

[Federal Register: November 13, 2006 (Volume 71, Number 218)]
[Notices]               
[Page 66204-66211]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13no06-81]                         

=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27546; File No. 812-13155]

 
Annuity Investors Life Insurance Company, et al.

November 6, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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

APPLICANTS: Annuity Investors Life Insurance Company (``Annuity 
Investors''), Annuity Investors Variable Account A (``Variable Account 
A''), Annuity Investors Variable Account B (``Variable Account B'') and 
Annuity Investors Variable Account C (``Variable Account C,'' together 
with Variable Account A and Variable Account B, the ``Separate 
Accounts'') (collectively, the ``Applicants'').
SUMMARY: Applicants seek an order pursuant to Section 26(c) of the 1940 
Act approving the proposed substitution of shares issued by Old Mutual 
Insurance Series Fund, DWS Investments VIT Fund, Wells Fargo Variable 
Trust, and Van Kampen-The Universal Institutional Funds, Inc. (the 
``Replaced Portfolios'') and held by Variable Account A, Variable 
Account B and Variable Account C (the ``Substitutions'').

FILING DATE: The Application was filed on January 18, 2005 and an 
amended and restated application was filed on October 30, 2006.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Secretary of the 
Commission and serving Applicants with a copy of the request, 
personally or by mail. Hearing requests must be received by the 
Commission by 5:30 p.m. on December 1, 2006, and should be accompanied 
by proof of service on Applicants in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the 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, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090. Applicants, Mark F. Muething, Esq., 
Executive Vice President and Secretary, Annuity Investors Life 
Insurance Company, P.O. Box 5423, Cincinnati, Ohio 45201-5423.

FOR FURTHER INFORMATION CONTACT: Alison T. White, Senior Counsel, or 
Joyce M. Pickholz, Branch Chief, Office of Insurance Products, Division 
of Investment Management, at (202) 551-6795.

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 Commission.

Applicants' Representations

    1. Annuity Investors is a stock life insurance company incorporated 
under the laws of Ohio. Annuity Investors is a subsidiary of Great 
American Life Insurance Company, which is a wholly-owned subsidiary of 
Great American Financial Resources, Inc. (``GAFRI''), a publicly traded 
insurance holding company. GAFRI is in turn indirectly controlled by 
American Financial Group, Inc., a publicly traded holding company.
    2. Variable Account A was established in 1995. Variable Account A 
is registered under the Act as a unit investment trust (File No. 811-
7299) and is used to fund variable annuity contracts issued by Annuity 
Investors. Two variable annuity contracts funded by Variable Account A 
are affected by this Application (the ``Variable Account A 
Contracts'').
    3. Variable Account B was established in 1996. Variable Account B 
is registered under the Act as a unit investment trust (File No. 811-
8017) and is used to fund variable annuity contracts issued by Annuity 
Investors. Three variable annuity contracts funded by Variable Account 
B are affected by this Application (the ``Variable Account B 
Contracts'').
    4. Variable Account C was established in 2001. Variable Account C 
is

[[Page 66205]]

registered under the Act as a unit investment trust (File No. 811-
21095) and is used to fund variable annuity contracts issued by Annuity 
Investors. Two variable annuity contracts funded by Variable Account C 
are affected by this Application (the ``Variable Account C Contracts,'' 
together with the Variable Account A Contracts and the Variable Account 
B Contracts, the ``Contracts'').
    5. Purchase payments under the Contracts may be allocated to one or 
more subaccounts of the Separate Accounts. Income, gains and losses, 
whether or not realized, from assets allocated to the Separate Accounts 
are, as provided in the Contracts, credited to or charged against the 
Separate Accounts without regard to other income, gains or losses of 
Annuity Investors. The assets maintained in the Separate Accounts will 
not be charged with any liabilities arising out of any other business 
conducted by Annuity Investors. Nevertheless, all obligations arising 
under the Contracts, including the commitment to make annuity payments 
or death benefit payments, are general corporate obligations of Annuity 
Investors. Accordingly, all of the assets of Annuity Investors are 
available to meet its obligations under its Contracts.
    6. Each of the Contracts permits allocations of accumulation value 
to available subaccounts that invest in specific investment portfolios 
of underlying mutual funds. As of May 1, 2006, each Variable Account A 
Contract offered 30 portfolios, each Variable Account B Contract 
offered 33 portfolios, and each Variable Account C Contract offered 38 
portfolios.
    7. All of the portfolios in Variable Account B Contracts and 
Variable Account C Contracts that are the subject of this Application 
were closed to new investors on or before November 30, 2004. All of the 
portfolios in Variable Account A Contracts that are the subject of 
these Substitutions were closed to new investors on or before May 1, 
2005.
    8. Each of the Contracts permits transfers of accumulation value 
from one subaccount to another subaccount at any time prior to 
annuitization, subject to certain restrictions and charges described 
below. A transfer fee of $25 is charged for each transfer in excess of 
12 in any contract year to offset cost incurred in administering the 
Contracts. A variety of automatically scheduled transfers is permitted 
without charge and is not counted against the 12 free transfers in a 
contract year. Transfers from the Variable Account A Contracts and the 
Variable Account B Contracts must be at least $500, or, if less, the 
entire amount in the subaccount from which value is to be transferred. 
Transfers from the subaccounts of the Variable Account C Contracts may 
be of any amount.
    9. Each of the Contracts reserves the right, upon notice to 
Contract owners and compliance with applicable law, to add or delete 
subaccounts or to substitute portfolios. This reservation of right is 
described in each Contract prospectus.
    10. The Substitutions are being proposed by Annuity Investors to: 
(a) Remove those fund families where the authorities have identified 
improper mutual fund trading and the Applicant is uncertain of the 
impact on the fund and its performance; (b) substitute stable, 
established fund families with solid reputations and longevity; and (c) 
replace those funds that are closed to new investors. None of the 
Applicants are affiliated with any of the Replaced Portfolios, the 
Replacement Portfolios or their respective investment advisers.
    11. Specifically, Applicants propose the following substitutions:

------------------------------------------------------------------------
    Substitution         Replaced portfolio       Replacement portfolio
------------------------------------------------------------------------
1...................  Liberty Ridge Growth II   American Century VP
                       Portfolio (now known as   Vista Fund--Class I.
                       Old Mutual Growth II
                       Portfolio).
2...................  Liberty Ridge Mid-Cap     American Century VP Mid
                       Portfolio (now known as   Cap Value--Class I.
                       Old Mutual Mid-Cap
                       Portfolio).
3...................  Liberty Ridge Select      American Century VP
                       Value Portfolio (now      Large Company Value--
                       known as Old Mutual       Class I.
                       Select Value Portfolio).
4...................  Liberty Ridge Large Cap   American Century VP
                       Growth Portfolio (now     Ultra Fund--Class I.
                       known as Old Mutual
                       Large Cap Growth
                       Portfolio).
5...................  Liberty Ridge Technology  Dreyfus IP Technology
                       & Communications          Growth Portfolio--
                       Portfolio (now known as   Initial Shares.
                       Old Mutual Columbus
                       Circle Technology &
                       Communications
                       Portfolio).
6...................  Scudder VIT Equity 500    Dreyfus Stock Index
                       Index Fund (now known     Fund, Inc.--Initial
                       as DWS Equity 500 Index   Shares.
                       VIP).
7...................  Wells Fargo Advantage VT  American Century VP
                       Discovery Fund.           Vista Fund--Class I.
8...................  Wells Fargo Advantage VT  AIM V.I. Capital
                       Opportunity Fund.         Development Fund--
                                                 Series I Shares.
9...................  Wells Fargo Advantage VT  AIM V.I. Capital
                       Opportunity Fund.         Development Fund--
                                                 Series II Shares.
10..................  Van Kampen UIF Emerging   Janus Aspen Series
                       Markets Equity            International Growth
                       Portfolio--Class I.       Portfolio--Institutiona
                                                 l Shares.
------------------------------------------------------------------------

Comparisons of Fees, Performance and Investment Objectives

    The investment objectives and expense and performance information 
for the year ended December 31, 2005, for each Replacement and Replaced 
Fund are as follows:
    12. The American Century VP Vista Fund--Class I for the Liberty 
Ridge Growth II Portfolio (now known as Old Mutual Growth II 
Portfolio):

                                             Comparison of 2005 Fees
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                              Total
                                                                 Other        annual        Fee       Net total
             Portfolio               Mgmt. fee    12b-1 fee     expenses    operating    reduction      annual
                                                                             expenses                  expenses
----------------------------------------------------------------------------------------------------------------
Liberty Ridge Growth II Portfolio.        0.825         None        0.365         1.19         0.15         1.04
American Century VP Vista Fund--           1.00         None         0.01         1.01          N/A         1.01
 Class I..........................
----------------------------------------------------------------------------------------------------------------


[[Page 66206]]


                                Comparison of Performance as of December 31, 2005
----------------------------------------------------------------------------------------------------------------
                                         1 year       3 year       5 year      10 year
              Portfolio                (percent)    (percent)    (percent)    (percent)    Inception
-----------------------------------------------------------------------------------------------------
Liberty Ridge Growth II Portfolio...        11.35        14.28       (9.17)          N/A        2.00%
                                                                                              4/30/97
American Century VP Vista Fund--             8.13        21.12          N/A          N/A        9.14%
 Class I............................                                                          10/5/01
----------------------------------------------------------------------------------------------------------------

    The Liberty Ridge Growth II Portfolio is a capital appreciation 
fund that normally invests at least 65% of its net assets in equity 
securities of small- and mid-cap companies with favorable growth 
prospects. The American Century VP Vista Fund seeks long-term growth. 
The fund's managers look for stocks of medium-sized and smaller 
companies they believe will increase in value over time, using 
investment strategies developed by American Century.
    13. American Century VP Mid Cap Value--Class I for the Liberty 
Ridge Mid-Cap Portfolio (now known as Old Mutual Mid-Cap Portfolio)

                                             Comparison of 2005 Fees
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                              Total
                                                                 Other        annual        Fee       Net total
             Portfolio               Mgmt. fee    12b-1 fee     expenses    operating    reduction      annual
                                                                             expenses                  expenses
----------------------------------------------------------------------------------------------------------------
Liberty Ridge Mid-Cap Portfolio...         0.95         None         0.22         1.17         0.18         0.99
American Century VP Mid Cap Value--        1.00         None         0.00         1.00          N/A         1.00
 Class I..........................
----------------------------------------------------------------------------------------------------------------


                                Comparison of Performance as of December 31, 2005
----------------------------------------------------------------------------------------------------------------
                                                    1 year       3 year       5 year      10 year
                   Portfolio                      (percent)    (percent)    (percent)    (percent)    Inception
----------------------------------------------------------------------------------------------------------------
Liberty Ridge Mid-Cap Portfolio................         5.71         9.06         8.18          N/A       14.78%
                                                                                                        11/30/98
American Century VP Mid-Cap Value--Class I.....         9.56          N/A          N/A          N/A       12.89%
                                                                                                       12//01/04
----------------------------------------------------------------------------------------------------------------

    The Liberty Ridge Mid-Cap Portfolio seeks to provide investors with 
above-average total return over a 3 to 5 year market cycle, consistent 
with reasonable risk. The American Century VP Mid-Cap Value Fund seeks 
long-term capital growth.
    14. American Century VP Large Company Value--Class I for Liberty 
Ridge Select Value Portfolio (now known as Old Mutual Select Value 
Portfolio)

                                             Comparison of 2005 Fees
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                              Total
                                                                 Other        annual        Fee       Net total
             Portfolio               Mgmt. fee    12b-1 fee     expenses    operating    reduction      annual
                                                                             expenses                  expenses
----------------------------------------------------------------------------------------------------------------
Liberty Ridge Select Value                 0.75         None         0.21         0.96         0.02         0.94
 Portfolio........................
American Century VP Large Company          0.90         None         0.01         0.91          N/A         0.91
 Value--Class I...................
----------------------------------------------------------------------------------------------------------------


                                Comparison of Performance as of December 31, 2005
----------------------------------------------------------------------------------------------------------------
                                                    1 year       3 year       5 year
                   Portfolio                      (percent)    (percent)    (percent)     10 year     Inception
----------------------------------------------------------------------------------------------------------------
Liberty Ridge Select Value Portfolio...........         4.51         8.34       (0.62)          N/A         7.38
                                                                                                        10/28/97
American Century VP Large Company Value--Class          4.83          N/A          N/A          N/A         6.66
 I.............................................                                                         12/01/04
----------------------------------------------------------------------------------------------------------------

    The Liberty Ridge Select Value Portfolio seeks to provide investors 
long-term growth of capital and income. Current income is a secondary 
objective. The American Century VP Large Company Value Fund seeks long-
term capital growth. Income is a secondary objective.
    15. American Century VP Ultra Fund Value-Class I for Liberty Ridge 
Large Cap Growth Portfolio (now known as Old Mutual Large Cap Growth 
Portfolio)

[[Page 66207]]



                                             Comparison of 2005 Fees
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                              Total
                                                                 Other        annual        Fee       Net total
             Portfolio               Mgmt. fee    12b-1 fee     expenses    operating    reduction      annual
                                                                             expenses                  expenses
----------------------------------------------------------------------------------------------------------------
Liberty Ridge Large Cap Growth             0.85         None         0.30         1.15         0.19         0.96
 Portfolio........................
American Century VP Ultra(r) Fund--        1.00         None         0.01         1.01          N/A         1.01
 Class I..........................
----------------------------------------------------------------------------------------------------------------


                                Comparison of Performance as of December 31, 2005
----------------------------------------------------------------------------------------------------------------
                                                    1 year       3 year       5 year
                   Portfolio                      (percent)    (percent)    (percent)     10 year     Inception
----------------------------------------------------------------------------------------------------------------
Liberty Ridge Large Cap Growth Portfolio.......         4.56        14.33       (5.40)          N/A         7.71
                                                                                                         4/30/97
American Century VP Ultra[supreg] Fund--Class I         2.17        12.18          N/A          N/A         0.85
                                                                                                         5/01/01
----------------------------------------------------------------------------------------------------------------

    The Liberty Ridge Large Cap Growth Portfolio seeks to provide 
investors with long-term growth of capital. The American Century VP 
Ultra Fund seeks long-term capital growth.
    16. Dreyfus IP Technology Growth Portfolio-Initial Series for 
Liberty Ridge Technology & Communications Portfolio (now known as Old 
Mutual Columbus Circle Technology & Communications Portfolio)

                                             Comparison of 2005 Fees
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                              Total
                                                                 Other        annual        Fee       Net total
             Portfolio               Mgmt. fee    12b-1 fee     expenses    operating    reduction      annual
                                                                             expenses                  expenses
----------------------------------------------------------------------------------------------------------------
Liberty Ridge Technology &                 0.95         None         0.19         1.14         0.29         0.85
 Communications Portfolio.........
Dreyfus IP Technology Growth               0.75         None         0.06         0.81          N/A         0.81
 Portfolio--Initial Shares........
----------------------------------------------------------------------------------------------------------------


                                Comparison of Performance as of December 31, 2005
----------------------------------------------------------------------------------------------------------------
                                                    1 year       3 year       5 year
                   Portfolio                      (percent)    (percent)    (percent)     10 year     Inception
----------------------------------------------------------------------------------------------------------------
Liberty Ridge Technology & Communications               9.91        19.35      (17.90)          N/A       (0.08)
 Portfolio.....................................                                                          4/30/97
Dreyfus IP Technology Growth Portfolio--Initial         3.78        16.32       (8.60)          N/A       (4.96)
 Series........................................                                                          8/31/99
----------------------------------------------------------------------------------------------------------------

    The Liberty Ridge Technology & Communications Portfolio, a non-
diversified fund, seeks to provide investors with long-term growth of 
capital. Current income is incidental to the portfolio's goal. To 
pursue this goal, the portfolio normally invests at least 80% of its 
net assets in equity securities of companies in the technology and 
communications sectors of the stock market. The Dreyfus IP Technology 
Growth Portfolio seeks capital appreciation. To pursue this goal, the 
portfolio normally invests at least 80% of its assets in the stocks of 
growth companies of any size that the fund manager believes to be 
leading procedures or beneficiaries of technological innovation.
    17. Dreyfus Stock Index Fund, Inc.--Initial Series for the Scudder 
VIT Equity 500 Index Fund (now known as DWS Equity 500 Index VIP)

                                             Comparison of 2005 Fees
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                              Total
                                                                 Other        annual        Fee       Net total
             Portfolio               Mgmt. fee    12b-1 fee     expenses    operating    reduction      annual
                                                                             expenses                  expenses
----------------------------------------------------------------------------------------------------------------
Scudder VIT Equity 500 Index Fund.         0.19         None         0.15         0.34         0.06         0.28
Dreyfus Stock Index Fund, Inc.--           0.25         None         0.02         0.27          N/A         0.27
 Initial Shares...................
----------------------------------------------------------------------------------------------------------------


[[Page 66208]]


                                Comparison of Performance as of December 31, 2005
----------------------------------------------------------------------------------------------------------------
                                                    1 year       3 year       5 year
                   Portfolio                      (percent)    (percent)    (percent)     10 year     Inception
----------------------------------------------------------------------------------------------------------------
Scudder VIT Equity 500 Index Fund..............         4.68        14.05         0.24          N/A         4.61
                                                                                                        10/01/97
Dreyfus Stock Index Fund, Inc.--Initial Series.         4.69        14.14         0.27         8.77          N/A
----------------------------------------------------------------------------------------------------------------

    The Scudder VIT Equity 500 Index Fund seeks to replicate, as 
closely as possible, before the deduction of expenses, the performance 
of the Standard & Poor's 500 Composite Stock Price Index. The Dreyfus 
Stock Index Fund, Inc. seeks to march the total return of the Standard 
& Poor's 500 Composite Stock Price Index.
    18. American Century VP Vista Fund--Class I for Wells Fargo 
Advantage VT Discovery Fund

                                             Comparison of 2005 Fees
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                              Total
                                                                 Other        annual        Fee       Net total
             Portfolio               Mgmt. fee    12b-1 fee     expenses    operating    reduction      annual
                                                                             expenses                  expenses
----------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage Discovery            0.75         0.25         0.23         1.23         0.08         1.15
 FundSM...........................
American Century VP VistaSM Fund--         1.00         None         0.01         1.01          N/A         1.01
 Class I..........................
----------------------------------------------------------------------------------------------------------------


                                Comparison of Performance as of December 31, 2005
----------------------------------------------------------------------------------------------------------------
                                                    1 year       3 year       5 year
                   Portfolio                      (percent)    (percent)    (percent)     10 year     Inception
----------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage Discovery FundSM.........         8.27        20.44         9.85         7.77          N/A
American Century VP VistaSM Fund--Class I......         8.13        21.12          N/A          N/A         9.14
                                                                                                        10/05/01
----------------------------------------------------------------------------------------------------------------

    The Wells Fargo Advantage VT Discovery Fund seeks capital 
appreciation by investing in securities of small- and medium-
capitalization companies that the fund manager believes offer 
attractive opportunities for growth. The American Century VP Vista Fund 
seeks long-term capital growth. The fund's managers look for stocks of 
medium-sized and smaller companies they believes will increase in value 
over time, using investment strategies developed by American Century.
    19. AIM V.I. Capital Development Fund--Series I Shares for the 
Wells Fargo Advantage VT Opportunity Fund

                                             Comparison of 2005 Fees
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                              Total
                                                                 Other        annual        Fee       Net total
             Portfolio               Mgmt. fee    12b-1 fee     expenses    operating    reduction      annual
                                                                             expenses                  expenses
----------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage Opportunity          0.72         0.25         0.21         1.18         0.11         1.07
 Fund.............................
AIM V.I. Capital Development Fund--        0.75         None         0.34         1.09          N/A         1.09
 Series I Shares..................
----------------------------------------------------------------------------------------------------------------


                                Comparison of Performance as of December 31, 2005
----------------------------------------------------------------------------------------------------------------
                                                    1 year       3 year       5 year      10 year
                   Portfolio                       (percent    (percent)    (percent)    (percent)    Inception
----------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage Opportunity Fund.........         7.88        20.45         4.25        11.54          N/A
AIM V.I. Capital Development Fund--Series I             9.61        19.66         4.37          N/A         6.46
 Shares........................................                                                          5/01/98
----------------------------------------------------------------------------------------------------------------

    The Wells Fargo Advantage VT Opportunity Fund seeks long-term 
capital appreciation. The fund manager invests in equity securities of 
medium-capitalization companies that it believes are under-priced yet, 
have attractive growth prospects. The AIM V.I. Capital Development 
Fund's investment objective is long-term growth of capital. The fund 
seeks to meet its objective by investing primarily in securities of 
small- and medium-sized companies.
    20. AIM V.I. Capital Development Fund--Series II Shares for the 
Wells Fargo Advantage VT Opportunity Fund

[[Page 66209]]



                                             Comparison of 2005 Fees
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                              Total
                                                                 Other        annual        Fee       Net total
             Portfolio               Mgmt. fee    12b-1 fee     expenses    operating    reduction      annual
                                                                             expenses                  expenses
----------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage Opportunity          0.72         0.25         0.21         1.18         0.11         1.07
 FundSM...........................
AIM V.I. Capital Development Fund--        0.75         0.25         0.34         1.34          N/A         1.34
 Series II Shares.................
----------------------------------------------------------------------------------------------------------------


                                Comparison of Performance as of December 31, 2005
----------------------------------------------------------------------------------------------------------------
                                                    1 year       3 year       5 year      10 year
                   Portfolio                      (percent)    (percent)    (percent)    (percent)    Inception
----------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage Opportunity FundSM.......         7.88        20.45         4.25        11.54          N/A
AIM V.I. Capital Development Fund--Series II            9.27        19.37         4.12          N/A         6.20
 Shares........................................                                                          8/21/01
----------------------------------------------------------------------------------------------------------------

    The Wells Fargo Advantage VT Opportunity Fund seeks long-term 
capital appreciation. The AIM V.I. Capital Development Fund's 
investment objective is long-term growth of capital.
    21. Janus Aspen Series International Growth Portfolio--
Institutional Shares for Van Kampen UIF Emerging Markets Equity 
Portfolio--Class I

                                             Comparison of 2005 Fees
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                              Total
                                                                 Other        annual        Fee       Net total
             Portfolio               Mgmt. fee    12b-1 fee     expenses    operating    reduction      annual
                                                                             expenses                  expenses
----------------------------------------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets            1.25         None         0.41         1.66         0.01         1.65
 Equity Portfolio--Class I........
Janus Aspen Series International           0.64         None         0.06         0.70          N/A         0.70
 Growth Portfolio--Institutional
 Shares...........................
----------------------------------------------------------------------------------------------------------------


                                Comparison of Performance as of December 31, 2005
----------------------------------------------------------------------------------------------------------------
                                                    1 year       3 year       5 year      10 year
                   Portfolio                      (percent)    (percent)    (percent)    (percent)    Inception
----------------------------------------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets Portfolio--            33.85        16.01        16.01          N/A         6.95
 Class I.......................................                                                         10/01/96
Janus Aspen Series International Growth                32.28        28.52         3.93        13.27        13.00
 Portfolio--Institutional Shares...............                                                          5/02/94
----------------------------------------------------------------------------------------------------------------

    The Van Kampen UIF Emerging Markets Equity Portfolio seeks long-
term capital appreciation by investing primarily in growth-oriented 
equity securities of issuers in emerging market countries. The Janus 
Aspen Series International Growth Portfolio is a portfolio that seeks 
long-term growth of capital by investing, under normal circumstances, 
at least 80% of its net assets (plus the amount of any borrowings for 
investment purposes) in securities of issuers from several different 
countries, excluding the United States.
    22. The Substitutions will take place at the portfolios' relative 
net asset values determined on the date of the Substitutions in 
accordance with Section 22 of the Act and Rule 22c-l thereunder with no 
change in the amount of any contract owner's cash value or death 
benefit or in the dollar value of his or her investment in any of the 
subaccounts. Accordingly, there will be no financial impact on any 
contract owner. The Substitutions will be effected by having each of 
the subaccounts that invests in the Replaced Portfolios redeem its 
shares for cash at the net asset value calculated on the date of the 
Substitutions and with such cash purchase shares of the respective 
Replacement Portfolios at the net asset value calculated on the same 
date.
    23. New contract owners are not permitted to allocate funds to the 
subaccounts that invest in the Replaced Portfolios (``Closed 
Subaccounts''). As a result, the prospectuses dated May 1, 2006 for the 
contracts do not include any information about Closed Subaccounts. 
Information about the applicable proposed substitutions is included in 
the supplemental prospectuses dated May 1, 2006 for the Contracts 
(``2006 Supplemental Prospectuses''), which provide information about 
Closed Subaccounts to the current contract owners who are permitted to 
allocate funds to the Closed Subaccounts.
    24. The Substitutions will be described in a supplement to the 2006 
Supplemental Prospectuses (``Stickers''), which will be filed with the 
Commission and mailed to contract owners. The Stickers will give 
contract owners notice of the Substitutions and will describe the 
reasons for engaging in the Substitutions. The Stickers will also 
inform contract owners with assets allocated to Closed Subaccounts that 
no

[[Page 66210]]

additional amount may be allocated to Closed Subaccounts on or after 
the date of the Substitutions. In addition, the Stickers will inform 
affected contract owners that they will have the opportunity to 
reallocate accumulation value without the imposition of any transfer 
charge or limitation and without diminishing the number of free 
transfers that may be made in a given contract year, both (a) prior to 
the Substitutions from the Closed Subaccounts; and (b) for 30 days 
after the Substitutions, from the Replacement Portfolios to subaccounts 
investing in other portfolios available under the respective Contracts.
    25. The prospectuses for the Contracts, as supplemented by the 
Stickers, will reflect the Substitutions. Each contract owner will be 
provided with a prospectus for the Replacement Portfolios before the 
Substitutions. Within five days after the Substitutions, Annuity 
Investors will send affected contract owners written confirmation that 
the Substitutions have occurred.
    26. Affected contract owners will not incur any fees or charges as 
a result of the Substitutions, nor will their rights or the obligations 
of the applicants under the Contracts be altered in any way. The 
Substitutions will not cause the fees and charges under the Contracts 
currently being paid by contract owners to be greater after the 
Substitutions than before the Substitutions. The Substitutions will 
have no adverse tax consequences to contract owners and will in no way 
alter the tax benefits to contract owners.

Applicants' Legal Analysis

    1. Section 26(c) of the Act makes it unlawful for any depositor or 
trustee of a registered unit investment trust holding the security of a 
single issuer to substitute another security for such security unless 
the Commission approves the substitution. The Commission will approve 
such a substitution if the evidence establishes that it is consistent 
with the protection of investors and the purposes fairly intended by 
the policy and provisions of the Act.
    2. Applicants represent that the purposes, terms and conditions of 
the Substitutions are consistent with the principles and purposes of 
Section 26(c) and do not entail any of the abuses that Section 26(c) is 
designed to prevent. The Substitutions will not result in the type of 
costly forced redemption that Section 26(c) was intended to guard 
against and, for the following reasons, is consistent with the 
protection of investors and the purposes fairly intended by the Act:
    (a) The investment objectives and policies of the Replacement 
Portfolios are sufficiently similar to those of the corresponding 
Replaced Portfolios (or its predecessor) that contract owners will have 
reasonable continuity in investment expectations.
    (b) The net total annual expense ratio for the year ended December 
31, 2005 of the Replacement Portfolio was the same as or lower than 
that of the Replaced Portfolio or, if the net total annual expense 
ratio of the Replacement Portfolio was higher than that of the Replaced 
Portfolio, Annuity Investors proposes to eliminate this difference for 
a period of time through an expense reduction at the Separate Account 
level.
    3. In connection with the Substitutions, the Applicants make the 
following representations:
    (a) The investment objectives and policies of each Replacement 
Portfolios are sufficiently similar to those of the corresponding 
Replaced Portfolio (or its predecessor) that contract owners will have 
reasonable continuity in investment expectations.
    (b) The costs of the Substitutions, including any legal, accounting 
and brokerage costs, will be borne by Annuity Investors and will not be 
borne by contract owners. No charges will be assessed to effect the 
Substitutions.
    (c) The Substitutions will be at the net asset values of the 
respective shares without the imposition of any transfer or similar 
charge and there will be no change in the amount of any contract 
owner's accumulation value, in the amount of his or her cash value or 
death benefit, or in the dollar value of his or her investment in any 
of the subaccounts in the applicable Separate Account as a result of 
the Substitutions.
    (d) The Substitutions will not cause the fees and charges under the 
Contracts currently being paid by contract owners to be greater after 
the Substitutions than before the Substitutions and will result in 
contract owners' Contract values being moved to a Replacement 
Portfolio(s) with a net total annual expense ratio for the most recent 
fiscal year that is the same or lower than that of the corresponding 
Replaced Portfolio, except in the case of the four Replacement 
Portfolios in Substitutions 2, 4, 8 and 9 where, as discussed below in 
paragraph (i), Annuity Investors proposes to eliminate the difference 
in expenses (provided that the amount of such expenses is greater than 
$1.00 for such Contract) through an expense reduction at the Separate 
Account level.
    (e) All Contract owners will be given notice of the Substitutions 
and the effective date of the Substitutions prior to the Substitutions 
and will have an opportunity, prior to the effective date of the 
Substitutions and for 30 days after the Substitutions, to reallocate 
accumulation value among other available subaccounts without the 
imposition of any transfer charge or limitation and without the 
reallocation counting as one of the contract owner's free transfers in 
a contract year.
    (f) Within five days after the Substitutions, Annuity Investors 
will send to affected Contract owners written confirmation that the 
Substitutions have occurred and the written confirmation will reiterate 
that all Contract owners may, during the 30 day period after the 
effective date of the Substitutions, reallocate accumulation value 
among other available subaccounts without the imposition of any 
transfer charge or limitation and without the reallocation counting as 
one of the Contract owner's free transfers in a contract year.
    (g) The Substitutions will in no way alter the insurance benefits 
to Contract owners or the contractual obligations of Annuity Investors.
    (h) The Substitutions will have no adverse tax consequences to 
Contract owners and will in no way alter the tax benefits to Contract 
owners.
    (i) If, on the last day of each fiscal quarter in the 12 month 
period following the Substitutions, the net total expense ratio of a 
Replacement Portfolio exceeds on an annualized basis the net total 
annual expense ratio of the corresponding Replaced Portfolio for the 
fiscal year ended December 31, 2005, Annuity Investors will, for each 
Contract outstanding on the date of the Substitutions, reimburse 
(provided that the amount of such reimbursement is greater than $1.00 
for such Contract) the Separate Account as of the last day of such 
fiscal quarter so that the amount of the Replacement Portfolio's net 
expenses for such period, together with the applicable expenses of the 
corresponding Separate Account will, on an annualized basis, be no 
greater than the sum of the net expenses of the corresponding Replaced 
Portfolio and the applicable expenses of the Separate Account for the 
2005 fiscal year. In addition, for 12 months following the 
Substitutions, Annuity Investors will not increase asset-based fees or 
charges for Contracts outstanding on the day of the Substitutions.
    (j) In connection with assets held under Contracts affected by the 
Substitutions, Annuity Investors will not receive, for three years from 
the date of the Substitutions, any direct or indirect benefits from the 
Replacement Portfolios, their advisers or underwriters (or their 
affiliates) at a rate higher than that which they had received from the

[[Page 66211]]

Replaced Portfolios, their advisers or underwriters (or their 
affiliates), including without limitation 12b-l, shareholder service, 
administration or other service fees, revenue sharing or other 
arrangements in connection with such assets. Annuity Investors 
represents that the Substitutions and the selection of the Replacement 
Portfolios were not motivated by any financial consideration paid or to 
be paid by the Replacement Portfolios, their advisers or underwriters, 
or their respective affiliates.

Conclusion

    For the reasons and upon the facts set forth above, Applicants 
submit that the requested order meets the standards set forth in 
Section 26(c). Applicants request an order of the Commission, pursuant 
to Section 26(c) of the Act, approving the Substitutions.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Nancy M. Morris,
Secretary.
 [FR Doc. E6-19075 Filed 11-9-06; 8:45 am]

BILLING CODE 8011-01-P
