[Federal Register Volume 65, Number 5 (Friday, January 7, 2000)]
[Notices]
[Pages 1195-1199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-380]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-24229; File No. 812-11732]
December 30, 1999.
Provident Mutual Life Insurance Company; Notice of Application
AGENCY: Securities and exchange Commission (the ``Commission'').
ACTION: Notice of application for an order pursuant to Section 26(b)
and Section 17(b) of the Investment Company Act of 1940 (the ``1940
Act'').
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SUMMARY OF APPLICATION: Provident Mutual Life Insurance Company
(``PMLIC''), Providentmutual Life and Annuity Company of America
(``PLACA''), Provident Mutual Variable Annuity Separate Account
(``PMLIC Annuity Account''), Provident Mutual Variable Separate Account
(``PMLIC Account''), Providentmutual Variable Annuity Separate Account
(``PLACA Annuity Account''), and Providentmutual Variable Life Separate
Account (``PLACA Life Account'') (together, the ``Applicants'') are
requesting an order of approval for the proposed substitution of shares
of the Equity 500 Index Portfolio (the ``New Portfolio'' of the Market
Street Fund, Inc. (``Market Street''), a management investment company
advised by an affiliate of PMLIC and PLACA, for shares of the Index 500
Portfolio (the ``Replaced Portfolio'') of the Variable Insurance
Products Fund II (``VIP II''), which is currently used as a variable
funding option under variable annuity and variable life contracts
(together, the ``Contracts'') issued by PMLIC or PLACA. Applicants also
seek an order pursuant to Section 17(b) of the 1940 Act to permit
Applicants to effect the substitution by redeeming shares of the
Replaced Portfolio in kind and using the proceeds to purchase shares of
the New Portfolio.
APPLICANTS: PMLIC, PLACA, PMLIC Annuity Account, PMLIC Account, PLACA
Annuity Account, and PLACA Life Account.
FILING DATE: The application was filed on August 2, 1999, and amended
on December 20, 1999.
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 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 January 24, 2000, and must 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
who wish to be notified of a hearing may requests notification by
writing to the Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, NW., Washington, DC 20549-0609. Applicants, c/o James G.
Potter, Esq., Provident Mutual Life Insurance Company, 1000
Chesterbrook Boulevard, Berwyn, Pennsylvania 19312-1181. Copies to
Jeffrey A. Dalke, Esq. and Cori E. Daggett, Esq., Drinker Biddle &
Reath LLP, One Logan Square, 18th and Cherry Streets, Philadelphia, PA
19103-6996.
FOR FURTHER INFORMATION CONTACT: Rebecca M. Marquigny, Senior Counsel,
or Keith E. Carpenter, Branch Chief, Office of Insurance Products,
Division of Investment Management, at (202) 942-0670.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the Commission's Public Reference Branch, 450 Fifth Street, NW,
Washington, DC 20549 (tel. (202) 942-8090).
Applicants' Representations
1. PMLIC, a mutual life insurance company chartered by the
Commonwealth of Pennsylvania, is authorized to transact life insurance
and annuity business in Pennsylvania and in 50 other jurisdictions.
PMLIC is the depositor and sponsor of the PMLIC Annuity Account and the
PMLIC Account.
2. PLACA is a stock life insurance company originally incorporated
under the laws of the Commonwealth of Pennsylvania in 1958, and
redomiciled as a Delaware insurance company in 1992. It is a wholly
owned subsidiary of PMLIC. PLACA is licensed to do business in 48
states and the District of Columbia. PLACA is the depositor and sponsor
of the PLACA Annuity Account and the PLACA Life Account.
3. PMLIC established the PMLIC Annuity Account on October 19, 1992
and the PMLIC Account on June 7, 1993 as segregated investment accounts
under Pennsylvania law. PLACA established the PLACA Annuity Account on
May 9, 1991 as a segregated investment account under Pennsylvania law,
and established the PLACA Life Account on June 30, 1994 as a segregated
investment account under Delaware law. Each Account is a ``separate
account'' as defined by Rule 0-1(e) under the 1940 Act, and is
registered with the Commission as a unit investment trust.
4. The PMLIC Account is divided into twenty subaccounts. Each
subaccount invests exclusively in shares representing an interest in a
separate corresponding Portfolio of one of five series-type management
companies. The assets of the PMLIC Account support variable life
insurance Contracts, and interests in the PMLIC Account offered through
such Contracts have been registered under the Securities Act of 1933
(the ``1933 Act'') on Form S-6.
5. The PMLIC Annuity Account is divided into thirty-one
subaccounts. Each subaccount invests exclusively in shares representing
an interest in a separate corresponding Portfolio of one of seven
series-type management companies. The assets of the PMLIC Annuity
Account support variable annuity Contracts, and interests in the PMLIC
Annuity Account offered through such Contracts have been registered
under the 1933 Act on Form N-4.
6. The PLACA Annuity Account is divided into thirty-one
subaccounts. Each subaccount invests exclusively in a Portfolio of one
of seven series-type registered investment management companies. The
assets of the PLACA
[[Page 1196]]
Annuity Account support variable annuity Contracts, and interests in
the PLACA Annuity Account offered through such Contracts have been
registered under the 1933 Act on Form N-4.
7. The PLACA Annuity Account is divided into twenty-five
subaccounts. Each subaccount invests in a Portfolio of one of six
series-type management companies. The assets of the PLACA Life Account
support variable life Contracts, and interests in the PLACA Life
Account offered through such Contracts have been registered under the
1933 Act on Form S-6.
8. The PMLIC Annuity Account, the PMLIC Account, the PLACA Annuity
Account and the PLACA Life Account, either directly or through their
subaccounts, invest in shares of various investment portfolios (the
``Portfolios''), including the Replaced Portfolio.
9. The Contracts are modified premium and flexible premium variable
life insurance contracts and individual flexible premium deferred
variable annuity contracts. PMLIC issues five of the variable life
insurance Contracts and one of the variable annuity Contracts that
would participate in the proposed substitution. PLACA issues three of
the variable life insurance Contracts and two variable annuity
Contracts that would participate in the proposed substitution. The
Contracts provide for the accumulation of values on a variable basis,
fixed basis, or both, during the accumulation period, and provide
settlement or annuity payment options on a fixed basis. PMLIC or PLACA,
under each of the Contracts, reserves the right to substitute shares of
one Portfolio for shares of another, including a Portfolio of a
different registered management investment company.
10. Generally, the variable life insurance Contracts provide for
twelve free transfers within one policy year, with a charge of $25
thereafter for any additional transfer within that policy year. Some
Contracts require a minimum transfer amount of $1,000. Another Contract
provides for four free transfers in a minimum amount of $100.
11. Three variable annuity Contracts provide for twelve free
transfers within one policy year, with a charge of $25 thereafter for
any additional transfer within that policy year. The remaining variable
annuity Contracts provide for a minimum transfer amount of $500 with no
limit on the number of transfers, except a limit of one transfer per
policy year from the Guaranteed Account.
12. VIP II was organized as a Massachusetts business trust on March
21, 1988. VIP II is registered under the 1940 Act as an open-end
diversified management investment company. VIP II is a series
investment company as defined by Rule 18f-2 under the 1940 Act and
currently comprises five portfolios. VIP II issues a separate series of
shares of beneficial interest in connection with each portfolio and has
registered these shares under the 1933 Act on Form N-1A. One of these
portfolios is the Replaced Portfolio. The investment adviser,
subadviser and distributor of the Replaced Portfolio are not affiliated
with PMLIC or PLACA. Shares of the Replaced Portfolio are held by the
Accounts either directly or indirectly through certain of their
subaccounts.
13. The Market Street Fund, Inc. (``Market Street'') was
incorporated in Maryland on March 21, 1985. Market Street is registered
under the 1940 Act as an open-end diversified management investment
company. Market Street is a series investment company as defined by
Rule 18f-2 under the Act and currently comprises eleven Portfolios.
Market Street issues a separate series of shares in connection with
each Portfolio and has registered these shares under the 1933 Act on
Form N-1A. Providentmutual Investment Management Company (``PIMC''), an
indirect subsidiary of PMLIC, serves as investment adviser to certain
of the Market Street Portfolios.
14. Market Street and PIMC are organizing the New Portfolio. PIMC
will serve as the investment adviser of the New Portfolio. PIMC will
enter into a contract with State Street Global Advisers (``State
Street''), a division of State Street Bank and Trust Company, under
which State Street will manage the New Portfolio as subadviser.
15. PMLIC, on its behalf and on behalf of the PMLIC Annuity Account
and the PMLIC Account, and PLACA, on its behalf and on behalf of the
PLACA Annuity Account and the PLACA Life Account, propose to substitute
shares of the New Portfolio for shares of the Replaced Portfolio. The
Applicants believe that by making the proposed substitutions in each of
the Accounts, they can better serve the interests of owners of their
Contracts as described below.
16. The Replaced Portfolio and the New Portfolio have substantially
the same investment objective. Both are passively managed portfolios
that seek investment results that correspond to the total return of
common stocks publicly traded in the United States, as represented by
the Standard & Poor's Composite Index of 500 Stocks (the ``S&P 500'').
Both invest substantially all of their assets in the common stocks that
are included in the S&P 500, and both attempt to minimize the
difference (``tracking error) between their investment performance and
the investment performance of the S&P 500. As a result of their similar
investment objectives and policies, the Replaced Portfolio and the New
Portfolio present substantially the same investment risk, which is the
risk of investing in the stocks of large U.S. issuers that are included
in the S&P 500.
17. At least until May 1, 2001, PMLIC and PLACA intend to maintain
the same total expense ratio for the New Portfolio as the Replaced
Portfolio has experienced. Total expenses as a percentage of net assets
are .28% for the Replaced Portfolio. This rate reflects a voluntary
reimbursement by the investment adviser for total operating expenses in
excess of .28% of average net assets. This arrangement may be
terminated at any time. Contractual total management fees for the
Replaced Portfolio are .24% of average net assets. Total annual
operating expenses without reimbursements would have been .35% of
average net assets for the fiscal year ended December 31, 1998.
Contractual total management fees for the New Portfolio will be .24% of
average net assets. Total annual operating expenses for the New
Portfolio are expected to be .39% of average net assets; however, total
expenses as a percentage of net assets for the New Portfolio will be
.28% as the result of the reimbursement of expenses.
18. Currently, approximately $300 million of Contract owner funds
are allocated to the Replaced Portfolio. PMLIC and PLACA intend to
reallocate the entire amount currently invested in the Replaced
Portfolio, less Contract owner reallocations to other currently
existing investment options, to the New Portfolio. The Applicants
believe that the amount of such Contract owner reallocations will be
insubstantial, and that the New Portfolio will have more than enough
assets to replicate the investment structure and performance of the S&P
500 Index.
19. The Applicants believe that it is in the interests of Contract
owners that PMLIC and PLACA control, to the extent practicable, the
underlying Portfolios in which the Accounts invest. The Applicants also
believe that Contract owners are benefited to the extent the PMLIC and
PLACA are able to improve their efficiency in administering the
products they offer and increase their oversight over the investment
options that are available to Contract owners.
20. Control, administrative efficiency and oversight are important
to Contract
[[Page 1197]]
owners because they help ensure the quality of PMLIC's and PLACA's
products and help reduce unnecessary costs. For example, because the
Replaced Portfolio is available as a portfolio in other variable
insurance products offered by unaffiliated companies, PMLIC and PLACA
do not have nearly as much influence over matters relating to the
Replaced Portfolio as they will have with respect to the New Portfolio.
In particular, by being able to interact directly with Market Street's
board of directors, PMLIC and PLACA will better be able to have
meaningful input on matters relating to the New Portfolio, such as the
use of particular investment techniques by the New Portfolio and the
level of Portfolio expenses. Furthermore, the substitution of the New
Portfolio will give PMLIC and PLACA greater ability to coordinate
events requiring communications to Contract owners. Changes to the
management or structure of Portfolios that are offered through the
Contracts but are managed by firms that are unaffiliated with PMLIC or
PLACA (such as the Replaced Portfolio) can result in costly, off-cycle
communications and mailings to Contract owners that might otherwise be
avoided. In addition, to the extent that the investment management of a
Portfolio is unsatisfactory for any reason, correction of the matter is
often less complicated and cheaper in situations where the investment
manager of the Portfolio is affiliated with the sponsor of the Accounts
than in situations where the investment manager is unaffiliated. In the
latter case, regulatory approval of the substitution of another
Portfolio may be the only available alternative.
21. The proposed substitution will thus enhance PMLIC's and PLACA's
ability to control both their costs and the costs of their products
(through administrative efficiencies and the greater ability to control
the costs of the New Portfolio), and in this way will be able to ensure
their continued competitiveness over time. Furthermore, the proposed
substitution will increase PMLIC's and PLACA's ability to monitor the
investment performance of the New Portfolio (including the accuracy of
its tracking the performance of the S&P 500), to react quickly to any
issues that may arise in connection with the New Portfolio's operations
and to ensure that the management of the New Portfolio is fully
consistent with both the terms and purposes of the Contracts offered to
customers and with the other investment options that are available
through the Contracts.
22. The proposed substitution reduces the possibility of conflicts
that can arise in connection with the use of Portfolios that are used
in ``shared'' funding arrangements by unaffiliated insurance companies.
23. By supplements to the various prospectuses for the Contracts
and the Accounts, all owners of the Contracts will be notified of the
Applicants' intention to take the necessary actions, including seeking
the order requested by the application, to substitute shares of the
Portfolio.
24. The supplements for the Accounts will advise Contract owners
that from the date of the supplement until 30 days after the date of
the proposed substitution, Contract owners are permitted to make one
transfer of all amounts under a Contract invested in any one of the
affected Accounts or subaccounts to another subaccount or separate
account available under a Contract without that transfer counting as a
``free'' transfer permitted under a Contract. The supplements also
inform Contract owners that PMLIC and PLACA will not exercise any
rights reserved under any Contract to impose additional restrictions on
transfers until at least 30 days after the proposed substitution.
25. The substitution will be effected by redeeming shares of the
Replaced Portfolio on the date of the substitution at net asset value
and using the proceeds to purchase shares of the New Portfolio at net
asset value on the same date. No transfer or similar charges will be
imposed by PMLIC or PLACA and, at all times, all contracts and policies
will remain unchanged and fully invested.
26. While the substitution may be effected in cash, the Applicants
are contemplating the possibility of a redemption of the shares of the
Replaced Portfolio partly or entirely in kind. If a redemption in kind
is effected, the cash and securities received as payment in kind would
then be used to purchase shares of the New Portfolio. Redemption and
contribution in kind would reduce the brokerage costs that would
otherwise be charged in connection with the redemption. In kind
redemption and contribution would be done in a manner consistent with
the investment objectives and policies and diversification requirements
of the New Portfolio, and PIMC and the New Portfolio's subadviser would
review the in kind redemption to assure that the assets proposed for
the substitution are suitable for the New Portfolio. The assets subject
to the in kind redemption and contribution would be valued based on the
normal valuation procedures of the Replaced Portfolio and the New
Portfolio. Any inconsistencies in valuation procedures between the
Replaced Portfolio and the New Portfolio would be reconciled so that
the redeeming and purchasing values are the same. It is expected that
any inconsistencies in valuation would be minimal because both the
Replaced Portfolio and the New Portfolio invest primarily in common
stocks listed on the S&P 500 Composite Price Index, securities with a
readily ascertainable market value. Both the Replaced Portfolio and the
New Portfolio value an equity security at its last sale price before
valuation, or if no sale price is available, at its closing bid price.
In effecting the substitution, the redemption requests and the purchase
orders will be placed simultaneously so that the purchases will be
effected for the exact amounts of the redemption proceeds. Consistent
with Rule 17a-7(d) under the 1940 Act, no brokerage commissions, fees
(except customary transfer fees) or other remunerations would be paid
in connection with any in kind transaction. In addition, no transfer
fees will be borne by the Contract owners.
27. The proposed substitution will take place at relative net asset
value with no change in the amount of any Contract owner's account
value or death benefit or in the dollar value of his or her investment
in any Contract. Contract owners will not incur any fees or charges as
a result of the proposed substitution, nor will their rights or PMLIC's
or PLACA's obligations under the Contracts be altered in any way. All
expenses incurred in connection with the proposed substitution,
including legal, accounting and other fees and expenses, including
brokerage expenses, will be paid by PMLIC or PLACA. In addition, the
proposed substitution will not impose any tax liability on Contract
owners. The proposed substitution will not cause the Contract fees and
charges currently being paid by existing Contract owners to be greater
after the proposed substitution than before the proposed substitution.
28. In addition to the prospectus supplements distributed to owners
of Contracts, within five days after the proposed substitution, any
Contract owners who were affected by the substitution will be sent a
written notice informing them that the substitution was carried out and
that for a period of 30 days following the substitution they may make
one transfer of all account value under a Contract invested in any one
of the affected Accounts or
[[Page 1198]]
subaccounts to another subaccount or separate account available under
their Contract without that transfer counting as one of any limited
number of transfers permitted in a Contract year or as one of a limited
number of transfers permitted in a Contract year free of charge. The
notice will also state that PMLIC and PLACA will not exercise any
rights reserved under any of the Contracts to impose additional
restrictions on transfers until at least 30 days after the proposed
substitution. The notice as delivered in certain states also may
explain that, under the insurance regulations in those states, Contract
owners who are affected by the substitution may exchange their
Contracts for fixed-benefit life insurance contracts or annuity
contracts, as applicable, issued by PMLIC (or one of its affiliates) or
PLACA (or one of its affiliates) during the 60 days following the
proposed substitutions. The notices will be accompanied by the current
prospectus for the New Portfolio.
29. PMLIC and PLACA also are seeking approval of the proposed
substitution form any state insurance regulators whose approval may be
necessary or appropriate.
Applicants' Legal Analysis
1. Section 26(b) of the Act requires the depositor of a registered
unit investment trust holding the securities of a single issuer to
receive commission approval before substituting the securities held by
the trust. Section 26(b) was added to the Act by the Investment Company
Amendments of 1970. Prior to the enactment of the 1970 amendments, a
depositor of a unit investment trust could substitute new securities
for those held by the trust by notifying the trust's security holders
of the substitution within five days of the substitution. In 1966, the
Commission, concerned with the high sales charges then common to most
unit investment trusts and the disadvantage these charges created for
investors who did not want to remain invested in the substituted fund,
recommended that Section 26 be amended to require that a proposed
substitution of the underlying investments of a trust receive prior
Commission approval. Congress responded to the Commission's concerns by
enacting Section 26(b) to require that the Commission approve all
substitutions by the depositor of investments held by unit investment
trusts.
2. The proposed substitution involves substitution of securities
within the meaning of Section 26(b) of the Act. Applicants therefore
request an order from the Commission pursuant to Section 26(b)
approving the proposed substitution.
3. The Contracts expressly reserve for PMLIC or PLACA the right,
subject to compliance with applicable law, to substitute shares of
another investment company for shares of an investment company held by
an Account or a subaccount of an Account. The prospectuses for the
Contracts and the Accounts contain appropriate disclosure of this
right. PMLIC and PLACA have each reserved this right of substitution to
preserve the opportunity to replace such shares in situations where a
substitution will further the mutual interests of Contract owners and
themselves.
4. In the present case, Contract owners will be at least as well
off after the proposed substitution as they are today. Shares of
Replaced Portfolio will be replaced by a portfolio with substantially
the same investment objectives and policies and substantially the same
expenses. Furthermore, the proposed substitution retains for Contract
owners the investment flexibility which is a central feature of the
Contracts. If the proposed substitution is carried out, the Contract
owners will be permitted to allocate purchase payments and transfer
account values between and among the same number of separate accounts
or subaccounts as they could before the proposed substitution. Most
importantly the proposed substitution provides the benefit of allowing
the Applicants greater control over the management and administration
of the Contracts and their underlying investments and reducing the risk
of harm that can result from less control.
5. In these respects, the proposed substitution is fully consistent
with the policies underlying Section 26(b). Unlike traditional unit
investment trusts where a depositor could only substitute an investment
security in a manner which permanently affected all the investors in
the trust, the Contracts provide each Contract owner with the right to
exercise his or her own judgment and transfer account values to other
separate accounts or subaccounts without cost or other disadvantage.
The proposed substitution will not result in the type of costly forced
redemption which Section 26(b) was designed to prevent.
6. The proposed substitution also is unlike the type of
substitution which Section 26(b) was designed to prevent in that by
purchasing a Contract, Contract owners select much more than a
particular investment company in which to invest their account values.
They also select the specific type of insurance coverage offered by
PMLIC or PLACA under their Contracts as well as numerous other rights
and privileges set forth in the Contracts. Contract owners would
reasonably have considered PMLIC's or PLACA's size, financial condition
and reputation for service in selecting their Contracts. These factors
will not change as a result of the proposed substitution.
7. The Applicants submit that the proposed substitution meets the
standards that the Commission and its staff have applied to similar
substitutions that have been approved in the past.
8. Section 17(a) (1) and (2) of the 1940 Act generally prohibit any
affiliated person of a registered investment company, or an affiliated
person of an affiliated person, from selling any security or other
property to such registered investment company and from purchasing any
security or other property from such registered investment company.
PMLIC and PLACA anticipate that the proposed substitution will be
accomplished in whole or in part by redeeming shares of the Replaced
Portfolio in kind rather than in cash and then using the securities
received to purchase shares of the New Portfolio.
9. PMLIC, as depositor of the PMLIC Annuity Account and the PMLIC
Account, effectively controls those Accounts, and therefore is an
affiliated person of each of the PMLIC Annuity Account and the PMLIC
Account. PLACA, as depositor of the PLACA Annuity Account and the PLACA
Life Account, effectively controls the PLACA Annuity Account and the
PLACA Life Account, and is therefore an affiliated person of those
Accounts.
10. The Accounts, PLACA and PIMC are under the common control of
PMLIC and therefore may be deemed to be affiliated persons of one
another. PIMC, as investment adviser to Market Street, is an affiliated
person of Market Street.
11. If the Applicants effect the proposed redemption and
contribution in kind, the Accounts would receive securities upon
redemption of shares of the Replaced Portfolio. The Accounts would then
purchase shares of the New Portfolio from Market Street with the
securities acquired in the redemption. The redemption and contribution
in kind therefore involve a purchase and sale of property among parties
which may be deemed to be affiliated persons under Section 17(a) of the
1940 Act.
12. Section 17(b) of the 1940 Act provides that the Commission may,
upon application, grant an order exemption any transaction from the
prohibitions of Section 17(a) if the
[[Page 1199]]
evidence establishes that: (1) The terms of the proposed transaction,
including the consideration to be paid or received, are reasonable and
fair and do not involve overreaching on the part of any person
concerned; (2) the proposed transaction is consistent with the policy
of each registered investment company concerned, as recited in its
registration statement and reports filed under the 1940 Act; and (3)
the proposed transaction is consistent with the general purposes of the
1940 Act.
13. The Applicants submit that the terms under which any redemption
and contribution in kind would be effected are reasonable and fair and
do not involve overreaching on the part of any person. The Applicants
further submit that the proposed transaction is consistent with the
policy of each registered investment company concerned and with the
general purposes of 1940 Act.
14. If a redemption and contribution in kind is effected, each of
PMLIC and PLACA, on behalf of its respective Accounts, would
contemporaneously place a redemption request with the Replaced
Portfolio and a purchase order with the New Portfolio so that each
purchase in the New Portfolio would correlate to the amount of the
redemption proceeds received from the Replaced Portfolio. As a result,
at all times, monies attributable to Contract owners then invested in
the Replaced Portfolio would remain fully invested.
15. Furthermore, the interests of the Contract owners would not be
diluted by the proposed transaction. The redemption and contribution in
kind would be done at values consistent with the policies of both the
Replaced Portfolio and the New Portfolio. In addition, PIMC and the
proposed subadviser of the New Portfolio would review the asset
transfers to ensure that the assets meet the objectives of the New
Portfolio and that they are valued under the appropriate valuation
procedures of the Replaced Portfolio and the New Portfolio. The in kind
redemption and contribution would reduce the brokerage costs that would
otherwise be charged in connection with the full redemption of shares
and would conform to the provisions of rule 17a-7(d) under the 1940
Act.
16. The Applicants believe proposed redemption and contribution in
kind are consistent with the general purposes of the 1940 Act and do
not present any of the abuses that the 1940 Act was designed to
address. The Applicants would carry out the proposed substitution and
any redemption and purchase in kind in a manner appropriate in the
public interest and consistent with the protection of investors. The
Applicants submit that the proposed redemption and contribution in kind
meets the standards the Commission and its staff have applied to
applications for orders of exemption for similar redemptions in kind
that have been granted in the past.
17. The Applicants request an order of the Commission pursuant to
Section 26(b) of the 1940 Act approving the proposed substitution by
PMLIC and PLACA and pursuant to Section 17(b) of the 1940 Act exempting
any related transaction involving a redemption and contribution in kind
from Section 17(a). The proposed substitution and related transaction
will not be completed until after both (1) the Commission has issued an
Order granting the relief requested in this application and (2) the
post-effective amendment to the registration statement of Market Street
registering the New Portfolio and its shares with the Commission is
effective.
Conclusion
For the reasons summarized above, Applicants assert that the
requested order meets the standards set forth in Section 26(b) of the
1940 Act and Section 17(b) of the 1940 Act and should, therefore, be
granted.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-380 Filed 1-6-00; 8:45 am]
BILLING CODE 8010-01-M