[Federal Register Volume 67, Number 154 (Friday, August 9, 2002)]
[Notices]
[Pages 51895-51900]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-20145]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-25692; File No. 812-12821]


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

August 2, 2002.
AGENCY: The Securities and Exchange Commission (``Commission'').

ACTION: Notice of 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 1940 Act 
from Section 17(a) of the 1940 Act.

-----------------------------------------------------------------------

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'') and 
Separate Account No. 49 of Equitable (``Separate Account 49'') 
(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. 66 of Equitable (``Separate Account 66'') (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;'' together with the Section 26 
Applicants, ``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/Capital Guardian Research Portfolio for Class 
IB shares of the EQ/MFS Research Portfolio (the ``Substitution''), and 
(b) to permit certain in-kind transactions in connection with the 
proposed Substitution. (The EQ/Capital Guardian Research Portfolio is 
referred to herein as the ``Replacement Portfolio.'' The EQ/MFS 
Research Portfolio is referred to herein as the ``Removed Portfolio.'')

FILING DATE: The application was filed on May 2, 2002 and amended and 
restated on August 1, 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 August 26, 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. 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 Mark C. Amorosi, Esq., 
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, NW., Washington, 
DC 20036.

FOR FURTHER INFORMATION CONTACT: Mark Cowan, Senior Counsel, or Zandra 
Bailes, Branch Chief, Office of Insurance Products, Division of 
Investment Management, at (202) 942-0670.

[[Page 51896]]


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., which is a wholly owned subsidiary of the 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 45 and Separate 
Account 49 fund certain variable annuity contracts. Separate Account FP 
funds certain variable life insurance policies. Separate Account 66 
funds 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 66, is registered with the 
Commission as a unit investment trust under the 1940 Act. Separate 
Account 66 is excluded from registration under the 1940 Act pursuant to 
Section 3(c)(11) of the 1940 Act. Separate Account 66 is not a Section 
26 Applicant.
    4. The Trust is organized as a Delaware business trust and 
registered as an open-end management investment company under the 1940 
Act. The Trust is a series investment company and currently has 39 
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 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, LLC (``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 Manager has retained investment sub-advisers (``Advisers'') 
to provide day-to-day investment advisory services for each of the 39 
current Portfolios. The Trust has received an exemptive order from the 
Commission 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: (a) select new or 
additional Advisers for each Portfolio; (b) enter into new Investment 
Advisory Agreements with Advisers (``Advisory Agreements'') and/or 
materially modify the terms of any existing Advisory Agreement; (c) 
terminate any existing Adviser and replace the Adviser; and (d) 
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 any of the current Portfolios 
offered as funding options under the Contracts. In particular, 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 
identical investment objective and substantially similar investment 
policies and risks as the Replacement Portfolio. Furthermore, Equitable 
believes that the Substitution ultimately may enable it to reduce 
certain of the costs that it incurs in administering the Contracts by 
consolidating overlapping and duplicative Portfolios. Finally, the 
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 
(``Substitution Date''), 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 and Removed 
Portfolios is to seek long-term growth of capital. To achieve this 
objective, the Replacement Portfolio invests primarily in equity 
securities of United States issuers and securities whose principal 
markets are in the United States, including American Depository 
Receipts and other United States registered foreign securities. The 
Portfolio invests primarily in common stocks of companies with a market 
capitalization greater than $1 billion at the time of purchase. To 
achieve its objective, the Removed Portfolio also invests primarily (at 
least 80% of its total assets) in equity securities, including common 
stocks, preferred stocks and depository receipts. The Portfolio may 
invest in securities of companies of any size but, like the Replacement 
Portfolio, invests primarily in large cap companies. The Replacement 
and Removed Portfolios each may invest a portion of their assets in 
foreign securities (up to 15% of total assets for the Replacement 
Portfolio and up to 20% of net assets for the Removed Portfolio). The 
primary risks associated with an investment in the Replacement 
Portfolio are: (a) General equity investment risk; and (b) foreign 
securities risk. The primary risks associated with an investment in the

[[Page 51897]]

Removed Portfolio are: (a) general equity investment risk; (b) foreign 
securities risk; and (c) small-cap and mid-cap company risk. Thus, 
Applicants believe 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 domestic company stocks, and 
would have assumed a substantially similar level of risk.
    9. The chart below compares the advisory fees, total expenses and 
asset sizes of the Replacement Portfolio and the Removed Portfolio for 
the one year periods ended December 31, 2000 and 2001. The chart also 
shows the pro forma expenses of the Replacement Portfolio assuming that 
the Substitution had been in effect for the year ended December 31, 
2001. The management fee rate for the Replacement Portfolio is 
identical to that of the Removed Portfolio. The net total expense ratio 
of the Replacement Portfolio was also identical to that of the Removed 
Portfolio for the one year period ended December 31, 2001 due to a 
management fee waiver and expense reimbursement agreement in effect for 
each of these Portfolios until April 30, 2003 (``Expense Limitation 
Agreement''). Absent this agreement, the total expense ratio of the 
Replacement Portfolio would have been higher than that of the Removed 
Portfolio. The net total expense ratio of the Replacement Portfolio for 
the one year period ended December 30, 2000 was slightly higher than 
that of the Removed Portfolio due to the Replacement Portfolio's 
slightly higher management fee rate at the time. However, as noted 
above, the current management fee rates for the Removed Portfolio and 
the Replacement Portfolio are identical under the current management 
agreement with the Manager.
    10. Applicants note that, as further set forth in the chart below, 
the Replacement Portfolio has been attracting assets over the last two 
years, while the Removed Portfolio has been losing assets over that 
same time period. Applicants state that the proposed Substitution would 
replace the Removed Portfolio with the Replacement Portfolio, which 
will have a larger asset size after the Substitution. 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. 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 Expense Limitation 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, as set forth in the 
following chart.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Replacement portfolio EQ/Capital Guardian       Removed portfolio EQ/MFS Research Portfolio     Combined portfolio
                                          Research Portfolio  (Class IB)                            (Class IB)                          (pro forma)
                                ------------------------------------------------------------------------------------------------------------------------
                                  One year period ended    One year period ended   One year period ended   One year period ended   One year period ended
                                        12/31/2000              12/31/2001              12/31/2000              12/31/2001              12/31/2001
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Assets.....................  $78.0 million..........  $111.9 million........  $878.1 million........  $683.4 million........  $846.1 million \2\
Management Fee \1\.............   0.65%.................  0.65%.................  0.62%.................  0.65%.................  0.65%
Rule 12b-1 Fee.................  0.25%..................  0.25%.................  0.25%.................  0.25%.................  0.25%
Other Expenses.................  0.16%..................  0.15%.................  0.07%.................  0.07%.................  0.06%
Total Expenses.................  1.06%..................  1.05%.................  0.94%.................  0.97%.................  0.96%
Fee Waiver and/or Expense        0.11%..................  0.10%.................  0.02%.................  0.02%.................  0.01%
 Reimbursement.
Net Expenses...................  0.95%..................  0.95%.................  0.92%.................  0.95%.................  0.95%
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The management fee for the EQ/Capital Guardian Research Portfolio on an annual basis is equal to 0.650% of the first $1 billion; 0.600% of the next
  $1 billion; 0.575% of the next $3 billion; 0.550% of the next $5 billion; and 0.525% thereafter. The management fee for the EQ/MFS Research Portfolio
  on an annual basis is equal to 0.650% of the first $1 billion; 0.600% of the next $1 billion; 0.575% of the next $3 billion; 0.550% of the next $5
  billion; and 0.525% thereafter.
\2\ Average daily net assets.

    11. In connection with the Substitution, 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 containing this disclosure to all 
existing and new Contract owners and participants.
    12. 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 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.
    13. 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

[[Page 51898]]

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 (a) 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 (b) a 
confirmation of the transactions.
    14. The Substitution will be effected by redeeming shares of the 
Removed Portfolio in-kind on the Substitution Date at their net asset 
value and using the proceeds of those in-kind redemptions to purchase 
shares of the Replacement Portfolio at their net asset value on the 
same date (``In-Kind Transactions''). The In-Kind Transactions 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 ensure 
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.
    15. 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 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.
    16. 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/Capital Guardian Research 
Portfolio for Class IB shares of the EQ/MFS Research 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.''
    2. Applicants represent that 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. Applicants state that Equitable has reserved the right under the 
Contracts to substitute shares of another eligible investment fund for 
any of the current Portfolios offered as funding options under the 
Contracts. Applicants represent that 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. Applicants state that the Replacement Portfolio and Removed 
Portfolio have an identical investment objective and substantially 
similar investment policies and risks. In addition, Applicants maintain 
that the proposed Substitution retains for Contract owners the 
investment flexibility that is a central feature of the Contracts, and 
any impact on the investment programs of affected Contract owners, 
including the appropriateness of the available investment options, 
should be negligible.
    5. Applicants also maintain that the ultimate effect of the 
Substitution would be to consolidate overlapping and duplicative 
investment options into 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, Applicants state that the Substitution protects the 
Contract owners and participants who have allocated Contract value to 
the Removed Portfolio by: (a) providing an underlying investment option 
for sub-accounts invested in the Removed Portfolio that is 
substantially similar to the Removed Portfolio; (b) providing such 
Contract owners and participants with simpler and more focused 
disclosure documents; and (c) 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,

[[Page 51899]]

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 for a period beginning thirty (30) days 
before the Substitution Date and ending no earlier than thirty (30) 
days after the Substitution Date. Applicants conclude that the 
Substitution will not result in the type of costly forced redemption 
that Section 26(c) was designed to prevent.
    8. Applicants assert that 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 state that the significant terms of the proposed 
substitution are as follows:
    a. The Replacement Portfolio has an identical investment objective 
and substantially similar investment policies and risks as the Removed 
Portfolio, providing Contract owners and participants with a means to 
continue their investment goals and risk expectations;
    b. The total expense ratio of 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 are 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 0.95% 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, for a period beginning thirty (30) days before the 
Substitution Date, and ending no earlier than thirty (30) days after 
the Substitution, Contract owners and participants directly affected by 
the Substitution will be permitted to transfer value from the 
Replacement Portfolio or the Removed Portfolio to another investment 
option 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 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: (a) the terms of the proposed transactions are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned; (b) the proposed transactions are consistent with the 
policy of each registered investment company concerned; and (c) 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. Applicants state that 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. 
Applicants further state that 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

[[Page 51900]]

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. 02-20145 Filed 8-8-02; 8:45 am]
BILLING CODE 8010-01-P