[Federal Register Volume 66, Number 37 (Friday, February 23, 2001)]
[Notices]
[Pages 11336-11341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-4496]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-24858; File No. 812-12188]


Lincoln Benefit Life Company, et al.

February 16, 2001.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application for an order pursuant to section 26(b) of 
the Investment Company Act of 1940 (the ``1940 Act'').

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    Summary of Application: Applicants seek an order to permit the 
substitution of shares of certain management investment companies for 
shares of certain other management investment companies held by Lincoln 
Benefit Life Variable Annuity Account (``VA Account'') and Lincoln 
Benefit Life Variable Life Account (``VL Account'').
    Applicants: Lincoln Benefit Life Company (``Lincoln Benefit''), VA 
Account and VL Account (together, the ``Separate Account Applicants''), 
and IAI Retirement Funds, Inc. (``IAI Applicant'').
    Filing Date: The application was filed on July 25, 2000, and 
amended and restated on February 7, 2001.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request

[[Page 11337]]

a hearing by writing to the Secretary of the SEC and serving Applicants 
with a copy of the request, personally or by mail. Hearing requests 
should be received by the SEC by 5:30 p.m. on March 13, 2001, and 
should be accompanied by proof of service on the 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 may request 
notification of a hearing by writing to the Secretary of the SEC.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W. Washington, D.C. 
20549-0609. Applicants, c/o Carol Watson, Esq., General Counsel, 
Lincoln Benefit Life Insurance Company, 2940 South 84th Street, 
Lincoln, Nebraska 68506. Copies to Jorden Burt Boros Ciccehetti 
Berenson & Johnson, LLP, 1025 Thomas Jefferson Street, N.W., Suite 400 
East, Washington, D.C. 20007-0806, Attention: Joan E. Boros, Esq.

FOR FURTHER INFORMATION CONTACT: Joyce M. Pickholz, Senior Counsel, or 
Keith E. Carpenter, 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 SEC, 450 Fifth Street, N.W., Washington, 
DC 20549 (tel. (202) 942-8090).

Applicants' Representations

    1. Lincoln Benefit is a stock life insurance company organized 
under the laws of the state of Nebraska in 1938. Lincoln Benefit is an 
indirect wholly-owned subsidiary of the Allstate Corporation.
    2. The VA Account and the VL Account are segregated asset accounts 
of Lincoln Benefit. Lincoln Benefit established the VA Account and the 
VL Account in 1992, in accordance with the laws of the state of 
Nebraska. The VA Account and the VL Account are registered as unit 
investment trusts under the 1940 Act. Lincoln Benefit issues certain 
variable annuity contracts through the VA Account and variable life 
insurance policies through the VL Account (together, ``Contracts''). 
The variable interests under the Contracts are registered with the SEC 
under the Securities Act of 1933 (the ``1933 Act'').
    3. The IAI Applicant was organized as a Minnesota corporation on 
September 16, 1993. The IAI Applicant currently issues shares in three 
investment portfolios: IAI Regional Portfolio, IAI Balanced Portfolio, 
and IAI Reserve Portfolio (collectively the ``Replaced Portfolios''). 
Shares of each of the Replaced Portfolios were sold only to the 
Separate Account Applicants for the purpose of funding certain 
Contracts. The IAI Applicant is registered as an open-end management 
investment company under the 1940 Act and its shares are registered as 
securities under the 1933 Act. The Replaced Portfolios are managed by 
Investment Advisors, Inc. (``IAI''). IAI is not affiliated with 
Lincoln.
    4. Lincoln Benefit, on behalf of the Separate Account Applicants, 
proposes to substitute Class A shares of the Bond Portfolio of the 
Scudder Variable Life Investment Fund (``SVLIF'') for shares of the IAI 
Reserve Portfolio. SVLIF was organized as a Massachusetts business 
trust on July 16, 1985. It offers its shares in nine series and two 
classes. Class A Shares, which the Separate Account Applicants 
purchase, are offered at net asset value and are not subject to Rule 
12b-1 fees. SVLIF is registered as an open-end management investment 
company under the 1940 Act, and its shares are registered as securities 
under the 1933 Act. Both classes of shares are sold only to insurance 
company separate accounts to fund variable life insurance policies and 
variable annuity contracts. Scudder Kempter Investments, Inc. serves as 
investment adviser to, among others, the SVLIF Bond Portfolio.
    5. Lincoln Benefit, on behalf of the Separate Account Applicants, 
also proposes to substitute Institutional Class shares of the Balanced 
Portfolio of the Janus Aspen Series (``JAS'') for shares of the IAI 
Balanced Portfolio, and Institutional Class shares of the JAS Growth 
Portfolio for shares of the IAI Regional Portfolio. JAS was organized 
as a Delaware business trust on September 13, 1993. It offers its 
shares in thirteen portfolios and two or three classes, depending on 
the portfolio. Institutional Shares, which the Separate Account 
Applicants purchase, are offered at net asset value and are not subject 
to Rule 12b-1 fees. Institutional Shares are sold to insurance company 
separate accounts to fund variable life insurance policies and variable 
annuity contracts and to certain qualified plans. JAS is registered as 
an open-end management investment company under the 1940 Act and its 
shares are registered as a securities under the 1933 Act. Janus Capital 
serves as investment adviser to, among others, the JAS Balanced 
Portfolio and the JAS Growth Portfolio. (The SVLIF Bond Portfolio, JAS 
Balanced Portfolio, and JAS Growth Portfolio, are referred to 
collectively as the ``Replacement Portfolios''.)
    6. IAI has announced publicly that a management team led by its 
president and chief investment officer has agreed in principle to 
acquire most of the business of IAI from its parent. In connection with 
this transaction, IAI is exiting the mutual fund business and the IAI 
Applicant has decided to discontinue making the Replaced Portfolios 
available as underlying investment options for variable insurance 
products. The IAI Applicant intends to liquidate the Replaced 
Portfolios as soon as possible after a substitution order is obtained 
from the SEC.
    7. The IAI Applicant wishes to close the Replaced Portfolios 
primarily because IAI is exiting the mutual fund business. Because the 
Replaced Portfolios have not attracted sufficient Contract owner 
(``Owner'') interest, IAI has suffered annual operating losses on the 
Replaced Portfolios and has needed to provide continual fee and expense 
waivers for the IAI Reserve Portfolio since its inception. In addition, 
the Replaced Portfolios are not attracting meaningful asset growth and 
IAI does not foresee significant future growth in the Replaced 
Portfolios. The small size of the Replaced Portfolios also makes it 
difficult to manage their assets efficiently.
    8. Lincoln Benefit has determined that in light of the impending 
closure of the Replaced Portfolios, it would be best for the company 
and the Owners to substitute the shares of the Replaced Portfolios with 
shares of other mutual funds having similar objectives that are 
currently available under the Contracts. Accordingly, Applicants 
request the SEC's approval to effect the following substitutions 
(collectively referred to as the ``Substitutions'') :
    (a) shares of SVLIF Bond Portfolio (Class A) for shares of IAI 
Reserve Portfolio;
    (b) shares of JAS Balanced Portfolio (Institutional Class) for 
shares of IAI Balanced Portfolio; and
    (c) shares of JAS Growth Portfolio (Institutional Class) for shares 
of IAI Regional Portfolio. (The SVLIF Bond Portfolio, JAS Balanced 
Portfolio, and JAS Growth Portfolio are referred to collectively as the 
``Replacement Portfolios''.)
    9. Lincoln Benefit will redeem for cash all of the shares of each 
Replaced Portfolio that it currently holds on behalf of the Separate 
Account Applicants at the close of business on the date selected for 
the Substitutions. Lincoln Benefit, on behalf of each Separate Account 
Applicant, will

[[Page 11338]]

simultaneously place a redemption request with each Replaced Portfolio 
and a purchase order with the corresponding Replacement Portfolio, so 
that each purchase will be for the exact amount of the redemption 
proceeds. As a result, at all times monies attributable to Owners then 
invested in the Replaced Portfolios will remain fully invested and will 
result in no change in the amount of any Owner's contract value, death 
benefit or investment in the applicable Separate Account Applicant.
    10. The full net asset value of the redeemed shares held by the 
Separate Account Applicants will be reflected in the Owners' 
accumulation unit or annuity unit values following the Substitutions. 
Lincoln Benefit and IAI have undertaken to assume all transaction costs 
and expenses relating to the Substitutions, including any direct or 
indirect costs of liquidating the assets of the Replaced Portfolios, so 
that the full net asset value of redeemed shares of the Replaced 
Portfolios held by the Separate Account Applicants will be reflected in 
the Owners' accumulation unit or annuity unit values following the 
Substitutions.
    11. Applicants anticipate that until the Substitutions occur, IAI 
will conduct the trading of portfolio securities in accordance with the 
investment objectives and strategies stated in the Replaced Portfolios' 
prospectuses and in a manner that provides for the anticipated 
redemptions of shares held by the Separate Account Applicants.
    12. As part of the Substitutions, Lincoln Benefit will combine the 
sub-accounts of the Separate Account Applicants currently invested in 
the Replaced Portfolios with the sub-accounts currently invested in the 
corresponding Replacement Portfolios. Applicants state that each of the 
Contracts gives Lincoln Benefit the right to eliminate or add sub-
accounts, combine two or more sub-accounts, or substitute one or more 
underlying mutual funds or portfolios for others in which one or more 
sub-accounts are invested. These contractual provisions have also been 
disclosed in the prospectuses or statements of additional information 
relating to the contract. Lincoln Benefit will schedule the 
Substitutions to occur after the issuance of the requested order and 
any required state insurance department approvals.
    13. Applicants represent that affected Owners will not incur any 
fees or charges as a result of the Substitutions, nor will the rights 
or obligations of Lincoln Benefit under the Contracts be altered in any 
way. The proposed Substitutions will not have any adverse tax 
consequences to Owners. The proposed Substitutions will not cause 
Contract fees and charges currently being paid by existing Owners to be 
greater after the proposed Substitutions than before the proposed 
Substitutions. The proposed Substitutions will not be treated as 
transfers for the purpose of assessing transfer charges. Lincoln 
Benefit will not, with respect to shares substituted, exercise any 
right it may have under the Contracts to impose additional restrictions 
on transfers for a period of at least 30 days following the proposed 
Substitutions.
    14. Lincoln Benefit has supplemented the prospectuses for the 
Contracts to reflect the Substitutions. Within five days after the 
Substitutions, Lincoln Benefit will send to Owners written notice of 
the Substitutions, identifying the shares of the Replaced Portfolios 
that have been eliminated and the shares of the Replacement Portfolios 
that have been substituted. Lincoln Benefit will include in such 
mailing the applicable prospectus supplement for the Contracts of the 
Separate Account Applicants describing the Substitutions. Lincoln 
Benefit does not intend to mail a copy of the prospectus for the 
Replacement Portfolios to the Owners, because they already will have 
received a copy of those prospectuses in the ordinary course. Owners 
will be advised in the Notice that for a period of thirty-one days from 
the mailing of the Notice (the ``Free Transfer Period''), Owners may 
transfer all assets, as substituted, to any other available subaccount 
without limitation or charge. In addition, Owners of VA Contracts, who 
as a result of the Substitutions are receiving variable annuity 
payments based on the Replacement Portfolios, will be permitted during 
the Free Transfer Period to transfer the substituted amounts to other 
sub-accounts, without limitation or charge, notwithstanding any 
limitation on such transfers in the variable annuity Contracts.

Applicants' Legal Analysis

    1. Section 26(b) of the 1940 Act provides that ``[i]t 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 [SEC] shall have approved such 
substitution.'' Section 26(b) of the 1940 Act was enacted as part of 
the Investment Company Act Amendments of 1970. Prior to the enactment 
of these amendments, a depositor of a unit investment trust could 
substitute new securities for those held by the trust by notifying the 
trust's security holders of the substitution within five (5) days after 
the substitution. In 1966, the SEC, concerned with the high sales 
charges then common to most unit investment trusts and the 
disadvantageous position in which such charges placed investors who did 
not want to remain invested in the substituted security, recommended 
that Section 26 be amended to require that a proposed substitution of 
the underlying investments of a trust receive prior SEC approval.
    2. Applicants' submit that the purposes, terms, and conditions of 
the Substitution are consistent with the principles and purposes of 
Section 26(b) and do not entail any of the abuses that Section 26(b) is 
designed to prevent. Owners will be assessed no charges whatsoever in 
connection with the Substitutions and their annual fund expense ratios 
are expected to decrease, in most cases significantly. In addition, to 
the extent an Owner does not wish to participate in the Substitutions, 
he or she is free to transfer to any other option available under the 
relevant Contract prior to the Substitutions and after the 
Substitutions without any transfer fee. Moreover, as described below, 
Owners will be substituted into a Replacement Portfolio whose 
investment objectives, policies and expenses are substantially similar 
or identical in all material respects to those of the Replaced 
Portfolio.
    3. Applicants submit that the Substitutions do not present the type 
of costly forced redemption or other harms 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 for the 
following reasons:
    (a) the Substitutions will continue to fulfill Owners' objectives 
and risk expectations, because the SVLIF Bond Portfolio and JAS 
Balanced Portfolio have objectives, policies, and restrictions 
substantially identical in all material respects to the objectives, 
policies, and restrictions of the corresponding Replaced Portfolios 
and, of the Portfolios currently available under the Contracts, the JAS 
Growth Portfolio has investment objectives, policies and restrictions 
most similar to those of the IAI Regional Portfolio;
    (b) after receipt of the Notice informing an Owner of the 
Substitutions, an Owner may request that his or her assets be 
reallocated to another sub-account at any time during the Free Transfer 
Period without any limitation or charges. This right will be granted to 
Owners of VA Contracts who are receiving variable payments based on the 
Replaced Portfolios, even though the relevant VA Contracts usually do 
not permit transfer during the Annuity

[[Page 11339]]

Period. The Free Transfer Period provides sufficient time for Owners to 
consider their reinvestment options;
    (c) the Substitutions will be at net asset value of the respective 
shares, without the imposition of any transfer or similar charge;
    (d) Lincoln Benefit and IAI have undertaken to assume all expenses 
and transaction costs, including, but not limited to, legal and 
accounting fees and any brokerage commissions, in connection with the 
Substitutions;
    (e) the Substitutions will in no way alter the contractual 
obligations of Lincoln Benefit or the rights and privileges of Owners 
under the Contracts;
    (f) the Substitutions will in no way alter the tax benefits to 
Owners;
    (g) the Substitutions are expected to confer certain economic 
benefits on Owners by virtue of enhanced asset size and lower expenses, 
as described below; and
    (h) at the time of the Substitutions, the aggregate fees and 
expenses under each Replacement Portfolio are expected to be lower than 
those of the corresponding Replaced Portfolio. Applicants agree that 
Lincoln Benefit will not increase the contract charges or the total 
separate account charges (net of any waiver or reimbursement) of the 
sub-accounts that invest in the Replacement Portfolios for those 
Contract Owners affected by the Substitutions for a period of two years 
from the Substitution Date. Lincoln Benefit further agrees that if the 
total operating expenses for any Replacement Portfolio (taking into 
account any expense waiver or reimbursement) for any fiscal quarter for 
the two-year period following the Substitution Date exceed on an 
annualized basis the relevant Maximum Portfolio Expense Limit as stated 
below (which is the net expense ratio for each corresponding Replaced 
Portfolio for the fiscal year ended December 31, 1999), Lincoln Benefit 
will make a corresponding reduction (through waiver or reimbursement) 
in the separate account expenses for that quarter of the sub-account 
that invests in such Replacement Portfolio for Contract Owners who were 
affected by the Substitution. The Maximum Portfolio Expense Limits for 
the Replacement Portfolios are: 1.01% for the SVLIF Bond Sub-account; 
0.97% for the JAS Balanced Sub-account; and 0.88% for the JAS Growth 
Sub-account.
    4. Applicants assert that the Replacement Portfolios and the 
Replaced Portfolios will have investment objectives and policies that 
are substantially the same or identical in all material respects.
    5. IAI Reserve Portfolio's investment objective is to provide high 
levels of capital stability and liquidity and, to the extent consistent 
with these primary objectives, a high level of current income. The IAI 
Reserve Portfolios pursues its objectives by investing primarily in a 
diversified portfolio of investment grade debt securities. In order to 
achieve the objectives of capital stability and liquidity, the IAI 
Reserve Portfolio maintains a dollar weighted average maturity of its 
investment portfolio of twenty-five (25) months or less.
    6. SVLIF Bond Portfolio's investment objective seeks to provide a 
high level of income consistent with ha high quality portfolio of debt 
securities. The SVLIF Bond Portfolio pursues its objective by investing 
at least 65% of its assets in bond. The SVLIF Bond Portfolio is 
permitted to invest in corporate bonds, U.S. government and agency 
bonds, mortgage and asset-backed securities and foreign debt 
securities. Under normal conditions, the SVLIF Bond Portfolio invests 
at least 65% of its assets in bonds rated in the top three grades of 
credit quality. While the SVLIF Bond Portfolio may invest in bonds of 
any maturity, its managers intend to seek to keep the average duration 
between four to six years.
    7. IAI Balanced Portfolio's investment objective is to maximize 
total return. The IAI Balanced Portfolio pursues its objective by 
investing in a broadly diversified portfolio of stocks and debt 
securities. The IAI Balanced Portfolio's investments in common stocks 
are primarily in large capitalization companies ($1 billion 
capitalization at the time of purchase) that IAI believes have solid 
competitive advantages and extremely high financial quality at 
attractive fundamental valuations. The IAI Balanced Portfolio is also 
permitted to invest in all types of debt securities, including 
securities issued by the U.S. government or its agencies, mortgage and 
asset-backed securities, zero coupon securities, payment-in-kind bonds 
and high-yield, non-investment grade debt securities commonly referred 
to as ``Junk Bonds.''
    8. JAS Balanced Portfolio's investment objective is to seek long-
term capital growth, consistent with preservation of capital and 
balanced by current income. Under normal conditions, JAS Balanced 
Portfolio pursues its objective by investing 40-60% of its assets in 
common stocks selected for their growth potential and 40-60% its assets 
in all types of debt and equity securities which Janus Capital believes 
have income potential, including investing up to 35% of its assets in 
Junk Bonds. JAS Balanced Portfolio is also permitted to invest in 
foreign securities, indexed/structured securities, options, futures, 
swaps and special situations.
    9. IAI Regional Portfolio's investment objective is capital 
appreciation. The IAI Regional Portfolio pursues its investment 
objective by investing primarily in the common stocks of issuers 
headquartered in Minnesota, Wisconsin, Iowa, Illinois, Nebraska, 
Montana, North Dakota and South Dakota.
    10. JAS Growth Portfolios investment objective is to seek long-term 
capital growth in a manner consistent with the preservation of capital. 
The JAS Growth Portfolio pursues its investment objective by investing 
in the common stocks of issuers, of any size, selected by Janus Capital 
for their growth potential. The LAS Growth Portfolio generally invests 
in larger more established companies. The JAS Growth Portfolio is also 
permitted to invest up to 35% of its assets in Junk Bonds as well as 
foreign equity securities, debt securities, indexed/structured 
securities, options, futures, swaps and special situations. The JAS 
Growth Portfolio is also permitted to invest in derivatives for hedging 
and non-hedging purposes.
    11. According to the Applicants, no other investment option 
currently available under the Contracts has the same regional focus as 
the IAI Regional Portfolio. Further, Applicants state that they are not 
aware of any other mutual fund available for purchase by insurance 
company separate accounts that has that regional focus. From among the 
current investment options under the Contracts, JAS Growth Portfolio is 
the nearest math to the IAI Regional Portfolio, because both Portfolios 
have capital growth as a primary investment objective and both 
Portfolios use growth potential as a primary criteria in selecting 
stock in which to invest.
    12. Accordingly, Lincoln Benefit has specifically determined that 
the Replacement Portfolios are appropriate investment vehicles for 
Owners who have allocated value to the Replaced Portfolios and that the 
Substitutions will be consistent with Owners' investment objectives and 
risk expectations.
    13. Applicants submit that the fees and expenses of the Replacement 
Portfolios will be less than the Replaced Portfolios' fees and 
expenses, even though Lincoln Benefit is entitled to receive a service 
fee from the investment advisers for each of the

[[Page 11340]]

Replacement Portfolios in return for providing certain administrative 
services and Lincoln Benefit does not receive any such fees from IAI, 
the adviser to the Replaced Portfolios. Accordingly, Applicants assert 
that the proposed Substitution poses no concerns in connection with the 
fees and expenses that will arise therefrom.

                           Expense Ratios \1\
              [As a percentage of average daily net assets]
------------------------------------------------------------------------
                                                                 (In
                                                               percent)
------------------------------------------------------------------------
IA1 Reserve Portfolio \2\:
  Management Fee...........................................         0.45
  Other Expenses...........................................         1.21
  Total Expenses (before waiver)...........................         1.66
  Total Expenses (after waiver)............................         1.01
IAI Balanced Portfolio \3\:
  Management Fee...........................................         0.65
  Other Expenses...........................................         0.34
  Total Expenses (before waiver)...........................         0.99
  Total Expenses (after waiver)............................        0.977
IAI Regional Portfolio:
  Management Fee...........................................         0.65
  Other Expenses...........................................         0.23
  Total Expenses...........................................         0.88
SVLIF Bond Portfolio:
  Management Fee...........................................        0.475
  Other Expenses...........................................        0.095
  Total Expenses...........................................         0.57
  Total Expenses...........................................         0.57
JAS Balanced Portfolio:
  Management Fee...........................................         0.65
  Other Expenses...........................................         0.02
  Total Expenses...........................................         0.67
  Total Expenses...........................................         0.67
JAS Growth Portfolio:
  Management Fee...........................................         0.65
  Other Expenses...........................................         0.02
  Total Expenses...........................................        0.67
------------------------------------------------------------------------
\1\ The Expense Ratios for the Replaced Portfolios and the SVLIF Bond
  Portfolio are based on expenses for the fiscal year ending December
  31, 1999. The Expense Ratios for the JAS Portfolios are based on
  expenses for the fiscal year ending December 31, 1999, restated to
  show the effect of an amendment to the investment advisory agreement
  reducing the management fee for both Portfolios. The actual expense
  ratios for each JAS Portfolio in the fiscal year ending December 31,
  1999 was 0.69% of average daily net assets, and the actual management
  fee was 0.67 of average daily net assets. The reduction in the
  management fee became effect on May 1, 2000.
\2\ IAI voluntarily waived certain expenses for the IAI Reserve
  Portfolio and the IAI Balanced Portfolios in the fiscal year ending
  December 31, 1999, and intends to continue to waive expenses in the
  current fiscal year.
14. Each of the Replacement Portfolios has significantly more assets
  than the corresponding Replaced Portfolio. It is expected that the
  lower expense ratios should continue as a result of the significantly
  greater assets of the Replacement Portfolios.
\3\ See note 2 supra.


                            Total Net Assets
                        [As of December 31, 1999]
------------------------------------------------------------------------
                                                                   In
                                                                millions
------------------------------------------------------------------------
Replaced Portfolios \1\:
  IAI Reserve................................................        0.6
  IAI Balanced...............................................        3.8
  IAI Regional...............................................       13.4
Replacement Portfolios:
  SVLIF Bond.................................................       94.0
  JAS Balanced...............................................    2,453.1
  JAS Growth.................................................   2,942.7
------------------------------------------------------------------------
\1\ As of December 31, 2000, the total Net Assets (unaudited) of the
  Replaced Portfolios had declined to the following amounts: for IAI
  Reserve Portfolio, $0.5 million; for IAI Balanced Portfolio, $2.8
  million; for IAI Regional Portfolio, $8.2 million.

    15. As shown in the following table, the total assets currently 
invested under the Contracts in the sub-accounts investing in the 
Replacement Portfolios are significantly greater than the total assets 
in the sub-accounts investing in the Replaced Portfolios.

                Total Assets Invested Under the Contracts
                  [As of December 31, 2000 (unaudited)]
------------------------------------------------------------------------
                                                                   In
                                                                millions
------------------------------------------------------------------------
Replaced Portfolios:
  IAI Reserve................................................        0.5
  IAI Balanced...............................................        2.8
  IAI Regional...............................................        8.2
Replacement Portfolios:
  SVLIF Bond.................................................        5.9
  JAS Balanced...............................................       56.2
  JAS Growth.................................................      101.3
------------------------------------------------------------------------

    16. The total returns of the Replacement Portfolios generally have 
been higher than the returns of corresponding Replaced Portfolios. 
Applicants submit that while there is no guarantee that past 
performance will continue, the return data provided support their view 
that the Substitutions are not expected to give rise to diminution in 
performance or other adverse effects on Contract values.

                                          Average Annual Total Returns
                                            [As of December 31, 1999]
----------------------------------------------------------------------------------------------------------------
                                             One year    Five years
                Portfolio                      (In          (In          Ten years of since inception  (In
                                             percent)     percent)                    percent)
---------------------------------------------------------------------------------------------------------------
IAI Reserve..............................         2.89         4.60  4.40 (since 4/7/94)......................
SVLIF Bond...............................        -0.95         6.95  7.37 (since years).......................
IAI Balanced.............................         3.87        11.62  10.150 (since 2/3/94)....................
JAS Balanced.............................        26.76        24.68  20.62 (since 9/1/93).....................
IAI Regional.............................        18.37        15.29  12.93 (since 1/31/91)....................
JAS Growth...............................        43.98        29.89  24.28 (since 9/13/93)....................
----------------------------------------------------------------------------------------------------------------


[[Page 11341]]

Conclusion

    For the reasons summarized above, Applicants assert that the 
requested order meets the standards set forth in section 26(b) of the 
1940 Act, and should, therefore, be granted.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-4496 Filed 2-22-01; 8:45 am]
BILLING CODE 8010-01-M