[Federal Register Volume 60, Number 173 (Thursday, September 7, 1995)]
[Notices]
[Pages 46674-46678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22196]



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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21330; File No. 812-9468]


Keyport Life Insurance Company, et al.

August 31, 1995.
Agency: Securities and Exchange Commission (``SEC'' or ``Commission'').

Action: Notice of Application for an Order under the Investment Company 
Act of 1940 (``1940 Act'').

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Applicants: Keyport Life Insurance Company (``Keyport''), KMA Variable 
Account (``KMA Account''), Keyport Variable Account I (``Variable 
Account I''), Independence Life and Annuity Company (formerly, Keyport 
America Life Insurance Company, ``Keyport America''),\1\ Independence 
Variable Annuity Separate Account (formerly, Keyport America Variable 
Annuity Separate Account, ``KA VA Account''), Independence Variable 
Life Separate Account (formerly, Keyport America Variable Life Separate 
Account, ``KA VLI Account''), Liberty Life Assurance Company of Boston 
(``Liberty Life'') and Variable Account-K (``Account K'').

    \1\ Keyport America Variable Life Insurance Company changed its 
name on July 13, 1995. To avoid confusion and effect a smooth 
transition, the company and its separate accounts may continue to 
use the name ``Keyport America'' for a period of time.
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Relevant 1940 Act Sections: Approval requested under Section 26(b) and 
exemption requested under Section 17(b) from Section 17(a).

Summary of Application: Applicants seek an order approving the 
substitution of shares of the Managed Assets Fund (``MAF'') for shares 
of the Strategic Managed Assets Fund (``SMAF''), each of which is a 
portfolio of SteinRoe Variable Investment Trust (``SteinRoe Trust''); 
shares of SteinRoe Trust's Mortgage Securities Income Fund (``MSIF'') 
for shares of the Colonial-Keyport U.S. Government Fund (``USGF'') of 
Keyport Variable Investment Trust (``Keyport Trust''); and shares of 
Keyport Trust's Colonial-Keyport Strategic Income Fund (``SIF'') for 
shares of SteinRoe Trust's Managed Income Fund (``MIF'') (the 
``Substitution'').

Filing Date: The application was filed on February 6, 1995 and amended 
on August 30, 1995.

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 on the application by writing to the 
Commission's Secretary and serving Applicants with a copy of the 
request, personally or by mail. Hearing requests must be received by 
the Commission by 5:30 p.m., on September 25, 1995, and should be 
accompanied by proof of service on Applicants in the form of an 
affidavit or, for lawyers, a certificate of service. Hearing requests 
should state the nature of the writer's interest, the reason for the 
request, and the issues contested. Persons may request notification of 
a hearing by writing to the Secretary of the Commission.

Addresses: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549. Applicants, c/o James Klopper, Esq., 
Keyport Life Insurance Company, 125 High Street, Boston, Massachusetts 
02110.

For Further Information Contact: Joyce Merrick Pickholz, Senior 
Counsel, or Wendy Finck Friedlander, Deputy Chief, at (202) 942-0670, 
Office of Insurance Products, Division of Investment Management.

Supplementary Information: Following is a summary of the application. 
The complete application is available for a fee from the SEC's Public 
Reference Branch.

Applicants' Representations

    1. Keyport is a stock life insurance company and an indirect 
majority-owned subsidiary of Liberty Mutual Insurance Company 
(``Liberty Mutual''). Among Liberty Mutual's other indirect 
subsidiaries are the investment advisory firm of SteinRoe & Farnham 
Incorporated (``SteinRoe''), which is the adviser to SteinRoe Trust, 
and Keyport Advisory Services Corp. (``Keyport Advisory''), which is 
the adviser to Keyport Trust. Keyport offers fixed individual life 
insurance and individual and group fixed and variable immediate and 
deferred annuity contracts on a non-participating basis. Keyport 
currently is not offering new variable life insurance policies.
    2. Keyport America is a stock life insurance company and a wholly-
owned subsidiary of Keyport. Keyport America is authorized to transact 
life insurance and annuity business in all states, except New York, and 
in the District of Columbia. Keyport America is not currently offering 
new variable annuity contracts or variable life insurance policies.
    3. Liberty Life is a stock life insurance company and a wholly-
owned subsidiary of Liberty Mutual and Liberty Mutual Fire Insurance 
Company. Liberty Life offers individual life insurance and group life 
and health insurance and individual and group annuity contracts.
    4. MAF, MSIF and SIF (collectively, ``Substitute Funds'') and SMAF, 
USGF and MIF, together with other portfolios of SteinRoe Trust and 
Keyport Trust, serve as eligible funding vehicles (``Eligible Funds'') 
for certain flexible premium variable annuity contracts (``Contracts'') 
offered by KMA Account and Account-K and previously offered by KA VA 
Account and certain single premium variable life insurance policies 
(``Policies'') previously offered by Variable Account I and KA VLI 
Account (collectively, ``Accounts'').
    5. The Accounts are segregated investment accounts registered under 
the 1940 Act as unit investment trusts. Each Account is divided into 
sub-accounts (``Sub-accounts'') each of which invests in the 
corresponding portfolio of SteinRoe Trust (including MAF, SMAF, MSIF, 
and MIF), or Keyport Trust (including USGF and SIF). KMA Account serves 
as the funding medium for certain variable annuity Contracts issued and 
administered by Keyport. Variable Account I was established to fund 
certain individual single premium variable life insurance Policies 
previously offered by Keyport. KA VA Account was established to fund 
certain variable annuity Contracts previously offered by Keyport 
America. KA VLI Account was established to fund certain individual 
single premium variable life insurance Policies previously offered by 
Keyport America. Account-K serves as the funding medium for certain 
variable annuity Contracts issued and administered by Liberty Life. 
Keyport Financial Services Corp., a subsidiary of Keyport, serves as 
principal underwriter for the Contracts and Policies.
    6. The Contracts offered by KMA Account and the Contracts 
previously 

[[Page 46675]]
offered by KA VA Account provide for allocation to the Sub-accounts 
that invest in each of the portfolios of SteinRoe Trust and each of the 
portfolios of Keyport Trust. The Contracts offered by Account-K provide 
for investment in the Sub-Accounts that invest in each of the 
portfolios of SteinRoe Trust and five of the portfolios of Keyport 
Trust, including USGF and SIF. Keyport America is not actively offering 
the Contracts funded through KA VA Account.
    7. The Policies previously offered by Variable Account I and by KA 
VLI Account provide for allocation to the Sub-accounts that invest in 
each of the portfolios of SteinRoe Trust and each of the portfolios of 
Keyport Trust. Neither Keyport nor Keyport America is actively offering 
the Policies funded through Variable Account I or KA VLI Account, 
respectively.
    8. Established in connection with the sale of Keyport to Liberty 
Mutual by the Travelers Insurance Company of Hartford, Connecticut, the 
SteinRoe Trust is a series type investment company registered with the 
Commission on Form N-1A. SteinRoe Trust currently has seven investment 
portfolios (``SteinRoe Trust's Funds'') that have differing investment 
objectives, policies and restrictions.
    9. Keyport Trust is a registered series type investment company 
that currently has six investment portfolios (collectively, with 
SteinRoe Trust's Funds, ``Funds''), that have differing investment 
objectives, policies and restrictions.
    10. Applicants state that SMAF, USGF and MIF, as individual 
investment alternatives, have not generated the interest of owners of 
Contracts (``Contract Owners'') or owners of Policies (``Policy 
Owners'') (collectively ``Owners'') that was anticipated at the time of 
their creation. Also, overall variable product sales by Keyport, 
Keyport America and Liberty Life have not generated the volume of 
assets sufficient to make every investment alternative viable. 
According to the Applicants, in the one-year period ended December 31, 
1994, the assets of SMAF attributable to Owners only increased by 
approximately $2.0 million, the assets of USFG attributable to Owners 
decreased by approximately $1.6 million, and the assets of MIF 
attributable to Owners decreased by approximately $10.7 million.
    11. MAF, MSIF and SIF are currently available in connection with 
new purchases and transfers under the Contracts offered by KMA Account 
and Account-K, the Contracts previously offered by KA VA Account, and 
the Policies previously offered by Variable Account I and KA VLI 
Account. Applicants represent that Owners have received current 
prospectuses or prospectus supplements for the SteinRoe Trust and the 
Keyport Trust that include information concerning all Eligible Funds, 
including MAF, MSIF and SIF.
    12. Applicants state that, on December 31, 1994, the assets 
attributable to Owners of each of the Funds expected to be eliminated 
were relatively small, i.e., approximately $59.1 million in SMAF, 
approximately $29.2 million in USGF and approximately $42.4 million in 
MIF. In addition, none of these Funds have generated a sufficient level 
of Owner interest to justify their high expense ratios. Applicants 
state that the assets of USGF and MIF declined during the year ended 
December 31, 1994 and the assets of SMAF increased by only 
approximately $2.0 million. Moreover, Applicants further state that 
none of these Funds have generated sufficient Owner interest to justify 
the expense reimbursements that SteinRoe and Keyport Advisory have 
assumed with respect to the Funds. Applicants believe that it is not in 
the public interest to continue to utilize SMAF, USGF and MIF as 
funding vehicles for the Contracts and Policies and that they can 
better serve the interests of Owners by utilizing investment 
alternatives that they believe may be better suited to the needs and 
interests of Owners.
    13. Keyport, Keyport America and Liberty Life, on their own behalf 
and on behalf of the Accounts, propose to effect a substitution of 
shares of MAF for all shares of SMAF, shares of MSIF for all shares of 
USGF, and shares of SIF for all shares of MIF attributable to the 
Contracts and Policies. Keyport, Keyport America and Liberty Life have 
undertaken to pay all expenses and transaction costs associated with 
the Substitution, including any applicable brokerage commissions. On 
February 7, 1995, Keyport, Keyport America and Liberty Life 
supplemented the prospectuses of their respective Accounts to reflect 
the proposed Substitution (``Supplements''). The Supplements were sent 
to Owners. Keyport, Keyport America and Liberty Life will schedule the 
Substitution to occur as soon as practicable following the issuance of 
the order so as to maximize the benefits to be realized from the 
Substitution. Within five days after the Substitution, Keyport, Keyport 
America and Liberty Life will send to Owners written notice of the 
Substitution (the ``Notice'') that identifies the shares of the Funds 
that have been eliminated and the shares of the Funds that have been 
substituted. Keyport, Keyport America and Liberty Life will include in 
such mailing the supplements to the prospectuses for the Accounts that 
disclose the completion of the Substitution.
    14. Owners will be advised in the Notice that for a period of 
thirty days from the mailing of the Notice, Owners may transfer all 
assets, as substituted, to any other available Sub-account, without 
limitation and without charge. Moreover, any transfers of all available 
assets from SMAF, USGF and MIF from the date of the Supplements will 
not be counted as transfer requests under any contractual provisions of 
the Contracts or Policies that limit allowable transfers. The period 
from the date of the Supplements to thirty days from the mailing of the 
Notice is referred to herein as the ``Free Transfer Period.'' Following 
the Substitution, Owners will be afforded the same contract rights, 
including surrender and other transfer rights with regard to amounts 
invested under the Contracts and Policies as they currently have. 
Immediately following the Substitution, Keyport, Keyport America and 
Liberty Life, as appropriate, will combine: (i) The Sub-account 
invested in SMAF with the continuing Sub-account invested in MAF; (ii) 
the Sub-account invested in USGF with the continuing Sub-account 
invested in MSIF; and (iii) the Sub-account invested in MIF with the 
continuing Sub-account invested in SIF. Keyport, Keyport America and 
Liberty Life each will reflect this treatment in disclosure documents 
for their respective Accounts, the Financial Statements of their 
respective Accounts, the Financial Statements of their respective 
Accounts and the Form N-SAR annual reports filed by their respective 
Accounts.
    15. Keyport, Keyport America and Liberty Life each will redeem for 
cash and securities all shares of SMAF, USGF and MIF they currently 
hold on behalf of the Accounts at the close of business on the 
effective date of the Substitution. The redemption of shares of SMAF, 
USGF and MIF will be effected partly for cash and partly for securities 
as a partial ``redemption-in-kind.'' SteinRoe Trust and Keyport Trust 
will effect the redemptions-in-kind in a manner that is consistent with 
the investment objectives and policies and diversification requirements 
applicable to each Substitute Fund. Keyport, Keyport America and 
Liberty Life each will review the securities selected by SteinRoe and 
Keyport Advisory for redemption-in-kind to assure that such securities 
are suitable investments for 

[[Page 46676]]
each Substitute Fund. Prior to effecting the Substitution, SteinRoe 
Trust and Keyport Trust will take all actions necessary to comply with 
the requirements of Rule 18f-1 of the 1940 Act. The securities redeemed 
in kind will be used together with the cash proceeds to purchase the 
shares of each Substitute Fund. Applicants have determined that 
partially effecting the redemption of shares of SMAF, USGF and MIF in 
kind is appropriate based on the current similarity of the portfolio 
investments of SMAF, USGF and MIF to those of MAF, MSIF and SIF, 
respectively. The valuation of any in kind redemptions will be made on 
a basis consistent with the normal valuation procedures of SMAF, USGF, 
MIF and the Substitute funds. In all cases, Keyport, Keyport America 
and Liberty Life on behalf of their respective Accounts will 
simultaneously place the redemption requests with SMAF, USGF and MIF 
and the purchase orders with MAF, MSIF and SIF, respectively, so that 
the purchases will be for the exact amount of the redemption proceeds. 
As a result, at all times, monies attributable to Owners currently 
invested in SMAF, USGF and MIF will be fully invested.
    16. The full net asset value of the redeemed shares held by the 
Accounts will be reflected in the Owners' accumulation unit values 
following the Substitution. Keyport, Keyport America and Liberty Life 
have undertaken to assume all transaction costs and expenses relating 
to the Substitution, including any direct or indirect costs of 
liquidating the assets of SMAF, USGF and MIF so that the full net asset 
value of redeemed shares of SMAF, USGF and MIF held by the Accounts 
will be reflected in the Owners' accumulation unit values following the 
Substitution.
    17. SteinRoe and Keyport Advisory have been fully advised of the 
terms of the Substitution. Keyport, Keyport America and Liberty Life 
anticipate that SteinRoe and Keyport Advisory, to the extent 
appropriate, will conduct the trading of portfolio securities in a 
manner that provides for the anticipated redemptions of shares held by 
Keyport and the Accounts.
Applicants' Legal Analysis and Conditions

    1. Section 26(b) of the 1940 Act provides, in pertinent part that 
``[i]t shall be unlawful for any depositor or trustee of a registered 
unit investment trust holding the security of a single issuer to 
substitute another security for such security unless the Commission 
shall have approved such substitution.'' The purpose of Section 26(b) 
is both to protect the expectation of investors in a unit investment 
trust that the unit investment trust will accumulate the shares of a 
particular issuer and to prevent unscrutinized substitutions which 
might, in effect, force shareholders dissatisfied with a substituted 
security to redeem their shares, thereby incurring either a loss of the 
sales load deducted from initial purchase payments, an additional sales 
load upon reinvestment of the redemption proceeds, or both. Section 
26(b) affords this protection to investors by preventing a depositor or 
trustee of a unit investment trust holding the shares of one issuer 
from substituting for those shares the shares of another issuer, unless 
the Commission approves that substitution.
    2. Applicants represent that the purposes, terms and conditions of 
the Substitution are consistent with the principles and purposes of 
Section 26(b) and do not entail any of the abuses it is designed to 
prevent. Applicants submit that the Substitution is an appropriate 
solution to the limited Owner interest and investment in SMAF, USGF and 
MIF and consistent with the alternative funding plans for the Contracts 
and Policies through the corresponding Substitute Funds. Applicants 
assert that the Substitution is being proposed in order to provide a 
consolidation of assets of Funds that currently are, and in the future 
are expected to be, of insufficient size to promote consistent 
investment performance or to reduce operating expenses.
    3. Applicants represent that the Substitution will not result in 
the type of costly forced redemption that Section 26(b) was intended to 
guard against and is consistent with the protection of investors and 
the purposes fairly intended by the 1940 Act for the following reasons: 
(a) The Substitution is of shares of the Substitute Funds whose 
objectives, policies and restrictions are sufficiently similar to the 
objectives of the Funds to be eliminated so as to continue fulfilling 
the Owner's objectives and risk expectations; (b) if an Owner so 
requests, during the Free Transfer Period, assets will be reallocated 
for investment in an Owner-selected Fund or Portfolio. Applicants 
represent that the Free Transfer Period is sufficient time for Owners 
to reconsider the Substitution; (c) the Substitution, in all cases, 
will be at the net asset value of the respective shares, without the 
imposition of any transfer or similar charge; (d) Keyport, Keyport 
America and Liberty Life have undertaken to assume the expenses and 
transaction costs, including among others, legal and accounting fees 
and any brokerage commissions, relating to the Substitution and are 
effecting the redemption of shares of USGF and MIF in a manner that 
attributes all transaction costs to Keyport. The partial redemptions-
in-kind contemplated for appropriate securities of SMAF, USGF and MIF 
are expected to contribute to the reduction of such costs; (e) the 
Substitution will not be counted as a transfer under any contractual 
provisions of the Contracts or Policies that limit allowable transfers; 
(f) the Substitution in no way will alter the insurance benefits to 
Owners or the contractual obligations of Keyport, Keyport America and 
Liberty Life; (g) the Substitution in no way will alter the tax 
benefits to Owners; (h) Owners may choose simply to withdraw amounts 
credited to them following the Substitution, under the conditions that 
currently exist, subject to any applicable declining sales load; and 
(i) the Substitution is expected to confer certain modest economic 
benefits to Owners by virtue of the enhanced asset size of the 
Substitute Funds. Applicants consent to be bound by the terms and 
conditions listed immediately above in this paragraph.
    4. Applicants represent that, on the basis of the facts and 
circumstances described both in the application and below, they have 
determined that it is in the best interests of Owners to substitute 
shares of MAF, MSIF and SIF for shares of SMAF, USGF and MIF, 
respectively. Each of the Funds is an existing portfolio of either 
SteinRoe Trust or Keyport Trust. SteinRoe, the adviser of SteinRoe 
Trust, and Keyport Advisory, the adviser of Keyport Trust, are both 
indirect subsidiaries of Liberty Mutual. The Independent Accounts and 
distributor are the same for each of the Funds. Applicants have 
determined that: (i) The investment objective and related investments 
of MAF are significantly similar to those of SMAF; (ii) the investment 
objective and related investments of MSIF are significantly similar to 
those of USGF; and (iii) the investment objectives and related 
investments of SIF are significantly similar to those of MIF. 
Applicants represent that both SMAF and MAF are portfolios that use 
asset allocation across the asset categories of stocks, bonds and money 
market securities to seek to achieve high total returns. Applicants 
further represent that both USGF and MSIF are income-oriented 
portfolios that primarily use debt securities issued or guaranteed by 
the U.S. Government, its agencies or instrumentalities to seek to 
achieve a high level of current income. Finally, 

[[Page 46677]]
they represent that MIF and SIF are income-oriented portfolios that 
seek to achieve high current income, although SIF is a portfolio that 
uses more foreign sovereign debt obligations and more higher-yielding, 
lower-quality corporate debt securities to achieve its objectives than 
MIF is permitted to use. Applicants submit that, although MIF is a 
somewhat more conservatively managed portfolio whose use of foreign 
debt securities and high-yielding corporate bonds is permitted but more 
limited than in SIF, the average maturity and duration of both MIF's 
and SIF's portfolio securities are very similar.
    5. In reviewing the Funds to form an opinion as to which Fund or 
Portfolio was an appropriate alternative to SMAF, USGF and MIF, 
Applicants submit that they were faced with a different economic 
environment than when SMAF, USGF and MIF were first established. 
Therefore, Applicants concluded that the selection of a Fund or 
Portfolio that shared the overall investment objective(s) of the Funds 
to be eliminated and that involved a comparable investment strategy or 
risk exposure would best serve the interests of Owners. Applicants 
state that they considered the fact that the investment performance of 
each Substitute Fund in which Owners will be indirectly invested 
following the Substitution is similar or superior to the investment 
performance of the substituted fund or Portfolio.
    6. Applicants represent that SteinRoe Trust's adviser and 
administrator, SteinRoe, and Keyport Trust's adviser, Keyport Advisory, 
have agreed to reimburse each of the Funds for their operating expenses 
in excess of certain specified percentages until April 30, 1995. For 
the year ended December 31, 1994, for example, SteinRoe reimbursed SMAF 
and MIF for their operating expenses $17,691 and $38,790, respectively. 
USGF received no reimbursement for its operating expenses during that 
period. Applicants further represent that, after April 30, 1995, 
SteinRoe has determined to continue, if necessary, to voluntarily 
reimburse MAF and MSIF for their operating expenses in excess of .75% 
and .70%, respectively, of each such Fund's average daily net assets 
until April 30, 1996. In addition, Applicants represent that, after 
April 30, 1995, Keyport Advisory and its affiliates have voluntarily 
agreed to increase the reimbursement to SIF for its operating expenses 
so that all operating expenses in excess of .80% of its average daily 
net assets will be reimbursed until April 30, 1996. Applicants believe, 
that, starting with the one-year period beginning on May 1, 1995, the 
anticipated expenses for each of the Funds to be eliminated are 
expected to be higher than or approximately the same as the anticipated 
or actual expenses of each of the corresponding Substitute Funds. Thus, 
on an annual basis, give or take one or two basis points, Owners will 
not be exposed to higher expenses, following the substitution and may, 
in fact, benefit from the lower expense ratios that should result from 
the consolidation of assets following the substitution. With respect to 
SMAF and USGF, Applicants state that the substitution will result in 
the consolidation of the assets of those Funds with substantially 
larger and more stable Funds. With respect to MIF, Applicants represent 
that the substitution will result in the assets in SIF (which commenced 
operation on July 14, 1994) increasing to over $55.7 million. 
Applicants believe that these consolidations of assets should promote 
greater economies of scale that may help to lower each Fund's expense 
ratio and, thereby, increase each Fund's performance.
    7. Section 17(a)(1) of the 1940 Act prohibits any affiliated person 
of a registered investment company, or an affiliated person of such 
affiliated person, from selling any security or other property to such 
registered investment company. Section 17(a)(2) of the 1940 Act 
prohibits any of the persons described above from purchasing any 
security or other property from such registered investment company. As 
explained above, immediately following the substitution, Keyport, 
Keyport America and Liberty Life, as appropriate, will combine: (i) the 
Sub-account invested in SMAF with the continuing Sub-account invested 
in MAF; (ii) the Sub-account invested in USGF with the continuing Sub-
account invested in MSIF; and (iii) the Sub-account invested in MIF 
with the continuing Sub-account invested in SIF. Sub-accounts of a 
registered separate account are to be treated as separate investment 
companies in connection with substitution transactions. Therefore, 
Keyport, Keyport America and Liberty Life could be said to be 
transferring unit values between their Sub-accounts, and that the 
transfer of unit values could be said to involve purchases and sale 
transactions between Sub-accounts that are affiliated persons. For 
example, the Sub-account investing in SMAF could be said to be selling 
shares of such Fund to a Sub-account investing in MAF in return for 
units of such Sub-account. Conversely, it could be said that a Sub-
account investing in MAF was purchasing shares of SMAF. The sale and 
purchase transactions between Sub-accounts could be said to come within 
the scope of Sections 17(a)(1) and 17(a)(2) of the 1940 Act, 
respectively.Therefore, the substitution may require an exemption from 
section 17(a) of the 1940 Act, pursuant to section 17(b) of the 1940 
Act.
    8. Section 17(b) of the 1940 Act provides that the Commission may 
grant an order exempting transactions prohibited by section 17(a), upon 
application, if 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 over-reaching on 
the part of any person concerned; (b) the proposed transaction is 
consistent with the investment policy of each registered investment 
company concerned, as recited in its registration statement and reports 
filed under the 1940 Act; and (c) the proposed transaction is 
consistent with the general purposes of the 1940 Act. Applicants 
represent that the terms of the proposed transactions, as described in 
the application, are reasonable and fair, including the consideration 
to be paid and received; do not involve over-reaching; are consistent 
with the policies of the Funds of SteinRoe Trust and Keyport Trust; and 
are consistent with the general purposes of the 1940 Act.
    9. Applicants represent that, for all the reasons stated above, 
with regard to Section 26(b) of the 1940 Act, the Substitution is 
reasonable and fair. Applicants expect that existing and future Owners 
will benefit from the consolidation of assets in the corresponding 
Substitute Funds. Applicants state that the transactions effecting the 
Substitution, including the redemption of the shares of SMAF, USGF and 
MIF and the purchase of shares of MAF, MSIF and SIF, respectively, will 
be effected in conformity with Section 22(c) of the 1940 Act and Rule 
22c-1 thereunder, as described above. Moreover, Applicants state that 
the partial redemptions-in-kind of shares of the Funds will be effected 
in conformity with Rule 18f-1 and Rule 17a-7 under the 1940 Act and the 
procedures of SteinRoe Trust and Keyport Trust established pursuant to 
Rule 17a-7. Applicants submit that owner interests after the 
Substitution, in practical economic terms, will not differ in any 
measurable way from such interests immediately prior to the 
Substitution. In each case, Applicants assert that the consideration to 
be received and paid is, therefore, 

[[Page 46678]]
reasonable and fair. Keyport, Keyport America and Liberty Life each 
believe, based on their review of existing federal income tax laws and 
regulations and advice of counsel, that the Substitution will not give 
rise to any taxable income for Owners.

Applicants' Conclusions

    Applicants submit, for all of the reasons stated herein, that their 
requests meet the standards set out in Sections 17(b) and 26(b) of the 
1940 Act and that an order should, therefore, be granted. Accordingly, 
Applicants request an order pursuant to Sections 17(b) and 26(b) of the 
1940 Act approving the substitution of shares of MAF for shares of 
SMAF, the substitution of shares of MSIF for shares of USGS, and the 
substitution of shares of SIF for shares of MIF, respectively.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-22196 Filed 9-6-95; 8:45 am]
BILLING CODE 8010-01-M