[Federal Register Volume 66, Number 188 (Thursday, September 27, 2001)]
[Notices]
[Pages 49435-49437]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24183]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-25166; File No. 812-12588]


Met Investors Series Trust and Metropolitan Life Insurance 
Company

September 21, 2001.
AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of Application under 176(b) of the Investment Company 
Act of 1940 (the ``Act'') for an exemption from section 17(a) of the 
Act.

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SUMMARY: Applicants request an order to allow certain series of a 
registered open-end investment company to acquire all of the assets and 
liabilities of certain other series of the same registered open-end 
investment company. Because of certain affiliations; applicants may not 
rely on Rule 17a-8 under the Act.

APPLICANTS: Met Investors Series Trust (``MIT'') and Metropolitan Life 
Insurance Company (``MetLife'').

FILING DATES The applicants was filed on August 3, 2001.

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 should be received by the Commission by 5:30 
p.m. on October 12, 2001 and should be accompanied by proof 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 request notification by writing to the 
Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549-0609. Applicants: Met Investors 
Series Trust, 22 Corporate Plaza Drive, Newport Beach, California 
92660,and Metropolitan Life Insurance Company, One Madison Avenue, New 
York, New York 10010.

FOR FURTHER INFORMATION CONTACT: Mark Cowan, Senior Counsel, or Keith 
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 at the 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549 (Tel. 202-942-9080).

Applicants' Representations

    1. Met Investors Series Trust (``MIT'') is a recently organized 
Delaware business trust registered under the Act as an open-end 
management investment company and is presently comprised of twenty-
three separate series. Shares of each series of MIT are sold only to 
certain accounts of MetLife and its affiliates to fund benefits under 
certain individual flexible premium and modified single premium 
variable life insurance policies and certain individual and group 
variable annuity contracts (``Contracts'') issued by

[[Page 49436]]

MetLife and its affiliates and to qualified pension and retirement 
plans. As of the date of this application, MetLife and its affiliates 
are the shareholders of record of the series of MIT.\1\ Only four 
series are involved in the proposed transactions. These series are 
BlackRock Equity Portfolio, BlackRock U.S. Government Portfolio, Met/
Putnam Research Portfolio and PIMCO Total Return Portfolio. MIT, along 
with its series, are referred to herein collectively, as the ``Met 
Portfolios''.
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    \1\ For ease of reference, the term ``shareholder'' is generally 
used hereinafter to refer to Contract owners that are unit holders 
of a registered separate account that invests in a respective Met 
Portfolio.
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    2. MetLife, a New York life insurance company, is a leading 
provider of insurance and financial products and services to individual 
and group customers. MetLife provided the initial seed money for the 
Met/Putnam Research and the PIMCO Total Return Portfolios. MetLife (as 
a result of its investment of seed capital) and the separate accounts 
of certain of MetLife's affiliates are the shareholders of record of 
Met/Putnam Research and PIMCO Total Return Portfolios.
    3. MetLife Investors USA Insurance Company (``MLI USA'') is a stock 
life insurance company organized under the laws of the State of 
Delaware. MLI USA is a wholly-owned subsidiary of MetLife Investors 
Group, Inc. (``MetLife Investors''). MetLife Investors is a wholly-
owned subsidiary of MetLife. MLI USA, through its separate account, is 
the record shareholder for the BlackRock Equity and BlackRock U.S. 
Government Income Portfolios.
    4. Met Investors Advisory Corp. (formerly known as Security First 
Investment Management Corporation) (``Met Advisory'') serves as 
investment adviser to MIT but has delegated responsibility for the day-
to-day management of the series to various unaffialiated sub-advisers. 
Met Advisory is a wholly-owned subsidiary of MetLife Investors. Met 
Advisory is registered as an investment adviser under the Investment 
Advisers Act of 1940, as amended (the ``Advisers Act'').
    5. On June 5, 2001, the Board of Trustees of MIT (``MIT Board''), 
including a majority of the Trustees who are not interested persons 
under section 2(a)(19) of the Act (the ``Disinterested Trustees''), 
authorized agreements and plans of reorganization (with respect to the 
Fund Reorganizations as defined below) (the `Plans'') pursuant to which 
certain of the Met Portfolios (the ``Acquiring Portfolios'') will 
acquire all of the assets and stated liabilities of certain other Met 
Portfolios (the ``Acquired Portfolios''). Pursuant to the terms of the 
Plans, the Acquired Portfolios have agreed to sell all of their assets 
(subject to the assumption of certain stated liabilities) to certain 
corresponding Acquiring Portfolios in exchange for shares of the 
Acquiring Portfolios (the ``Fund reorganizations''). the exchange will 
take place at the respective net asset values calculated as of the 
close of business on the business day immediately prior to the date on 
which the Fund Reorganizations will occur. Shareholders of the Acquired 
Portfolios will exchange their shares for Class A shares of the 
Acquiring Portfolios.\2\ As a result of the Fund Reorganizations, each 
Acquired Portfolio shareholder will receive Class A shares of the 
Acquiring Portfolios shares having an aggregate net asset value equal 
to the aggregate net asset value of the corresponding Acquired 
Portfolio's shares held by that shareholder. After the distribution of 
the Acquiring Portfolio's shares and the winding up of the Acquired 
Portfolio's business, the Acquired Portfolio will be liquidated.
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    \2\ The Acquired Portfolios offer only Class A shares. The 
Acquiring Portfolios offer Class A, Class B and Class E shares. 
Class B and Class E shares are not involved in the Fund 
Reorganizations.
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    6. No sales change will be imposed in connection with Class A 
shares of the Acquiring Portfolios received by the Acquired Portfolios' 
shareholders. Accordingly, no sales charges will be incurred by 
shareholders of the Acquired Portfolios in connection with their 
acquisition of shares of the Acquiring Portfolios in the Fund 
Reorganizations. Upon consummation of the transactions described above, 
each Acquired Portfolio will distribute its full and fractional shares 
of the Acquiring Portfolio pro rata to its shareholders of record, 
determined as of the exchange date.
    7. Prior to the Fund Reorganizations, the shareholders of the 
Acquired Portfolio and the Class A shareholders of the Acquiring 
Portfolio will hold shares with identical characteristics. Class A 
shares of the Met Portfolios are sold without a front-end sales charge 
or a contingent deferred sales charge and are not subject to any Rule 
12b-1 fees.
    8. The investment objectives of each of the Acquired Portfolios is 
similar to that of the corresponding Acquiring Portfolios. The 
investment strategies of each Acquired Portfolio and its corresponding 
Acquiring Portfolio are also similar.
    9. There is a Plan for the Fund Reorganizations. Each Plan may be 
terminated by the mutual agreement of the Acquiring Portfolio and the 
Acquired Portfolio.
    10. The Board, on behalf of each of the Acquired and Acquiring 
Portfolios, including in each case a majority of Disinterested 
Trustees, approved the Fund Reorganizations as in the best interests of 
shareholders and determined that the interests of existing shareholders 
will not be diluted as a result of the Fund Reorganizations. The MIT 
Board on behalf of each Portfolio considered, among other things, (a) 
the terms and conditions of each Fund Reorganization; (b) whether the 
Fund Reorganization would result in the dilution of shareholders' 
interests; (c) the effect of the Fund Reorganization on the Contract 
owners and the value of their Contracts; (d) the comparative 
performance records of the Acquired Portfolio and the Acquiring 
Portfolio, and the case of the Acquiring Portfolio, the prior 
performance of a comparable fund; (e) the expense ratios, fees and 
expenses of the Acquired Portfolio and of the Acquiring Portfolio; (f) 
comparability of the Acquiring and Acquired Portfolio's investment 
objectives and policies; (g) the fact that the costs estimated to be 
incurred by the Portfolios as a result of the Fund Reorganizations will 
not be borne by the Portfolios but will be borne by MetLife or an 
affiliate; (h) the benefits to shareholders, including operating 
efficiencies, to be achieved from participating in the restructuring of 
the investment portfolios to be offered in connection with MLI USA's 
insurance products and to employee benefit plans; (i) the fact that the 
Acquiring Portfolio will assume the identified liabilities of the 
Acquired Portfolio; (j) alternatives available to shareholders of the 
Acquired Portfolios, including the liability to redeem their shares, 
and (k) the expected federal income tax consequences of the Fund 
Reorganizations.
    11. Each Fund Reorganization is subject to the approval of the 
Acquired Portfolios' shareholders. A Special Meeting of the 
Shareholders of each Acquired Portfolio is scheduled to be held on or 
about October 5, 2001. As stated above, the shareholder of record of 
the Acquired Portfolios, at the date of this Application, is MLI USA 
through its registered separate account. MLI USA will vote all shares 
of the Acquired Portfolios in accordance with and in proportion to 
timely voting instructions received from Contract owners participating 
in the separate account registered under the Act, the value of which is 
invested in shares of the Acquired Portfolio through such

[[Page 49437]]

separate account at the record date. Shares of each Acquired Portfolio 
for which properly executed voting instructions are not received will 
be voted in the same proportion as that of shares of such Acquired 
Portfolio for which instructions are received.
    12. MetLife or an affiliate will be responsible for the expenses 
incurred in connection with the Fund Reorganizations.
    13. The Plans are subject to a number of conditions precedent, 
including requirements that (a) the Plans shall have been approved by 
the Boards on behalf of each of the Acquiring Portfolios and the 
Acquired Portfolios and approved by the requisite votes of the holders 
of the outstanding shares of each of the Acquired Portfolios in 
accordance with the provisions of MIT's Agreement and Declaration of 
Trust and By-laws; (b) the Acquired Portfolio and the Acquiring 
Portfolio have received opinions of counsel stating, among other 
things, that (i) each Fund Reorganization will constitute a ``fund 
reorganization'' under Section 368 of the Internal Revenue Code of 
1986, as amended (the ``Code''), (ii) the Acquiring Portfolio and the 
Acquired Portfolio is a ``party to a fund reorganization'' within the 
meaning of Section 368 of the Code, (iii) no gain or loss will be 
recognized by the Acquiring Portfolio upon the receipt of the assets of 
the Acquired Portfolio solely in exchange for the Acquiring Portfolio 
shares and the assumption by the Acquiring Portfolio of the identified 
liabilities of the Acquired Portfolio and (iv) no gain or loss will be 
recognized by the Acquired Portfolio upon the transfer of the Acquired 
Portfolio's assets to the Acquiring Portfolio in exchange for the 
Acquiring Portfolio shares and the assumption by the Acquiring 
Portfolio of the identified liabilities of the Acquired Portfolio or 
upon the distribution of the Acquiring Portfolio shares to Acquired 
Portfolio shareholders in exchange for their shares of the Acquired 
Portfolio; and (c) the Acquired Portfolio and the Acquiring Portfolio 
shall have received from the Commission an order exempting the Fund 
Reorganizations from the provisions of section 17(a) of the Act.

Applicant's Legal Analysis

    1. Section 17(a) of the Act provides, in pertinent part, that it is 
unlawful for any affiliated person of a registered investment company, 
or any affiliated person of such a person, ``(1) knowingly to sell any 
security or other property to such registered company * * * [or] (2) 
knowingly to purchase from such registered company * * * any security 
or other property * * *.'' Section 2(a)(3) of the Act defines the term 
``affiliated person'' of another person to include, in pertinent part, 
``(A) any person directly or indirectly owning, controlling, or holding 
with power to vote, 5 per centum or more of the outstanding voting 
securities of such other person; (B) any person 5 per centum or more of 
whose outstanding voting securities are directly or indirectly owned, 
controlled, or held with power to vote, by such other person; (C) any 
person directly or indirectly controlling, controlled by, or under 
common control with, such other person * * *; and (E) if such other 
person is an investment company, any investment adviser thereof * * 
*.''
    2. Rule 17a-8 may not be available to exempt the proposed 
transactions described herein. The premise of Rule 17a-8 is that the 
investment companies involved in mergers or consolidations are under 
common control by virtue of having a common investment adviser, 
directors and/or officers and no other affiliation exists. In this 
case, the Portfolios may be deemed to be affiliated persons or 
affiliated persons of each other because MetLife beneficially owns 5% 
or more of the outstanding voting securities of the Acquiring 
Portfolios through its investment of initial seed capital.
    3. Section 17(b) of the Act provides that, notwithstanding Section 
17(a), any person may file with the Commission an application for an 
order exempting a proposed transaction from one or more provisions of 
that subsection and that the Commission shall grant such application 
and issue such order of exemption if 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 Act]; and (3) the proposed transaction is consistent 
with the general purposes of [the Act] * * *.''
    4. Applicants submit that the terms of the Fund Reorganizations 
satisfy the standards set forth in section 17(b), in that the terms are 
fair and reasonable and do not involve overreaching on the part of any 
person concerned. Applicants note that the MIT Board, including the 
Disinterested Trustees, found that participation in the Fund 
Reorganization is in the best interests of each Portfolio based on the 
following factors: (a) The interests of shareholders will not be 
diluted; (b) the Portfolios' investment objectives and policies are 
similar; (c) the benefits to shareholders, including operating 
efficiencies and potential economies of scale, to be achieved from 
participating in the restructuring of the investment portfolios to be 
offered in connection with MLI USA's insurance products and to employee 
benefit plans; (d) no sales charges will be imposed in connection with 
the Fund Reorganizations; (e) the service and distribution resources 
available to MIT and the anticipated increased array of investment 
alternatives available to the shareholders of MIT; (f) the transactions 
will be free from federal income taxes; (g) the conditions and policies 
of Rule 17a-8 will be followed; (h) the Fund Reorganizations have been 
submitted to shareholders of the Acquired Series pursuant to 
registration statements on Form N-14 under the 1933 Act; (i) the 
transfer of securities in exchange for shares will be at relative net 
asset value; (j) MetLife or an affiliate will pay the expenses incurred 
by the Portfolios in connection with the Fund Reorganizations; and (k) 
no overreaching by any person concerned with the transactions is 
occurring.

Conclusion

    For the reasons and upon the factors set forth above, Applicants 
state that the requested order meets the standards set forth in section 
17(b) of the Act and should, therefore, be granted.

    For the Commission, by the Division of Investment Management, 
under delegated authority.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-24183 Filed 9-26-01; 8:45 am]
BILLING CODE 8010-01-M