[Federal Register Volume 67, Number 66 (Friday, April 5, 2002)]
[Notices]
[Pages 16470-16475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-8206]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-25503; File No. 812-12636]


The Equitable Life Assurance Society of the United States, et al.

March 29, 2002
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order of approval pursuant to 
Section 26(c) of the Investment Company Act of 1940 (the ``1940 Act'') 
and an order of exemption pursuant to Section 17(b) of the Act.

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Applicants: For purposes of the order requested pursuant to Section 
26(c), The Equitable Life Assurance Society of the United States 
(``Equitable''), Separate Account A of Equitable (``Separate Account 
A''), Separate Account FP of Equitable (``Separate Account FP''), 
Separate Account No. 45 of Equitable (``Separate Account 45''), 
Separate Account No. 49 of Equitable (``Separate Account 49'') and 
Separate Account No. 301 of Equitable (``Separate Account 301'') 
(collectively, the ``Section 26 Applicants''). For purposes of the 
order pursuant to Section 17(b), Equitable, Separate Account A, 
Separate Account FP, Separate Account 45, Separate Account 49, Separate 
Account No. 65 of Equitable (``Separate Account 65''), Separate Account 
No. 66 of Equitable (``Separate Account 66''), Separate Account 301 
(the separate accounts are collectively referred to herein as the 
``Separate Accounts'' and individually as a ``Separate Account'') and 
EQ Advisors Trust (the ``Trust'') (collectively with Equitable and the 
Separate Accounts, the ``Section 17 Applicants'').

Summary of Application: Applicants request an order (a) approving the 
proposed substitution by certain insurance company separate accounts of 
Class IB shares of the EQ/Putnam International Equity Portfolio for 
Class IB shares of the EQ/T. Rowe Price International Stock Portfolio 
(the ``Substitution''), and (b) to permit certain in-kind transactions 
in connection with the proposed Substitution (``In-Kind 
Transactions''). (The EQ/Putnam International Equity

[[Page 16471]]

Portfolio is referred to herein as the ``Replacement Portfolio.'' The 
EQ/T. Rowe Price International Stock Portfolio is referred to herein as 
the ``Removed Portfolio.'')

Filing Date: The application was filed on September 19, 2001 and 
amended and restated on March 21, 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 23, 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 the issues contested. 
Persons may request notification of a hearing by writing to the 
Secretary of the Commission.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 450 
Fifth Street, NW, Washington, DC 20549-0609. Applicants: c/o Peter D. 
Noris, Executive Vice President and Chief Investment Officer, The 
Equitable Life Assurance Society of the United States, 1290 Avenue of 
the Americas, New York, New York 10104, and Arthur J. Brown, Esq., 
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, NW, Washington, 
DC 20036.

FOR FURTHER INFORMATION CONTACT: Mark A. Cowan, Senior Counsel, or 
William Kotapish, Assistant Director, 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 Public Reference Branch of the Commission, 450 Fifth Street, NW, 
Washington, DC 20549 (tel. (202) 942-8090).

Applicants' Representations

    1. Equitable is a New York stock life insurance company that has 
been in business since 1859. Equitable is a wholly-owned subsidiary of 
AXA Financial, Inc. (``AXA Financial''). AXA Financial is a wholly-
owned subsidiary of the global AXA Group, the holding company for an 
international group of insurance and related financial services 
companies.
    2. Equitable serves as sponsor and depositor for each of the 
Separate Accounts. Separate Account A, Separate Account 301, Separate 
Account 45 and Separate Account 49 fund certain variable annuity 
contracts. Separate Account FP funds certain variable life insurance 
policies. Separate Account 65 and Separate Account 66 fund group 
pension and profit-sharing plans under group annuity contracts issued 
by Equitable. (The variable annuity contracts and variable life 
insurance policies funded by the Separate Accounts are collectively 
referred to herein as the ``Contracts.'')
    3. Each Separate Account is a segregated asset account of Equitable 
and, with the exception of Separate Account 65 and Separate Account 66, 
is registered with the Commission as a unit investment trust under the 
1940 Act. Separate Account 65 and Separate Account 66 are excluded from 
registration under the 1940 Act pursuant to Section 3(c)(11) of the 
1940 Act. Separate Account 65 and Separate Account 66 are not Section 
26 Applicants.
    4. The Trust is organized as a Delaware business trust. It is 
registered as an open-end management investment company under the 1940 
Act. The Trust is a series investment company and currently offers 40 
separate series (each a ``Portfolio'' and collectively, the 
``Portfolios''). Equitable currently serves as investment manager 
(``Manager'') of each of the Portfolios. Both the Removed and 
Replacement Portfolios are series of the Trust. The Trust does not 
impose sales charges for buying and selling its shares. All dividends 
and other distributions with respect to a Portfolio's shares are 
reinvested in full and fractional shares of the Portfolio to which they 
relate. The Trust currently offers two classes of shares, Class IA and 
Class IB shares, which differ only in that Class IB shares are subject 
to a distribution plan adopted and administered pursuant to Rule 12b-1 
under the 1940 Act. Under that distribution plan, up to 0.50% of the 
average daily net assets attributable to the Class IB shares of each 
Portfolio may be used to pay for distribution and shareholder services. 
The distributors for the Class IA and Class IB shares of each Portfolio 
are AXA Advisors, LLC (``AXA Advisors'') and AXA Distributors, Inc. 
(``AXA Distributors''). Under the Distribution Agreements with respect 
to the promotion, sale and servicing of shares of each Portfolio, 
payments to AXA Advisors and AXA Distributors, with respect to 
activities under the distribution plan, are currently limited to 
payments at an annual rate equal to 0.25% of the average daily net 
assets of each Portfolio (including the Removed and Replacement 
Portfolios) attributable to its Class IB shares.
    5. The Trust has received an exemptive order from the Commission 
(``Multi-Manager Order'') that permits the Manager, or any entity 
controlling, controlled by, or under common control (within the meaning 
of Section 2(a)(9) of the 1940 Act) with the Manager, subject to 
certain conditions, including approval of the Board of Trustees of the 
Trust, and without the approval of shareholders to: (i) Select a new 
investment adviser or additional investment advisers (``Advisers'') for 
each Portfolio; (ii) enter into new Investment Advisory Agreements with 
Advisers (``Advisory Agreements'') and/or materially modify the terms 
of any existing Advisory Agreement; (iii) terminate any existing 
Adviser and replace the Adviser; and (iv) continue the employment of an 
existing Adviser on the same contract terms where the Advisory 
Agreement has been assigned because of a change of control of the 
Adviser.
    6. Equitable, on its own behalf and on behalf of the Separate 
Accounts, proposes to exercise its contractual right to substitute a 
different eligible investment fund for the Removed Portfolio as a 
funding option under the Contracts. The Section 26 Applicants propose 
to substitute Class IB shares of the Replacement Portfolio for Class IB 
shares of the Removed Portfolio. Although each Portfolio of the Trust 
is authorized to issue Class IA shares, neither of the Portfolios 
involved in the proposed Substitution has issued any Class IA shares to 
date. Accordingly, no Class IA shares are involved in the proposed 
Substitution.
    7. The Section 26 Applicants propose the Substitution as part of a 
continued and overall business plan by Equitable to make its Contracts 
more competitive and thus more attractive to existing Contract owners, 
and to prospective purchasers. The Substitution is also intended to 
simplify the prospectuses and related materials with respect to the 
Contracts and the investment options available through the Separate 
Accounts. Additionally, the Substitution will substitute shares of the 
Replacement Portfolio for shares of the Removed Portfolio, which has an 
investment objective, policies and risks substantially similar to those 
of the Replacement Portfolio. Furthermore, Equitable believes that the 
Substitution ultimately may enable Equitable to reduce certain of the 
costs that it incurs in administering the Contracts by consolidating 
overlapping and duplicative Portfolios. Finally, the

[[Page 16472]]

Substitution is designed to provide Contract owners with an opportunity 
to continue their investment in a similar Portfolio without 
interruption and without any cost to them. In this regard, Equitable 
will bear all expenses incurred in connection with the Substitution and 
related filings and notices, including legal, accounting, brokerage and 
other fees and expenses. On the effective date of the Substitution, the 
amount of any Contract owner's or participant's Contract value or the 
dollar value of a Contract owner's or participant's investment in the 
relevant Contract will not change as a result of the Substitution.
    8. The investment objective of the Replacement Portfolio is to seek 
capital appreciation. To achieve this objective, the Replacement 
Portfolio invests primarily in equity securities of companies located 
in a number of different countries. Under normal circumstances, a 
majority of the Replacement Portfolio's assets will be invested in 
companies located in at least three different countries outside the 
United States. The countries in which the Replacement Portfolio may 
invest include emerging market countries. The Replacement Portfolio 
will not limit its investments to any particular type of company, 
although it generally invests in large capitalization companies, and 
will invest in companies whose earnings its Adviser believes to be in a 
relatively strong growth trend or whose securities the Adviser 
considers to be undervalued. The primary risks associated with an 
investment in the Replacement Portfolio are: (i) General equity 
investment risk; (ii) foreign securities risk (both emerging markets 
and regulatory risks); (iii) small-capitalization and mid-
capitalization company risk; (iv) derivatives risk; and (v) liquidity 
risk.
    9. Applicants state that the Removed Portfolio has an investment 
objective, policies and risks that are substantially similar to those 
of the Replacement Portfolio in that it also seeks to achieve long-term 
growth of capital through investment primarily in common stocks of 
established foreign companies. The Removed Portfolio invests 
substantially all of its assets in common stocks of established 
companies outside of the United States. The Adviser broadly diversifies 
the Portfolio's investments among developed and emerging market 
countries throughout the world. Stock selection reflects a growth 
style. The Removed Portfolio may purchase the stock of companies of any 
size, but typically focuses on large capitalization companies, and to a 
lesser extent, medium-sized companies. The primary risks associated 
with an investment in the Removed Portfolio are: (i) general equity 
investment risk; (ii) growth investing risk; (iii) foreign securities 
risk (including currency, emerging markets, regulatory, political/
economic and geographic risks); and (iv) liquidity risk. Applicants 
assert that, after the proposed Substitution, a Contract owner or 
participant who allocated value to the Removed Portfolio would continue 
to have value allocated to a Replacement Portfolio that seeks capital 
appreciation through investment in foreign company stocks, and would 
have assumed a substantially similar level of risk.
    10. The first chart below compares the advisory fees and total 
expenses of the Class IB shares of the Replacement Portfolio and the 
Removed Portfolio for the six month period ended June 30, 2001 
(annualized) and the one year period ended December 31, 2001. The 
management fee for the Replacement Portfolio is identical to that for 
the Removed Portfolio. The net total expense ratio for the Replacement 
Portfolio was also identical to that of the Removed Portfolio for the 
corresponding period. With respect to the Removed and Replacement 
Portfolios for the period ended December 31, 2001, this is as a result 
of a management fee waiver and expense reimbursement agreement in 
effect for each of these Portfolios until April 30, 2002. Absent this 
agreement, the total expense ratio of the Replacement Portfolio would 
have been slightly higher than that of the Removed Portfolio. 
Applicants state that the proposed Substitution would replace the 
Removed Portfolio with the Replacement Portfolio, which currently has, 
and will have after the Substitution, a larger asset size. Generally 
speaking, larger funds tend to have lower expenses than comparable 
funds that are smaller. This is because, with a larger asset size, 
fixed fund expenses are spread over a larger base, lowering the expense 
ratios. Also, larger funds may have lower trading expenses, potentially 
resulting in higher returns. Applicants state that it is anticipated 
that the net total expense ratio of the Replacement Portfolio will be 
no higher than that of the Removed Portfolio as a result of the 
proposed Substitution due to the fee waiver and expense reimbursement 
agreement. In addition, it is anticipated that the total expense ratio 
of the Replacement Portfolio will be lower than that of the Removed 
Portfolio as a result of the Substitution, absent any fee waivers or 
expense reimbursements. The second chart below includes the fees and 
expenses of the Class IB shares of the Replacement Portfolio on a pro 
forma basis assuming that the Substitution had been in effect for the 
one year period ended December 31, 2001.

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                                        Replacement portfolio  EQ/Putnam     Removed portfolio  EQ/T. Rowe Price
                                         International Equity Portfolio     International Stock Portfolio (Class
                                                   (Class IB)                                IB)
                                     ---------------------------------------------------------------------------
                                      Six month  period                     Six month  period
                                       ended  6/30/2001   One year  period   ended  6/30/2001   One year  period
                                         (annualized)    ended  12/31/2001     (annualized)    ended  12/31/2001
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Net Assets..........................       $344,446,000       $330,234,330       $201,898,000       $202,104,053
Management Fee \1\..................              0.85%              0.85%              0.85%              0.85%
Rule 12b-1 Fee......................              0.25%              0.25%              0.25%              0.25%
Other Expenses......................              0.15%              0.24%              0.15%              0.19%
                                     ---------------------------------------------------------------------------
    Total Expenses..................              1.25%              1.34%              1.25%              1.29%
Fee Waiver and/or Expense                            NA              0.09%                 NA              0.04%
 Reimbursement......................
Net Expenses........................              1.25%              1.25%              1.25%             1.25%
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\1\ The management fee for the Replacement Portfolio on an annual basis is equal to 0.850% of the first $1
  billion; 0.800% of the next $1 billion; 0.775% of the next $3 billion; 0.750% of the next $5 billion; and
  0.725% thereafter. The management fee for the Removed Portfolio on an annual basis is equal to 0.850% of the
  first $1 billion; 0.800% of the next $1 billion; 0.775% of the next $3 billion; 0.750% of the next $5 billion;
  and 0.725% thereafter.


[[Page 16473]]


                           Combined Portfolio
                   [One Year Period Ended 12/31/2001]
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Net Assets..............................................    $532,338,383
Management Fee..........................................           0.85%
Rule 12b-1 Fee..........................................           0.25%
Other Expenses..........................................           0.17%
                                                         ---------------
Total Expenses..........................................           1.27%
Fee Waiver and/or Expense Reimbursement.................           0.02%
Net Expenses............................................           1.25%
------------------------------------------------------------------------

    11. The chart below compares the average annual total returns for 
the Class IB shares of the Replacement Portfolio and the Removed 
Portfolio for one year, three years and since inception, for the period 
ended December 31, 2001. The historical performance of the Replacement 
Portfolio for the time periods listed below has been more favorable 
than that of the Removed Portfolio, although there is no guarantee that 
this will be the case in the future.

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                                        One year  ended  12/31/  Three years  ended  12/  Since  inception  (05/
     Portfolio  (Benchmark Index)                  01                     31/01                    1/97)
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Putnam Portfolio......................  (21.55)%                 3.29%                    8.18%
T. Rowe Price Portfolio...............  (21.79)%                 (5.69)%                  (1.33)%
MSCI EAFE Index.......................  (21.44)%                 (5.05)%                  1.19%
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    12. The Section 26 Applicants will file with the Commission 
prospectuses and prospectus supplements that notify Contract owners and 
participants of Equitable's intention to substitute the Replacement 
Portfolio for the Removed Portfolio. The prospectuses and prospectus 
supplements, as appropriate, also will describe the Substitution, the 
Replacement and Removed Portfolio and the impact of the Substitution on 
fees and expenses at the underlying fund level. The Section 26 
Applicants will send the appropriate prospectus or prospectus 
supplement (or other notice, in the case of Contracts no longer 
actively marketed and for which there are a relatively small number of 
existing Contract owners (``Inactive Contracts'')), as appropriate, 
containing this disclosure to all existing and new Contract owners and 
participants.
    13. At or after the time the Commission approves the Application, 
the Section 26 Applicants will send to existing Contract owners and 
participants a supplement to the relevant Contract prospectus (or other 
notice in the case of Inactive Contracts) that discloses to such 
Contract owners and participants that the Application has been 
approved. Together with this disclosure, the Section 26 Applicants will 
send to any of those existing Contract owners and participants who have 
not previously received a prospectus for the Replacement Portfolio a 
prospectus and/or prospectus supplement for the Replacement Portfolio. 
New purchasers of Contracts will be provided with a Contract prospectus 
and/or supplement containing disclosure that the Commission has issued 
an order approving the Substitution, as well as a prospectus for the 
Replacement Portfolio. The Contract prospectus and/or supplement and 
the prospectus and/or prospectus supplement for the Trust, including 
the Replacement Portfolio, will be delivered to purchasers of new 
Contracts in accordance with all applicable legal requirements.
    14. Contract owners and participants will be sent a notice of the 
Substitution before the Substitution Date. The notice will inform 
Contract owners and participants that the Substitution will be effected 
on the Substitution Date and that they may transfer assets from the 
Removed Portfolio (or from the Replacement Portfolio following the 
Substitution Date) to another investment option available under their 
Contract without the imposition of any applicable transfer charges, 
limitations, fees, or other penalties that might otherwise be imposed 
for a period beginning thirty (30) days before the Substitution Date 
and ending no earlier than thirty (30) days following the Substitution 
Date and such transfers will not count against the limit, if any, on 
the number of free transfers permitted under the Contracts. Within five 
days after the Substitution Date, Equitable will mail (i) a written 
notice to all Contract owners and participants affected by the 
Substitution informing them that the Substitution was completed and 
restating that they may transfer assets from the Replacement Portfolio 
to another investment option available under their Contract free of any 
applicable transfer charges, limitations, fees, or other penalties that 
might otherwise be imposed through a date at least thirty (30) days 
following the Substitution Date and such transfers will not count 
against the limit, if any, on the number of free transfers permitted 
under the Contracts and (ii) a confirmation of the transactions.
    15. The Substitution will be effected by redeeming shares of the 
Removed Portfolio in-kind on the Substitution Date at its net asset 
value and using the proceeds of those in-kind redemptions to purchase 
shares of the Replacement Portfolio at its net asset value on the same 
date.
    16. In-kind redemptions and contributions will be done in a manner 
consistent with the investment objectives, policies and diversification 
requirements of the Replacement Portfolio and the Removed Portfolio. 
Equitable, in consultation with the Replacement Portfolio's Adviser, 
will review the In-Kind Transactions to assure that the assets are 
suitable for the Replacement Portfolio. All assets and liabilities will 
be valued based on the normal valuation procedures of the Removed 
Portfolio and the Replacement Portfolio, as set forth in the Trust's 
registration statement.
    17. No transfer or similar charges will be imposed by the Section 
26 Applicants and, on the Substitution Date, all Contract values will 
remain unchanged and fully invested. Contract owners and participants 
will not incur any fees or charges as a result of the proposed 
Substitution, nor will their rights or Equitable's obligations under 
the Contracts be altered in any way. All expenses in connection with 
the proposed Substitution, including any brokerage, legal, accounting, 
and other fees and expenses will be paid by Equitable. The proposed 
Substitution will not impose any tax liability on Contract owners or 
participants or cause the Contract charges currently being paid by 
Contract owners and participants to be greater after the proposed 
Substitution than before the proposed Substitution. All Contract-level 
fees will remain the same after the proposed Substitution. The proposed 
Substitution will not alter in any way the benefits, including tax 
benefits to Contract owners and participants, or

[[Page 16474]]

Equitable's obligations under the Contracts. In addition, the proposed 
Substitution will not be treated as a transfer for purposes of 
assessing transfer charges or computing the number of permissible 
transfers under the Contracts.
    18. The Section 26 Applicants request that the Commission issue an 
order pursuant to Section 26(c) of the 1940 Act approving the 
Substitution of Class IB shares of the EQ/Putnam International Equity 
Portfolio for Class IB shares of the EQ/T. Rowe Price International 
Stock Portfolio. The Section 17 Applicants request that the Commission 
issue an order pursuant to Section 17(b) of the 1940 Act granting an 
exemption from Section 17(b) to the extent necessary to permit the In-
Kind Transactions.

Applicable Law

Section 26(c) of the 1940 Act

    1. Section 26(c) of the 1940 Act prohibits the depositor of a 
registered unit investment trust that invests in the securities of a 
single issuer from substituting the securities of another issuer 
without Commission approval. Section 26(c) provides that ``[t]he 
Commission shall issue an order approving such substitution if the 
evidence establishes that it is consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of this title.'' Section 26(c) protects the expectation of investors 
that the unit investment trust will accumulate shares of a particular 
issuer and is intended to insure that unnecessary or burdensome sales 
loads, additional reinvestment costs and other charges will not be 
incurred due to unapproved substitution of securities.
    2. The proposed Substitution involves a substitution of securities 
within the meaning of Section 26(c) of the 1940 Act. The Applicants, 
therefore, request an order from the Commission pursuant to Section 
26(c) approving the proposed Substitution.
    3. Equitable has reserved the right under the Contracts to 
substitute shares of another eligible investment fund for any of the 
current Portfolios. The prospectuses for the Contracts and the Separate 
Accounts contain appropriate disclosure of this right. The Section 26 
Applicants have reserved this right of substitution both to protect 
themselves and their Contract owners in situations where either might 
be harmed or disadvantaged by events affecting the issuer of the 
securities held by a Separate Account and to preserve the opportunity 
to replace such shares in situations where a substitution could benefit 
Equitable and its Contract owners.
    4. The Replacement Portfolio and Removed Portfolio have 
substantially similar investment objectives, policies and risks. In 
addition, the proposed Substitution retains for Contract owners the 
investment flexibility that is a central feature of the Contracts. Any 
impact on the investment programs of affected Contract owners, 
including the appropriateness of the available investment options, 
should therefore be negligible.
    5. Applicants also maintain that the ultimate effect of the 
Substitution would be to consolidate overlapping and duplicative 
investment options in a single Portfolio. This consolidation will 
permit Equitable to present information to its Contract owners and 
participants in a simpler and more concise manner. The anticipated 
streamlining of the disclosure documents should provide Contract owners 
and participants with a simpler presentation of the available 
investment options under their Contracts and related financial 
information.
    6. Thus, the Substitution protects the Contract owners and 
participants who have allocated Contract value to the Removed Portfolio 
by: (i) providing an underlying investment option for sub-accounts 
invested in the Removed Portfolio that is substantially similar to the 
Removed Portfolio; (ii) providing such Contract owners and participants 
with simpler and more focused disclosure documents; and (iii) providing 
such Contract owners and participants with an investment option with an 
identical management fee and total expense ratio as the current 
investment option.
    7. Applicants assert that the proposed Substitution is not of the 
type that Section 26(c) was designed to prevent. Unlike traditional 
unit investment trusts where a depositor could only substitute 
investment securities in a manner which permanently affected all the 
investors in the trust, the Contracts provide each Contract owner and 
participant with the right to exercise his or her own judgment, and 
transfer Contract values and cash values into and among other 
investment options available to Contract owners and participants under 
their Contracts. Additionally, the Substitution will not, in any 
manner, reduce the nature or quality of the available investment 
options. Moreover, the Section 26 Applicants will offer Contract owners 
and participants the opportunity to transfer amounts out of the 
affected sub-accounts without any cost or other penalty that may 
otherwise have been imposed until thirty days after the Substitution 
Date. The Substitution, therefore, will not result in the type of 
costly forced redemption that Section 26(c) was designed to prevent.
    8. The proposed Substitution is also unlike the type of 
substitution which Section 26(c) was designed to prevent in that by 
purchasing a Contract, Contract owners and participants select much 
more than a particular underlying fund in which to invest their 
Contract values. They also select the specific type of insurance 
coverage offered by the Section 26 Applicants under the applicable 
Contract, as well as numerous other rights and privileges set forth in 
the Contract. Contract owners also may have considered Equitable's 
size, financial condition, and its reputation for service in selecting 
their Contract. These factors will not change as a result of the 
proposed Substitution.
    9. Applicants have agreed to the following terms and conditions of 
the Substitution:
    a. The investment objectives, policies and risks of the Replacement 
Portfolio are substantially similar to the investment objectives, 
policies and risks of the Removed Portfolio, providing Contract owners 
and participants with a means to continue their investment goals and 
risk expectations;
    b. The total expense ratio for the Class IB shares of the 
Replacement Portfolio will be equal to or less than that of the Class 
IB shares of the Removed Portfolio, assuming that the assets of the 
Replacement Portfolio do not decrease significantly from the present 
asset level. In this regard, for those Contract owners or participants 
who were Contract owners or participants on the date of the 
Substitution, Equitable will waive its management fee with respect to 
the Replacement Portfolio and/or reimburse expenses incurred by the 
Replacement Portfolio during the twenty-four months following the 
Substitution to the extent necessary to ensure that the total expense 
ratio for any period (not to exceed a fiscal quarter) for the Class IB 
shares of the Replacement Portfolio does not exceed 1.25% of the 
Replacement Portfolio's average daily net assets (on an annualized 
basis);
    c. Investments in the Replacement Portfolio may be temporary 
investments for Contract owners and participants as each Contract owner 
and participant may exercise his or her own judgment as to the most 
appropriate investment alternative available. In this regard, the 
proposed Substitution retains for Contract owners and participants the 
investment flexibility which is a central feature of the Contracts. 
Additionally,

[[Page 16475]]

for a period beginning 30 days before the Substitution Date, and ending 
no earlier than 30 days after the Substitution, Contract owners and 
participants will be permitted to transfer value among the various 
investment options available under their Contract free of any otherwise 
applicable transfer charges, limitations, fees, or other penalties that 
might otherwise be imposed and such transfers will not count against 
the limit, if any, on the number of free transfers permitted under the 
Contracts;
    d. The Substitution will be effected at the relative net asset 
values of the respective shares of the Removed Portfolio and the 
Replacement Portfolio, without the imposition of any transfer or 
similar charge by the Section 26 Applicants, and with no change in the 
amount of any Contract owner's or participant's Contract value or in 
the dollar value of his or her investment in such Contract;
    e. Contract owners and participants will not incur directly or 
indirectly related fees or charges as a result of the Substitution. 
Equitable will bear all expenses incurred in connection with the 
Substitution and related filings and notices, including legal, 
accounting, brokerage and other fees and expenses. The Substitution 
will not cause the Contract fees and charges currently being paid by 
existing Contract owners to be greater after the Substitution than 
before the Substitution;
    f. The Substitution will not be counted as a new investment 
selection in determining the limit, if any, on the total number of 
Portfolios that Contract owners and participants can select during the 
life of a Contract;
    g. The Substitution will not alter or affect the insurance benefits 
or rights of Contract owners or participants or the terms and 
obligations of the Contracts;
    h. Contract owners and participants would not incur any adverse tax 
consequences as a result of the Substitution;
    i. Contract owners and participants affected by the Substitution 
will be sent written confirmation of the Substitution that identifies 
the Substitution made on behalf of the Contract owner or participant 
within five days following the Substitution;
    j. For those Contract owners or participants who were Contract 
owners or participants on the date of the Substitution, Equitable will 
not increase sub-account or Contract expenses for a period of twenty-
four months following the Substitution Date; and
    k. Contract owners and participants may withdraw amounts under the 
Contract or terminate their interest in a Contract, under the 
conditions that currently exist, including payment of any applicable 
withdrawal or surrender charge.

Section 17(a) of the 1940 Act

    1. Section 17(a)(1) of the 1940 Act prohibits any affiliated person 
of a registered investment company, or any affiliated person of such a 
person, acting as principal, from knowingly selling any security or 
other property to that company. Section 17(a)(2) of the 1940 Act 
generally prohibits the same persons, acting as principals, from 
knowingly purchasing any security or other property from the registered 
investment company.
    2. Section 17(b) of the 1940 Act provides that the Commission may, 
upon application, issue an order exempting any proposed transaction 
from Section 17(a) if: (i) the terms of the proposed transactions are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned; (ii) the proposed transactions are consistent with 
the policy of each registered investment company concerned; and (iii) 
the proposed transactions are consistent with the general purposes of 
the 1940 Act.
    3. The Section 17 Applicants request an order pursuant to Section 
17(b) of the 1940 Act exempting them from the provisions of Section 
17(a) to the extent necessary to permit them to carry out the In-Kind 
Transactions.
    4. The Section 17 Applicants submit that the terms of the proposed 
In-Kind Transactions, including the consideration to be paid and 
received are reasonable and fair and do not involve overreaching on the 
part of any person concerned. The In-Kind Transactions will be effected 
at the respective net asset values of the Removed Portfolio and the 
Replacement Portfolio, as determined in accordance with the procedures 
disclosed in the registration statement for the Trust and as required 
by Rule 22c-1 under the 1940 Act. The In-Kind Transactions will not 
change the dollar value of any Contract owner's or participant's 
investment in any of the Separate Accounts, the value of any Contract, 
the accumulation value or other value credited to any Contract, or the 
death benefit payable under any Contract. After the proposed In-Kind 
Transactions, the value of a Separate Account's investment in the 
Replacement Portfolio will equal the value of its investments in the 
Removed Portfolio (together with the value of any pre-existing 
investments in the Replacement Portfolio) before the In-Kind 
Transactions.
    5. Applicants state that the Section 17 Applicants will assure 
themselves that the In-Kind Transactions will be in substantial 
compliance with the conditions of Rule 17a-7. To the extent that the 
In-Kind Transactions do not comply fully with the provisions of 
paragraphs (a) and (b) of Rule 17a-7, the Section 17 Applicants assert 
that the terms of the In-Kind Transactions provide the same degree of 
protection to the participating companies and their shareholders as if 
the In-Kind Transactions satisfied all of the conditions enumerated in 
Rule 17a-7. The Section 17 Applicants also assert that the proposed In-
Kind Transactions by the Section 17 Applicants do not involve 
overreaching on the part of any person concerned. Furthermore, the 
Section 17 Applicants represent that the proposed Substitution will be 
consistent with the policies of the Removed Portfolio and the 
Replacement Portfolio, as recited in the Trust's current registration 
statement.
    6. Applicants also assert that the proposed In-Kind Transactions 
are consistent with the general purposes of the 1940 Act and that the 
proposed In-Kind Transactions do not present any conditions or abuses 
that the 1940 Act was designed to prevent.

Conclusion

    For the reasons set forth in the Application, the Section 26 
Applicants and the Section 17 Applicants each respectively state that 
the proposed Substitution and the related In-Kind Transactions meet the 
standards of Section 26(c) of the 1940 Act and Section 17(b) of the 
1940 Act, respectively, and respectfully request that the Commission 
issue an order of approval pursuant to Section 26(c) of the 1940 Act 
and Section 17(b) of the 1940 Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-8206 Filed 4-4-02; 8:45 am]
BILLING CODE 8010-01-P