[Federal Register Volume 78, Number 79 (Wednesday, April 24, 2013)]
[Notices]
[Pages 24249-24257]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-09633]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-30468; File No. 812-14063]


Lincoln National Life Insurance Company, et al; Notice of 
Application

April 18, 2013
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

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

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APPLICANTS: Lincoln National Life Insurance Company (``Lincoln Life''), 
Lincoln National Variable Annuity Account C, Lincoln National Variable 
Annuity Account L, Lincoln Life Variable Annuity Account N, and Lincoln 
Life Variable Annuity Account Q, (the ``Lincoln Life Separate 
Accounts'') and Lincoln Life & Annuity Company of New York (``LNY''), 
Lincoln Life & Annuity Variable Annuity Account L, and Lincoln New York 
Account N for Variable Annuities (the ``LNY Separate Accounts,'' and 
together with the Lincoln Life Separate Accounts, the ``Separate 
Accounts'') (collectively, the ``Section 26 Applicants''). The Section 
26 Applicants and the Lincoln Variable Insurance Products Trust (the 
``Trust'') (which is a registered investment company that is an 
affiliate of the Section 26 Applicants) are collectively referred to in 
this notice as the ``Section 17 Applicants.'' Lincoln Life and LNY are 
also referred to as the ``Insurance Companies.''
SUMMARY OF APPLICATION: The Section 26 Applicants seek an order 
pursuant to Section 26(c) of the 1940 Act, approving the substitution 
of certain shares of the Trust for shares of other registered 
investment companies unaffiliated with the Section 26 Applicants (the 
``Substitutions'') each of which is currently used as an underlying 
investment option for certain variable annuity contracts (collectively, 
the ``Contracts''). The Section 17 Applicants seek an order pursuant to 
Section 17(b) of the 1940 Act exempting them from Section 17(a) of the 
Act to the extent necessary to permit them to engage in certain in-kind 
transactions (``In-Kind Transfers'') in connection with the 
Substitutions.

FILING DATE: The application was filed on July 25, 2012, and amended 
and restated applications were filed on November 14, 2012, March 5, 
2013, and April 16, 2013.

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 the 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 May 13, 2013, 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 requester's interest, the reason for the request, and the 
issues contested. Persons who wish to be notified of a hearing may 
request notification by writing to the Secretary of the Commission.

ADDRESSES: Secretary, SEC, 100 F Street NE., Washington, DC 20549-1090. 
Applicants: Lincoln National Life Insurance Company, Lincoln National 
Variable Annuity Account C, Lincoln National Variable Annuity Account 
L, Lincoln Life Variable Annuity Account N, Lincoln Life Variable 
Annuity Account Q, and Lincoln Variable Insurance Products Trust, 1300 
South Clinton Street, Fort Wayne, IN 46802; Lincoln Life & Annuity 
Company of New York, Lincoln Life & Annuity Variable Annuity Account L, 
and Lincoln New York Account N for Variable Annuities, 100 Madison 
Street, Suite 1860, Syracuse, NY 13202.

FOR FURTHER INFORMATION CONTACT: Alberto H. Zapata, Senior Counsel, or 
Joyce M. Pickholz, Branch Chief, Insured Investments Office, Division 
of Investment Management, at (202) 551-6795.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application

[[Page 24250]]

may be obtained via the Commission's Web site by searching for the file 
number, or for an applicant using the Company name box, at http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.

Applicants' Representations

    1. Lincoln Life is the depositor and sponsor of the Lincoln Life 
Separate Accounts. LNY is the depositor and sponsor of the LNY Separate 
Accounts.
    2. Each of the Separate Accounts is a registered unit investment 
trust used to issue one or more Contracts issued by the Insurance 
Companies. Each Separate Account is divided into sub-accounts, each of 
which invests in the securities of a single underlying mutual fund. The 
application sets forth the registration statement file numbers for the 
Contracts and the Separate Accounts.
    3. The Trust is organized as a Delaware statutory trust. It is 
registered as an open-end management investment company under the 1940 
Act and its shares are registered under the Securities Act of 1933, on 
Form N-1A (see File Nos. 811-08090 and 033-70742). The Trust is a 
series investment company and currently offers sixty-four separate 
series (each a ``Trust Fund''), six of which are involved in the 
proposed Substitutions (the ``Replacement Funds'').
    4. Lincoln Investment Advisors Corporation (``LIAC''), a Delaware 
corporation and investment adviser registered under the Investment 
Advisers Act of 1940 currently serves as investment adviser to each of 
the Trust Funds.
    5. The Trust received an exemptive order from the Commission (In 
the Matter of Lincoln Investment Advisors Corporation, et al., Inv. Co. 
Rel. No. 29197 (Mar. 31, 2010) File No. 812-13732) (the ``Manager of 
Managers Order'') that permits LIAC, subject to certain conditions, 
including approval of the Trust's Board of Trustees, and without the 
approval of shareholders, to: (i) Select a new Subadviser or additional 
Subadviser for each Trust Fund; (ii) terminate any existing Subadviser 
and/or replace the Subadviser; (iii) enter into new sub-advisory 
agreements and/or materially modify the terms of, or terminate, any 
existing sub-advisory agreement; and (iv) allocate and reallocate a 
Trust Fund's assets among one or more Subadvisers.
    6. Shares of the Trust are continuously distributed and 
underwritten by Lincoln Financial Distributors, Inc., an affiliate of 
the Trust and the Section 26 Applicants. Lincoln Life, also an 
affiliate of the Trust and the Section 26 Applicants, serves as 
administrator to the Trust.
    7. The Contracts can be issued as individual or group contracts. 
Contract owners and participants in group contracts (each a ``Contract 
Owner'') may allocate some or all of their Contract value to one or 
more sub-accounts available as investment options under the Contract. 
Additionally, the Contract Owner may, if provided for under the 
Contract, allocate some or all of their Contract value to a fixed 
account and/or guaranteed term option, both of which are supported by 
the assets of Lincoln Life's general account.
    8. Each Contract's prospectus contains provisions reserving the 
Insurance Company's right to substitute shares of one underlying mutual 
fund for shares of another underlying mutual fund already purchased or 
to be purchased in the future if either of the following occurs: ``(i) 
shares of a current underlying mutual fund are no longer available for 
investment by the Separate Account; or (ii) in the judgment of the 
Insurance Company's management, further investment in such underlying 
mutual fund is inappropriate in view of the purposes of the Contract.'' 
All of the Replacement Funds that correspond to the Existing Funds are 
currently available as underlying investment options in the Contracts.
    9. The Section 26 Applicants request an order from the Commission 
pursuant to Section 26(c) of the 1940 Act approving the proposed 
Substitutions of shares of the following series of the Trust, the 
Replacement Funds, for shares of the corresponding third party, 
unaffiliated underlying mutual funds, the Existing Funds, as shown in 
the following table:

------------------------------------------------------------------------
           Existing funds                     Replacement funds
------------------------------------------------------------------------
AllianceBernstein Variable Products  Lincoln Variable Products Trust--
 Series Fund--AllianceBernstein VPS   LVIP SSgA S&P 500 Index Fund:
 Growth and Income Portfolio:
    Class A........................    Standard Class
    Class B........................    Service Class
AllianceBernstein Variable Products  Lincoln Variable Insurance Products
 Series Fund--AllianceBernstein VPS   Trust--LVIP Mondrian International
 International Value Portfolio:       Value Fund:
    Class B........................    Standard Class
    Class B........................    Service Class
American Century Investment          Lincoln Variable Products Trust--
 Variable Products--American          LVIP BlackRock Inflation Protected
 Century VP Inflation Protection      Bond Fund:
 Fund:
    Class I........................    Standard Class
    Class II.......................    Service Class
Dreyfus Stock Index Fund, Inc.--     Lincoln Variable Products Trust--
 Dreyfus Stock Index Fund:.           LVIP SSgA S&P 500 Index Fund:
    Initial Class..................    Standard Class
Dreyfus Variable Investment Fund--   Lincoln Variable Products Trust--
 Dreyfus VIF Opportunistic Small      LVIP SSgA Small-Cap Index Fund:
 Cap Portfolio:
    Initial Class..................    Standard Class
DWS Investments VIT Funds--DWS       Lincoln Variable Products Trust--
 Equity 500 Index VIP Portfolio:.     LVIP SSgA S&P 500 Index Fund:
    Class A........................    Standard Class
    Class B........................    Service Class
DWS Investments VIT Funds--DWS       Lincoln Variable Products Trust--
 Small Cap Index VIP Portfolio:.      LVIP SSgA Small-Cap Index Fund:
    Class A........................    Standard Class
    Class B........................    Service Class
Fidelity Variable Insurance          Lincoln Variable Products Trust--
 Products Trust--Fidelity VIP         LVIP SSgA S&P 500 Index Fund:
 Equity-Income Portfolio:
    Initial Class..................    Standard Class
    Service Class 2................    Service Class
Fidelity Variable Insurance          Lincoln Variable Products Trust--
 Products Trust--Fidelity VIP         LVIP SSgA International Index
 Overseas Portfolio:                  Fund:
    Initial Class..................    Service Class

[[Page 24251]]

 
    Service Class 2................    Service Class
Franklin Templeton Variable          Lincoln Variable Products Trust--
 Insurance Products Trust--FTVIPT     LVIP SSgA Small-Cap Index Fund:
 Franklin Small-Mid Cap Growth
 Securities Fund:
    Class 1........................    Standard Class
    Class 2........................    Service Class
MFS Variable Insurance Trust--MFS    Lincoln Variable Products Trust--
 VIT Total Return Series:.            LVIP SSgA Moderate Structured
                                      Allocation Fund:
    Service Class..................    Service Class
Neuberger Berman Advisers            Lincoln Variable Products Trust--
 Management Trust--Neuberger Berman   LVIP SSgA S&P 500 Index Fund:
 AMT Mid-Cap Growth Portfolio:
    I Class........................    Standard Class
    I Class........................    Service Class
------------------------------------------------------------------------

    The class into which a Contract Owner will be transferred is set 
forth in the relevant Contract, which lists the class of the 
Replacement Fund available within the Contract. Comparisons of the 
investing strategies and risks of the Existing Funds and the 
Replacement Funds are included in the application.
    10. The following tables compare the fees and expenses of the 
Existing Fund and the Replacement Fund as of December 31, 2012:

------------------------------------------------------------------------
                                  Existing fund       Replacement fund
------------------------------------------------------------------------
                              AllianceBernstein     Lincoln Variable
                               Variable Products     Products Trust--
                               Series Fund--         LVIP SSgA S&P 500
                               AllianceBernstein     Index Fund.
                               VPS Growth and
                               Income Portfolio.
------------------------------------------------------------------------
Management Fees.............  0.55% Class A.......  0.19% Standard Class
                              0.55% Class B.......  0.19% Service Class
12b-1 Fees..................  0.00% Class A.......  0.00% Standard Class
                              0.25% Class B.......  0.25% Service Class
Other Expenses..............  0.05% Class A.......  0.06% Standard Class
                              0.05% Class B.......  0.06% Service Class
Total Gross Expenses........  0.60% Class A.......  0.25% Standard Class
                              0.85% Class B.......  0.50% Service Class
Waivers/Reimbursements......  0.00% Class A.......  0.00% Standard Class
                              0.00% Class B.......  0.00% Service Class
Total Net Expenses..........  0.60% Class A.......  0.25% Standard Class
                              0.85% Class B.......  0.50% Service Class
------------------------------------------------------------------------
                              AllianceBernstein     Lincoln Variable
                               Variable Products     Products Trust--
                               Series Fund--         LVIP Mondrian
                               AllianceBernstein     International Value
                               VPS International     Fund.
                               Value Portfolio.
------------------------------------------------------------------------
Management Fees.............  0.75% Class B.......  0.75% Standard Class
                              0.75% Class B.......  0.75% Service Class
12b-1 Fees..................  0.25% Class B.......  0.00% Standard Class
                              0.25% Class B.......  0.25% Service Class
Other Expenses..............  0.06% Class B.......  0.08% Standard Class
                              0.06% Class B.......  0.08% Service Class
Total Gross Expenses........  1.06% Class B.......  0.83% Standard Class
                              1.06% Class B.......  1.08% Service Class
Waivers/Reimbursements......  0.00% Class B.......  0.00% Standard Class
                              0.00% Class B.......  0.00% Service Class
Total Net Expenses..........  1.06% Class B.......  0.83% Standard Class
                              1.06% Class B.......  1.08% Service Class
------------------------------------------------------------------------
                              American Century      Lincoln Variable
                               Investments           Products Trust--
                               Variable Products--   LVIP BlackRock
                               American Century VP   Inflation Protected
                               Inflation             Bond Fund.
                               Protection Fund.
------------------------------------------------------------------------
Management Fees.............  0.47% Class I.......  0.44% Standard Class
                              0.47% Class.........  0.44% Service Class
12b-1 Fees..................  0.00% Class I.......  0.00% Standard Class
                              0.25% Class II......  0.25% Service Class
Other Expenses..............  0.01% Class I.......  0.07% Standard Class
                              0.01% Class II......  0.07% Service Class
Total Gross Expenses........  0.48% Class I.......  0.54% Standard Class
                              0.73% Class II......  0.79% Service Class
Waivers/Reimbursements......  0.00% Class I.......  0.00% Standard Class
                              0.00% Class II......  0.00% Service Class
Total Net Expenses..........  0.48% Class I.......  0.54% Standard Class
                              0.73% Class II......  0.79% Service Class
------------------------------------------------------------------------

[[Page 24252]]

 
                              Dreyfus Stock Index   Lincoln Variable
                               Fund, Inc.--Dreyfus   Products Trust--
                               Stock Index Fund.     LVIP SSgA S&P 500
                                                     Index Fund.
------------------------------------------------------------------------
Management Fees.............  0.25% Initial Class.  0.19% Standard Class
12b-1 Fees..................  0.00% Initial Class.  0.00% Standard Class
Other Expenses..............  0.03% Initial Class.  0.06% Standard Class
Total Gross Expenses........  0.28% Initial Class.  0.25% Standard Class
Waivers/Reimbursements......  0.00% Initial Class.  0.00% Standard Class
Total Net Expenses..........  0.28% Initial Class.  0.25% Standard Class
------------------------------------------------------------------------
                              Dreyfus Variable      Lincoln Variable
                               Investment Fund--     Products Trust--
                               Dreyfus VIF           LVIP SSgA Small-Cap
                               Opportunistic Small   Index Fund.
                               Cap Portfolio.
------------------------------------------------------------------------
Management Fees.............  0.75% Initial Class.  0.32% Standard Class
12b-1 Fees..................  0.00% Initial Class.  0.00% Standard Class
Other Expenses..............  0.13% Initial Class.  0.09% Standard Class
Total Gross Expenses........  0.88% Initial Class.  0.41% Standard Class
Waivers/Reimbursements......  0.00% Initial Class.  0.00% Standard Class
Total Net Expenses..........  0.88% Initial Class.  0.41% Standard Class
------------------------------------------------------------------------
                              DWS Investments VIT   Lincoln Variable
                               Funds--DWS Equity     Products Trust--
                               500 Index VIP         LVIP SSgA S&P 500
                               Portfolio.            Index Fund.
------------------------------------------------------------------------
Management Fees.............  0.20% Class A.......  0.19% Standard Class
                              0.20% Class B.......  0.19% Service Class
12b-1 Fees..................  0.00% Class A.......  0.00% Standard Class
                              0.25% Class B.......  0.25% Service Class
Other Expenses..............  0.15% Class A.......  0.06% Standard Class
                              0.15% Class B.......  0.06% Service Class
Total Gross Expenses........  0.35% Class A.......  0.25% Standard Class
                              0.60% Class B.......  0.50% Service Class
Waivers/Reimbursements......  0.00% Class A.......  0.00% Standard Class
                              0.00% Class B.......  0.00% Service Class
Total Net Expenses..........  0.35% Class A.......  0.25% Standard Class
                              0.60% Class B.......  0.50% Service Class
------------------------------------------------------------------------
                              DWS Investments VIT   Lincoln Variable
                               Funds--DWS Small      Products Trust--
                               Cap Index VIP         LVIP SSgA Small-Cap
                               Portfolio.            Index Fund.
------------------------------------------------------------------------
Management Fees.............  0.35% Class A.......  0.32% Standard Class
                              0.35% Class B.......  0.32% Service Class
12b-1 Fees..................  0.00% Class A.......  0.00% Standard Class
                              0.25% Class B.......  0.25% Service Class
Other Expenses..............  0.20% Class A.......  0.09% Standard Class
                              0.20% Class B.......  0.09% Service Class
Total Gross Expenses........  0.55% Class A.......  0.41% Standard Class
                              0.80% Class B.......  0.66% Service Class
Waivers/Reimbursements......  -0.06% Class A......  0.00% Standard Class
                              -0.06% Class B......  0.00% Service Class
Total Net Expenses..........  0.49% Class A.......  0.41% Standard Class
                              0.74% Class B.......  0.66% Service Class
------------------------------------------------------------------------
                              Fidelity[supreg]      Lincoln Variable
                               Variable Insurance    Products Trust--
                               Products Trust--      LVIP SSgA S&P 500
                               Fidelity[supreg]      Index Fund.
                               VIP Equity-Income
                               Portfolio.
------------------------------------------------------------------------
Management Fees.............  0.46% Initial Class.  0.19% Standard Class
                              0.46% Service Class   0.19% Service Class
                               2.
12b-1 Fees..................  0.00% Initial Class.  0.00% Standard Class
                              0.25% Service Class   0.25% Service Class
                               2.
Other Expenses..............  0.10% Initial Class.  0.06% Standard Class
                              0.10% Service Class   0.06% Service Class
                               2.
Total Gross Expenses........  0.56% Initial Class.  0.25% Standard Class
                              0.81% Service Class   0.50% Service Class
                               2.
Waivers/Reimbursements......  0.00% Initial Class.  0.00% Standard Class
                              0.00% Service Class   0.00% Service Class
                               2.
Total Net Expenses..........  0.56% Initial Class.  0.25% Standard Class
                              0.81% Service Class   0.50% Service Class
                               2.
------------------------------------------------------------------------
                              Fidelity[supreg]      Lincoln Variable
                               Variable Insurance    Products Trust--
                               Products Trust--      LVIP SSgA
                               Fidelity[supreg]      International Index
                               VIP Overseas          Fund.
                               Portfolio.
------------------------------------------------------------------------
Management Fees.............  0.71% Initial Class.  0.40% Service Class
                              0.71% Service Class   0.40% Service Class
                               2.
12b-1 Fees..................  0.00% Initial Class.  0.25% Service Class
                              0.25% Service Class   0.25% Service Class
                               2.

[[Page 24253]]

 
Other Expenses..............  0.14% Initial Class.  0.14% Standard Class
                              0.14% Service Class   0.14% Service Class
                               2.
Total Gross Expenses........  0.85% Initial Class.  0.79% Service Class
                              1.10% Service Class   0.79% Service Class
                               2.
Waivers/Reimbursements......  0.00% Initial Class.  -0.04% Service Class
                              0.00% Service Class   -0.04% Service Class
                               2.
Total Net Expenses..........  0.85% Initial Class.  0.75% Service Class
                              1.10% Service Class   0.75% Service Class
                               2.
------------------------------------------------------------------------
                              Franklin Templeton    Lincoln Variable
                               Variable Insurance    Products Trust--
                               Products Trust--      LVIP SSgA Small-Cap
                               FTVIPT Franklin       Index Fund.
                               Small-Mid Cap
                               Growth Securities
                               Fund.
------------------------------------------------------------------------
Management Fees.............  0.51% Class 1.......  0.32% Standard Class
                              0.51% Class 2.......  0.32% Service Class
12b-1 Fees..................  0.00% Class 1.......  0.00% Standard Class
                              0.25% Class 2.......  0.25% Service Class
Other Expenses..............  0.29% Class 1.......  0.09% Standard Class
                              0.29% Class 2.......  0.09% Service Class
Acquired Fund Fees and        0.00% Class 1.......  0.00% Standard Class
 Expenses.
                              0.00% Class 2.......  0.00% Service Class
Total Gross Expenses........  0.80% Class 1.......  0.41% Standard Class
                              1.05% Class 2.......  0.66% Service Class
Waivers/Reimbursements......  0.00% Class 1.......  0.00% Standard Class
                              0.00% Class 2.......  0.00% Service Class
Total Net Expenses..........  0.80% Class 1.......  0.41% Standard Class
                              1.05% Class 2.......  0.66% Service Class
------------------------------------------------------------------------
                              MFS Variable          Lincoln Variable
                               Insurance Trust--     Products Trust--
                               MFS VIT Total         LVIP SSgA Moderate
                               Return Series.        Structured
                                                     Allocation Fund.
------------------------------------------------------------------------
Management Fees.............  0.75% Service Class.  0.25% Service Class
12b-1 Fees..................  0.25% Service Class.  0.25% Service Class
Other Expenses..............  0.05% Service Class.  0.04% Service Class
Acquired Fund Fees and        0.00% Service Class.  0.37% Service Class
 Expenses.
Total Gross Expenses........  1.05% Service Class.  0.91% Service Class
Waivers/Reimbursements......  -0.03% Service Class  -0.10% Service Class
Total Net Expenses..........  1.02% Service Class.  0.81% Service Class
------------------------------------------------------------------------
                              Neuberger Berman      Lincoln Variable
                               Advisers Management   Products Trust--
                               Trust--Neuberger      LVIP SSgA S&P 500
                               Berman AMT Mid-Cap    Index Fund
                               Growth Portfolio.
------------------------------------------------------------------------
Management Fees.............  0.84% Class I.......  0.19% Standard Class
                              0.84% Class I.......  0.19% Service Class
12b-1 Fees..................  0.00% Class I.......  0.00% Standard Class
                              0.00% Class I.......  0.25% Service Class
Other Expenses..............  0.15% Class I.......  0.06% Standard Class
                              0.15% Class I.......  0.06% Service Class
Total Gross Expenses........  0.99% Class I.......  0.25% Standard Class
                              0.99% Class I.......  0.50% Service Class
Waivers/Reimbursements......  0.00% Class I.......  0.00% Standard Class
                              0.00% Class I.......  0.00% Service Class
Total Net Expenses..........  0.99% Class I.......  0.25% Standard Class
                              0.99% Class I.......  0.50% Service Class
------------------------------------------------------------------------

    11. The Section 26 Applicants propose the Substitutions as part of 
a continued and overall business plan by each Insurance Company to make 
its Contracts more attractive to both existing and prospective Contract 
Owners, and more efficient to administer and oversee via enhanced 
flexibility to deliver to the Contract Owners changes that are designed 
to promote their best interests.
    12. The Section 26 Applicants believe that eliminating investment 
option redundancy via the proposed Substitutions would result in a more 
consolidated and less confusing menu of investment options for 
investors. Since the proposed Substitutions involve consolidating 
duplicative investment options, the diversity of investment options 
available under the Contracts will not be adversely impacted. 
Furthermore, this consolidation of investment options would result in 
greater efficiency in administration of the Contracts because there 
will be fewer investment options to support, resulting in the 
availability of resources to apply elsewhere to the Contracts. Finally 
reducing overlapping investment options gives the Contracts the 
capacity to add other types of investment options.
    13. The Section 26 Applicants submit that the Substitutions will, 
after implementation, simplify the prospectuses and related materials 
with respect to the Contracts and the investment options available 
through the Separate Accounts. By reducing the number of underlying 
mutual funds and mutual fund companies offered in the

[[Page 24254]]

Contracts, the offering Insurance Company necessarily reduces the 
number of underlying mutual fund prospectuses and prospectus formats 
the Contract Owner must navigate. By consolidating overlapping 
investment options into the Trust, the number of mutual fund companies, 
and varying prospectus formats, is reduced, simplifying the investment 
decision process for Contract Owners. The Trust Funds employ a common 
share class structure, a common set of valuation procedures that is 
administered by a single investment adviser, and the same prospectus 
style, vocabulary, look and feel. The Section 26 Applicants believe 
that the proposed Substitutions will continue to provide Contract 
Owners with access to quality investment managers and a large variety 
of investment options, but will make the investment decision process 
more manageable for the investor by having the underlying fund 
disclosure presented in a consistent format using consistent 
terminology, making it easier for Contract Owners to analyze fund 
information and make informed investment decisions relating to 
allocation of his or her Contract value.
    14. Also, the proposed Substitutions involve substituting a 
Replacement Fund for an Existing Fund with very similar, and in some 
cases substantially identical, investment objective and investment 
strategy.
    15. Contract Owners with Contract value allocated to the sub-
accounts of the Existing Funds will experience the same or lower fund 
net annual operating expenses after the Substitutions as prior to the 
Substitutions, except for the following:

------------------------------------------------------------------------
           Existing funds                     Replacement funds
------------------------------------------------------------------------
AllianceBernstein Variable Products  Lincoln Variable Products Trust--
 Series Fund--AllianceBernstein VPS   LVIP Mondrian International Value
 International Value Portfolio:       Fund:
    Class B........................    Service Class
American Century Investment          Lincoln Variable Products Trust--
 Variable Products--American          LVIP BlackRock Inflation Protected
 Century VP Inflation Protection      Bond Fund:
 Fund:
    Class I........................    Standard Class
    Class II.......................    Service Class
------------------------------------------------------------------------

    16. Each Replacement Fund has a combined management fee and 12b-1 
Fee that is less than or equal to that of the Existing Fund, except for 
the DWS Equity 500 Index VIP Portfolio/LVIP SSgA S&P 500 Index Fund 
substitution in which the combined management and 12b-1 Fees of the 
Replacement fund could be higher than those of the Existing Fund at 
certain management fee breakpoints.
    17. The Substitutions are designed to provide Contract Owners with 
the ability to continue their investment in similar investment options 
without interruption and at no additional cost to them. In this regard, 
the Insurance Companies have agreed to bear all expenses incurred in 
connection with the Substitutions and related filings and notices, 
including legal, accounting, brokerage, and other fees and expenses. 
Also, the Contract value of each Contract Owner impacted by the 
Substitutions will not change as a result of the Substitutions.
    18. Prospectus supplements (``Pre-Substitution Notices'') were sent 
to Contract Owners on April 1, 2013. The Pre-Substitution Notices: (i) 
Notify all Contract Owners of the Insurance Company's intent to 
implement the Substitutions, that it has filed the application in order 
to obtain the necessary orders to do so, and indicate the anticipated 
Substitution Date; (ii) advise Contract Owners that from the date of 
the Pre-Substitution Notice until the Substitution Date, Contract 
Owners are permitted to transfer Contract value out of any Existing 
Fund sub-account to any other sub-account(s) offered under the Contract 
without the transfer being treated as a transfer for purposes of 
transfer limitations and fees that would otherwise be applicable under 
the terms of the Contract; (iii) instruct Contract Owners how to submit 
transfer requests in light of the proposed Substitutions; (iv) advise 
Contract Owners that any Contract value remaining in an Existing Fund 
sub-account on the Substitution Date will be transferred to the 
corresponding Replacement Fund sub-account, and that the Substitutions 
will take place at relative net asset value; (v) inform Contract Owners 
that for at least thirty days following the Substitution Date, the 
Insurance Companies will permit Contract Owners to make transfers of 
Contract value out of each Replacement Fund sub-account to any other 
sub-account(s) offered under the Contract without the transfer being 
treated as a transfer for purposes of transfer limitations and fees 
that would otherwise be applicable under the terms of the Contract; and 
(vi) inform Contract Owners that, except as described in the market 
timing/short-term trading provision of the relevant prospectus, the 
respective Insurance Company will not exercise any rights reserved by 
it under the Contracts to impose additional restrictions on transfers 
out of a Replacement Fund for at least thirty days after the 
Substitution Date. Existing Contract Owners will receive the Pre-
Substitution Notice and the prospectus for the Replacement Fund before 
the Substitution Date, if they have not already received such 
information. The prospectus for the Replacement Fund will disclose and 
explain the substance and effect of the Manager of Managers Order. New 
purchasers of the Contracts will be provided the Pre-Substitution 
Notice, the Contract prospectus and the prospectus for the Replacement 
Funds in accordance with all applicable legal requirements. Prospective 
purchasers of the Contracts will be provided the Pre-Substitution 
Notice and the Contract prospectus.
    19. In addition to the Pre-Substitution Notice distributed to 
Contract Owners, within five business days after the Substitution Date, 
Contract Owners will be sent a written confirmation of the 
Substitutions in accordance with Rule 10b-10 under the Securities 
Exchange Act of 1934. The confirmation statement will restate the 
information set forth in the Pre-Substitution Notice.
    20. As of the Substitution Date, a portion of the securities of the 
Existing Funds will be redeemed in kind and those securities received 
will be used to purchase shares of the Replacement Funds. The 
redemption of each Existing Fund's shares and repurchase of the 
corresponding Replacement Fund's shares will be effected and take place 
at relative net asset value determined on the Substitution Date 
pursuant to Section 22 of the 1940 Act and Rule 22c-1 thereunder with 
no change in the amount of any Contract Owner's Contract value, cash 
value, death benefit, or dollar value of his or her investment in the 
Separate Accounts and without such transactions counting as a transfer 
for purposes of transfer limitations and fees that would otherwise be 
applicable under the terms

[[Page 24255]]

of the Contracts. Each Substitution will be effected by redeeming 
shares of the Existing Fund in cash and/or in-kind on the Substitution 
Date at their net asset value. In the event that either LIAC or the 
relevant Subadviser of a Replacement Fund declines to accept, on behalf 
of the Replacement Fund, securities redeemed in-kind by an Existing 
Fund, such Existing Fund shall instead provide cash equal to the value 
of the declined securities so that Contract Owners' Contract values 
will not be adversely impacted or diluted. Each Substitution will be 
effected by redeeming shares of Existing Funds in cash and/or in kind 
on the Substitution Date and using the proceeds of those redemptions to 
purchase shares of the Replacement Funds. Therefore, simultaneous to 
the redemption of the Existing Fund's shares, all the proceeds of such 
redemptions shall be used to purchase shares of the Replacement Fund at 
their net asset value so that each Contract Owner's Contract value will 
remain fully invested at all times.
    21. Contract Owners will not incur any fees or charges as a result 
of the proposed Substitutions, nor will their rights or insurance 
benefits or the Insurance Companies' obligations under the Contracts be 
altered in any way. All expenses incurred in connection with the 
proposed Substitutions, including any brokerage, legal, accounting, and 
other fees and expenses, will be paid by the Insurance Companies. In 
addition, the Substitutions will not result in adverse tax consequences 
to Contract Owners and will not alter any tax benefits associated with 
the Contracts. The proposed Substitutions will not cause the Contract 
fees and charges currently being paid by Contract Owners to be greater 
after the proposed Substitution than before the proposed Substitution. 
Redemptions and repurchases that occur in connection with effecting the 
Substitution will not count as a transfer for purposes of transfer 
limitations and fees that would otherwise be applicable under the terms 
of the Contracts. Consequently, no fees will be charged on transfers 
made to effectuate the Substitutions.
    22. The Section 26 Applicants represent that, after the 
Substitution Date, the Replacement Funds will not change a Subadviser, 
add a new Subadviser, or otherwise rely on the Manager of Managers 
Order without first obtaining shareholder approval of the change in 
Subadviser, the new Subadviser, or the Fund's ability to add or to 
replace a Subadviser in reliance on the Manager of Managers Order. 
Additionally, the Section 26 Applicants represent that a prospectus for 
the relevant Replacement Fund(s) containing disclosure describing the 
existence, substance, and effect of the Manager of Managers Order will 
have been provided to each Contract Owner prior to the Substitution 
Date.

Legal Analysis and Conditions

Section 26(c) Relief

    1. The Section 26 Applicants request that the Commission issue an 
order pursuant to Section 26(c) of the 1940 Act approving the proposed 
substitutions. Section 26(c) of the 1940 Act makes it unlawful for the 
depositor of a registered unit investment trust that invests in the 
securities of a single issuer to substitute another security for such 
security without Commission approval.
    2. The Section 26 Applicants have reserved the right under the 
Contracts to substitute shares of another underlying mutual fund for 
one of the current underlying mutual funds offered as an investment 
option under the Contracts. The Contract prospectuses disclose this 
right.
    3. Each Replacement Fund and its corresponding Existing Fund have 
similar, and in some cases substantially similar or identical, 
investment objectives and strategies. In addition, each proposed 
Substitution retains for Contract Owners the investment flexibility and 
expertise in asset management, which are core investment features of 
the Contracts. Any impact on the investment programs of affected 
Contract Owners should be negligible.
    4. In each Substitution, except the DWS Equity 500 Index VIP 
Portfolio/LVIP SSgA 500 Index Fund substitutions, the Replacement Fund 
has a combined management fee and 12b-1 Fee that is less than or equal 
to that of the Existing Fund. Except with respect to the 
AllianceBernstein VPS International Value Portfolio/LVIP Mondrian 
International Value Fund, and American Century VP Inflation Protection 
Fund/LVIP BlackRock Inflation Protected Bond Fund, Contract Owners with 
Contracts value allocated to the sub-accounts of the Existing Funds 
will experience the same or lower fund net annual operating expenses 
after the Substitutions as prior to the Substitutions.
    5. Section 26 Applicants agree that for a period of two years 
following the Substitution date and for those Contracts with assets 
allocated to the Existing Fund on the date of the Substitution, the 
Insurance Companies will reimburse, on the last business day of each 
fiscal quarter, the contract owners whose sub-accounts invest in the 
applicable Replacement Fund to the extent that the Replacement Fund's 
net annual operating expenses for such period exceeds, on an annualized 
basis, the net annual operating expenses of the Existing Fund for 
fiscal year 2012, except with respect to the DWS Equity 500 Index VIP 
Portfolio/LVIP SSgA S&P 500 Index Fund substitution. With respect to 
the DWS Equity 500 Index VIP Portfolio/LVIP SSgA S&P 500 Index Fund 
substitution, the reimbursement agreement with respect to the 
Replacement Fund's net annual operating expenses will extend for the 
life of each Contract outstanding on the date of the proposed 
Substitutions.
    6. In addition, the Section 26 Applicants agree that, except with 
respect to the DWS Equity 500 Index VIP Portfolio/LVIP SSgA S&P 500 
Index Fund, the Insurance Companies will not increase total separate 
account charges (net of any reimbursements or waivers) for any existing 
owner of the Contracts on the date of the Substitutions for a period of 
two (2) years from the date of the Substitutions. With respect to the 
DWS Equity 500 Index VIP Portfolio/LVIP SSgA S&P 500 Index Fund 
substitution, the agreement not to increase the separate account 
charges will extend for the life of each Contract outstanding on the 
date of the proposed Substitutions.
    7. The Section 26 Applicants submit that the proposed Substitutions 
are not of the type that Section 26 was designed to prevent: 
Overreaching on the part of the depositor by permanently impacting the 
investment allocations of the entire trust. In the current situation, 
the Contracts provide Contract Owners with investment discretion to 
allocate and reallocate their Contract value among the available 
underlying mutual funds. This flexibility provides Contract Owners with 
the ability to reallocate their assets at any time--either before the 
Substitution Date, or after the Substitution Date--if they do not wish 
to invest in the Replacement Fund. Thus, the likelihood of being 
invested in an undesired underlying mutual fund is minimized, with the 
discretion remaining with the Contract Owners. The Substitutions, 
therefore, will not result in the type of costly forced redemption that 
Section 26(c) was designed to prevent. The Section 26 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 1940 Act.

[[Page 24256]]

Section 17(b) Relief

    1. The Section 17 Applicants request that the Commission issue an 
order pursuant to Section 17(b) of the 1940 Act exempting them from the 
provisions of Section 17(a) of the 1940 Act to the extent necessary to 
permit them to carry out the In-Kind Transactions.
    2. Section 17(a)(1) of the 1940 Act, in relevant part, generally 
prohibits any affiliated person of a registered investment company (or 
any affiliated person of such a person), acting as principal, from 
knowingly selling any security or other property to that company. 
Section 17(a)(2) of the 1940 Act generally prohibits the same persons, 
acting as principals, from knowingly purchasing any security or other 
property from the registered investment company.
    3. Shares held by an insurance company separate account are legally 
owned by the insurance company. Thus, the Insurance Companies 
collectively own substantially all of the shares of the Trust. 
Accordingly, the Trust and its respective Trust Funds are arguably 
under the control of the Insurance Companies, as per Section 2(a)(9) of 
the 1940 Act (notwithstanding the fact that the Contract Owners are the 
beneficial owners of those Separate Account shares). If the Trust is 
under the common control of the Insurance Companies, then each 
Insurance Company is an affiliated person of the Trust and its 
respective Trust Funds. If the Trust and its respective Trust Funds are 
under the control of the Insurance Companies, then the Trust and its 
respective affiliates are affiliated persons of the Insurance 
Companies. Regardless of whether or not the Insurance Companies can be 
considered to actually control the Trust and its Trust Funds, because 
the Insurance Companies and their affiliates own of record more than 5% 
of the shares of each Trust Fund and are under common control with 
LIAC, the Insurance Companies are affiliated persons of the Trust and 
its Trust Funds. Likewise, the Trust and its respective Trust Funds are 
each an affiliated person of the Insurance Companies. The proposed In-
Kind Transactions could be seen as the indirect purchase of shares of 
certain Replacement Funds with portfolio securities of certain Existing 
Funds and the indirect sale of portfolio securities of certain Existing 
Funds for shares of certain Replacement Funds. Pursuant to this 
analysis, the proposed In-Kind Transactions also could be categorized 
as a purchase of shares of certain Replacement Funds by certain 
Existing Funds, acting as principal, and a sale of portfolio securities 
by certain Existing Funds, acting as principal, to certain Replacement 
Funds. In addition, the proposed In-Kind Transactions could be viewed 
as a purchase of securities from certain Existing Portfolios, and a 
sale of securities to certain Replacement Funds, by the Insurance 
Companies (or their Separate Accounts), acting as principal. If 
categorized in this manner, the proposed In-Kind Transactions may be 
deemed to contravene Section 17(a) due to the affiliated status of 
these participants.
    4. The Section 17 Applicants submit that the In-Kind Transactions, 
as described in the application, meet the conditions set forth in 
Section 17(b) of the 1940 Act.
    5. Contract Owners' Contract values will not be adversely impacted 
or diluted because the In-Kind Transactions will be effected at the 
respective net asset values of the Existing Funds and the Replacement 
Funds, as described in each fund's registration statement and as 
required by Rule 22c-1 under the 1940 Act. The In-Kind Transactions 
will not change the dollar value of any Contract, the accumulation unit 
value or annuity unit value of any Contract, or the death benefit 
payable under any Contract. After the In-Kind Transactions, the value 
of a Separate Account's investment in a Replacement Fund will equal the 
value of its investments in the corresponding Existing Fund (in 
addition to any pre-existing investment in the Replacement Fund) before 
the In-Kind Transactions.
    6. Additionally, the Section 17 Applicants will cause the In-Kind 
Transactions to be implemented in compliance with the conditions set 
forth in Rule 17a-7 under the 1940 Act, except that the consideration 
paid for the securities being purchased or sold will not be in cash.
    7. The proposed In-Kind Transactions will be effected based upon 
the independent current market price of the portfolio securities as 
specified in Rule 17a-7(b). Because, per the terms of Rule 17a-7(a), 
Rule 17a-7 is available only with respect to securities for which 
market quotations are readily available, the proposed In-Kind 
Transactions will include only securities for which market quotations 
are readily available on the Substitution Date. Further, the proposed 
In-Kind Transactions will be consistent with the policy of each 
registered investment company and separate series thereof participating 
in the In-Kind Transactions, as recited in the relevant registered 
investment company's registration statement and reports in accordance 
with Rule 17a-7(c). No brokerage commission, fee (except for any 
customary transfer fees), or other remuneration will be paid in 
connection with the proposed In-Kind Transactions as specified in Rule 
17a-7(d). The Trust's Board of Trustees has adopted and implemented the 
fund governance and oversight procedures as required by Rule 17a-7(e) 
and (f). In addition, pursuant to Rule 17a-7(e)(3), during the calendar 
quarter following the quarter in which any In-Kind Transactions occur, 
the Trust's Board of Trustees will review reports submitted by LIAC in 
respect of such In-Kind Transactions in order to determine that all 
such In-Kind Transactions made during the preceding quarter were 
effected in accordance with the representations stated herein. Finally, 
a written record of the procedures for the proposed In-Kind 
Transactions will be maintained and preserved in accordance with Rule 
17a-7(g).
    Although the proposed In-Kind Transactions will not comply with the 
cash consideration requirement of Rule 17a-7(a), the terms of the 
proposed In-Kind Transactions will offer to each of the relevant 
Existing Funds and each of the relevant Replacement Funds the same 
degree of protection from overreaching that Rule 17a-7 generally 
provides in connection with the purchase and sale of securities under 
that Rule in the ordinary course of business. Specifically, the 
Insurance Companies and their affiliates cannot effect the proposed In-
Kind Transactions at a price that is disadvantageous to any Replacement 
Fund and the proposed In-Kind Transactions will not occur absent an 
exemptive order from the Commission.
    8. For those Existing Funds that will redeem their shares in-kind 
as part of the In-Kind Transactions, such transactions will be 
consistent with the investment policies of the Existing Fund because: 
(1) The redemption in-kind policy is stated in the relevant Existing 
Fund's current registration statement; and (2) the shares will be 
redeemed at their net asset value in conformity with Rule 22c-1 under 
the 1940 Act. In addition, to the extent applicable to the Section 17 
Applicants as affiliated persons redeeming in-kind from an Existing 
Fund, the Section 17 Applicants will comply with the Commission's no-
action letter issued to Signature Financial Group, Inc. (pub. avail. 
Dec. 28, 1999). Likewise, for the Replacement Funds that will sell 
shares in exchange for portfolio securities as part of the In-Kind 
Transactions, such transactions will be consistent with the investment 
policies of the Replacement Fund because: (1) The Trust's policy of

[[Page 24257]]

selling shares in exchange for investment securities is stated in the 
Trust's current registration statement; (2) the shares will be sold at 
their net asset value in conformity with Rule 22c-1 under the Act; and 
(3) the investment securities will be of the type and quality that a 
Replacement Fund could have acquired with the proceeds from the sale of 
its shares had the shares been sold for cash. For each of the proposed 
In-Kind Transactions, LIAC and the relevant Subadviser(s) will analyze 
the portfolio securities being offered to each relevant Replacement 
Fund and will retain only those securities that it would have acquired 
for each such Fund in a cash transaction.
    9. The Section 17 Applicants submit that, for all the reasons 
stated above: (1) The terms of the proposed In-Kind Transactions, 
including the consideration to be paid and received, are reasonable and 
fair to each of the relevant Replacement Funds, each of the relevant 
Existing Funds, and Contract Owners, and that the proposed In-Kind 
Transactions do not involve overreaching on the part of any person 
concerned; (2) the proposed In-Kind Transactions are, or will be, 
consistent with the policies of the relevant Replacement Funds and the 
relevant Existing Funds as stated in the relevant investment company's 
registration statement and reports filed under the 1940 Act; and (3) 
the proposed In-Kind Transactions are, or will be, consistent with the 
general purposes of the 1940 Act. The Section 17 Applicants maintain 
that the proposed In-Kind Transactions, as described herein, are 
consistent with the general purposes of the 1940 Act set forth in 
Section 1 of the 1940 Act. In particular, the proposed In-Kind 
Transactions do not present any conditions or abuses that the 1940 Act 
was designed to prevent.

Conclusion

    For the reasons set forth in the application, the Applicants submit 
that the proposed Substitutions and related transactions meet the 
standards of Section 26(c) of the 1940 Act and are consistent with the 
standards of Section 17(b) of the 1940 Act and that the requested 
orders should be granted.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-09633 Filed 4-23-13; 8:45 am]
BILLING CODE 8011-01-P