provide SEC scrutiny of
proposed substitutions which could
otherwise, in effect, force shareholders
dissatisfied with the substituted security
to redeem their shares, thereby possibly
incurring either a loss of the sales load
deducted from initial purchase
payments, an additional sales load upon
reinvestment of the proceeds of
redemption, or both. The section-bysection analysis states in pertinent part:
The proposed amendment recognizes that
in the case of the unit investment trust
holding the securities of a single issuer
notification to shareholders does not provide
adequate protection since the only relief
available to shareholders, if dissatisfied,
would be to redeem their shares. A
shareholder who redeems and reinvests the
proceeds in another unit investment trust or
in an open-end company would under most
circumstances be subject to a new sales load.
The proposed approval of the substitution
would close this gap in shareholder
protection by providing for [SEC] approval of
the substitution. The [SEC] would be
required to issue an order approving the
substitution if it finds the substitution
consistent with the protection of investors
and the purposes fairly intended by the
policy and provisions of the act.
3. The Proposed substitutions appear
to involve substitutions of securities
within the meaning of Section 26(c) of
the Act.
4. Applicants therefore request an
Order of the SEC pursuant to Section
26(c) of the Act to permit them to effect
the Substitution on the terms set forth
in this Application. Section 26(c) of the
Act provides:
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 [SEC] shall have approved such
substitution. The [SEC] 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 provisions
of this title.
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Federal Register / Vol. 70, No. 120 / Thursday, June 23, 2005 / Notices
Applicants believe that their requests
for approval meet the standards set forth
in Section 26(c) and are consistent with
applicable precedent.
5. 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.
6. With respect to each proposed
substitution, Contract owners with
balances invested in the Replacement
Portfolios will have a lower expense
ratio in most cases. Moreover, it is
expected that the expense
reimbursement arrangements for the
Existing Portfolios will be discontinued
in the near future which will result in
a dramatic increase in the expenses of
the Existing Portfolios causing them to
far exceed those of the Replacement
Portfolios.
7. The proposed Replacement
Portfolio for each Existing Portfolio has
an investment objective that is at least
substantially similar to that of the
Existing Portfolio. Moreover, the
principal investment policies of the
Replacement Portfolios are similar to
those of the corresponding Existing
Portfolios.
8. In each case, the applicable
Insurance Companies believe that it is
in the best interests of the Contract
owners to substitute the Replacement
Portfolio for the Existing Portfolio. The
Insurance Companies believe that the
advisers and sub-advisers of the
Replacement Portfolios will, over the
long term, be positioned to provide at
least comparable performance to that of
the Existing Portfolios’ adviser or subadvisers.
9. The 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 subaccounts 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 accumulation
values between and among
VerDate jul<14>2003
18:40 Jun 22, 2005
Jkt 205001
approximately the same number of subaccounts as they could before the
proposed substitutions.
Conclusion
Applicants submit, for all of the
reasons stated herein, that their request
meets the standards set out in Section
26(c) of the Act and that an Order
should, therefore, be granted.
Accordingly, Applicants request an
Order pursuant to Section 26(c) of the
Act approving the substitution.
For the Commission, by the Division of
Investment Management pursuant to
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–3257 Filed 6–22–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51862; File No. SR–NASD–
2005–039]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Order Approving
Proposed Rule Change to Incorporate
the Brut System Book Feed Into the
TotalView Entitlement
June 16, 2005.
On March 30, 2005, the National
Association of Securities Dealers, Inc.
(‘‘NASD’’), through its subsidiary, the
Nasdaq Stock Market, Inc. (‘‘Nasdaq’’),
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 incorporate Brut’s System
Book Feed into the TotalView
entitlement. The proposed rule change
was published for comment in the
Federal Register on May 17, 2005.3 The
Commission received no comments on
the proposal.
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a selfregulatory organization.4 In particular,
PO 00000
7 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
1 15
Frm 00060
Fmt 4703
Sfmt 4703
the Commission believes that the
proposed rule change is consistent with
Section 15A(b)(5) of the Act,5 which
requires, among other things, that the
rules of the association provide for the
equitable allocation of reasonable dues,
fees, and other charges among members
and issuers and other persons using any
facility or system which the association
operates or controls.
Nasdaq has proposed to modify NASD
Rule 7010(q)(1) to incorporate Brut’s
System Book Feed within Nasdaq’s
TotalView entitlement. Nasdaq’s
TotalView data feed provides
information regarding all quotes and
orders in the Nasdaq Market Center
(including, but not limited, to Brut
orders), while the Brut System Book
Feed, contains the same information
with respect to orders in Brut. In the
Notice, Nasdaq stated that it would
make this proposal effective on July 1,
2005.
The Commission believes that the
inclusion of the Brut System Book Feed
into Nasdaq’s TotalView entitlement for
fee purposes should enable Nasdaq to
equitably charge for Brut depth of book
information, regardless of the source
from which it is received. In approving
the proposed rule change, the
Commission notes that Nasdaq has
stated that TotalView subscribers may
obtain the Brut System Book Feed upon
request of Nasdaq. In addition, the
Commission notes that Nasdaq has
stated that, in order to ease the
transition of market participants to a
single platform, it intends to distribute
Brut order information via both
TotalView and the System Book Feed as
long as Brut remains a separate Nasdaq
facility.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,6 that the
proposed rule change (File No. SR–
NASD–2005–039) be, and hereby is,
approved.
For the Commission, by the Division
of Market Regulation, pursuant to
delegated authority.7
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–3263 Filed 6–22–05; 8:45 am]
BILLING CODE 8010–01–P
4 The Commission has considered the proposed
rule’s impact on efficiency, competition and capital
formation. 15 U.S.C. 78c(f).
5 15 U.S.C. 78o–3(b)(5).
6 15 U.S.C. 78s(b)(2).
E:\FR\FM\23JNN1.SGM
23JNN1
]]>Agencies
[Federal Register Volume 70, Number 120 (Thursday, June 23, 2005)]
[Notices]
[Pages 36414-36426]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-3257]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-26909; File No. 812-13170]
Business Men's Assurance Company of America, et al.; Notice of
Application
June 17, 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, as amended (the ``Act''), approving
certain substitutions of securities.
-----------------------------------------------------------------------
Applicants: Business Men's Assurance Company of America (``BMA''), BMA
Variable Annuity Account A (``BMA VA Account''), BMA Variable Life
Account A (``BMA VL Account''), Fidelity Security Life Insurance
Company (``Fidelity Security''), and FSL Separate Account M (``FSL
Account'').
Filing Date: The application was filed on February 28, 2005, and
amended on June 16, 2005.
Summary of Application: The Applicants request an order pursuant to
Section 26(c) of the Act to permit certain unit investment trusts to
substitute shares of certain portfolios of various unaffiliated funds
(``Replacement Portfolios'') for shares of certain portfolios of
Investors Mark Series Fund, Inc. (``IMSF''), which are currently held
by those unit investment trusts (``Existing Portfolios''). The shares
are held by the unit investment trusts to fund certain variable annuity
contracts and variable life insurance policies (collectively, the
``Contracts'') issued by the BMA and Fidelity Security. Specifically,
Applicants propose to make the following substitutions:
------------------------------------------------------------------------
Separate account Existing portfolios Replacement portfolio
------------------------------------------------------------------------
BMA VA.......... IMSF Intermediate Fidelity VIP II Investment
BMA VL.......... Fixed Income. Grade Bond (Initial Shares).
BMA VA.......... IMSF Money Market.... Fidelity VIP Money Market
BMA VL.......... (Initial Shares).
[[Page 36415]]
FSL............. IMSF Money Market.... Federated Prime Money Fund II.
BMA VA.......... IMSF Global Fixed Fidelity VIP II Investment
BMA VL.......... Income. Grade Bond (Initial Shares).
BMA VA.......... IMSF Mid Cap Equity.. Fidelity VIP III Mid Cap
BMA VL.......... (Initial Shares).
All............. IMSF Small Cap Equity Dreyfus Emerging Leaders
(Initial Class).
BMA VA.......... IMSF Large Cap Growth T. Rowe Price Blue Chip Growth.
BMA VL..........
FSL............. IMSF Large Cap Growth Universal Institutional Funds
Equity Growth (Class I
Shares).
BMA VA.......... IMSF Large Cap Value. Lord Abbett Growth and Income
BMA VL.......... (Class VC Share).
All............. IMSF Growth and Lord Abbett Growth and Income
Income. (Class VC Shares).
BMA VA.......... IMSF Balanced........ T. Rowe Price Personal Strategy
BMA VL.......... Balanced.
------------------------------------------------------------------------
Hearing or Notification of Hearing: An order granting the amended and
restated application will be issued unless the Commission orders a
hearing. Interested persons may request a hearing by writing to the
Secretary of the Commission and serving Applicants with a copy of the
request personally or by mail. Hearing requests should be received by
the Commission by 5:30 p.m. on July 12, 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
issues contested. Persons may request notification of a hearing by
writing to the Secretary of the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549. Applicants: Raymond A. O'Hara III, Blazzard,
Grodd & Hasenauer, P.C., 943 Post Road East, Westport, CT 06880. Copy
to Michael K. Deardorff, Business Men's Assurance Company of America,
2300 Main Street, Suite 450, Kansas City, MO 64108.
FOR FURTHER INFORMATION CONTACT: Thu Ta, Senior Counsel, or Lorna J.
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, 100 F Street, NE.,
Washington, DC 20549 (tel. (202) 551-5850).
Applicants' Representations
1. BMA was incorporated on July 1, 1909, under the laws of the
State of Missouri. As of December 31, 2003, BMA became a South Carolina
domiciled insurance company. BMA is licensed to do business in the
District of Columbia and in all States except New York. BMA is a wholly
owned subsidiary of Liberty Life Insurance Company, which is an
insurance company domiciled in the State of South Carolina.
2. Fidelity Security is a stock life insurance company. Fidelity
Security was originally incorporated on January 17, 1969, as a Missouri
corporation. It is principally engaged in the sale of life insurance
and annuities. Fidelity Security is licensed in the District of
Columbia and in all States except New York, where it is only admitted
as a reinsurer. Fidelity Security is majority owned by Richard F. Jones
(an individual).
3. BMA and Fidelity Security (collectively, the ``Insurance
Companies'') are not affiliates. However, through their collective
ownership of all of the shares of the Existing Portfolios, they are
affiliates of the Existing Portfolios.
4. BMA VA Account is a separate investment account of BMA
established pursuant to a resolution of its Board of Directors on
September 6, 1996, under Missouri law to fund variable annuity
contracts issued by BMA. BMA VA Account is registered under the Act as
a unit investment trust. The variable annuity contracts issued through
BMA VA Account are registered on Form N-4 under the Securities Act of
1933 (the ``1933 Act'').
5. BMA VL Account is a separate investment account of BMA
established pursuant to a resolution of its Board of Directors on
December 1, 1998, under Missouri law to fund variable life insurance
policies issued by BMA. BMA VL Account is registered under the Act as a
unit investment trust. The variable life insurance policies issued
through BMA VL Account are registered on Form N-6 under the 1933 Act.
6. FSL Account is a separate investment account of Fidelity
Security established pursuant to a resolution of its Board of Directors
on August 25, 1998, pursuant to Missouri law to fund variable annuity
contracts issued by Fidelity Security. FSL Account is registered under
the Act as a unit investment trust. The variable annuity contract
issued through FSL Account is registered on Form N-4 under the 1933
Act.
7. Each of the BMA VA Account, BML VL Account, and FSL Account
meets the definition of ``separate account'' contained in Section
2(a)(37) of the Act.
8. IMSF is an open-end management investment company that was
incorporated in Maryland in 1997. Currently, there are nine Portfolios
offered in IMSF, each of which is involved in the Substitution. IMSF is
registered under the Act as an open-end management investment company
and its securities are registered under the 1933 Act. Investors Mark
Advisor LLC (``IMA'') is the investment adviser for each of the
Existing Portfolios. IMA has hired sub-advisers for each of the
Existing Portfolios. The sub-advisers are:
------------------------------------------------------------------------
Portfolio Sub-adviser
------------------------------------------------------------------------
Intermediate Fixed Income Portfolio.... Standish Mellon Asset
Management Company LLC.
Money Market Portfolio................. Standish Mellon Asset
Management Company LLC.
Global Fixed Income Portfolio.......... Standish Mellon Asset
Management Company LLC.
Mid Cap Equity Portfolio............... The Boston Company Asset
Management LLC.
[[Page 36416]]
Small Cap Equity Portfolio............. Columbia Management Advisors,
Inc.
Large Cap Growth Portfolio............. Columbia Management Advisors,
Inc.
Large Cap Value Portfolio.............. Babson Capital Management LLC.
Growth & Income Portfolio.............. Lord, Abbett & Co. LLC.
Balanced Portfolio..................... Kornitzer Capital Management,
Inc.
------------------------------------------------------------------------
9. The BMA Separate Accounts invest in all nine Portfolios of IMSF.
The FSL Account invests in four Portfolios of IMSF: Money Market
Portfolio, Small Cap Equity Portfolio, Large Cap Growth Portfolio and
Growth & Income Portfolio.
10. Each of the Replacement Portfolios is a portfolio of a
registered open-end management investment company, and their securities
are registered under the 1933 Act. The Investment Grade Bond Portfolio
is a portfolio of Fidelity Variable Insurance Products Fund II. The Mid
Cap Portfolio is a portfolio of the Fidelity Variable Insurance
Products Fund III. Money Market Portfolio is a portfolio of Fidelity
Variable Insurance Products Fund. Fidelity Management & Research
Company (``FMR'') serves as the adviser for each of these Fidelity
portfolios. The Federated Prime Money Fund II is a portfolio of
Federated Insurance Series. Federated Investment management Company
serves as adviser to the Federated Prime Money Fund II. T. Rowe Price
Blue Chip Growth Portfolio and T. Rowe Price Personal Strategy Balanced
Portfolio are portfolios of the T. Rowe Price Equity Series, Inc. T.
Rowe Price Associates, Inc. serves as the investment manager for each
of these T. Rowe Price portfolios. Equity Growth Portfolio is a
portfolio of the Universal Institutional Funds, Inc. Morgan Stanley
Investment Management, Inc. serves as the adviser for the Equity Growth
Portfolio. The Growth and Income Portfolio is a portfolio of the Lord
Abbett Series Fund, Inc. Lord, Abbett & Co., LLC serve as adviser to
the Growth and Income Portfolio. The Emerging Leaders Portfolio is a
portfolio of the Dreyfus Investment Portfolios. The Dreyfus Corporation
serves as adviser to the Emerging Leaders Portfolio. None of the
Replacement Portfolios is affiliated with either of the Insurance
Companies.
11. Each of the Contracts permits its owners to allocate the
Contract's accumulated value among numerous available Subaccounts, each
of which invests in a different investment portfolio of an underlying
mutual fund. Each of the BMA Contracts will have at least 21 different
Subaccounts (and corresponding portfolios) available for this purpose.
The FSL Contract will have 17 different Subaccounts (and corresponding
portfolios) available for this purpose.
12. Each Contract permits its owner to transfer the Contract's
accumulated value from one Subaccount to another Subaccount of the
issuing Separate Account at any time, subject to certain potential
restrictions and charges. The only charges on such transfers are flat
dollar amounts that may be assessed to help defray the administrative
costs of effecting these transfers. Each of the Contracts permits up to
a specified number of free transfers in a Contract year, before any
such transfer charge may be imposed.
13. To the extent that the Contracts contain restrictions or
limitations on an owner's right to transfer, such restrictions and
limitations will be suspended in connection with substitution-related
transfers as described in further detail elsewhere herein.
14. BMA or Fidelity Security, as applicable, reserves the right to
make certain changes, including the right to substitute, for the shares
held in any Subaccount, the shares of another Fund or the shares of
another underlying mutual fund, as stated in each prospectus for the
Contracts contained in the applicable Form N-6 or Form N-4 registration
statement.
15. BMA and Fidelity Security, on each of its behalf and on behalf
of the Separate Accounts, propose to make certain substitutions of
shares of the Replacement Portfolio for shares of the Existing
Portfolios held in sub-accounts of their respective Separate Accounts.
The proposed substitutions are as follows:
(a) Shares of the Investment Grade Bond Portfolio (Initial Class)
of Fidelity Variable Insurance Products Fund II for shares of the
Intermediate Fixed Income Portfolio and Global Fixed Income Portfolio
of IMSF, with respect to the BMA VA Account and BMA VL Account only.
(b) Shares of the Mid Cap Portfolio (Initial Class) of Fidelity
Variable Insurance Products Fund III for shares of the Mid Cap Equity
Portfolio of IMSF, with respect to the BMA VA Account and BMA VL
Account only.
(c) Shares of the Money Market Portfolio (Initial Class) of
Fidelity Variable Insurance Products Fund for shares of the Money
Market Portfolio of IMSF, with respect to the BMA VA Account and BMA VL
Account only.
(d) Shares of the Federated Prime Money Fund II of Federated
Insurance Series for shares of the Money Market Portfolio of IMSF, with
respect to the FSL Account only.
(e) Shares of the T. Rowe Price Blue Chip Growth Portfolio of T.
Rowe Price Equity Series, Inc. for shares of the Large Cap Growth
Portfolio of IMSF, with respect to the BMA VA Account and BMA VL
Account only.
(f) Shares of the Equity Growth Portfolio (Class I) of The
Universal Institutional Funds, Inc. for shares of the Large Cap Growth
Portfolio of IMSF, with respect to the FSL Account only.
(g) Shares of the T. Rowe Price Personal Strategy Balanced
Portfolio of T. Rowe Price Equity Series, Inc. for shares of the
Balanced Portfolio of IMSF, with respect to the BMA VA Account and BMA
VL Account only.
(h) Shares of the Growth and Income Portfolio (Class VC Shares) of
Lord Abbett Series Fund, Inc. for shares of the Growth & Income
Portfolio and, with respect to the BMA VA Account and BMA VL Account
only, the Large Cap Value Portfolio of IMSF.
(i) Shares of the Emerging Leaders Portfolio (Initial Class) of
Dreyfus Investment Portfolios for shares of the Small Cap Equity
Portfolio of IMSF.
16. The substitutions are expected to provide significant benefits
to Contract owners, including improved selection of portfolio managers.
The Applicants believe that the advisers and subadvisers of the
Replacement Portfolios overall are better positioned to provide
consistent above-average performance for their funds than are the
adviser and sub-advisers of the Existing Portfolios. 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.
17. Applicants believe that the Replacement Portfolios have
investment objectives, policies, and risk profiles that are
substantially the same as, or sufficiently similar to, the
corresponding Existing Portfolios to make those Replacement Portfolios
appropriate candidates as substitutes.
[[Page 36417]]
Set forth below is a description of the investment objectives and
principal investment policies of each Existing Portfolio and its
corresponding Replacement Portfolio.
------------------------------------------------------------------------
Existing Portfolio Replacement Portfolio
------------------------------------------------------------------------
IMSF Intermediate Fixed Income Fidelity VIP II Investment Grade
Portfolio--primarily seeks to Bond Portfolio (BMA Substitution
achieve a high level of current only)--seeks as high a level of
income consistent with preserving current income as is consistent
capital and liquidity. with the preservation of capital.
Secondarily, the Portfolio seeks The Portfolio normally invests at
capital appreciation when changes least 80% of its assets in
in interest rates or other investment-grade debt securities
economic conditions indicate that (those of medium and high quality)
capital appreciation may be of all types and repurchase
available without significant risk agreements for those securities.
to principal. During normal market The Portfolio may invest up to 10%
conditions, the Portfolio will of the Portfolio's assets in lower-
invest at least 80% of its total quality (those of less than
net assets in investment grade investment-grade quality) debt
fixed income securities. The securities. The Portfolio is
Portfolio may invest up to 20% of managed to have similar overall
its total net assets in fixed interest rate risk to an index,
income securities of foreign which, as of December 31, 2004,
corporations and foreign was the Lehman Brothers[reg]
governments and their political Aggregate Bond Index. The
subdivisions, including securities Portfolio's assets are allocated
of issuers located in emerging across different market sectors
markets. No more than 10% of the and maturities.
Portfolio's total net assets will
be invested in foreign securities
not subject to currency hedging
transactions back into U.S.
dollars. The Portfolio may invest
up to 20% of its total net assets
in below-investment grade
securities (junk bonds).
------------------------------------
IMSF Mid Cap Equity Portfolio-- Fidelity VIP III Mid Cap Portfolio
seeks to achieve long-term growth (BMA Substitution only)--seeks
of capital through investment long-term growth of capital. The
primarily in equity and equity- Portfolio normally invests
related securities of companies primarily in common stocks. The
which appear to be undervalued. Portfolio will normally invest at
The Portfolio invests primarily in least 80% of its assets in
equity securities of mid securities of companies with
capitalization companies. Under medium market capitalizations
normal conditions, the Portfolio (which, for purposes of this
will invest at least 80% of its Portfolio, are those companies
assets in securities issued by mid with market capitalizations
capitalization companies, which similar to companies in the
are those companies whose equity Russell Midcap[reg] Index or the
market capitalizations at the time S&P[reg] MidCap 400 Index. The
of investment are similar to the Portfolio may invest in domestic
market capitalizations of and foreign issuers; in either
companies in the Standard & ``growth'' or ``value'' stocks;
Poor's[reg] MidCap 400 Index and in companies with smaller or
(``S&P[reg] MidCap 400 Index''). larger market capitalizations.
------------------------------------
IMSF Global Fixed Income Portfolio-- Fidelity VIP II Investment Grade
seeks maximum total return while Bond Portfolio (BMA Substitution
realizing a market level of income only)--seeks as high a level of
consistent with preserving capital current income as is consistent
and liquidity. During normal with the preservation of capital.
market conditions, the Portfolio The Portfolio normally invests at
will invest at least 80% of its least 80% of its assets in
total net assets in fixed income investment-grade debt securities
securities of foreign governments (those of medium and high quality)
or their political subdivisions of all types and repurchase
and companies located in at least agreements for those securities.
three countries around the world, The Portfolio may invest up to 10%
including the United States. of the Portfolio's assets in lower-
Usually the Portfolio will invest quality (those of less than
in no fewer than eight foreign investment-grade quality) debt
countries. The Portfolio invests securities. The Portfolio is
primarily in investment grade managed to have similar overall
fixed income securities or those interest rate risk to an index,
determined by the sub-adviser to which, as of December 31, 2004,
be of comparable quality, but it was the Lehman Brothers[reg]
may invest up to 15% of its total Aggregate Bond Index. The
net assets in below-investment Portfolio's assets are allocated
grade securities (junk bonds). across different market sectors
and maturities.
------------------------------------
IMSF Money Market Portfolio--seeks Fidelity VIP Money Market Portfolio
to obtain the highest level of (BMA Substitution only)--seeks as
current income which is consistent high a level of current income as
with the preservation of capital is consistent with preservation of
and maintenance of liquidity. The capital and liquidity. The
Portfolio invests in obligations Portfolio invests in U.S. dollar-
of the U.S. Government and its denominated money market
agencies and instrumentalities. securities of domestic and foreign
The Portfolio may also invest in issuers and repurchase agreements.
other obligations and instruments The Portfolio may invest more than
common to money market funds. 25% of its total assets in the
financial services industries and
may enter into reverse repurchase
agreements.
------------------------------------
IMSF Money Market Portfolio--seeks Federated Prime Money Fund II
to obtain the highest level of (Fidelity Security Substitution
current income which is consistent only)--seeks to maintain a stable
with the preservation of capital net asset value of $1.00 per
and maintenance of liquidity. The share. The Fund's investment
Portfolio invests in obligations objective is to provide current
of the U.S. Government and its income consistent with stability
agencies and instrumentalities. of principal and liquidity. The
The Portfolio may also invest in Fund invests primarily in a
other obligations and instruments portfolio of short-term, high-
common to money market funds. quality fixed income securities
issued by banks, corporations and
the U.S. Government.
------------------------------------
IMSF Large Cap Growth Portfolio-- T. Rowe Price Blue Chip Growth
seeks long-term capital Portfolio (BMA Substitution only)--
appreciation. During normal market seeks to provide long-term capital
conditions, the Portfolio will growth. Income is a secondary
invest at least 80% of its total objective. The Portfolio will
net assets in common stocks and normally invest at least 80% of
other equity-type securities of its net assets in the common
companies exceeding $10 billion in stocks of large and medium-sized
market capitalization at the time blue chip growth companies, which
of purchase. The sub-adviser will in the adviser's view, are well
focus on companies that it established in their industries
believes have long-term and have the potential for above-
appreciation possibilities. The average earnings growth. The
Portfolio may invest in investment average market capitalization of
grade debt securities of corporate the companies in which the
and government issuers. The Portfolio was invested as of
Portfolio also may invest up to December 31, 2004 was
25% of its total net assets in approximately $83 billion. As of
foreign securities. The Portfolio that same date, approximately 7.1%
may invest in options, futures of the Portfolio was invested in
contracts and futures options. companies with a market
capitalization of less than $10
billion. The Portfolio may also
invest in foreign stocks, futures
and options.
------------------------------------
[[Page 36418]]
IMSF Large Cap Growth Portfolio-- Equity Growth Portfolio of The
seeks long-term capital Universal Institutional Funds,
appreciation. During normal market Inc. (Fidelity Security
conditions, the Portfolio will Substitution only)--seeks long-
invest at least 80% of its total term capital appreciation by
net assets in common stocks and investing primarily in growth-
other equity-type securities of oriented equity securities of
companies exceeding $10 billion in large capitalization companies.
market capitalization at the time The Portfolio invests primarily in
of purchase. The sub-adviser will growth-oriented equity securities
focus on companies that it of U.S. and, to a limited extent,
believes have long-term foreign companies that are listed
appreciation possibilities. The on U.S. exchanges or traded in
Portfolio may invest in investment U.S. markets. Under normal
grade debt securities of corporate circumstances, at least 80% of the
and government issuers. The Portfolio's assets will be
Portfolio also may invest up to invested in equity securities. The
25% of its total net assets in Portfolio invests primarily in
foreign securities. The Portfolio companies with market
may invest in options, futures capitalizations of generally $10
contracts and futures options. billion or more that the adviser
believes exhibit, among other
things, strong free cash flow and
compelling business strategies.
------------------------------------
IMSF Balanced Portfolio--seeks long- T. Rowe Price Personal Strategy
term capital growth and high Balanced Portfolio (BMA
current income. The Portfolio Substitution only)--seeks the
seeks to achieve long-term capital highest total return over time
growth primarily by investment in consistent with an emphasis on
common stocks and secondarily by both capital appreciation and
investment in convertible bonds income. The Portfolio pursues its
and convertible preferred stocks. objective by investing in a
The sub-adviser seeks to achieve diversified portfolio typically
high current income by investing consisting of approximately 60%
in: Corporate bonds; government stocks, 30% bonds, and 10% money
bonds; mortgage-backed securities; market securities. Under normal
convertible bonds; preferred conditions, allocations for the
stocks; and/or convertible Portfolio can vary by 10% above or
preferred stocks. The Portfolio below these ranges, based on the
may invest up to 75% of its total adviser's outlook for the economy
net assets in corporate bonds; and the financial markets. The
convertible bonds; preferred Portfolio will invest at least 25%
stocks; and/or convertible of its total assets in senior
preferred stocks. The Portfolio fixed-income securities. The
may invest in below-investment Portfolio may invest in below-
grade debt securities (junk bonds). investment grade debt securities
(junk bonds) and in other
securities, including futures,
options and swaps.
------------------------------------
IMSF Growth & Income Portfolio-- Lord Abbett Growth and Income
seeks to provide long-term growth Portfolio (BMA and Fidelity
of capital and income without Security Substitutions)--seeks
excessive fluctuation in market long-term growth of capital and
value. The Portfolio intends to income without excessive
keep its assets invested in those fluctuations in market value. The
securities which are selling at Portfolio primarily purchases
reasonable prices in relation to equity securities of large,
value. During normal market seasoned U.S. and multinational
conditions, the Portfolio will companies that the adviser
invest in common stocks (including believes are undervalued. Under
securities convertible into common normal circumstances, the
stocks) of large, U.S. and Portfolio will invest at least 80%
multinational companies that the of its net assets in equity
sub-adviser believes are securities of large companies.
undervalued. A large company is a Large companies are companies with
company having a market a market capitalization at the
capitalization at the time of time of purchase that falls within
purchase that falls within the the market capitalization range of
market capitalization range of companies in the Russell 1000
companies in the Russell 1000 Index ($471 million to $382
Index (which at 1/31/05 was $471 billion as of 1/31/05).
million-$382 billion).
------------------------------------
IMSF Large Cap Value Portfolio-- Lord Abbett Growth and Income
seeks long-term growth of capital Portfolio (BMA Substitution only)--
and income by investing seeks long-term growth of capital
principally in a diversified and income without excessive
portfolio of common stocks which fluctuations in market value. The
are considered to be undervalued Portfolio primarily purchases
in relation to earnings, dividends equity securities of large,
and/or assets. The Portfolio seasoned U.S. and multinational
invests, under normal companies that the adviser
circumstances, at least 90% of its believes are undervalued. Under
net assets, plus any borrowings normal circumstances, the
for investment purposes, in common Portfolio will invest at least 80%
stocks that are considered to be of its net assets in equity
undervalued in relation to securities of large companies.
earnings, dividends and/or assets. Large companies are companies with
a market capitalization at the
time of purchase that falls within
the market capitalization range of
companies in the Russell 1000
Index.
------------------------------------
IMSF Small Cap Equity Portfolio-- Dreyfus Emerging Leaders Portfolio
seeks long-term capital (BMA and Fidelity Security
appreciation. During normal market Substitutions)--seeks capital
conditions, the Portfolio will growth. To pursue this goal, the
invest at least 80% of its total Portfolio normally invests at
net assets in a diversified least 80% of its assets in stocks
portfolio of common stocks and of companies that the adviser
equity-type securities of believes to be emerging leaders.
companies with market Based on current market
capitalization, at the time of conditions, the Portfolio
purchase, equal to or less than primarily invests in companies
the capitalization of the largest with market capitalizations of
stock in the Standard & Poor's less than $2 billion at the time
Small Cap 600 Index. The Portfolio of purchase. The Portfolio may
may invest up to 20% of its total invest up to 25% of its assets in
net assets in debt securities of foreign securities. The
corporate and governmental Portfolio's investments may
issuers, primarily investment include common stocks, preferred
grade. The Portfolio may also stocks and convertible securities,
invest up to 25% of its total net including those issued in initial
assets in foreign securities, and public offerings (IPOs) or shortly
the Portfolio may invest in thereafter. The Portfolio may, but
options, futures contracts and is not required to, use
futures options. derivatives, such as futures and
options, as a substitute for
taking a position in an underlying
asset, to increase returns or as
part of a hedging strategy. The
Portfolio also may engage in short-
selling, typically for hedging
purposes, such as to limit
exposure to a possible market
decline in the value of its
portfolio securities. However,
short sales in the Portfolio are
extremely rare. Since the
Portfolio's inception, the
Portfolio managers have engaged in
very few short sales, and there is
no intent to increase the use of
short sales in the future.
------------------------------------------------------------------------
18. Contract owners with sub-account balances invested in shares of
the Replacement Portfolios will, in most cases, based on current
expenses, have lower total expense ratios than they currently have in
the Existing Portfolios. However, even where the expense ratios of the
Replacement Portfolios are currently higher than those of the
[[Page 36419]]
Existing Portfolios, this is not expected to remain so. IMA and its
affiliates have been heavily subsidizing each of the Existing
Portfolios since their inception in 1997 through an expense
reimbursement arrangement. None of the Existing Portfolios has ever
been out of the expense reimbursement mode. As disclosed in a
supplement to each Insurance Company's product prospectuses, the
adviser's current contractual obligation to reimburse the Existing
Portfolios' expenses expired on May 1, 2005. As further disclosed in
the supplement, IMA subsequently agreed to voluntarily continue the
reimbursement arrangement until July 1, 2005. IMA has now determined
that, effective July 1, 2005, it is discontinuing the expense
reimbursement of the IMSF Money Market, Large Cap Growth and Small Cap
Equity Portfolios. IMA may determine to voluntarily continue
subsidizing the expenses of the other Portfolios after July 1, 2005.
19. The following tables compare the total operating expenses of
the Existing Portfolio and the Replacement Portfolio for each proposed
substitution. The comparative fund expenses are generally based on
actual expenses, including waivers, for the year ended December 31,
2004. For the IMSF Money Market, Large Cap Growth and Small Cap Equity
Portfolios, expenses have been restated to reflect the expenses of
those funds without the waivers.
----------------------------------------------------------------------------------------------------------------
Replacement portfolio:
Existing portfolio: Fidelity VIP II
IMSF Intermediate Fixed Investment Grade Bond
Income Portfolio Portfolio (Initial
(percent) class) (percent)
----------------------------------------------------------------------------------------------------------------
Management Fee................................................ 0.60 0.43
12b-1 Fee..................................................... None None
Other Expenses................................................ 2.16 0.13
--------------------------
Total Expenses............................................ 2.76 0.56
Waivers....................................................... *1.96 **0
--------------------------
Net Expenses.............................................. 0.80 0.56
----------------------------------------------------------------------------------------------------------------
* The adviser has voluntarily agreed to reimburse certain expenses of the Portfolio until July 1, 2005 so that
the annual expenses do not exceed 0.80%.
** Effective February 1, 2005, the adviser has voluntarily agreed to reimburse the Initial Class to the extent
that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage
commissions, and extraordinary expenses), as a percentage of the Initial Class' average net assets, exceed
0.58%.
----------------------------------------------------------------------------------------------------------------
Replacement portfolio
Existing portfolio: Fidelity VIP III Mid
IMSF Mid Cap Equity Cap Portfolio (Initial
Portfolio (percent) class) (percent)
----------------------------------------------------------------------------------------------------------------
Management Fee................................................ 0.80 0.57
12b-1 Fee..................................................... None None
Other Expenses................................................ 1.93 0.14
--------------------------
Total Expenses............................................ 2.73 0.71
Waivers....................................................... *1.83 **0
--------------------------
Net Expenses.............................................. 0.90 0.71
----------------------------------------------------------------------------------------------------------------
*The adviser has voluntarily agreed to reimburse certain expenses of the Portfolio until July 1, 2005 so that
the annual expenses do not exceed 0.90%.
** Effective February 1, 2005, the adviser has voluntarily agreed to reimburse the Initial Class to the extent
that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage
commissions, and extraordinary expenses), as a percentage of the Initial Class' average net assets, exceed
0.85%.
----------------------------------------------------------------------------------------------------------------
Replacement portfolio:
Existing portfolio: Fidelity VIP II
IMSF Global Fixed Investment Grade Bond
Income Portfolio Portfolio (Initial
(percent) class) (percent)
----------------------------------------------------------------------------------------------------------------
Management Fee................................................ 0.75 0.43
12b-1 Fee..................................................... None None
Other Expenses................................................ 1.85 0.13
--------------------------
Total Expenses............................................ 2.60 0.56
Waivers....................................................... \*\ 1.60 \**\ 0
--------------------------
Net Expenses.............................................. 1.00 0.56
----------------------------------------------------------------------------------------------------------------
\*\ The adviser has voluntarily agreed to reimburse certain expenses of the Portfolio until July 1, 2005 so that
the annual expenses do not exceed 1.00%.
\**\ Effective February 1, 2005, the adviser has voluntarily agreed to reimburse the Initial Class to the extent
that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage
commissions, and extraordinary expenses), as a percentage of the Initial Class' average net assets, exceed
0.58%.
[[Page 36420]]
----------------------------------------------------------------------------------------------------------------
Replacement portfolio:
Existing portfolio: Fidelity VIP Money
IMSF Money Market Market Portfolio
Portfolio (percent) (Initial class)
(percent)
----------------------------------------------------------------------------------------------------------------
Management Fee................................................ 0.40 0.20
12b-1 Fee..................................................... None None
--------------------------
Other Expenses................................................ 3.07 0.09
Total Expenses............................................ 3.47 0.29
Waivers....................................................... 0\*\ 0
--------------------------
Net Expenses.............................................. 3.47 \**\0.29
----------------------------------------------------------------------------------------------------------------
* Effective July 1, 2005 an expense reimbursement arrangement currently in effect will terminate.
** Effective February 1, 2005, the adviser has voluntarily agreed to reimburse the Initial Class to the extent
that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage
commissions, and extraordinary expenses), as a percentage of the Initial Class' average net assets, exceed
0.40%.
----------------------------------------------------------------------------------------------------------------
Existing portfolio: Replacement portfolio:
IMSF Money Market Federated Prime Money
portfolio (percent) Fund II (percent)
----------------------------------------------------------------------------------------------------------------
Management Fee................................................ 0.40 ** 0.50
12b-1 Fee..................................................... None None
Shareholder Services Fee...................................... None *** 0.25
Other Expenses................................................ 3.07 **** 0.30
--------------------------
Total Expenses............................................ 3.47 1.05
Waivers....................................................... \*\0 0.40
--------------------------
Net Expenses.............................................. 3.47 0.65
----------------------------------------------------------------------------------------------------------------
* Effective July 1, 2005 an expense reimbursement arrangement currently in effect will terminate.
** The adviser has voluntarily waived a portion of the management fee. The adviser can terminate this voluntary
waiver at any time. The management fee paid by the Fund (after the voluntary waiver) was 0.38% for the fiscal
year ended December 31, 2004.
*** The Fund did not pay or accrue the shareholder services fee during the fiscal year ended December 31, 2004.
The Fund has no present intention of paying or accruing the shareholder services fee during the fiscal year
ending December 31, 2005.
**** The administrator voluntarily waived a portion of its fee. The administrator can terminate this voluntary
waiver at any time. Total other expenses paid by the Fund (after the voluntary waiver) were 0.27% for the
fiscal year ended December 31, 2004.
----------------------------------------------------------------------------------------------------------------
Replacement portfolio:
Existing portfolio: T. Rowe Price Blue Chip
IMSF Large Cap Growth Growth Portfolio
Portfolio (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Management Fee................................................ 0.80 0.85
12b-1 Fee..................................................... None None
Other Expenses................................................ 2.01 0
--------------------------
Total Expenses............................................ 2.81 0.85
Waivers....................................................... * 0 0
--------------------------
Net Expenses.............................................. 2.81 0.85
----------------------------------------------------------------------------------------------------------------
* Effective July 1, 2005 an expense reimbursement arrangement currently in effect will terminate.
----------------------------------------------------------------------------------------------------------------
Existing portfolio: Replacement portfolio:
IMSF Large Cap Growth Equity Growth Portfolio
Portfolio (percent) (Class I) (percent)
----------------------------------------------------------------------------------------------------------------
Management Fee................................................ 0.80 0.50
12b-1 Fee..................................................... None None
Other Expenses................................................ 2.01 0.35
--------------------------
Total Expenses............................................ 2.81 0.85
Waivers....................................................... * 0 **
--------------------------
Net Expenses.............................................. 2.81 0.85
----------------------------------------------------------------------------------------------------------------
* Effective July 1, 2005 an expense reimbursement arrangement currently in effect will terminate.
** The adviser has voluntarily agreed to reduce its advisory fee and/or reimburse the fund so that total annual
operating expenses, excluding certain investment related expenses, will not exceed 0.85%.
[[Page 36421]]
----------------------------------------------------------------------------------------------------------------
Replacement Portfolio:
Existing Portfolio: T. Rowe Price Personal
IMSF Balanced Portfolio Strategy Balaned
(percent) Portfolio (percent)
----------------------------------------------------------------------------------------------------------------
Management Fee................................................ 0.80 0.90
12b-1 Fee..................................................... None None
Other Expenses................................................ 1.78 0
--------------------------
Total Expenses............................................ 2.58 0.90
Waivers....................................................... * 1.68 .......................
--------------------------
Net Expenses.............................................. 0.90 ** 0.90
----------------------------------------------------------------------------------------------------------------
* The adviser has voluntarily agreed to reimburse certain expenses of the fund until July 1, 2005 so that the
annual expenses do not exceed 0.90%.
** Actual expenses paid were 0.87% due to a credit received from investing in the T. Rowe Price Institutional
High Yield Fund.
----------------------------------------------------------------------------------------------------------------
Replacement Portfolio:
Existing Portfolio: Lord Abbett Growth and
IMSF Growth & Income Income Portfolio (Class
Portfolio (percent) VC shares) (percent)
----------------------------------------------------------------------------------------------------------------
Management Fee................................................ 0.80 0.50
12b-1 Fee..................................................... None None
Other Expenses................................................ 1.46 0.39
--------------------------
Total Expenses............................................ 2.26 0.89
Waivers....................................................... * 1.36 0
--------------------------
Net Expenses.............................................. 0.90 0.89
----------------------------------------------------------------------------------------------------------------
* The adviser has voluntarily agreed to reimburse certain expenses of the Portfolio until July 1, 2005 so that
the annual expenses do not exceed 0.90%.
----------------------------------------------------------------------------------------------------------------
Replacement Portfolio:
Existing Portfolio: Lord Abbett Growth and
IMSF Large Cap Value Income Portfolio (Class
Portfolio (percent) VC shares) (percent)
----------------------------------------------------------------------------------------------------------------
Management Fee................................................ 0.80 0.50
12b-1 Fee..................................................... None None
Other Expenses................................................ 2.04 0.39
--------------------------
Total Expenses............................................ 2.84 0.89
Waivers....................................................... *1.94 0
--------------------------
Net Expenses.............................................. 0.90 0.89
----------------------------------------------------------------------------------------------------------------
* The adviser has contractually agreed to reimburse certain expenses of the Portfolio until July 1, 2005 so that
the annual expenses do not exceed 0.90%.
----------------------------------------------------------------------------------------------------------------
Replacement Portfolio:
Existing Portfolio: Dreyfus Emerging
IMSF Small Cap Equity Leaders Portfolio
Portfolio (percent) (Initial class)
(percent)
----------------------------------------------------------------------------------------------------------------
Management Fee................................................ 0.95 0.90
12b-1 Fee..................................................... None None
Other Expenses................................................ 2.16 0.23
--------------------------
Total Expenses............................................ 3.11 1.13
Waivers....................................................... *0 **.04
--------------------------
Net Expenses.............................................. 3.11 1.09
----------------------------------------------------------------------------------------------------------------
* Effective July 1, 2005 an expense reimbursement arrangement currently in effect will terminate.
** The adviser's parent has agreed, until December 31, 2005, to waive receipt of its fees and/or assume the
expenses of the Portfolio so that the expenses of the Class (excluding taxes, brokerage commissions,
extraordinary expenses, interest expenses and commitment fees on borrowings) do not exceed 1.50%.
20. The T. Rowe Price Blue Chip Growth Portfolio and the T. Rowe
Price Personal Strategy Balanced Portfolio each has higher management
fees than its corresponding Existing Portfolio (higher by .05% and
.10%,
[[Page 36422]]
respectively). However, each of the two T. Rowe Price Portfolios has a
``unified'' management fee which requires that many of the fund
expenses be paid by the adviser out of its fee rather than be charged
directly to the fund. Thus, under the unified fee arrangement, the
overall expenses of the two T. Rowe Price Portfolios are largely
reflected by each Portfolio's management fee. Specifically, each T.
Rowe Price Portfolio's management fee pays for investment management
services and ordinary, recurring operating expenses, but does not cover
interest, taxes, brokerage, nonrecurring and extraordinary items or
fees and expenses for the fund's independent directors. The investment
adviser of the T. Rowe Price Portfolios has represented to Applicants
that the ordinary, recurring operating expenses covered by the
management fee of the T. Rowe Price Blue Chip Growth and T. Rowe Price
Personal Strategy Balanced Portfolios have exceeded .05% and 0.10%,
respectively, for each of the past three years. Effectively, therefore,
this makes the management fees of each of the two T. Rowe Price
Portfolios lower than the management fees of each of their
corresponding Existing Portfolios.
21. The Federated Prime Money Fund II also has a higher management
fee than its corresponding Existing Portfolio (higher by .10%) as well
as higher overall current total expenses. However, effective July 1,
2005, the expense reimbursement arrangement for the Existing Portfolio
will be discontinued. When that occurs, the expenses of the IMSF Money
Market Portfolio will increase significantly. In fact, the total
expenses of the IMSF Money Market Portfolio are anticipated to be more
than double those of the Federated Prime Money Fund II when the waiver
with respect to the IMSF Money Market Portfolio is discontinued.
22. In summary, with respect to Fund expenses, given the
anticipated discontinuation of the expense reimbursement arrangement
for the Existing Portfolios, there will be a dramatic increase in each
Existing Portfolio's total expenses resulting in a significant increase
in overall expenses to the Contract owners. Without the expense
reimbursement arrangement in place for the Existing Portfolios, the
total expenses of each Existing Portfolio are substantially higher in
all cases than those of the corresponding Replacement Portfolios, even
without taking into account any fee waiver/expense reimbursement
arrangements of the Replacement Portfolios.
23. The Insurance Companies also considered the performance history
of the Existing Portfolios and the Replacement Portfolios and
determined that no Contract owners would be materially adversely
affected as a result of the substitutions. The following tables compare
the performance history of the Existing Portfolio and the Replacement
Portfolio for each proposed substitution.
----------------------------------------------------------------------------------------------------------------
Replacement portfolio:
Existing portfolio: Fidelity VIP II
Average annual total returns (For years or periods ended IMSF Intermediate Fixed Investment Grade Bond
December 31, 2004) Income Portfolio Portfolio (Initial
class) (percent)
----------------------------------------------------------------------------------------------------------------
One Year...................................................... 4.50 4.46
Five Years.................................................... 6.98 7.90
Ten Years..................................................... N/A 7.60
Life of Fund.................................................. 5.75
Fund Inception Date........................................... 11/13/97
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Replacement portfolio:
Average annual total returns (For years or periods ended Existing portfolio: Fidelity VIP III Mid
December 31, 2004) IMSF Mid Cap Equity Cap Portfolio (Initial
(percent) class) (percent)
----------------------------------------------------------------------------------------------------------------
One Year...................................................... 16.94 24.92
Five Years.................................................... 11.11 15.11
Life of Fund.................................................. 9.80 20.74
Fund Inception Date........................................... 11/13/97 12/28/98
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Replacement portfolio:
Existing portfolio: Fidelity VIP II
Average annual total returns (For years or periods ended IMSF Global Fixed Investment Grade Bond
December 31, 2004) Income Portfolio Portfolio (Initial
class) (percent)
---------------------------------------------------
