[Federal Register Volume 62, Number 36 (Monday, February 24, 1997)]
[Notices]
[Pages 8278-8279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4386]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22514; File No. 812-10412]
Ameritas Variable Life Insurance Company, et al.
February 14, 1997.
AGENCY: The Securities and Exchange Commission (the ``Commission'').
ACTION: Notice of Application for an Order Pursuant to the Investment
Company Act of 1940 (``1940 Act'').
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APPLICANTS: Ameritas Variable Life Insurance Company Separate Account V
(``Separate Account V''), Ameritas Variable Life Insurance Company
Separate Account VA-2 (``Separate Account VA-2,'' together with
Separate Account V, the ``Applicant Accounts''), the Ameritas Variable
Life Insurance Company (``AVLIC'').
RELEVANT 1940 ACT SECTIONS: Order requested pursuant to Section 26(b).
SUMMARY OF THE APPLICATION: Applicants seek an order approving the
proposed substitution of shares of the Index 500 Portfolio of the
Variable Insurance Products Fund II (``Index 500 Portfolio'') for
shares of The Dreyfus Stock Index Fund (``Dreyfus Fund'') held by
Applicant Accounts.
FILING DATES: The application was filed on October 21, 1996.
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 March 11, 1997, 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 requestor's interest, the reason for the request, and the
issues contested. Persons may request notification of a hearing by
writing to the Secretary of the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, DC., 20549. Applicants, c/o Norman M.
Krivosha, Esq., Ameritas Variable Life Insurance Company, 5900 ``O''
Street, Lincoln, Nebraska 68510.
FOR FURTHER INFORMATION CONTACT:
Kevin M. Kirchoff, Branch Chief, Office of Insurance Products (Division
of Investment Management), at (202) 942-0670.
SUPPLEMENTARY INFORMATION: Following is a summary of the application;
the complete application is available for a fee from the Public
Reference Branch of the Commission.
Applicants' Representations
1. AVLIC, a stock life insurance company organized pursuant to
Nebraska law, is a wholly-owned subsidiary of AMAL Corporation.
Ameritas Life Insurance Corporation, also a Nebraska corporation, owns
a majority interest in AMAL Corporation.
2. The Applicant Accounts were established by AVLIC and registered
with the Commission as unit investment trusts pursuant to the 1940 Act.
Separate Account VA-2 was established on May 28, 1987, to fund group
variable annuity policies (``VA Policies''). Separate Account V was
established on August 28, 1985, to fund variable universal life
insurance policies (``VUL Policies''). The VA and VUL Policies
(collectively, the ``Subject Contracts'') are issued and administered
by AVLIC and are offered exclusively by means of separate prospectuses
that describe the applicable terms and conditions of the respective
contracts.
3. Each of the Applicant Accounts is divided into separate
subaccounts that invest exclusively in shares of one of the investment
portfolios of certain open-end investment companies (collectively,
``Underlying Funds''). The Underlying Funds in which the subaccounts of
the Applicant Accounts may invest are: The Alger American Fund, which
currently offers to Applicant Accounts six investment portfolios, and
MFS Variable Insurance Trust, which currently offers three investment
portfolios. In addition, Variable Insurance Products Fund I and
Variable Insurance Products Fund II currently offer to Applicant
Accounts ten investment portfolios, one of which is the Index 500
Portfolio. Applicant Accounts offer subaccounts that invest exclusively
in the Index 500 Portfolio (``Index 500 Subaccounts'').
4. Applicant Accounts also offered subaccounts that invested
exclusively in shares of the Dreyfus Fund (``Dreyfus Subaccounts'').
New investments in the Dreyfus Subaccounts have not been accepted since
May 1, 1996, and all prospectuses relating to the Subject Contracts
have been amended to eliminate reference to them. Subject Contract
owners who invested in the Dreyfus Subaccounts (``Affected
Contractholders'') were permitted to remain in the Dreyfus Subaccounts
after May 1, 1996, and to continue to reinvest dividends paid by the
Dreyfus Fund in the Dreyfus Subaccounts. All Affected Contractholders
continue to have the option of transferring investments without charge
from the Dreyfus Subaccounts to the Index 500 Subaccounts or to other
subaccounts, but it is not anticipated that all Affected
Contractholders will take advantage of this option. As of July 31,
1996, the Dreyfus Subaccount of Separate Account VA-2 had total assets
of $8,561,723, representing the interests of 916 owners, and the
Dreyfus Subaccount of Separate Account V had total assets of
$2,067,298, representing the interests of 735 owners.
5. Applicants represent that the investment objectives of the Index
500 Portfolio and the Dreyfus Fund are identical. Both are ``index
funds'' that attempt to allocate assets to correspond to the Standard &
Poor's Index (``S&P 500''). Each fund: (a) must invest at least 80% of
its assets in securities represented in the S&P 500; (b) seeks to
achieve a total return that reflects at least a 95% correlation with
the S&P 500; and (c) may use financial futures for hedging purposes
only.
6. Fidelity Management & Research Company (``FRM''), which manages
the Index 500 Portfolio, is entitled to receive an investment advisory
fee at the annual rate of .28% of the Portfolio's net assets. For each
of the fiscal years ended December 31, 1995, 1994, and 1993, the
expense ratio of the Index 500 Portfolio, taking into account expense
reimbursements and fee waivers, was .28% of the Portfolio's average net
assets. During each such period FMR voluntarily reimbursed the Index
500 Portfolio to the extent that its ratio of expenses to average net
assets exceeded
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.28%. Had this reimbursement policy not been in place, the expense
ratios for the Index 500 Portfolio for the fiscal years ended December
31, 1995, 1994, and 1993, would have been .47%, .81%, and .95%,
respectively.
7. The Dreyfus Corporation (``Dreyfus''), which manages the Dreyfus
Fund, receives a fee at the annual rate of .245% of the Fund's average
daily net assets. The expense ratios for the Dreyfus Fund for the
fiscal years ended December 31, 1995, 1994, and 1993, were .39%, .40%,
and .40% of the Fund's average daily net assets. These expense levels
take into account Dreyfus's policy to voluntarily reimburse the Fund in
any year in which the Fund's expenses exceeded .40% of the Fund's
average net assets. Dreyfus has undertaken to maintain this expense
reimbursement policy absent 180 days notice to the Fund's shareholders
of any change in the policy.
8. The proposed substitution will be effected by redeeming the
shares of the Dreyfus Fund held by the Dreyfus Subaccounts,
transferring the cash values of Affected Contractholders from the
Dreyfus Subaccounts to the Index 500 Subaccounts, and then purchasing
shares of the Index 500 Portfolio. The Dreyfus Subaccounts would then
be eliminated. All redemptions of shares of the Dreyfus Fund and
purchases of shares of the Index 500 Portfolio will be effected in
compliance with Rule 22c-1 under the 1940 Act. The substitution will be
at net asset value of the respective shares, without the imposition of
any transfer, sales, or similar charge. There will be no change in the
amount of any Affected Contractholder's investment after the
substitution.
Applicants' Legal Analysis
1. Section 26(b) 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(b) provides that
the Commission will approve a substitution if it is consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the 1940 Act. The purpose of Section 26(b) is to
protect the expectation of investors in a unit investment trust that
the unit investment trust will accumulate the shares of a particular
issuer and to prevent unscrutinized substitutions which might, in
effect, force the contractholders, dissatisfied with the substituted
security, to redeem their shares, thereby incurring either a loss of
the sales load deducted from initial proceeds, an additional sales load
upon reinvestment of the redemption proceeds, or both.
2. Applicants request that the Commission issue an order pursuant
to Section 26(b) of the 1940 Act to permit the Applicant Accounts to
substitute securities of the Index 500 Portfolio for securities of the
Dreyfus Fund.
3. Applicants submit that the proposed substitution meets the
standard enunciated in Section 26(b), and further that, if implemented,
the substitution would not raise any of the concerns that Congress
sought to address when the 1940 Act was amended to include the
provision. Applicants further submit that the substitution will not
result in the type of costly forced redemption that Section 26(b) was
intended to guard against and is consistent with the protection of
investors and the purposes fairly intended by the 1940 Act.
4. Applicants submit that the investment objective, policies, and
operating expenses of the Index 500 Portfolio and the Dreyfus Fund are
substantially the same or comparable. Applicants state that the Index
500 Portfolio is large enough to provide the portfolio diversification
necessary to decrease investment risk and to provide the economies of
scale that may benefit the Affected Contractholders, as well as other
Subject Contractholders.
5. Applicants represent that AVLIC will bear the costs of the
proposed substitution, including legal, accounting, and brokerage fees,
and Affected Contractholders will not incur any fees or charges as a
result of the substitution. Applicants also represent that the
substitution will not impose any tax liability on Affected
Contractholders or raise the level of fees and charges currently paid
by Affected Contractholders. Applicants further represent that the
rights of affected Contractholders and AVLIC's obligations under any of
the Subject Contracts will also not change.
6. Applicants represent that as soon as reasonably practicable
after the requested order is issued, AVLIC will send to the Affected
Contractholders a written notice (``Notice'') describing the proposed
substitution, including the date on which the substitution will take
effect. The Notice will advise Affected Contractholders that either
before or within thirty days from the date on which the substitution
occurs, they may transfer all substituted assets to other subaccounts.
Applicants also represent that any transfer of cash values in the
Dreyfus Subaccounts that occurs either prior to, or within the thirty
days, after the substitution will not be treated as a transfer that may
be restricted because of earlier transfers between subaccounts.
Applicants further represent that no transfer charge is currently in
effect, and none will be imposed before the end of the thirty-day
period.
Conclusion
For the reasons summarized above, Applicants assert that the
requested order approving the proposed substitution is consistent with
the protection of investors and the policy and provisions of the 1940
Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4386 Filed 2-21-97; 8:45 am]
BILLING CODE 8010-01-M
