Integrity Life Insurance Company, et al., 4312-4320 [E7-1408]
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requestor seeks to have litigated at the
proceeding.
Each contention must consist of a
specific statement of the issue of law or
fact to be raised or controverted. In
addition, the petitioner/requestor shall
provide a brief explanation of the bases
for the contention and a concise
statement of the alleged facts or expert
opinion which support the contention
and on which the petitioner intends to
rely in proving the contention at the
hearing. The petitioner must also
provide references to those specific
sources and documents of which the
petitioner is aware and on which the
petitioner intends to rely to establish
those facts or expert opinion. The
petition must include sufficient
information to show that a genuine
dispute exists with the applicant on a
material issue of law or fact.1
Contentions shall be limited to matters
within the scope of the amendment
under consideration. The contention
must be one which, if proven, would
entitle the petitioner to relief. A
petitioner/requestor who fails to satisfy
these requirements with respect to at
least one contention will not be
permitted to participate as a party.
Each contention shall be given a
separate numeric or alpha designation
within one of the following groups:
1. Technical—primarily concerns/
issues relating to technical and/or
health and safety matters discussed or
referenced in the applications.
2. Environmental—primarily
concerns/issues relating to matters
discussed or referenced in the
environmental analysis for the
applications.
3. Miscellaneous—does not fall into
one of the categories outlined above.
As specified in 10 CFR 2.309, if two
or more petitioners/requestors seek to
co-sponsor a contention, the petitioners/
requestors shall jointly designate a
representative who shall have the
authority to act for the petitioners/
requestors with respect to that
contention. If a petitioner/requestor
seeks to adopt the contention of another
sponsoring petitioner/requestor, the
petitioner/requestor who seeks to adopt
the contention must either agree that the
sponsoring petitioner/requestor shall act
as the representative with respect to that
contention, or jointly designate with the
sponsoring petitioner/requestor a
representative who shall have the
1 To the extent that the applications contain
attachments and supporting documents that are not
publicly available because they are asserted to
contain safeguards or proprietary information,
petitioners desiring access to this information
should contact the applicant or applicant’s counsel
and discuss the need for a protective order.
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authority to act for the petitioners/
requestors with respect to that
contention.
Those permitted to intervene become
parties to the proceeding, subject to any
limitations in the order granting leave to
intervene, and have the opportunity to
participate fully in the conduct of the
hearing. Since the Commission has
made a final determination that the
amendment involves no significant
hazards consideration, if a hearing is
requested, it will not stay the
effectiveness of the amendment. Any
hearing held would take place while the
amendment is in effect.
A request for a hearing or a petition
for leave to intervene must be filed by:
(1) First-class mail addressed to the
Office of the Secretary of the
Commission, U.S. Nuclear Regulatory
Commission, Washington, DC 20555–
0001, Attention: Rulemaking and
Adjudications Staff; (2) courier, express
mail, and expedited delivery services:
Office of the Secretary, Sixteenth Floor,
One White Flint North, 11555 Rockville
Pike, Rockville, Maryland 20852,
Attention: Rulemaking and
Adjudications Staff; (3) E-mail
addressed to the Office of the Secretary,
U.S. Nuclear Regulatory Commission,
HearingDocket@nrc.gov; or (4) facsimile
transmission addressed to the Office of
the Secretary, U.S. Nuclear Regulatory
Commission, Washington, DC,
Attention: Rulemakings and
Adjudications Staff at (301) 415–1101,
verification number is (301) 415–1966.
A copy of the request for hearing and
petition for leave to intervene should
also be sent to the Office of the General
Counsel, U.S. Nuclear Regulatory
Commission, Washington, DC 20555–
0001, and it is requested that copies be
transmitted either by means of facsimile
transmission to (301) 415–3725 or by email to OGCMailCenter@nrc.gov. A copy
of the request for hearing and petition
for leave to intervene should also be
sent to the attorney for the licensee.
Nontimely requests and/or petitions
and contentions will not be entertained
absent a determination by the
Commission or the presiding officer or
the Atomic Safety and Licensing Board
that the petition, request and/or the
contentions should be granted based on
a balancing of the factors specified in 10
CFR 2.309(a)(1)(i)–(viii).
STP Nuclear Operating Company,
Docket No. 50–498, South Texas Project,
Unit 1, Matagorda County, Texas
Date of amendment request:
December 20, 2006, as supplemented by
letter dated December 28, 2006.
Description of amendment request:
The amendment, for a one-time change,
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revised Technical Specification (TS)
3.3.2 for the loss of power (LOP)
instrumentation (Functional Unit 8,
‘‘loss of power’’) in TS Table 3.3–3,
‘‘Engineered Safety Features Actuation
System Instrumentation.’’ A note is
added to TS Table 3.3–3, Action 20,
which is the TS-required action for
inoperable LOP instrumentation, to
allow a one-time provision for
corrective maintenance on an
inoperable Unit 1 LOP instrumentation
channel when the number of operable
channels are more than one less than
the total number of channels. This
provision for corrective maintenance
expires 30 days after the amendment is
approved.
Date of issuance: January 11, 2007.
Effective date: Effective as of its date
of issuance and shall be implemented
by January 15, 2007.
Amendment No.: 176.
Facility Operating License No. NPF–
76: The amendment revised the
Technical Specifications and Facility
Operating License.
Public comments requested as to
proposed no significant hazards
consideration (NSHC): No.
The Commission’s related evaluation
of the amendment, finding of emergency
circumstances, state consultation, and
final NSHC determination are contained
in a safety evaluation dated January 11,
2007.
Attorney for licensee: A. H.
Gutterman, Esq., Morgan, Lewis &
Bockius, 1111 Pennsylvania Avenue,
NW., Washington, DC 20004.
NRC Branch Chief: David Terao.
Dated at Rockville, Maryland, this 22nd
day of January 2007.
For the Nuclear Regulatory Commission.
John W. Lubinski,
Deputy Director, Division of Operating
Reactor Licensing, Office of Nuclear Reactor
Regulation.
[FR Doc. E7–1259 Filed 1–29–07; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release Number IC–27677; File No. 812–
13321]
Integrity Life Insurance Company, et al.
January 24, 2007.
Securities and Exchange
Commission (the ‘‘Commission’’).
ACTION: Notice of application for an
order of approval pursuant to Section
26(c) of the Investment Company Act of
1940, as amended (the ‘‘Act’’).
AGENCY:
Integrity Life Insurance
Company (‘‘Integrity’’), Separate
APPLICANTS:
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Federal Register / Vol. 72, No. 19 / Tuesday, January 30, 2007 / Notices
Account I of Integrity Life Insurance
Company (‘‘Integrity Separate Account
I’’), Separate Account II of Integrity Life
Insurance Company (‘‘Integrity Separate
Account II’’), National Integrity Life
Insurance Company (‘‘National
Integrity’’), Separate Account I of
National Integrity Life Insurance
Company (‘‘National Integrity Separate
Account I’’), and Separate Account II of
National Integrity Life Insurance
Company (‘‘National Integrity Separate
Account II,’’ together with Integrity
Separate Account I, Integrity Separate
Account II, and National Integrity
Separate Account I, the ‘‘Separate
Accounts’’).
SUMMARY: Applicants seek an order
approving the proposed substitution of
shares of DWS Equity 500 Index VIP
Fund: Class A with Fidelity VIP Index
500: Initial Class; DWS Equity 500 Index
VIP Fund: Class B with Fidelity VIP
Index 500: Service Class 2; JPMorgan
Bond Portfolio with Fidelity VIP
Investment Grade Bond: Initial Class;
JPMorgan International Equity Portfolio
with Fidelity VIP Overseas: Initial Class;
MFS VIT Capital Opportunities Series:
Service Class with Franklin VIP Growth
and Income Securities Fund: Class 2;
MFS VIT Emerging Growth Series:
Service Class with Touchstone VST
Eagle Capital Appreciation Fund; MFS
VIT Investors Growth Stock Series:
Service Class with Touchstone VST
Eagle Capital Appreciation Fund; MFS
VIT Mid Cap Growth Series: Service
Class with Touchstone VST Mid Cap
Growth Fund; MFS VIT New Discovery
Series: Service Class with Fidelity VIP
Disciplined Small Cap: Service Class 2;
MFS VIT Total Return Series: Service
Class with Franklin VIP Growth and
Income Securities Fund: Class 2;
Putnam VT Discovery Growth: Class IB
with Fidelity VIP Mid Cap: Service
Class 2; Putnam VT George Putnam
Fund of Boston: Class IB with Fidelity
VIP Balanced: Service Class 2; Putnam
VT Growth and Income Fund: Class IB
with Franklin VIP Growth and Income
Securities Fund: Class 2; Putnam VT
International Equity Fund: Class IB with
Fidelity VIP Overseas: Service Class 2;
Putnam VT Small Cap Value Fund:
Class IB with Touchstone VST Third
Avenue Value Fund; Putnam VT
Voyager Fund: Class IB with Fidelity
VIP Growth: Service Class 2.
FILING DATE: The application was filed
on August 4, 2006, and an amended and
restated application was filed on
January 23, 2007.
HEARING OR NOTIFICATION OF HEARING: An
order granting the application will be
issued unless the Commission orders a
hearing. Interested persons may request
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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 must be
received by the Commission by 5:30
p.m. on February 16, 2007, 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 requester’s interest, the reason for
the request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Secretary of the
Commission.
ADDRESSES: Secretary, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549. Applicants,
c/o Rhonda S. Malone, Esq., Associate
Counsel—Securities, Western and
Southern Financial Group, 400
Broadway, Cincinnati, Ohio 45202.
FOR FURTHER INFORMATION CONTACT:
Alison T. White, Senior Counsel, or
Joyce M. Pickholz, Branch Chief, Office
of Insurance Products, Division of
Investment Management, at (202) 551–
6795.
SUPPLEMENTARY INFORMATION: The
following is a summary of the amended
and restated application. The complete
application is available for a fee from
the Public Reference Branch of the
Commission, 100 F Street, NE.,
Washington, DC 20549 (202–551–8090).
Applicants’ Representations
1. Integrity is a stock life insurance
company organized under the laws of
Ohio. Integrity is a wholly owned
subsidiary of The Western and Southern
Life Insurance Company. The Western
and Southern Life Insurance Company
is wholly owned by Western and
Southern Financial Group, Inc., which
is wholly owned by Western and
Southern Mutual Holding Company.
2. Integrity Separate Account I and
Integrity Separate Account II are
registered under the Act as unit
investment trusts (File Nos. 811–04844
and 811–07134, respectively). They are
used to fund variable annuity contracts
of Integrity.
3. National Integrity is a stock life
insurance company organized under the
laws of New York. National Integrity is
a direct subsidiary of Integrity and an
indirect subsidiary of The Western and
Southern Life Insurance Company.
4. National Integrity Separate Account
I and National Integrity Separate
Account II are registered under the Act
as unit investment trusts (File Nos. 811–
04846 and 811–07132, respectively).
They are used to fund variable annuity
contracts of National Integrity.
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4313
5. The fifteen variable annuity
Contracts affected by this application
are flexible premium deferred variable
annuities and hereinafter are
collectively referred to as the
‘‘Contracts.’’
6. Each Contract permits allocations
of value to certain fixed subaccounts
and variable subaccounts that invest in
specific investment portfolios of
underlying mutual funds. The Contracts
currently offer between 12 and 54
portfolios. All of the Contracts currently
being sold offer the same portfolios and
same series of the Putnam Variable
Trust Funds (‘‘Putnam’’), MFS Variable
Insurance Trust (‘‘MFS’’), DWS
Investments VIP Funds (‘‘DWS’’), and
J.P. Morgan Series Trust II (‘‘JP
Morgan’’) that are the subject of this
Substitution. One contract that is no
longer sold currently offers 12 portfolios
including only one of the replaced
portfolios, and will continue to offer 12
portfolios after the substitution.
7. Each Contract permits transfers
from one subaccount to another
subaccount at any time prior to
annuitization, subject to certain
restrictions and charges described
below. No sales charge applies to such
a transfer of value among subaccounts.
The Contracts permit up to twelve free
transfers during any contract year. A fee
of $20 is imposed on transfers in excess
of twelve transfers in a contract year.
8. Each Contract reserves the right,
upon notice to Contract owners and
compliance with applicable law, to add,
combine or remove subaccounts, or to
withdraw assets from one subaccount
and put them into another subaccount.
9. The Applicants propose the
Substitution of 16 separate portfolios,
representing all the currently available
portfolios, except one, of four
unaffiliated companies: Putnam, MFS,
DWS, and JP Morgan (the ‘‘Replaced
Portfolios’’). As replacements, the
Applicants propose 12 portfolios: eight
from Fidelity VIP Funds (‘‘Fidelity’’),
one from Franklin Templeton Variable
Insurance Product Trust (‘‘Franklin’’),
and three from Touchstone VST Funds
(the ‘‘Replacement Portfolios’’). Each of
these fund companies currently offers
portfolios in the Contracts, and 11 of the
12 proposed replacement portfolios are
currently or were previously available
in the Contracts.
10. The investment objective,
strategies and risks of each Replacement
Portfolio are the same as, or
substantially similar to, the investment
objective, strategies and risks of the
corresponding Replaced Portfolio. For
each Replaced Portfolio and each
Replacement Portfolio, the investment
objective, strategies, and risks, along
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with the Morningstar Style Category, are
shown in the tables that follow:
Replacement Portfolio (Unless otherwise indicated, the
Replacement Portfolios are not affiliated with the Integrity Companies.)
Replaced Portfolio
Replacements 1 and 2
Name ....................................
Investment Objective ....
Strategy .........................
Principal Risks ..............
Morningstar Category ...
DWS Equity 500 Index ....................................................
Match the performance of the S&P 500 Index, which
emphasizes stocks of large U.S. companies.
Invests in stocks and other securities of a statistically
selected sample of the companies included in the
benchmark and derivative instruments that are representative of the S&P 500 Index as a whole, using a
process called optimization.
• Market Risk ..................................................................
• Tracking Error Risk.
• Issuer-Specific Changes.
• Index Fund Risk.
• Futures and Options Risk.
• Pricing Risk.
• Securities Lending Risk.
Large Cap Blend .............................................................
Fidelity Index 500.
Results that correspond to the total return of common
stocks in the US, as represented by the S&P 500.
Invests at least 80% of assets in common stocks included in the S&P 500 using statistical sampling
techniques; lends securities to earn income for the
fund.
• Stock Market Volatility.
Large Cap Blend.
Replacement 3
Name ....................................
Investment Objective ....
Strategy .........................
Principal Risks ..............
Morningstar Category ...
JPMorgan Bond ..............................................................
Provide a high total return consistent with moderate risk
of capital and maintenance of liquidity.
Invests at least 80% of its assets in debt investments,
including U.S. government and agency securities,
corporate bonds, private placements, asset backed
and mortgage backed securities it believes have the
potential to provide a high total return over time.
• Interest Rate Risk ........................................................
• Junk Bond Risk ...........................................................
• Foreign Exposure ........................................................
• Prepayment Risk .........................................................
• Issuer-Specific Change.
• Short Sales Risk.
• Futures and Options Risk.
Intermediate Term Bond .................................................
Fidelity Investment Grade Bond.
Provide a high level of current income consistent with
the preservation of capital.
Invests at least 80% of assets in investment-grade debt
securities of all types and repurchase agreements for
those securities; allocates assets across different
market sectors and maturities, and analyzes a security’s structural features and current pricing, trading
opportunities, and the credit quality of the issuer;
may invest up to 10% in lower-quality debt securities.
• Interest Rate Risk.
• Foreign Exposure.
• Prepayment Risk.
• Issuer-Specific Changes.
Intermediate Term Bond.
Replacement 4
Name ....................................
Investment Objective ....
Strategy .........................
Principal Risks ..............
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Morningstar Category ...
JPMorgan International Equity ........................................
Provide a high total return of capital growth and current
income.
Invests at least 80% of its assets in equity investments
of primarily foreign companies of various sizes, including foreign subsidiaries of U.S. companies.
• Market Risk ..................................................................
• Foreign Exposure ........................................................
• Futures and Options Risk ............................................
• Emerging Market Risk.
• Small Company Risk.
• Prepayment Risk.
• Interest Rate Risk.
Foreign Large Cap Blend ................................................
Fidelity Overseas.
Provide long-term growth of capital.
Invests at least 80% of assets in non-U.S. common
stocks; allocates investments across countries and
regions considering the size of the market in each
country and region relative to the size of the international market as a whole, using fundamental analysis of each issuer, its industry position, and market
and economic conditions.
• Market Risk.
• Foreign Exposure.
• Issuer-Specific Changes.
Foreign Large Cap Blend.
Replacement 5
Name ....................................
Investment Objective ....
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MFS Capital Opportunities ..............................................
Capital appreciation ........................................................
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Franklin Growth and Income Securities.
Capital appreciation with current income as a secondary goal.
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Replacement Portfolio (Unless otherwise indicated, the
Replacement Portfolios are not affiliated with the Integrity Companies.)
Replaced Portfolio
Strategy .........................
Principal Risks ..............
Morningstar Category ...
4315
Invests at least 65% of its net assets in common stocks
and related securities; focuses on companies it believes have favorable growth prospects and attractive
valuations based on current and expected earnings
or cash flow, using fundamental research and a
‘‘bottom-up’’ investment style.
• Market Risk ..................................................................
• Company Risk .............................................................
• Over-the-Counter Risk .................................................
• Foreign Securities Risk ...............................................
• Emerging Market Risk .................................................
Large Cap Blend .............................................................
Invests predominantly in a broadly diversified portfolio
of equity securities that the advisor considers to be financially strong but undervalued by the market.
• Market Risk.
• Undervalued Securities Risk.
• Interest Rate Risk.
• Sector Risk.
• Foreign Securities Risk.
• Emerging Market Risk.
Large Cap Value.
Replacement 6
Name ....................................
MFS Emerging Growth ...................................................
Investment Objective ....
Strategy .........................
Long-term growth of capital ............................................
Invests at least 65% of its net assets in common stocks
and related securities of emerging growth companies
it believes are either (1) early in their life cycle but
which have the potential to become major enterprises, or (2) major enterprises whose rates of earnings growth are expected to accelerate because of
special factors, such as rejuvenated management,
new products, changes in consumer demand, or
basic changes in the economic environment; emerging growth companies may be of any size.
Principal Risks ..............
• Market Risk ..................................................................
• Over-the-Counter Risk .................................................
• Foreign Securities Risk ...............................................
• Emerging Markets Risk ...............................................
• Emerging Growth Risk ................................................
• Frequent Trading Risk .................................................
Large Cap Growth ...........................................................
Morningstar Category ...
Touchstone Eagle Capital Appreciation (affiliated with
the Integrity Companies).
Long-term capital appreciation.
Invests in a diversified portfolio of common stocks in
large cap companies, selected from the largest 500
stocks by market cap size, screened using fundamental research to develop five-year earnings estimates for each company based on historical data,
current comparables and a thorough understanding
of each company and the relevant industry drivers;
assigned either a premium or discount multiple; then
ranked using a proprietary valuation model which
ranks each stock based on the five year expected
rates of return.
• Market Risk.
• Large-cap Company Risk.
• Analysis Risk.
• Sector Risk.
• Growth Company Risk.
• Management Risk.
Large Cap Growth.
Replacement 7
Name ....................................
MFS Investors Growth Stock ..........................................
Investment Objective ....
Provide long-term growth of capital and future income
rather than current income.
Invests at least 80% of its net assets in common stocks
and related securities of companies it believes offer
better than average prospects for long-term growth.
Strategy .........................
Principal Risks ..............
•
•
•
•
Morningstar Category ...
Large Cap Growth ...........................................................
Market Risk ..................................................................
Growth Company Risk ................................................
Foreign Securities Risk ...............................................
Frequent Trading Risk .................................................
Touchstone Eagle Capital Appreciation (affiliated with
the Integrity Companies).
Long-term capital appreciation.
Invests in a diversified portfolio of common stocks in
large cap companies, selected from the largest 500
stocks by market cap size, screened using fundamental research to develop five-year earnings estimates for each company based on historical data,
current comparables and a thorough understanding
of each company and the relevant industry drivers;
assigned either a premium or discount multiple; then
ranked using a proprietary valuation model which
ranks each stock based on the five year expected
rates of return.
• Market Risk.
• Growth Company Risk.
• Large-cap Company Risk.
• Sector Risk.
• Management Risk.
Large Cap Growth.
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Replacement 8
Name ....................................
MFS Mid Cap Growth .....................................................
Investment Objective ....
Long-term growth of capital ............................................
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Touchstone Mid Cap Growth (affiliated with the Integrity
Companies).
Increase the value of fund shares as a primary goal
and earn income as a secondary goal.
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Replacement Portfolio (Unless otherwise indicated, the
Replacement Portfolios are not affiliated with the Integrity Companies.)
Replaced Portfolio
Strategy .........................
Invests at least 80% of its net total assets in common
stocks and related securities of companies with medium market capitalization that it believes have
above-average growth potential.
Principal Risks ..............
• Mid Cap Growth Company Risk ..................................
• Over-the-Counter Risk .................................................
• Foreign Securities Risk ...............................................
• Emerging Markets Risk ...............................................
• Short Sales Risk.
Mid Cap Growth ..............................................................
Morningstar Category ...
Invests at least 80% of assets in common stocks of mid
cap companies including companies that have earnings that the portfolio manager believes may grow
faster than the U.S. economy in general or companies that are believed to be undervalued, including
those with unrecognized asset values, undervalued
growth or those undergoing turnaround.
• Market Risk.
• Mid Cap Company Risk.
• Sector Risk.
• Management Risk.
Mid Cap Growth.
Replacement 9
Name ....................................
Investment Objective ....
Strategy .........................
Principal Risks ..............
Morningstar Category ...
MFS New Discovery .......................................................
Capital appreciation ........................................................
Invests at least 65% of assets in common stocks and
related securities of emerging growth companies it
believes offer superior prospects for growth and are
either (1) early in their life cycle but which have the
potential to become major enterprises, or (2) enterprises whose rates of earnings growth are expected
to accelerate because of special factors; the Portfolio
will generally focus on smaller cap companies within
the range of market capitalizations in the Russell
2000 Growth Index.
• Market Risk ..................................................................
• Company Risk .............................................................
• Over-the-Counter Risk .................................................
• Foreign Securities Risk ...............................................
• Short Sales Risk ..........................................................
• Emerging Growth Companies.
• Small Cap Companies Risk.
Small Cap Growth ...........................................................
Fidelity Disciplined Small Cap.
Capital appreciation.
Invests at least 80% of assets in securities of Companies with small market capitalizations similar to companies in the Russell 2000 Index; invest in domestic
and foreign issuers, in either growth or value stocks;
uses computer aided quantitative analysis of historical valuation, growth, profitability and other factors.
•
•
•
•
•
Stock Market Volatility.
Foreign Exposure.
Issuer-Specific Changes.
Quantitative Investing.
Small Cap Investing.
Small Cap Growth.
Replacement 10
Name ....................................
Investment Objective ....
Strategy .........................
Principal Risks ..............
Morningstar Category ...
MFS Total Return ............................................................
Provide above-average income (compared to a portfolio
invested entirely in equity securities) consistent with
the prudent employment of capital, and secondarily
to provide a reasonable opportunity for growth of
capital and income.
Invests in a combination of equity and fixed income securities (1) at least 40%, but not more than 75%, of
its net assets in common stocks and related securities and (2) at least 25% of its net assets in non-convertible fixed income securities.
• Allocation Risk .............................................................
• Undervalued Securities Risk .......................................
• Market Risk ..................................................................
• Foreign Securities Risk ...............................................
• Interest Rate Risk ........................................................
• Convertible Securities Risk .........................................
• Maturity Risk.
• Credit Risk.
• Junk Bond Risk.
• Liquidity Risk.
• Prepayment Risk.
Moderate Allocation ........................................................
Franklin Growth and Income Securities.
Capital appreciation with current income as a secondary goal.
Invests predominantly in a broadly diversified portfolio
of equity securities that the advisor considers to be financially strong but undervalued by the market.
•
•
•
•
•
•
Market Risk.
Undervalued Securities Risk.
Interest Rate Risk.
Sector Risk.
Foreign Securities Risk.
Emerging Market Risk.
Large Cap Value.
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Replacement 11
Name ....................................
Investment Objective ....
Strategy .........................
Principal Risks ..............
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Putnam Discovery Growth ..............................................
Long-term growth of capital ............................................
Invests mainly in common stocks of U.S. companies
with a focus on growth stocks.
• Market Risk ..................................................................
• Small Cap Company Risk ...........................................
• Mid Cap Company Risk ..............................................
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Fidelity Mid Cap.
Long-term growth of capital.
Invests at least 80% of assets in securities of U.S. and
foreign companies with medium market caps.
• Stock Market Volatility Risk.
• Foreign Exposure.
• Mid Cap Company Risk.
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Replacement Portfolio (Unless otherwise indicated, the
Replacement Portfolios are not affiliated with the Integrity Companies.)
Replaced Portfolio
Morningstar Category ...
4317
Mid Cap Growth ..............................................................
Mid Cap Growth.
Replacement 12
Name ....................................
Investment Objective ....
Strategy .........................
Principal Risks ..............
Morningstar Category ...
Putnam The George Putnam Fund of Boston ................
Provide a balanced investment composed of a well-diversified portfolio of stocks and bonds that produce
both capital growth and current income.
Invests in a combination of bonds and U.S. value
stocks, with a greater focus on value stocks; at least
25% of the Fund’s total assets in fixed-income securities, including debt securities, preferred stocks and
that portion of the value of convertible securities attributable to the fixed-income characteristics of those
securities.
• Stock Market Volatility Risk .........................................
• Interest Rate Risk ........................................................
• Credit Risk ...................................................................
• Junk Bond Risk ...........................................................
• Allocation Risk .............................................................
• Futures and Options Risk.
Moderate Allocation ........................................................
Fidelity Balanced.
Income and capital growth consistent with reasonable
risk.
Invests approximately 60% of assets in common stocks
of domestic and foreign issuers and at least 25% of
assets in fixed income senior securities.
•
•
•
•
•
Stock Market Volatility Risk.
Interest Rate Risk.
Foreign Exposure.
Prepayment Risk.
Issuer-Specific Changes.
Moderate Allocation.
Replacement 13
Name ....................................
Investment Objective ....
Putnam Growth and Income ...........................................
Seeks capital growth and current income ......................
Strategy .........................
Invests mainly in common stocks of U.S. companies,
with a focus on value stocks that offer potential for
capital growth, current income, or both.
• Market Risk ..................................................................
• Company Risk .............................................................
Principal Risks ..............
Morningstar Category ...
Large Cap Value .............................................................
Franklin Growth and Income Securities.
Capital appreciation with current income as a secondary goal.
Invests predominantly in a broadly diversified portfolio
of equity securities that the advisor considers to be financially strong but undervalued by the market.
• Market Risk.
• Undervalued Securities Risk.
• Interest Rate Risk.
• Sector Risk.
• Foreign Securities Risk.
• Emerging Market Risk.
Large Cap Value.
Replacement 14
Name ....................................
Investment Objective ....
Strategy .........................
Putnam International Equity ............................................
Capital appreciation ........................................................
Invests in common stocks of companies outside the
United States that it believes have favorable investment potential; at least 80% of assets in equity investments.
Principal Risks ..............
• Foreign Exposure ........................................................
• Market Risk ..................................................................
• Company Risk .............................................................
Foreign Large Cap Blend ................................................
Morningstar Category ...
Fidelity Overseas.
Provide long-term growth of capital.
Invests at least 80% of its assets in non-U.S. common
stocks; allocates investments across countries and
regions considering the size of the market in each
country and region relative to the size of the international market as a whole, using fundamental analysis of each issuer, its industry position, and market
and economic conditions.
• Market Risk.
• Foreign Exposure.
• Issuer-Specific Changes.
Foreign Large Cap Blend.
Replacement 15
Name ....................................
Putnam Small Cap Value ................................................
Investment Objective ....
Strategy .........................
Capital appreciation ........................................................
Invests in common stocks of U.S. companies, with a
focus on stocks it believes are currently undervalued
by the market; at least 80% of its net assets in small
companies of a size similar to those in the Russell
2000 Value Index.
• Market Risk ..................................................................
• Company Risk .............................................................
• Small Cap Companies Risk
ycherry on PROD1PC64 with NOTICES
Principal Risks ..............
VerDate Aug<31>2005
15:36 Jan 29, 2007
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Fmt 4703
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Touchstone Third Avenue Value (affiliated with the Integrity Companies).
Long-term capital appreciation.
Non-diversified Fund that seeks to achieve its objective
mainly by investing in common stocks of well-financed companies (companies without significant
debt in comparison to their cash resources) at a discount to what it believes is their liquid value.
• Market Risk.
• Company Risk.
• Small Cap Companies Risk.
• Foreign Exposure.
• Valuation Risk.
• Sector Risk.
• Diversification Risk.
E:\FR\FM\30JAN1.SGM
30JAN1
4318
Federal Register / Vol. 72, No. 19 / Tuesday, January 30, 2007 / Notices
Replacement Portfolio (Unless otherwise indicated, the
Replacement Portfolios are not affiliated with the Integrity Companies.)
Replaced Portfolio
Morningstar Category ...
Small Cap Value .............................................................
Small Cap Blend.
Replacement 16
Name ....................................
Investment Objective ....
Strategy .........................
Putnam Voyager .............................................................
Capital appreciation ........................................................
Invests mainly in common stocks of U.S. companies,
with a focus on growth stocks.
Principal Risks ..............
• Market Risk ..................................................................
• Company Risk .............................................................
Morningstar Category ...
Large Cap Growth ...........................................................
11. Applicants assert that the
proposed Substitutions will streamline
the Contracts, creating efficiencies and
reducing costs. The current portfolio
structure requires the Integrity
Companies to interface with eight fund
companies. Reducing the number of its
fund partners from eight to five will
reduce the burden on the Integrity
Companies’ administrative, accounting,
auditing, compliance, and marketing
areas and systems. In addition,
Applicants maintaining the legal and
administrative relationships with eight
fund companies has become
increasingly burdensome in light of
recently enhanced compliance
requirements. Focusing compliance and
administrative efforts on a smaller
Fidelity Growth.
Capital appreciation.
Invests in domestic and foreign common stock it believes have above average growth potential, using
fundamental analysis.
• Stock Market Volatility.
• Foreign Exposure.
• Issuer-specific Changes.
• Growth Investing.
Large Cap Growth.
number of fund partners is intended to
reduce risk and improve controls and
oversight.
12. Applicants state that the proposed
Substitutions are expected to provide
significant benefits to the Contract
owners, including improved selection of
superior portfolios and simplification of
fund offerings through the elimination
of overlapping and duplicative
portfolios in certain asset classes,
particularly large cap growth. At the
same time, Contract owners will
continue to be able to select among 41
funds with a full range of investment
objectives, investment strategies and
risks.
13. Applicants represent that every
Replacement Portfolio has an equal or
lower expense ratio than the
corresponding Replaced Portfolio,
taking into account current fund
expenses and fee waivers. Service fees
charged by the Replacement Portfolios
pursuant to a 12b–1 plan are equal to or
less than those charged by the Replaced
Portfolio, and the management fees are
substantially similar between the
Replaced and Replacement Portfolios.
Detailed expense information is set forth
in the chart below. By maintaining
expenses at an equal or lower level, the
Integrity Companies are offering their
Contract owners and prospective
investors a selection of better-managed
funds at the same or reduced cost.
EXPENSES
Management fee
(percent)
ycherry on PROD1PC64 with NOTICES
Name
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
VerDate Aug<31>2005
12b-1 fee
(percent)
Total expense
(percent)
0.19
0.10
0.19
0.10
0.30
0.36
0.60
0.72
0.75
0.48
0.75
0.48
0.75
0.75
0.75
0.75
0.75
22 0.80
0.90
0.72
0.70
0.57
0.62
0.42
0.49
0.48
0.75
0.00
0.00
0.25
0.25
0.00
0.00
0.00
0.00
0.25
0.25
0.25
0.25
0.25
0.00
0.25
0.00
0.25
0.00
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.34
0.10
0.72
0.35
0.75
0.49
1.20
0.89
1.09
0.76
1.23
0.76
1.13
1.22
1.15
1.22
1.17
1.33
1.31
1.51
1.42
0.94
0.97
0.83
0.79
0.76
1.18
DWS Equity 500 Index, Class A ............................
Fidelity VIP Index 500, Initial Class .......................
DWS Equity 500 Index, Class B ............................
Fidelity VIP Index 500, Service Class 2 ................
JPMorgan Bond .....................................................
Fidelity VIP Invstmt Grade Bond, Initial Cl ............
JPMorgan International Equity ...............................
Fidelity VIP Overseas, Initial Class ........................
MFS Total Return, Service Class ..........................
Franklin Growth and Income Securities, Cl 2 ........
MFS Capital Opportunity, Service Class ...............
Franklin Growth and Income Securities, Cl 2 ........
MFS Emerging Growth, Service Class ..................
Touchstone Eagle Cap Appreciation .....................
MFS Investors Growth Stock, Serv Class .............
Touchstone Eagle Cap Appreciation .....................
MFS Mid Cap Growth, Service Class ....................
Touchstone Mid Cap Growth .................................
MFS New Discovery, Service Class ......................
Fidelity Disciplined Small Cap, Serv Cl 2 ..............
Putnam Discovery Growth, Class IB .....................
Fidelity VIP Mid Cap, Service Class 2 ...................
Putnam Geo Putnam Boston, Class IB .................
Fidelity VIP Balanced, Service Class 2 .................
Putnam Growth & Income, Class IB ......................
Franklin Growth and Income Securities, Cl 2 ........
Putnam International Equity, Class IB ...................
15:36 Jan 29, 2007
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E:\FR\FM\30JAN1.SGM
30JAN1
Waivers and
reimbursements
(percent)
0.06
........................
0.19
........................
........................
........................
........................
........................
........................
........................
0.08
........................
........................
0.17
........................
0.17
........................
0.17
........................
0.26
0.29
0.05
........................
0.03
........................
........................
........................
Net expense
(percent)
0.28
0.10
0.53
0.35
0.75
0.49
1.20
0.89
1.09
0.76
1.15
0.76
1.13
1.05
1.15
1.05
1.17
1.15
1.31
1.25
1.13
0.89
0.97
0.80
0.79
0.76
1.18
4319
Federal Register / Vol. 72, No. 19 / Tuesday, January 30, 2007 / Notices
EXPENSES—Continued
Management fee
(percent)
Name
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Replaced Portfolio ...........
Replacement Portfolio .....
Applicants Legal Analysis and
Conditions
ycherry on PROD1PC64 with NOTICES
Total expense
(percent)
0.72
0.76
0.80
0.57
0.57
0.25
0.25
0.00
0.25
0.25
1.14
1.09
1.16
0.88
0.92
Fidelity VIP Overseas, Service Class 2 .................
Putnam Small Cap Value, Class IB .......................
Touchstone Third Avenue Value ...........................
Putnam Voyager, Class IB .....................................
Fidelity Growth, Service Class 2 ............................
14. Applicants submit that each of the
Replacement Portfolios has
demonstrated better performance than
the Replaced Portfolios during the
overwhelming majority of the periods
measured. Detailed performance
information is set forth in the
Application.
1. The Substitution will take place at
the portfolios’ relative net asset values
determined on the date of the
Substitution in accordance with Section
22 of the Act and Rule 22c–1 thereunder
with no change in the amount of any
Contract owner’s cash value or death
benefit or in the dollar value of his or
her investment in any of the
subaccounts. Accordingly, there will be
no financial impact on any Contract
owner. The Substitution will be effected
by having each of the subaccounts that
invests in the Replaced Portfolios
redeem its shares at the net asset value
calculated on the date of the
Substitution and purchase shares of the
respective Replacement Portfolios at the
net asset value calculated on the same
date.
2. The Substitution will be described
in a supplement to the prospectuses for
the Contracts (‘‘Sticker’’) filed with the
Commission and mailed to Contract
owners. The Sticker will give Contract
owners notice of the Substitution and
will describe the reasons for engaging in
the Substitution. The Sticker will also
inform contract owners with assets
allocated to a subaccount investing in
the Replaced Portfolios that no
additional amount may be allocated to
those subaccounts on or after the date of
the Substitution. In addition, the
Stickers will inform affected Contract
owners that at anytime after receipt of
the notification of the Substitution and
for 30 days after the Substitution, they
will have the opportunity to reallocate
assets from the subaccounts investing in
the Replacement Portfolios to
subaccounts investing in other
portfolios available under the respective
Contracts, without the imposition of any
VerDate Aug<31>2005
12b-1 fee
(percent)
15:36 Jan 29, 2007
Jkt 211001
transfer charge or limitation and
without diminishing the number of free
transfers that may be made in a given
contract year.
3. The prospectuses for the Contracts,
as supplemented by the Sticker, will
reflect the Substitution. Each Contract
owner will be provided with a
prospectus for the Replacement
Portfolios applicable to them. Within
five days after the Substitution, the
Integrity Companies will each send
affected Contract owners written
confirmation that the Substitution has
occurred.
4. The Integrity Companies will pay
all expenses and transaction costs of the
Substitution, including all legal,
accounting and brokerage expenses
relating to the Substitution. No costs
will be borne by Contract owners.
Affected Contract owners will not incur
any fees or charges as a result of the
Substitution, nor will their rights or the
obligations of the Integrity Companies
under the Contracts be altered in any
way. The Substitution will not cause the
fees and charges under the Contracts
currently being paid by Contract owners
to be greater after the Substitution than
before the Substitution. The
Substitution will have no adverse tax
consequences to Contract owners and
will in no way alter the tax benefits to
contract owners.
5. Each Contract and its prospectus
expressly discloses the reservation of
the Applicants’ right, subject to
applicable law, to substitute shares of
another portfolio for shares of the
portfolio in which a subaccount is
invested.
6. In all cases the investment
objectives and policies of the
Replacement Portfolios are sufficiently
similar to those of the corresponding
Replaced Portfolios that contract owners
will have reasonable continuity in
investment expectations.
7. The Substitution will not result in
the type of costly forced redemption
that Section 26(c) was intended to guard
against because the Contract owner will
continue to have the same type of
investment choices, with better
potential returns and the same or lower
PO 00000
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Fmt 4703
Sfmt 4703
Waivers and
reimbursements
(percent)
0.07
........................
0.11
........................
0.04
Net expense
(percent)
1.07
1.09
1.05
0.88
0.88
expenses and will not otherwise have
any incentive to redeem their shares or
terminate their Contracts.
8. The purposes, terms and conditions
of the proposed Substitution are
consistent with the protection of
investors, and the principles and
purposes of Section 26(c), and do not
entail any of the abuses that Section
26(c) is designed to prevent.
9. Current net annual expenses in the
Replacement Portfolios are lower or
equal to those of the Replaced
Portfolios.
10. Each of the Replacement
Portfolios is an appropriate portfolio to
which to move Contract owners with
values allocated to the Replaced
Portfolios because the portfolios have
substantially similar investment
objectives, strategies and risks.
11. The costs of the Substitution,
including any brokerage costs, will be
borne by the Integrity Companies and
will not be borne by Contract owners.
No charges will be assessed to effect the
Substitution.
12. The Substitution will be at the net
asset values of the respective shares
without the imposition of any transfer
or similar charge and with no change in
the amount of any Contract owner’s
accumulation value.
13. The Substitution will not cause
the fees and charges under the Contracts
currently being paid by contract owners
to be greater after the Substitution than
before the Substitution and will result
in Contract owners’ contract values
being moved to Portfolios with the same
or lower current total net annual
expenses.
14. In connection with assets held
under Contracts affected by the
Substitutions, the Integrity Companies
will not receive, for three years from the
date of the Substitutions, any direct or
indirect benefits from the Replacement
Portfolios, their advisors or
underwriters (or their affiliates) at a rate
higher than that which they had
received from the Replaced Portfolios,
their advisors or underwriters (or their
affiliates), including without limitation
12b–1, shareholder service,
administration or other service fees,
E:\FR\FM\30JAN1.SGM
30JAN1
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4320
Federal Register / Vol. 72, No. 19 / Tuesday, January 30, 2007 / Notices
revenue sharing or other arrangements
in connection with such assets.
Applicants represent that the
Substitutions and the selection of the
Replacement Portfolios were not
motivated by any financial
consideration paid or to be paid by the
Replacement Portfolios, their advisors
or underwriters, or their respective
affiliates.
15. For the two year period following
the date of the Substitutions, the
Applicants agree that if, on the last day
of each fiscal quarter during the 2 year
period, the total operating expenses of
an unaffiliated Replacement Fund
(taking into account any expense waiver
or reimbursement) exceed on an
annualized basis the net expense level
of the corresponding Replaced Fund for
the 2005 fiscal year, it will, for each
Contract outstanding on the date of the
Substitutions, make a corresponding
reimbursement of expenses to the
Contract Owners as of the last day of
such fiscal quarter period, such that the
amount of the Replacement Fund’s net
expenses, together with those of the
corresponding Separate Account, on an
annualized basis, will be no greater than
the sum of the net expenses of the
corresponding Replaced Fund and the
expenses of the Separate Account for
the 2005 fiscal year.
16. For a two year period following
the date of the Substitution, the
Applicants agree that the total operating
expenses of each affiliated Replacement
Portfolio (taking into account any
expense waiver or reimbursement) will
not exceed on an annualized basis the
net expense level of the corresponding
Replaced Fund for the 2005 fiscal year.
17. Applicants further agree that
Separate Account charges on the
Contracts affected by this Substitution
will not be increased at any time during
the 2 year period following the date of
the Substitution, while the caps
discussed in paragraphs 15 and 16 are
in effect on the Replacement Portfolios.
18. Notice of the proposed
substitution was mailed to all Contract
owners on October 30, 2006. In
addition, all Contract owners will be
given another notice of the Substitution
after it is approved by the Commission.
This notice will be sent at least 30 days
prior to the Substitution. All Contract
owners will have an opportunity at any
time after receipt of this notification of
the Substitution and for 30 days after
the Substitution to reallocate
accumulation value among other
available subaccounts without the
imposition of any transfer charge or
limitation and without being counted as
one of the Contract owner’s free
transfers in a contract year.
VerDate Aug<31>2005
15:36 Jan 29, 2007
Jkt 211001
19. Within five days after the
Substitution, the Integrity Companies
will send to affected Contract owners
written confirmation that the
Substitution has occurred.
20. The Substitution will in no way
alter the insurance benefits to Contract
owners or the contractual obligations of
the Integrity Companies.
21. The Substitution will have no
adverse tax consequences to contract
owners and will in no way alter the tax
benefits to Contract owners.
Conclusion
For the reasons and upon the facts set
forth above, Applicants submit that the
requested order meets the standards set
forth in Section 26(c). Applicants
request an order of the Commission,
pursuant to Section 26(c) of the Act,
approving the Substitutions.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–1408 Filed 1–29–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55157; File No. SR–NSCC–
2006–12]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Granting Approval
to Proposed Rule Change Relating to
Buy-Ins of Municipal Securities
January 23, 2007.
I. Introduction
On October 16, 2006, the National
Securities Clearing Corporation
(‘‘NSCC’’) submitted to the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
modify NSCC’s rules concerning buy-ins
of municipal securities. The proposed
rule change was published for comment
in the Federal Register on December 14,
2006.3 No comment letters were
received on the proposal. This order
approves the proposal.
II. Description of the Proposal
The purpose of this filing is to amend
NSCC’s rules to streamline the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 54900 (Dec.
8, 2006), 71 FR 75286.
2 17
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
processing of continuous net settlement
(‘‘CNS’’) buy-ins of municipal securities.
At the request of members and after
consultation with the Buy-In
Subcommittee of the Securities Industry
Association, NSCC is modifying Rule 11
(CNS System), Procedure VII (CNS
Accounting Operation), and Procedure
X (Execution of CNS Buy-Ins) with
respect to CNS buy-ins of municipal
securities as set forth below.
Executions of buy-ins of municipal
securities are governed by the rules of
the Municipal Securities Rulemaking
Board (‘‘MSRB’’) and have a ten-day
cycle from notification of intent to buyin to buy-in execution. In contrast, buyins for equity and corporate bond
securities have a two-day cycle.
Under NSCC’s rules (except with
respect to securities subject to voluntary
corporate reorganizations), an NSCC
member that has a long CNS position at
the end of any day (‘‘originator’’) may
submit to NSCC a Notice of Intention to
Buy-In (‘‘Buy-In Notice’’) specifying a
quantity of securities not exceeding
such long CNS position that it intends
to buy-in (‘‘Buy-In Position’’). The day
the Buy-In Notice is submitted is
referred to as N and the succeeding days
are referred to as N+1 and N+2. The
Buy-In Position is given high priority for
CNS allocations until expiration of the
buy-in.
While increased priority is provided
to facilitate the allocation of the Buy-In
Position in CNS, municipal securities
are usually thinly traded and the
increased allocation priority has not
been generally effective in accelerating
the delivery process. Accordingly, when
a municipal security Buy-In Position is
not satisfied by a CNS allocation, the
long member must have its Buy-In
Position exited from CNS in order to be
able to proceed under MSRB rules,
which entails issuing a new buy-in
notice and then waiting an additional
ten days before executing the buy-in. As
a result, a member typically will request
that NSCC exit the municipal security
Buy-In Position from CNS, and NSCC
will exit the municipal security from
CNS, which results in receive and
deliver obligations for the affected
parties two days later.
To assist members in their timely
processing of buy-ins of municipal
securities, NSCC is modifying its rules
and procedures to automatically exit
from CNS unsatisfied municipal
security Buy-In Positions. Under the
new procedures, CNS will automatically
exit such positions prior to the night
cycle on N+1. This will create a brokerto-broker close-out receive and deliver
obligation between the member with the
long CNS position and the member(s)
E:\FR\FM\30JAN1.SGM
30JAN1
]]>Agencies
[Federal Register Volume 72, Number 19 (Tuesday, January 30, 2007)]
[Notices]
[Pages 4312-4320]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-1408]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release Number IC-27677; File No. 812-13321]
Integrity Life Insurance Company, et al.
January 24, 2007.
AGENCY: Securities and Exchange Commission (the ``Commission'').
ACTION: Notice of application for an order of approval pursuant to
Section 26(c) of the Investment Company Act of 1940, as amended (the
``Act'').
-----------------------------------------------------------------------
Applicants: Integrity Life Insurance Company (``Integrity''), Separate
[[Page 4313]]
Account I of Integrity Life Insurance Company (``Integrity Separate
Account I''), Separate Account II of Integrity Life Insurance Company
(``Integrity Separate Account II''), National Integrity Life Insurance
Company (``National Integrity''), Separate Account I of National
Integrity Life Insurance Company (``National Integrity Separate Account
I''), and Separate Account II of National Integrity Life Insurance
Company (``National Integrity Separate Account II,'' together with
Integrity Separate Account I, Integrity Separate Account II, and
National Integrity Separate Account I, the ``Separate Accounts'').
SUMMARY: Applicants seek an order approving the proposed substitution
of shares of DWS Equity 500 Index VIP Fund: Class A with Fidelity VIP
Index 500: Initial Class; DWS Equity 500 Index VIP Fund: Class B with
Fidelity VIP Index 500: Service Class 2; JPMorgan Bond Portfolio with
Fidelity VIP Investment Grade Bond: Initial Class; JPMorgan
International Equity Portfolio with Fidelity VIP Overseas: Initial
Class; MFS VIT Capital Opportunities Series: Service Class with
Franklin VIP Growth and Income Securities Fund: Class 2; MFS VIT
Emerging Growth Series: Service Class with Touchstone VST Eagle Capital
Appreciation Fund; MFS VIT Investors Growth Stock Series: Service Class
with Touchstone VST Eagle Capital Appreciation Fund; MFS VIT Mid Cap
Growth Series: Service Class with Touchstone VST Mid Cap Growth Fund;
MFS VIT New Discovery Series: Service Class with Fidelity VIP
Disciplined Small Cap: Service Class 2; MFS VIT Total Return Series:
Service Class with Franklin VIP Growth and Income Securities Fund:
Class 2; Putnam VT Discovery Growth: Class IB with Fidelity VIP Mid
Cap: Service Class 2; Putnam VT George Putnam Fund of Boston: Class IB
with Fidelity VIP Balanced: Service Class 2; Putnam VT Growth and
Income Fund: Class IB with Franklin VIP Growth and Income Securities
Fund: Class 2; Putnam VT International Equity Fund: Class IB with
Fidelity VIP Overseas: Service Class 2; Putnam VT Small Cap Value Fund:
Class IB with Touchstone VST Third Avenue Value Fund; Putnam VT Voyager
Fund: Class IB with Fidelity VIP Growth: Service Class 2.
Filing Date: The application was filed on August 4, 2006, and an
amended and restated application was filed on January 23, 2007.
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 must be received by the
Commission by 5:30 p.m. on February 16, 2007, 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 requester's interest, the reason for the request, and the
issues contested. Persons who wish to be notified of a hearing may
request notification by writing to the Secretary of the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549. Applicants, c/o Rhonda S. Malone, Esq.,
Associate Counsel--Securities, Western and Southern Financial Group,
400 Broadway, Cincinnati, Ohio 45202.
FOR FURTHER INFORMATION CONTACT: Alison T. White, Senior Counsel, or
Joyce M. Pickholz, Branch Chief, Office of Insurance Products, Division
of Investment Management, at (202) 551-6795.
SUPPLEMENTARY INFORMATION: The following is a summary of the amended
and restated application. The complete application is available for a
fee from the Public Reference Branch of the Commission, 100 F Street,
NE., Washington, DC 20549 (202-551-8090).
Applicants' Representations
1. Integrity is a stock life insurance company organized under the
laws of Ohio. Integrity is a wholly owned subsidiary of The Western and
Southern Life Insurance Company. The Western and Southern Life
Insurance Company is wholly owned by Western and Southern Financial
Group, Inc., which is wholly owned by Western and Southern Mutual
Holding Company.
2. Integrity Separate Account I and Integrity Separate Account II
are registered under the Act as unit investment trusts (File Nos. 811-
04844 and 811-07134, respectively). They are used to fund variable
annuity contracts of Integrity.
3. National Integrity is a stock life insurance company organized
under the laws of New York. National Integrity is a direct subsidiary
of Integrity and an indirect subsidiary of The Western and Southern
Life Insurance Company.
4. National Integrity Separate Account I and National Integrity
Separate Account II are registered under the Act as unit investment
trusts (File Nos. 811-04846 and 811-07132, respectively). They are used
to fund variable annuity contracts of National Integrity.
5. The fifteen variable annuity Contracts affected by this
application are flexible premium deferred variable annuities and
hereinafter are collectively referred to as the ``Contracts.''
6. Each Contract permits allocations of value to certain fixed
subaccounts and variable subaccounts that invest in specific investment
portfolios of underlying mutual funds. The Contracts currently offer
between 12 and 54 portfolios. All of the Contracts currently being sold
offer the same portfolios and same series of the Putnam Variable Trust
Funds (``Putnam''), MFS Variable Insurance Trust (``MFS''), DWS
Investments VIP Funds (``DWS''), and J.P. Morgan Series Trust II (``JP
Morgan'') that are the subject of this Substitution. One contract that
is no longer sold currently offers 12 portfolios including only one of
the replaced portfolios, and will continue to offer 12 portfolios after
the substitution.
7. Each Contract permits transfers from one subaccount to another
subaccount at any time prior to annuitization, subject to certain
restrictions and charges described below. No sales charge applies to
such a transfer of value among subaccounts. The Contracts permit up to
twelve free transfers during any contract year. A fee of $20 is imposed
on transfers in excess of twelve transfers in a contract year.
8. Each Contract reserves the right, upon notice to Contract owners
and compliance with applicable law, to add, combine or remove
subaccounts, or to withdraw assets from one subaccount and put them
into another subaccount.
9. The Applicants propose the Substitution of 16 separate
portfolios, representing all the currently available portfolios, except
one, of four unaffiliated companies: Putnam, MFS, DWS, and JP Morgan
(the ``Replaced Portfolios''). As replacements, the Applicants propose
12 portfolios: eight from Fidelity VIP Funds (``Fidelity''), one from
Franklin Templeton Variable Insurance Product Trust (``Franklin''), and
three from Touchstone VST Funds (the ``Replacement Portfolios''). Each
of these fund companies currently offers portfolios in the Contracts,
and 11 of the 12 proposed replacement portfolios are currently or were
previously available in the Contracts.
10. The investment objective, strategies and risks of each
Replacement Portfolio are the same as, or substantially similar to, the
investment objective, strategies and risks of the corresponding
Replaced Portfolio. For each Replaced Portfolio and each Replacement
Portfolio, the investment objective, strategies, and risks, along
[[Page 4314]]
with the Morningstar Style Category, are shown in the tables that
follow:
----------------------------------------------------------------------------------------------------------------
Replacement Portfolio (Unless
otherwise indicated, the
Replaced Portfolio Replacement Portfolios are not
affiliated with the Integrity
Companies.)
----------------------------------------------------------------------------------------------------------------
Replacements 1 and 2
----------------------------------------------------------------------------------------------------------------
Name......................................... DWS Equity 500 Index............ Fidelity Index 500.
Investment Objective..................... Match the performance of the S&P Results that correspond to the
500 Index, which emphasizes total return of common stocks
stocks of large U.S. companies. in the US, as represented by
the S&P 500.
Strategy................................. Invests in stocks and other Invests at least 80% of assets
securities of a statistically in common stocks included in
selected sample of the the S&P 500 using statistical
companies included in the sampling techniques; lends
benchmark and derivative securities to earn income for
instruments that are the fund.
representative of the S&P 500
Index as a whole, using a
process called optimization.
Principal Risks.......................... Market Risk............ Stock Market
Volatility.
Tracking Error Risk....
Issuer-Specific Changes
Index Fund Risk........
Futures and Options
Risk.
Pricing Risk...........
Securities Lending Risk
Morningstar Category..................... Large Cap Blend................. Large Cap Blend.
----------------------------------------------------------------------------------------------------------------
Replacement 3
----------------------------------------------------------------------------------------------------------------
Name......................................... JPMorgan Bond................... Fidelity Investment Grade Bond.
Investment Objective..................... Provide a high total return Provide a high level of current
consistent with moderate risk income consistent with the
of capital and maintenance of preservation of capital.
liquidity.
Strategy................................. Invests at least 80% of its Invests at least 80% of assets
assets in debt investments, in investment-grade debt
including U.S. government and securities of all types and
agency securities, corporate repurchase agreements for
bonds, private placements, those securities; allocates
asset backed and mortgage assets across different market
backed securities it believes sectors and maturities, and
have the potential to provide a analyzes a security's
high total return over time. structural features and
current pricing, trading
opportunities, and the credit
quality of the issuer; may
invest up to 10% in lower-
quality debt securities.
Principal Risks.......................... Interest Rate Risk..... Interest Rate Risk.
Junk Bond Risk......... Foreign Exposure.
Foreign Exposure....... Prepayment Risk.
Prepayment Risk........ Issuer-Specific
Changes.
Issuer-Specific Change.
Short Sales Risk.......
Futures and Options
Risk.
Morningstar Category..................... Intermediate Term Bond.......... Intermediate Term Bond.
----------------------------------------------------------------------------------------------------------------
Replacement 4
----------------------------------------------------------------------------------------------------------------
Name......................................... JPMorgan International Equity... Fidelity Overseas.
Investment Objective..................... Provide a high total return of Provide long-term growth of
capital growth and current capital.
income.
Strategy................................. Invests at least 80% of its Invests at least 80% of assets
assets in equity investments of in non-U.S. common stocks;
primarily foreign companies of allocates investments across
various sizes, including countries and regions
foreign subsidiaries of U.S. considering the size of the
companies. market in each country and
region relative to the size of
the international market as a
whole, using fundamental
analysis of each issuer, its
industry position, and market
and economic conditions.
Principal Risks.......................... Market Risk............ Market Risk.
Foreign Exposure....... Foreign Exposure.
Futures and Options Issuer-Specific
Risk. Changes.
Emerging Market Risk...
Small Company Risk.....
Prepayment Risk........
Interest Rate Risk.....
Morningstar Category..................... Foreign Large Cap Blend......... Foreign Large Cap Blend.
----------------------------------------------------------------------------------------------------------------
Replacement 5
----------------------------------------------------------------------------------------------------------------
Name......................................... MFS Capital Opportunities....... Franklin Growth and Income
Securities.
Investment Objective..................... Capital appreciation............ Capital appreciation with
current income as a secondary
goal.
[[Page 4315]]
Strategy................................. Invests at least 65% of its net Invests predominantly in a
assets in common stocks and broadly diversified portfolio
related securities; focuses on of equity securities that the
companies it believes have advisor considers to be
favorable growth prospects and financially strong but
attractive valuations based on undervalued by the market.
current and expected earnings
or cash flow, using fundamental
research and a ``bottom-up''
investment style.
Principal Risks.......................... Market Risk............ Market Risk.
Company Risk........... Undervalued Securities
Risk.
Over-the-Counter Risk.. Interest Rate Risk.
Foreign Securities Risk Sector Risk.
Emerging Market Risk... Foreign Securities
Risk.
Emerging Market Risk.
Morningstar Category..................... Large Cap Blend................. Large Cap Value.
----------------------------------------------------------------------------------------------------------------
Replacement 6
----------------------------------------------------------------------------------------------------------------
Name......................................... MFS Emerging Growth............. Touchstone Eagle Capital
Appreciation (affiliated with
the Integrity Companies).
Investment Objective..................... Long-term growth of capital..... Long-term capital appreciation.
Strategy................................. Invests at least 65% of its net Invests in a diversified
assets in common stocks and portfolio of common stocks in
related securities of emerging large cap companies, selected
growth companies it believes from the largest 500 stocks by
are either (1) early in their market cap size, screened
life cycle but which have the using fundamental research to
potential to become major develop five-year earnings
enterprises, or (2) major estimates for each company
enterprises whose rates of based on historical data,
earnings growth are expected to current comparables and a
accelerate because of special thorough understanding of each
factors, such as rejuvenated company and the relevant
management, new products, industry drivers; assigned
changes in consumer demand, or either a premium or discount
basic changes in the economic multiple; then ranked using a
environment; emerging growth proprietary valuation model
companies may be of any size. which ranks each stock based
on the five year expected
rates of return.
Principal Risks.......................... Market Risk............ Market Risk.
Over-the-Counter Risk.. Large-cap Company
Risk.
Foreign Securities Risk Analysis Risk.
Emerging Markets Risk.. Sector Risk.
Emerging Growth Risk... Growth Company Risk.
Frequent Trading Risk.. Management Risk.
Morningstar Category..................... Large Cap Growth................ Large Cap Growth.
----------------------------------------------------------------------------------------------------------------
Replacement 7
----------------------------------------------------------------------------------------------------------------
Name......................................... MFS Investors Growth Stock...... Touchstone Eagle Capital
Appreciation (affiliated with
the Integrity Companies).
Investment Objective..................... Provide long-term growth of Long-term capital appreciation.
capital and future income
rather than current income.
Strategy................................. Invests at least 80% of its net Invests in a diversified
assets in common stocks and portfolio of common stocks in
related securities of companies large cap companies, selected
it believes offer better than from the largest 500 stocks by
average prospects for long-term market cap size, screened
growth. using fundamental research to
develop five-year earnings
estimates for each company
based on historical data,
current comparables and a
thorough understanding of each
company and the relevant
industry drivers; assigned
either a premium or discount
multiple; then ranked using a
proprietary valuation model
which ranks each stock based
on the five year expected
rates of return.
Principal Risks.......................... Market Risk............ Market Risk.
Growth Company Risk.... Growth Company Risk.
Foreign Securities Risk Large-cap Company
Risk.
Frequent Trading Risk.. Sector Risk.
Management Risk.
Morningstar Category..................... Large Cap Growth................ Large Cap Growth.
----------------------------------------------------------------------------------------------------------------
Replacement 8
----------------------------------------------------------------------------------------------------------------
Name......................................... MFS Mid Cap Growth.............. Touchstone Mid Cap Growth
(affiliated with the Integrity
Companies).
Investment Objective..................... Long-term growth of capital..... Increase the value of fund
shares as a primary goal and
earn income as a secondary
goal.
[[Page 4316]]
Strategy................................. Invests at least 80% of its net Invests at least 80% of assets
total assets in common stocks in common stocks of mid cap
and related securities of companies including companies
companies with medium market that have earnings that the
capitalization that it believes portfolio manager believes may
have above-average growth grow faster than the U.S.
potential. economy in general or
companies that are believed to
be undervalued, including
those with unrecognized asset
values, undervalued growth or
those undergoing turnaround.
Principal Risks.......................... Mid Cap Growth Company Market Risk.
Risk.
Over-the-Counter Risk.. Mid Cap Company Risk.
Foreign Securities Risk Sector Risk.
Emerging Markets Risk.. Management Risk.
Short Sales Risk.......
Morningstar Category..................... Mid Cap Growth.................. Mid Cap Growth.
----------------------------------------------------------------------------------------------------------------
Replacement 9
----------------------------------------------------------------------------------------------------------------
Name......................................... MFS New Discovery............... Fidelity Disciplined Small Cap.
Investment Objective..................... Capital appreciation............ Capital appreciation.
Strategy................................. Invests at least 65% of assets Invests at least 80% of assets
in common stocks and related in securities of Companies
securities of emerging growth with small market
companies it believes offer capitalizations similar to
superior prospects for growth companies in the Russell 2000
and are either (1) early in Index; invest in domestic and
their life cycle but which have foreign issuers, in either
the potential to become major growth or value stocks; uses
enterprises, or (2) enterprises computer aided quantitative
whose rates of earnings growth analysis of historical
are expected to accelerate valuation, growth,
because of special factors; the profitability and other
Portfolio will generally focus factors.
on smaller cap companies within
the range of market
capitalizations in the Russell
2000 Growth Index.
Principal Risks.......................... Market Risk............ Stock Market
Volatility.
Company Risk........... Foreign Exposure.
Over-the-Counter Risk.. Issuer-Specific
Changes.
Foreign Securities Risk Quantitative
Investing.
Short Sales Risk....... Small Cap Investing.
Emerging Growth
Companies.
Small Cap Companies
Risk.
Morningstar Category..................... Small Cap Growth................ Small Cap Growth.
----------------------------------------------------------------------------------------------------------------
Replacement 10
----------------------------------------------------------------------------------------------------------------
Name......................................... MFS Total Return................ Franklin Growth and Income
Securities.
Investment Objective..................... Provide above-average income Capital appreciation with
(compared to a portfolio current income as a secondary
invested entirely in equity goal.
securities) consistent with the
prudent employment of capital,
and secondarily to provide a
reasonable opportunity for
growth of capital and income.
Strategy................................. Invests in a combination of Invests predominantly in a
equity and fixed income broadly diversified portfolio
securities (1) at least 40%, of equity securities that the
but not more than 75%, of its advisor considers to be
net assets in common stocks and financially strong but
related securities and (2) at undervalued by the market.
least 25% of its net assets in
non-convertible fixed income
securities.
Principal Risks.......................... Allocation Risk........ Market Risk.
Undervalued Securities Undervalued Securities
Risk. Risk.
Market Risk............ Interest Rate Risk.
Foreign Securities Risk Sector Risk.
Interest Rate Risk..... Foreign Securities
Risk.
Convertible Securities Emerging Market Risk.
Risk.
Maturity Risk..........
Credit Risk............
Junk Bond Risk.........
Liquidity Risk.........
Prepayment Risk........
Morningstar Category..................... Moderate Allocation............. Large Cap Value.
----------------------------------------------------------------------------------------------------------------
Replacement 11
----------------------------------------------------------------------------------------------------------------
Name......................................... Putnam Discovery Growth......... Fidelity Mid Cap.
Investment Objective..................... Long-term growth of capital..... Long-term growth of capital.
Strategy................................. Invests mainly in common stocks Invests at least 80% of assets
of U.S. companies with a focus in securities of U.S. and
on growth stocks. foreign companies with medium
market caps.
Principal Risks.......................... Market Risk............ Stock Market
Volatility Risk.
Small Cap Company Risk. Foreign Exposure.
Mid Cap Company Risk... Mid Cap Company Risk.
[[Page 4317]]
Morningstar Category..................... Mid Cap Growth.................. Mid Cap Growth.
----------------------------------------------------------------------------------------------------------------
Replacement 12
----------------------------------------------------------------------------------------------------------------
Name......................................... Putnam The George Putnam Fund of Fidelity Balanced.
Boston.
Investment Objective..................... Provide a balanced investment Income and capital growth
composed of a well-diversified consistent with reasonable
portfolio of stocks and bonds risk.
that produce both capital
growth and current income.
Strategy................................. Invests in a combination of Invests approximately 60% of
bonds and U.S. value stocks, assets in common stocks of
with a greater focus on value domestic and foreign issuers
stocks; at least 25% of the and at least 25% of assets in
Fund's total assets in fixed- fixed income senior
income securities, including securities.
debt securities, preferred
stocks and that portion of the
value of convertible securities
attributable to the fixed-
income characteristics of those
securities.
Principal Risks.......................... Stock Market Volatility Stock Market
Risk. Volatility Risk.
Interest Rate Risk..... Interest Rate Risk.
Credit Risk............ Foreign Exposure.
Junk Bond Risk......... Prepayment Risk.
Allocation Risk........ Issuer-Specific
Changes.
Futures and Options
Risk.
Morningstar Category..................... Moderate Allocation............. Moderate Allocation.
----------------------------------------------------------------------------------------------------------------
Replacement 13
----------------------------------------------------------------------------------------------------------------
Name......................................... Putnam Growth and Income........ Franklin Growth and Income
Securities.
Investment Objective..................... Seeks capital growth and current Capital appreciation with
income. current income as a secondary
goal.
Strategy................................. Invests mainly in common stocks Invests predominantly in a
of U.S. companies, with a focus broadly diversified portfolio
on value stocks that offer of equity securities that the
potential for capital growth, advisor considers to be
current income, or both. financially strong but
undervalued by the market.
Principal Risks.......................... Market Risk............ Market Risk.
Company Risk........... Undervalued Securities
Risk.
Interest Rate Risk.
Sector Risk.
Foreign Securities
Risk.
Emerging Market Risk.
Morningstar Category..................... Large Cap Value................. Large Cap Value.
----------------------------------------------------------------------------------------------------------------
Replacement 14
----------------------------------------------------------------------------------------------------------------
Name......................................... Putnam International Equity..... Fidelity Overseas.
Investment Objective..................... Capital appreciation............ Provide long-term growth of
capital.
Strategy................................. Invests in common stocks of Invests at least 80% of its
companies outside the United assets in non-U.S. common
States that it believes have stocks; allocates investments
favorable investment potential; across countries and regions
at least 80% of assets in considering the size of the
equity investments. market in each country and
region relative to the size of
the international market as a
whole, using fundamental
analysis of each issuer, its
industry position, and market
and economic conditions.
Principal Risks.......................... Foreign Exposure....... Market Risk.
Market Risk............ Foreign Exposure.
Company Risk........... Issuer-Specific
Changes.
Morningstar Category..................... Foreign Large Cap Blend......... Foreign Large Cap Blend.
----------------------------------------------------------------------------------------------------------------
Replacement 15
----------------------------------------------------------------------------------------------------------------
Name......................................... Putnam Small Cap Value.......... Touchstone Third Avenue Value
(affiliated with the Integrity
Companies).
Investment Objective..................... Capital appreciation............ Long-term capital appreciation.
Strategy................................. Invests in common stocks of U.S. Non-diversified Fund that seeks
companies, with a focus on to achieve its objective
stocks it believes are mainly by investing in common
currently undervalued by the stocks of well-financed
market; at least 80% of its net companies (companies without
assets in small companies of a significant debt in comparison
size similar to those in the to their cash resources) at a
Russell 2000 Value Index. discount to what it believes
is their liquid value.
Principal Risks.......................... Market Risk............ Market Risk.
Company Risk........... Company Risk.
Small Cap Companies Small Cap Companies
Risk Risk.
Foreign Exposure.
Valuation Risk.
Sector Risk.
Diversification Risk.
[[Page 4318]]
Morningstar Category..................... Small Cap Value................. Small Cap Blend.
----------------------------------------------------------------------------------------------------------------
Replacement 16
----------------------------------------------------------------------------------------------------------------
Name......................................... Putnam Voyager.................. Fidelity Growth.
Investment Objective..................... Capital appreciation............ Capital appreciation.
Strategy................................. Invests mainly in common stocks Invests in domestic and foreign
of U.S. companies, with a focus common stock it believes have
on growth stocks. above average growth
potential, using fundamental
analysis.
Principal Risks.......................... Market Risk............ Stock Market
Volatility.
Company Risk........... Foreign Exposure.
Issuer-specific
Changes.
Growth Investing.
Morningstar Category..................... Large Cap Growth................ Large Cap Growth.
----------------------------------------------------------------------------------------------------------------
11. Applicants assert that the proposed Substitutions will
streamline the Contracts, creating efficiencies and reducing costs. The
current portfolio structure requires the Integrity Companies to
interface with eight fund companies. Reducing the number of its fund
partners from eight to five will reduce the burden on the Integrity
Companies' administrative, accounting, auditing, compliance, and
marketing areas and systems. In addition, Applicants maintaining the
legal and administrative relationships with eight fund companies has
become increasingly burdensome in light of recently enhanced compliance
requirements. Focusing compliance and administrative efforts on a
smaller number of fund partners is intended to reduce risk and improve
controls and oversight.
12. Applicants state that the proposed Substitutions are expected
to provide significant benefits to the Contract owners, including
improved selection of superior portfolios and simplification of fund
offerings through the elimination of overlapping and duplicative
portfolios in certain asset classes, particularly large cap growth. At
the same time, Contract owners will continue to be able to select among
41 funds with a full range of investment objectives, investment
strategies and risks.
13. Applicants represent that every Replacement Portfolio has an
equal or lower expense ratio than the corresponding Replaced Portfolio,
taking into account current fund expenses and fee waivers. Service fees
charged by the Replacement Portfolios pursuant to a 12b-1 plan are
equal to or less than those charged by the Replaced Portfolio, and the
management fees are substantially similar between the Replaced and
Replacement Portfolios. Detailed expense information is set forth in
the chart below. By maintaining expenses at an equal or lower level,
the Integrity Companies are offering their Contract owners and
prospective investors a selection of better-managed funds at the same
or reduced cost.
Expenses
----------------------------------------------------------------------------------------------------------------
Management 12b-1 fee Total Waivers and Net
Name fee expense reimbursements expense
(percent) (percent) (percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Replaced Portfolio........... DWS Equity 500 0.19 0.00 0.34 0.06 0.28
Index, Class A.
Replacement Portfolio........ Fidelity VIP Index 0.10 0.00 0.10 .............. 0.10
500, Initial Class.
Replaced Portfolio........... DWS Equity 500 0.19 0.25 0.72 0.19 0.53
Index, Class B.
Replacement Portfolio........ Fidelity VIP Index 0.10 0.25 0.35 .............. 0.35
500, Service Class
2.
Replaced Portfolio........... JPMorgan Bond....... 0.30 0.00 0.75 .............. 0.75
Replacement Portfolio........ Fidelity VIP Invstmt 0.36 0.00 0.49 .............. 0.49
Grade Bond, Initial
Cl.
Replaced Portfolio........... JPMorgan 0.60 0.00 1.20 .............. 1.20
International
Equity.
Replacement Portfolio........ Fidelity VIP 0.72 0.00 0.89 .............. 0.89
Overseas, Initial
Class.
Replaced Portfolio........... MFS Total Return, 0.75 0.25 1.09 .............. 1.09
Service Class.
Replacement Portfolio........ Franklin Growth and 0.48 0.25 0.76 .............. 0.76
Income Securities,
Cl 2.
Replaced Portfolio........... MFS Capital 0.75 0.25 1.23 0.08 1.15
Opportunity,
Service Class.
Replacement Portfolio........ Franklin Growth and 0.48 0.25 0.76 .............. 0.76
Income Securities,
Cl 2.
Replaced Portfolio........... MFS Emerging Growth, 0.75 0.25 1.13 .............. 1.13
Service Class.
Replacement Portfolio........ Touchstone Eagle Cap 0.75 0.00 1.22 0.17 1.05
Appreciation.
Replaced Portfolio........... MFS Investors Growth 0.75 0.25 1.15 .............. 1.15
Stock, Serv Class.
Replacement Portfolio........ Touchstone Eagle Cap 0.75 0.00 1.22 0.17 1.05
Appreciation.
Replaced Portfolio........... MFS Mid Cap Growth, 0.75 0.25 1.17 .............. 1.17
Service Class.
Replacement Portfolio........ Touchstone Mid Cap \22\ 0.80 0.00 1.33 0.17 1.15
Growth.
Replaced Portfolio........... MFS New Discovery, 0.90 0.25 1.31 .............. 1.31
Service Class.
Replacement Portfolio........ Fidelity Disciplined 0.72 0.25 1.51 0.26 1.25
Small Cap, Serv Cl
2.
Replaced Portfolio........... Putnam Discovery 0.70 0.25 1.42 0.29 1.13
Growth, Class IB.
Replacement Portfolio........ Fidelity VIP Mid 0.57 0.25 0.94 0.05 0.89
Cap, Service Class
2.
Replaced Portfolio........... Putnam Geo Putnam 0.62 0.25 0.97 .............. 0.97
Boston, Class IB.
Replacement Portfolio........ Fidelity VIP 0.42 0.25 0.83 0.03 0.80
Balanced, Service
Class 2.
Replaced Portfolio........... Putnam Growth & 0.49 0.25 0.79 .............. 0.79
Income, Class IB.
Replacement Portfolio........ Franklin Growth and 0.48 0.25 0.76 .............. 0.76
Income Securities,
Cl 2.
Replaced Portfolio........... Putnam International 0.75 0.25 1.18 .............. 1.18
Equity, Class IB.
[[Page 4319]]
Replacement Portfolio........ Fidelity VIP 0.72 0.25 1.14 0.07 1.07
Overseas, Service
Class 2.
Replaced Portfolio........... Putnam Small Cap 0.76 0.25 1.09 .............. 1.09
Value, Class IB.
Replacement Portfolio........ Touchstone Third 0.80 0.00 1.16 0.11 1.05
Avenue Value.
Replaced Portfolio........... Putnam Voyager, 0.57 0.25 0.88 .............. 0.88
Class IB.
Replacement Portfolio........ Fidelity Growth, 0.57 0.25 0.92 0.04 0.88
Service Class 2.
----------------------------------------------------------------------------------------------------------------
14. Applicants submit that each of the Replacement Portfolios has
demonstrated better performance than the Replaced Portfolios during the
overwhelming majority of the periods measured. Detailed performance
information is set forth in the Application.
Applicants Legal Analysis and Conditions
1. The Substitution will take place at the portfolios' relative net
asset values determined on the date of the Substitution in accordance
with Section 22 of the Act and Rule 22c-1 thereunder with no change in
the amount of any Contract owner's cash value or death benefit or in
the dollar value of his or her investment in any of the subaccounts.
Accordingly, there will be no financial impact on any Contract owner.
The Substitution will be effected by having each of the subaccounts
that invests in the Replaced Portfolios redeem its shares at the net
asset value calculated on the date of the Substitution and purchase
shares of the respective Replacement Portfolios at the net asset value
calculated on the same date.
2. The Substitution will be described in a supplement to the
prospectuses for the Contracts (``Sticker'') filed with the Commission
and mailed to Contract owners. The Sticker will give Contract owners
notice of the Substitution and will describe the reasons for engaging
in the Substitution. The Sticker will also inform contract owners with
assets allocated to a subaccount investing in the Replaced Portfolios
that no additional amount may be allocated to those subaccounts on or
after the date of the Substitution. In addition, the Stickers will
inform affected Contract owners that at anytime after receipt of the
notification of the Substitution and for 30 days after the
Substitution, they will have the opportunity to reallocate assets from
the subaccounts investing in the Replacement Portfolios to subaccounts
investing in other portfolios available under the respective Contracts,
without the imposition of any transfer charge or limitation and without
diminishing the number of free transfers that may be made in a given
contract year.
3. The prospectuses for the Contracts, as supplemented by the
Sticker, will reflect the Substitution. Each Contract owner will be
provided with a prospectus for the Replacement Portfolios applicable to
them. Within five days after the Substitution, the Integrity Companies
will each send affected Contract owners written confirmation that the
Substitution has occurred.
4. The Integrity Companies will pay all expenses and transaction
costs of the Substitution, including all legal, accounting and
brokerage expenses relating to the Substitution. No costs will be borne
by Contract owners. Affected Contract owners will not incur any fees or
charges as a result of the Substitution, nor will their rights or the
obligations of the Integrity Companies under the Contracts be altered
in any way. The Substitution will not cause the fees and charges under
the Contracts currently being paid by Contract owners to be greater
after the Substitution than before the Substitution. The Substitution
will have no adverse tax consequences to Contract owners and will in no
way alter the tax benefits to contract owners.
5. Each Contract and its prospectus expressly discloses the
reservation of the Applicants' right, subject to applicable law, to
substitute shares of another portfolio for shares of the portfolio in
which a subaccount is invested.
6. In all cases the investment objectives and policies of the
Replacement Portfolios are sufficiently similar to those of the
corresponding Replaced Portfolios that contract owners will have
reasonable continuity in investment expectations.
7. The Substitution will not result in the type of costly forced
redemption that Section 26(c) was intended to guard against because the
Contract owner will continue to have the same type of investment
choices, with better potential returns and the same or lower expenses
and will not otherwise have any incentive to redeem their shares or
terminate their Contracts.
8. The purposes, terms and conditions of the proposed Substitution
are consistent with the protection of investors, and the principles and
purposes of Section 26(c), and do not entail any of the abuses that
Section 26(c) is designed to prevent.
9. Current net annual expenses in the Replacement Portfolios are
lower or equal to those of the Replaced Portfolios.
10. Each of the Replacement Portfolios is an appropriate portfolio
to which to move Contract owners with values allocated to the Replaced
Portfolios because the portfolios have substantially similar investment
objectives, strategies and risks.
11. The costs of the Substitution, including any brokerage costs,
will be borne by the Integrity Companies and will not be borne by
Contract owners. No charges will be assessed to effect the
Substitution.
12. The Substitution will be at the net asset values of the
respective shares without the imposition of any transfer or similar
charge and with no change in the amount of any Contract owner's
accumulation value.
13. The Substitution will not cause the fees and charges under the
Contracts currently being paid by contract owners to be greater after
the Substitution than before the Substitution and will result in
Contract owners' contract values being moved to Portfolios with the
same or lower current total net annual expenses.
14. In connection with assets held under Contracts affected by the
Substitutions, the Integrity Companies will not receive, for three
years from the date of the Substitutions, any direct or indirect
benefits from the Replacement Portfolios, their advisors or
underwriters (or their affiliates) at a rate higher than that which
they had received from the Replac
