MetLife Insurance Company of Connecticut, et al., 401-407 [2010-33117]
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Federal Register / Vol. 76, No. 2 / Tuesday, January 4, 2011 / Notices
Deposit Security for the Fund through a
transaction in which the Fund could not
engage directly.
6. The requested order will expire on
the effective date of any Commission
rule under the Act that provides relief
permitting the operation of actively
managed exchange-traded funds.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–33116 Filed 1–3–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–29544; File No. 812–13816]
MetLife Insurance Company of
Connecticut, et al.
December 28, 2010.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order pursuant to Section 26(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) approving certain substitutions of
securities and an order of exemption
pursuant to Section 17(b) of the Act
from Section 17(a) of the Act.
AGENCY:
MetLife Insurance
Company of Connecticut (‘‘MetLife of
CT’’), MetLife of CT Separate Account
Eleven for Variable Annuities (‘‘Separate
Account Eleven’’), MetLife of CT
Separate Account QPN for Variable
Annuities (‘‘Separate Account QPN’’),
MetLife of CT Fund UL for Variable Life
Insurance (‘‘Fund UL’’), MetLife of CT
Fund UL III for Variable Life Insurance
(‘‘Fund UL III’’), MetLife of CT Separate
Account CPPVUL I (‘‘Separate Account
CPPVUL 1’’), MetLife Investors
Insurance Company (‘‘MetLife
Investors’’), MetLife Investors Variable
Annuity Account One (‘‘VA Account
One’’), MetLife Investors Variable Life
Account One (‘‘VL Account One’’), First
MetLife Investors Insurance Company
(‘‘First MetLife Investors’’), First MetLife
Investors Variable Annuity Account
One (‘‘First VA Account One’’), MetLife
Investors USA Insurance Company
(‘‘MetLife Investors USA’’), MetLife
Investors USA Separate Account A
(‘‘Separate Account A’’), Metropolitan
Life Insurance Company (‘‘MetLife’’),
Metropolitan Life Separate Account
DCVL (‘‘Separate Account DCVL’’),
Metropolitan Life Separate Account UL
(‘‘Separate Account UL’’), Metropolitan
Life Variable Annuity Separate Account
II (‘‘Separate Account II’’), Security
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APPLICANTS:
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Equity Separate Account No. 13S (‘‘SE
Separate Account 13S’’), Security Equity
Separate Account No. 485 (‘‘SE Separate
Account 485’’), General American Life
Insurance Company (‘‘General
American’’), General American Separate
Account Seven (‘‘GA Separate Account
Seven’’), General American Separate
Account Eleven (‘‘GA Separate Account
Eleven’’), General American Separate
Account Thirty-Three (‘‘GA Separate
Account Thirty-Three’’), (together with
Separate Account Eleven, Separate
Account QPN, Fund UL, Fund UL III,
Separate Account CPPVUL 1, VA
Account One, VL Account One, First
VA Account One, Separate Account A,
Separate Account DCVL, Separate
Account UL, Separate Account II, SE
Separate Account 13S, SE Separate
Account 485, GA Separate Account
Seven, GA Separate Account Eleven, GA
Separate Account Thirty-Three, the
‘‘Separate Accounts’’), Met Investors
Series Trust (‘‘MIST’’) and Metropolitan
Series Fund, Inc. (‘‘Met Series Fund’’)
(together with MIST, the ‘‘Investment
Companies’’). The Insurance Companies
and the Separate Accounts are referred
to as the ‘‘Substitution Applicants.’’ The
Insurance Companies, the Separate
Accounts and the Investment
Companies are referred to as the
‘‘Section 17 Applicants.’’
SUMMARY OF APPLICATION: Applicants
seek an order approving the substitution
of certain series of the Investment
Companies for shares of series of other
unaffiliated registered investment
companies held by the Separate
Accounts to fund certain group and
individual variable annuity contracts
and variable life insurance policies
issued by the Insurance Companies
(collectively, the ‘‘Contracts’’). The
Section 17 Applicants seek an order
pursuant to Section 17(b) of the Act to
permit certain in-kind transactions in
connection with certain of the
Substitutions.
FILING DATE: The application was filed
on August 26, 2010, and an amended
and restated application was filed on
December 9, 2010 and December 27,
2010.
HEARING OR NOTIFICATION OF HEARING:
An order granting the application will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Secretary of the Commission and
serving Applicants with a copy of the
request personally or by mail. Hearing
requests should be received by the
Commission by 5:30 p.m. on January 21,
2011, and should be accompanied by
proof of service on Applicants, in the
form of an affidavit or for lawyers a
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401
certificate of service. Hearing requests
should state the nature of the writer’s
interest, the reason for the request and
the issue 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 20549–1090.
Applicants c/o Paul G. Cellupica, Chief
Counsel—Securities Regulation and
Corporate Services, MetLife Group, 1095
Avenue of the Americas, 40th Floor,
New York, NY 10036 and David C.
Mahaffey, Esq., Sullivan & Worcester
LLP, 1666 K Street, NW., Washington,
DC 20006.
FOR FURTHER INFORMATION CONTACT:
Alison T. White, Senior Counsel, or
Joyce M. Pickholz, Branch Chief, Office
of Insurance Products, Division of
Investment Management, at (202) 551–
6795.
The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm, or by
calling (202) 551–8090.
SUPPLEMENTARY INFORMATION:
Applicants’ Representations
1. MetLife of CT is a stock life
insurance company organized in 1863
under the laws of Connecticut. MetLife
Investors is a stock life insurance
company organized on August 17, 1981
under the laws of Missouri. First
MetLife Investors is a stock life
insurance company organized on
December 31, 1992 under the laws of
New York. MetLife Investors USA is a
stock life insurance company organized
on September 13, 1960 under the laws
of Delaware. MetLife is a stock life
insurance company organized in 1868
under the laws of New York. General
American is a stock life insurance
company organized in 1933 under the
laws of Missouri.
2. Separate Account Eleven, Fund UL,
Fund UL III, VA Account One, VL
Account One, First VA Account One,
Separate Account A, Separate Account
UL, Separate Account II, SE Separate
Account 13S and GA Separate Account
Eleven are registered under the Act as
unit investment trusts for the purpose of
funding the Contracts. Security interests
under the Contracts have been
registered under the Securities Act of
1933.
3. Separate Account QPN is exempt
from registration under the Act. Security
interests under the Contracts have been
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registered under the Securities Act of
1933.
4. Separate Account CPPVUL1,
Separate Account DCVL, Separate
Account 485, GA Separate Account
Seven and GA Separate Account ThirtyThree serve as separate account funding
vehicles for certain Contracts that are
exempt from registration under Section
4(2) of the Securities Act of 1933 and
Regulation D thereunder.
5. Although Separate Account QPN,
Separate Account CPPVUL1, Separate
Account DCVL, Separate Account 485,
GA Separate Account Seven and GA
Separate Account Thirty-Three are
exempt from registration under the Act,
they would be subject to the investment
limitations of Section 12 but for the
exclusion contained in Section
12(d)(1)(E) of the Act. To rely on such
exclusion, an investment company that
is not a registered investment company
must, among other things, agree to
refrain from substituting a security
unless the Commission approves the
substitution in the manner provided in
Section 26 of the Act.
6. MIST and Met Series Fund are each
registered under the Act as open-end
management investment companies of
the series type, and their securities are
registered under the Securities Act of
1933. Metlife Advisers, LLC serves as
investment adviser to MIST and Met
Series Fund.
7. The Contracts permit the applicable
Insurance Company, 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 disclosures of this
right. File numbers for the Contracts, the
Separate Accounts and the Investment
Companies are set forth in the
application.
8. Each Insurance Company, on its
behalf and on behalf of the Separate
Accounts proposes to make certain
substitutions of shares of 11 funds (the
‘‘Existing Funds’’) held in sub-accounts
of its respective Separate Accounts for
certain series (the ‘‘Replacement Funds’’)
of MIST and Met Series Fund.
9. The proposed substitutions are as
follows: (a) Third Avenue Small Cap
Value Portfolio for Delaware VIP Small
Cap Value Series; (b) RCM Technology
Portfolio for Janus Aspen Global
Technology Portfolio; (c) Davis Venture
Value Portfolio for Legg Mason
ClearBridge Variable Capital Portfolio;
(d) MFS Research International Portfolio
for Legg Mason Global Currents Variable
International All Cap Opportunity
Portfolio; (e) Western Asset
Management Strategic Bond
Opportunities Portfolio for Legg Mason
Western Asset Variable Diversified
Strategic Income Portfolio; (f) Western
Asset Management Strategic Bond
Opportunities Portfolio for Legg Mason
Western Asset Variable Strategic Bond
Portfolio; (g) PIMCO Total Return
Portfolio for Pioneer Bond VCT
Portfolio; (h) Pioneer Fund Portfolio for
Pioneer Fund VCT Portfolio; (i) Met/
Templeton Growth Portfolio for
Templeton Growth Securities Fund; (j)
Met/Templeton Growth Portfolio for
Templeton Growth Fund, Inc.; (k) Van
Eck Global Natural Resources Portfolio
for Van Eck VIP Global Hard Assets
Fund.
10. The following is a summary of the
investment objectives and policies of
each Existing Fund and its
corresponding Replacement Fund.
Additional information including asset
sizes, risk factors and comparative
performance history for each Existing
Fund and Replacement Fund can be
found in the Application.
Existing fund
Replacement fund
Delaware VIP Small Cap Value Series—seeks capital appreciation.
The Series invests at least 80% of its assets in investments of small
companies whose stock prices appear low relative to their underlying
value or future potential.
Third Avenue Small Cap Value Portfolio—seeks long-term capital appreciation. The Portfolio invests at least 80% of its assets in equity
securities of well-financed small companies (meaning companies
with high quality assets and a relative absence of liabilities) at a discount to what the subadviser believes is the intrinsic value.
RCM Technology Portfolio—seeks capital appreciation; no consideration is given to income. The Portfolio invests, under normal circumstances, at least 80% of its assets in common stocks of companies which utilize new, creative or different, or ‘‘innovative’’ technologies.
Davis Venture Value Portfolio—seeks growth of capital. The Portfolio
invests, under normal circumstances, the majority of its assets in equity securities of companies with market capitalizations of at least
$10 billion.
MFS Research International Portfolio—seeks capital appreciation. The
Portfolio invests, under normal circumstances, primarily in foreign equity securities, including emerging market equity securities.
Janus Aspen Global Technology Portfolio—seeks long-term growth of
capital. The Portfolio invests, under normal circumstances, at least
80% of its net assets in securities of companies that the adviser believes will benefit significantly from advances or improvements in
technology.
Legg Mason ClearBridge Variable Capital Portfolio—seeks capital appreciation through investment in securities which the portfolio manager believes have above-average capital appreciation potential.
Legg Mason Global Currents Variable International All Cap Opportunity
Portfolio—seeks total return on its assets from growth of capital and
income. Normally, the Portfolio invests 80% of its net assets in a diversified portfolio of equity securities of foreign companies and invests substantially all of its assets outside of the United States.
Legg Mason Western Asset Variable Diversified Strategic Income Portfolio—seeks high current income. The Portfolio normally invests in
fixed income securities, including related securities and instruments.
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Legg Mason Western Asset Variable Strategic Bond Portfolio—seeks
to maximize current income consistent with preservation of capital.
Under normal circumstances, the Portfolio invests at least 80% of its
assets in fixed income securities and related instruments.
Pioneer Bond VCT Portfolio—seeks to provide current income from an
investment grade portfolio with due regard to preservation of capital
and prudent investment risk.
Pioneer Fund VCT Portfolio—seeks reasonable income and capital
growth. The Portfolio primarily invests in securities of U.S. issuers.
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Western Asset Management Strategic Bond Opportunities Portfolio—
seeks to maximize total return consistent with preservation of capital.
The Portfolio invests, under normal circumstances, at least 80% of
its assets in three classes of bonds and other fixed-income securities.
Western Asset Management Strategic Bond Opportunities Portfolio—
seeks to maximize total return consistent with preservation of capital.
The Portfolio invests, under normal circumstances, at least 80% of
its assets in three classes of bonds and other fixed-income securities.
PIMCO Total Return Portfolio—seeks maximum total return, consistent
with the preservation of capital and prudent investment management.
Pioneer Fund Portfolio—seeks reasonable income and capital growth.
The Portfolio normally invests substantially in equity securities, primarily of U.S. issuers.
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Existing fund
Replacement fund
Templeton Growth Securities Fund—seeks long-term capital growth.
The Fund normally invests in the equity securities of companies located anywhere in the world, including emerging markets.
Met/Templeton Growth Portfolio—seeks long-term capital growth. The
Portfolio, under normal circumstances, primarily invests in the equity
securities of companies of various market capitalizations located
anywhere in the world, including emerging markets.
Met/Templeton Growth Portfolio—seeks long-term capital growth. The
Portfolio, under normal circumstances, primarily invests in the equity
securities of companies of various market capitalizations located
anywhere in the world, including emerging markets.
Van Eck Global Natural Resources Portfolio—seeks long-term capital
appreciation with income as a secondary consideration. Under normal market conditions, the Portfolio invests at least 80% of its net
assets in securities of natural resource companies and in instruments that derive their value from natural resources.
Templeton Growth Fund, Inc.—seeks long-term capital growth. The
Fund, under normal circumstances, primarily invests in the equity securities and companies of various market capitalizations located anywhere in the world, including emerging markets.
Van Eck VIP Global Hard Assets Fund—seeks long-term capital appreciation by investing primarily in hard-asset securities. Income is a
secondary consideration.
11. The management fees, 12b–1 fees
(if applicable), other expenses and total
operating expenses for each Existing
(‘‘Old Fund’’) and Replacement Fund
(‘‘New Fund’’) are as follows:
Management
fees
(%)
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New Fund: Third Avenue Small Cap Portfolio—Class A ....
Old Fund: Delaware VIP Small Cap Value Series—Standard Class ..........................................................................
New Fund: Third Avenue Small Cap Portfolio—Class B ....
Old Fund: Delaware VIP Small Cap Value Series—Service
Class .................................................................................
New Fund: RCM Technology Portfolio—Class B ................
Old Fund: Janus Aspen Global Technology Portfolio—
Service Class ...................................................................
New Fund: Davis Venture Value Portfolio—Class B ...........
Old Fund: Legg Mason ClearBridge Variable Capital Portfolio ...................................................................................
New Fund: MFS Research International Portfolio—Class B
Old Fund: Legg Mason Global Currents Variable International All Cap Opportunity Portfolio ..............................
New Fund: Western Asset Management Strategic Bond
Opportunities Portfolio—Class B ......................................
Old Fund: Legg Mason Western Asset Variable Diversified
Strategic Income Portfolio ................................................
New Fund: Western Asset Management Strategic Bond
Opportunities Portfolio—Class B ......................................
Old Fund: Legg Mason Western Asset Variable Strategic
Bond Portfolio—Class I ....................................................
New Fund: PIMCO Total Return Portfolio—Class B ...........
Old Fund: Pioneer Bond VCT Portfolio—Class II ...............
New Fund: Pioneer Fund Portfolio—Class B ......................
Old Fund: Pioneer Fund VCT Portfolio—Class II ................
New Fund: Met/Templeton Growth Portfolio—Class A .......
Old Fund: Templeton Growth Securities Fund—Class 1 ....
New Fund: Met/Templeton Growth Portfolio—Class B .......
Old Fund: Templeton Growth Securities Fund—Class 2 ....
New Fund: Met/Templeton Growth Portfolio—Class E .......
Old Fund: Templeton Growth Fund—Class A .....................
New Fund: Van Eck Global Natural Resources Portfolio—
Class A .............................................................................
Old Fund: Van Eck VIP Global Hard Assets Fund—Initial
Class .................................................................................
12. MetLife Advisers, LLC is the
adviser of each of the Replacement
Funds. Each Replacement Fund
currently offers up to four classes of
shares, three of which, Class A, Class B
and Class E are involved in the
substitutions.
13. The Applicants believe the
substitutions will provide significant
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12b–1 fees
(%)
Frm 00092
Waiver/
Reimbursemt
(%)
Total
expenses
(%)
.74
........................
.04
........................
.78
.74
.74
........................
.25
.11
.04
........................
........................
.85
1.03
.74
.88
.30
.25
.11
.08
.05
........................
1.10
1.21
.64
.71
.25
.25 (.50)
.33
.03
........................
.05
1.22
.94
.75
.71
.25
.25 (.50)
.14
.10
.14
........................
1.00
1.06
.85
........................
.25
........................
1.10
.62
.25 (.50)
.07
.04
.90
.65
........................
.30
........................
.95
.62
.25 (.50)
.07
.04
.90
65
.48
.50
.66
.65
.69
.75
.69
.75
.69
.59
........................
.25 (.50)
.25
.25 (.50)
.25
........................
........................
.25 (.50)
.25
.15 (.25)
.25
.31
.04
.26
.08
.09
.18
.04
.18
.04
.18
.28
........................
........................
.14
........................
........................
.07
........................
.07
........................
.07
........................
.96
.77
.87
.99
.99
.80
.79
1.05
1.04
.95
1.12
.79
........................
.08
........................
.87
.96
........................
.15
........................
1.11
benefits to Contract owners, including
improved selection of sub-advisers and
simplification of fund offerings through
the elimination of overlapping offerings.
14. As a result of the substitutions, the
number of investment options offered
under substantially all of the Contracts
will not change (currently ranges in
number from 12 to 121). For the limited
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expenses
(%)
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number of Contracts that will
experience a reduction in the number of
available investment options, no
contract will ever be reduced by more
than 2 investment options after the
substitutions.
15. Those substitutions which replace
investment options advised by
investment advisers that are not
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affiliated with the Substitution
Applicants with funds for which
MetLife Advisers, LLC acts as
investment adviser will permit each
adviser, under the Multi-Manager Order,
[IC–22824 (1997) and IC–23859 (1999)],
to hire, monitor and replace subadvisers as necessary to achieve optimal
performance.
16. Contract owners with sub-account
balances invested (through the separate
account) in shares of the Replacement
Funds, except for the Templeton
Growth Securities Fund/Met/Templeton
Growth Portfolio substitution, will have
the same or lower total expense ratios
taking into account fund expenses and
current fee waivers.
17. In the following substitutions, the
management fee and/or applicable Rule
12b-1 fee of the Replacement Fund are
either currently higher, or, at certain
management fee breakpoints, may be
higher than those of the respective
Existing Fund: Delaware VIP Small Cap
Value Series/Third Avenue Small Cap
Value Portfolio; Janus Aspen Global
Technology Portfolio/RCM Technology
Portfolio; Legg Mason Global Currents
Variable International All Cap
Opportunity Portfolio/MFS Research
International Portfolio; Legg Mason
Western Asset Variable Diversified
Strategic Income Portfolio/Western
Asset Management Strategic Bond
Opportunities Portfolio; Legg Mason
Western Asset Variable Strategic Bond
Portfolio/Western Asset Management
Strategic Bond Opportunities Portfolio;
Pioneer Fund VCT Portfolio/Pioneer
Fund Portfolio; Templeton Growth
Fund, Inc./Met/Templeton Growth
Portfolio; and Templeton Growth
Securities Fund/Met/Templeton Growth
Portfolio.
18. The Substitution Applicants
propose to limit Contract charges
attributable to Contract value invested
in the Replacement Funds following the
proposed substitutions to a rate that
would offset the difference in the
expense ratio between each Existing
Fund’s net expense ratio and the net
expense ratio for the respective
Replacement Fund.
19. Except for the Templeton Growth
Securities Fund/Met/Templeton Growth
Portfolio substitution where there is an
increase in net expenses after waivers of
0.01% and the Pioneer Fund VCT
Portfolio/Pioneer Fund Portfolio where
there is no increase or decrease in net
expense ratios, after waivers, the
substitutions will result in decreased
net expense ratios, after waivers,
ranging from 1 basis point to 24 basis
points. Moreover, there will be no
increase in Contract fees and expenses,
including mortality and expense risk
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fees and administration and distribution
fees charged to the Separate Accounts as
a result of the substitutions.
20. The Substitution Applicants
believe that the Replacement Funds
have investment objectives, policies and
risk profiles, as described in their
prospectuses, that are substantially the
same as, or sufficiently similar to, the
corresponding Existing Funds to make
those Replacement Funds appropriate
candidates as substitutes.
21. In addition, after the substitutions,
neither MetLife Advisers, LLC nor any
of their affiliates will receive
compensation from the charges to the
Separate Accounts related to the
Contracts or from Rule 12b-1 fees or
revenue sharing from the Replacement
Funds in excess of the compensation
currently received from the investment
advisers or distributors of the Existing
Funds.
22. The share classes of the
Replacement Funds are either identical
to or less than the share classes of the
Existing Funds with respect to the
imposition of Rule 12b-1 fees currently
imposed, except with respect to the
substitution of MFS Research
International Portfolio (Class B shares—
0.25%) for Legg Mason Global Currents
Variable International All Cap
Opportunity Portfolio (single share
class—0%); Western Asset Management
Strategic Bond Opportunities Portfolio
(Class B shares—0.25%) for Legg Mason
Western Asset Variable Diversified
Strategic Income Portfolio (single share
class—0%); Western Asset Management
Strategic Bond Opportunities Portfolio
(Class B shares—0.25%) for Legg Mason
Western Asset Variable Strategic Bond
Portfolio (Class I—0%).
23. Each MIST and Met Series Fund
Replacement Fund’s Class B shares Rule
12b-1 fees can be raised to 0.50%, each
MIST Replacement Fund’s Class E
shares Rule 12b-1 fees can be raised to
0.25% and each Met Series Fund
Replacement Fund’s Class E shares Rule
12b-1 fees can be raised to 0.50% of net
assets by the Replacement Fund’s Board
of Directors/Trustees without
shareholder approval. However, Met
Series Fund and MIST represent that
Rule 12b-1 fees of the Class B and Class
E shares of the Replacement Funds
issued in connection with the proposed
substitutions will not be raised above
the current rate without approval of a
majority in interest of the respective
Replacement Funds’ shareholders after
the substitutions.
24. The distributors of the Existing
Funds pay to the Insurance Companies,
or their affiliates, any 12b-1 fees
associated with the class of shares sold
to the Separate Accounts. Similarly, the
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distributors for MIST and Met Series
Fund will receive from the applicable
class of shares held by the Separate
Accounts Rule 12b-1 fees in the same
amount or a lesser amount than the
amount paid by the Existing Funds,
except as described above.
25. Further, in addition to any Rule
12b-1 fees, the investment advisers or
distributors of the Existing Funds pay
the Insurance Companies or one of their
affiliates from 0 to 50 basis points for
the Existing Funds’ classes of shares
involved in the substitutions. Following
the substitutions, these payments will
not be made on behalf of the
Replacement Funds. Rather, the
Insurance Companies or their affiliates
will have available both the 25 and 15
basis points in Rule 12b-1 fees from the
Replacement Funds (with respect to
Class B and Class E shares, respectively)
and, as owners of the Replacement
Funds’ adviser, profit distributions from
the adviser. These profits from
investment advisory fees may be more
or less than the fees being paid by the
Existing Funds.
Applicants’ Legal Analysis and
Conditions
1. The Substitution Applicants
request that the Commission issue an
order pursuant to Section 26(c) of the
Act approving the proposed
substitutions.
2. Applicants represent that the
Contracts permit the applicable
Insurance Company, 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.
3. By a supplement to the
prospectuses for the Contracts and the
Separate Accounts, each Insurance
Company has notified all owners of the
Contracts of its intention to take the
necessary actions, including seeking the
order requested by this Application, to
substitute shares of the funds as
described herein. The supplement has
advised Contract owners that from the
date of the supplement until the date of
the proposed substitution, owners are
permitted to make one transfer of
Contract value (or annuity unit
exchange) out of the Existing Fund subaccount to one or more other subaccounts without the transfer (or
exchange) being treated as one of a
limited number of permitted transfers
(or exchanges) or a limited number of
transfers (or exchanges) permitted
without a transfer charge. The
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supplement also has informed Contract
owners that the Insurance Company will
not exercise any rights reserved under
any Contract to impose additional
restrictions on transfers until at least 30
days after the proposed substitutions.
The supplement has also advised
Contract owners that for at least 30 days
following the proposed substitutions,
the Insurance Companies will permit
Contract owners affected by the
substitutions to make one transfer of
Contract value (or annuity unit
exchange) out of the Replacement Fund
sub-account to one or more other subaccounts without the transfer (or
exchange) being treated as one of a
limited number of permitted transfers
(or exchanges) or a limited number of
transfers (or exchanges) permitted
without a transfer charge.
4. The proposed substitutions will
take place at relative net asset value
with no change in the amount of any
Contract owner’s Contract value, cash
value, or death benefit or in the dollar
value of his or her investment in the
Separate Accounts.
5. The process for accomplishing the
transfer of assets from each Existing
Fund to its corresponding Replacement
Fund will be determined on a case-bycase basis. In most cases, it is expected
that the substitutions will be effected by
redeeming shares of an Existing Fund
for cash and using the cash to purchase
shares of the Replacement Fund. In
certain other cases, it is expected that
the substitutions will be effected by
redeeming the shares of an Existing
Fund in-kind; those assets will then be
contributed in-kind to the
corresponding Replacement Fund to
purchase shares of that Fund. All inkind redemptions from an Existing
Fund of which any of the Substitution
Applicants is an affiliated person will
be effected in accordance with the
conditions set forth in the Commission’s
no-action letter issued to Signature
Financial Group, Inc. (available
December 28, 1999).
6. Contract owners will not incur any
fees or charges as a result of the
proposed substitutions, nor will their
rights or an Insurance Company’s
obligations under the Contracts be
altered in any way. All expenses
incurred in connection with the
proposed substitutions, including
brokerage, legal, accounting, and other
fees and expenses, will be paid by the
Insurance Companies. In addition, the
proposed substitutions will not impose
any tax liability on Contract owners.
The proposed substitutions will not
cause the Contract fees and charges
currently being paid by existing
Contract owners to be greater after the
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proposed substitutions than before the
proposed substitutions. No fees will be
charged on the transfers made at the
time of the proposed substitutions,
because the proposed substitutions will
not be treated as a transfer for the
purpose of assessing transfer charges or
for determining the number of
remaining permissible transfers in a
Contract year.
7. In addition to the prospectus
supplements distributed to owners of
Contracts, within five business days
after the proposed substitutions are
completed, Contract owners will be sent
a written notice informing them that the
substitutions were carried out and that
they may make one transfer of all
Contract value or cash value under a
Contract invested in any one of the subaccounts on the date of the notice to one
or more other sub-accounts available
under their Contract at no cost and
without regard to the usual limit on the
frequency of transfers among subaccounts or from the variable account
options to the fixed account options.
The notice will also reiterate that (other
than with respect to ‘‘market timing’’
activity) the Insurance Company will
not exercise any rights reserved by it
under the Contracts to impose
additional restrictions on transfers or to
impose any charges on transfers until at
least 30 days after the proposed
substitutions. The Insurance Companies
will also send each Contract owner
current prospectuses for the
Replacement Funds involved to the
extent that they have not previously
received a copy.
8. Each Insurance Company also is
seeking approval of the proposed
substitutions from any State insurance
regulators whose approval may be
necessary or appropriate.
9. The Substitution Applicants agree
that for those who were Contract owners
on the date of the proposed
substitutions, the Insurance Companies
will reimburse, on the last business day
of each fiscal period (not to exceed a
fiscal quarter) during the twenty-four
months following the date of the
proposed substitutions, those Contract
owners whose sub-account invests in
the Replacement Fund such that the
sum of the Replacement Fund’s net
operating expenses (taking into account
fee waivers and expense
reimbursements) and sub-account
expenses (asset-based fees and charges
deducted on a daily basis from subaccount assets and reflected in the
calculation of sub-account unit values)
for such period will not exceed, on an
annualized basis, the sum of the
Existing Fund’s net operating expenses
taking into account fee waivers and
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405
expense reimbursements and subaccount expenses for fiscal year 2009,
except with respect to the Delaware VIP
Small Cap Value Series/Third Avenue
Small Cap Value Portfolio, Janus Aspen
Global Technology Portfolio/RCM
Technology Portfolio, Legg Mason
Global Currents Variable International
All Cap Opportunity Portfolio/MFS
Research International Portfolio, Legg
Mason Western Asset Variable
Diversified Strategic Income Portfolio/
Western Asset Management Strategic
Bond Opportunities Portfolio, Legg
Mason Western Asset Variable Strategic
Bond Portfolio/Western Asset
Management Strategic Bond
Opportunities Portfolio, Pioneer Fund
VCT Portfolio/Pioneer Fund Portfolio,
Templeton Growth Fund, Inc./Met/
Templeton Growth Portfolio, and
Templeton Growth Securities Fund/
Met/Templeton Growth Portfolio
substitutions.
10. With respect to the Delaware VIP
Small Cap Value Series/Third Avenue
Small Cap Value Portfolio, Janus Aspen
Global Technology Portfolio/RCM
Technology Portfolio, Legg Mason
Global Currents Variable International
All Cap Opportunity Portfolio/MFS
Research International Portfolio, Legg
Mason Western Asset Variable
Diversified Strategic Income Portfolio/
Western Asset Management Strategic
Bond Opportunities Portfolio, Legg
Mason Western Asset Variable Strategic
Bond Portfolio/Western Asset
Management Strategic Bond
Opportunities Portfolio, Pioneer Fund
VCT Portfolio/Pioneer Fund Portfolio
substitutions, Templeton Growth Fund,
Inc./Met/Templeton Growth Portfolio,
and Templeton Growth Securities Fund/
Met/Templeton Growth Portfolio
substitutions, the reimbursement
agreement with respect to the
Replacement Fund’s operating expenses
and sub-account expenses, will extend
for the life of each Contract outstanding
on the date of the proposed
substitutions.
11. The Substitution Applicants
further agree that, except with respect to
the Delaware VIP Small Cap Value
Series/Third Avenue Small Cap Value
Portfolio, Janus Aspen Global
Technology Portfolio/RCM Technology
Portfolio, Legg Mason Global Currents
Variable International All Cap
Opportunity Portfolio/MFS Research
International Portfolio, Legg Mason
Western Asset Variable Diversified
Strategic Income Portfolio/Western
Asset Management Strategic Bond
Opportunities Portfolio, Legg Mason
Western Asset Variable Strategic Bond
Portfolio/Western Asset Management
Strategic Bond Opportunities Portfolio,
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Pioneer Fund VCT Portfolio/Pioneer
Fund Portfolio, Templeton Growth
Fund, Inc./Met/Templeton Growth
Portfolio and Templeton Growth
Securities Fund/Met/Templeton Growth
Portfolio substitutions, the Insurance
Companies will not increase total
separate account charges (net of any
reimbursements or waivers) for any
existing owner of the Contracts on the
date of the substitutions for a period of
two years from the date of the
substitutions.
12. With respect to the Delaware VIP
Small Cap Value Series/Third Avenue
Small Cap Value Portfolio, Janus Aspen
Global Technology Portfolio/RCM
Technology Portfolio, Legg Mason
Global Currents Variable International
All Cap Opportunity Portfolio/MFS
Research International Portfolio, Legg
Mason Western Asset Variable
Diversified Strategic Income Portfolio/
Western Asset Management Strategic
Bond Opportunities Portfolio, Legg
Mason Western Asset Variable Strategic
Bond Portfolio/Western Asset
Management Strategic Bond
Opportunities Portfolio, Pioneer Fund
VCT Portfolio/Pioneer Fund Portfolio,
Templeton Growth Fund, Inc./Met/
Templeton Growth Portfolio, and
Templeton Growth Securities Fund/
Met/Templeton Growth Portfolio
substitutions, the agreement not to
increase the separate account charges
will extend for the life of each Contract
outstanding on the date of the proposed
substitutions.
13. In each case, the applicable
Insurance Companies believe that it is
in the best interests of the Contract
owners to substitute the Replacement
Fund for the Existing Fund. The
Insurance Companies believe that in
cases where the Replacement Fund has
a new sub-adviser, the new sub-adviser
will, over the long term, be positioned
to provide at least comparable
performance to that of the Existing
Fund’s sub-adviser.
14. The Substitution Applicants
anticipate that Contract owners will be
better off with the array of sub-accounts
offered after the proposed substitutions
than they have been with the array of
sub-accounts offered prior to the
substitutions.
15. The Substitution Applicants
submit that none of the proposed
substitutions is of the type that Section
26(c) was designed to prevent.
16. The Substitution Applicants
request an order of the Commission
pursuant to Section 26(c) of the Act
approving the proposed substitutions by
the Insurance Companies.
17. The Section 17 Applicants request
an order under Section 17(b) exempting
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them from the provisions of Section
17(a) to the extent necessary to permit
the Insurance Companies to carry out
each of the proposed substitutions.
18. Section 17(a)(1) of the Act, in
relevant part, prohibits any affiliated
person of a registered investment
company, or any affiliated person of
such person, acting as principal, from
knowingly selling any security or other
property to that company. Section
17(a)(2) of the Act generally prohibits
the persons described above, acting as
principals, from knowingly purchasing
any security or other property from the
registered company.
19. Because shares held by a separate
account of an insurance company are
legally owned by the insurance
company, the Insurance Companies and
their affiliates collectively own of record
substantially all of the shares of MIST
and Met Series Fund. Therefore, MIST
and Met Series Fund and their
respective funds are arguably under the
control of the Insurance Companies
notwithstanding the fact that Contract
owners may be considered the
beneficial owners of those shares held
in the Separate Accounts. If MIST and
Met Series Fund and their respective
funds are under the control of the
Insurance Companies, then each
Insurance Company is an affiliated
person or an affiliated person of an
affiliated person of MIST and Met Series
Fund and their respective funds. If
MIST and Met Series Fund and their
respective funds are under the control of
the Insurance Companies, then MIST
and Met Series Fund and their
respective funds are affiliated persons of
the Insurance Companies.
20. Regardless of whether or not the
Insurance Companies can be considered
to control MIST and Met Series Fund
and their respective funds, because the
Insurance Companies own of record
more than 5% of the shares of each of
them and are under common control
with each Replacement Fund’s
investment adviser, the Insurance
Companies are affiliated persons of both
MIST and Met Series Fund and their
respective funds. Likewise, their
respective funds are each an affiliated
person of the Insurance Companies.
21. The Insurance Companies,
through their separate accounts in the
aggregate own more than 5% of the
outstanding shares of the following
Existing Funds: Janus Aspen Global
Technology Portfolio, Legg Mason
Clearbridge Variable Capital Portfolio,
Legg Mason Global Currents Variable
International All Cap Opportunity
Portfolio, Legg Mason Western Asset
Variable Diversified Strategic Income
Portfolio, Legg Mason Western Asset
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Sfmt 4703
Variable Strategic Bond Portfolio,
Pioneer Bond VCT Portfolio and Pioneer
Fund VCT Portfolio. Therefore, each
Insurance Company is an affiliated
person of those funds.
22. Because the substitutions may be
effected, in whole or in part, by means
of in-kind redemptions and purchases,
the substitutions may be deemed to
involve one or more purchases or sales
of securities or property between
affiliated persons. The proposed
transactions may involve a transfer of
portfolio securities by the Existing
Funds to the Insurance Companies;
immediately thereafter, the Insurance
Companies would purchase shares of
the Replacement Funds with the
portfolio securities received from the
Existing Funds. Accordingly, as the
Insurance Companies and certain of the
Existing Funds listed above, and the
Insurance Companies and the
Replacement Funds, could be viewed as
affiliated persons of one another under
Section 2(a)(3) of the Act, it is
conceivable that this aspect of the
substitutions could be viewed as being
prohibited by Section 17(a).
23. Section 17(b) of the Act provides
that the Commission may, upon
application, grant an order exempting
any transaction from the prohibitions of
Section 17(a) if the evidence establishes
that: (a) The terms of the proposed
transaction, including the consideration
to be paid or received, are reasonable
and fair and do not involve
overreaching on the part of any person
concerned; (b) the proposed transaction
is consistent with the policy of each
registered investment company
concerned, as recited in its registration
statement and records filed under the
Act; and (c) the proposed transaction is
consistent with the general purposes of
the Act.
24. The Section 17 Applicants submit
that for all the reasons stated above the
terms of the proposed in-kind purchases
of shares of the Replacement Funds by
the Insurance Companies, including the
consideration to be paid and received,
as described in this Application, are
reasonable and fair and do not involve
overreaching on the part of any person
concerned. The Section 17 Applicants
also submit that the proposed in-kind
purchases by the Insurance Companies
are consistent with the policies of: (a)
MIST and of its Third Avenue Small
Cap Value, RCM Technology, Met/
Templeton Growth, MFS Research
International, PIMCO Total Return, and
Pioneer Fund Portfolios; and (b) Met
Series Fund and of its Davis Venture
Value, Western Asset Management
Strategic Bond Opportunities and Van
Eck Global Natural Resources Portfolios,
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as recited in the current registration
statements and reports filed by each
under the Act. Finally, the Section 17
Applicants submit that the proposed
substitutions are consistent with the
general purposes of the Act.
25. To the extent that the in-kind
purchases by the Insurance Company of
the Replacement Funds’ shares are
deemed to involve principal
transactions among affiliated persons,
the procedures described below should
be sufficient to assure that the terms of
the proposed transactions are reasonable
and fair to all participants. The Section
17 Applicants maintain that the terms of
the proposed in-kind purchase
transactions, including the
consideration to be paid and received by
each fund involved, are reasonable, fair
and do not involve overreaching
principally because the transactions will
conform with all but one of the
conditions enumerated in Rule 17a–7.
The proposed transactions will take
place at relative net asset value in
conformity with the requirements of
Section 22(c) of the Act and Rule 22c–
1 thereunder with no change in the
amount of any Contract owner’s contract
value or death benefit or in the dollar
value of his or her investment in any of
the Separate Accounts. Contract owners
will not suffer any adverse tax
consequences as a result of the
substitutions. The fees and charges
under the Contracts will not increase
because of the substitutions. Even
though the Separate Accounts, the
Insurance Companies, MIST and Met
Series Fund may not rely on Rule 17a–
7, the Section 17 Applicants believe that
the Rule’s conditions outline the type of
safeguards that result in transactions
that are fair and reasonable to registered
investment company participants and
preclude overreaching in connection
with an investment company by its
affiliated persons. In addition, as stated
above, the in-kind redemptions will
only be made in accordance with the
conditions set out in the Signature
Financial Group no-action letter
(December 29, 1999).
26. The boards of MIST and Met
Series Fund have adopted procedures,
as required by paragraph (e)(1) of Rule
17a–7, pursuant to which the series of
each may purchase and sell securities to
and from their affiliates. The Section 17
Applicants will carry out the proposed
Insurance Company in-kind purchases
in conformity with all of the conditions
of Rule 17a–7 and each series’
procedures thereunder, except that the
consideration paid for the securities
being purchased or sold may not be
entirely cash. Nevertheless, the
circumstances surrounding the
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proposed substitutions will be such as
to offer the same degree of protection to
each Replacement Fund from
overreaching that Rule 17a–7 provides
to them generally in connection with
their purchase and sale of securities
under that Rule in the ordinary course
of their business. In particular, the
Insurance Companies (or any of their
affiliates) cannot effect the proposed
transactions at a price that is
disadvantageous to any of the
Replacement Funds. Although the
transactions may not be entirely for
cash, each will be effected based upon
(1) the independent market price of the
portfolio securities valued as specified
in paragraph (b) of Rule 17a–7, and (2)
the net asset value per share of each
fund involved valued in accordance
with the procedures disclosed in its
respective investment company
registration statement and as required
by Rule 22c–1 under the Act. No
brokerage commission, fee, or other
remuneration will be paid to any party
in connection with the proposed in kind
purchase transactions.
27. The sale of shares of Replacement
Funds for investment securities, as
contemplated by the proposed
Insurance Company in-kind purchases,
is consistent with the investment
policies and restrictions of the
Investment Companies and the
Replacement Funds because (a) the
shares are sold at their net asset value,
and (b) the portfolio securities are of the
type and quality that the Replacement
Funds would each have acquired with
the proceeds from share sales had the
shares been sold for cash. To assure that
the second of these conditions is met,
MetLife Advisers, LLC and the subadviser, as applicable, will examine the
portfolio securities being offered to each
Replacement Fund and accept only
those securities as consideration for
shares that it would have acquired for
each such fund in a cash transaction.
28. The Section 17 Applicants submit
that the proposed Insurance Company
in-kind purchases are consistent with
the general purposes of the Act as stated
in the Findings and Declaration of
Policy in Section 1 of the Act and that
the proposed transactions do not
present any of the conditions or abuses
that the Act was designed to prevent.
29. The Section 17 Applicants request
that the Commission issue an order
pursuant to Section 17(b) of the Act
exempting the Separate Accounts, the
Insurance Companies, MIST, Met Series
Fund and each Replacement Fund from
the provisions of Section 17(a) of the
Act to the extent necessary to permit the
Insurance Companies on behalf of the
Separate Accounts to carry out, as part
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407
of the substitutions, the in-kind
purchase of shares of the Replacement
Funds which may be deemed to be
prohibited by Section 17(a) of the Act.
Conclusion
Applicants assert that for the reasons
summarized above that the proposed
substitutions and related transactions
meet the standards of Section 26(c) of
the Act and are consistent with the
standards of Section 17(b) of the Act
and that the requested orders should be
granted.
For the Commission, by the Division of
Investment Management pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–33117 Filed 1–3–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold a Closed Meeting
on Thursday, January 6, 2011 at 2:00
p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10)
and 17 CFR 200.402(a)(3), (5), (7), 9(ii)
and (10), permit consideration of the
scheduled matters at the Closed
Meeting.
Commissioner Aguilar, as duty
officer, voted to consider the items
listed for the Closed Meeting in a closed
session.
The subject matter of the Closed
Meeting scheduled for Thursday,
January 6, 2011 will be:
Formal order of investigation;
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
An adjudicatory matter; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
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]]>Agencies
[Federal Register Volume 76, Number 2 (Tuesday, January 4, 2011)]
[Notices]
[Pages 401-407]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-33117]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-29544; File No. 812-13816]
MetLife Insurance Company of Connecticut, et al.
December 28, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order pursuant to Section 26(c) of
the Investment Company Act of 1940 (the ``Act'') approving certain
substitutions of securities and an order of exemption pursuant to
Section 17(b) of the Act from Section 17(a) of the Act.
-----------------------------------------------------------------------
Applicants: MetLife Insurance Company of Connecticut (``MetLife of
CT''), MetLife of CT Separate Account Eleven for Variable Annuities
(``Separate Account Eleven''), MetLife of CT Separate Account QPN for
Variable Annuities (``Separate Account QPN''), MetLife of CT Fund UL
for Variable Life Insurance (``Fund UL''), MetLife of CT Fund UL III
for Variable Life Insurance (``Fund UL III''), MetLife of CT Separate
Account CPPVUL I (``Separate Account CPPVUL 1''), MetLife Investors
Insurance Company (``MetLife Investors''), MetLife Investors Variable
Annuity Account One (``VA Account One''), MetLife Investors Variable
Life Account One (``VL Account One''), First MetLife Investors
Insurance Company (``First MetLife Investors''), First MetLife
Investors Variable Annuity Account One (``First VA Account One''),
MetLife Investors USA Insurance Company (``MetLife Investors USA''),
MetLife Investors USA Separate Account A (``Separate Account A''),
Metropolitan Life Insurance Company (``MetLife''), Metropolitan Life
Separate Account DCVL (``Separate Account DCVL''), Metropolitan Life
Separate Account UL (``Separate Account UL''), Metropolitan Life
Variable Annuity Separate Account II (``Separate Account II''),
Security Equity Separate Account No. 13S (``SE Separate Account 13S''),
Security Equity Separate Account No. 485 (``SE Separate Account 485''),
General American Life Insurance Company (``General American''), General
American Separate Account Seven (``GA Separate Account Seven''),
General American Separate Account Eleven (``GA Separate Account
Eleven''), General American Separate Account Thirty-Three (``GA
Separate Account Thirty-Three''), (together with Separate Account
Eleven, Separate Account QPN, Fund UL, Fund UL III, Separate Account
CPPVUL 1, VA Account One, VL Account One, First VA Account One,
Separate Account A, Separate Account DCVL, Separate Account UL,
Separate Account II, SE Separate Account 13S, SE Separate Account 485,
GA Separate Account Seven, GA Separate Account Eleven, GA Separate
Account Thirty-Three, the ``Separate Accounts''), Met Investors Series
Trust (``MIST'') and Metropolitan Series Fund, Inc. (``Met Series
Fund'') (together with MIST, the ``Investment Companies''). The
Insurance Companies and the Separate Accounts are referred to as the
``Substitution Applicants.'' The Insurance Companies, the Separate
Accounts and the Investment Companies are referred to as the ``Section
17 Applicants.''
Summary of Application: Applicants seek an order approving the
substitution of certain series of the Investment Companies for shares
of series of other unaffiliated registered investment companies held by
the Separate Accounts to fund certain group and individual variable
annuity contracts and variable life insurance policies issued by the
Insurance Companies (collectively, the ``Contracts''). The Section 17
Applicants seek an order pursuant to Section 17(b) of the Act to permit
certain in-kind transactions in connection with certain of the
Substitutions.
Filing Date: The application was filed on August 26, 2010, and an
amended and restated application was filed on December 9, 2010 and
December 27, 2010.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Secretary of the
Commission and serving Applicants with a copy of the request personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on January 21, 2011, 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 issue 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 20549-1090. Applicants c/o Paul G. Cellupica, Chief
Counsel--Securities Regulation and Corporate Services, MetLife Group,
1095 Avenue of the Americas, 40th Floor, New York, NY 10036 and David
C. Mahaffey, Esq., Sullivan & Worcester LLP, 1666 K Street, NW.,
Washington, DC 20006.
FOR FURTHER INFORMATION CONTACT: Alison T. White, Senior Counsel, or
Joyce M. Pickholz, Branch Chief, Office of Insurance Products, Division
of Investment Management, at (202) 551-6795.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1. MetLife of CT is a stock life insurance company organized in
1863 under the laws of Connecticut. MetLife Investors is a stock life
insurance company organized on August 17, 1981 under the laws of
Missouri. First MetLife Investors is a stock life insurance company
organized on December 31, 1992 under the laws of New York. MetLife
Investors USA is a stock life insurance company organized on September
13, 1960 under the laws of Delaware. MetLife is a stock life insurance
company organized in 1868 under the laws of New York. General American
is a stock life insurance company organized in 1933 under the laws of
Missouri.
2. Separate Account Eleven, Fund UL, Fund UL III, VA Account One,
VL Account One, First VA Account One, Separate Account A, Separate
Account UL, Separate Account II, SE Separate Account 13S and GA
Separate Account Eleven are registered under the Act as unit investment
trusts for the purpose of funding the Contracts. Security interests
under the Contracts have been registered under the Securities Act of
1933.
3. Separate Account QPN is exempt from registration under the Act.
Security interests under the Contracts have been
[[Page 402]]
registered under the Securities Act of 1933.
4. Separate Account CPPVUL1, Separate Account DCVL, Separate
Account 485, GA Separate Account Seven and GA Separate Account Thirty-
Three serve as separate account funding vehicles for certain Contracts
that are exempt from registration under Section 4(2) of the Securities
Act of 1933 and Regulation D thereunder.
5. Although Separate Account QPN, Separate Account CPPVUL1,
Separate Account DCVL, Separate Account 485, GA Separate Account Seven
and GA Separate Account Thirty-Three are exempt from registration under
the Act, they would be subject to the investment limitations of Section
12 but for the exclusion contained in Section 12(d)(1)(E) of the Act.
To rely on such exclusion, an investment company that is not a
registered investment company must, among other things, agree to
refrain from substituting a security unless the Commission approves the
substitution in the manner provided in Section 26 of the Act.
6. MIST and Met Series Fund are each registered under the Act as
open-end management investment companies of the series type, and their
securities are registered under the Securities Act of 1933. Metlife
Advisers, LLC serves as investment adviser to MIST and Met Series Fund.
7. The Contracts permit the applicable Insurance Company, 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 disclosures of this
right. File numbers for the Contracts, the Separate Accounts and the
Investment Companies are set forth in the application.
8. Each Insurance Company, on its behalf and on behalf of the
Separate Accounts proposes to make certain substitutions of shares of
11 funds (the ``Existing Funds'') held in sub-accounts of its
respective Separate Accounts for certain series (the ``Replacement
Funds'') of MIST and Met Series Fund.
9. The proposed substitutions are as follows: (a) Third Avenue
Small Cap Value Portfolio for Delaware VIP Small Cap Value Series; (b)
RCM Technology Portfolio for Janus Aspen Global Technology Portfolio;
(c) Davis Venture Value Portfolio for Legg Mason ClearBridge Variable
Capital Portfolio; (d) MFS Research International Portfolio for Legg
Mason Global Currents Variable International All Cap Opportunity
Portfolio; (e) Western Asset Management Strategic Bond Opportunities
Portfolio for Legg Mason Western Asset Variable Diversified Strategic
Income Portfolio; (f) Western Asset Management Strategic Bond
Opportunities Portfolio for Legg Mason Western Asset Variable Strategic
Bond Portfolio; (g) PIMCO Total Return Portfolio for Pioneer Bond VCT
Portfolio; (h) Pioneer Fund Portfolio for Pioneer Fund VCT Portfolio;
(i) Met/Templeton Growth Portfolio for Templeton Growth Securities
Fund; (j) Met/Templeton Growth Portfolio for Templeton Growth Fund,
Inc.; (k) Van Eck Global Natural Resources Portfolio for Van Eck VIP
Global Hard Assets Fund.
10. The following is a summary of the investment objectives and
policies of each Existing Fund and its corresponding Replacement Fund.
Additional information including asset sizes, risk factors and
comparative performance history for each Existing Fund and Replacement
Fund can be found in the Application.
------------------------------------------------------------------------
Existing fund Replacement fund
------------------------------------------------------------------------
Delaware VIP Small Cap Value Series-- Third Avenue Small Cap Value
seeks capital appreciation. The Series Portfolio--seeks long-term
invests at least 80% of its assets in capital appreciation. The
investments of small companies whose Portfolio invests at least 80%
stock prices appear low relative to of its assets in equity
their underlying value or future securities of well-financed
potential. small companies (meaning
companies with high quality
assets and a relative absence
of liabilities) at a discount
to what the subadviser
believes is the intrinsic
value.
Janus Aspen Global Technology RCM Technology Portfolio--seeks
Portfolio--seeks long-term growth of capital appreciation; no
capital. The Portfolio invests, under consideration is given to
normal circumstances, at least 80% of income. The Portfolio invests,
its net assets in securities of under normal circumstances, at
companies that the adviser believes least 80% of its assets in
will benefit significantly from common stocks of companies
advances or improvements in which utilize new, creative or
technology. different, or ``innovative''
technologies.
Legg Mason ClearBridge Variable Capital Davis Venture Value Portfolio--
Portfolio--seeks capital appreciation seeks growth of capital. The
through investment in securities which Portfolio invests, under
the portfolio manager believes have normal circumstances, the
above-average capital appreciation majority of its assets in
potential. equity securities of companies
with market capitalizations of
at least $10 billion.
Legg Mason Global Currents Variable MFS Research International
International All Cap Opportunity Portfolio--seeks capital
Portfolio--seeks total return on its appreciation. The Portfolio
assets from growth of capital and invests, under normal
income. Normally, the Portfolio circumstances, primarily in
invests 80% of its net assets in a foreign equity securities,
diversified portfolio of equity including emerging market
securities of foreign companies and equity securities.
invests substantially all of its
assets outside of the United States.
Legg Mason Western Asset Variable Western Asset Management
Diversified Strategic Income Strategic Bond Opportunities
Portfolio--seeks high current income. Portfolio--seeks to maximize
The Portfolio normally invests in total return consistent with
fixed income securities, including preservation of capital. The
related securities and instruments. Portfolio invests, under
normal circumstances, at least
80% of its assets in three
classes of bonds and other
fixed-income securities.
Legg Mason Western Asset Variable Western Asset Management
Strategic Bond Portfolio--seeks to Strategic Bond Opportunities
maximize current income consistent Portfolio--seeks to maximize
with preservation of capital. Under total return consistent with
normal circumstances, the Portfolio preservation of capital. The
invests at least 80% of its assets in Portfolio invests, under
fixed income securities and related normal circumstances, at least
instruments. 80% of its assets in three
classes of bonds and other
fixed-income securities.
Pioneer Bond VCT Portfolio--seeks to PIMCO Total Return Portfolio--
provide current income from an seeks maximum total return,
investment grade portfolio with due consistent with the
regard to preservation of capital and preservation of capital and
prudent investment risk. prudent investment management.
Pioneer Fund VCT Portfolio--seeks Pioneer Fund Portfolio--seeks
reasonable income and capital growth. reasonable income and capital
The Portfolio primarily invests in growth. The Portfolio normally
securities of U.S. issuers. invests substantially in
equity securities, primarily
of U.S. issuers.
[[Page 403]]
Templeton Growth Securities Fund--seeks Met/Templeton Growth Portfolio--
long-term capital growth. The Fund seeks long-term capital
normally invests in the equity growth. The Portfolio, under
securities of companies located normal circumstances,
anywhere in the world, including primarily invests in the
emerging markets. equity securities of companies
of various market
capitalizations located
anywhere in the world,
including emerging markets.
Templeton Growth Fund, Inc.--seeks long- Met/Templeton Growth Portfolio--
term capital growth. The Fund, under seeks long-term capital
normal circumstances, primarily growth. The Portfolio, under
invests in the equity securities and normal circumstances,
companies of various market primarily invests in the
capitalizations located anywhere in equity securities of companies
the world, including emerging markets. of various market
capitalizations located
anywhere in the world,
including emerging markets.
Van Eck VIP Global Hard Assets Fund-- Van Eck Global Natural
seeks long-term capital appreciation Resources Portfolio--seeks
by investing primarily in hard-asset long-term capital appreciation
securities. Income is a secondary with income as a secondary
consideration. consideration. Under normal
market conditions, the
Portfolio invests at least 80%
of its net assets in
securities of natural resource
companies and in instruments
that derive their value from
natural resources.
------------------------------------------------------------------------
11. The management fees, 12b-1 fees (if applicable), other expenses
and total operating expenses for each Existing (``Old Fund'') and
Replacement Fund (``New Fund'') are as follows:
----------------------------------------------------------------------------------------------------------------
Waiver/
Management 12b-1 fees Other Reimbursemt Total
fees (%) (%) expenses (%) (%) expenses (%)
----------------------------------------------------------------------------------------------------------------
New Fund: Third Avenue Small Cap .74 .............. .04 .............. .78
Portfolio--Class A.............
Old Fund: Delaware VIP Small Cap .74 .............. .11 .............. .85
Value Series--Standard Class...
New Fund: Third Avenue Small Cap .74 .25 .04 .............. 1.03
Portfolio--Class B.............
Old Fund: Delaware VIP Small Cap .74 .30 .11 .05 1.10
Value Series--Service Class....
New Fund: RCM Technology .88 .25 .08 .............. 1.21
Portfolio--Class B.............
Old Fund: Janus Aspen Global .64 .25 .33 .............. 1.22
Technology Portfolio--Service
Class..........................
New Fund: Davis Venture Value .71 .25 (.50) .03 .05 .94
Portfolio--Class B.............
Old Fund: Legg Mason ClearBridge .75 .25 .14 .14 1.00
Variable Capital Portfolio.....
New Fund: MFS Research .71 .25 (.50) .10 .............. 1.06
International Portfolio--Class
B..............................
Old Fund: Legg Mason Global .85 .............. .25 .............. 1.10
Currents Variable International
All Cap Opportunity Portfolio..
New Fund: Western Asset .62 .25 (.50) .07 .04 .90
Management Strategic Bond
Opportunities Portfolio--Class
B..............................
Old Fund: Legg Mason Western .65 .............. .30 .............. .95
Asset Variable Diversified
Strategic Income Portfolio.....
New Fund: Western Asset .62 .25 (.50) .07 .04 .90
Management Strategic Bond
Opportunities Portfolio--Class
B..............................
Old Fund: Legg Mason Western 65 .............. .31 .............. .96
Asset Variable Strategic Bond
Portfolio--Class I.............
New Fund: PIMCO Total Return .48 .25 (.50) .04 .............. .77
Portfolio--Class B.............
Old Fund: Pioneer Bond VCT .50 .25 .26 .14 .87
Portfolio--Class II............
New Fund: Pioneer Fund .66 .25 (.50) .08 .............. .99
Portfolio--Class B.............
Old Fund: Pioneer Fund VCT .65 .25 .09 .............. .99
Portfolio--Class II............
New Fund: Met/Templeton Growth .69 .............. .18 .07 .80
Portfolio--Class A.............
Old Fund: Templeton Growth .75 .............. .04 .............. .79
Securities Fund--Class 1.......
New Fund: Met/Templeton Growth .69 .25 (.50) .18 .07 1.05
Portfolio--Class B.............
Old Fund: Templeton Growth .75 .25 .04 .............. 1.04
Securities Fund--Class 2.......
New Fund: Met/Templeton Growth .69 .15 (.25) .18 .07 .95
Portfolio--Class E.............
Old Fund: Templeton Growth Fund-- .59 .25 .28 .............. 1.12
Class A........................
New Fund: Van Eck Global Natural .79 .............. .08 .............. .87
Resources Portfolio--Class A...
Old Fund: Van Eck VIP Global .96 .............. .15 .............. 1.11
Hard Assets Fund--Initial Class
----------------------------------------------------------------------------------------------------------------
12. MetLife Advisers, LLC is the adviser of each of the Replacement
Funds. Each Replacement Fund currently offers up to four classes of
shares, three of which, Class A, Class B and Class E are involved in
the substitutions.
13. The Applicants believe the substitutions will provide
significant benefits to Contract owners, including improved selection
of sub-advisers and simplification of fund offerings through the
elimination of overlapping offerings.
14. As a result of the substitutions, the number of investment
options offered under substantially all of the Contracts will not
change (currently ranges in number from 12 to 121). For the limited
number of Contracts that will experience a reduction in the number of
available investment options, no contract will ever be reduced by more
than 2 investment options after the substitutions.
15. Those substitutions which replace investment options advised by
investment advisers that are not
[[Page 404]]
affiliated with the Substitution Applicants with funds for which
MetLife Advisers, LLC acts as investment adviser will permit each
adviser, under the Multi-Manager Order, [IC-22824 (1997) and IC-23859
(1999)], to hire, monitor and replace sub-advisers as necessary to
achieve optimal performance.
16. Contract owners with sub-account balances invested (through the
separate account) in shares of the Replacement Funds, except for the
Templeton Growth Securities Fund/Met/Templeton Growth Portfolio
substitution, will have the same or lower total expense ratios taking
into account fund expenses and current fee waivers.
17. In the following substitutions, the management fee and/or
applicable Rule 12b-1 fee of the Replacement Fund are either currently
higher, or, at certain management fee breakpoints, may be higher than
those of the respective Existing Fund: Delaware VIP Small Cap Value
Series/Third Avenue Small Cap Value Portfolio; Janus Aspen Global
Technology Portfolio/RCM Technology Portfolio; Legg Mason Global
Currents Variable International All Cap Opportunity Portfolio/MFS
Research International Portfolio; Legg Mason Western Asset Variable
Diversified Strategic Income Portfolio/Western Asset Management
Strategic Bond Opportunities Portfolio; Legg Mason Western Asset
Variable Strategic Bond Portfolio/Western Asset Management Strategic
Bond Opportunities Portfolio; Pioneer Fund VCT Portfolio/Pioneer Fund
Portfolio; Templeton Growth Fund, Inc./Met/Templeton Growth Portfolio;
and Templeton Growth Securities Fund/Met/Templeton Growth Portfolio.
18. The Substitution Applicants propose to limit Contract charges
attributable to Contract value invested in the Replacement Funds
following the proposed substitutions to a rate that would offset the
difference in the expense ratio between each Existing Fund's net
expense ratio and the net expense ratio for the respective Replacement
Fund.
19. Except for the Templeton Growth Securities Fund/Met/Templeton
Growth Portfolio substitution where there is an increase in net
expenses after waivers of 0.01% and the Pioneer Fund VCT Portfolio/
Pioneer Fund Portfolio where there is no increase or decrease in net
expense ratios, after waivers, the substitutions will result in
decreased net expense ratios, after waivers, ranging from 1 basis point
to 24 basis points. Moreover, there will be no increase in Contract
fees and expenses, including mortality and expense risk fees and
administration and distribution fees charged to the Separate Accounts
as a result of the substitutions.
20. The Substitution Applicants believe that the Replacement Funds
have investment objectives, policies and risk profiles, as described in
their prospectuses, that are substantially the same as, or sufficiently
similar to, the corresponding Existing Funds to make those Replacement
Funds appropriate candidates as substitutes.
21. In addition, after the substitutions, neither MetLife Advisers,
LLC nor any of their affiliates will receive compensation from the
charges to the Separate Accounts related to the Contracts or from Rule
12b-1 fees or revenue sharing from the Replacement Funds in excess of
the compensation currently received from the investment advisers or
distributors of the Existing Funds.
22. The share classes of the Replacement Funds are either identical
to or less than the share classes of the Existing Funds with respect to
the imposition of Rule 12b-1 fees currently imposed, except with
respect to the substitution of MFS Research International Portfolio
(Class B shares--0.25%) for Legg Mason Global Currents Variable
International All Cap Opportunity Portfolio (single share class--0%);
Western Asset Management Strategic Bond Opportunities Portfolio (Class
B shares--0.25%) for Legg Mason Western Asset Variable Diversified
Strategic Income Portfolio (single share class--0%); Western Asset
Management Strategic Bond Opportunities Portfolio (Class B shares--
0.25%) for Legg Mason Western Asset Variable Strategic Bond Portfolio
(Class I--0%).
23. Each MIST and Met Series Fund Replacement Fund's Class B shares
Rule 12b-1 fees can be raised to 0.50%, each MIST Replacement Fund's
Class E shares Rule 12b-1 fees can be raised to 0.25% and each Met
Series Fund Replacement Fund's Class E shares Rule 12b-1 fees can be
raised to 0.50% of net assets by the Replacement Fund's Board of
Directors/Trustees without shareholder approval. However, Met Series
Fund and MIST represent that Rule 12b-1 fees of the Class B and Class E
shares of the Replacement Funds issued in connection with the proposed
substitutions will not be raised above the current rate without
approval of a majority in interest of the respective Replacement Funds'
shareholders after the substitutions.
24. The distributors of the Existing Funds pay to the Insurance
Companies, or their affiliates, any 12b-1 fees associated with the
class of shares sold to the Separate Accounts. Similarly, the
distributors for MIST and Met Series Fund will receive from the
applicable class of shares held by the Separate Accounts Rule 12b-1
fees in the same amount or a lesser amount than the amount paid by the
Existing Funds, except as described above.
25. Further, in addition to any Rule 12b-1 fees, the investment
advisers or distributors of the Existing Funds pay the Insurance
Companies or one of their affiliates from 0 to 50 basis points for the
Existing Funds' classes of shares involved in the substitutions.
Following the substitutions, these payments will not be made on behalf
of the Replacement Funds. Rather, the Insurance Companies or their
affiliates will have available both the 25 and 15 basis points in Rule
12b-1 fees from the Replacement Funds (with respect to Class B and
Class E shares, respectively) and, as owners of the Replacement Funds'
adviser, profit distributions from the adviser. These profits from
investment advisory fees may be more or less than the fees being paid
by the Existing Funds.
Applicants' Legal Analysis and Conditions
1. The Substitution Applicants request that the Commission issue an
order pursuant to Section 26(c) of the Act approving the proposed
substitutions.
2. Applicants represent that the Contracts permit the applicable
Insurance Company, 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.
3. By a supplement to the prospectuses for the Contracts and the
Separate Accounts, each Insurance Company has notified all owners of
the Contracts of its intention to take the necessary actions, including
seeking the order requested by this Application, to substitute shares
of the funds as described herein. The supplement has advised Contract
owners that from the date of the supplement until the date of the
proposed substitution, owners are permitted to make one transfer of
Contract value (or annuity unit exchange) out of the Existing Fund sub-
account to one or more other sub-accounts without the transfer (or
exchange) being treated as one of a limited number of permitted
transfers (or exchanges) or a limited number of transfers (or
exchanges) permitted without a transfer charge. The
[[Page 405]]
supplement also has informed Contract owners that the Insurance Company
will not exercise any rights reserved under any Contract to impose
additional restrictions on transfers until at least 30 days after the
proposed substitutions. The supplement has also advised Contract owners
that for at least 30 days following the proposed substitutions, the
Insurance Companies will permit Contract owners affected by the
substitutions to make one transfer of Contract value (or annuity unit
exchange) out of the Replacement Fund sub-account to one or more other
sub-accounts without the transfer (or exchange) being treated as one of
a limited number of permitted transfers (or exchanges) or a limited
number of transfers (or exchanges) permitted without a transfer charge.
4. The proposed substitutions will take place at relative net asset
value with no change in the amount of any Contract owner's Contract
value, cash value, or death benefit or in the dollar value of his or
her investment in the Separate Accounts.
5. The process for accomplishing the transfer of assets from each
Existing Fund to its corresponding Replacement Fund will be determined
on a case-by-case basis. In most cases, it is expected that the
substitutions will be effected by redeeming shares of an Existing Fund
for cash and using the cash to purchase shares of the Replacement Fund.
In certain other cases, it is expected that the substitutions will be
effected by redeeming the shares of an Existing Fund in-kind; those
assets will then be contributed in-kind to the corresponding
Replacement Fund to purchase shares of that Fund. All in-kind
redemptions from an Existing Fund of which any of the Substitution
Applicants is an affiliated person will be effected in accordance with
the conditions set forth in the Commission's no-action letter issued to
Signature Financial Group, Inc. (available December 28, 1999).
6. Contract owners will not incur any fees or charges as a result
of the proposed substitutions, nor will their rights or an Insurance
Company's obligations under the Contracts be altered in any way. All
expenses incurred in connection with the proposed substitutions,
including brokerage, legal, accounting, and other fees and expenses,
will be paid by the Insurance Companies. In addition, the proposed
substitutions will not impose any tax liability on Contract owners. The
proposed substitutions will not cause the Contract fees and charges
currently being paid by existing Contract owners to be greater after
the proposed substitutions than before the proposed substitutions. No
fees will be charged on the transfers made at the time of the proposed
substitutions, because the proposed substitutions will not be treated
as a transfer for the purpose of assessing transfer charges or for
determining the number of remaining permissible transfers in a Contract
year.
7. In addition to the prospectus supplements distributed to owners
of Contracts, within five business days after the proposed
substitutions are completed, Contract owners will be sent a written
notice informing them that the substitutions were carried out and that
they may make one transfer of all Contract value or cash value under a
Contract invested in any one of the sub-accounts on the date of the
notice to one or more other sub-accounts available under their Contract
at no cost and without regard to the usual limit on the frequency of
transfers among sub-accounts or from the variable account options to
the fixed account options. The notice will also reiterate that (other
than with respect to ``market timing'' activity) the Insurance Company
will not exercise any rights reserved by it under the Contracts to
impose additional restrictions on transfers or to impose any charges on
transfers until at least 30 days after the proposed substitutions. The
Insurance Companies will also send each Contract owner current
prospectuses for the Replacement Funds involved to the extent that they
have not previously received a copy.
8. Each Insurance Company also is seeking approval of the proposed
substitutions from any State insurance regulators whose approval may be
necessary or appropriate.
9. The Substitution Applicants agree that for those who were
Contract owners on the date of the proposed substitutions, the
Insurance Companies will reimburse, on the last business day of each
fiscal period (not to exceed a fiscal quarter) during the twenty-four
months following the date of the proposed substitutions, those Contract
owners whose sub-account invests in the Replacement Fund such that the
sum of the Replacement Fund's net operating expenses (taking into
account fee waivers and expense reimbursements) and sub-account
expenses (asset-based fees and charges deducted on a daily basis from
sub-account assets and reflected in the calculation of sub-account unit
values) for such period will not exceed, on an annualized basis, the
sum of the Existing Fund's net operating expenses taking into account
fee waivers and expense reimbursements and sub-account expenses for
fiscal year 2009, except with respect to the Delaware VIP Small Cap
Value Series/Third Avenue Small Cap Value Portfolio, Janus Aspen Global
Technology Portfolio/RCM Technology Portfolio, Legg Mason Global
Currents Variable International All Cap Opportunity Portfolio/MFS
Research International Portfolio, Legg Mason Western Asset Variable
Diversified Strategic Income Portfolio/Western Asset Management
Strategic Bond Opportunities Portfolio, Legg Mason Western Asset
Variable Strategic Bond Portfolio/Western Asset Management Strategic
Bond Opportunities Portfolio, Pioneer Fund VCT Portfolio/Pioneer Fund
Portfolio, Templeton Growth Fund, Inc./Met/Templeton Growth Portfolio,
and Templeton Growth Securities Fund/Met/Templeton Growth Portfolio
substitutions.
10. With respect to the Delaware VIP Small Cap Value Series/Third
Avenue Small Cap Value Portfolio, Janus Aspen Global Technology
Portfolio/RCM Technology Portfolio, Legg Mason Global Currents Variable
International All Cap Opportunity Portfolio/MFS Research International
Portfolio, Legg Mason Western Asset Variable Diversified Strategic
Income Portfolio/Western Asset Management Strategic Bond Opportunities
Portfolio, Legg Mason Western Asset Variable Strategic Bond Portfolio/
Western Asset Management Strategic Bond Opportunities Portfolio,
Pioneer Fund VCT Portfolio/Pioneer Fund Portfolio substitutions,
Templeton Growth Fund, Inc./Met/Templeton Growth Portfolio, and
Templeton Growth Securities Fund/Met/Templeton Growth Portfolio
substitutions, the reimbursement agreement with respect to the
Replacement Fund's operating expenses and sub-account expenses, will
extend for the life of each Contract outstanding on the date of the
proposed substitutions.
11. The Substitution Applicants further agree that, except with
respect to the Delaware VIP Small Cap Value Series/Third Avenue Small
Cap Value Portfolio, Janus Aspen Global Technology Portfolio/RCM
Technology Portfolio, Legg Mason Global Currents Variable International
All Cap Opportunity Portfolio/MFS Research International Portfolio,
Legg Mason Western Asset Variable Diversified Strategic Income
Portfolio/Western Asset Management Strategic Bond Opportunities
Portfolio, Legg Mason Western Asset Variable Strategic Bond Portfolio/
Western Asset Management Strategic Bond Opportunities Portfolio,
[[Page 406]]
Pioneer Fund VCT Portfolio/Pioneer Fund Portfolio, Templeton Growth
Fund, Inc./Met/Templeton Growth Portfolio and Templeton Growth
Securities Fund/Met/Templeton Growth Portfolio substitutions, the
Insurance Companies will not increase total separate account charges
(net of any reimbursements or waivers) for any existing owner of the
Contracts on the date of the substitutions for a period of two years
from the date of the substitutions.
12. With respect to the Delaware VIP Small Cap Value Series/Third
Avenue Small Cap Value Portfolio, Janus Aspen Global Technology
Portfolio/RCM Technology Portfolio, Legg Mason Global Currents Variable
International All Cap Opportunity Portfolio/MFS Research International
Portfolio, Legg Mason Western Asset Variable Diversified Strategic
Income Portfolio/Western Asset Management Strategic Bond Opportunities
Portfolio, Legg Mason Western Asset Variable Strategic Bond Portfolio/
Western Asset Management Strategic Bond Opportunities Portfolio,
Pioneer Fund VCT Portfolio/Pioneer Fund Portfolio, Templeton Growth
Fund, Inc./Met/Templeton Growth Portfolio, and Templeton Growth
Securities Fund/Met/Templeton Growth Portfolio substitutions, the
agreement not to increase the separate account charges will extend for
the life of each Contract outstanding on the date of the proposed
substitutions.
13. In each case, the applicable Insurance Companies believe that
it is in the best interests of the Contract owners to substitute the
Replacement Fund for the Existing Fund. The Insurance Companies believe
that in cases where the Replacement Fund has a new sub-adviser, the new
sub-adviser will, over the long term, be positioned to provide at least
comparable performance to that of the Existing Fund's sub-adviser.
14. The Substitution Applicants anticipate that Contract owners
will be better off with the array of sub-accounts offered after the
proposed substitutions than they have been with the array of sub-
accounts offered prior to the substitutions.
15. The Substitution Applicants submit that none of the proposed
substitutions is of the type that Section 26(c) was designed to
prevent.
16. The Substitution Applicants request an order of the Commission
pursuant to Section 26(c) of the Act approving the proposed
substitutions by the Insurance Companies.
17. The Section 17 Applicants request an order under Section 17(b)
exempting them from the provisions of Section 17(a) to the extent
necessary to permit the Insurance Companies to carry out each of the
proposed substitutions.
18. Section 17(a)(1) of the Act, in relevant part, prohibits any
affiliated person of a registered investment company, or any affiliated
person of such person, acting as principal, from knowingly selling any
security or other property to that company. Section 17(a)(2) of the Act
generally prohibits the persons described above, acting as principals,
from knowingly purchasing any security or other property from the
registered company.
19. Because shares held by a separate account of an insurance
company are legally owned by the insurance company, the Insurance
Companies and their affiliates collectively own of record substantially
all of the shares of MIST and Met Series Fund. Therefore, MIST and Met
Series Fund and their respective funds are arguably under the control
of the Insurance Companies notwithstanding the fact that Contract
owners may be considered the beneficial owners of those shares held in
the Separate Accounts. If MIST and Met Series Fund and their respective
funds are under the control of the Insurance Companies, then each
Insurance Company is an affiliated person or an affiliated person of an
affiliated person of MIST and Met Series Fund and their respective
funds. If MIST and Met Series Fund and their respective funds are under
the control of the Insurance Companies, then MIST and Met Series Fund
and their respective funds are affiliated persons of the Insurance
Companies.
20. Regardless of whether or not the Insurance Companies can be
considered to control MIST and Met Series Fund and their respective
funds, because the Insurance Companies own of record more than 5% of
the shares of each of them and are under common control with each
Replacement Fund's investment adviser, the Insurance Companies are
affiliated persons of both MIST and Met Series Fund and their
respective funds. Likewise, their respective funds are each an
affiliated person of the Insurance Companies.
21. The Insurance Companies, through their separate accounts in the
aggregate own more than 5% of the outstanding shares of the following
Existing Funds: Janus Aspen Global Technology Portfolio, Legg Mason
Clearbridge Variable Capital Portfolio, Legg Mason Global Currents
Variable International All Cap Opportunity Portfolio, Legg Mason
Western Asset Variable Diversified Strategic Income Portfolio, Legg
Mason Western Asset Variable Strategic Bond Portfolio, Pioneer Bond VCT
Portfolio and Pioneer Fund VCT Portfolio. Therefore, each Insurance
Company is an affiliated person of those funds.
22. Because the substitutions may be effected, in whole or in part,
by means of in-kind redemptions and purchases, the substitutions may be
deemed to involve one or more purchases or sales of securities or
property between affiliated persons. The proposed transactions may
involve a transfer of portfolio securities by the Existing Funds to the
Insurance Companies; immediately thereafter, the Insurance Companies
would purchase shares of the Replacement Funds with the portfolio
securities received from the Existing Funds. Accordingly, as the
Insurance Companies and certain of the Existing Funds listed above, and
the Insurance Companies and the Replacement Funds, could be viewed as
affiliated persons of one another under Section 2(a)(3) of the Act, it
is conceivable that this aspect of the substitutions could be viewed as
being prohibited by Section 17(a).
23. Section 17(b) of the Act provides that the Commission may, upon
application, grant an order exempting any transaction from the
prohibitions of Section 17(a) if the evidence establishes that: (a) The
terms of the proposed transaction, including the consideration to be
paid or received, are reasonable and fair and do not involve
overreaching on the part of any person concerned; (b) the proposed
transaction is consistent with the policy of each registered investment
company concerned, as recited in its registration statement and records
filed under the Act; and (c) the proposed transaction is consistent
with the general purposes of the Act.
24. The Section 17 Applicants submit that for all the reasons
stated above the terms of the proposed in-kind purchases of shares of
the Replacement Funds by the Insurance Companies, including the
consideration to be paid and received, as described in this
Application, are reasonable and fair and do not involve overreaching on
the part of any person concerned. The Section 17 Applicants also submit
that the proposed in-kind purchases by the Insurance Companies are
consistent with the policies of: (a) MIST and of its Third Avenue Small
Cap Value, RCM Technology, Met/Templeton Growth, MFS Research
International, PIMCO Total Return, and Pioneer Fund Portfolios; and (b)
Met Series Fund and of its Davis Venture Value, Western Asset
Management Strategic Bond Opportunities and Van Eck Global Natural
Resources Portfolios,
[[Page 407]]
as recited in the current registration statements and reports filed by
each under the Act. Finally, the Section 17 Applicants submit that the
proposed substitutions are consistent with the general purposes of the
Act.
25. To the extent that the in-kind purchases by the Insurance
Company of the Replacement Funds' shares are deemed to involve
principal transactions among affiliated persons, the procedures
described below should be sufficient to assure that the terms of the
proposed transactions are reasonable and fair to all participants. The
Section 17 Applicants maintain that the terms of the proposed in-kind
purchase transactions, including the consideration to be paid and
received by each fund involved, are reasonable, fair and do not involve
overreaching principally because the transactions will conform with all
but one of the conditions enumerated in Rule 17a-7. The proposed
transactions will take place at relative net asset value in conformity
with the requirements of Section 22(c) of the Act and Rule 22c-1
thereunder with no change in the amount of any Contract owner's
contract value or death benefit or in the dollar value of his or her
investment in any of the Separate Accounts. Contract owners will not
suffer any adverse tax consequences as a result of the substitutions.
The fees and charges under the Contracts will not increase because of
the substitutions. Even though the Separate Accounts, the Insurance
Companies, MIST and Met Series Fund may not rely on Rule 17a-7, the
Section 17 Applicants believe that the Rule's conditions outline the
type of safeguards that result in transactions that are fair and
reasonable to registered investment company participants and preclude
overreaching in connection with an investment company by its affiliated
persons. In addition, as stated above, the in-kind redemptions will
only be made in accordance with the conditions set out in the Signature
Financial Group no-action letter (December 29, 1999).
26. The boards of MIST and Met Series Fund have adopted procedures,
as required by paragraph (e)(1) of Rule 17a-7, pursuant to which the
series of each may purchase and sell securities to and from their
affiliates. The Section 17 Applicants will carry out the proposed
Insurance Company in-kind purchases in conformity with all of the
conditions of Rule 17a-7 and each series' procedures thereunder, except
that the consideration paid for the securities being purchased or sold
may not be entirely cash. Nevertheless, the circumstances surrounding
the proposed substitutions will be such as to offer the same degree of
protection to each Replacement Fund from overreaching that Rule 17a-7
provides to them generally in connection with their purchase and sale
of securities under that Rule in the ordinary course of their business.
In particular, the Insurance Companies (or any of their affiliates)
cannot effect the proposed transactions at a price that is
disadvantageous to any of the Replacement Funds. Although the
transactions may not be entirely for cash, each will be effected based
upon (1) the independent market price of the portfolio securities
valued as specified in paragraph (b) of Rule 17a-7, and (2) the net
asset value per share of each fund involved valued in accordance with
the procedures disclosed in its respective investment company
registration statement and as required by Rule 22c-1 under the Act. No
brokerage commission, fee, or other remuneration will be paid to any
party in connection with the proposed in kind purchase transactions.
27. The sale of shares of Replacement Funds for investment
securities, as contemplated by the proposed Insurance Company in-kind
purchases, is consistent with the investment policies and restrictions
of the Investment Companies and the Replacement Funds because (a) the
shares are sold at their net asset value, and (b) the portfolio
securities are of the type and quality that the Replacement Funds would
each have acquired with the proceeds from share sales had the shares
been sold for cash. To assure that the second of these conditions is
met, MetLife Advisers, LLC and the sub-adviser, as applicable, will
examine the portfolio securities being offered to each Replacement Fund
and accept only those securities as consideration for shares that it
would have acquired for each such fund in a cash transaction.
28. The Section 17 Applicants submit that the proposed Insurance
Company in-kind purchases are consistent with the general purposes of
the Act as stated in the Findings and Declaration of Policy in Section
1 of the Act and that the proposed transactions do not present any of
the conditions or abuses that the Act was designed to prevent.
29. The Section 17 Applicants request that the Commission issue an
order pursuant to Section 17(b) of the Act exempting the Separate
Accounts, the Insurance Companies, MIST, Met Series Fund and each
Replacement Fund from the provisions of Section 17(a) of the Act to the
extent necessary to permit the Insurance Companies on behalf of the
Separate Accounts to carry out, as part of the substitutions, the in-
kind purchase of shares of the Replacement Funds which may be deemed to
be prohibited by Section 17(a) of the Act.
Conclusion
Applicants assert that for the reasons summarized above that the
proposed substitutions and related transactions meet the standards of
Section 26(c) of the Act and are consistent with the standards of
Section 17(b) of the Act and that the requested orders should be
granted.
For the Commission, by the Division of Investment Management
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-33117 Filed 1-3-11; 8:45 am]
BILLING CODE 8011-01-P
