Federal Register / Vol. 71, No.

178 / Thursday, September 14, 2006 / Notices 54313

where they will be processed through Hearing or Notification of Hearing: An to payment under, those Contracts.
security prior to entering GSFC. Please order granting the application will be Consequently, such assets in each
provide the appropriate data, via fax issued unless the Commission orders a Account equal to the reserves and other
301–286–1230, noting at the top of the hearing. Interested persons may request liabilities with respect to such Account
page ‘‘Public Admission to the NASA a hearing by writing to the Secretary of are not chargeable with liabilities
Advisory Council Meeting at GSFC’’. the Commission and serving the arising out of any other business that
For security questions, please call Applicants with a copy of the request in NLIC may conduct. Income, gains and
Chuck Lombard at 301–286–1109. person or by mail. Hearing requests losses, realized and unrealized, from
It is imperative that the meeting be must be received by the Commission by assets allocated to each Account are
held on this date to accommodate the 5:30 p.m., on October 2, 2006 and credited to or charged against that
scheduling priorities of the key should be accompanied by proof of Account without regard to the other
participants. service of Applicants in the form of an income, gains or losses of NLIC. Each
affidavit or, for lawyers, a certificate of Account is a ‘‘separate account’’ as
P. Diane Rausch,
service. Hearing requests should state defined by Rule 0–1(e) under the Act
Advisory Committee Management Officer, the nature of the writer’s interest, the (File No. 811–08015 for the Annuity
National Aeronautics and Space
reason for the request and the issues Account and File No. 811–09044 for the
Administration.
contested. Persons may request Life Account).
[FR Doc. E6–15272 Filed 9–13–06; 8:45 am]
notification of a hearing by writing to 3. The Annuity Account is divided
BILLING CODE 7510–13–P
the Secretary of the Commission. into forty-nine subaccounts. Each
ADDRESSES: Secretary, Securities and subaccount invests exclusively in a
Exchange Commission, 100 F Street, corresponding series of one of thirteen
SECURITIES AND EXCHANGE NE., Washington, DC 20549–0609. management investment companies.
COMMISSION Applicants, c/o Kerry A. Jung, Esq., The assets of the Annuity Account
Senior Counsel, National Life Insurance support variable annuity contracts, and
[Rel. No. IC–27477; File No. 812–13244] Company, One National Life Drive, interests in the Account offered through
Montpelier, VT 05604. the Contracts have been registered
National Life Insurance Company, et al.
FOR FURTHER INFORMATION CONTACT: under the Securities Act of 1933, as
September 7, 2006. Curtis A. Young, Senior Counsel, or amended (‘‘1933 Act’’) on Form N–4
AGENCY: Securities and Exchange Harry Eisentein, Branch Chief, Office of (File No. 333–19583).
Commission (‘‘SEC’’ or ‘‘Commission’’). Insurance Products, Division of 4. The Life Account is divided into
ACTION: Notice of application for an Invstmetn Management, at 202–551– one hundred and twenty-nine
order pursuant to Section 26(c) of the 6795. subaccounts. Each subaccount invests
Investment Company Act of 1940, as SUPPLEMENTARY INFORMATION: The
exclusively in shares representing an
amended (the ‘‘Act’’), approving a following is a summary of the amended interest in a corresponding series of one
certain substitution of securities. and restated application. The complete of thirteen management investment
application may be obtained for a fee companies. The assets of the Life
Applicants: National Life Insurance from the Public Reference Room, 100 F Account support variable life insurance
Company (‘‘NLIC’’), National Variable street, NE., Washington, DC 20549, or by contracts, and interests in this Account
Annuity Account II (‘‘Annuity calling (202) 551–8090. offered through the Contracts have been
Account’’), and National Variable Life registered under the 1933 Act on Form
Insurance Account (‘‘Life Account’’) Applicants’ Representations N–6 (File Nos. 33–91938, 333–44723,
(NLIC, Annuity Account and Life 1. NLIC is a stock life insurance and 333–67003).
Account collectively, the ‘‘Applicants’’). company, all the outstanding stock of 5. The Sentinel Variable Products
Summary of Application: Applicants which is indirectly owned by National Trust was organized as a business trust
have submitted an application for an Life Holding Company, a mutual in Delaware on March 14, 2000, and is
order of the Commission, pursuant to insurance holding company. All owners currently registered under the Act as an
Section 26(c) of the Act, permitting of NLIC contracts, including the open-end diversified management
NLIC to substitute securities issued by Contracts, are voting members of investment company. It is a series
Fidelity VIP Index 500 Portfolio National Life Holding Company. NLIC is investment company as defined by Rule
(‘‘Fidelity Fund’’), a series of Variable authorized to transact life insurance and 18f–2 under the Act.
Insurance Products Fund II, or DWS annuity business in Vermont and 50 6. The Sentinel Fund’s investment
Equity Index 500 VIP (‘‘DWS Fund’’), a other jurisdictions. For purposes of the advisor, Sentinel Asset Management,
series of DWS Investments VIT Funds, Act, NLIC is the depositor and sponsor Inc. (‘‘SAM’’), is an affiliated person of
to support variable annuity contracts or of the Accounts as those terms have NLIC because it is controlled by NLIC.
variable life insurance contracts been interpreted by the Commission 7. The Variable Insurance Products
(separately, ‘‘Contract’’, collectively, with respect to variable life insurance Fund II was created under an initial
‘‘Contracts’’) issued by NLIC, for and variable annuity separate accounts. declaration of trust dated March 21,
securities issued by Sentinel Variable 2. NLIC established the Annuity 1988, and is currently registered under
Products Growth Index Fund (‘‘Sentinel Account on November 1, 1996 and the the Act as an open-end management
Fund’’), a series of Sentinel Variable Life Account on February 1, 1985, as investment company. It is a series
Products Trust, held by both the segregated investment accounts under investment company as defined by Rule
Annuity Account or the Life Account Vermont law. Under Vermont law, the 18f–2 under the Act.
(individually, ‘‘Account’’ and assets of each Account attributable to 8. The DWS Investments VIT Funds
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collectively, ‘‘Accounts’’). the Contracts through which interests in was organized on January 18, 1996,
Filing Date: The application was filed that Account are issued are owned by under the laws of the Commonwealth of
on October 28, 2005, amended on NLIC but are held separately from all Massachusetts, and is currently
February 2, 2006, June 16, 2006, July 17, other assets of NLIC for the benefit of registered under the Act as an open-end
2006, and September 1, 2006. the owners of, and the persons entitled management investment company. SVIT

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 54314 Federal Register / Vol. 71, No. 178 / Thursday, September 14, 2006 / Notices

is a series investment company as prospectuses for the Contracts, NLIC subaccount invests may also impose its
defined by Rule 18f–2 under the Act. reserves the right to substitute shares of own redemption fees.
9. Neither NLIC nor the Accounts are one series of an investment company for 12. NLIC proposes to substitute (a)
affiliated with the Fidelity Fund or the shares of another series, including a The Fidelity Fund, which is currently
DWS Fund. In consideration for series of a different investment offered as an investment option, for the
administrative services provided by company. Sentinel Fund in the Annuity Account
NLIC to the Fidelity and DWS Funds, 11. Contract owners may transfer and the VariTrak and Sentinel Estate
NLIC is paid an annual fee of 0.05% and among the subaccounts of the Variable Provider products of the Life Account
0.13%, respectively, of each fund’s Account and, subject to certain and (b) the DWS Fund, which is
average net assets that are attributable to limitations, among the Variable currently offered as an investment
the Accounts. Account, the fixed account and the option, for the Sentinel Fund in the
10. The Contracts are flexible guaranteed accounts. Contract owners Sentinel Benefit Provider product of the
premium variable life insurance may transfer among the subaccounts of Life Account. NLIC believes that by
Contracts and individual flexible the Life Account and between the Life making the proposed substitution in
premium deferred variable annuity Account and NLIC’s general account, each of the Accounts they can better
Contracts. The Contracts provide for the where available. Currently there is no serve the interests of the Contracts
accumulation of values on a variable charge for transfers. However, NLIC owners.
basis, fixed basis, or both, during the reserves the right to assess a $25 charge 13. The investment objective and
accumulation period, and provide for each transfer in excess of twelve in principal investment strategies of each
settlement or annuity payment options any Contract year. Each series of an of the Sentinel Fund, the Fidelity Fund
on a fixed basis. In each of the investment company in which a and the DWS Fund are as follows:

Fund Objective Principal strategies

Sentinel Fund Seeks to match, as closely as possible Invests at all times at least 80% of its total assets in the common stocks of the
before expenses, the performance of companies that comprise the Index.
the S&P 500/ Citigroup Growth Index Normally intends to invest substantially all its total assets in these common stocks,
(‘‘Index’’), by investing in common in approximately the same weightings as the Index.
stocks of the companies comprising the May hold up to 20% of its assets in money market instruments and stock index op-
Index in approximately the same tions and futures, which it intends to buy, if at all, only in anticipation of buying
weightings as the Index. stocks. The Fund may not purchase or sell derivative instruments if, as a result,
the aggregate initial margin and options premiums required to establish these po-
sitions exceed 5% of the Fund’s total assets.
Fidelity Fund .. Seeks investment results that correspond Normally invests at least 80% of assets in common stocks included in the S&P
to the total return of common stocks 500.
publicly traded in the United States, as May buy and sell futures contracts, swaps, and exchange traded funds, to increase
represented by the S&P 500. or decrease the Fund’s exposure to changing security prices or other factors that
affect security values. The Fund will not purchase any option if, as a result, more
than 5% of its total assets would be invested in option premiums. Under normal
conditions, the Fund will not enter into any futures contract, option, or swap
agreement if, as a result, the sum of (i) the current value of assets hedged in the
case of strategies involving the sale of securities, and (ii) the current value of the
indices or other instruments underlying the fund’s other futures, options, or
swaps positions, would exceed 35% of the Fund’s total assets. These limitations
do not apply to options attached to, or acquired or traded together with their un-
derlying securities, and do not apply to securities that incorporate features similar
to futures, options or swaps.
Lends securities to earn income for the Fund.
DWS Fund ..... Seeks to replicate, as closely as possible, Investments at least 80% of its assets in the securities of the companies included
before the deduction of expenses, the in the Standard & Poor’s 500 Composite Stock Price Index (‘‘S&P 500 Index’’)
performance of the S&P 500. and derivative instruments such as futures contracts and options, relating to the
benchmark.
May not invest more than 15% of assets in options on securities indices and may
not invest more than 5% of assets in futures on securities indices or on options
on futures.
Invests in a statistically selected sample of the securities found in the S&P 500
Index, using a process known as ‘‘optimization.’’
May exclude or remove any S&P stock if its investment advisor believes that the
stock is illiquid or that the merit of the investment has been impaired by financial
conditions or other extraordinary events.
May purchase a stock not included in the S&P 500 Index when it is believed to be
a cost-efficient way of approximating the S&P 500 Index’s performance.
May hold assets in short-term debt securities or money market instruments for li-
quidity purposes.
My lend its investment securities up to 30% of its total assets.
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14. Projected advisory fees and fees and net expense ratios of the
expense ratios for the Fidelity Fund and Sentinel Fund as of December 31, 2005.
DWS Fund are lower than the advisory

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 Federal Register / Vol. 71, No. 178 / Thursday, September 14, 2006 / Notices 54315

EXPENSE RATIOS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2005
Total annual Waivers and re- New annual
Management fee Other expenses
Fund 12b–1 fee expense ratio imbursements expense ratio
(percent) (percent) (percent) (percent) (percent)

Sentinel Fund ................... 0.30 ............................ 1.59 1.89 11.29 0.60

Fidelity Fund .................... 0.10 0.25 0.00 0.35 ............................ 2 0.35

DWS Fund ....................... 0.19 ............................ 0.15 0.34 30.06 0.28

1 SAM and/or an affiliate has agreed to waive fees and/or reimbursement expenses so that the net annual expense ratio of the Sentinel Fund,
after expense offsets, is no more than 0.60% through December 31, 2006.
2 Fidelity management & Research Company (‘‘FMR’’) has contractually agreed to reimburse the Fidelity Fund to the extent that total operating
expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions and extraordinary expenses) as a percentage of av-
erage net assets exceed 0.35%. The expense limitation may not be increased without approval of the Fidelity Fund’s shareholders and board of
trustees. Therefore the expense limit is required by contact and is not voluntary on the Fidelity Fund manager’s part.
3 Effective September 19, 2005, the DWS Fund’s advisor contractually agreed to waive its fees and/or reimbursement expenses to the extent
necessary to limit all expenses to 0.28% for Class A Shares until April 30, 2009.

15. The Applicants note that the 500 Index, while the Sentinel Fund that is sufficiently similar to the
primary differences between the seeks to match only the Citigroup Sentinel Fund considering the benefits
Sentinel Fund and the Fidelity Fund are Growth portion of the S&P 500 Index, of the proposed substitution.
that (1) The Fidelity Fund seeks to (2) the DWS Fund may invest in 16. Applicants state that the Fidelity
match the S&P 500 index, while the securities other than those included in
and DWS Funds each have significantly
Sentinel Fund seeks to match only the the S&P 500 Index under certain
more assets than the Sentinel Fund. In
Citigroup Growth portion of the S&P cirucmstances in which the Sentinel
500 Index and (2) the Fidelity Fund may Fund could not and (3) DWS Fund may addition, each of the Fidelity and DWS
lend securuities while the Sentinel lend securities, while the Sentinel Fund Funds has also significantly
Fund does not. Applicants state the does not. While there are some outperformed the Sentinel Fund in the
primary difference between the Sentinel differences in these strategies, NLIC one and three year peiods ended June
Fund and the DWS Fund are that (1) believes that the Fidelity Fund and the 30, 2006 as well as the period since the
The DWS Fund seeks to match the S&P DWS Fund offer an investment strategy inception of the Sentinel fund.

PERFORMANCE AS OF JUNE 30, 2006

Since
1-year 3-year 5-year 10-year Since 11/30/00
Fund inception
(percent) (percent) (percent) (percent) percent)
(percent)

Sentinel Fund ........................................... 3.81 6.42 ¥0.26 (1 ) ¥3.36 3.36

Fidelity Fund ............................................ 8.57 11.04 2.27 8.05 10.26 8.76
DWS Fund ............................................... 8.34 10.91 2.18 (1) 4.64 0.76
1 Not applicable.

17. Supplements to the prospectus substitution will not cause the Contract under the insurance regulations in those
will advise Contract owners that they fees and charges currently being paid by states, Contract owners who are affected
are permitted from the date of the Contract owners to be greater than those by the substitutions may exchange their
supplement until the date of the being charged at the time of the Contracts for fixed-benefit life insurance
proposed substitution to make transfers substitution. The proposed substituting contracts or annuity contracts, as
of all amounts under the Contracts will not be treated as a transfer or applicable, issued by NLIC during the
invested in the Sentinel Fund exchange for purposes of assessing 60 days following the proposed
subaccount to another subaccount transfer charges or for determining the substitutions. A current prospectus for
available under the Contracts without number of remaining ‘‘free’’ transfers or the Fidelity Fund or DWS Fund, as
those transfers counting as ‘‘free’’ exchanges in a Contract year. applicable, each of which is a currently
transfers permitted under the Contracts 19. Within five days of the available investment option under the
at any time prior to the substitution. substitution, Contract owners affected applicable Contract, will precede or
18. The proposed substitution will by the substitution will be sent a written accompany the notice.
take place at relative net asset value notice informing them that the 20. NLIC will not receive, for three
with no change in the amount of any substitution was carried out and that for years from the date of the substitution,
Contract owner’s account value or death the next 30 days they may make any direct or indirect benefits from the
benefit or in the dollar value of any transfers of all accumulated or contract Fidelity Fund or the DWS Fund or their
Account. Contract owners will not incur value under a Contract invested in the respective advisors or underwriters or
any fees or charges as a result of the Fidelity Fund or DWS Fund subaccount, any of their respective affiliates in
proposed substitutions, nor will their as applicable, on the date of the notice connection with the assets attributable
rights or NLIC’s obligations under the to another subaccount available under to the Contracts, which in the aggregate
rwilkins on PROD1PC63 with NOTICES

Contracts be altered in any way. All the Contract without the transfers (including, without limitation, all
expenses incurred in connection with counting as part of the limited number advisory, 12b–1, shareholder servicing,
the proposed substitution is not of transfers permitted in a Contract year administration, marketing support or
expected to impose any tax liability on free of charge. The notice as delivered similar fees) is higher than the benefit
Contract owners. The proposed in certain states also may explain that, it would have received from the

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 54316 Federal Register / Vol. 71, No. 178 / Thursday, September 14, 2006 / Notices

Sentinel Fund or its advisor, opportunity to transfer amounts out of SECURITIES AND EXCHANGE
underwriter or affiliates absent any the Sentinel Fund, prior to the COMMISSION
waivers. substitution, or the Fidelity Fund or
21. Applicants state that the [Release No. 34–54410; File No. SR–
DWS Fund, as applicable, after the NYSEArca–2006–31]
substitution and selection of the Fidelity substitution, into any of the remaining
Fund and the DWS Fund was not subaccounts without cost or other Self-Regulatory Organizations; NYSE
motivated by any financial disadvantage. The proposed Arca, Inc.; Order Granting Approval of
consideration paid or to be paid to NLIC substitution, therefore, will not result in a Proposed Rule Change Amending
or its affiliates by the Fidelity Fund or Rules to Mandate Listed Companies
the type of costly forced redemption
the DWS Fund or their respective Become Eligible To Participate in a
which Section 26(c) was designed to
advisor, underwriters or affiliates. Direct Registration System
prevent.
Applicants’ Legal Analysis 7. The Applicants note that within September 7, 2006.
1. Applicants state that the proposed five days after the proposed
substitution is a substitution within the I. Introduction
substitution, Contract owners affected
meaning of Section 26(c) of the Act, by the substitution will be sent a written On June 19, 2006, NYSE Arca, Inc.
which requires the depositor of a notice informing them that the (‘‘NYSE Arca’’) filed with the Securities
registered unit investment trust holding substitution was carried out and that, and Exchange Commission
the securities of a single issuer to (‘‘Commission’’) proposed rule change
for the next 30 days, they may make one
receive commission approval before SR–NYSEArca–2006–31 pursuant to
transfer of all accumulated or contract
substituting the securities held by the Section 19(b)(1) of the Securities
value under a Contract invested in the Exchange Act of 1934 (‘‘Act’’).1 Notice
trust.
2. Applicants note that the Fidelity Fund or the DWS Fund, as of the proposal was published in the
prospectuses disclose that the Contracts applicable, on the date of the notice to Federal Register on July 18, 2006.2 One
expressly reserve for NLIC the right, another subaccount available under comment letter was received.3 For the
subject to compliance with applicable their Contract without the transfer reasons discussed below, the
law, to substitute shares of one series of counting as one of a limited number of Commission is granting approval of the
an investment company held by a transfers permitted in a Contract year proposed rule change.4
subaccount for another series, including free of charge.
II. Description
a series of a different investment 8. Applicants state the proposed
company, when, among other things, in substitution in also unlike the type of The Direct Registration System
NLIC’s judgment the investment in such (‘‘DRS’’) allows an investor to establish
substitutions which Section 26(c) was
series is inappropriate. either through the issuer’s transfer agent
designed to prevent in that by
3. Applicants assert that the proposed or through the investor’s broker-dealer a
purchasing a Contract, Contract owners
substitution will provide Contract book-entry position on the books of the
select much more than a particular issuer and to electronically transfer her
owners a sufficiently similar investment investment company in which to invest
strategy considering the opportunity for position between the transfer agent and
their account values. They also select the broker-dealer of her choice through
lower expenses and greater economies
the specific type of insurance coverage a facility currently administered by The
of scale. In addition, Applicants
generally submit that the proposed offered by NLIC under their Contract as Depository Trust Company (‘‘DTC’’).5
substitution meets the standards that the well as numerous other rights and DRS, therefore, enables an investor to
Commission and its staff have applied privileges set forth in the Contract. have securities registered in her name
to similar substitutions that have been Contract owners may also have on the books of the issuer without
approved in the past. considered NLIC’s size, financial having a securities certificate issued to
4. Applicants anticipate that Contract condition, type and its reputation for her and to electronically transfer her
owners will be at least as well off with service in selecting their Contract. These
the proposed array of subaccounts factors will not change as a result of the 1 15 U.S.C. 78s(b)(1).
2 Securities Exchange Act Release No. 54126 (July
offered after the proposed substitution proposed substitution.
11, 2006), 71 FR 40768 (July 18, 2006) [File No. SR–
as they have been with the array of NYSEArca–2006–31].
Conclusion
subaccounts offered prior to the 3 Letter from Loren K. Hanson, Director of

substitution. Applicants’ assert that the Applicants submit that, for all the Investor Relations, to Nancy M. Morris, Secretary,
proposed substitution retains for Commission (August 15, 2006).
reasons stated above, the proposed 4 The Commission has also granted approval to
Contract owners the investment substitution is consistent with the similar rule changes submitted by the New York
flexibility that is a central feature of the protection of investors and the purposes Stock Exchange LLC (‘‘NYSE’’), American Stock
Contracts. fairly intended by the policy and Exchange LLC (‘‘Amex’’), and The NASDAQ Stock
5. Applicants assert that the proposed Market LLC (‘‘Nasdaq’’). Securities Exchange Act
provisions of the Act. Release Nos. 54289 (August 8, 2006), 71 FR 47278
substitution is not the type of
For the Commission, by the Division of (August 16, 2006) [File No. SR–NYSE–2006–29];
substitution which Section 26(c) was 54288 (August 8, 2006), 71 FR 47276 (August 16,
designed to prevent. Unlike traditional Investment Management, pursuant to 2006) [File No. SR–NASDAQ–2006–08]; and 54290
unit investment trusts where a depositor delegated authority. (August 8, 2006), 71 FR 47262 (August 16, 2006)
could only substitute an investment J. Lynn Taylor, [File No. SR–Amex–2006–40].
5 Currently, the only registered clearing agency
security in a manner that permanently Assistant Secretary. operating a DRS is DTC. For a detailed description
affected all the investors in the trust, the [FR Doc. 06–7641 Filed 9–13–06; 8:45 am] of DRS and the DRS facilities administered by DTC,
Contracts provide each Contract owner
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see Securities Exchange Act Release Nos. 37931

BILLING CODE 8010–01–M
with the right to exercise her or his own (November 7, 1996), 61 FR 58600 (November 15,
judgment and transfer accumulation and 1996), [File No. SR–DTC–96–15] (order granting
approval to establish DRS) and 41862 (September
contract values into other subaccounts. 10, 1999), 64 FR 51162 (September 21, 1999), [File
6. Applicants note that the Contracts No. SR–DTC–99–16] (order approving
will offer Contract owners an implementation of the Profile Modification System).

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