[Federal Register Volume 69, Number 73 (Thursday, April 15, 2004)]
[Notices]
[Pages 20081-20089]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-8567]



[[Page 20081]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26416: File No. 812-12942]


ING USA Annuity & Life Insurance Company, et al. April 9, 2004.

AGENCY: The Securities and Exchange Commission (``SEC'' or 
``Commission'').

ACTION: Notice of application for an order pursuant to section 26(c) of 
the Investment Company Act of 1940, as amended, (the ``Act'') approving 
certain substitutions of securities and for an order of exemption 
pursuant to section 17(b) of the Act.

-----------------------------------------------------------------------

APPLICANTS: ING USA Annuity & Life Insurance Company (``ING USA''), 
Separate Account B of ING USA Annuity & Life Insurance Company 
(``Account B''), Separate Account EQ of ING USA Annuity & Life 
Insurance Company (``Account EQ''), ING Life Insurance and Annuity 
Company (``ING Life''), Variable Annuity Account C of ING Life 
Insurance & Annuity Company (``ING VA C Account'') Variable Life 
Account C of ING Life Insurance & Annuity Company (``ING C Account''), 
ReliaStar Life Insurance Company (``ReliaStar''), ReliaStar Select 
Variable Account of ReliaStar Life Insurance Company (``RLS Select 
VA''), ReliaStar Select Life Variable Account of ReliaStar Life 
Insurance Company, (``RLS Select LVA''), ReliaStar Life Insurance 
Company of New York (``ReliaStar New York''), ReliaStar Life Insurance 
Company of New York--Separate Account NY-B (``RLNY Separate Account 
B''); Variable Life Separate Account I of ReliaStar Life Insurance 
Company of New York (``RLNY VL Separate Account I''), Variable Annuity 
Separate Account II of ReliaStar Life Insurance Company of New York 
(``RLNY VA II''), Security Life of Denver Insurance Company (``Security 
Life''), Security Life Separate Account A1 (``Security Life A1''), 
Security Life Separate Account L1 (``Security Life L1''), Southland 
Life Insurance Company (``Southland''), Southland Separate Account A1 
(``Southland A1''), Southland Separate Account L1 (``Southland L1'') 
and ING Investors Trust (the ``Trust'') (together, the ``Applicants''). 
Prior to May 1, 2003, ING Investors Trust was known as The GCG Trust. 
Effective May 1, 2003, the name of The GCG Trust was changed to ING 
Investors Trust. At the same time, the name of each portfolio of The 
GCG Trust also was changed.

SUMMARY: The Applicants have submitted an application for an order of 
the Securities and Exchange Commission (the ``Commission''), pursuant 
to section 26(c) of the Investment Company Act of 1940, as amended (the 
``1940 Act''), permitting the substitutions of securities issued by 
certain registered investment companies held by Account B, Account EQ, 
ING VA C Account, ING C Account, RLS Select VA, RLS Select LVA, RLNY 
Separate Account B, RLNY VL Separate Account I, RLNY VA II, Security 
Life A1, Security Life L1, Southland A1 and Southland L1 (each, an 
``Account''and together, the ``Accounts'') to support certain in force 
variable life insurance policies and variable annuity contracts 
(collectively, the ``Contracts'') issued by ING USA, ING Life, 
ReliaStar, ReliaStar New York, Security Life and Southland (each a 
``Company'' and together, the ``Companies''). More particularly, the 
Applicants propose to substitute shares of certain investment 
management companies (each a ``Management Company'') currently held by 
sub-accounts of the various Accounts for shares of certain series of 
the Trust as follows: (1) Shares of Fidelity Variable Insurance 
Products--Money Market Portfolio (Initial Class) (the ``Fidelity Money 
Fund'') for Institutional Class shares of the ING Liquid Asset 
Portfolio of the Trust, formerly known as the Liquid Asset Portfolio 
(the ``Liquid Asset Portfolio'' or the ``New Money Market Fund''); (2) 
Class O shares of The Alger American Fund--Alger American Small 
Capitalization Portfolio (the ``Alger Fund'') for Institutional Class 
shares of the ING J. P. Morgan Fleming Small Cap Equity Portfolio of 
the Trust (the ``Small Cap Portfolio''); (3) Initial Class shares of 
Fidelity Variable Insurance Products--Index 500 Portfolio (the 
``Fidelity VIP Fund'') for Institutional Class shares of the ING Stock 
Index Portfolio of the Trust (the ``ING Index Portfolio''); (4) shares 
of Fund for Life Series of the Trust (the ``Fund for Life'') for 
Service Class shares of the ING T. Rowe Price Capital Appreciation 
Portfolio of the Trust, formerly the Fully Managed Portfolio (the 
``Fully Managed Portfolio''); (5) shares of Institutional Class shares 
of Janus Aspen Series--Growth Portfolio (the ``Janus Institutional 
Fund'') and Service Class Shares of Janus Aspen Series--Growth 
Portfolio (the ``Janus Service Fund'') for Institutional Class shares 
of the ING Van Kampen Equity Growth Portfolio of the Trust, formerly 
the Equity Growth Portfolio (the ``Equity Growth Portfolio''); (6) 
shares of Neuberger Berman Advisers Management Trust--Partners 
Portfolio (the ``Neuberger Fund'') for Institutional Class Shares of 
the ING Mercury Focus Value Portfolio of the Trust (the ``Focus Value 
Portfolio''); and (7) Administrative Class shares of PIMCO Variable 
Insurance Trust--High Yield Bond Portfolio (the ``PIMCO Fund'') for 
Service Class shares of the ING PIMCO High Yield Bond Portfolio of the 
Trust (the ``High Yield Portfolio''). Applicants also seek an order of 
exemption pursuant to section 17(b) of the 1940 Act to permit certain 
in-kind redemptions and purchases in connection with the substitution.

FILING DATE: The application was filed on March 12, 2003. The 
application was amended and restated on October 29, 2003, amended and 
restated on March 24, 2004 and amended and restated on March 31, 2004. 
Applicants represent that they will file an amendment to the 
application during the notice period to conform 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 April 30, 2004, 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: For the Commission: Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549. For 
Applicants, Terrence O. Davis, Esquire, ING Americas U.S. Legal 
Services, 1475 Dunwoody Drive, West Chester, Pennsylvania 19380.

FOR FURTHER INFORMATION CONTACT: Curtis A. Young, Senior Counsel, or 
Lorna J. MacLeod, Branch Chief, Office of Insurance Products, Division 
of Investment Management, at (202) 942-0670.

SUPPLEMENTARY INFORMATION: The following is a summary of the amended 
and restated application. The complete amended and restated application 
is available for a fee from the SEC's Public Reference Branch, 450 
Fifth Street, NW., Washington, DC 20549-0102 (tel. (202) 942-8090).

[[Page 20082]]

I. The Proposed Substitution

    The Applicants have requested that the Commission issue an order to 
permit the substitution (``Substitution'') of certain shares of various 
portfolios for shares of similar portfolios offered by the Trust. More 
particularly, the Applicants propose to substitute shares of certain 
investment management companies currently held by sub-accounts of the 
various Accounts for shares of certain series of the Trust as follows: 
(1) Shares of the Fidelity Money Fund for Institutional Class shares of 
the Liquid Asset Portfolio; (2) Class O shares of The Alger Fund for 
Institutional Class shares of the Small Cap Portfolio; (3) Initial 
Class shares of the Fidelity VIP Fund for Institutional Class shares of 
the ING Index Portfolio''); (4) shares of Fund for Life for Service 
Class shares of the Fully Managed Portfolio; (5) shares of the Janus 
Institutional Fund and the Janus Service Fund for Institutional Class 
shares of the Equity Growth Portfolio; (6) shares of the Neuberger Fund 
for Institutional Class Shares of the Focus Value Portfolio; and (7) 
Administrative Class shares of the PIMCO Fund for Service class shares 
of the High Yield Portfolio.

II. Applicants' Representations

    A. Each of the Companies listed below is a direct or indirect 
subsidiary of ING Groep, N.V. (``ING''). ING is a global financial 
services holding company based in The Netherlands which is active in 
the field of insurance, banking and asset management in more than 60 
countries. As a result each of the Companies likely would be deemed to 
be an affiliate of each other.
    1. ING USA. ING USA is an Iowa stock life insurance company which 
originally was organized under the insurance laws of Minnesota. Prior 
to January 1, 2004, ING USA was known as Golden American Life Insurance 
Company (``Golden''). Effective on January 1, 2004, Equitable Life 
Insurance Company of Iowa (``Equitable''), along with several other 
affiliated companies, was merged with and into Golden and the name of 
Golden changed to ING USA. Prior to the merger, Golden primarily was 
engaged primarily in the issuance of variable annuity and variable life 
insurance products. Subsequent to the merger, ING USA succeeded to 
business of Golden and became the sponsor and depositor of Account B 
along with Account EQ.
    2. ING Life. ING Life is a stock life insurance company organized 
under the insurance laws of the State of Connecticut in 1976 and an 
indirect wholly-owned subsidiary of ING. Through a merger, ING Life 
succeeded to the business of Aetna Variable Annuity Life Insurance 
Company (formerly Participating Annuity Life Insurance Company, an 
Arkansas life insurance company organized in 1954). Prior to May 1, 
2002, the ING Life was known as Aetna Life Insurance and Annuity 
Company. ING Life principally is engaged in the business of issuing 
life insurance policies and variable annuity contracts. ING Life also 
is registered as an investment adviser under the Investment Advisers 
Act of 1940, as amended, and, as such, is the investment adviser for 
ING Partners, Inc. (prior to May 1, 2002 known as Portfolio Partners, 
Inc.) ING Life is the depositor of ING VA C Account and ING C Account, 
each of which is a separate account of ING Life and is registered with 
the Commission as a unit investment trust.
    3. ReliaStar. ReliaStar is a stock life insurance company organized 
in 1885 and incorporated under the laws of the State of Minnesota. 
ReliaStar is an indirect, wholly-owned subsidiary of ING which 
principally offers individual life insurance and annuities, employee 
benefits and retirement contracts.
    4. ReliaStar New York. ReliaStar New York is a stock life insurance 
company that was incorporated under the laws of the State of New York 
in 1917. ReliaStar New York is an indirect, wholly-owned subsidiary of 
ReliaStar Financial, an indirect, wholly owned subsidiary of ING. 
ReliaStar New York principally offers individual life insurance and 
annuities.
    5. Security Life. Security Life is a stock life insurance company 
organized under the laws of the State of Colorado in 1929. Security 
Life is a wholly owned indirect subsidiary of ING and principally is 
engaged in the business of issuing life insurance policies and annuity 
contracts.
    6. Southland Life. Southland Life is a stock life insurance company 
organized under the laws of the State of Texas in 1908. Southland Life 
principally is engaged in the business of issuing life insurance 
policies and annuity contracts.
    7. Each of the Accounts is a segregated asset account of the 
applicable Company, and is registered under the 1940 Act as a unit 
investment trust. Each of the respective Accounts is used by the 
Company of which it is a part to support the Contracts that it issues.
    8. Each Account is administered and accounted for as part of the 
general business of the Company of which it is a part. The assets of 
each Account attributable to the Contracts issued through it are owned 
by each Company but are held separately from all other assets of that 
Company for the benefit of the owners of, and persons entitled to 
benefits under such Contracts. Pursuant to applicable state insurance 
law, such assets are not chargeable with liabilities arising out of any 
other business that each Company may conduct. Income, if any, gains and 
losses, realized or unrealized, from each Account are credited to or 
charged against the assets of that Account, without regard to other 
income, gains or losses of its Company or any of its other segregated 
asset accounts. Each Account is a ``separate account'' as defined by 
Rule 0-1(e) under the 1940 Act.
    9. Each Account is divided into subaccounts. Each Account has 
subaccounts, each of which invests exclusively in shares of one 
investment company portfolio of the Trust, a Replaced Fund or another 
mutual fund. Each investment company portfolio has its own distinct 
investment objective(s) and policies. Income, gains and losses, 
realized or unrealized, of a portfolio are credited to or charged 
against the corresponding subaccount of each Account without regard to 
any other income, gains or losses of the applicable Company. Assets 
equal to the reserves and other contract liabilities with respect to 
each are not chargeable with liabilities arising out of any other 
business of the applicable Company.
    10. The Contracts are flexible premium variable annuity and 
variable life insurance contracts. The variable annuity Contracts 
provide for the accumulation of values on a variable basis, fixed 
basis, or both, during the accumulation period, and provide settlement 
or annuity payment options on a variable or fixed basis. The variable 
life insurance Contracts provide for the accumulation of values on a 
variable basis, fixed basis, or both throughout the insured's life and 
for a death benefit, upon the death of the insured. Under each of the 
Contracts, each Company reserves the right to substitute shares of one 
fund or portfolio for shares of another.
    11. A Contract owner may transfer all or any part of the Contract 
value from one subaccount to any other subaccount or a fixed account as 
long as the Contract remains in effect for variable life insurance 
contracts, and at any time up to 30 days before the due date of the 
first annuity payment for variable annuity contracts. For many of the 
variable annuity contracts, the Company issuing the Contract reserves 
the right to

[[Page 20083]]

limit the number of transfers during a specified period.
    12. Each Company, on behalf of itself and their Accounts propose a 
series of substitutions of shares held in the applicable Accounts. The 
table below summarizes the proposed substitutions.

----------------------------------------------------------------------------------------------------------------
                                                                                           Account(s) holding
         Replaced fund           Class of shares    Substitute trust  Substitute trust    replaced money market
                                 (if applicable)       portfolio       portfolio class           fund(s)
----------------------------------------------------------------------------------------------------------------
                                           Replaced Money Market Funds
----------------------------------------------------------------------------------------------------------------
Fidelity Money Fund...........  Initial..........  Liquid Asset       Institutional...  RLS Select VA.
                                                    Portfolio.                          RLS Select LVA.
                                                                                        RLNY VA II.
                                                                                        RLNY VL I.
                                                                                        Security Life A1.
                                                                                        Southland A1.
                                                                                        Southland L1.
                                                                                        Security Life L1.
-------------------------------
                                             Non-Money Market Funds
----------------------------------------------------------------------------------------------------------------
Alger Fund....................  Class O..........  Small Cap          Institutional...  RLS Select VA.
                                                    Portfolio.                          RLS Select LVA.
                                                                                        RLNY VA II.
                                                                                        RLNY VL I.
                                                                                        Security Life A1.
                                                                                        Security Life L1.
                                                                                        Southland A1.
                                                                                        Southland A2.
                                                                                        Southland L1.
Fidelity VIP..................  Initial..........  ING Index          Institutional...  RLNY VA II.
                                                    Portfolio.                          RLS Select VA.
                                                                                        RLS Select LVA.
                                                                                        RLNY VL I.
                                                                                        Security Life A1.
                                                                                        Security Life L1.
                                                                                        Southland A1.
                                                                                        Southland L1.
Janus Fund....................  Institutional....  Equity Growth      Institutional...  ING Acct. C.
                                                    Portfolio.                          RLS Select VA.
                                                                                        RLS Select LVA.
                                                                                        RLNY VA II.
                                                                                        RLNY VL I.
                                                                                        Southland A1.
                                                                                        Southland L1.
Janus Fund....................  Service..........  Equity Growth      Institutional...  Southland A1.
                                                    Portfolio.                          Southland L1.
                                                                                        Security Life L1.
Fund for Life.................  N/A..............  Fully Managed      Service.........  Account B.
                                                    Portfolio.
Neuberger Fund................  N/A..............  Focus Value        Institutional...  RLS Select VA.
                                                    Portfolio.                          RLS Select LVA.
                                                                                        RLNY VA II.
                                                                                        RLNY VL I.
                                                                                        Security Life A1.
                                                                                        Security Life L1.
PIMCO Fund....................  Administrative...  High Yield         Service.........  Account B.
                                                    Portfolio.                          Account EQ.
                                                                                        RLNY Separate.
                                                                                        Account B.
----------------------------------------------------------------------------------------------------------------

    13. Applicants believe that for each proposed substitution, the 
investment objectives and policies of the replacing Fund(s) or 
Portfolio(s) are sufficiently similar to those of the replaced Fund(s) 
or Portfolio(s) that Contract owners will have reasonable continuity in 
investment expectations. Applicants also believe that the proposed 
substitutions will better serve the interests of Contract owners 
because, in each case, the replacing Fund or Portfolio has either the 
same or lower fees or expenses.
    14. Each Management Company is registered as an open-end management 
investment company under the Act. Further, each is a series investment 
company as defined by Rule 18f-2 under the Act and issues separate 
series of shares of stock (for corporations) or of beneficial interest 
(for business trusts) in connection with each Fund or Portfolio. The 
shares of each Fund or Portfolio are registered under the 1933 Act on 
Form N-1A.
    15. The investment objective of the Fidelity Money Fund is 
substantially identical to the investment objective of the Liquid Asset 
Portfolio. More particularly, the investment objective of the Fidelity 
Money Fund is to seek as a high a level of current income as is 
consistent with the preservation of capital and liquidity. On the other 
hand, the investment objective of the Liquid Asset Portfolio is to seek 
a high level of

[[Page 20084]]

current income consistent with the preservation of capital and 
liquidity. Similarly, the investment policies of the Fidelity Money 
Fund are substantially similar to the policies of the Liquid Asset 
Portfolio. Both the Fidelity Money Fund and the Liquid Asset Portfolio 
have elected to use the amortized cost method to value their respective 
portfolio securities. As a result, both the Fidelity Money Fund and the 
Liquid Asset Portfolio are subject to the requirements of Rule 2a-7 
adopted under the 1940 Act. Among other features, Rule 2a-7 sets forth 
certain requirements concerning issuer creditworthiness and 
diversification standards which must be complied with by money market 
funds seeking to use the amortized cost method. Thus, the Fidelity 
Money Fund and the Liquid Asset Portfolio are required to follow 
substantially identical policies as prescribed by Rule 2a-7.
    16. The Alger Fund and the Small Cap Portfolio share the same 
investment objective. More particularly, both the Alger Fund and the 
Small Cap Portfolio each seek to achieve long term capital 
appreciation. Furthermore, both the Alger Fund and the Small Cap 
Portfolio (each a ``Small Cap Fund'') have substantially identical 
policies. Each Small Cap Fund principally invests in stocks of 
companies included on the Russell 2000 Growth Index or the S&P SmallCap 
600 Index.
    17. The investment objective of the Fidelity VIP Fund and the ING 
Index Portfolio (each an ``Index Fund'') are identical. More 
specifically, each Index Fund seeks to achieve investment results that 
correspond to the total return of common stocks publicly traded in the 
United States, as represented by the S&P 500 Index.
    Furthermore, each Index Fund has substantially identical investment 
policies as the other Index Fund. Each Index Fund invests substantially 
all of its assets in securities of companies included on the S&P 500 
Index.
    18. The Janus Fund and the Equity Growth Portfolio have 
substantially identical investment objectives. The investment objective 
of the Janus Fund is to seek long-term growth of capital in a manner 
consistent with the preservation of capital. While the investment 
objective of the Equity Growth Portfolio is to achieve long-term 
capital appreciation. Both the Janus Fund and the Equity Growth 
Portfolio seek to achieve growth in their investment portfolios over 
the longer term. Further both the Janus Fund and the Equity Growth 
Portfolio pursue their respective investment objectives by investing 
principally in U.S. companies and foreign companies listed on 
securities exchanges in the United States with larger market 
capitalizations. The investment policies of the Janus Fund and the 
Equity Growth Portfolio are nearly identical. Both the Janus Fund and 
the Equity Growth Portfolio are permitted to invest in a wide range of 
securities, but each invests the majority of its assets in equity 
securities.
    19. The investment objective of the Neuberger Fund and the Focus 
Value Portfolio are substantially identical. Both the Neuberger Fund 
and the Focus Value Portfolio seek growth of capital. However, the 
Focus Value Portfolio seeks to achieve the growth of capital over the 
long term. While the language of the investment objective of may not be 
articulated the same, each fund pursues its respective investment 
objective by investing in the same types of issuers. More particularly, 
both the Neuberger Fund and the Focus Value Portfolio seek to find 
issuers whose stock prices are believed to be undervalued. Furthermore, 
each fund has the ability to invest in a range of securities in pursuit 
of its investment objective, including junk bonds.
    20. Both the PIMCO Fund and the High Yield Portfolio (each a ``Bond 
Fund'') have the same investment objective. More specifically, each 
Bond Fund seeks maximum total return, consistent with preservation of 
capital and prudent investment management. The High Yield Portfolio is 
modeled after the PIMCO Fund. As a result, the investment objectives 
and policies of each Bond Fund nearly are identical. Furthermore, it is 
anticipated that PIMCO will manage the High Yield Portfolio after the 
Substitution in substantially the same manner as PIMCO manages the 
PIMCO Fund.
    21. While the Fully Managed Portfolio is not a ``fund of funds,'' 
there is no substitution alternative available among the investment 
portfolios of the ING Investors Trust for the Fund For Life's structure 
as a ``fund of funds.'' Both the Fully Managed Portfolio and the Fund 
For Life share the primary objective of high total investment return. 
The Fully Managed Portfolio also has the same investment strategy as 
the Fund For Life, of allocating assets among equity and bond classes 
of investments, with the majority invested in equity investments. In 
addition, the Fund For Life is authorized to allocate 10% of its assets 
to mutual funds investing in international equity securities; the Fully 
Managed Portfolio is authorized to invest 20% of its net assets in 
equity securities of foreign issuers. Golden American has, therefore, 
concluded that the overall investment objectives of the Fund For Life 
and the Fully Managed Portfolio are sufficiently similar to be 
appropriate for substitution.
    22. A significant difference in the configuration of the funds is 
how the fees are structured by each portfolio together with the fact 
that the overall expenses are lower or comparable under the Trust 
Portfolio fee structure. Each Trust Portfolio is part of the unified 
fee structure of the Trust, under which DSI, which receives a fixed 
management fee, pays almost all of the operating expenses incurred by 
each Trust Portfolio. In contrast, each Replaced Fund pays both a 
management or advisory fee and all of its own operating expenses. The 
following tables compare the expenses of each Replaced Fund with the 
expenses of the corresponding Trust Portfolio (as a percentage of 
average daily net assets):

          Replaced Money Market Fund vs. Liquid Asset Portfolio
                              [In percent]
------------------------------------------------------------------------
                                                         Trust portfolio
 Replaced fund  Fidelity money fund                       Liquid asset
           (Initial class)                Expenses          portfolio
                                                         (Instit. class)
------------------------------------------------------------------------
Management Fee......................              0.20              0.27
    Other Expenses, 12b-1 Fees......              0.10              0.01
                                     -------------------
    Total Expenses..................              0.30              0.28
------------------------------------------------------------------------


[[Page 20085]]


    Non-Money Market Replaced Funds vs. Corresponding Trust Portfolio
                              [In percent]
------------------------------------------------------------------------
                                                         Trust portfolio
                                                            Small cap
                                        Replaced fund       portfolio
                                         Alger Fund      (Institutional
                                                             class)
------------------------------------------------------------------------
Management Fee......................              0.85              0.90
Other Expenses......................              0.11               0.0
12b-1 Fees..........................  ................  ................
                                     -------------------
    Total Expenses..................              0.96              0.90
-------------------------------------
                                          Fidelity VIP         ING Index
                                       (Initial class)         Portfolio
                                                          (Institutional
                                                                  class)
-------------------------------------
Management Fee......................              0.24              0.27
Other Expenses......................              0.10              0.01
12b-1 Fees..........................  ................  ................
                                     -------------------
    Total Expenses..................              0.34              0.28
-------------------------------------
                                         Fund for Life     Fully Managed
                                                               Portfolio
                                                         (Service class)
-------------------------------------
Management Fee......................              0.10              0.68
Other Expenses......................              2.95              0.25
12b-1 Fees..........................  ................              0.01
                                     -------------------
    Total Expenses..................          \1\ 3.05              0.94
-------------------------------------
                                            Janus Fund     Equity Growth
                                        (Institutional         Portfolio
                                                class)    (Institutional
                                                                  class)
-------------------------------------
Management Fee......................              0.65              0.65
Other Expenses......................              0.02              0.02
12b-1 Fees..........................  ................  ................
                                     -------------------
    Total Expenses..................              0.67              0.67
-------------------------------------
                                            Janus Fund     Equity Growth
                                       (Service class)         Portfolio
                                                          (Institutional
                                                                  class)
-------------------------------------
Management Fee......................              0.65              0.65
Other Expenses......................              0.02              0.02
12b-1 Fees..........................              0.25  ................
                                     -------------------
    Total Expenses..................              0.92              0.67
-------------------------------------
                                             Neuberger  Focus Value Fund
                                                  Fund    (Institutional
                                                                  Class)
-------------------------------------
Management Fee......................              0.82              0.80
Other Expenses......................              0.13              0.00
12b-1 Fees..........................  ................  ................
                                     -------------------
    Total Expenses..................              0.95              0.80
-------------------------------------
                                            PIMCO Fund        High Yield
                                       (Administrative         Portfolio
                                                class)   (Service class)
-------------------------------------
Management Fee......................              0.25              0.49
Other Expenses......................              0.25              0.01
12b-1 Fees..........................              0.25              0.25
                                     -------------------
    Total Expenses..................              0.75              0.75
                                     ===================

[[Page 20086]]

 
        Total Net Expenses..........              0.75             0.75
------------------------------------------------------------------------
\1\ DSI has agreed to waive and/or assume 0.55% of the annual expenses
  of the Fund for Life.

    23. The accompanying chart shows the approximate year-end size (in 
net assets), expense ratio (ratio of operating expenses as a percentage 
of average net assets), and annual total returns for the past year for 
each of the Funds and Portfolios involved in the proposed 
substitutions.

                            Comparison of the Replaced Funds to the Trust Portfolios
----------------------------------------------------------------------------------------------------------------
                                                                                             Expense     Total
               Replaced fund                            As of                Net assets       ratio      return
----------------------------------------------------------------------------------------------------------------
                                           Replaced Money Market Fund
----------------------------------------------------------------------------------------------------------------
Fidelity Money Fund.......................  Dec. 31, 2003...............    $1,817,439,610      0.29%      1.00%
-------------------------------------------
                                                 Trust Portfolio
----------------------------------------------------------------------------------------------------------------
 
          Liquid Asset Portfolio
         (Institutional Class) \2\
-------------------------------------------
                                             Non-Money Market Funds
----------------------------------------------------------------------------------------------------------------
Alger Fund................................  Dec. 31, 2003...............      $469,076,000      0.97%     42.34%
-------------------------------------------
                                                 Trust Portfolio
----------------------------------------------------------------------------------------------------------------
            Small Cap Portfolio
         (Institutional Class) \3\
 
Fidelity VIP (Initial Class)..............  Dec. 31, 2003...............    $3,031,540,423      0.34%     28.41%
-------------------------------------------
                                                 Trust Portfolio
----------------------------------------------------------------------------------------------------------------
         ING Index Portfolio \4\
----------------------------------------------------------------------------------------------------------------
\2\ As of the date of this Application, the Institutional Class shares of the Liquid Asset Portfolio had not yet
  commenced operation.
\3\ As of the date of this Application, the Institutional Class shares of the Small Cap Portfolio had not yet
  commenced operation.
\4\ As noted above, the ING Index Portfolio is being created in anticipation of the substitutions contemplated
  by this Application. Thus, there is no operating history to report for this Trust Portfolio.


 
----------------------------------------------------------------------------------------------------------------
                                                                                             Expense     Total
               Replaced fund                            As of                Net assets       ratio      return
----------------------------------------------------------------------------------------------------------------
Janus Fund................................  Dec. 31, 2003...............    $1,666,317,000      0.67%     31.73%
-------------------------------------------
                                                 Trust Portfolio
----------------------------------------------------------------------------------------------------------------
        Equity Growth Portfolio \5\
           (Institutional Class)
 
Janus Fund................................  Dec. 31, 2003...............      $211,100,000      0.92%     31.49%
-------------------------------------------
                                                 Trust Portfolio
----------------------------------------------------------------------------------------------------------------
        Equity Growth Portfolio \6\
           (Institutional Class)
 
Neuberger Fund............................  Dec. 31, 2003...............      $669,639,353      0.91%     35.09%
-------------------------------------------

[[Page 20087]]

 
                                                 Trust Portfolio
----------------------------------------------------------------------------------------------------------------
         Focus Value Portfolio \7\
           (Institutional Class)
 
PIMCO Fund................................  Dec. 31, 2003...............      $955,599,000      0.75%     22.85%
-------------------------------------------
                                                 Trust Portfolio
----------------------------------------------------------------------------------------------------------------
         High Yield Portfolio \8\
                 (Service)
 
Fund for Life.............................  Dec. 31, 2003...............          $108,405      3.05%     18.40%
-------------------------------------------
                                                  New Portfolio
----------------------------------------------------------------------------------------------------------------
Fully Managed (Service)...................  Dec. 31, 2003...............    $1,413,027,000      0.94%    25.23%
----------------------------------------------------------------------------------------------------------------
\5\ The Equity Growth Portfolio has not yet commenced operations.
\6\ Id.
\7\ The Focus Value Portfolio has not yet commenced operations.
\8\ The High Yield Portfolio has not yet commenced operations.

    24. Applicants propose to rationalize and consolidate their 
underlying investment portfolio and fund offerings among the Contracts. 
The rationalization and consolidation effort and resulting proposed 
substitutions arise from two factors. First, as a consequence of 
several acquisitions and/or mergers over the past several years 
involving ING and one or more of the Companies, there are several asset 
management divisions/groups being offered by each of the various 
Companies. Second, contemporaneously, the various Companies conducted a 
reevaluation of the array of investment options offered within each 
Contract. The goal of the reevaluation was to identify and establish an 
updated, current array of investment options for the Contracts and 
respond to distributor feedback regarding offerings in various variable 
annuity and life insurance contracts.
    25. As a result of the review process described above, the 
Applicants determined that maintaining and servicing such a large array 
of often redundant investment options unnecessarily uses resources 
which could be better directed elsewhere, including the servicing of 
existing Contracts. Furthermore, Applicants believe that such a large 
array of underlying fund options is inefficient and not necessary in 
light of the investment options offered by the Trust which have 
investment objectives and policies that, in most cases, are 
substantially identical to those of the Replaced Fund. Thus, a plan was 
developed to realign some of the underlying fund/portfolio offerings 
and/or to rationalize such offerings of which the proposed 
substitutions are an essential component.
    26. The Trust, in anticipation of the proposed consolidation formed 
several new Portfolios, including the Equity Growth Portfolio, Focus 
Value Portfolio and ING Index Portfolio. In addition, the Companies 
began adding several new options to the certain Contracts this past May 
1 and, where possible, closed off the proposed Replaced Fund to new 
investments as of that date. The Applicants believe that Contract 
owners will benefit from these efforts in several respects.
    27. Apart from the substitution of the underlying mutual funds, the 
rights of affected Contract owners and the obligations of the Companies 
under the Contracts would not be altered by the Substitutions. Affected 
Contract owners will not incur any additional tax liability or any 
additional fees or expenses as a result of the Substitutions.
    28. The Substitutions will take place at relative net asset value 
(in accordance with Rule 22c-1 under the 1940 Act) with no change in 
the amount of any affected Contract owner's accumulation value or death 
benefit or in dollar value of his or her investment in the Accounts. 
Affected Contract owners will not incur any fees or charges as a result 
of the Substitutions nor will their rights or the Companies' 
obligations under the affected Contracts be altered in any way. The 
Companies or their affiliates will pay all other expenses incurred with 
the Substitutions, including legal, accounting, and other fees and 
expenses. In addition, the Substitutions will not impose any tax 
liability on affected Contract owners. The Substitutions will not cause 
the affected Contract fees and charges currently being paid by affected 
Contract owners to be greater after the Substitutions than before the 
Substitutions. In addition, while the Companies do not anticipate 
increasing Contract fees and/or charges paid by any current Contract 
owners, the Companies have agreed not to increase the Contract fees and 
charges currently being assessed by the Contracts for a period of at 
least two years following the Substitutions.
    29. Affected Contract owners will have the right to surrender their 
affected Contracts or reallocate accumulation value of each Replaced 
Fund in accordance with the terms and conditions of their Contract 
prior to (and after) the Effective Date.
    30. Each affected Contract owner will receive a copy of (i) a 
supplement informing shareholders of the proposed substitution; (ii) a 
prospectus for the appropriate Trust portfolio, and (iii) a second 
supplement setting forth the Effective Date and advising affected 
Contract owners of their right to reconsider the Substitutions and, if 
they so choose, any time prior to the Effective Date, they may withdraw 
or reallocate accumulation value under the affected Contract or 
otherwise terminate their interest thereof in accordance with the terms 
and conditions of their Contract; and (iv) within five business days of 
the Effective Date, a Post-Substitution Notice. If affected Contract 
owners reallocate accumulation value prior to the Effective Date, or 
within 30 days after the Effective Date, there will be no charge for 
the initial reallocation of accumulated value from each Affected 
Subaccount and the initial reallocation will not be counted toward the 
total number of reallocations made

[[Page 20088]]

within the Contract year for purposes of determining whether the number 
of reallocations which may be made without incurring administrative or 
transfer fees, if any, under the relevant Contract has been exceeded. 
The Companies will not exercise any right they may have under the 
Contracts to impose additional restrictions or fees on transfers from 
the Replaced Funds under the Contracts for a period of at least thirty 
days following the proposed substitutions.

III. Applicant's Legal Analysis

    1. Section 26(c) of the Act requires the depositor of a registered 
unit investment trust holding the securities of a single issuer to 
receive Commission approval before substituting the securities held by 
the trust. Each of the Contracts expressly reserved to the Companies 
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 investment company held by a subaccount of an 
Account. The prospectuses for the Contracts and the Accounts contain 
appropriate disclosure of this right.
    2. The Companies reserved this right of substitution both to 
protect themselves and their Contract owners in situations where either 
might be harmed or disadvantaged by circumstances surrounding the 
issuer of the shares held by one or more of its separate accounts and 
to afford the opportunity to replace such shares where to do so could 
benefit the Contract owners and Companies.
    3. Applicants maintain that Contract owners will be better served 
by the proposed substitutions. Applicants anticipate that the 
replacement of certain unpopular Portfolios or Funds will result in a 
Contract that is administered and managed more efficiently, and one 
that is more competitive with other variable products in both wholesale 
and retail markets. Applicants state that for all of the proposed 
substitutions, the new Portfolios or Funds are either substantially the 
same or more conservative in their investment objective(s) or 
strategies or both, than the Portfolios or Funds that they would 
replace. Likewise, Applicants believe that a majority of the new 
Portfolios or Funds have a substantially similar or lower investment 
risk profile than the Portfolios or Funds each would replace.
    4. In addition to the foregoing, Applicants generally submit that 
the proposed substitutions meet the standards that the Commission and 
its staff have applied to similar substitutions that have been approved 
in the past.
    5. Applicants anticipate that Contract owners will be at least as 
well off with the proposed array of subaccounts to be offered after the 
proposed substitutions as they have been with the array of subaccounts 
offered before the substitutions. The proposed substitutions retain for 
Contract owners the investment flexibility that is a central feature of 
the Contracts. If the proposed substitutions are carried out, all 
Contract owners will be permitted to allocate purchase payments and 
transfer accumulated values and contract values between and among the 
remaining subaccounts as they could before the proposed substitutions.
    6. Applicants assert that each of the proposed substitutions is not 
the type of substitution that Section 26(c) was designed to prevent. 
Unlike traditional unit investment trusts where a depositor could only 
substitute an investment security in a manner which permanently 
affected all the investors in the trust, the Contracts provide each 
Contract owner with the right to exercise his or her own judgment and 
transfer accumulation and contract values into other subaccounts. 
Moreover, the Contracts will offer Contract owners the opportunity to 
transfer amounts out of the affected subaccounts into any of the 
remaining subaccounts without cost or other disadvantage. The proposed 
substitutions, therefore, will not result in the type of costly forced 
redemption that Section 26(c) was designed to prevent.
    7. Applicants maintain that the proposed substitutions also are 
unlike the type of substitution that Section 26(c) was designed to 
prevent in that by purchasing a Contract, Contract owners select much 
more than a particular investment company in which to invest their 
account values. They also select the specific types of insurance 
coverages offered by the various Companies under the Contracts as well 
as numerous other rights and privileges set forth in each Contract. 
Contract owners may also have considered the size, financial condition, 
type, and reputation of ING and the various Companies. These factors 
will not change because of the proposed substitutions.
    8. Applicants submit that, for all the reasons stated above, the 
proposed substitutions are consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act.
    9. 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 principals, 
from knowingly purchasing any security or other property from the 
registered investment company. 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. Applicants maintain that the terms of the proposed 
transactions, including the consideration to be paid and received by 
each Portfolio or Fund involved, are reasonable, fair and do not 
involve overreaching principally because the transactions do not cause 
owners' interests under a Contract to be diluted and because the 
transactions will conform with the principal conditions enumerated in 
Rule 17a-7. The proposed transactions will take place at relative net 
asset value with no change in the amount of any Contract owner's 
Contract or cash value or death benefit or in the dollar value of his 
or her investment in any of the Accounts. Even though the Applicants 
may not rely on Rule 17a-7, 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 in connection with an investment 
company by its affiliated persons.
    11. Applicants submit that the Substitutions by the Companies are 
consistent with the policies of each Portfolio and each Replaced Fund, 
as recited in the current registration statements and reports filed by 
each under the 1940 Act. Finally, Applicants submit that the 
Substitutions are consistent with the general purposes of the 1940 Act.
    12. The boards of trustees or directors, as applicable of each 
Replaced Fund and the Trust have adopted procedures, as required by 
paragraph (e)(1) of Rule 17a-7, pursuant to which the portfolios or 
funds of each may purchase and sell

[[Page 20089]]

securities to and from their affiliates. The Companies and the 
investment advisers will carry out the Substitutions in conformity with 
the principal conditions of Rule 17a-7 and each Replaced Fund's and the 
Trust's procedures thereunder. Although the transaction may not be 
entirely for cash, with the exception of the substitution involving the 
PIMCO Fund and the High Yield Portfolio as described below, it will be 
effected based upon (i) the independent market price of the portfolio 
securities valued as specified in paragraph (b) of Rule 17a-7, and (ii) 
the net asset value per share of each Portfolio and the corresponding 
Replaced Fund valued in accordance with the procedures disclosed in the 
registration statements for each Fund and as required by Rule 22c-1 
under the 1940 Act. No brokerage commission, fee, or other remuneration 
will be paid to any party in connection with the proposed transactions. 
In addition, the Trust Board will subsequently review the Substitutions 
and make the determinations required by paragraph (e)(3) of Rule 17a-7.
    13. With regard to the substitution involving the PIMCO Fund and 
the High Yield Portfolio, DSI and the investment adviser to the PIMCO 
Fund and the investment sub-adviser to the High Yield Portfolio, PIMCO, 
intend to value securities selected for transfer between the two funds 
in a manner that is consistent with the current methodology used to 
calculate the daily net asset value of the PIMCO Fund. Currently, PIMCO 
employs certain third party, independent pricing services to value 
securities held by the PIMCO Fund (``vendor pricing''). DSI and PIMCO 
intend to employ vendor pricing to value securities held by the PIMCO 
Fund that are selected for transfer to the High-Yield Portfolio. 
Securities will be selected for transfer to the High Yield Portfolio on 
a pro-rata basis.
    14. After the assets have been contributed to the Trust, 
responsibility for valuation of the securities held by the High Yield 
Portfolio will shift to the valuation committee of the Board of the 
Trust. At the end of the first trading following the transfer, the 
valuation agent and custodian for the Trust, the Bank of New York, will 
value the securities held by the High-Yield Portfolio. The foregoing 
notwithstanding, the Board of the Trust will retain ultimate 
responsibility for the valuation of the securities held by the High 
Yield Portfolio.
    15. DSI and PIMCO believe that the use of neutral, third party 
vendor prices will ensure that both portfolios utilize unbiased 
evaluations in determining respective security and, ultimately, 
portfolio market values. In the event that independent pricing services 
do not provide valuations for a specific security selected for 
transfer, DSI and PIMCO, in accordance with paragraph (b)(4) of Rule 
17a-7 under the 40 Act, will rely on the ``average of highest current 
independent bid and lowest current independent offer determined on the 
basis of reasonable inquiry * * *'' in valuing such security.
    16. The Substitutions are consistent with the general purposes of 
the 1940 Act, as enunciated in the Findings and Declaration of Policy 
in Section 1 of the 1940 Act. The proposed transactions do not present 
any of the issues or abuses that the 1940 Act is designed to prevent. 
Moreover, the proposed transactions will be effected in a manner 
consistent with the public interest and the protection of investors, as 
required by Section 6(c) of the 1940 Act. Contract owners will be fully 
informed of the terms of the Substitutions through the supplements and 
the Post-Substitution Notice and will have an opportunity to withdraw 
from the Replaced Fund through reallocation to another subaccount or 
otherwise terminate their interest thereof in accordance with the terms 
and conditions of their Contract prior to the Effective Date.

IV. Applicant's Conditions

    For purposes of the approval sought pursuant to Section 26(c) of 
the Act, the substitutions described in the amended and restated 
application will not be completed, unless all of the following 
conditions are met:
    1. The Commission shall have issued an order (i) approving the 
Substitutions under Section 26(c) of the 1940 Act; and (ii) exempting 
the in-kind redemptions from the provisions of Section 17(a) of the 
1940 Act as necessary to carry out the transactions described in this 
Application.
    2. Each affected Contract owner will have been sent a copy of (i) a 
supplement informing shareholders of this Application; (ii) a 
prospectus for the appropriate Trust Portfolio, and (iii) a second 
supplement setting forth the Effective Date and advising affected 
Contract owners of their right to reconsider the Substitutions and, if 
they so choose, any time prior to the Effective Date, they may 
reallocate or withdraw amounts under their affected Contract or 
otherwise terminate their interest thereof in accordance with the terms 
and conditions of their Contract. If affected Contract owners 
reallocate accumulation value prior to the Effective Date, or within 30 
days after the Effective Date, there will be no charge for the initial 
reallocation of accumulated value from each affected Subaccount and the 
initial reallocation will not be counted toward the total number of 
reallocations made within the Contract year for purposes of determining 
whether the number of reallocations which may be made without incurring 
administrative or transfer fees, if any, under the relevant Contract 
has been exceeded. The Companies will not exercise any right they may 
have under the Contracts to impose additional restrictions or fees on 
transfers from the Replaced Funds under the Contracts for a period of 
at least thirty days following the proposed substitutions.
    3. The Companies shall have satisfied themselves, that (a) the 
Contracts allow the substitution of investment company shares in the 
manner contemplated by the Substitutions and related transactions 
described herein; (b) the transactions can be consummated as described 
in this Application under applicable insurance laws; and (c) that any 
regulatory requirements in each jurisdiction where the Contracts are 
qualified for sale, have been complied with to the extent necessary to 
complete the transactions.
    Within five business days of the Effective Date of the 
Substitutions, the Applicants will forward to affected Contract owners 
a Post-Substitution Notice.

V. Conclusion

    Applicants assert that, for the reasons summarized above, the 
requested order approving the Substitution and related transactions 
involving redemptions should be granted.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-8567 Filed 4-14-04; 8:45 am]
BILLING CODE 8010-01-P