National Life Insurance Company, et al., 20727-20731 [2011-8731]
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Federal Register / Vol. 76, No. 71 / Wednesday, April 13, 2011 / Notices
agency (i.e., law enforcement agency)
that contributed the questioned
information, or direct challenge as to the
accuracy or completeness of any entry
on the criminal history record to the
Assistant Director, Federal Bureau of
Investigation Identification Division,
Washington, DC 20537–9700 (as set
forth in 28 CFR 16.30 through 16.34). In
the latter case, the FBI forwards the
challenge to the agency that submitted
the data and requests that agency to
verify or correct the challenged entry.
Upon receipt of an official
communication directly from the agency
that contributed the original
information, the FBI Identification
Division makes any changes necessary
in accordance with the information
supplied by that agency. The licensee
must provide at least 10 days for an
individual to initiate an action
challenging the results of a FBI CHRC
after the record is made available for
his/her review. The licensee may make
a final access determination based on
the criminal history record only upon
receipt of the FBI’s ultimate
confirmation or correction of the record.
Upon a final adverse determination on
access to an ISFSI, the licensee shall
provide the individual its documented
basis for denial. Access to an ISFSI shall
not be granted to an individual during
the review process.
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G. Protection of Information
1. The licensee shall develop,
implement, and maintain a system for
personnel information management
with appropriate procedures for the
protection of personal, confidential
information. This system shall be
designed to prohibit unauthorized
access to sensitive information and to
prohibit modification of the information
without authorization.
2. Each licensee who obtains a
criminal history record on an individual
pursuant to this Order shall establish
and maintain a system of files and
procedures, for protecting the record
and the personal information from
unauthorized disclosure.
3. The licensee may not disclose the
record or personal information collected
and maintained to persons other than
the subject individual, his/her
representative, or to those who have a
need to access the information in
performing assigned duties in the
process of determining suitability for
unescorted access to the protected area
of an ISFSI. No individual authorized to
have access to the information may redisseminate the information to any
other individual who does not have the
appropriate need to know.
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4. The personal information obtained
on an individual from a CHRC may be
transferred to another licensee if the
gaining licensee receives the
individual’s written request to redisseminate the information contained
in his/her file, and the gaining licensee
verifies information such as the
individual’s name, date of birth, social
security number, sex, and other
applicable physical characteristics for
identification purposes.
5. The licensee shall make criminal
history records, obtained under this
section, available for examination by an
authorized representative of the NRC to
determine compliance with the
regulations and laws.
[FR Doc. 2011–9007 Filed 4–12–11; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–29627; File No. 812–13806]
National Life Insurance Company, et al.
April 7, 2011.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order pursuant to Section 26(c) of the
Investment Company Act of 1940 (the
‘‘1940 Act’’).
AGENCY:
National Life Insurance
Company (‘‘NLIC’’), National Variable
Annuity Account II (‘‘Annuity
Account’’), National Variable Life
Insurance Account (‘‘Life Account’’, and
together with Annuity Account,
‘‘Separate Accounts’’).
SUMMARY OF APPLICATION: Applicants
request an order of the Commission
pursuant to Section 26(c) of 1940 Act,
as amended, approving the substitution
of shares of the Money Market Portfolio
(the ‘‘Replacement Portfolio’’) of the
Variable Insurance Products Fund V
(‘‘VIPFV’’) for shares of the Money
Market Fund (the ‘‘Substituted
Portfolio’’) of the Sentinel Variable
Products Trust (‘‘SVPT’’) held by the
Separate Accounts to support variable
annuity contracts or variable life
insurance contracts (collectively, the
‘‘Contracts’’) issued by NLIC.
FILING DATE: The application was
originally filed on July 26, 2010 and
amended on December 13, 2010, and
March 28, 2011.
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
APPLICANTS:
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20727
Secretary of the Commission and
serving NLIC 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 28, 2011, and should
be accompanied by proof of service on
NLIC 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, c/o Lisa F. Muller, Counsel,
National Life Insurance Company,
National Life Drive, Montpelier,
Vermont 05604.
FOR FURTHER INFORMATION CONTACT:
Craig Ruckman, Attorney-Adviser, at
(202) 551–6753 or Michael Kosoff,
Branch Chief, Office of Insurance
Products, Division of Investment
Management, at (202) 551–6754.
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. NLIC is a stock life insurance
company, all the outstanding stock of
which is indirectly owned by National
Life Holding Company, a mutual
insurance holding company established
under Vermont law on January 1, 1999.
NLIC is authorized to transact life
insurance and annuity business in
Vermont and in 50 other jurisdictions.
For purposes of the 1940 Act, NLIC is
the depositor and sponsor of the
Annuity Account and the Life Account
as those terms have been interpreted by
the Commission with respect to variable
life insurance and variable annuity
separate accounts.
2. Under Vermont law, the assets of
each Separate Account attributable to
the Contracts through which interests in
that Separate Account are issued are
owned by NLIC but are held separately
from all other assets of NLIC for the
benefit of the owners of, and the persons
entitled to payment under, those
Contracts. Consequently, the assets in
each Separate Account equal to the
reserves and other contract liabilities of
the Separate Account are not chargeable
with liabilities arising out of any other
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business that NLIC may conduct.
Income, gains and losses, realized or
unrealized, from assets allocated to each
Separate Account are credited to or
charged against that Separate Account
without regard to the other income,
gains or losses of NLIC. Each Separate
Account is a ‘‘separate account’’ as
defined by Rule 0–1(e) under the 1940
Act, and is registered with the
Commission as a unit investment trust.1
3. The Annuity Account is divided
into sixty-four subaccounts. Each
subaccount invests exclusively in shares
of a corresponding investment portfolio
(a ‘‘Portfolio’’) of one of fifteen seriestype management investment
companies, including the SVPT. The
assets of the Annuity Account support
variable annuity contracts, and interests
in the Separate Account offered through
such contracts have been registered
under the Securities Act of 1933, as
amended (the ‘‘1933 Act’’), on Form N–
4 (File No. 333–19583).
4. The Life Account is divided into
sixty-eight subaccounts. Each
subaccount invests exclusively in shares
of a corresponding investment portfolio
(also, a ‘‘Portfolio’’) of one of sixteen
series-type management investment
companies, including the SVPT. The
assets of the Life Account support
variable life insurance contracts, and
interests in the Separate Account
offered through such contracts have
been registered under the 1933 Act on
Form N–6 (File Nos. 33–91938, 333–
44723, 333–151535, and 333–67003).
5. SVPT is registered under the 1940
Act as a diversified, open-end
management investment company.2
SVPT currently consists of six
investment portfolios, including the
Substituted Portfolio, and issues a
separate series of shares of beneficial
interest in connection with each. SVPT
has registered such shares under the
1933 Act on Form N–1A (File No. 333–
35832).
6. Sentinel Asset Management, Inc.
(‘‘Sentinel’’) serves as the investment
adviser to each SVPT Portfolio. Sentinel
manages the Porfolios’ investments and
the business operations of the SVPT
under the overall supervision of the
SVPT board of trustees. Sentinel has the
responsibility for making all investment
decisions for the SVPT Portfolios and
receives an investment management fee
from each Portfolio. Sentinel is a
registered investment adviser. Sentinel
is an indirect wholly-owned subsidiary
of National Life Holding Company and
therefore is under common control with
NLIC.
7. VIPFV is registered under the 1940
Act as a diversified, open-end
management investment company.3
Currently, VIPFV has 31 investment
portfolios, one of which—the
Replacement Portfolio—would be
involved in the proposed Substitution.
VIPFV issues a separate series of shares
of beneficial interest in connection with
each portfolio and has registered such
shares under the 1933 Act on Form N–
1A (File No. 33–17704).
8. Fidelity Management & Research
Company (‘‘FMR’’) serves as the manager
of each portfolio of VIPFV. As the
manager, FMR has overall responsibility
for directing portfolio investments and
handling the VIPFV’s business affairs.
FMR receives an investment
management fee from each portfolio.
FMR is a registered investment adviser.
Fidelity Investments Money
Management, Inc. (‘‘FIMM’’) and other
affiliates of FMR serve as sub-advisers
for the Replacement Portfolio. FIMM
has the day-to-day responsibility of
choosing investments for the
Replacement Portfolio. In addition,
Fidelity Research & Analysis Company
(‘‘FRAC’’), another affiliate of FMR,
serves as a sub-adviser for the Portfolio
and may provide investment research
and advice for the Portfolio.4 None of
VIPFV, FMR, FIMM, or FRAC are
affiliated persons (or affiliated persons
of affiliated persons) of any of the
Applicants. Likewise, none of the
Applicants are affiliated persons (or
affiliated persons of affiliated persons)
of VIPFV, FMR, FIMM, or FRAC.
9. Each Contract permits Contract
owners to transfer contract value
between and allocate contract value
among the subaccounts. Currently, NLIC
does not assess a transfer charge or limit
the number of transfers permitted each
year. However, NLIC reserves the right,
upon prior notice, to impose a transfer
charge of $25 for each transfer in excess
of 12 in any one contract year. NLIC
does have in place market timing
policies and procedures that may
operate to limit transfers. Under the Life
Account, transfers resulting from loans,
dollar cost averaging, portfolio
3 File
1 File
No. 811–08015 (Annuity Account); File No.
811–09044 (Life Account).
2 File No. 811–09917.
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No. 811–05361.
does not manage the sub-advisers for the
VIPFV Money Market Portfolio pursuant to a
‘‘manager-of-managers’’ exemption.
4 FMR
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rebalancing features, or the initial
reallocation from a money market
subaccount do not count as transfers for
the purpose of determining the transfer
charge.
10. Pursuant to each Contract, NLIC
reserves the right to substitute shares of
one portfolio for shares of another. Each
Contract’s prospectus discloses that
NLIC reserves the right to substitute
shares of one portfolio for shares of
another if the shares of the portfolio
should no longer be available for
investment or, if in NLIC’s judgment
further investment in such portfolio
shares should become inappropriate.
11. NLIC proposes to substitute
Service Class Shares of the Money
Market Portfolio of the Variable
Insurance Products Fund V for shares of
the Money Market Fund of the Sentinel
Variable Products Trust (‘‘Substitution’’).
12. The Applicants assert that the
Substitution is necessary in order to
provide the Contract owners with
continued access to a money market
portfolio investment option. Currently,
the only money market portfolio
investment option offered under the
Contracts is the Substituted Portfolio.
The Applicants contend that the
Substituted Portfolio is small and,
because it is only offered as an
investment option under the Contracts,
there is little prospect of it growing in
size sufficiently to materially decrease
its expense ratio or obtain economies of
scale. In addition, Sentinel has been
subsidizing the Substituted Portfolio’s
expenses for some time, but cannot
continue to do so indefinitely.5
NLIC has determined that Contract
owners would be better served if the
Substituted Portfolio is closed and
replaced as an investment option by
another, larger, money market fund with
lower expenses and better prospects for
future growth and competitive yields.
13. The table below sets forth the
name, investment adviser, investment
objective, principal investment
strategies, and principal risks of both
the Substituted Portfolio and the
Replacement Portfolio.
5 For the fiscal year ended December 31, 2010,
Sentinel reimbursed the Substituted Portfolio in an
amount equal to 0.37% of the Portfolio’s average
daily net assets. This reimbursement was made to
avoid the Substituted Portfolio having a negative
yield in the current very low interest rate
environment. Sentinel may cease the
reimbursement at any time and is only providing
it to the extent necessary to avoid a negative yield.
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Substituted Portfolio
Name ..................................................................
Investment Adviser (Subadviser) .......................
Investment Objective ..........................................
Principal Investment Strategies ..........................
Replacement Portfolio
Sentinel Variable Products Trust Sentinel
Variable Products Money Market Fund.
Sentinel ............................................................
Seeks as high a level of current income as is
consistent with stable principal values and
liquidity.
The Fund invests exclusively in dollar-denominated money market instruments, including
U.S. government securities, bank obligations, repurchase agreements, commercial
paper, and other corporate debt obligations.
All such investments will have remaining
maturities of 397 days or less.
Variable Insurance Products Fund V Money
Market Portfolio.
FMR (FIMM, FRAC).
Seeks as high a level of current income as is
consistent with preservation of capital and
liquidity.
FMR invests the Fund’s assets in U.S. dollardenominated money market securities of
domestic and foreign issuers and repurchase agreements. FMR also may enter
into reverse repurchase agreements for the
Fund.
FMR will invest more than 25% of the Fund’s
total assets in the financial services industries.
In buying and selling securities for the Fund,
FMR complies with industry-standard regulatory requirements for money market funds
regarding the quality, maturity, and diversification of the fund’s investments.
FMR stresses maintaining a stable $1.00
share price, liquidity, and income.
The Fund may also invest up to 10% of its
total assets in shares of institutional money
market funds that invest primarily in securities in which the Fund could invest directly.
Principal Risks ....................................................
14. The table below compares the
investment management fees,
distribution fees, other expenses, total
The Fund seeks to maintain a net asset value
of $1.00 per share by using the amortized
cost method of valuing its securities. The
Fund is required to maintain a dollarweighted average portfolio maturity of 90
days or less.
The Fund may participate in a securities lending program.
• General Fixed-Income Securities Risk .........
• Government Securities Risk .........................
operating expenses, fee waivers and net
operating expenses for the year ended
December 31, 2010, expressed as an
•
•
•
•
Interest Rate Charges.
Foreign Exposure.
Financial Services Exposure.
Issuer-Specific Changes.
annual percentage of average daily net
assets, of the Substituted Portfolio and
the Replacement Portfolio.
Substituted Portfolio
Replacement Portfolio
Sentinel Variable
Products Trust Sentinel
Variable Products
Money Market Fund
Variable Insurance
Products Fund V Money
Market Portfolio
0.25%
None
0.27%
0.52%
0.37%
0.15%
0.18%
0.10%
0.08%
0.36%
N/A
0.36%
Management Fee .................................................................................................................
Distribution and Service (12b–1) Fee ..................................................................................
Other Expenses ...................................................................................................................
Total Operating Expenses ...................................................................................................
Fee Waivers and Expense Reimbursements 6 ....................................................................
Net Operating Expenses .....................................................................................................
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6 Fee
waivers and expense reimbursements are not contractual and may be terminated at any time.
The management fee for the
Replacement Portfolio in the table above
consists of two components: a so-called
‘‘group’’ fee of 0.11% and an ‘‘incomerelated’’ fee of 0.07%. The incomerelated fee varies from month to month
depending on the level of the
Replacement Portfolio’s monthly gross
income from an annual rate of 0.05% of
average daily net assets throughout the
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month when the annualized gross yield
for the month is 0% to an annual rate
of 0.27% of average daily net assets
throughout the month when the
annualized gross yield for the month is
15%. The group fee rate is based on the
average daily net assets for all of the
mutual funds managed by FMR. The
group fee is capped at an annual rate of
0.37% of average daily net assets.
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15. The table below compares the 1year, 5-year, and 10-year average annual
total return of the Substituted Portfolio
and Replacement Portfolio, as well as
the yield for the seven days ending
December 31, 2010 and the net asset
values of the Substituted Portfolio and
Replacement Portfolio as of December
31, 2010.
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Substituted Portfolio
Replacement Portfolio
Sentinel Variable Products Trust Sentinel Variable Products Money
Market Fund
Variable Insurance Products Fund V Money Market Portfolio
0.00%
2.24%
2.07%
0.00%
$15,290,904
0.14%
2.69%
2.40%
0.11%
$155,272,000
1-Year Average Annual Return ...........................................................................................
5-Year Average Annual Return ...........................................................................................
10-Yr Average Annual Return .............................................................................................
7-Day Yield ..........................................................................................................................
Net Asset Value ...................................................................................................................
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As of December 31, 2010.
16. As of the effective date of the
Substitution (the ‘‘Effective Date’’), each
Separate Account will redeem shares of
the Substituted Portfolio. The proceeds
of such redemptions will then be used
to purchase shares of the Replacement
Portfolio, with the subaccount of the
applicable Separate Account investing
the proceeds of its redemption from the
Substituted Portfolio in the applicable
Replacement Portfolio. Redemptions
and purchases will occur
simultaneously so that contract values
will remain fully invested at all times.
All redemptions of shares of the
Substituted Portfolio and purchases of
shares of the Replacement Portfolio will
be effected in accordance with Section
22(c) of the Act and Rule 22c–1
thereunder. The Substitution will take
place at relative net asset value as of the
Effective Date with no change in the
amount of any Contract owner’s contract
value or death benefit or in the dollar
value of his or her investments in the
money market subaccount of the
appropriate Separate Account.
17. Contract values attributable to
investments in the Substituted Portfolio
will be transferred to the Replacement
Portfolio without charge (including
sales charges or surrender charges) and
without counting toward the number of
transfers that may be permitted without
charge. Contract owners will not incur
any additional fees or charges as a result
of the Substitution, nor will their rights
or NLIC’s obligations under the
Contracts be altered in any way and the
Substitution will not change Contract
owners’ insurance benefits under the
Contracts. All expenses incurred in
connection with the Substitution,
including legal, accounting,
transactional, and other fees and
expenses, including brokerage
commissions, will be paid by NLIC. In
addition, the Substitution will not
impose any tax liability on Contract
owners. The Substitution will not cause
the Contract fees and charges currently
paid by existing Contract owners to be
greater after the Substitution than before
the Substitution. NLIC will not exercise
any right it may have under the
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Contracts to impose restrictions on
transfers under the Contracts for the
period beginning on the date the
Application was filed with the
Commission through at least thirty (30)
days following the Effective Date.7
18. For twenty-four months following
the Effective Date and for those
Contracts with contract value invested
in the Substituted Portfolio on the
Effective Date, NLIC will reimburse, on
the last business day of each fiscal
period (not to exceed a fiscal quarter),
the sub-accounts investing in the
Replacement Portfolio to the extent that
the Replacement Portfolio’s net annual
expenses (taking into account
contractual fee waivers and expense
reimbursements) for such period
exceeds, on an annualized basis, the net
annual expenses (taking into account
contractual fee waivers and expense
reimbursements) of the Substituted
Portfolio for the fiscal year ended
December 31, 2010. In addition, for
twenty-four months following the
Effective Date, NLIC will not increase
asset-based fees or charges for Contracts
outstanding on the Effective Date.
19. Existing Contract owners as of the
date the Application was filed, and new
Contract owners who have purchased or
who will purchase a Contract
subsequent to that date but prior to the
Effective Date, have been or will be
notified of the proposed Substitution by
means of a prospectus or prospectus
supplement for each of the Contracts
(‘‘Pre-Substitution Notice’’). The PreSubstitution Notice will state that the
Applicants filed the Application, set
forth the anticipated Effective Date,
explain that contract values attributable
to investments in the Substituted
Portfolio would be attributable to the
Replacement Portfolio as of the Effective
Date, and state that, from the date the
Application was first filed with the
Commission through the date thirty (30)
days after the Substitution, Contract
7 One exception to this would be restrictions that
NLIC may impose to prevent or restrict ‘‘market
timing’’ activities by Contract owners or their
agents.
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owners may make one transfer of
contract value from the sub-account
investing in the Substituted Portfolio
(before the Substitution) or the
Replacement Portfolio (after the
Substitution) to one or more other subaccount(s) without a transfer charge and
without that transfer counting against
any contractual transfer limitations.
20. All Contract owners will receive a
copy of the most recent prospectus for
the Replacement Portfolio prior to the
Substitution. Within five (5) days
following the Substitution, Contract
owners affected by the Substitution will
be notified in writing that the
Substitution was carried out. This
notice will restate the information set
forth in the Pre-Substitution Notice, and
will also explain that the contract values
attributable to investments in the
Substituted Portfolio were transferred to
the Replacement Portfolio without
charge (including sales charges or
surrender charges) and without
counting toward the number of transfers
that may be permitted without charge.
Legal Analysis
1. Applicants request an order of the
Commission pursuant to Section 26(c)
of the 1940 Act approving the
Substitution.
2. Applicants assert that Section 26(c)
of the 1940 Act prohibits any depositor
or trustee of a unit investment trust that
invests exclusively in the securities of a
single issuer from substituting the
securities of another issuer without the
approval of the Commission. Section
26(c) provides that such approval shall
be granted by order of the Commission,
if the evidence establishes that the
substitution is consistent with the
protection of investors and the purposes
of the 1940 Act.
3. Applicants aver that Section 26(c)
was intended to provide for
Commission scrutiny of a proposed
substitution which could, in effect, force
shareholders dissatisfied with the
substitute security to redeem their
shares, thereby possibly incurring a loss
of the sales load deducted from initial
premium, an additional sales load upon
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reinvestment of the proceeds of
redemption, or both.8 The section was
designed to forestall the ability of a
depositor to present holders of interest
in a unit investment trust with
situations in which a holder’s only
choice would be to continue an
investment in an unsuitable underlying
security, or to elect a costly and, in
effect, forced redemption.
4. Applicants represent that each
Contract and its prospectus reserves
NLIC’s right to substitute shares of one
portfolio for shares of another.
5. Applicants contend that based on a
comparison of the basic characteristics
of the Replacement Portfolio and the
Substituted Portfolio, the Substitution
will provide Contract owners with
substantially the same investment
vehicle.
6. Applicants believe that the
Replacement Portfolio and the
Substituted Portfolio have substantially
the same investment objectives and
principal investment strategies, thus
making the Replacement Portfolio an
appropriate candidate for the
Substitution. Both the Replacement
Portfolio and the Substituted Portfolio
seek a high level of current income as
is consistent with stable principal
values and liquidity. However, while
both the Replacement Portfolio and the
Substituted Portfolio pursue their
investment objective by investing in
U.S. dollar-denominated money market
securities of domestic issuers as well as
repurchase agreements, only the
Replacement Portfolio invests in
instruments issued by foreign issuers.
Both the Replacement Portfolio and the
Substituted Portfolio seek to maintain a
net asset value of $1.00 per share as well
as liquidity. Most significantly, both the
Replacement Portfolio and the
Substituted Portfolio must comply with
the diversification and risk-limiting
conditions of Rule 2a-7 under the Act.
Notwithstanding one difference in the
investment strategies, both the
Replacement Portfolio and the
Substituted Portfolio emphasize the
same investment objective and follow
substantially the same investment
strategies to pursue those objectives.
Thus, the Applicants believe that the
money market investment option
available to Contract owners will not
change in any material respect as a
result of the Substitution.
7. Applicants represent that the
Replacement Portfolio entails
substantially the same investment risks
8 House Comm. Interstate Commerce, Report of
the Securities and Exchange Commission on the
Public Policy Implications of Investment Company
Growth, H.R. Rep. No. 2337, 89th Cong. 2d Session
337 (1966).
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as does the Substituted Portfolio. In
particular, given the diversification and
risk-limiting conditions of Rule 2a–7
under the Act, the Replacement
Portfolio cannot have a materially
different risk profile than the
Substituted Portfolio.
8. Applicants assert that the
Substitution will result in a reduction in
overall expenses of the Replacement
Portfolio as compared to the Substituted
Portfolio. Although the Service Class
shares of the Replacement Portfolio are
subject to a modest Rule 12b–1
distribution and shareholder service
plan expense that the Substituted
Portfolio does not bear, the total annual
operating expenses for the Replacement
Portfolio have been significantly less
than the total annual operating expenses
for the Substituted Portfolio in recent
years.
9. The Applicants believe that
Contract owners would benefit from the
significantly larger size of the
Replacement Portfolio and the
somewhat higher yields that the
Replacement Portfolio can be expected
to provide, as contrasted with the size
and recent yields of the Substituted
Portfolio.
10. Applicants represent that for three
years from the Effective Date, NLIC and
persons under common control with
NLIC will not receive in the aggregate
any direct or indirect benefits from the
Replacement Portfolio, its investment
adviser, or its principal underwriter (or
their affiliates) in connection with assets
representing contract values (at the time
of the substitution) of the Contracts, at
a higher rate than they had received
from the Substituted Portfolio, its
investment adviser, or its principal
underwriter (or their affiliates)
including, without limitation: Rule 12b1 fees, shareholder service fees,
administrative fees or other service fees,
revenue-sharing payments, or payments
from other arrangements in connection
with such assets.
11. Applicants submit that the
Substitution meets the standards set
forth in Section 26(c) and that, if
implemented, the Substitution would
not raise any of the aforementioned
concerns that Congress intended to
address when the 1940 Act was
amended to include this provision.
Further, Applicants submit that the
replacement of the Substituted Portfolio
with the Replacement Portfolio is
consistent with the protection of
Contract owners and the purposes fairly
intended by the policy and provisions of
the 1940 Act and, thus, meets the
standards necessary to support an order
pursuant to Section 26(c) of the 1940
Act.
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
20731
Conclusion
Applicants submit that for the reasons
summarized above the proposed
Substitution meets the standards of
Section 26(c) of the 1940 Act and
request that the Commission issue an
order of approval pursuant to Section
26(c) of the 1940 Act.
For the Comission, by the Division of
Investment Management pursuant to
delegated authority.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–8731 Filed 4–12–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[File No. 500–1]
RINO International Corporation; Order
of Suspension of Trading
April 11, 2011.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of RINO
International Corporation, because the
company has failed to disclose that: (i)
The outside law firm and forensic
accountants hired by the audit
committee to investigate allegations of
financial fraud at the company resigned
on or about March 31, 2011, after
reporting the results of their
investigation to management and the
board; (ii) the chairman of its audit
committee resigned on March 31, 2011;
and (iii) the company’s remaining
independent directors have also
resigned. Further, questions have arisen
regarding, among other things: (i) The
size of the company’s operations and
number of employees; (ii) the existence
of certain material customer contracts;
and (iii) the existence of two separate
and materially different sets of corporate
books and accounts. RINO is a Nevada
corporation with its headquarters and
operations in the People’s Republic of
China, which trades on OTC Link under
the symbol ‘‘RINO.’’
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
company.
Therefore, it is ordered, pursuant to
Section 12(k) of the Securities Exchange
Act of 1934, that trading in the abovelisted company is suspended for the
period from 9:30 a.m. EDT, April 11,
2011, through 11:59 p.m. EDT, on April
25, 2011.
E:\FR\FM\13APN1.SGM
13APN1
]]>Agencies
[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20727-20731]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8731]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-29627; File No. 812-13806]
National Life Insurance Company, et al.
April 7, 2011.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order pursuant to Section 26(c) of
the Investment Company Act of 1940 (the ``1940 Act'').
-----------------------------------------------------------------------
Applicants: National Life Insurance Company (``NLIC''), National
Variable Annuity Account II (``Annuity Account''), National Variable
Life Insurance Account (``Life Account'', and together with Annuity
Account, ``Separate Accounts'').
Summary of Application: Applicants request an order of the Commission
pursuant to Section 26(c) of 1940 Act, as amended, approving the
substitution of shares of the Money Market Portfolio (the ``Replacement
Portfolio'') of the Variable Insurance Products Fund V (``VIPFV'') for
shares of the Money Market Fund (the ``Substituted Portfolio'') of the
Sentinel Variable Products Trust (``SVPT'') held by the Separate
Accounts to support variable annuity contracts or variable life
insurance contracts (collectively, the ``Contracts'') issued by NLIC.
Filing Date: The application was originally filed on July 26, 2010 and
amended on December 13, 2010, and March 28, 2011.
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 NLIC 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 28, 2011, and should be accompanied by proof of service
on NLIC 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, c/o Lisa F. Muller,
Counsel, National Life Insurance Company, National Life Drive,
Montpelier, Vermont 05604.
FOR FURTHER INFORMATION CONTACT: Craig Ruckman, Attorney-Adviser, at
(202) 551-6753 or Michael Kosoff, Branch Chief, Office of Insurance
Products, Division of Investment Management, at (202) 551-6754.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at https://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. NLIC is a stock life insurance company, all the outstanding
stock of which is indirectly owned by National Life Holding Company, a
mutual insurance holding company established under Vermont law on
January 1, 1999. NLIC is authorized to transact life insurance and
annuity business in Vermont and in 50 other jurisdictions. For purposes
of the 1940 Act, NLIC is the depositor and sponsor of the Annuity
Account and the Life Account as those terms have been interpreted by
the Commission with respect to variable life insurance and variable
annuity separate accounts.
2. Under Vermont law, the assets of each Separate Account
attributable to the Contracts through which interests in that Separate
Account are issued are owned by NLIC but are held separately from all
other assets of NLIC for the benefit of the owners of, and the persons
entitled to payment under, those Contracts. Consequently, the assets in
each Separate Account equal to the reserves and other contract
liabilities of the Separate Account are not chargeable with liabilities
arising out of any other
[[Page 20728]]
business that NLIC may conduct. Income, gains and losses, realized or
unrealized, from assets allocated to each Separate Account are credited
to or charged against that Separate Account without regard to the other
income, gains or losses of NLIC. Each Separate Account is a ``separate
account'' as defined by Rule 0-1(e) under the 1940 Act, and is
registered with the Commission as a unit investment trust.\1\
---------------------------------------------------------------------------
\1\ File No. 811-08015 (Annuity Account); File No. 811-09044
(Life Account).
---------------------------------------------------------------------------
3. The Annuity Account is divided into sixty-four subaccounts. Each
subaccount invests exclusively in shares of a corresponding investment
portfolio (a ``Portfolio'') of one of fifteen series-type management
investment companies, including the SVPT. The assets of the Annuity
Account support variable annuity contracts, and interests in the
Separate Account offered through such contracts have been registered
under the Securities Act of 1933, as amended (the ``1933 Act''), on
Form N-4 (File No. 333-19583).
4. The Life Account is divided into sixty-eight subaccounts. Each
subaccount invests exclusively in shares of a corresponding investment
portfolio (also, a ``Portfolio'') of one of sixteen series-type
management investment companies, including the SVPT. The assets of the
Life Account support variable life insurance contracts, and interests
in the Separate Account offered through such contracts have been
registered under the 1933 Act on Form N-6 (File Nos. 33-91938, 333-
44723, 333-151535, and 333-67003).
5. SVPT is registered under the 1940 Act as a diversified, open-end
management investment company.\2\ SVPT currently consists of six
investment portfolios, including the Substituted Portfolio, and issues
a separate series of shares of beneficial interest in connection with
each. SVPT has registered such shares under the 1933 Act on Form N-1A
(File No. 333-35832).
---------------------------------------------------------------------------
\2\ File No. 811-09917.
---------------------------------------------------------------------------
6. Sentinel Asset Management, Inc. (``Sentinel'') serves as the
investment adviser to each SVPT Portfolio. Sentinel manages the
Porfolios' investments and the business operations of the SVPT under
the overall supervision of the SVPT board of trustees. Sentinel has the
responsibility for making all investment decisions for the SVPT
Portfolios and receives an investment management fee from each
Portfolio. Sentinel is a registered investment adviser. Sentinel is an
indirect wholly-owned subsidiary of National Life Holding Company and
therefore is under common control with NLIC.
7. VIPFV is registered under the 1940 Act as a diversified, open-
end management investment company.\3\ Currently, VIPFV has 31
investment portfolios, one of which--the Replacement Portfolio--would
be involved in the proposed Substitution. VIPFV issues a separate
series of shares of beneficial interest in connection with each
portfolio and has registered such shares under the 1933 Act on Form N-
1A (File No. 33-17704).
---------------------------------------------------------------------------
\3\ File No. 811-05361.
---------------------------------------------------------------------------
8. Fidelity Management & Research Company (``FMR'') serves as the
manager of each portfolio of VIPFV. As the manager, FMR has overall
responsibility for directing portfolio investments and handling the
VIPFV's business affairs. FMR receives an investment management fee
from each portfolio. FMR is a registered investment adviser. Fidelity
Investments Money Management, Inc. (``FIMM'') and other affiliates of
FMR serve as sub-advisers for the Replacement Portfolio. FIMM has the
day-to-day responsibility of choosing investments for the Replacement
Portfolio. In addition, Fidelity Research & Analysis Company
(``FRAC''), another affiliate of FMR, serves as a sub-adviser for the
Portfolio and may provide investment research and advice for the
Portfolio.\4\ None of VIPFV, FMR, FIMM, or FRAC are affiliated persons
(or affiliated persons of affiliated persons) of any of the Applicants.
Likewise, none of the Applicants are affiliated persons (or affiliated
persons of affiliated persons) of VIPFV, FMR, FIMM, or FRAC.
---------------------------------------------------------------------------
\4\ FMR does not manage the sub-advisers for the VIPFV Money
Market Portfolio pursuant to a ``manager-of-managers'' exemption.
---------------------------------------------------------------------------
9. Each Contract permits Contract owners to transfer contract value
between and allocate contract value among the subaccounts. Currently,
NLIC does not assess a transfer charge or limit the number of transfers
permitted each year. However, NLIC reserves the right, upon prior
notice, to impose a transfer charge of $25 for each transfer in excess
of 12 in any one contract year. NLIC does have in place market timing
policies and procedures that may operate to limit transfers. Under the
Life Account, transfers resulting from loans, dollar cost averaging,
portfolio rebalancing features, or the initial reallocation from a
money market subaccount do not count as transfers for the purpose of
determining the transfer charge.
10. Pursuant to each Contract, NLIC reserves the right to
substitute shares of one portfolio for shares of another. Each
Contract's prospectus discloses that NLIC reserves the right to
substitute shares of one portfolio for shares of another if the shares
of the portfolio should no longer be available for investment or, if in
NLIC's judgment further investment in such portfolio shares should
become inappropriate.
11. NLIC proposes to substitute Service Class Shares of the Money
Market Portfolio of the Variable Insurance Products Fund V for shares
of the Money Market Fund of the Sentinel Variable Products Trust
(``Substitution'').
12. The Applicants assert that the Substitution is necessary in
order to provide the Contract owners with continued access to a money
market portfolio investment option. Currently, the only money market
portfolio investment option offered under the Contracts is the
Substituted Portfolio. The Applicants contend that the Substituted
Portfolio is small and, because it is only offered as an investment
option under the Contracts, there is little prospect of it growing in
size sufficiently to materially decrease its expense ratio or obtain
economies of scale. In addition, Sentinel has been subsidizing the
Substituted Portfolio's expenses for some time, but cannot continue to
do so indefinitely.\5\
---------------------------------------------------------------------------
\5\ For the fiscal year ended December 31, 2010, Sentinel
reimbursed the Substituted Portfolio in an amount equal to 0.37% of
the Portfolio's average daily net assets. This reimbursement was
made to avoid the Substituted Portfolio having a negative yield in
the current very low interest rate environment. Sentinel may cease
the reimbursement at any time and is only providing it to the extent
necessary to avoid a negative yield.
---------------------------------------------------------------------------
NLIC has determined that Contract owners would be better served if
the Substituted Portfolio is closed and replaced as an investment
option by another, larger, money market fund with lower expenses and
better prospects for future growth and competitive yields.
13. The table below sets forth the name, investment adviser,
investment objective, principal investment strategies, and principal
risks of both the Substituted Portfolio and the Replacement Portfolio.
[[Page 20729]]
------------------------------------------------------------------------
Substituted Replacement
Portfolio Portfolio
------------------------------------------------------------------------
Name........................ Sentinel Variable Variable Insurance
Products Trust Products Fund V
Sentinel Variable Money Market
Products Money Portfolio.
Market Fund.
Investment Adviser Sentinel............ FMR (FIMM, FRAC).
(Subadviser).
Investment Objective........ Seeks as high a Seeks as high a
level of current level of current
income as is income as is
consistent with consistent with
stable principal preservation of
values and capital and
liquidity. liquidity.
Principal Investment The Fund invests FMR invests the
Strategies. exclusively in Fund's assets in
dollar-denominated U.S. dollar-
money market denominated money
instruments, market securities
including U.S. of domestic and
government foreign issuers and
securities, bank repurchase
obligations, agreements. FMR
repurchase also may enter into
agreements, reverse repurchase
commercial paper, agreements for the
and other corporate Fund.
debt obligations. FMR will invest more
All such than 25% of the
investments will Fund's total assets
have remaining in the financial
maturities of 397 services
days or less. industries.
The Fund may also In buying and
invest up to 10% of selling securities
its total assets in for the Fund, FMR
shares of complies with
institutional money industry-standard
market funds that regulatory
invest primarily in requirements for
securities in which money market funds
the Fund could regarding the
invest directly. quality, maturity,
and diversification
of the fund's
investments.
The Fund seeks to FMR stresses
maintain a net maintaining a
asset value of stable $1.00 share
$1.00 per share by price, liquidity,
using the amortized and income.
cost method of
valuing its
securities. The
Fund is required to
maintain a dollar-
weighted average
portfolio maturity
of 90 days or less.
The Fund may ....................
participate in a
securities lending
program.
Principal Risks............. General Interest
Fixed-Income Rate Charges.
Securities Risk. Foreign
Government Exposure.
Securities Risk. Financial
Services Exposure.
Issuer-
Specific Changes.
------------------------------------------------------------------------
14. The table below compares the investment management fees,
distribution fees, other expenses, total operating expenses, fee
waivers and net operating expenses for the year ended December 31,
2010, expressed as an annual percentage of average daily net assets, of
the Substituted Portfolio and the Replacement Portfolio.
----------------------------------------------------------------------------------------------------------------
Substituted Portfolio Replacement Portfolio
-----------------------------------------------------
Sentinel Variable
Products Trust Sentinel Variable Insurance
Variable Products Money Products Fund V Money
Market Fund Market Portfolio
----------------------------------------------------------------------------------------------------------------
Management Fee............................................ 0.25% 0.18%
Distribution and Service (12b-1) Fee...................... None 0.10%
Other Expenses............................................ 0.27% 0.08%
Total Operating Expenses.................................. 0.52% 0.36%
Fee Waivers and Expense Reimbursements \6\................ 0.37% N/A
Net Operating Expenses.................................... 0.15% 0.36%
----------------------------------------------------------------------------------------------------------------
\6\ Fee waivers and expense reimbursements are not contractual and may be terminated at any time.
The management fee for the Replacement Portfolio in the table above
consists of two components: a so-called ``group'' fee of 0.11% and an
``income-related'' fee of 0.07%. The income-related fee varies from
month to month depending on the level of the Replacement Portfolio's
monthly gross income from an annual rate of 0.05% of average daily net
assets throughout the month when the annualized gross yield for the
month is 0% to an annual rate of 0.27% of average daily net assets
throughout the month when the annualized gross yield for the month is
15%. The group fee rate is based on the average daily net assets for
all of the mutual funds managed by FMR. The group fee is capped at an
annual rate of 0.37% of average daily net assets.
15. The table below compares the 1-year, 5-year, and 10-year
average annual total return of the Substituted Portfolio and
Replacement Portfolio, as well as the yield for the seven days ending
December 31, 2010 and the net asset values of the Substituted Portfolio
and Replacement Portfolio as of December 31, 2010.
[[Page 20730]]
----------------------------------------------------------------------------------------------------------------
Substituted Portfolio Replacement Portfolio
-----------------------------------------------------
Sentinel Variable
Products Trust Sentinel Variable Insurance
Variable Products Money Products Fund V Money
Market Fund Market Portfolio
----------------------------------------------------------------------------------------------------------------
1-Year Average Annual Return.............................. 0.00% 0.14%
5-Year Average Annual Return.............................. 2.24% 2.69%
10-Yr Average Annual Return............................... 2.07% 2.40%
7-Day Yield............................................... 0.00% 0.11%
Net Asset Value........................................... $15,290,904 $155,272,000
----------------------------------------------------------------------------------------------------------------
As of December 31, 2010.
16. As of the effective date of the Substitution (the ``Effective
Date''), each Separate Account will redeem shares of the Substituted
Portfolio. The proceeds of such redemptions will then be used to
purchase shares of the Replacement Portfolio, with the subaccount of
the applicable Separate Account investing the proceeds of its
redemption from the Substituted Portfolio in the applicable Replacement
Portfolio. Redemptions and purchases will occur simultaneously so that
contract values will remain fully invested at all times. All
redemptions of shares of the Substituted Portfolio and purchases of
shares of the Replacement Portfolio will be effected in accordance with
Section 22(c) of the Act and Rule 22c-1 thereunder. The Substitution
will take place at relative net asset value as of the Effective Date
with no change in the amount of any Contract owner's contract value or
death benefit or in the dollar value of his or her investments in the
money market subaccount of the appropriate Separate Account.
17. Contract values attributable to investments in the Substituted
Portfolio will be transferred to the Replacement Portfolio without
charge (including sales charges or surrender charges) and without
counting toward the number of transfers that may be permitted without
charge. Contract owners will not incur any additional fees or charges
as a result of the Substitution, nor will their rights or NLIC's
obligations under the Contracts be altered in any way and the
Substitution will not change Contract owners' insurance benefits under
the Contracts. All expenses incurred in connection with the
Substitution, including legal, accounting, transactional, and other
fees and expenses, including brokerage commissions, will be paid by
NLIC. In addition, the Substitution will not impose any tax liability
on Contract owners. The Substitution will not cause the Contract fees
and charges currently paid by existing Contract owners to be greater
after the Substitution than before the Substitution. NLIC will not
exercise any right it may have under the Contracts to impose
restrictions on transfers under the Contracts for the period beginning
on the date the Application was filed with the Commission through at
least thirty (30) days following the Effective Date.\7\
---------------------------------------------------------------------------
\7\ One exception to this would be restrictions that NLIC may
impose to prevent or restrict ``market timing'' activities by
Contract owners or their agents.
---------------------------------------------------------------------------
18. For twenty-four months following the Effective Date and for
those Contracts with contract value invested in the Substituted
Portfolio on the Effective Date, NLIC will reimburse, on the last
business day of each fiscal period (not to exceed a fiscal quarter),
the sub-accounts investing in the Replacement Portfolio to the extent
that the Replacement Portfolio's net annual expenses (taking into
account contractual fee waivers and expense reimbursements) for such
period exceeds, on an annualized basis, the net annual expenses (taking
into account contractual fee waivers and expense reimbursements) of the
Substituted Portfolio for the fiscal year ended December 31, 2010. In
addition, for twenty-four months following the Effective Date, NLIC
will not increase asset-based fees or charges for Contracts outstanding
on the Effective Date.
19. Existing Contract owners as of the date the Application was
filed, and new Contract owners who have purchased or who will purchase
a Contract subsequent to that date but prior to the Effective Date,
have been or will be notified of the proposed Substitution by means of
a prospectus or prospectus supplement for each of the Contracts (``Pre-
Substitution Notice''). The Pre-Substitution Notice will state that the
Applicants filed the Application, set forth the anticipated Effective
Date, explain that contract values attributable to investments in the
Substituted Portfolio would be attributable to the Replacement
Portfolio as of the Effective Date, and state that, from the date the
Application was first filed with the Commission through the date thirty
(30) days after the Substitution, Contract owners may make one transfer
of contract value from the sub-account investing in the Substituted
Portfolio (before the Substitution) or the Replacement Portfolio (after
the Substitution) to one or more other sub-account(s) without a
transfer charge and without that transfer counting against any
contractual transfer limitations.
20. All Contract owners will receive a copy of the most recent
prospectus for the Replacement Portfolio prior to the Substitution.
Within five (5) days following the Substitution, Contract owners
affected by the Substitution will be notified in writing that the
Substitution was carried out. This notice will restate the information
set forth in the Pre-Substitution Notice, and will also explain that
the contract values attributable to investments in the Substituted
Portfolio were transferred to the Replacement Portfolio without charge
(including sales charges or surrender charges) and without counting
toward the number of transfers that may be permitted without charge.
Legal Analysis
1. Applicants request an order of the Commission pursuant to
Section 26(c) of the 1940 Act approving the Substitution.
2. Applicants assert that Section 26(c) of the 1940 Act prohibits
any depositor or trustee of a unit investment trust that invests
exclusively in the securities of a single issuer from substituting the
securities of another issuer without the approval of the Commission.
Section 26(c) provides that such approval shall be granted by order of
the Commission, if the evidence establishes that the substitution is
consistent with the protection of investors and the purposes of the
1940 Act.
3. Applicants aver that Section 26(c) was intended to provide for
Commission scrutiny of a proposed substitution which could, in effect,
force shareholders dissatisfied with the substitute security to redeem
their shares, thereby possibly incurring a loss of the sales load
deducted from initial premium, an additional sales load upon
[[Page 20731]]
reinvestment of the proceeds of redemption, or both.\8\ The section was
designed to forestall the ability of a depositor to present holders of
interest in a unit investment trust with situations in which a holder's
only choice would be to continue an investment in an unsuitable
underlying security, or to elect a costly and, in effect, forced
redemption.
---------------------------------------------------------------------------
\8\ House Comm. Interstate Commerce, Report of the Securities
and Exchange Commission on the Public Policy Implications of
Investment Company Growth, H.R. Rep. No. 2337, 89th Cong. 2d Session
337 (1966).
---------------------------------------------------------------------------
4. Applicants represent that each Contract and its prospectus
reserves NLIC's right to substitute shares of one portfolio for shares
of another.
5. Applicants contend that based on a comparison of the basic
characteristics of the Replacement Portfolio and the Substituted
Portfolio, the Substitution will provide Contract owners with
substantially the same investment vehicle.
6. Applicants believe that the Replacement Portfolio and the
Substituted Portfolio have substantially the same investment objectives
and principal investment strategies, thus making the Replacement
Portfolio an appropriate candidate for the Substitution. Both the
Replacement Portfolio and the Substituted Portfolio seek a high level
of current income as is consistent with stable principal values and
liquidity. However, while both the Replacement Portfolio and the
Substituted Portfolio pursue their investment objective by investing in
U.S. dollar-denominated money market securities of domestic issuers as
well as repurchase agreements, only the Replacement Portfolio invests
in instruments issued by foreign issuers. Both the Replacement
Portfolio and the Substituted Portfolio seek to maintain a net asset
value of $1.00 per share as well as liquidity. Most significantly, both
the Replacement Portfolio and the Substituted Portfolio must comply
with the diversification and risk-limiting conditions of Rule 2a-7
under the Act. Notwithstanding one difference in the investment
strategies, both the Replacement Portfolio and the Substituted
Portfolio emphasize the same investment objective and follow
substantially the same investment strategies to pursue those
objectives. Thus, the Applicants believe that the money market
investment option available to Contract owners will not change in any
material respect as a result of the Substitution.
7. Applicants represent that the Replacement Portfolio entails
substantially the same investment risks as does the Substituted
Portfolio. In particular, given the diversification and risk-limiting
conditions of Rule 2a-7 under the Act, the Replacement Portfolio cannot
have a materially different risk profile than the Substituted
Portfolio.
8. Applicants assert that the Substitution will result in a
reduction in overall expenses of the Replacement Portfolio as compared
to the Substituted Portfolio. Although the Service Class shares of the
Replacement Portfolio are subject to a modest Rule 12b-1 distribution
and shareholder service plan expense that the Substituted Portfolio
does not bear, the total annual operating expenses for the Replacement
Portfolio have been significantly less than the total annual operating
expenses for the Substituted Portfolio in recent years.
9. The Applicants believe that Contract owners would benefit from
the significantly larger size of the Replacement Portfolio and the
somewhat higher yields that the Replacement Portfolio can be expected
to provide, as contrasted with the size and recent yields of the
Substituted Portfolio.
10. Applicants represent that for three years from the Effective
Date, NLIC and persons under common control with NLIC will not receive
in the aggregate any direct or indirect benefits from the Replacement
Portfolio, its investment adviser, or its principal underwriter (or
their affiliates) in connection with assets representing contract
values (at the time of the substitution) of the Contracts, at a higher
rate than they had received from the Substituted Portfolio, its
investment adviser, or its principal underwriter (or their affiliates)
including, without limitation: Rule 12b-1 fees, shareholder service
fees, administrative fees or other service fees, revenue-sharing
payments, or payments from other arrangements in connection with such
assets.
11. Applicants submit that the Substitution meets the standards set
forth in Section 26(c) and that, if implemented, the Substitution would
not raise any of the aforementioned concerns that Congress intended to
address when the 1940 Act was amended to include this provision.
Further, Applicants submit that the replacement of the Substituted
Portfolio with the Replacement Portfolio is consistent with the
protection of Contract owners and the purposes fairly intended by the
policy and provisions of the 1940 Act and, thus, meets the standards
necessary to support an order pursuant to Section 26(c) of the 1940
Act.
Conclusion
Applicants submit that for the reasons summarized above the
proposed Substitution meets the standards of Section 26(c) of the 1940
Act and request that the Commission issue an order of approval pursuant
to Section 26(c) of the 1940 Act.
For the Comission, by the Division of Investment Management
pursuant to delegated authority.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8731 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P
