[Federal Register Volume 67, Number 48 (Tuesday, March 12, 2002)]
[Notices]
[Pages 11148-11155]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5878]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-25453; File No. 812-12550]


Jefferson Pilot Financial Insurance Company, et al.; Notice of 
Application

March 6, 2002.
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 (``1940 Act'').

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    Applicants: Jefferson Pilot Financial Insurance Company 
(``Jefferson Pilot Financial''), and its JPF Separate Account A (``JPF 
Account A''), JPF Separate Account C (``JPF Account C''), JPF Variable 
Annuity Separate Account (``JPF VA Account''), JPF Variable Annuity 
Separate Account II (``JPF VA Account II''); and Jefferson Pilot 
LifeAmerica Insurance Company (``JP LifeAmerica'') and its JPF Separate 
Account B (``JPF Account B'') (all collectively, the ``Applicants'').

SUMMARY OF THE APPLICATION: Applicants request an order pursuant to 
Section 26(c) of the 1940 Act to permit certain registered unit 
investment trusts to substitute shares of certain underlying portfolios 
for shares of certain other portfolios.

FILING DATE: The Application was filed on June 14, 2001, and amended on 
February 28, 2002.
    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 April 1, 2002, 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 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,

[[Page 11149]]

NW, Washington, DC 20549-0609. Applicants, c/o Jorden Burt, LLP, 1025 
Thomas Jefferson Street, NW, Suite 400 East, Washington, DC 20007-0805, 
Attention: Christopher S. Petito, Esq.

FOR FURTHER INFORMATION CONTACT: Martha Atkins, Attorney, at (202) 942-
0668, or William J. Kotapish, Assistant Director, at (202) 942-0672, 
Office of Insurance Products, Division of Investment Management.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application is available for a fee from the 
Public Reference Branch of the Commission, 450 Fifth Street, NW, 
Washington, DC 20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. Applicants Jefferson Pilot Financial and JP LifeAmerica 
(``Insurance Company Applicants''), are affiliated companies wholly 
owned by Jefferson-Pilot Corporation, a North Carolina corporation. 
Jefferson Pilot Financial is a stock-life insurance company chartered 
in 1903 in Tennessee, redomesticated to New Hampshire in 1991, and 
redomesticated to Nebraska effective June 12, 2000. It is engaged 
primarily in the sale of annuities and life insurance. JP LifeAmerica 
is a stock life insurance company chartered in 1897 in New Jersey. It 
is a wholly-owned subsidiary of Jefferson Pilot Financial and is 
engaged primarily in the sale of individual annuities and life 
insurance.
    2. JPF Account A was established by Jefferson Pilot Financial 
pursuant to a resolution of its Board of Directors on August 20, 1984 
in accordance with the laws of the State of Tennessee and is registered 
as a unit investment trust under the 1940 Act. It is now governed by 
the laws of the State of Nebraska, as a result of Jefferson Pilot 
Financial's redomestication. JPF Account A is used to fund certain 
variable life insurance policies issued by Jefferson Pilot Financial.
    3. JPF Account C is a segregated asset account of Jefferson Pilot 
Financial. It was established by Jefferson Pilot Financial pursuant to 
a resolution of its Board of Directors on August 3, 1993, in accordance 
with the laws of the State of New Hampshire and is registered as a unit 
investment trust under the 1940 Act. It is now governed by the laws of 
the State of Nebraska, as a result of Jefferson Pilot Financial's 
redomestication. JPF Account C is used to fund certain variable life 
insurance policies issued by Jefferson Pilot Financial.
    4. JPF VA Account was established by Jefferson Pilot Financial 
pursuant to a resolution of its Board of Directors on November 18, 1999 
in accordance with the laws of the State of New Hampshire and is 
registered as a unit investment trust under the 1940 Act. It is now 
governed by the laws of the State of Nebraska, as a result of Jefferson 
Pilot Financial's redomestication. JPF VA Account is used to fund 
certain variable annuity contracts issued by Jefferson Pilot Financial.
    5. JPF VA Account II was established by Alexander Hamilton Life, a 
predecessor of Jefferson Pilot Financial, as a separate investment 
account under the laws of the State of Michigan on January 24, 1994. On 
August 1, 2000, Alexander Hamilton Life, together with the Separate 
Account, was merged into Jefferson Pilot Financial. The Separate 
Account survived the merger intact. It is now governed by the laws of 
the State of Nebraska. It is registered as a unit investment trust 
under the 1940 Act. JPF VA Account II is used to fund certain variable 
annuity contracts issued by Jefferson Pilot Financial.
    6. JPF Account B is a segregated asset account of JP LifeAmerica. 
It was established by JP LifeAmerica pursuant to a resolution of its 
Board of Directors on March 2, 1994, in accordance with the laws of the 
State of New Jersey and is registered as a unit investment trust under 
the 1940 Act. JPF Account B is used to fund certain variable life 
insurance policies issued by JP LifeAmerica.
    7. The above-noted segregated asset accounts are referred to as the 
``Separate Account Applicants.'' Certain variable annuity contracts and 
variable life insurance policies issued by the Insurance Company 
Applicants through the Separate Account Applicants are referred to 
herein as ``Contracts.'' The variable interests under the Contracts are 
registered with the Commission under the Securities Act of 1933 (the 
``1933 Act'').
    8. Oppenheimer Bond Fund/VA (``OVAF Bond''), Oppenheimer Strategic 
Bond Fund/VA (``OVAF Strategic Bond'') and Oppenheimer Capital 
Appreciation Fund/VA (``OVAF Capital Appreciation'') are separate 
series of Oppenheimer Variable Account Funds (``OVAF''). (Oppenheimer 
Bond Fund/VA and Oppenheimer Strategic Bond Fund/VA are sometimes 
collectively referred to as the ``OVAF Bond Funds''.) OVAF was 
organized as a Massachusetts business trust in 1984. It offers its 
shares in ten series and two classes. The class of OVAF shares 
purchased by the Separate Account Applicants is offered at net asset 
value and is not subject to Rule 12b-1 fees. OVAF is registered as an 
open-end management investment company under the 1940 Act, and its 
shares are registered as securities under the 1933 Act. OVAF shares are 
sold only to insurance company separate accounts to fund variable 
annuity contracts and variable life insurance policies. Oppenheimer 
Funds, Inc., serves as investment adviser to all three OVAF funds. 
Oppenheimer Funds, Inc., is not affiliated with the Insurance Company 
Applicants.
    9. JPVF Global Hard Assets Portfolio (``JPVF Global Hard Assets'') 
is a separate series of Jefferson Pilot Variable Fund, Inc. (``JPVF''). 
JPVF was organized as a Maryland corporation on October 19, 1984. It 
offers its shares in fifteen series. Its shares are offered at net 
asset value and are not subject to Rule 12b-1 fees. JPVF is registered 
as an open-end management investment company under the 1940 Act, and 
its shares are registered as securities under the 1933 Act. Its shares 
are sold only to separate accounts of Jefferson Pilot Financial and its 
affiliates to fund variable annuity contracts and variable life 
insurance policies, and to qualified retirement plans. Jefferson Pilot 
Investment Advisory Corporation (``JPIA''), like the Insurance Company 
Applicants, is a wholly-owned subsidiary of Jefferson-Pilot 
Corporation. JPIA acts as manager for JPVF Global Hard Assets and has 
retained Van Eck Associates to act as sub-adviser. Van Eck Associates 
is not affiliated with the Insurance Company Applicants.
    10. If the requested substitution order is granted, Administrative 
Class shares of the PIMCO Total Return Bond Portfolio (``PIMCO Total 
Return Bond'') of the PIMCO Variable Insurance Trust (``PIMCO VIT'') 
will be substituted for shares of the OVAF Bond Funds. PIMCO VIT was 
organized as a Delaware business trust on October 3, 1997. It offers 
its shares in thirteen series and two classes. Administrative Class 
Shares, which the Separate Account Applicants purchase, are offered at 
net asset value and are not subject to Rule 12b-1 fees. However, they 
have a service fee, which is used to reimburse financial intermediaries 
who provide non-distribution services relating to this class of shares. 
PIMCO VIT is registered as an open-end management investment company 
under the 1940 Act, and its shares are registered as securities under 
the 1933 Act. Both classes of shares currently are sold only to 
separate accounts to fund variable annuity contracts and variable life 
insurance policies. They also may be sold to qualified pension and 
retirement plans. Pacific Investment Management Company (``PIMCO'')

[[Page 11150]]

serves as investment adviser to PIMCO Total Return Bond. PIMCO is not 
affiliated with the Insurance Company Applicants.
    11. If the requested substitution order is granted, Initial Class 
Shares of the Growth Portfolio (``Fidelity VIP Growth'') of the 
Fidelity Variable Insurance Products Fund (``VIP Fund'') will be 
substituted for shares of OVAF Capital Appreciation. VIP Fund was 
organized as a Massachusetts business trust on November 13, 1981. It 
offers its shares in six series and three classes. Initial Class 
Shares, which the Separate Account Applicants purchase, are offered at 
net asset value and are not subject to Rule 12b-1 fees. Initial Class 
Shares are sold to insurance company separate accounts to fund variable 
annuity contracts and variable life insurance policies and to certain 
qualified retirement and pension plans. VIP Fund is registered as an 
open-end management investment company under the 1940 Act and its 
shares are registered as securities under the 1933 Act. Fidelity 
Management & Research Company (``FMR'') serves as investment adviser to 
Fidelity VIP Growth. FMR is not affiliated with the Insurance Company 
Applicants.
    12. If the requested substitution order is granted, shares of JPVF 
World Growth Stock Portfolio (``JPVF World Growth Stock'') will be 
substituted for shares of JPVF Global Hard Assets. JPVF World Growth 
Stock is a series of JPVF. JPIA serves as investment adviser to JPVF 
World Growth Stock, and has retained Templeton Investment Counsel LLC 
(``Templeton''), an indirect wholly-owned subsidiary of Franklin 
Resources, Inc., to act as sub-adviser. Templeton is not affiliated 
with the Insurance Company Applicants.
    13. In 2000 and early 2001, the Insurance Company Applicants 
reviewed the investment options available under the Contracts. This 
review had several goals. One was to standardize the array of 
investment options so that the same options would be available under 
all of the contracts offered by the Insurance Company Applicants. A 
second goal was to reduce duplication of investment options. A third 
goal was to eliminate or replace investment options that in Applicants' 
view were not performing well or were not popular with contract owners. 
As relevant to the Application, this review resulted in the following 
recommendations:
     Replace the OVAF Bond Funds with PIMCO Total Return Bond,
     Replace OVAF Capital Appreciation with Fidelity VIP 
Growth, and
     Eliminate JPVF Global Hard Assets as an investment option 
under the Contracts, and substitute shares of JPVF World Growth Stock 
(referred to collectively as the ``Substitutions'').

Applicants submitted the Application to implement those 
recommendations. (OVAF Bond, OVAF Strategic Bond, OVAF Capital 
Appreciation, and JPVF Global Hard Assets are referred to collectively 
as the ``Replaced Portfolios;'' PIMCO Total Return Bond, Fidelity VIP 
Growth, and JPVF World Growth Stock are referred to collectively as the 
``Replacement Portfolios.'')
    14. Each Insurance Company Applicant will redeem for cash all of 
the shares of each Replaced Portfolio that it currently holds on behalf 
of its respective Separate Account Applicants at the close of business 
on the date selected for the Substitutions. Each Insurance Company 
Applicant, on behalf of its respective Separate Account Applicants, 
will simultaneously place a redemption request with each Replaced 
Portfolio and a purchase order with the corresponding Replacement 
Portfolio, so that each purchase will be for the exact amount of the 
redemption proceeds. As a result, at all times monies attributable to 
contract owners then invested in the Replaced Portfolios will remain 
fully invested and will result in no change in the amount of any 
contract owner's contract value, death benefit or investment in the 
applicable Separate Account Applicant.
    15. The full net asset value of the redeemed shares held by the 
Separate Account Applicants will be reflected in the contract owners' 
accumulation values or annuity unit values following the Substitutions. 
The Insurance Company Applicants hereby undertake to assume all 
transaction costs and expenses relating to the Substitutions, including 
any direct or indirect costs of liquidating the assets of the Replaced 
Portfolios, so that the full net asset value of redeemed shares of the 
Replaced Portfolios held by the Separate Account Applicants will be 
reflected in the contract owners' accumulation values or annuity unit 
values following the Substitutions.
    16. Applicants anticipate that until the Substitutions occur, the 
manager of each Replaced Portfolio will conduct the trading of 
portfolio securities in accordance with the investment objectives and 
strategies stated in the Replaced Portfolios' prospectuses and in a 
manner that provides for the anticipated redemptions of shares held by 
the Separate Account Applicants.
    17. After the Substitutions, each Insurance Company Applicant will 
treat each division currently invested in a Replaced Portfolio as one 
division with the division currently invested in the corresponding 
Replacement Portfolio.
    18. Each of the Contracts gives the relevant Insurance Company 
Applicant the right, consistent with the requirements of Section 26(c) 
of the 1940 Act, to eliminate or add divisions, combine two or more 
divisions, or substitute one or more underlying mutual funds or 
portfolios for others in which one or more divisions are invested. 
These contractual provisions have also been disclosed in the 
prospectuses or statements of additional information relating to the 
Contracts.
    19. The Insurance Company Applicants will schedule the 
Substitutions to occur after issuance of the requested order and any 
required state insurance department approvals. Affected contract owners 
will not incur any fees or charges as a result of the Substitutions, 
nor will the rights or obligations of the Insurance Company Applicants 
under the Contracts be altered in any way. The proposed Substitutions 
will not have any adverse tax consequences to contract owners. The 
proposed Substitutions will not cause Contract fees and charges 
currently being paid by existing contract owners to be greater after 
the proposed Substitutions than before the proposed Substitutions. The 
proposed Substitutions will not be treated as transfers for the purpose 
of transfer limits or assessing transfer charges. The Insurance Company 
Applicants will not, with respect to shares substituted, exercise any 
right they may have under the Contracts to collect transfer fees or 
impose any additional restrictions on transfers for a period of at 
least 30 days following mailing of the notice of the proposed 
Substitutions referred to below (the ``Free Transfer Period''). During 
the Free Transfer Period, transfers will be permitted without that 
transfer being counted against any limits on free transfers under the 
Contracts.
    20. The Insurance Company Applicants supplemented the prospectuses 
for the Contracts to reflect the proposed Substitutions. Within five 
days after the Substitutions, each Insurance Company Applicant will 
send to its respective contract owners written notice of the 
Substitutions (the ``Notice'') identifying the shares of the Replaced 
Portfolios that have been eliminated and the shares of the Replacement 
Portfolios that have been substituted. Each Insurance Company Applicant 
will include in such mailing the applicable prospectus supplement for 
the Contracts of the relevant Separate Account Applicant describing

[[Page 11151]]

the Substitutions. The Insurance Company Applicants also will mail a 
copy of prospectuses for the Replacement Portfolios to contract owners 
who have not already received a copy of those prospectuses in the 
ordinary course.
    21. Contract owners will be advised in the Notice that during the 
Free Transfer Period, they may transfer all assets, as substituted, to 
any other available division without limit or charge and without that 
transfer being counted against any limit on free transfers under their 
Contract.

Applicants' Legal Analysis

    22. Section 26(c) of the 1940 Act provides that ``[i]t shall be 
unlawful for any depositor or trustee of a registered unit investment 
trust holding the security of a single issuer to substitute another 
security for such security unless the Commission shall have approved 
such substitution.'' Section 26(c) of the 1940 Act was enacted as part 
of the Investment Company Act Amendments of 1970. Prior to the 
enactment of these amendments, a depositor of a unit investment trust 
could substitute new securities for those held by the trust by 
notifying the trust's security holders of the substitution within five 
(5) days after the substitution. In 1966, the Commission, concerned 
with the high sales charges then common to most unit investment trusts 
and the disadvantageous position in which such charges placed investors 
who did not want to remain invested in the substituted security, 
recommended that Section 26 be amended to require that a proposed 
substitution of the underlying investments of a trust receive prior 
Commission approval.
    23. The purposes, terms, and conditions of the Substitutions are 
consistent with the principles and purposes of Section 26(c) and do not 
entail any of the abuses that Section 26(c) is designed to prevent. 
Simply put, contract owners will be assessed no charges in connection 
with the Substitutions, and their annual fund expense ratios are 
expected to decrease. In addition, to the extent a contract owner does 
not wish to participate in the Substitutions, he or she is free to 
transfer to any other option available under the relevant Contract and, 
during the Free Transfer Period, no transfer fee will be charged and 
the transfer will not be counted against any limit on free transfers 
under the Contracts. Moreover, as discussed below, in three of the four 
proposed substitutions, the proposed Replacement Portfolio has 
investment objectives and policies that are substantially similar in 
all material respects to those of the Replaced Portfolio. In the fourth 
proposed substitution, involving JPVF Global Hard Assets, the proposed 
Replacement Portfolio has the most similar investment objective of 
funds currently available under the Contracts, and better long-term 
performance and lower expenses than the Replaced Portfolio.
    24. Applicants submit that the Substitutions do not present the 
type of costly forced redemption or other harms that Section 26(c) 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 Substitutions will continue to fulfill contract owners' 
objectives and risk expectations, because the Replacement Portfolios 
corresponding to the OVAF Replaced Portfolios have objectives, 
policies, and restrictions substantially similar in all material 
respects to the objectives, policies, and restrictions of the OVAF 
Replaced Portfolios, and JPVF World Growth Stock has investment 
objectives and policies most similar to JVF Global Hard Assets;
    b. After receipt of the Notice informing a contract owner of the 
Substitutions, a contract owner may request that his or her assets be 
reallocated to another division at any time during the Free Transfer 
Period without any limit or charge, and without the transfer being 
counted against any limit on free transfers under the Contracts. This 
right also will be granted to contract owners of variable annuity 
Contracts who are receiving variable payments based on the Replaced 
Portfolios. The Free Transfer Period provides sufficient time for 
contract owners to consider their reinvestment options;
    c. The Substitutions will be at net asset value of the respective 
shares, without the imposition of any transfer or similar charge;
    d. Each Insurance Company Applicant has undertaken to assume all 
expenses and transaction costs, including, but not limited to, legal 
and accounting fees and any brokerage commissions, in connection with 
the Substitutions involving their respective Separate Account 
Applicants;
    e. The Substitutions will in no way alter the contractual 
obligations of the Insurance Company Applicants or the rights and 
privileges of contract owners under the Contracts;
    f. The Substitutions will in no way alter the tax benefits to 
contract owners;
    g. The Substitutions are expected to confer certain economic 
benefits on contract owners by virtue of lower expenses, as described 
below;
    h. At the time of the Substitutions, the aggregate fees and 
expenses under each Replacement Portfolio are expected to be lower than 
those of the corresponding Replaced Portfolio;
    i. Each Insurance Company Applicant and its affiliates currently do 
not, and will not for a period of three years from the date of the 
order requested herein, receive any direct or indirect benefit from 
Fidelity VIP Growth or its adviser (or its adviser's affiliates) at a 
higher rate, as a percentage of such Applicant's separate account 
assets invested in the Replacement Portfolio, than it had received from 
the corresponding Replaced Portfolio, its adviser, and/or its adviser's 
affiliates, including, without limitation, 12b-1, shareholder service, 
administrative or other service fees, revenue sharing or other 
arrangement, either with specific reference to Fidelity VIP Growth or 
as part of any overall business arrangement;
    j. Each Insurance Company Applicant agrees that for a period of two 
years after the effective date of the Substitutions, it will not 
increase the Contract charges or the total separate account charges of 
the divisions that invest in PIMCO Total Return Bond for those contract 
owners whose Contracts were issued before May 1, 2001, except to the 
extent of any increase in premium or similar taxes charged by a state 
or other locality. Each Insurance Company Applicant further agrees that 
if the total operating expenses for PIMCO Total Return Bond (taking 
into account any expense waiver or reimbursement) for any fiscal 
quarter for the two-year period following the effective date of the 
Substitutions exceed on an annualized basis the relevant Maximum 
Portfolio Expense Limit as stated below (which is the lower of the 
expense ratios for the two corresponding Replaced Portfolios as of 
December 31, 2000), each Insurance Company Applicant will make a 
corresponding reduction (through waiver or reimbursement) in the 
separate account expenses for that quarter of the division that invests 
in PIMCO Total Return Bond for contract owners whose Contracts were 
issued before May 1, 2001. The Maximum Portfolio Expense Limits for 
PIMCO Total Return Bond is 0.76%. Applicants submit that it is 
appropriate to apply this expense limit only to Contracts issued before 
May 1, 2001, because the OVAF Bond Funds were not available under 
Contracts purchased on or after that date, and accordingly owners of 
Contracts purchased on or after that date have never had an expectation 
of being

[[Page 11152]]

able to invest in those Replaced Funds; and
    k. Each Insurance Company Applicant agrees that for a period of two 
years after the effective date of the Substitutions it will not 
increase the Contract charges or the total separate account charges of 
the divisions that invest in JPVF World Growth Stock for those contract 
owners affected by the Substitution for JPVF Global Hard Assets shares, 
except to the extent of any increase in premium or similar taxes 
charged by a state or other locality. Each Insurance Company Applicant 
further agrees that if the total operating expenses for JPVF World 
Growth Stock (taking into account any expense waiver or reimbursement) 
for any fiscal quarter for the two-year period following the effective 
date of the Substitutions exceed on an annualized basis the relevant 
Maximum Portfolio Expense Limit as stated below (which is the expense 
ratio for JPVF Global Hard Assets as of December 31, 2000), each 
Insurance Company Applicant will make a corresponding reduction 
(through waiver or reimbursement) in the separate account expenses for 
that quarter of the division that invests in JPVF World Growth Stock 
for contract owners affected by the Substitution for JPVF Global Hard 
Assets shares. The Maximum Portfolio Expense Limit for JPVF World 
Growth Stock is 1.10%.
    25. As described below, the OVAF Replaced Portfolios and the 
corresponding Replacement Portfolios have investment objectives and 
policies that are substantially similar in all material respects, and 
JPVF World Growth Stock has investment objectives and policies that are 
most similar among funds available under the Contracts to those of JPVF 
Global Hard Assets.
    26. OVAF Bond's primary investment objective is to seek a high 
level of current income. As a secondary goal, OVAF Bond seeks capital 
appreciation when consistent with its goal of high current income. The 
fund invests primarily in investment grade debt securities, U.S. 
government securities, and money market instruments. The fund also may 
invest up to 35% of its assets in high yield debt securities, other 
below investment grade debt securities, and other investments such as 
preferred stock. The fund may invest in securities of any maturity.
    27. PIMCO Total Return Bond's investment objective is to seek 
maximum total return, consistent with preservation of capital and 
prudent investment management. The ``total return'' sought by the fund 
consists of income earned on its portfolio securities and capital 
appreciation, if any. The fund invests primarily in investment grade 
debt securities. It may also invest up to 10% of its assets in certain 
high yield securities. It also may invest up to 20% of its assets in 
securities denominated in foreign currencies and may invest beyond that 
limit in U.S. dollar-denominated foreign securities. The average 
portfolio duration usually varies between three and six years, 
depending on the adviser's forecast as to interest rates.
    28. Applicants represent that PIMCO Total Return Bond has 
objectives, policies, and restrictions substantially similar in all 
material respects to the objectives, policies and restrictions of OVAF 
Bond. Both funds invest primarily in high-quality, fixed-income 
instruments. While PIMCO Total Return Bond places more emphasis on 
capital appreciation, it appears that both funds rely significantly 
upon the income from their portfolio investments to earn investment 
return. Accordingly, Applicants believe that PIMCO Total Return Bond 
will continue to fulfill the investment objectives and risk 
expectations of contract owners who want a fixed-income investment 
option.
    29. Applicants believe that the total return orientation of PIMCO 
Total Return Bond may be more attractive to contract owners. Variable 
annuities and life insurance are designed to be long-term investments. 
Accordingly, Applicants believe that owners of variable products may 
prefer a fixed income investment alternative that is oriented toward 
total return (i.e., both income and capital appreciation) because it 
can invest in some types of fixed income investments that do not 
generate significant current income. In addition, Applicants note that 
PIMCO Total Return Fund, which has the same investment adviser and 
similar investment objectives, but is offered to retail and 
institutional investors, reportedly was the largest bond mutual fund in 
the United States with assets of $43.5 billion as of March 31, 2001.
    30. OVAF Strategic Bond's investment objective is to seek a high 
level of current income principally derived from interest on debt 
securities. The fund invests in three market sectors: debt securities 
of foreign governments and companies; U.S. government securities; and 
lower-rated, high-yield securities of U.S. and foreign companies. Under 
normal market conditions, the fund invests in each sector. However, the 
fund is not obligated to do so. At times, it may invest 100% of its 
assets in a single sector, if the adviser believes that the fund can 
achieve its objectives without undue risk. The fund does not seek 
capital appreciation.
    31. Applicants represent that PIMCO Total Return Bond has 
objectives, policies, and restrictions substantially similar in all 
material respects to the objectives, policies and restrictions of OVAF 
Strategic Bond. Both funds are bond funds. While PIMCO Total Return 
Bond has total return rather than a high level of income as its 
investment objective, income usually has been and will be a significant 
portion of both funds' return. While OVAF Strategic Bond has more 
flexibility in the allocation of its assets among different sectors of 
the fixed income securities market, both funds can invest in the same 
types of fixed income securities. Accordingly, Applicants believe that 
PIMCO Total Return Bond will continue to fulfill contract owners' 
investment objectives and risk expectations. Moreover, Applicants 
believe that the total return orientation of PIMCO Total Return Bond 
may be more attractive to contract owners.
    32. OVAF Capital Appreciation's investment objective is capital 
appreciation. The fund invests primarily in the common stocks of well-
known established companies that the adviser believes may appreciate in 
value over the long-term. The adviser looks primarily for companies 
with a high potential for growth, using fundamental analysis of the 
companies' finances and management, as well as other factors. Although 
the adviser currently emphasizes mid-capitalization and large-
capitalization issuers, the fund can invest in issuers of all sizes.
    33. Fidelity VIP Growth's investment objective is to seek to 
achieve capital appreciation. It usually invests primarily in common 
stocks. The adviser looks for companies that it believes have above-
average growth potential. The adviser selects investments using 
fundamental analysis of each issuer's financial condition, industry 
position, and other factors. The fund may invest in domestic and 
foreign issuers of all sizes. As of December 31, 2000, 7.2% of the 
fund's assets were invested in foreign securities.
    34. Applicants represent that Fidelity VIP Growth has objectives, 
policies, and restrictions substantially similar in all material 
respects to the objectives, policies and restrictions of OVAF Capital 
Appreciation. Both funds are growth equity funds with a primary 
investment objective of capital appreciation. Both funds select stocks 
using fundamental analysis. Both funds can invest in issuers of all 
sizes. While Fidelity VIP Growth, unlike OVAF Capital Appreciation, may 
invest in foreign equity securities, it does so only to a limited 
extent. The broader scope

[[Page 11153]]

of permissible investments for Fidelity VIP Growth should not preclude 
a substitution, given the overall similarity in the two funds' 
investment orientation. Accordingly, Applicants believe that 
substituting Fidelity VIP Growth for OVAF Capital Appreciation will 
continue to fulfill contract owners' investment objectives and risk 
expectations.
    35. JPVF Global Hard Assets has as its investment objective long-
term capital appreciation by globally investing primarily in ``Hard 
Asset Securities.'' Income is a secondary consideration. Hard Asset 
Securities are equity and debt securities of companies that are 
directly or indirectly involved to a significant extent in the 
exploration, development, production or distribution of precious 
metals, ferrous and non-ferrous metals, fossil fuels, forest products, 
real estate or other basis non-agricultural commodities. This fund also 
may invest in securities and structured notes whose value is linked to 
the price of a hard asset commodity or a commodity index. The fund 
seeks investment opportunities worldwide. Normally, the fund will 
invest in at least three countries, including the United States.
    36. JPVF World Growth Stock's investment objective is long-term 
capital growth, which it seeks to achieve through a flexible policy of 
investing primarily in stocks of companies organized in the United 
States or any foreign nation. The fund also may invest in debt 
obligations of domestic and foreign companies.
    37. Applicants have determined to eliminate JPVF Global Hard Assets 
as an investment option under the Contracts because this fund has not 
attracted sufficient investor interest. JPVF Global Hard Assets has 
been in operation since August 1, 1985. As of December 31, 2001, it had 
$4.2 million in net assets. Applicants represent that as of December 
31, 2001, it was the smallest series of JPVF and the least popular 
investment option available under the Contracts.
    38. Over the past five years, the fund's net assets have declined. 
Applicants submit that the lack of owner interest also may be 
attributable to the fund's negative long-term performance. Applicants 
also note that despite positive performance in 1999, which continued 
into 2000, the fund's net assets declined in 2000. Accordingly, 
Applicants do not expect that, in the foreseeable future, contract 
owner interest in the fund will increase significantly.
    39. Because of the low asset level in the fund, its expense ratio 
is higher than most of the other investment options available under the 
Contracts. While the management fee is comparable to the fee charged 
other equity funds available under the Contracts, the other expenses 
are significantly higher because they are spread over a smaller asset 
base. Because the fund's asset base is not expected to increase 
significantly, Applicants expect that the comparatively high level of 
the fund's expense ratio will continue.
    40. For the foregoing reasons, Applicants believe that it would 
serve contract owners' interests to eliminate JPVF Global Hard Assets 
as an investment option under the Contracts. Applicants believe that 
JPVF World Growth Stock is an appropriate substitute for JPVF Global 
Hard Assets because its objectives, policies, and restrictions are most 
similar to the objectives, policies, and restrictions of JPVF Global 
Hard Assets. Both portfolios seek long-term capital appreciation in 
their investment objectives. Both portfolios can invest in both equity 
and debt instruments. And while JPVF World Growth Stock is not limited 
to the narrow sector focus of JPVF Global Hard Assets, both portfolios 
invest in a mix of domestic and foreign securities, both debt and 
equity. Accordingly, Applicants believe that JPVF World Growth will 
permit contract owners who wish to diversify into the global securities 
assets class to satisfy that need.
    41. The following table sets forth the total net assets for each of 
the Replaced Portfolios and the corresponding Replacement Portfolios:

                                                Total Net Assets
                              [In thousands of dollars; Dec. 31, 2001 (unaudited)]
----------------------------------------------------------------------------------------------------------------
             Replaced portfolios                 Amount             Replacement portfolios              Amount
----------------------------------------------------------------------------------------------------------------
OVAF Bond...................................      695,900  PIMCO Total Return Bond.................      357,899
OVAF Strategic Bond.........................      350,400  Same....................................  ...........
OVAF Capital Appreciation...................    1,979,900  Fidelity VIP Growth.....................   11,485,436
JPVF Global Hard Assets.....................        4,227  JPVF World Growth Stock.................      118,932
----------------------------------------------------------------------------------------------------------------

The net asset information for JPVF Global Hard Assets and JPVF World 
Growth Stock shown in the table above also represents the net assets of 
the corresponding divisions under the Contracts, because these two 
Funds are available only under the Contracts.
    42. The management fee and total expenses for each Replacement 
Portfolio are less than or equal to the fees and expenses of the 
corresponding Replaced Portfolio. Applicants note that each Insurance 
Company Applicant is entitled to receive a service fee from the adviser 
for each of the OVAF Replaced Portfolios and the corresponding 
Replacement Portfolios, in return for providing certain administrative 
support services to the funds. Notwithstanding the payment of service 
fees by the advisers to those two Replacement Portfolios, both of those 
Replacement Portfolios have lower expense ratios than the OVAF Replaced 
Portfolios, as set forth in the table below.

                   Expense Ratios as of Dec. 31, 2000
              [As a percentage of average daily net assets]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
OVAF Bond:
  Management Fee...............................................     0.72
  Other Expenses...............................................     0.04
                                                                --------
  Total Expenses...............................................     0.76
OVAF Strategic Bond:
  Management Fee...............................................     0.74
  Other Expenses...............................................     0.05
                                                                --------
  Total Expenses...............................................     0.79
OVAF Capital Appreciation:
  Management Fee...............................................     0.64
  Other Expenses...............................................     0.03
                                                                --------
  Total Expenses...............................................     0.67
JPVF Global Hard Assets:
  Management Fee...............................................     0.75
  Other Expenses...............................................     0.35
                                                                --------
  Total Expenses...............................................     1.10
                                                                --------
PIMCO Total Return Bond:
  Management Fee...............................................     0.25
  Service Fee..................................................     0.15

[[Page 11154]]

 
  Other Expenses...............................................     0.26
                                                                --------
    Total Expenses (before reduction)..........................     0.66
  Expense Reduction............................................     0.01
                                                                --------
    Total Expenses (after reduction)...........................     0.65
Fidelity VIP Growth:
  Management Fee...............................................     0.57
  Other Expenses...............................................     0.08
                                                                --------
  Total Expenses...............................................     0.65
JPVF World Growth Stock:
  Management Fee...............................................     0.75
  Other Expenses...............................................     0.10
                                                                --------
  Total Expenses...............................................     0.85
------------------------------------------------------------------------

    43. The Insurance Company Applicants represent that they currently 
do not, and for a period of three years from the date of the requested 
Order will not, receive any direct or indirect benefit from Fidelity 
VIP Growth or its adviser (or its adviser's affiliates) at a higher 
rate, as a percentage of such Applicant's separate account assets 
invested in the Replacement Portfolio, than it had received from the 
corresponding Replaced Portfolio, its adviser, and/or its adviser's 
affiliates, including, without limitation, 12b-1, shareholder service, 
administrative or other service fees, revenue sharing or other 
arrangement, either with specific reference to Fidelity VIP Growth or 
as part of any overall business arrangement. In addition, each 
Insurance Company Applicant has agreed to a two-year expense limitation 
with respect to PIMCO Total Return Bond and JPVF World Growth Stock, as 
set forth in paragraphs 24(j) and (k) above.
    44. Applicants submit that each of the Replacement Portfolios has 
sufficient assets to achieve economies of scale. Accordingly, it is 
expected that the lower expense ratios should continue.
    45. The following chart sets forth the average annual total returns 
for each of the Replaced Portfolios and the corresponding Replacement 
Portfolios.

                                Average Annual Total Returns as of Dec. 31, 2000
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                                 Five years or     Ten years or
                          Portfolio                                One year     since inception  since inception
----------------------------------------------------------------------------------------------------------------
OVAF Bond....................................................             6.10             5.02             7.58
OVAF Strategic Bond..........................................             2.63             5.76         \1\ 5.71
PIMCO Total Return Bond......................................            10.15         \2\ 5.95  ...............
OVAF Capital Appreciation....................................            -0.23            22.69            19.45
Fidelity VIP Growth..........................................           -10.96            19.31            20.04
JPVF Global Hard Assets......................................             8.19            -8.81            -1.74
JPVF World Growth Stock......................................             1.54            11.65           13.02
----------------------------------------------------------------------------------------------------------------
\1\ Since May 3, 1993.
\2\ Since Dec. 31, 1997.


                        Average Annual Total Returns as of September 30, 2001 (Unaudited)
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                                 Five years or     Ten years or
                  Portfolio                         YTD            One year     since inception  since inception
----------------------------------------------------------------------------------------------------------------
OVAF Bond...................................             9.52            11.91             6.59             7.24
OVAF Strategic Bond.........................             0.54             0.32             4.22         \1\ 5.26
PIMCO Total Return Bond.....................             8.13            12.31         \2\ 6.94  ...............
OVAF Capital Appreciation...................           -24.34           -30.64            12.14            14.73
Fidelity VIP Growth.........................           -29.52           -38.19             8.68            12.72
JPVF Global Hard Assets.....................           -18.86           -15.63           -13.84            -3.12
JPVF World Growth Stock.....................           -15.81           -14.70             5.92            9.41
----------------------------------------------------------------------------------------------------------------
\1\ Since May 3, 1993.
\2\ Since Dec. 31, 1997.

    46. As shown in the total return chart, the total returns of PIMCO 
Total Return Bond have been higher than the returns of OVAF Strategic 
Bond for the corresponding periods. As to OVAF Bond, the total returns 
of PIMCO Total Return as of December 31, 2000, upon which Applicants 
based their decision to seek a substitution, also were higher than the 
returns of OVAF Bond. Since the beginning of 2001, however, OVAF Bond 
has had a higher return than PIMCO Total Return Bond. However, PIMCO 
Total Return Bond's one-year return and return since inception (on 12/
31/97) still are higher than OVAF Bond's performance for the 
corresponding periods. PIMCO Total Return Bond's one-year return still 
is higher than OVAF Bond's one-year performance. Applicants submit that 
these short-term fluctuations are not significant and do not detract 
from the appropriateness of PIMCO Total Return Bond as a substitution 
for OVAF Bond.
    47. While the one-year and five-year returns for Fidelity VIP 
Growth as of December 31, 2000, were lower than the corresponding 
returns for OVAF Capital Appreciation, Applicants submit that a 
significant portion of that difference was attributable to the year 
2000, in which the U.S. stock markets and growth stocks in particular 
dropped significantly. Over the 10-year period ending December 31, 
2000, the average annual return for Fidelity VIP Growth was higher than 
the average annual return for OVAF Capital Appreciation. Since the 
beginning of 2001, OVAF Capital Appreciation has declined less than 
Fidelity VIP Growth, such that OVAF Capital Appreciation's unaudited 
five-year and 10-year returns, measured as of September 30, 2001, also 
are higher than Fidelity VIP Growth's returns. Applicants argue that 
while the difference may appear significant, it

[[Page 11155]]

reflects more the effect of the starting point from which return is 
measured: in contrast, from January 1, 1991 (the starting point for the 
10-year returns reported as of December 31, 2000) to September 30, 
2001, the average annual return of the OVAF Capital Appreciation and 
Fidelity VIP Growth are 14.96% and 14.72%, respectively. In light of 
the long-term perspective that is particularly appropriate under 
variable contracts, Applicants believe that the longer-term results are 
more significant for contract owners. Even with year-to-date losses 
factored in, Applicants submit that Fidelity VIP Growth's 10-year 
performance is comparable to the 10-year performance of OVAF Capital 
Appreciation.
    48. Applicants submit that although the one-year return for JPVF 
World Growth Stock as of December 31, 2000, was lower than the 
corresponding return for JPVF Global Hard Assets, the five- and 10-year 
returns were significantly higher. Moreover, JPVF World Stock Growth 
Stock's unaudited total returns as of September 30, 2001, for all 
periods shown were higher than the corresponding returns of JPVF Global 
Hard Assets. Accordingly, in light of the long-term perspective that is 
particularly appropriate under variable contracts, Applicants believe 
that JPVF World Growth Stock's performance further supports its 
appropriateness as a substitute for JPVF Global Hard Assets.
    49. While there is no guarantee that past performance will 
continue, Applicants believe that the foregoing return data support the 
view that the Substitutions are not expected to diminish performance or 
otherwise adversely affect Contract values.
    50. Applicants request an order of the Commission pursuant to 
Section 26(c) of the 1940 Act to permit them to effect the 
Substitutions on the terms set forth in this Amended Application.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 02-5878 Filed 3-11-02; 8:45 am]
BILLING CODE 8010-01-U