[Federal Register Volume 63, Number 223 (Thursday, November 19, 1998)]
[Notices]
[Pages 64289-64292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30949]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-23533; File No. 812-11142]
The Mutual Life Insurance Company of New York, et al.
November 13, 1998.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of Application for Approval and Exemption under the
Investment Company Act of 1940 (``1940 Act''). Order requested pursuant
to Section 26(b) of the 1940 Act
[[Page 64290]]
approving the proposed substitution of securities and pursuant to
Section 17(b) of the 1940 Act exempting the proposed transaction from
the provisions of Section 17(a) of the 1940 Act.
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SUMMARY OF APPLICATION: Applicants seek an Order approving the
substitution of shares of the Money Market Portfolio Series (the ``MONY
Money Market Portfolio'') of the MONY Series Fund, Inc. for shares of
the Money Market Series (``OCC Money Market Portfolio'') of the OCC
Accumulation Trust (the ``Trust''). Applicants also seek an Order
exempting them from Section 17(a) of the 1940 Act to the extent
necessary to permit Applicants to carry out the above-referenced
substitution by redeeming shares of the OCC Money Market Portfolio in-
kind or partly in-kind and using the redemption proceeds to purchase
shares of the MONY Money Market Portfolio.
APPLICANTS: The Mutual Life Insurance Company of New York (``MONY'')
and MONY Life Insurance Company of America (``MONY America'', and
collectively with MONY ``the Companies''), their respective separate
accounts, MONY Variable Account A (``MONY Account'') and MONY America
Variable Account A (``MONY America Account'', and collectively with the
MONY Account ``the Accounts''), OCC Accumulation Trust and MONY Series
Fund (collectively with OCC Accumulation Trust, the Companies and the
Accounts ``the Applicants'').
FILING DATE: The Application was filed on May 8, 1998, and amended and
restated on September 16, 1998.
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 on this application by writing to the
Commission's Secretary and serving the Applicants with a copy of the
request, personally or by mail. Hearing requests must be received by
the Commission by 5:30 p.m., on December 8, 1998, 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, Securities and Exchange Commission, 450 Fifth
Street, NW., Washington, DC 20549. Applicants, c/o Frederick C.
Tedeschi, Esq., The Mutual Life Insurance Company of New York, 1740
Broadway, New York, NY 10019. Copies to Deborah Kaback, Esq.,
Oppenheimer Capital, Two World Financial Center, New York, N.Y. 10281-
1698.
FOR FURTHER INFORMATION CONTACT:
Lorna MacLeod, Attorney, or Mark Amorosi, Special Counsel, Office of
Insurance Products, Division of Investment Management, at (202) 942-
0670.
SUPPLEMENTARY INFORMATION: Following is a summary of the Application.
The complete Application is available for a fee from the Public
Reference Branch of the Commission.
Applicants' Representations
1. MONY is a mutual life insurance company organized in the state
of New York in 1842. MONY America is a stock insurance company
organized in the state of Arizona. MONY America is the corporate
successor of VICO Credit Life Insurance Company, incorporated in
Arizona on March 6, 1969. MONY America is a wholly owned subsidiary of
MONY. MONY and MONY America serve as sponsor and depositor of the MONY
Account and MONY America Account, respectively.
2. MONY and MONY America established the MONY Account and MONY
America Account on November 28, 1990 and March 27, 1987, respectively.
The Accounts are segregated asset accounts registered with the
Commission as unit investment trusts pursuant to the provisions of the
1940 Act and are used to fund certain individual and group flexible
payment variable annuity contracts issued by the Companies and sold
under the name ``ValueMaster'' (``ValueMaster Contracts'').
3. The Accounts are currently divided into various sub-accounts
(``Sub-Accounts''), five of which are available to owners of
ValueMaster Contracts (``ValueMaster Contractowners'') and which
reflect the investment performance of the Bond, Equity, Managed, Money
Market and Small Cap Series of the Trust, a registered investment
company. ValueMaster Contractowners may transfer account values among
the Sub-Accounts without any charge up to four times a year. For any
additional transfers, a transfer charge is not currently imposed,
however the Companies reserve the right to impose a charge, which will
not exceed $25 per transfer. The ValueMaster Contracts are offered
exclusively by agents of Oppenheimer Life Agency, Ltd., (``Oppenheimer
Life''), which is not an affiliate of OpCap Advisors, a registered
investment adviser and the Trust's investment manager. Neither
Oppenheimer Life nor OpCap Advisors are affiliates of the Applicants.
As of December 31, 1997, there were under 800 ValueMaster
Contractowners with allocations totaling $2,166,258 to the OCC Money
Market Portfolio, representing only 3% of the total assets invested in
the Accounts by ValueMaster Contractowners. Oppenheimer Life is no
longer actively selling the ValueMaster Contracts.
4. The Trust was established on May 12, 1994 and is a registered
open-end management investment company consisting of seven separate
series (``Portfolios'') with differing investment objectives, policies
and restrictions. The Trust currently also offers shares of its
Portfolios to accounts of other unaffiliated life insurance companies,
to serve as the investment vehicle for their respective variable
annuity and life insurance contracts.
5. The OCC Money Market Portfolio seeks maximum current income
consistent with stability of principal and liquidity through investment
in a portfolio of high quality money market instruments. Shares of the
OCC Money Market Portfolio are purchased, without sales charge, by the
Money Market Sub-Accounts of the respective Accounts at the net asset
value per share next determined following receipt of a purchase payment
by the Sub-Accounts. Any dividend or capital gain distributions
received from the Portfolio is reinvested in additional shares of the
Portfolio and retained as assets of the Sub-Accounts. Shares are
redeemed without any charge or fee to the Accounts to the extent
necessary for the Companies to make annuity or other payments under the
ValueMaster Contracts. As of December 31, 1997, the OCC Money Market
Portfolio had assets of $2,166,067 all of which were attributable to
ValueMaster Contractowners. For the calendar year 1997, net redemptions
by the Accounts of shares of the OCC Money Market Portfolio, not
including dividend or capital gain reinvestments, totaled $3,312,805.
6. Like the OCC Money Market Portfolio, the MONY Money Market
Portfolio seeks maximum current income consistent with stability of
principal and liquidity through investment in a portfolio of high
quality money market instruments. Shares of the MONY Money Market
Portfolio are currently offered by the Companies as a funding vehicle
for their variable products and, as such, are held by a segregated
account of each insurance
[[Page 64291]]
company. As of December 31, 1997, the MONY Money Market Portfolio had
assets of $158,286,237. For the calendar year 1997, net sales of shares
of the MONY Money Market Portfolio, not including dividend or capital
gain reinvestments, totaled $5,418,168.
7. Under the Investment Advisory Agreement (``Advisory Agreement'')
between the Trust and OpCap Advisors, OpCap Advisors provide management
and investment advisory services to the Trust and its Portfolios and is
compensated by the Trust for services rendered to the OCC Money Market
Portfolio on a monthly basis at the annual rate of .40 percent of the
average daily net assets of the OCC Money Market Portfolio. Under the
Advisory Agreement, OpCap Advisors has contractually agreed to limit
the total expenses of the Portfolio to 1.00 percent of its average
daily net assets. Pursuant to an Investment Advisory Agreement between
the MONY Series Fund, Inc. and MONY America, MONY America provides
management and investment advisory services to the MONY Money Market
Portfolio of the MONY Series Fund, Inc. for an annual fee at the rate
of .40% of the first $400 million of the aggregate average daily net
assets of the portfolio; .35% of the next $400 million of the aggregate
average daily net assets of the portfolio and .30% of the aggregate
average daily net assets of the portfolio in excess of $800 million.
For the year ended December 31, 1997, the ratio of net operating
expenses to average net assets for the OCC Money Market Portfolio was
.98% as compared to .46% for the MONY Money Market Portfolio for the
year ended December 31, 1997.
8. The ValueMaster Contracts reserve to the Companies the right to
replace the shares of the Portfolios held by the Accounts with shares
of another portfolio, such as the MONY Money Market Portfolio, if (i)
shares of the Portfolio should no longer be available for investment by
the Accounts; or (ii) in the judgment of the Companies, further
investment in the Portfolio should become inappropriate in view of the
purpose of the ValueMaster Contracts, provided any such substitution is
approved by the Commission and is in compliance with applicable rules
and regulations. The Companies believe that further investment in
shares of the OCC Money Market Portfolio is no longer appropriate in
view of the purposes of the ValueMaster Contracts.
9. The decreasing asset base of the OCC Money Market Portfolio,
based upon lack of interest by ValueMaster Contractowners in the
Portfolio as evidenced by net redemption of Portfolio shares, has made
it difficult for the Portfolio to retain current investors and attract
new investors. Moreover, Oppenheimer Life Agency's limited effort in
actively selling the ValueMaster Contract, coupled with a constant
amount of fixed costs incurred by the Portfolio, can reasonably be
expected to lead to an increase in the actual expenses of the OCC Money
Market Portfolio in the future.
10. The relative small asset size of the OCC Money Market Portfolio
hampers the ability to maintain optimal diversification. The MONY Money
Market Portfolio can be expected to achieve greater diversification and
more readily react to changes in market conditions. ValueMaster
Contractowners will benefit through the more effective management of a
larger portfolio such as the MONY Money Market Portfolio.
11. The Companies on their own behalf and on behalf of the Accounts
respectively, propose to substitute shares of the MONY Money Market
Portfolio for all shares of the OCC Money Market Portfolio attributable
to the ValueMaster Contracts (``Substitution''). The Substitution will
occur as soon as practicable after receipt of the Order. As of the
effective date of the Substitution, the Companies will redeem shares of
the OCC Money Market Portfolio. Simultaneously, the Companies will use
the proceeds to purchase the appropriate number of shares of the MONY
Money Market Portfolio. The Substitution will take place at relative
net asset values of the Portfolios, with no change in the amount of any
ValueMaster Contractowner's account value.
12. To alleviate the impact of brokerage fees and expenses upon the
OCC Money Market Portfolio and ultimately OpCap Advisors, the Trust and
OpCap Advisors propose that the redemption of the OCC Money Market
Portfolio shares be accomplished, in part, by ``in kind'' transactions.
Under the proposal, the Trust would transfer to the Companies their
proportionate interest in cash and/or securities held by the OCC Money
Market Portfolio on the date of the Substitution, and the Companies
will then use such cash and/or securities to purchase shares of the
MONY Money Market Portfolio. The valuation of any ``in kind'' transfers
will be on a basis consistent with the valuation procedures of the OCC
Money Market and MONY Money Market Portfolios.
Terms and Conditions
Applicants agree to the following terms and conditions:
1. The OCC Money Market and MONY Money Market Portfolios have
substantially similar investment objectives, policies and restrictions.
2. The Substitution will take place at the net asset value of the
respective shares, which both portfolios seek to maintain at $1.00 per
share, with no change in the amount of any ValueMaster Contractowner's
account value and without the imposition of any transfer or similar
charge.
3. The valuation of any ``in kind'' transfer will be on a basis
consistent with the valuation procedures of the OCC Money Market and
MONY Money Market Portfolios.
4. ValueMaster Contractowners will not incur any fees or charges as
a result of the proposed substitution. OpCap Advisors will assume any
expenses and transaction costs, including legal and accounting fees and
any brokerage commissions, relating to the Substitution. To the extent
the OCC Money Market Portfolio incurs brokerage fees and expenses in
connection with the redemption by the Companies of its shares, these
expenses would be charged to the applicable Portfolio but borne by
OpCap Advisors.
5. The proposed substitution will not cause the contract fees and
charges currently being paid by existing contractowners to be greater
after proposed substitution than before the substitution.
6. Before the Substitution occurs, the prospectuses for the
Accounts will be supplemented to reflect the proposed Substitution (the
``Application Supplements'') and distributed to all ValueMaster
Contractowners.
7. Within five days after the Substitution, the Companies will send
to ValueMaster Contractowners written notice of the Substitution (the
``Notice'') stating that shares of the OCC Money Market Portfolio have
been eliminated and that the shares of the MONY Money Market Portfolio
have been substituted. The Companies will include in such mailing a
second supplement to the prospectuses of the Accounts which discloses
that the Substitution has occurred. The Notice will also advise
ValueMaster Contractowners that for a period of thirty days from the
mailing of the Notice, they may transfer all assets, as substituted, to
any other available Sub-Account, without limitation and without the
transfer being deemed a transfer for purposes of determining any
transfer charge (the period from the date of the Application
Supplements to
[[Page 64292]]
thirty days from the mailing of the Notice is the ``Free Transfer
Period'').
8. The Substitution will not in any way alter the insurance
benefits or contractual obligations of the Companies to ValueMaster
Contractowners or tax benefits and consequences to ValueMaster
Contractowners. Following the Substitution, ValueMaster Contractowners
will be afforded the same surrender and other transfer rights as they
currently have. Any applicable surrender (contingent deferred sales)
charges will continue to be imposed but will not be affected in any way
by the Substitution.
Applicants' Legal Analysis
1. Section 26(b) of the 1940 Act provides, in pertinent part, 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(b) of the 1940 Act
further provides that the Commission shall issue an order approving
such substitution if the evidence establishes that the substitution is
consistent with the protection of investors and the purposes fairly
intended by the policies and provisions of the 1940 Act.
2. The purpose of Section 26(b) is to protect the expectation of
investors in a unit investment trust that the unit investment trust
will accumulate the share of a particular issuer and to prevent
unscrutinized substitutions which might, in effect, force shareholders
dissatisfied with the substituted security to redeem their shares,
thereby possibly incurring either a loss of the sales load deducted
from initial purchase payments, an additional sales load upon
reinvestment of the redemption proceeds, or both. Section 26(b) affords
this protection to investors by preventing a depositor or trustee of a
unit investment trust holding the shares of one issuer from
substituting for those shares the shares of another issuer, unless the
Commission approves that substitution.
3. Applicants assert that the purposes, terms and conditions of the
proposed Substitution are consistent with the principles and purposes
of Section 26(b) and do not entail any of the abuses that Section 26(b)
is designed to prevent. Applicants further assert that the Substitution
will not result in the type of costly forced redemption that Section
26(b) was intended to guard against and is consistent with the
protection of investors and the purposes fairly intended by the
1940Act.
4. Section 17(a)(1) of the 1940 Act prohibits an affiliated person
of a registered investment company or an affiliated person of such
person, acting as principal, from selling any security or other
property to such registered investment company. Section 17(a)(2) of the
1940 Act prohibits any of such affiliated persons, acting as principal,
from purchasing any security or other property from such registered
investment company. The transfer or proceeds emanating out of the
redemption of share in-kind of the OCC Money Market Portfolio to the
Money Market Sub-Account and the purchase by the Money Market Sub-
Account of shares of the MONY Money Market Portfolio could be deemed to
involve a sale between the OCC Money Market Portfolio and the Money
Market Sub-Account (which may be considered to be affiliates of each
other because all the shares of the OCC Money Market Portfolio are held
by the Money Market Sub-Account), and a purchase between the Money
Market Sub-Account and the MONY Money Market Portfolio, each of which
is affiliated person of the other.
5. Section 17(b) provides that the Commission may grant an order
exemption a proposed transaction provided: (a) the terms of the
proposed transaction, including the consideration to be paid or
received, are reasonable and fair and do not involve overreaching on
the part of any person; (b) the proposed transaction is consistent with
the policy of each registered investment company concerned, as recited
in its registration statement and reports filed under the 1940 Act; and
(c) the proposed transaction is consistent with the general purposes of
the 1940 Act.
6. Applicants assert that the terms of the proposed transaction are
reasonable and fair and do not involve overreaching; the transaction is
consistent with the policy of each investment company concerned and
with the purposes of the 1940 Act; and the exemption is necessary or
appropriate in the public interest and consistent with the protection
of investors and the purposes fairly intended by the policy and
provisions of the 1940 Act.
7. Applicants assert that the Substitution is an appropriate
solution to the limited ValueMaster Contractowner interest or
investment in the OCC Money Market Portfolio, which is currently and in
the future may be expected to be, of insufficient size to promote
consistent investment performance or to reduce operating expenses.
Conclusion
Applicants assert that, for the reasons summarized above, the
requested order approving the substitution and related transactions
involving in-kind redemptions and purchases should be granted.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-30949 Filed 11-18-98; 8:45 am]
BILLING CODE 8010-01-M
