[Federal Register Volume 67, Number 109 (Thursday, June 6, 2002)]
[Notices]
[Pages 39086-39089]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14202]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-25600; File No. 812-12100]


Ameritas Life Insurance Corp., et al.; Notice of Application

May 31, 2002.
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 (``1940 Act'').

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    Applicants: Ameritas Life Insurance Corp. (``Ameritas''), and 
Ameritas Life Insurance Corp. Separate Account LLVA (``Separate 
Account'').
Summary of Application: Applicants seek an order pursuant to Section 
26(c) of the 1940 Act to permit the substitution of shares of the 
Vanguard International Portfolio for the Strong International Fund II.

Filing Date: The application was filed by Acacia National Life 
Insurance Company, Acacia National Variable Life Separate Account I and 
Acacia National Variable Annuity Separate Account II (collectively, the 
``Acacia Applicants'') on May 16, 2000, and amended and restated by the 
Acacia Applicants, Ameritas and Separate Account on October 16, 2001. 
The filing was amended and restated by Ameritas and Separate Account on 
February 12, 2002, April 10, 2002, and April 19, 2002. Applicants 
represent that they will file an amendment to the application during 
the notice period to conform to the representations set forth herein.
    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 should be received by the 
Commission by 5:30 p.m. on June 21, 2002, and should be accompanied by 
proof of service on Applicants, in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the writer's interest, the reason for the request, and the 
issues contested. Persons 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, 450 Fifth 
Street, NW., Washington, DC 20549-0609. Applicants: Ken Reitz, Esq., 
Ameritas Life Insurance Corp., 5900 ``O'' Street, Lincoln, NE 68510.

For Further Information Contact: Zandra Y. Bailes, Senior Counsel, or 
Lorna MacLeod, Branch Chief, Office of Insurance Products, Division of 
Investment Management, at (202) 942-0670.

Supplementary Information: The following is a summary of the 
application. The complete application is available for a fee from the 
Public Reference Branch of the Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. Ameritas is a stock life insurance company organized in the 
State of Nebraska and currently licensed to sell life insurance in all 
50 states and in the District of Columbia. Ameritas is a subsidiary of 
AmeritasAcacia Mutual Holding Company.
    2. The Separate Account was established by Ameritas on August 26, 
1995, to receive and invest premiums received from purchasers of 
certain variable annuity contracts issued by Ameritas. The Separate 
Account is registered with the Commission as a unit investment trust 
under the 1940 Act. In addition, the variable annuity contracts funded 
by the Separate Account are registered with the Commission under the 
Securities Act of 1933 (``1933 Act''). The income, capital gains and 
capital losses incurred on the assets of the Separate Account are

[[Page 39087]]

credited to, or charged against, the assets of the Separate Account 
without regard to the income, capital gains or capital losses arising 
out of any other business Ameritas may conduct. In addition, the laws 
of the State of Nebraska, under which the Applicants were established 
provide that assets in each such Separate Account attributable to the 
annuity contracts funded by such Account are generally not chargeable 
with liabilities arising out of any other business which Ameritas may 
conduct.
    3. The Separate Account currently serves as the funding vehicle for 
variable annuity contracts (``VA Contracts'') registered under the 1933 
Act. The Separate Account is divided into separate subaccounts 
(``Subaccounts'') that each invest exclusively in shares of an 
underlying fund. Owners of the VA Contracts are currently permitted to 
accumulate funds, on a tax-deferred basis, based on the investment 
experience of the assets underlying the VA Contract. The VA Contracts 
may be purchased on a non-tax qualified basis or in connection with 
certain plans qualifying for favorable federal income tax treatment. 
Owners of a VA Contract can allocate premium payments to one or more 
Subaccounts and/or to the Fixed Account. Owners of a VA Contract may 
make up to 15 transfers of cash values among the Subaccounts each year 
without charge; transfers in excess of 15 in any year may be subject to 
a charge. Owners of VA Contracts are also subject to certain 
administrative and other charges and may be subject to certain 
surrender charges.
    4. The Separate Account currently makes available to owners of VA 
Contracts a total of forty-five separate investment options, as well as 
the option to allocate premiums to the insurance company Fixed Account.
    5. Prior to October 1, 2001, the Separate Account also offered a 
subaccount (``Strong Subaccount'') that invested exclusively in shares 
of Strong International Stock Fund II, (``Strong International''). 
Shares of Strong International are registered under the 1933 Act on 
Form N-1A (File No. 33-45108). Strong Capital Management, Inc., serves 
as the investment adviser for Strong International. Ameritas 
discontinued offering the Strong Subaccount as an investment option 
under VA Contracts as of October 1, 2001. Owners of VA Contracts with 
interests in the Strong Subaccount were, and continue to be, permitted 
to remain in the subaccount, but no new investments in the subaccount 
are being accepted.
    6. Shares of Vanguard International Portfolio (``Vanguard 
International'') are registered under the 1933 Act on Form N-1A (File 
No. 33-32216). Vanguard International is a separate investment 
portfolio of the Vanguard Variable Insurance Fund and has been 
available to owners of VA Contracts since May 2001. Schroder Investment 
Management North America, Inc., serves as the investment adviser for 
Vanguard International.
    7. The investment objective of both Vanguard International and 
Strong International is capital growth. Each fund seeks to achieve its 
objective by investing primarily in equity securities of foreign 
issuers. Neither fund is limited with respect to the nations in which 
investments may be made or the capitalization of the companies in which 
they invest.
    8. Strong International and Vanguard International differ with 
respect to the relative emphasis placed by each fund's investment 
adviser on various investment criteria. As stated in the prospectus 
relating to Strong International, that fund's investment adviser 
selects securities for the fund using an investment approach that 
examines the investment outlook of individual countries in determining 
whether to invest; identifies individual investments based on rigorous, 
in-depth analysis of the individual characteristics of the issuer 
involved; and seeks to manage foreign currency risk. The investment 
adviser for Vanguard International considers similar factors, but with 
a somewhat different emphasis. Vanguard International's investment 
adviser first examines the investment outlook of foreign markets around 
the world, then determines the proportion of the fund's assets to 
allocate to individual countries before selecting companies' securities 
within such countries based upon a selection process emphasizing on-
site evaluations of the companies. The adviser's investment approach 
results in a fund portfolio whose overall characteristics often differ 
substantially from those of broad international stock indexes and are 
therefore apt to differ substantially from time to time from the 
performance of such indexes.
    9. Applicants propose to substitute securities of Vanguard 
International for securities issued by Strong International (the 
``Substitution'').
    10. Applicants state that although not identical, Vanguard 
International and Strong International afford their shareholders very 
similar investment opportunities. Applicants believe that the 
objectives and policies of Vanguard International are the same as, or 
sufficiently similar to, those of Strong International to assure that 
the core investment goals of those owners of the VA Contracts affected 
by the Substitution (``Affected Contractowners'') will not be 
frustrated and the investment expectations of Affected Contractowners 
can continue to be met. Further, Applicants state that the Substitution 
will reduce the expenses of the Affected Contractowners because 
Vanguard International is larger and less expensive than Strong 
International and because Vanguard International has a performance 
record that is both comparable to, and less volatile than, that of 
Strong International.
    11. The following table summarizes the annual operating expenses to 
which holders of shares of Strong International have been and which 
holders of shares of Vanguard International are subject. The table does 
not include any fees or sales charges imposed by those VA contracts 
issued by Ameritas. The figures shown below are based on the assets of 
Strong International and Vanguard International as of December 31, 
2001.

------------------------------------------------------------------------
                                                Strong        Vanguard
                                            International  International
                                              (percent)      (percent)
------------------------------------------------------------------------
Management Fees...........................         1.00           0.16
Distribution and service (12b-1) fees.....  .............  .............
Other Expenses............................         0.03           0.27
Total before Waivers and Reductions.......         1.03           0.43
Waivers and Reductions....................  .............  .............
Total after Waivers and Reductions........         1.03           0.43
------------------------------------------------------------------------

    12. On April 6, 2001, Applicants were notified by Strong 
International that it had suspended sales to new insurance company 
separate accounts and, on June 1, 2001, received a second notice from 
Strong International stating that it intended to close to existing 
relationships.
    13. A prospectus supplement dated September 21, 2001, was 
distributed to all owners of VA Contracts. The supplement stated, among 
other things, that the Strong Subaccount would not be available as an 
investment option under the VA Contracts as of October 1, 2001, and 
that Applicants intended to file an application with the Commission to 
substitute other investment options for Strong International.
    14. Following the date on which Ameritas is notified that the 
notice of this Application is to be published in the Federal Register, 
but before the date the Requested Order becomes effective,

[[Page 39088]]

Ameritas will forward to Affected Contractowners a notice describing 
the Substitution that will affect their interest in the VA Contracts, 
including the anticipated effective date of the Substitution. The 
notice will be accompanied by a copy of the portfolio prospectus for 
Vanguard International. This Notice will inform Affected Contractowners 
of (i) the anticipated effective date of the Substitution; (ii) the 
right of each Affected Contractowner under the VA Contracts to transfer 
contract values among the various Subaccounts; and (iii) the fact that 
any such transfer that involves a transfer from Strong International 
will not be subject to any administrative charge and will not count as 
one of the ``free transfers'' to which Affected Contractowners may 
otherwise be entitled. The notice will advise Contractowners that cash 
values attributable to investments in Strong International may be 
transferred to any other available Subaccount, without regard to any 
transfer charge or other restriction to which transfers between 
Subaccounts may otherwise be subject, for not less than 30 days after 
the effective date of the Substitution. All such transfers will be made 
at the relative net asset value on the date on which the Affected 
Contractowner elects to make the transfer.
    15. Within five days after the effective date of the Substitution, 
Ameritas will forward to Affected Contractowners a written confirmation 
notice relating to the substitution transaction. The confirmation 
notice will (i) confirm that such transaction was carried out; (ii) 
again advise Affected Contractowners that cash values attributable to 
investments in Strong International may be transferred to any other 
available Subaccount, without regard to any transfer charge or other 
restriction to which transfers between Subaccounts may otherwise be 
subject, for not less than 30 days after the effective date of the 
Substitution; (iii) advise Affected Contractowners that no transfer 
made by Affected Contractowners during this period will be counted as 
one of the ``free'' transfers to which such owners may otherwise be 
entitled under the Subject Contract held; and (iv) state that Ameritas 
will not exercise any right reserved by it under the Subject Contracts 
to impose additional restrictions on transfers from cash value 
attributable to investment in Strong International until at least 30 
days after the effective date of the Substitution.
    16. As of the effective date of the Substitution, shares of Strong 
International held by the Strong Subaccount will be presented to Strong 
International for cash redemption. The proceeds of such cash 
redemptions will then be used to purchase the appropriate number of 
shares of Vanguard International. On the effective date of the 
Substitution, the cash values of Affected Contractowners will be 
transferred to Vanguard International, and the Strong Subaccount will 
then be eliminated. The Substitution will take place at net asset 
value, with no change in the contract value of any Affected 
Contractowner, and all cash redemptions of shares of Strong 
International and purchases of shares of Vanguard International will be 
effected in accordance with Section 22(c) of the 1940 Act and Rule 22c-
1 thereunder.
    17. Ameritas will bear the costs of the Substitution, including any 
legal, accounting and brokerage fees and expenses relating to them. 
Affected Contractowners will not incur any additional fees or charges 
as a result of the Substitution. No current fees or charges applicable 
under the Subject Contracts will be increased as a result of the 
Substitution, nor will the rights of the owners of the Subject 
Contracts or the obligations of Ameritas under the Subject Contracts be 
diminished. The Substitution will not alter in any way the annuity, 
life or tax benefits afforded under the VA Contracts held by any 
Affected Contractowner. The Substitution will not result in any adverse 
tax consequences to the owners of the Subject Contracts, any change in 
the economic interest or contract values of any such owner or any 
change in the dollar value of the Subject Contracts held by any 
Affected Contractowner. Finally, Affected Contractowners will be 
permitted to withdraw amounts from the VA Contracts held, or to 
terminate their interest in any such contract, under the conditions set 
forth in the contracts.
    18. Applicants state that Applicants will not receive for three 
years from the date of the substitutions, any direct or indirect 
benefit from Vanguard International, its advisers or underwriters, or 
from affiliates of Vanguard International, its advisers or underwriters 
in connection with assets attributable to Contracts affected by the 
substitution, at a higher rate than Applicants have received from 
Strong International, its advisers or underwriters, or from affiliates 
of Strong International, its advisers or underwriters, including, 
without limitation, Rule 12b-1 fees, shareholder service or 
administrative or other service fees, revenue sharing or other 
arrangements. Applicants represent that the substitutions and the 
selection of Vanguard International was not motivated by any financial 
consideration paid or to be paid to Applicants or any affiliate of 
Applicants by Vanguard International, its advisors or underwriters, or 
by affiliates of them.

Applicants' Legal Analysis

    1. Section 26(c) of the 1940 Act provides, in pertinent part, that 
``it shall be unlawful for any depositor or trustee of a registered 
unit investment trust holding the security of a single issuer to 
substitute another security for such security unless the Commission 
shall have approved such substitution.'' Section 26(c) of the 1940 Act 
also provides that the Commission shall issue an order approving such 
substitution if the evidence establishes that the substitution is 
consistent with the protection of investors and the purposes fairly 
intended by the policies and provisions of the 1940 Act.
    2. Applicants request an order pursuant to Section 26(c) of the 
1940 Act approving the substitution. Applicants assert that the 
purposes, terms, and conditions of the Substitution are consistent with 
the protection of investors and the purposes fairly intended by the 
1940 Act.
    3. Each Subject Contract reserves to the issuing insurance company 
the right, subject to compliance with applicable law, to substitute 
shares of another open-end management investment company for shares of 
an open-end management company held by a Subaccount of the Separate 
Account. This reservation of rights is disclosed in the prospectus for 
the Subject Contracts.
    4. Applicants assert that Vanguard International and Strong 
International afford their shareholders very similar investment 
opportunities. Applicants state that from an investment perspective, 
the only difference between Strong International and Vanguard 
International lies in the relative emphasis placed by each fund's 
investment adviser on various investment criteria. Applicants believe 
such a distinction in investment style does not require a conclusion 
that the proposed Substitution would not meet the standards of Section 
26(c).
    5. Applicants believe that the Strong International/Vanguard 
International substitution satisfies the standards for relief under 
Section 26(c), because, following the Substitution, Affected 
Contractowners will be invested in Vanguard International, a fund (i) 
with the same investment objective as, and investment policies very 
similar to, those of Strong International; (ii) with actual performance 
which has been better on a cumulative basis than that of Strong 
International; and (iii) that is

[[Page 39089]]

both larger than Strong International, and enjoys a lower management 
fee and lower overall expense ratio than Strong International.

Conclusion

    Applicants assert that the proposed Substitution is consistent with 
the protection of investors and the purposes fairly intended by the 
policy and purposes of the 1940 Act and therefore request that the 
Substitution should be granted.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-14202 Filed 6-5-02; 8:45 am]
BILLING CODE 8010-01-U