Jefferson National Life Insurance Company, et al., 13926-13931 [E8-5100]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 73, Number 51 (Friday, March 14, 2008)]
[Notices]
[Pages 13926-13931]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-5100]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-28191; File No. 812-13452]


Jefferson National Life Insurance Company, et al.

March 10, 2008.
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''), and an order of exemption pursuant to Section 17(b) of the 
Act from Section 17(a) of the Act.

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Applicants: Jefferson National Life Insurance Company (``JNL''), 
Jefferson National Life Annuity Account C (``Separate Account C''), 
Jefferson National Life Annuity Account E (``Separate Account E''), 
Jefferson National Life Annuity Account F (``Separate Account F''), 
Jefferson National Life Annuity Account G (``Separate Account G''), 
Jefferson National Life Annuity Account H (``Separate Account H''), 
Jefferson National Life Annuity Account I (``Separate Account I''), 
Jefferson National Life Annuity Account J (``Separate Account J''), 
Jefferson National Life Annuity Account K (``Separate Account K''), 
Conseco Variable Insurance-Separate Account L (``Separate Account L'', 
and together with Separate Account C, Separate Account E, Separate 
Account F, Separate Account G, Separate Account H, Separate Account I, 
Separate Account J, and Separate Account K, the ``Separate Accounts'' 
and, collectively with JNL, the ``Applicants''), and Northern Lights 
Variable Trust (``NLVT'' and collectively with Applicants, the 
``Section 17 Applicants'').

Summary of Application: Applicants seek an order approving the proposed 
substitution of shares of the PIMCO Variable Insurance Trust Money 
Market Portfolio (the ``Substitution'') for shares of the JNF Money 
Market Portfolio, a series of NLVT. Section 17 Applicants seek an order 
exempting them from the provisions of Section 17(a) of the Act to the 
extent necessary to permit JNL to carry out the Substitution.

Filing Date: The application was originally filed on November 21, 2007 
and amended on March 7, 2008.

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 April 2, 2008, 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 20549-1090. Applicants, 9920 Corporate Campus 
Drive, Suite 1000, Louisville, Kentucky 40223.

FOR FURTHER INFORMATION CONTACT: Michael Kosoff, Staff Attorney, at 
(202) 551-6754 or Harry Eisenstein, Branch Chief, Office of Insurance 
Products, Division of Investment Management, at (202) 551-6795.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the Public Reference Branch of the Commission, 100 F Street, NE., 
Washington, DC 20549 (202-551-8090).

Applicants' and Section 17 Applicants' Representations

    1. JNL is a stock life insurance company originally organized in 
1937 under the laws of Texas.
    2. Separate Account C was established in 1980. Separate Account C 
is registered under the Act as a unit investment trust (File No. 811-
04819) and is used to fund variable annuity contracts issued by JNL. 
Two variable annuity contracts funded by Separate Account C are 
affected by this application.
    Separate Account E was established in 1993. Separate Account E is 
registered under the Act as a unit investment trust (File No. 811-
08288) and is used to fund variable annuity contracts issued by JNL. 
One variable annuity contract funded by Separate Account E is affected 
by this application.
    Separate Account F was established in 1997. Separate Account F is 
registered under the Act as a unit investment trust (File No. 811-
08483) and is used to fund variable annuity contracts issued by JNL. 
One variable annuity contract funded by Separate Account F is affected 
by this application.
    Separate Account G was established in 1996. Separate Account G is 
registered under the Act as a unit investment trust (File No. 811-
07501) and is used to fund variable annuity contracts issued by JNL. 
Three variable annuity contracts funded by Separate Account G are 
affected by this application.
    Separate Account H was established in 1999. Separate Account H is 
registered under the Act as a unit investment trust (File No. 811-
09693) and is used to fund variable annuity contracts issued by JNL. 
One variable annuity contract funded by Separate

[[Page 13927]]

Account H is affected by this application.
    Separate Account I was established in 2000. Separate Account I is 
registered under the Act as a unit investment trust (File No. 811-
10213) and is used to fund variable annuity contracts issued by JNL. 
One variable annuity contract funded by Separate Account I is affected 
by this application.
    Separate Account J was established in 2003. Separate Account J is 
registered under the Act as a unit investment trust (File No. 811-
21498) and is used to fund variable annuity contracts issued by JNL. 
One variable annuity contract funded by Separate Account J is affected 
by this application.
    Separate Account K was established in 2003. Separate Account K is 
registered under the Act as a unit investment trust (File No. 811-
21500) and is used to fund variable annuity contracts issued by JNL. 
One variable annuity contract funded by Separate Account K is affected 
by this application.
    Separate Account L was established in 2000. Separate Account L is 
registered under the Act as a unit investment trust (File No. 811-
10271) and is used to fund variable universal life contracts issued by 
JNL. One variable universal life contract funded by Separate Account L 
is affected by this application (all eleven variable annuity contracts 
and the one variable universal life contract affected by this 
application are hereinafter collectively referred to as the 
``Contracts'').
    3. NLVT was organized in Delaware as a statutory trust on November 
2, 2005 and is registered under the Act as an open-end management 
investment company.
    4. Pacific Investment Management Company, LLC (``PIMCO'') is the 
investment adviser for the PIMCO Variable Insurance Trust Money Market 
Portfolio (the ``Replaced Fund''). PIMCO and the Replaced Fund are not 
affiliated with JNL. JNF Advisors, Inc. (``JNF Advisor'') is a recently 
formed investment adviser under common control with JNL. JNF Advisor 
will serve as investment adviser to the JNF Money Market Portfolio (the 
``Replacement Fund''). A I M Advisors, Inc. (``AIM'') will be sub-
adviser for the Replacement Fund. AIM is not affiliated with JNL. There 
are no corporate affiliations among the investment advisers.
    5. Purchase payments under the Contracts may be allocated to one or 
more sub-accounts of the Separate Accounts (the ``Sub-Accounts''). 
Income, gains and losses, whether or not realized, from assets 
allocated to the Separate Accounts are credited to or charged against 
the Separate Accounts without regard to other income, gains or losses 
of JNL. The assets maintained in the Separate Accounts will not be 
charged with any liabilities arising out of any other business 
conducted by JNL. Nevertheless, all obligations arising under the 
Contracts, including the commitment to make annuity payments or death 
benefit payments, are general corporate obligations of JNL. 
Accordingly, all of the assets of JNL are available to meet its 
obligations under the Contracts.
    6. The Contracts permit allocations of account value to available 
Sub-Accounts that invest in specific investment portfolios of 
underlying registered investment companies (a ``Fund'' and, 
collectively, the ``Mutual Funds''). The Mutual Funds are registered 
under the Act as open-end management investment companies.
    7. The Contracts permit transfers of accumulation value from one 
Sub-Account to another Sub-Account at any time subject to certain 
restrictions. No sales charge applies to such a transfer of 
accumulation value among Sub-Accounts. A transaction fee is imposed on 
purchases or redemptions involving Sub-Accounts (``Transaction Fee Sub-
Accounts'') which invest in certain Funds.\1\ None of the Transaction 
Fee Sub-Accounts hold shares of a money market fund.
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    \1\ The Monument Adviser contract (File No. 333-124048) is the 
only contract covered by this application that imposes the 
transaction fee.
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    8. The Contracts reserve the right, upon notice to contract owners 
(the ``Contract Owners''), to substitute shares of another mutual fund 
for shares of a Fund held by a Sub-Account.
    9. After the Substitution, the investment objective and policies of 
the Replacement Fund will be substantially similar to the investment 
objective and policies of the Replaced Fund.
    10. JNF Advisor will serve as the investment adviser for the 
Replacement Fund. However, the management of the Replacement Fund will 
be sub-advised by AIM. For the Replaced Fund and the Replacement Fund, 
the investment objectives, principal risks, investment adviser/sub-
adviser, and fee structure are shown in the tables that follow. The 
tables also show the Replaced Fund's expenses for the fiscal year 
ending in 2007 and assets as of December 31, 2007.
    11. Substitution 1

------------------------------------------------------------------------
                                  Replaced fund       Replacement fund
------------------------------------------------------------------------
Fund Name...................  PIMCO Variable        JNF Money Market
                               Insurance Trust       Portfolio;
                               Money Market          subadvised by AIM
                               Portfolio.
Investment Objective........  Seeks maximum         Seeks as high a
                               current income,       level of current
                               consistent with       income as is
                               preservation of       consistent with
                               capital and daily     preservation of
                               liquidity.            capital and daily
                                                     liquidity.
Strategy....................  Invests at least 95%  Invests at least 95%
                               of its total assets   of its total assets
                               in a diversified      in a diversified
                               portfolio of money    portfolio of money
                               market securities     market securities
                               that are in the       that are in the
                               highest rating        highest rating
                               category for short-   category for short-
                               term obligations.     term obligations.
                               May invest up to 5%   May invest up to 5%
                               of its total assets   of its total assets
                               in money market       in money market
                               securities in the     securities in the
                               second highest        second highest
                               rating category.      rating category.
                               Will only invest in   Will only invest in
                               U.S. dollar           U.S. dollar
                               denominated           denominated
                               securities maturing   securities maturing
                               in 397 days or        in 397 days or
                               less. Dollar-         less. Dollar-
                               weighted average      weighted average
                               portfolio maturity    portfolio maturity
                               will not exceed 90    will not exceed 90
                               days.                 days
Principal Risks.............      Market        Market
                                  Risk.                 Risk.
                                  Interest      Interest
                                  Rate Risk.            Rates and Bond
                                                        Maturities Risk.
                                  Issuer       
                                  Risk.                 Municipal Bond
                                                        Risk.
                                                U.S.
                                  Management Risk.      Government
                                                        Obligations
                                                        Risk.
                                               
                                  Inflation--Index      Inflation--Index
                                  ed Securities         Securities Risk.
                                  Risk.

[[Page 13928]]

 
                                  Foreign       Foreign
                                  (Non-U.S.)            Securities Risk.
                                  Investment Risk.
                                  Credit        Credit
                                  Risk.                 Risk.
Significant Principal Risk                       None
 Disparities?.
Adviser/Subadviser..........  PIMCO...............  JNF Advisor/ AIM.
Fund Asset Level as of 9/30/  $376,000,000 \(a)\..  $0
 07.
Advisory Fee................  0.15%...............  0.15%
Advisory Fee Schedule.......  0.15% \(b)\.........  0.15% \(b)\
Service Fee.................  0.15%...............  0
12b-1 Fee...................  0...................  0 \(c)\
Other Expenses..............  0.20%...............  0.51% \(d)\
Total Annual Operating        0.50%...............  0.66%
 Expenses.
Fee Reduction...............  N/A.................  0.16% \(e)\
Net Total Annual Expenses...  0.50%...............  0.50%
------------------------------------------------------------------------
\(a)\ As of December 31, 2007, approximately 32% of the Replaced Fund's
  assets would be transferred to the Replacement Fund.
\(b)\ The advisory fee schedule does not contain breakpoints.
\(c)\ An affirmative vote of shareholders would be required to approve a
  Rule 12b-1 plan for the Replacement Fund.
\(d)\ Other fees are based on estimated amounts for the Portfolio's
  current fiscal year.
\(e)\ JNF Advisor has contractually agreed to waive its investment
  advisory fees and/or reimburse the Money Market Portfolio to the
  extent that the ratio of expenses (excluding brokerage fees and
  commissions, acquired fund fees and expenses, borrowing costs (such as
  interest and dividend expense on securities sold short), taxes and
  extraordinary expenses) to net assets on an annual basis exceeds 0.50%
  for the Money Market Portfolio. JNF Advisor may discontinue the
  contractual limits at any time after April 30, 2009, subject to the
  condition in this Application relating to the maximum total operating
  expenses for the Replacement Fund for the 24 months following the
  Substitution.

    The Applicants believe that the Replacement Fund is an appropriate 
substitute for the Replaced Fund because the investment objective and 
policies of the Replacement Fund are substantially similar to those of 
the Replaced Fund. Because the Substitution involves replacing one 
money market fund with another money market fund, the Substitution will 
not result in a reduced number or a change in the investment 
characteristics of the investment options offered under the Contracts.
    12. The Substitution will take place at the Funds' 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 account value or death benefit or in 
the dollar value of his or her investment in any of the Sub-Accounts. 
Accordingly, there will be no financial impact on any Contract Owner.
    13. The Substitution may be effected by having each of the Sub-
Accounts that invests in the Replaced Fund redeem its shares at the net 
asset value calculated on the date of the Substitution and purchase 
shares of the Replacement Fund at the net asset value calculated on the 
same date.
    14. In the alternative, should the Replaced Fund determine that a 
cash redemption would adversely affect its shareholders, it may redeem 
the interest ``in-kind.'' In that case, the Substitution will be 
effected by the Sub-Account contributing all the securities it receives 
from the Replaced Fund for an amount of Replacement Fund shares equal 
to the fair market value of the securities contributed. All in-kind 
redemptions from the Replaced Fund of which any of the Applicants is an 
affiliated person will be effected in accordance with the conditions 
set forth in the Commission's no-action letter issued to Signature 
Financial Group, Inc. (available Dec. 28, 1999).
    15. The Substitution will be described in a supplement to the 
prospectuses for the Contracts (``Supplement'') filed with the 
Commission and mailed to Contract Owners. The Supplement will provide 
Contract Owners with notice of the Substitution and describe the 
reasons for engaging in the Substitution. The Supplement also will 
inform Contract Owners with assets allocated to a Sub-Account investing 
in the Replaced Fund that the Replaced Fund will not be an available 
investment option after the date of the Substitution and that Contract 
Owners will have the opportunity to reallocate account value on one day 
to one or more Sub-Accounts:
     Prior to the Substitution, from the Sub-Accounts investing 
in the Replaced Fund, and
     For 30 days after the Substitution, from the Sub-Accounts 
investing in the Replacement Fund to Sub-Accounts investing in another 
Fund available under the respective Contracts,

Without diminishing the number of free transfers that may be made in a 
given contract year and without the imposition of any transfer charge 
or limitation, other than the transaction fee applicable to certain 
Sub-Accounts and any applicable limitations in place to deter 
potentially harmful excessive trading.\2\
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    \2\ There are five Transaction Fee Sub-Accounts which are 
available only under one annuity contract (File No. 333-124048) 
which offers 160 no-fee Sub-Accounts. The Transaction Fee Sub-
Accounts hold shares of the following Nationwide VIT Index Funds: 
S&P 500; Small Cap; Mid Cap; International and Bond. These funds 
have investment characteristics which are completely unlike those of 
the Pimco Variable Insurance Trust Money Market Portfolio which is 
being replaced in the Substitution. In light of the foregoing 
Applicants do not believe there is any investor protection basis not 
to allow the substituted Contract Owners to bear a charge applicable 
to all other Contract Owners seeking to invest in a Transaction Fee 
Sub-Account.
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    16. The prospectuses for the Contracts will contain the substance 
of the information contained in the Supplement concerning the 
Substitution. Each Contract Owner will be provided with a prospectus 
for the Replacement Fund before the Substitution, unless the 
Replacement Fund becomes effective contemporaneously with the 
Substitutions, in which case a prospectus will be sent to affected 
Contract Owners with the written confirmation. Within five days after 
the Substitution, JNL will send affected Contract Owners written 
confirmation that the Substitution has occurred and notice that 
Contract Owners will have the opportunity to reallocate account value 
for 30 days after the Substitution, from the Sub-Accounts investing in 
the Replacement Fund to Sub-Accounts investing in another Fund 
available under the respective Contracts, without diminishing the 
number of free transfers that may be made in a given contract year and 
without the imposition of any transfer charge or limitation, other than 
the transaction fee applicable to certain Sub-Accounts and any 
applicable limitations in place to deter potentially harmful excessive 
trading.

[[Page 13929]]

    17. JNL will pay all direct and indirect 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 Applicants 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.
    18. Applicants believe that their request satisfies the standards 
for relief pursuant to Section 26(c) of the Act, as set forth below, 
because the affected Contract Owners will have:
    (1) Account values allocated to a Sub-Account invested in the 
Replacement Fund with an investment objective and policies 
substantially similar to the investment objective and policies of the 
Replaced Fund; and
    (2) The Replacement Fund whose current total annual expenses will 
be no higher than that of the Replaced Fund for its 2007 fiscal year 
because, as described below, JNL has agreed to, for a period of 24 
months following the Substitutions, limit the total net expenses of the 
Replacement Fund to those of the Replaced Fund for the 2007 fiscal 
year. At the end of the 24 month period it is possible that the 
expenses of the Replacement Fund may be higher.

Applicants' and Section 17 Applicants' Legal Analysis

    1. The Applicants represent that Section 26(c) of the Act makes it 
unlawful for any depositor or trustee of a registered unit investment 
trust holding the security of a single issuer to substitute another 
security for such security unless the Commission approves the 
substitution. The Commission will approve such a substitution if the 
evidence establishes that it is consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of the Act.
    2. The Applicants note that the purpose of Section 26(c) is to 
protect the expectation of investors in a unit investment trust that 
the unit investment trust will accumulate shares of a particular issuer 
by preventing unscrutinized substitutions that might, in effect, force 
shareholders dissatisfied with the substituted security to redeem their 
shares, thereby possibly incurring either a loss of the sales load 
deducted from initial premium payments, an additional sales load upon 
reinvestment of the redemption proceeds, or both. Moreover, in the 
insurance product context, a Contract Owner forced to redeem may suffer 
adverse tax consequences. Section 26(c) affords this protection to 
investors by preventing a depositor or trustee of a unit investment 
trust that holds shares of one issuer from substituting for those 
shares the shares of another issuer, unless the Commission approves 
that substitution.
    3. The Applicants assert that the purposes, terms and conditions of 
the Substitution are consistent with the principles and purposes of 
Section 26(c) and do not entail any of the abuses that Section 26(c) is 
designed to prevent. Applicants have reserved the right to make such a 
substitution under the Contracts and this reserved right is disclosed 
in the prospectus for the Contracts.
    4. The Applicants submit that the investment objectives and 
policies of the Replacement Fund are sufficiently similar to those of 
the Replaced Fund that Contract Owners will have continuity in 
investment expectations. Accordingly, the Replacement Fund is an 
appropriate investment vehicle for those Contract Owners who have 
account values allocated to the Replaced Fund.
    5. The Applicants represent that for the 24-month period following 
the date of the Substitution, JNL agrees to limit the total operating 
expenses of the Replacement Fund (taking into account any expense 
waiver or reimbursement) on an annualized basis to the net expense 
level of the Replaced Fund for the 2007 fiscal year. In addition, for 
24 months following the Substitution, JNL will not increase asset-based 
fees or charges for Contracts outstanding on the day of the 
Substitution. JNL represents that the Substitution and the selection of 
the Replacement Fund were not motivated by any financial consideration 
paid or to be paid by the Replacement Fund, its adviser. its sub-
adviser or underwriters, or their respective affiliates.\3\
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    \3\ In this regard, JNL has been receiving .30% annually in 
``revenue sharing'' with respect to investments by its separate 
accounts in the Replaced Fund and expects that it will receive that 
same percentage amount from the Replacement Fund. With respect to 
the Replaced Fund, JNL receives .15% pursuant to the Replaced Fund's 
Administrative Services Plan and .15% from the Replaced Fund's 
investment adviser for non-marketing services rendered to current 
and prospective Contract Owners. With respect to the Replacement 
Fund, JNL expects to receive from the Replacement Fund .30% for 
administrative services.
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    6. The Applicants assert that the Substitution will not result in 
the type of costly forced redemption that Section 26(c) was intended to 
guard against and, for the following reasons, is consistent with the 
protection of investors and the purposes fairly intended by the Act:
    (1) The Replacement Fund is an appropriate fund to which to move 
Contract Owners with account values allocated to the Replaced Fund 
because the new fund has substantially similar investment objectives 
and policies.
    (2) The costs of the Substitution, including any brokerage costs, 
will be borne by JNL and will not be borne by Contract Owners. No 
charges will be assessed to effect the Substitution.
    (3) The Substitution will be at the net asset value of the shares 
without the imposition of any transfer or similar charge and with no 
change in the amount of any Contract Owner's account value.
    (4) 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' account values being moved to a Fund with the same or 
lower current total annual expenses.
    (5) All Contract Owners will be given notice of the Substitution 
prior to the Substitution and will have an opportunity before, and for 
30 days after, the Substitution to reallocate account value among other 
available Sub-Accounts without diminishing the number of free transfers 
that may be made in a given contract year and without the imposition of 
any transfer charge or limitation, other than the transaction fee 
applicable to certain Sub-Accounts and any applicable limitations in 
place to deter potentially harmful excessive trading or limitation on 
the number of transfers to or from the fixed accounts available with 
the variable annuity contracts.
    (6) Within five days after the Substitution, JNL will send to its 
affected Contract Owners written confirmation that the Substitution has 
occurred.
    (7) The Substitution will in no way alter the insurance benefits to 
Contract Owners or the contractual obligations of JNL.
    (8) The Substitution will have no adverse tax consequences to 
Contract Owners and will in no way alter the tax benefits to Contract 
Owners.
    (9) The Replacement Fund will not rely on any ``manager of 
managers''

[[Page 13930]]

exemptive relief unless such action is approved by a majority of the 
Replacement Fund's shareholders at a meeting whose record date is after 
the Substitution has been effected.
    7. The Section 17 Applicants request an order under Section 17(b) 
exempting them from the provisions of Section 17(a) to the extent 
necessary to permit JNL to carry out the proposed substitution. Section 
17(a)(1) of the Act, in relevant part, prohibits any affiliated person 
of a registered investment company, or any affiliated person of such 
person, acting as principal, from knowingly selling any security or 
other property to that company. Section 17(a)(2) of the Act generally 
prohibits the persons described above, acting as principal, from 
knowingly purchasing any security or other property from the registered 
company.
    8. JNL, as depositor of the Separate Accounts, is an affiliate of 
the Separate Accounts and also JNF Advisor, which serves as investment 
adviser for the affected NLVT series. As such, JNF Advisor could be 
deemed to control the affected NLVT series and be an affiliate of the 
affected NLVT series. Assuming, for this or other reasons, that an 
affected NLVT series is an affiliate of an affiliate of JNL, to the 
extent the Separate Accounts each use assets received in-kind to 
purchase Replacement Fund Shares, the substitutions would involve one 
or more purchases or sales of securities or property between persons 
who are affiliates of affiliates. Accordingly, the Section 17 
Applicants are seeking relief, to the extent necessary, from Section 
17(a) for the in-kind purchases and sales of Replacement Fund Shares.
    9. Section 17(b) of the Act provides that the Commission may, upon 
application, grant an order exempting any transaction from the 
prohibitions of Section 17(a) if the evidence establishes that:
    (1) The terms of the proposed transaction, including the 
consideration to be paid or received, are reasonable and fair and do 
not involve overreaching on the part of any person concerned;
    (2) The proposed transaction is consistent with the policy of each 
registered investment company concerned, as recited in its registration 
statement and records filed under the Act; and
    (3) The proposed transaction is consistent with the general 
purposes of the Act.
    10. The Section 17 Applicants submit that, for all the reasons set 
forth in paragraphs 3-6 immediately above, the terms of the proposed 
in-kind purchases of shares of the Replacement Fund by the Separate 
Accounts, including the consideration to be paid and received, as 
described in this Application, are reasonable and fair and do not 
involve overreaching on the part of any person concerned. The Section 
17 Applicants also submit that the proposed in-kind purchases by the 
Separate Accounts are consistent with the policies of JNL and the 
affected NLVT series. Finally, the Section 17 Applicants submit that 
the proposed substitutions are consistent with the general purposes of 
the Act.
    11. The Section 17 Applicants assert that, to the extent the 
Separate Account's in-kind purchases of Replacement Fund shares are 
deemed to involve principal transactions between entities which are 
affiliates of affiliates, the procedures described below should be 
sufficient to assure that the terms of the proposed transactions are 
reasonable and fair to all participants. The Section 17 Applicants 
maintain that the terms of the proposed in-kind purchase transactions, 
including the consideration to be paid and received by each Fund 
involved, are reasonable, fair and do not involve overreaching. In 
addition, although not applicable, the in-kind transactions will 
conform with all except one of the conditions enumerated in Rule 17a-7. 
The proposed transactions will take place at relative net asset value 
in conformity with the requirements of Section 22(c) of the Act and 
Rule 22c-1 thereunder with no change in the amount of any Contract 
Owner's account value or death benefit or in the dollar value of his or 
her investment in any Sub-Account. Contract Owners will not suffer any 
adverse tax consequences as a result of the substitution. The fees and 
charges under the Contracts will not increase because of the 
substitution. Even though they may not rely on Rule 17a-7, the Section 
17 Applicants believe that the Rule's conditions outline the type of 
safeguards that result in transactions that are fair and reasonable to 
registered investment company participants and preclude overreaching.
    12. The Section 17 Applicants will carry out the proposed in-kind 
purchases in conformity with all of the conditions of Rule 17a-7 and 
the Replacement Fund's procedures thereunder, except that the 
consideration paid for the securities being purchased or sold may not 
be entirely cash. Nevertheless, the circumstances surrounding the 
proposed substitution will be such as to offer the same degree of 
protection to the Replacement Fund from overreaching that Rule 17a-7 
provides to them generally in connection with their purchase and sale 
of securities under that Rule in the ordinary course of their business. 
In particular, JNL (or any of their affiliates) cannot effect the 
proposed transaction at a price that is disadvantageous to the 
Replacement Fund. Although the transaction may not be entirely for 
cash, it will be effected based upon (1) the independent market price 
of the portfolio securities valued as specified in paragraph (b) of 
Rule 17a-7, and (2) the net asset value per share of the Fund valued in 
accordance with the procedures disclosed in its registration statement 
and as required by Rule 22c-1 under the Act. No brokerage commission, 
fee, or other remuneration will be paid to any party in connection with 
the proposed in-kind transaction.
    13. The Section 17 Applicants assert that the sale of shares of the 
Replacement Fund for investment securities, as contemplated by the 
proposed in-kind transaction, is consistent with the investment policy 
and restrictions of the Replacement Fund because (1) the shares are 
sold at their net asset value, and (2) the portfolio securities are of 
the type and quality that the Replacement Fund would each have acquired 
with the proceeds from share sales had the shares been sold for cash. 
To assure that the second of these conditions is met, the sub-adviser 
will examine the portfolio securities being offered to the Replacement 
Fund and accept only those securities as consideration for shares that 
it would have acquired for such fund in a cash transaction.
    14. The Section 17 Applicants submit that the proposed in-kind 
transactions are consistent with the general purposes of the Act as 
stated in the Findings and Declaration of Policy in Section 1 of the 
Act. The proposed transactions do not present any of the conditions or 
abuses that the Act was designed to prevent. In particular, Sections 
1(b)(2) and (3) of the Act state, among other things, that the national 
public interest and the interest of investors are adversely affected 
``when investment companies are organized, operated, managed, or their 
portfolio securities are selected in the interest of directors, 
officers, investment advisers, depositors, or other affiliated persons 
thereof, or in the interests of other investment companies or persons 
engaged in other lines of business, rather than in the interest of all 
classes of such companies' security holders; * * * when investment 
companies issue securities containing inequitable or discriminatory 
provisions, or fail to protect the preferences and privileges of the 
holders of their outstanding

[[Page 13931]]

securities * * *.'' For all the reasons stated in Sections V.B. and VI 
of the Application, the abuses described in Sections l(b)(2) and (3) of 
the Act will not occur in connection with the proposed in-kind 
purchases.
    15. The Section 17 Applicants note that the Commission has 
previously granted exemptions from Section 17(a) in circumstances 
substantially similar in all material respects to those presented in 
this Application to applicants affiliated with an open-end management 
investment company that proposed to purchase shares issued by the 
company with investment securities of the type that the company might 
otherwise have purchased for its portfolio. In these cases, the 
Commission issued an order pursuant to Section 17(b) of the Act where 
the expense of liquidating such investment securities and using the 
cash proceeds to purchase shares of the investment company would have 
reduced the value of investors' ultimate investment in such shares.

Conclusion

    For the reasons and upon the facts set forth above, the Applicants 
and the Section 17 Applicants believe that the requested order meets 
the standards set forth in Section 26(c) and Section 17(b), 
respectively, and should, therefore, be granted.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
 Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-5100 Filed 3-13-08; 8:45 am]
BILLING CODE 8011-01-P