Investment Manager Report

For the Period 3/25/02 to 4/15/02

Securities and Exchange Commission Action:

• SEC adopts new registration form for insurance company separate accounts registered as unit investment trusts that offer variable life insurance policies: The SEC has adopted a new registration form for insurance company separate accounts that are registered as unit investment trusts ("UITs") and that offer variable life insurance policies. The new Form N-6 is to be used by these separate accounts to both register under the Investment Company Act of 1940 (the "1940 Act") and to offer their securities under the Securities Act of 1933 (the "1933 Act").

Variable life separate accounts, as UITs, are currently required to register on Form N-8B-2 under the 1940 Act and to register their securities on Form S-6 under the 1933 Act. The SEC commented that these forms were designed for non-separate account UITs and were adopted before the establishment of the first separate accounts used to fund variable life insurance policies. The SEC further commented that while much of their required disclosure is useful, the forms request some information that is not typically of consequence to a buyer of variable life insurance. In addition, many matters that would be significant to a buyer of a variable life insurance policy are not addressed at all by the forms. The SEC also noted that these forms do not reflect fundamental improvements that the SEC has made to other investment company registration forms which facilitate clearer and more concise disclosure to investors. The SEC commented that new Form N-6 represents an improvement over the existing forms in the following ways:

• Tailored registration form - Form N-6 will eliminate requirements in the current registration forms that are not relevant to variable life insurance. Form N-6 also will include items that are specifically addressed to variable life insurance products, such as descriptions of contractual provisions relating to premiums, death benefits, cash values, surrenders and withdrawals, and loans.
• Plain English - The SEC's plain English rule will apply to the front and back covers and the risk/benefit summary in the variable life insurance prospectus.
• Reducing complex and lengthy prospectus disclosure - Form N-6 will streamline variable life prospectus disclosure by adopting a two-part format consisting of a simplified prospectus and a statement of additional information which would be provided to investors upon request.
• Standardized fee information - Form N-6 will require variable life insurance registrants to provide a uniform, tabular presentation of fees and charges in order to improve the disclosure to investors of the often complex charges associated with variable life insurance policies and increase the comparability of charges among policies.
• Integrated disclosure document - Form N-6 will provide variable life insurance registrants with an integrated form for 1940 Act and 1933 Act registrations.

The SEC has also amended Form N-1A to eliminate the existing exclusion from the fee table requirement for mutual funds that offer their shares as investment options for variable life insurance policies or variable annuity contracts. The SEC commented that this change is intended to ensure that variable life investors have access to complete information about the underlying mutual fund fees and expenses.

All new registration statements filed on or after December 1, 2002 for separate accounts that are registered as UITs and that offer variable life insurance polices must comply with Form N-6. All existing insurance company separate accounts registered as UITs and which currently offer variable life insurance policies with effective registration statements must comply with Form N-6 for post-effective amendments that are annual updates to the registration statements filed on or after December 1, 2002 and no later than December 1, 2003. All new registration statements and post-effective amendments that are annual updates to effective registration statements filed on or after September 1, 2002 must comply with the amendment to Form N-1A. SEC Release No. IC-25522 (April 12, 2002).

• SEC proposes rules accelerating the filing of periodic and annual reports for operating companies: The SEC has proposed rules and form amendments which would accelerate the filing of quarterly and annual reports by certain domestic reporting companies that are required under the Securities Exchange Act of 1934 (the "1934 Act"). The proposed rules and form amendments would apply to domestic reporting companies which have:
  
• a public float of at least $75 million;
• have been subject to the 1934 Act reporting requirements for at least 12 calendar months; and
• have previously filed at least one annual report.

The proposed rules and form amendments would shorten the filing deadlines for these companies from 45 to 30 days after the end of a period for quarterly reports and from 90 to 60 calendar days after fiscal year end for annual reports. The SEC stated in the proposing release that companies that meet the public float and reporting history requirement at the end of their first fiscal year ending after October 31, 2002 would be subject to the accelerated filing deadlines.

The SEC has also proposed amendments to Regulation S-K requiring companies subject to the accelerated filing deadlines to disclose in their annual reports where investors can obtain access to company filings. The proposed amendments also require these companies to also disclose whether the company provides free access to its reports on Forms 10-K, 10-Q and 8-K on its Internet website as soon as reasonably practicable, and in any event on the same day as those reports are electronically filed with or furnished with the SEC. If the company does not make its filings available on its Internet website, the company must disclose the reasons why it does not do so.

The SEC noted in the release that many companies currently provide website access to their 1934 Act reports in a variety of ways, including by establishing a hyperlink to the reports via a third-party service in lieu of maintaining the reports themselves. In such cases, the SEC encouraged companies to hyperlink directly to the company's reports or to a list of its reports instead of just to the home page of the third-party service. The SEC also commented that hyperlinking to its EDGAR system would not allow a company to state that it provides website access to its reports on the same day those reports are filed with the SEC because filings on the EDGAR website currently are posted after a 24-hour delay. The SEC commented that it anticipates eliminating this 24-hour delay for filings posted to a website in the future. Comments are due on the proposals 30 days after their publication in the Federal Register. SEC Release No. 34-45741 (April 12, 2002).

• The SEC has proposed a rule requiring current disclosure of directors' and executive officers' transactions in company equity securities: The SEC has proposed a rule amending Form 8-K under the 1934 Act to require companies with a class of equity securities registered under Section 12 of the 1934 Act to report information about:
  
• each director's and executive officer's transactions in company equity securities (whether or not of the class registered under Section 12), including the acquisition and disposition of derivative securities, and the exercise, termination or settlement of derivative transactions;
• each director's and executive officer's adoption, modification or termination of a contract, instruction or written plan for purchase of sale of company equity securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the 1934 Act; and
• each loan of money to a director or executive officer made or guaranteed by the company or an affiliate of the company.

Rule 10b5-1(c) provides an affirmative defense to allegations of illegal insider trading by providing that a corporate insider's purchase or sale was not "on the basis of" material non-public information under certain circumstances. These circumstances can be shown by demonstrating that before the insider became aware of the information, he or she (i) contracted to purchase or sell the security, (ii) instructed another person to purchase or sell the security for the instructing person's account, or (iii) adopted a written plan for trading securities. Under the SEC's proposal, these arrangements would have to be disclosed on Form 8-K.

Reports or transactions with loans with an aggregate value of $100,000 or more would be due within two business days. Reports of transactions with a smaller aggregate value, grants and awards pursuant to employee benefit plans, and Rule 10b5-1 arrangements generally would be due by the close of business on the second business day of the following week. Reports of transactions and loans with an aggregate value of less than $10,000 would be deferrable until the aggregate cumulative value of those unreported events for the same director or executive officer exceeds $10,000.

The SEC commented in the proposing release that some of the information a company would report with respect to directors' and executive officers' transactions in company equity securities is also reportable by officers and directors under Section 16(a) of the 1934 Act. However, the SEC noted that Section 16(a) requires disclosure that may be filed too slowly for the public to obtain the maximum benefit from the information and that reports are not always readily accessible because they are not required to be filed electronically. The SEC stated that it believes that these proposed reports would protect investors and promote fair dealing in the company's securities by enabling investors to make informed decisions on a more timely basis. As proposed, the categories of transactions to be reported currently on Form 8-K would not replicate all the transactions that officers and directors must report under Section 16(a), but only those most related to the purpose of the newly proposed current disclosure. Comments on the proposed rule are due on or before 60 days after publication in the Federal Register. SEC Release No. 34-45742 (April 12, 2002).

Investment Adviser Action:

• SEC proposes rule allowing Internet-only investment advisers to register with the SEC: The SEC has published for comment rule amendments to the Investment Advisers Act of 1940 (the "Adviser's Act") which would permit certain investment advisers that provide advisory services primarily through the Internet to register with the Commission instead of with state securities authorities. The SEC noted that the amendments are designed to alleviate the burden of multiple state regulation on advisers whose businesses aren't connected with any particular state and for whom state registration would be a hardship.

The investment advisers covered by proposed Rule 203A-2(f) under the Advisers Act, which the SEC refers to as Internet investment advisers, must provide substantially all of their advisory services through interactive websites. Clients visiting these websites answer on-line questions about their finances, investment objectives and investment time horizon, risk tolerance and investment restrictions. The Internet investment adviser's computer-based application or platform processes and analyzes the client's responses to generate the personalized investment advice that is communicated to the client through the website. The interactive website may be reached at any time by a person residing in any state or outside the United States.

The SEC commented that it has drafted the proposed rule to make it unavailable to advisers that merely have websites as marketing tools or that use Internet vehicles such as e-mail, chat rooms, bulletin boards and web casts or other electronic media to communicate with clients. Instead, eligibility for the exemption would turn on whether the adviser conducts substantially all of its advisory business through an interactive website. The proposed rule defines "interactive website" as a website in which computer software-based models or applications provide investment advice to clients based on information that each client supplies through the website. The proposed rule also defines the term "substantially all" to mean that at least 90% of the investment adviser's clients obtain advice exclusively through the Internet interactive website.

The SEC noted that most Internet investment advisers are not eligible to register with the SEC because they do not have at least $25 million in assets under management or advise a registered investment company. The SEC also noted that most of these advisers do not initially qualify to use the SEC's multi-state advisory exemption which permits an adviser that does not meet the statutory thresholds to register with the SEC if it would otherwise have to register with the securities authorities of at least 30 states. Because an Internet investment adviser's clients can come from anywhere at any time, the adviser would have to wait until it has registration obligations in 30 states before registering with the SEC and canceling its state registration, which the SEC views as unduly burdensome and impractical. Advisers registering with the SEC under the new exemption would be required to keep records demonstrating that they meet the conditions of the proposed rule. Comments on proposed rule are due on or before June 6, 2002. SEC Release No. IA-2028 (April 12, 2002).