RiverSource Life Insurance Company, et al., Notice of Application, 75475-75485 [E8-29312]
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Federal Register / Vol. 73, No. 239 / Thursday, December 11, 2008 / Notices
statements for the record; therefore,
OPIC’s public hearing scheduled for 2
PM, December 8, 2008 in conjunction
with OPIC’s December 11, 2008 Board of
Directors meeting has been cancelled.
Contact Person for Information:
Information on the hearing cancellation
may be obtained from Connie M. Downs
at (202) 336–8438, via facsimile at (202)
218–0136, or via e-mail at
Connie.Downs@opic.gov.
Dated: December 8, 2008.
Connie M. Downs,
OPIC Corporate Secretary.
[FR Doc. E8–29432 Filed 12–9–08; 11:15 am]
BILLING CODE 3195–01–P
POSTAL REGULATORY COMMISSION
[Docket No. CP2009–15; Order No. 144]
International Mail Contract
Postal Regulatory Commission.
ACTION: Notice.
AGENCY:
SUMMARY: This document announces a
recently-filed Postal Service notice of a
new international mail contract. It
addresses procedural steps associated
with this filing.
DATES: Comments due December 12,
2008.
Submit comments
electronically via the Commission’s
Filing Online system at https://
www.prc.gov.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Stephen L. Sharfman, General Counsel,
202–789–6820 and
stephen.sharfman@prc.gov.
SUPPLEMENTARY INFORMATION:
I. Background
On December 2, 2008, the Postal
Service filed a notice announcing that it
has entered into an additional Global
Expedited Package Services 1 (GEPS 1)
contract.1 GEPS 1 provides volumebased incentives for mailers that send
large volumes of Express Mail
International (EMI) and/or Priority Mail
International (PMI). The Postal Service
believes the instant contract is
functionally equivalent to previously
submitted GEPS agreements, and
supported by the Governors’ Decision
filed in Docket No. CP2008–5.2 Id. at 1–
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1 Notice
of United States Postal Service Filing of
Functionally Equivalent Global Expedited Package
Services 1 Negotiated Service Agreement, December
2, 2008 (Notice).
2 See Docket No. CP2008–5, Decision of the
Governors of the United States Postal Service on the
Establishment of Prices and Classifications for
Global Expedited Package Services Contracts
(Governors’ Decision No. 08–7), May 6, 2008, and
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2. It further notes that in Order No. 86,
which established GEPS 1 as a product,
the Commission held that additional
contracts may be included as part of the
GEPS 1 product if they meet the
requirements of 39 U.S.C. 3633 and if
they are functionally equivalent to the
initial GEPS 1 contract filed in Docket
No. CP2008–5.3 Id. at 1.
The instant contract. The Postal
Service filed the instant contract
pursuant to 39 CFR 3015.5. In addition,
the Postal Service contends that the
contract is in accordance with Order No.
86. It submitted the contract and
supporting material under seal, and
attached a redacted copy of the certified
statement required by 39 CFR
3015.5(c)(2) to the Notice. Id. at 1–2.
The Notice addresses reasons why the
instant GEPS 1 contract fits within the
Mail Classification Schedule language
for GEPS 1, explains expiration terms,
and discusses the Postal Service’s
interest in confidential treatment for the
contract and related material.4 Id. at 2–
3. It also provides the Postal Service’s
rationale for concluding that the instant
contract is functionally equivalent to the
initial contract filed in Docket No.
CP2008–5. The Postal Service requests
that this contract be included within the
GEPS 1 product. Id. at 3–5.
II. Notice of Filing
The Commission establishes Docket
No. CP2009–15 for consideration of
matters related to the contract identified
in the Postal Service’s Notice.
Interested persons may submit
comments on whether the Postal
Service’s contract is consistent with the
policies of 39 U.S.C. 3632, 3633, or
3642. Comments are due no later than
December 12, 2008. The public portions
of these filings can be accessed via the
Commission’s Web site (https://
www.prc.gov).
The Commission appoints Michael J.
Ravnitzky to serve as Public
Representative in the captioned filings.
It Is Ordered
1. The Commission establishes Docket
No. CP2009–15 for consideration of the
matters raised in this docket.
2. Pursuant to 39 U.S.C. 505, Michael
J. Ravnitzky is appointed to serve as
officer of the Commission (Public
Representative) to represent the
United States Postal Service Notice of Filing
Redacted Copy of Governors’ Decision No. 08–7,
July 23, 2008.
3 See PRC Order No. 86, Order Concerning Global
Expedited Package Services Contracts, June 27,
2008, at 7 (Order No. 86).
4 Contract expiration is tied to one year after the
Postal Service notifies the customer that all
necessary approvals and reviews have been
obtained. Id. at 2.
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interests of the general public in these
proceedings.
3. Comments by interested persons in
these proceedings are due no later than
December 12, 2008.
4. The Secretary shall arrange for the
publication of this Order in the Federal
Register.
By the Commission.
Steven W. Williams,
Secretary.
[FR Doc. E8–29264 Filed 12–10–08; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–28527; File No. 812–13492]
RiverSource Life Insurance Company,
et al., Notice of Application
December 4, 2008.
AGENCY: Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of amended and restated
application for an order of exemption
pursuant to Section 26(c) of the
Investment Company Act of 1940 (the
‘‘1940 Act’’) approving certain
substitutions of securities and an order
of exemption pursuant to Section 17(b)
of the 1940 Act from Section 17(a) of the
1940 Act.
Applicants: RiverSource Life
Insurance Company (‘‘RiverSource
Life’’), RiverSource Life Insurance Co. of
New York (‘‘RiverSource Life of NY’’
and, together with RiverSource Life, the
‘‘Companies’’), RiverSource Variable
Account10 (‘‘Account 10’’), RiverSource
Variable Life Separate Account
(‘‘Variable Life Separate Account’’),
RiverSource of New York Variable
Annuity Account (‘‘Variable Annuity
Account NY’’) and RiverSource of New
York Account 8 (‘‘Account 8 NY’’)
(except for the Companies, each a
‘‘separate account’’ as defined in
Section 2(a)(37) of the Investment
Company Act of 1940, as amended (the
‘‘1940 Act’’); the separate accounts are
collectively referred to herein as the
‘‘Separate Accounts’’) (all foregoing
parties collectively referred to herein as
the ‘‘Applicants’’); and RiverSource
Variable Series Trust (‘‘RiverSource VS
Trust,’’ and together with the
Applicants, the ‘‘Section 17(b)
Applicants’’).
Filing Date: The application was filed
on February 11, 2008, and amended and
restated on October 30, 2008.
Summary of Application: Applicants
request an order of the Commission,
pursuant to Section 26(c) of the 1940
Act, approving the substitution of shares
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of certain investment portfolios
(‘‘Substituted Portfolios’’) for shares of
certain other investment portfolios
(‘‘Replacement Portfolios’’) under
certain variable life insurance policies
and/or variable annuity contracts
(‘‘Contracts’’), each issued through a
Separate Account. The Section 17(b)
Applicants seek an order of exemption
pursuant to Section 17(b) of the 1940
Act from Section 17(a) of the 1940 Act
to the extent necessary to permit the
Companies to carry out the
Substitutions.
Hearing or Notification of Hearing: An
order granting the application will be
issued unless the Commission orders a
hearing. Interested persons may request
a hearing by writing to the Secretary of
the Commission and serving Applicants
with a copy of the request, personally or
by mail. Hearing requests should be
received by the Commission by 5:30
p.m. on December 29, 2008, 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 writer’s interest, the reason for the
request, and the issues contested.
Persons may request notification of a
hearing by writing to the Secretary of
the Commission.
ADDRESSES: Secretary, Securities and
Exchange Commission, 100 F Street,
NW., Washington, DC 20549.
Applicants, c/o Rodney Jay Vessels,
Esq., RiverSource Life Insurance
Company, 829 Ameriprise Financial
Center, Minneapolis, Minnesota 55474,
with copy to Stephen E. Roth, Esq.,
Sutherland Asbill & Brennan LLP, 1275
Pennsylvania Avenue, NW.,
Washington, DC 20004–2415.
FOR FURTHER INFORMATION CONTACT:
Mark A. Cowan, Senior Counsel, or
Zandra Y. Bailes, 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,
100 F Street, NE., Washington, DC
20549 (202–551–8090).
Applicants’ Representations
1. RiverSource Life is a stock life
insurance company organized in 1957
under the laws of the state of Minnesota
and is located at 70100 Ameriprise
Financial Center, Minneapolis, MN
55474. It is a wholly-owned subsidiary
of Ameriprise Financial, Inc.
2. RiverSource Life established
Account 10 on August 23, 1995
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pursuant to the provisions of Minnesota
law. Account 10 meets the definition of
‘‘separate account’’ under the federal
securities laws. Account 10 is registered
with the Commission under the 1940
Act as a unit investment trust (File No.
811–07355). The assets of Account 10
support certain Contracts that offer
Substituted Portfolios as investment
options (the ‘‘Account 10 Contracts’’),
and interests in Account 10 offered
through such Contracts have been
registered under the Securities Act of
1933 (‘‘1933 Act’’) on Form N–4.
3. RiverSource Life is the legal owner
of the assets in Account 10. The assets
of Account 10 are not chargeable with
liabilities arising out of any other
RiverSource Life business. Income,
capital gains and/or capital losses,
whether or not realized, from assets
allocated to Account 10 are credited to
or charged against the account without
regard to the income, capital gains, and/
or capital losses arising out of any other
RiverSource Life business. Account 10
is segmented into subaccounts, and
certain subaccounts invest in the
Substituted Portfolios.
4. A majority of Account 10 Contracts
involved in the Substitution are no
longer offered for sale, except for
RiverSource Retirement Advisor 4
Advantage Variable Annuity,
RiverSource Retirement Advisor 4
Select Variable Annuity and
RiverSource Retirement Advisor 4
Access Variable Annuity Contracts. The
subaccounts investing in the Substituted
Portfolios are currently available for the
allocation of additional purchase
payments and transfer of contract value
under the Account 10 Contracts for
existing and new Contract owners, and
will continue to be available to such
Contract owners until the time the
Substitutions occur.
5. The terms and conditions,
including charges and expenses,
applicable to the Account 10 Contracts
are described in the registration
statements relating to such Contracts.
Pursuant to the Account 10 Contracts,
RiverSource Life reserves the right to
substitute shares of one portfolio for
shares of another. In the prospectuses
for the Account 10 Contracts,
RiverSource Life also reserves the right
to substitute shares of one portfolio for
shares of another.
6. The terms of the Account 10
Contracts and the prospectuses for the
Account 10 Contracts also permit
owners to transfer contract value among
the subaccounts. Currently, subject to
certain restrictions, owners may
redistribute contract value among the
accounts without charge at any time
until annuity payouts begin, and once
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per contract year among the
subaccounts after annuity payouts
begin. RiverSource Life does not assess
a transfer charge. RiverSource Life also
has market timing policies and
procedures that may operate to limit
transfers. If the Account 10 Contract
offers a fixed account and GPA account,
RiverSource Life may impose
restrictions on transfers to and from the
fixed account and GPA account.
7. RiverSource Life established
Variable Life Separate Account on
October 16, 1985 pursuant to the
provisions of Minnesota law. Variable
Life Separate Account meets the
definition of ‘‘separate account’’ under
the federal securities laws. Variable Life
Separate Account is registered with the
Commission under the 1940 Act as a
unit investment trust (File No. 811–
4298). The assets of Variable Life
Separate Account support certain
Contracts that offer Substituted
Portfolios as investment options (the
‘‘Variable Life Separate Account
Contracts’’), and interests in Variable
Life Separate Account offered through
such Contracts have been registered
under the 1933 Act on Form N–4.
8. RiverSource Life is the legal owner
of the assets in Variable Life Separate
Account. The assets of Variable Life
Separate Account are not chargeable
with liabilities arising out of any other
RiverSource Life business. Income,
capital gains and/or capital losses,
whether or not realized, from assets
allocated to Variable Life Separate
Account are credited to or charged
against the account without regard to
the income, capital gains, and/or capital
losses arising out of any other
RiverSource Life business. Variable Life
Separate Account is segmented into
subaccounts, and certain subaccounts
invest in the Substituted Portfolios.
9. The majority of the Variable Life
Separate Account Contracts involved in
the Substitution are no longer offered
for sale, except RiverSource Single
Premium Variable Life, RiverSource
Variable Life Universal Life IV and
RiverSource Variable Life Universal Life
IV—Estate Series. The subaccounts
investing in the Substituted Portfolios
are currently available for the allocation
of additional purchase payments and
transfer of contract value under the
Variable Life Separate Account
Contracts for existing and new Contract
owners, and will continue to be
available to such Contract owners until
the time the Substitutions occur.
10. The terms and conditions,
including charges and expenses,
applicable to the Variable Life Separate
Account Contracts are described in the
registration statements relating to such
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Contracts. Pursuant to the Variable Life
Separate Account Contracts,
RiverSource Life reserves the right to
substitute shares of one portfolio for
shares of another. In the prospectuses
for the Variable Life Separate Account
Contracts, RiverSource Life also reserves
the right to substitute shares of one
portfolio for shares of another.
11. The terms of the Variable Life
Separate Account Contracts and the
prospectuses for the Variable Life
Separate Account Contracts also permit
owners to transfer contract value among
the subaccounts. Currently, subject to
certain restrictions, owners may
redistribute contract value among the
accounts without charge. RiverSource
Life does not assess a transfer charge.
RiverSource Life also has market timing
policies and procedures that may
operate to limit transfers. If the Variable
Life Separate Account Contract offers a
fixed account, RiverSource Life may
impose restrictions on transfers to and
from the fixed account.
12. RiverSource Life of NY is a stock
life insurance company organized in
1972 under the laws of the state of New
York and is located at 20 Madison
Avenue Extension, Albany, New York
12203. It is a wholly-owned subsidiary
of RiverSource Life. RiverSource Life of
NY conducts a conventional life
insurance business. Its primary products
currently include fixed and variable
annuity contracts and life insurance
policies. These products are distributed
through individual insurance agents,
financial planners, and broker-dealers to
both the tax qualified and non-taxqualified markets. As of December 31,
2007, RiverSource Life of NY’s assets
were in excess of $ 5.32 billion. For
purposes of the 1940 Act, RiverSource
Life of NY is the depositor and sponsor
of the Variable Annuity Account NY
and Account 8 NY as those terms have
been interpreted by the Commission
with respect to variable annuity and
variable life insurance separate
accounts.
13. RiverSource Life of NY
established Variable Annuity Account
NY on April 17, 1996 pursuant to the
provisions of New York law. Variable
Annuity Account NY meets the
definition of ‘‘separate account’’ under
the federal securities laws. Variable
Annuity Account NY is registered with
the Commission under the 1940 Act as
a unit investment trust (File No. 811–
07623). The assets of Variable Annuity
Account NY support certain Contracts
that offer Substituted Portfolios as
investment options (the ‘‘Variable
Annuity Account NY Contracts’’), and
interests in Variable Annuity Account
NY offered through such Contracts have
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been registered under the 1933 Act on
Form N–4.
14. RiverSource Life of NY is the legal
owner of the assets in Variable Annuity
Account NY. The assets of Variable
Annuity Account NY are not chargeable
with liabilities arising out of any other
RiverSource Life of NY business.
Income, capital gains and/or capital
losses, whether or not realized, from
assets allocated to Variable Annuity
Account NY are credited to or charged
against the account without regard to
the income, capital gains, and/or capital
losses arising out of any other
RiverSource Life of NY business.
Variable Annuity Account NY is
segmented into subaccounts, and certain
subaccounts invest in the Substituted
Portfolios.
15. The majority of the Variable
Annuity Account NY Contracts
involved in the Substitution are no
longer offered for sale, except
RiverSource Retirement Advisor 4
Advantage Variable Annuity,
RiverSource Retirement Advisor 4
Select Variable Annuity and
RiverSource Retirement Advisor 4
Access Variable Annuity Contracts. The
subaccounts investing in the Substituted
Portfolios are currently available for the
allocation of additional purchase
payments and transfer of contract value
under the Variable Annuity Account NY
Contracts for existing and new Contract
owners, and will continue to be
available to such Contract owners until
the time the Substitutions occur.
16. The terms and conditions,
including charges and expenses,
applicable to the Variable Annuity
Account NY Contracts are described in
the registration statements relating to
such Contracts. Pursuant to the Variable
Annuity Account NY Contracts,
RiverSource Life of NY reserves the
right to substitute shares of one portfolio
for shares of another. In the
prospectuses for the Variable Annuity
Account NY Contracts, RiverSource Life
of NY also reserves the right to
substitute shares of one portfolio for
shares of another.
17. The terms of the Variable Annuity
Account NY Contracts and the
prospectuses for the Variable Annuity
Account NY Contracts also permit
owners to transfer contract value among
the subaccounts. Currently, subject to
certain restrictions, owners may
redistribute contract value among the
accounts without charge at any time
until annuity payouts begin, and once
per contract year among the
subaccounts after annuity payouts
begin. RiverSource Life of NY does not
assess a transfer charge. RiverSource
Life of NY also has market timing
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policies and procedures that may
operate to limit transfers. If the Variable
Annuity Account NY Contract offers a
fixed account, RiverSource Life of NY
may impose restrictions on transfers to
and from the fixed account.
18. RiverSource Life of NY
established Account 8 NY on September
12, 1985 pursuant to the provisions of
New York law. Account 8 NY meets the
definition of ‘‘separate account’’ under
the federal securities laws. Account 8
NY is registered with the Commission
under the 1940 Act as a unit investment
trust (File No. 811–5213). The assets of
Account 8 NY support certain Contracts
that offer Substituted Portfolios as
investment options (the ‘‘Account 8 NY
Contracts’’), and interests in Account 8
NY offered through such Contracts have
been registered under the 1933 Act on
Form N–4.
19. RiverSource Life of NY is the legal
owner of the assets in Account 8 NY.
The assets of Account 8 NY are not
chargeable with liabilities arising out of
any other RiverSource Life of NY
business. Income, capital gains and/or
capital losses, whether or not realized,
from assets allocated to Account 8 NY
are credited to or charged against the
account without regard to the income,
capital gains, and/or capital losses
arising out of any other RiverSource Life
of NY business. Account 8 NY is
segmented into subaccounts, and certain
subaccounts invest in the Substituted
Portfolios.
20. The majority of the Account 8 NY
Contracts involved in the Substitution
are no longer offered for sale, except
RiverSource Succession Select Variable
Life Insurance and RiverSource Variable
Life Universal Life IV and RiverSource
Variable Life Universal Life IV—Estate
Series Contracts. The subaccounts
investing in the Substituted Portfolios
are currently available for the allocation
of additional purchase payments and
transfer of contract value under the
Account 8 NY Contracts for existing and
new Contract owners, and will continue
to be available to such Contract owners
until the time the Substitutions occur.
21. The terms and conditions,
including charges and expenses,
applicable to the Account 8 NY
Contracts are described in the
registration statements relating to such
Contracts. Pursuant to the Account 8 NY
Contracts, RiverSource Life of NY
reserves the right to substitute shares of
one portfolio for shares of another. In
the prospectuses for the Account 8 NY
Contracts, RiverSource Life of NY also
reserves the right to substitute shares of
one portfolio for shares of another.
22. The terms of the Account 8 NY
Contracts and the prospectuses for the
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Account 8 NY Contracts also permit
owners to transfer contract value among
the subaccounts. Currently, subject to
certain restrictions, owners may
redistribute contract value among the
accounts without charge at any time
until annuity payouts begin, and once
per contract year among the
subaccounts after annuity payouts
begin. RiverSource Life of NY does not
assess a transfer charge. RiverSource
Life of NY also has market timing
policies and procedures that may
operate to limit transfers. If the Account
8 NY Contract offers a fixed account,
RiverSource Life of NY may impose
restrictions on transfers to and from the
fixed account.
23. The proposed substitutions are as
follows: (i) Class I shares of the
American Century VP Value Fund of the
American Century Variable Portfolios
for shares of RiverSource VP—
Diversified Equity Income Fund of the
RiverSource Variable Series Trust; (ii)
Class II Shares of the Pioneer Equity
Income VCT Portfolio of the Pioneer
Variable Contracts Trust for shares of
RiverSource VP—Diversified Equity
Income Fund of the RiverSource
Variable Series Trust; (iii) Class IB
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Shares of the Putnam VT International
New Opportunities Fund of the Putnam
Variable Trust for Series II Shares of the
AIM V.I. International Growth Fund of
the AIM Variable Insurance Funds; (iv)
Service Shares of the Dreyfus VIF
International Value Portfolio of the
Dreyfus Variable Investment Fund for
Class B shares of the AllianceBernstein
VPS International Value Portfolio of the
AllianceBernstein Variable Products
Series Fund; (v) Service Shares of the
Lazard Retirement International Equity
Portfolio of the Lazard Retirement Series
for Class B shares of the
AllianceBernstein VPS International
Value Portfolio of the AllianceBernstein
Variable Products Series Fund; (vi)
Service Class shares of the MFS® Total
Return Series of the MFS® Variable
Insurance Trust for shares of
RiverSource VP—Balanced Fund of the
RiverSource Variable Series Trust; (vii)
Class 1 shares of the FTVIPT Templeton
Developing Markets Securities Fund of
the Franklin Templeton Variable
Insurance Products Trust for shares of
Threadneedle VP—Emerging Markets
Fund of the RiverSource Variable Series
Trust; and (viii) Class 2 shares of the
FTVIPT Templeton Foreign Securities
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Fund of the Franklin Templeton
Variable Insurance Products Trust for
Class 2 shares of the Evergreen VA
International Equity Fund of the
Evergreen Variable Annuity Trust.
24. The Applicants represent that
each of the Replacement Portfolios has
substantially similar investment
objectives, principal investment
strategies, and risk characteristics to
those of its corresponding Substituted
Portfolio as stated in their respective
prospectuses and/or Statements of
Additional Information (‘‘SAI’’) and as
set out in the application.
25. The Applicants represent that
each of the Replacement Portfolios’ total
net operating expenses and aggregate
investment management fees and 12b–1
fees, for the year ended December 31,
2007, expressed as an annual percentage
of average daily net assets, are no higher
than those of its corresponding
Substituted Portfolio (except for the
Threadneedle VP—Emerging Markets
Fund, which has slightly higher total
net operating expenses than the FTVIPT
Templeton Developing Markets
Securities Fund, Class 1), as set forth in
the following chart:
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26. Applicants represent that the
Substitutions proposed herein are part
of an overall business goal of the
Companies to make the Contracts more
attractive to Contract owners by
providing a diverse array of investment
options that are neither redundant nor
duplicative in terms of the investment
types and styles of the mutual funds
underlying such options. The
Companies believe that a more
concentrated and streamlined array of
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investment options could result in
increased operational and
administrative efficiencies and
economies of scale for the Companies.
The Companies also believe that
Contracts that offer too many similar
investment options may be
unnecessarily confusing to Contract
owners and may increase the
Companies’ costs of administering the
Contracts.
27. Applicants represent that the
Companies chose the Replacement
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Portfolios with the goal of ensuring that
Contract owners would be provided
with similar investment options under
their Contracts following the
Substitutions, based on an analysis of
investment objectives, strategies, risks,
performance, fees and expenses.
28. Applicants represent that for all
but one Substitution, the expense ratio
of the Replacement Portfolio is lower
than that of the corresponding
Substituted Portfolio. Applicants also
represent that for a vast majority of the
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Substitutions, the Replacement Portfolio
is larger than or of a comparable size to
the corresponding Substituted Portfolio.
Applicants note that a high level of
assets means various fund costs (such as
legal, accounting, printing and trustee
fees) are spread over a larger base, with
each Contract owner potentially bearing
a smaller portion of the cost than would
be the case if the Replacement Portfolio
were smaller in size. Applicants also
note that for many of the Replacement
Portfolios, assets will increase as a
result of the Substitutions, in some
cases significantly, and thus it is
anticipated that with such an increase,
operating expenses will decrease.
29. Ultimately, given all of the factors
discussed above, the Companies
concluded that the Substituted
Portfolios offered under the Contracts
warranted replacement. Accordingly,
the Applicants seek the Commission’s
approval under Section 26(c) to engage
in the substitution transactions
described below.
30. The Companies will effect the
Substitutions following the issuance of
the requested order as follows. As of the
effective date of the Substitutions
(‘‘Effective Date’’), each Separate
Account will either redeem shares of the
applicable Substituted Portfolios inkind or the Substituted Portfolios will
liquidate portfolio securities as
necessary and shares of the
Replacement portfolio will be
purchased with cash. In either event,
the proceeds of such redemptions will
then be used to purchase shares of the
corresponding class of the Replacement
Portfolio, with each subaccount of the
applicable Separate Account investing
the proceeds of its redemption from the
Substituted Portfolios in the applicable
class of the Replacement Portfolio.
31. Redemption requests and
purchase orders will be placed
simultaneously so that contract values
will remain fully invested at all times.
All redemptions of shares of the
Substituted Portfolios and purchases of
shares of the Replacement Portfolio will
be effected in accordance with Section
22(c) of the 1940 Act and Rule 22c–1
thereunder.
32. The Substitutions will take place
at relative net asset value as of the
Effective Date with no change in the
amount of any Contract owner’s contract
value or death benefit or in the dollar
value of his or her investments in any
of the subaccounts. Contract owners
will not incur any additional fees or
charges as a result of the Substitutions,
nor will their rights or the Companies’
obligations under the Contracts be
altered in any way, and the
Substitutions will not change Contract
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17:27 Dec 10, 2008
Jkt 217001
owners’ insurance benefits under the
Contracts. All expenses incurred in
connection with the Substitutions,
including legal, accounting,
transactional, and other fees and
expenses, including brokerage
commissions, will be paid by
RiverSource Life or RiverSource Life of
NY. In addition, the Substitutions will
not impose any tax liability on Contract
owners. The Substitutions will not
cause the Contract fees and charges
currently paid by existing Contract
owners to be greater after the
Substitutions than before the
Substitutions. Neither RiverSource Life
nor RiverSource Life of NY will exercise
any right it may have under the
Contracts to impose restrictions on
transfers under the Contracts for a
period of at least thirty (30) days
following the Substitutions. The only
exception to this would be restrictions
that RiverSource Life or RiverSource
Life of NY may impose to prevent or
restrict ‘‘market timing’’ activities by
Contract owners or their agents.
33. The Companies represent that,
with respect to Contracts outstanding on
the Effective Date, the Companies will
reimburse, on the last business day of
each fiscal period (not to exceed a fiscal
quarter), during the twenty-four months
following the Effective Date, the
subaccounts investing in each
applicable Replacement Portfolio to the
extent that the sum of the Replacement
Portfolio’s net operating expenses
(taking into account any expense waiver
or reimbursement) and the Separate
Account expenses for such period
exceed, on an annualized basis, the sum
of the corresponding Substituted
Portfolio’s net operating expenses
(taking into account any expense waiver
or reimbursement) and the Separate
Account expenses for the fiscal year
ended December 31, 2007. In addition,
for twenty-four months following the
Effective Date, the Companies will not
increase asset-based fees or charges for
Contracts outstanding on the Effective
Date.
34. Applicants represent that the
procedures to be implemented are
sufficient to assure that each Contract
owner’s cash values immediately after
the Substitutions shall be equal to the
cash value immediately before the
Substitutions.
35. Applicants represent that under
the Manager of Managers Order
applicable to the RiverSource Funds, a
vote of the shareholders is not necessary
to change a subadviser of the applicable
Replacement Portfolio, except for
changes involving an affiliated
subadviser. Notwithstanding, after the
Effective Date of the Substitutions, the
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Fmt 4703
Sfmt 4703
Applicants agree not to change the
Replacement Portfolio’s subadviser, add
a new subadviser, or otherwise rely on
the Manager of Managers Order without
first obtaining shareholder approval of
either the subadviser change or the
Replacement Portfolio’s continued
ability to rely on the Manager of
Managers Order.
36. Applicants note that Contract
owners were notified of the initial
application by means of a prospectus
supplement for each of the Contracts
stating that the Applicants filed the
initial application and seek approval for
the Substitutions (‘‘Pre-Substitution
Notice’’). The Pre-Substitution Notice
set forth the anticipated Effective Date
and advised Contract owners that
contract values attributable to
investments in the Substituted
Portfolios will be transferred to the
Replacement Portfolio, without charge
(including sales charges or surrender
charges) and without counting toward
the number of transfers that may be
permitted without charge, on the
Effective Date. The Pre-Substitution
Notice stated that, from the date the
initial application was filed with the
Commission through the date thirty (30)
days after the Substitutions, Contract
owners may make one transfer of
contract value from the subaccounts
investing in the Substituted Portfolios
(before the Substitutions) or the
Replacement Portfolio (after the
Substitutions) to one or more other
subaccount(s) without charge (including
sales charges or surrender charges) and
without that transfer counting against
their contractual transfer limitations.
37. Applicants represent that all
Contract owners will have received a
copy of the most recent Replacement
Portfolio prospectus prior to the
Substitutions.
38. Applicants represent that within
five (5) days following the Substitutions,
Contract owners affected by the
Substitutions will be notified in writing
that the Substitutions were carried out.
This notice will restate the information
set forth in the Pre-Substitution Notice.
Applicants’ Legal Analysis
1. Section 26(c) of the 1940 Act
(formerly, Section 26(b)) prohibits any
depositor or trustee of a unit investment
trust that invests exclusively in the
securities of a single issuer from
substituting the securities of another
issuer without the approval of the
Commission. Section 26(c) provides that
such approval shall be granted by order
of the Commission, if the evidence
establishes that the substitution is
consistent with the protection of
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Federal Register / Vol. 73, No. 239 / Thursday, December 11, 2008 / Notices
investors and the purposes of the 1940
Act.
2. Section 26(c) was intended to
provide for Commission scrutiny of
proposed substitutions which could, in
effect, force shareholders dissatisfied
with the substitute security to redeem
their shares, thereby possibly incurring
a loss of the sales load deducted from
initial premium, an additional sales
load upon reinvestment of the proceeds
of redemption, or both. The section was
designed to forestall the ability of a
depositor to present holders of interest
in a unit investment trust with
situations in which a holder’s only
choice would be to continue an
investment in an unsuitable underlying
security, or to elect a costly and, in
effect, forced redemption. For the
reasons described below, the Applicants
submit that the Substitutions meet the
standards set forth in Section 26(c) and
that, if implemented, the Substitutions
would not raise any of the
aforementioned concerns that Congress
intended to address when the 1940 Act
was amended to include this provision.
In addition, the Applicants submit that
the proposed Substitutions meet the
standards that the Commission and its
Staff have applied to substitutions that
have been approved in the past.
3. The replacement of the Substituted
Portfolios with the Replacement
Portfolio is consistent with the
protection of Contract owners and the
purposes fairly intended by the policy
and provisions of the 1940 Act and,
thus, meets the standards necessary to
support an order pursuant to Section
26(c) of the 1940 Act.
4. Although not always identical, the
investment objectives and principal
investment strategies of the
Replacement Portfolio are substantially
similar to those of the corresponding
Substituted Portfolio.
5. The total operating expenses, prior
to expense waivers and reimbursements,
of the applicable class of the
Replacement Portfolios were lower than
those of the corresponding Substituted
Portfolio as a December 31, 2007, except
for the Threadneedle VP—Emerging
Markets Fund, which has slightly higher
total net operating expenses than the
FTVIPT Templeton Developing Markets
Securities Fund, Class 1. For a two-year
period following the date of the
Substitutions the Companies will ensure
that total net operating expenses of the
applicable class of all Replacement
Portfolios, together with Separate
Account expenses, will not exceed, on
an annualized basis, the total net
operating expenses of the corresponding
Substituted Portfolio, together with
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17:27 Dec 10, 2008
Jkt 217001
Separate Account expenses, as of
December 31, 2007.
6. Applicants request an order of the
Commission pursuant to Section 26(c)
of the 1940 Act approving the
Substitutions. The Applicants submit
that, for all the reasons stated above, the
Substitutions are consistent with the
protection of investors and the purposes
fairly intended by the policy of the
Contracts and provisions of the 1940
Act.
7. The Section 17(b) Applicants also
request that the Commission issue an
order pursuant to Section 17(b) of the
1940 Act exempting them from Section
17(a) of the 1940 Act to the extent
necessary to permit RiverSource Life or
RiverSource Life of NY to carry out the
Substitutions by redeeming shares
issued by the Substituted Portfolios inkind and using the distributed securities
to purchase shares issued by the
applicable Replacement Portfolios.
8. Section 17(a)(l) and (a)(2) of the
1940 Act generally prohibit any
affiliated person of a registered
investment company, or any affiliated
person of an affiliated person, from
selling any security or other property to
such registered investment company
and from purchasing any security or
other property from such registered
investment company. As described
below, RiverSource Life and
RiverSource Life of NY anticipate that
the Substitutions will be done (in whole
or in part) by redeeming shares of the
Substituted Portfolios in-kind rather
than in cash and then using those assets
to purchase shares of the Replacement
Portfolio. Redemptions and purchases
in-kind involve the purchase of property
from a registered investment company
and the sale of property to a registered
investment company by RiverSource
Life, RiverSource Life of NY, and
RiverSource Funds, each arguably an
affiliated person of those investment
companies.
9. Pursuant to Section 17(a)(1) of the
1940 Act, the Section 17(b) Applicants
may be considered affiliates of one or
more of the Replacement Portfolios
involved in such Substitutions, based
upon the definition of ‘‘affiliated
person’’ under Section 2(a)(3) of the
1940 Act. In addition to the Companies’
affiliation with each Replacement
Portfolio of the RiverSource Funds, the
Companies, through their Separate
Accounts, in the aggregate own 5% or
more of the outstanding shares of the
following Replacement Portfolios:
AllianceBernstein VPS International
Value Portfolio and Evergreen VA
International Equity Fund. Therefore,
arguably each Company is an affiliated
person of these Replacement Portfolios.
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Sfmt 4703
75483
Because the Substitutions involving
these Replacement Portfolios and the
Replacement Portfolios of the
RiverSource Funds may be effected, in
whole or in part, by means of in-kind
redemptions and subsequent purchases
of shares, and also by means of in-kind
transactions, these Substitutions may be
deemed to involve one or more
purchases or sales of securities or
property between affiliates.
10. Section 17(b) of the 1940 Act
provides that the Commission may,
upon application, grant an order
exempting any transaction from the
prohibitions of Section 17(a) if the
evidence establishes that: (1) The terms
of the proposed transaction, including
the consideration to be paid or received,
are reasonable and fair and do not
involve overreaching on the part of any
person concerned; (2) the proposed
transaction is consistent with the policy
of each registered investment company
concerned, as recited in its registration
statement and records filed under the
1940 Act; and (3) the proposed
transaction is consistent with the
general purposes of the 1940 Act.
11. Rule 17a–7 under the 1940 Act
exempts from Section 17(a), subject to
certain enumerated conditions, a
purchase or sale transaction between
registered investment companies or
separate series of registered investment
companies, which are affiliated persons,
or affiliated persons of affiliated
persons, of each other, between separate
series of a registered investment
company, or between a registered
investment company or a separate series
of a registered investment company and
a person which is an affiliated person of
such registered investment company (or
affiliated person of such person) solely
by reason of having a common
investment adviser or investment
advisers which are affiliated persons of
each other, common directors, and/or
common officers.
12. The Section 17(b) Applicants
submit that the terms of the
Substitutions, including the
consideration to be paid and received,
as described in the Application, are
reasonable and fair and do not involve
overreaching on the part of any person
concerned. The Section 17(b)
Applicants also submit that the
Substitutions are consistent with the
policies of the applicable fund
companies and their portfolios, as
recited in the current registration
statements and reports filed by them
under the 1940 Act. Finally, the Section
17(b) Applicants submit that the
proposed Substitutions are consistent
with the general purposes of the 1940
Act.
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Federal Register / Vol. 73, No. 239 / Thursday, December 11, 2008 / Notices
13. RiverSource Life and RiverSource
Life of NY assert that the terms under
which the in-kind redemptions and
purchases will be effected are
reasonable and fair and do not involve
overreaching on the part of any person
principally because the applicable
Substitutions will comply in substance
with all but one of the principal
conditions enumerated in Rule 17a-7.
The use of in-kind transactions will not
cause Contract owner interests to be
diluted. The proposed transactions will
take place at relative net asset value as
of the Effective Date in conformity with
the requirements of Section 22(c) of the
1940 Act and Rule 22c–1 thereunder
with no change in the amount of any
Contract owner’s contract value or death
benefit or in the dollar value of his or
her investment in any of the Separate
Accounts. Contract owners will not
suffer any adverse tax consequences as
a result of the Substitutions. Fees and
charges under the Contracts will not
increase because of the Substitutions.
14. Even though the Section 17(b)
Applicants may not rely on Rule 17a–
7 because they cannot meet all of its
conditions, the Section 17(b) Applicants
submit that the Rule’s conditions
outline the type of safeguards that result
in transactions that are fair and
reasonable to registered investment
company participants and preclude
overreaching in connection with an
investment company by its affiliated
persons. The Section 17(b) Applicants
will carry out the proposed in-kind
purchases in conformity with all of the
conditions of Rule 17a–7 and the
procedures adopted thereunder, except
that the consideration paid for the
securities being purchased or sold may
not be entirely cash. Nevertheless, the
circumstances surrounding the
proposed Substitutions will be such as
to offer the same degree of protection to
the Replacement Portfolio from
overreaching that Rule 17a–7 provides
to it generally in connection with its
purchase and sale of securities under
that Rule in the ordinary course of its
business.
15. In particular, the proposed
Substitutions will not be effected at a
price that is disadvantageous to the
Substituted Portfolios or the
Replacement Portfolios. Although the
Substitutions may not be entirely for
cash, each will be effected based upon
(1) the independent market price of the
portfolio securities valued as specified
in paragraph (b) of Rule 17a–7, and (2)
the net asset value per share of each
Portfolio involved valued in accordance
with the procedures disclosed in its
registration statement and as required
by Rule 22c–1 under the 1940 Act.
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17:27 Dec 10, 2008
Jkt 217001
Moreover, consistent with Rule 17a–
7(d), no brokerage commissions, fees, or
other remuneration will be paid in
connection with the in-kind
transactions. All in-kind redemptions
from a Substituted Portfolio of which
any of the Substitution Applicants is an
affiliated person will be effected in
accordance with the conditions set forth
in the Commission’s no-action letter
issued to Signature Financial Group,
Inc. (available December 28, 1999).
16. Consistent with Section 17(b) and
Rule 17a–7(c), any in-kind redemptions
and purchases for purposes of the
Substitutions will be transacted in a
manner consistent with the investment
objectives and policies of the applicable
Substituted Portfolios and the
Replacement Portfolios, as recited in
their registration statements. The
adviser or any subadviser to each
Replacement Portfolio will review the
securities holdings of the Substituted
Portfolios to determine whether their
portfolio holdings would be suitable
investments for the corresponding
Replacement Portfolio in the overall
context of that Portfolio’s investment
objectives and policies and consistent
with the management of that Portfolio.
The adviser or any subadviser to each
Replacement Portfolio will conduct its
review of the Substituted Portfolios’
securities holdings in the same manner
that a board of directors would normally
follow in accordance with Rule 17a–7.
The adviser or any subadviser to each
Replacement Portfolio will only accept
those securities as consideration for its
shares that it would have acquired in a
cash transaction. The Section 17(b)
Applicants state that securities to be
paid out as redemption proceeds and
subsequently contributed to the
Replacement Portfolios to effect the
contemplated in-kind purchases of
shares will be valued based on the
normal valuation procedures of the
redeeming and purchasing Portfolios.
The redeeming and purchasing values
will be the same. If the adviser or any
subadviser to any Replacement Portfolio
declines to accept particular portfolio
securities of the corresponding
Substituted Portfolio for purchase inkind of shares of that corresponding
Portfolio, the applicable Substituted
Portfolio will liquidate portfolio
securities as necessary and shares of the
corresponding Replacement Portfolio
will be purchased with cash.
17. Applicants represent that the
Substitutions, as described herein, are
consistent with the general purposes of
the 1940 Act as stated in the Findings
and Declaration of Policy in Section 1
of the 1940 Act. The proposed
transactions do not present any of the
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
conditions or abuses that the 1940 Act
was designed to prevent. Securities to
be paid out as redemption proceeds and
subsequently contributed to the
Replacement Portfolio to effect the
contemplated in-kind purchases of
shares will be valued based on the
normal valuation procedures of the
redeeming Substituted Portfolios and
purchasing Replacement Portfolio.
Therefore, there will be no change in
value to any Contract owner as a result
of the Substitutions. The Commission
has granted relief to others based on
similar facts.
18. The Section 17(b) Applicants
request an order of the Commission
pursuant to Section 17(b) of the 1940
Act exempting them from Section 17(a)
of the 1940 Act to the extent necessary
to permit the Companies to carry out
certain of the Substitutions by
redeeming shares issued by each
applicable Substituted Portfolio in-kind
and using the securities distributed as
redemption proceeds to purchase shares
issued by the applicable Replacement
Portfolios. The Section 17(b) Applicants
submit that, for all of the reasons stated
above, the terms of the proposed in-kind
redemptions and purchases, including
the consideration to be paid or received,
are reasonable and fair to Contract
owners and do not involve overreaching
on the part of any person; and
furthermore, granting the relief required
herein for the proposed Substitutions
that may be effected by means of in-kind
redemptions and purchases of shares is
appropriate, in the public interest, and
consistent with the policies of each
Portfolio and the general purposes of the
1940 Act.
Applicants’ Conditions
For purposes of the approval sought
pursuant to Section 26(c) of the 1940
Act, the Substitutions described in the
application will not be completed
unless all of the following conditions,
and all other conditions and
representations set forth in the
Application, are met:
1. The Commission shall have issued
an order (i) approving the Substitutions
under Section 26(c) of the 1940 Act as
necessary to carry out the transactions
described in the application; and (ii)
exempting any in-kind redemptions and
purchases from the provisions of
Section 17(a) of the 1940 Act as
necessary to carry out the transactions
described in the application.
2. Each Contract owner will have been
sent (i) prior to the Effective Date, a
copy of the effective prospectus for the
Replacement Portfolio, (ii) prior to the
Effective Date, a Pre-Substitution Notice
describing the terms of the Substitutions
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Federal Register / Vol. 73, No. 239 / Thursday, December 11, 2008 / Notices
and the rights of the Contract owners in
connection with the Substitutions, and
(iii) within five (5) days after the
Substitutions occur, a notice informing
Contract owners affected by the
Substitutions that the Substitutions
were carried out and restating the
information set forth in the PreSubstitution Notice.
3. The Companies shall have satisfied
themselves that (i) the Contracts allow
the substitution of the Portfolios in the
manner contemplated by the
Substitutions and related transactions
described herein, (ii) the transactions
can be consummated as described in the
application under applicable insurance
laws, and (iii) any applicable regulatory
requirements in each jurisdiction where
the Contracts are qualified for sale have
been complied with to the extent
necessary to complete the transaction.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–29312 Filed 12–10–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59052; File No. SR–CBOE–
2008–119]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend CBOE Rules
Relating to Appointment Costs
mstockstill on PROD1PC66 with NOTICES
December 4, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
25, 2008, the Chicago Board Options
Exchange, Incorporated (the ‘‘Exchange’’
or ‘‘CBOE’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
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17:27 Dec 10, 2008
Jkt 217001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
CBOE rules relating to appointment
costs in connection with CBOE’s
decision to trade OEX on the Hybrid
Trading System. The text of the
proposed rule change is available on the
Exchange’s Web site (https://
www.cboe.org/legal), at the Exchange’s
Office of the Secretary and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in Sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this rule change is to
amend CBOE Rule 8.3 relating to the
appointment costs for the OEX and XEO
option classes, in connection with
CBOE’s decision to trade OEX on the
Hybrid Trading System, and not on the
Hybrid 3.0 Platform. Specifically, CBOE
proposes to lower the appointment cost
of OEX from .75 to .40, and lower the
appointment cost of XEO from .25 to
.10. The changes to the appointment
costs would be effective December 9,
2008, which coincides with the date
CBOE intends to trade OEX on the
Hybrid Trading System. OEX would be
placed in the AA Tier, which tier holds
all option classes which have a fixed
appointment cost. The tables in
paragraphs (c)(i) and (c)(iii) of Rule 8.3
would be amended to reflect these
proposed changes.
CBOE believes that amending the
appointment costs of OEX and XEO as
proposed promotes competition and
efficiency, as members then could
utilize the excess membership capacity
to hold an appointment and quote
electronically in additional Hybrid
option classes.
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75485
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to a national
securities exchange and, in particular,
the requirements of Section 6(b) of the
Act. Specifically, the Exchange believes
the proposed rule change is consistent
with Section 6(b)(5) of the Act’s 5
requirements that the rules of an
exchange be designed to promote just
and equitable principles of trade, in that
lowering the appointment cost of OEX
and XEO promotes competition and
efficiency, as members then could
utilize the excess membership capacity
to hold an appointment and quote
electronically in additional Hybrid
option classes.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposal.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 6 and Rule 19b–
4(f)(6) thereunder.7
CBOE has asked the Commission to
waive the 30-day operative delay. The
Commission hereby grants the
Exchange’s request and believes that
such waiver is consistent with the
protection of investors and the public
interest. Allowing CBOE to lower the
appointment cost of OEX and XEO does
not raise any novel or significant
regulatory issues and should promote
competition and efficiency by allowing
5 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(3)(A).
7 17 CFR 240.19b–4(f)(6). The Commission notes
that CBOE has satisfied the five-day pre-filing
notice requirement.
6 15
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]]>Agencies
[Federal Register Volume 73, Number 239 (Thursday, December 11, 2008)]
[Notices]
[Pages 75475-75485]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-29312]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-28527; File No. 812-13492]
RiverSource Life Insurance Company, et al., Notice of Application
December 4, 2008.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of amended and restated application for an order of
exemption pursuant to Section 26(c) of the Investment Company Act of
1940 (the ``1940 Act'') approving certain substitutions of securities
and an order of exemption pursuant to Section 17(b) of the 1940 Act
from Section 17(a) of the 1940 Act.
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Applicants: RiverSource Life Insurance Company (``RiverSource
Life''), RiverSource Life Insurance Co. of New York (``RiverSource Life
of NY'' and, together with RiverSource Life, the ``Companies''),
RiverSource Variable Account10 (``Account 10''), RiverSource Variable
Life Separate Account (``Variable Life Separate Account''), RiverSource
of New York Variable Annuity Account (``Variable Annuity Account NY'')
and RiverSource of New York Account 8 (``Account 8 NY'') (except for
the Companies, each a ``separate account'' as defined in Section
2(a)(37) of the Investment Company Act of 1940, as amended (the ``1940
Act''); the separate accounts are collectively referred to herein as
the ``Separate Accounts'') (all foregoing parties collectively referred
to herein as the ``Applicants''); and RiverSource Variable Series Trust
(``RiverSource VS Trust,'' and together with the Applicants, the
``Section 17(b) Applicants'').
Filing Date: The application was filed on February 11, 2008, and
amended and restated on October 30, 2008.
Summary of Application: Applicants request an order of the
Commission, pursuant to Section 26(c) of the 1940 Act, approving the
substitution of shares
[[Page 75476]]
of certain investment portfolios (``Substituted Portfolios'') for
shares of certain other investment portfolios (``Replacement
Portfolios'') under certain variable life insurance policies and/or
variable annuity contracts (``Contracts''), each issued through a
Separate Account. The Section 17(b) Applicants seek an order of
exemption pursuant to Section 17(b) of the 1940 Act from Section 17(a)
of the 1940 Act to the extent necessary to permit the Companies to
carry out the Substitutions.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Secretary of
the Commission and serving Applicants with a copy of the request,
personally or by mail. Hearing requests should be received by the
Commission by 5:30 p.m. on December 29, 2008, 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 writer's interest, the reason for the request, and the
issues contested. Persons may request notification of a hearing by
writing to the Secretary of the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NW., Washington, DC 20549. Applicants, c/o Rodney Jay Vessels, Esq.,
RiverSource Life Insurance Company, 829 Ameriprise Financial Center,
Minneapolis, Minnesota 55474, with copy to Stephen E. Roth, Esq.,
Sutherland Asbill & Brennan LLP, 1275 Pennsylvania Avenue, NW.,
Washington, DC 20004-2415.
FOR FURTHER INFORMATION CONTACT: Mark A. Cowan, Senior Counsel, or
Zandra Y. Bailes, 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, 100 F Street, NE.,
Washington, DC 20549 (202-551-8090).
Applicants' Representations
1. RiverSource Life is a stock life insurance company organized in
1957 under the laws of the state of Minnesota and is located at 70100
Ameriprise Financial Center, Minneapolis, MN 55474. It is a wholly-
owned subsidiary of Ameriprise Financial, Inc.
2. RiverSource Life established Account 10 on August 23, 1995
pursuant to the provisions of Minnesota law. Account 10 meets the
definition of ``separate account'' under the federal securities laws.
Account 10 is registered with the Commission under the 1940 Act as a
unit investment trust (File No. 811-07355). The assets of Account 10
support certain Contracts that offer Substituted Portfolios as
investment options (the ``Account 10 Contracts''), and interests in
Account 10 offered through such Contracts have been registered under
the Securities Act of 1933 (``1933 Act'') on Form N-4.
3. RiverSource Life is the legal owner of the assets in Account 10.
The assets of Account 10 are not chargeable with liabilities arising
out of any other RiverSource Life business. Income, capital gains and/
or capital losses, whether or not realized, from assets allocated to
Account 10 are credited to or charged against the account without
regard to the income, capital gains, and/or capital losses arising out
of any other RiverSource Life business. Account 10 is segmented into
subaccounts, and certain subaccounts invest in the Substituted
Portfolios.
4. A majority of Account 10 Contracts involved in the Substitution
are no longer offered for sale, except for RiverSource Retirement
Advisor 4 Advantage Variable Annuity, RiverSource Retirement Advisor 4
Select Variable Annuity and RiverSource Retirement Advisor 4 Access
Variable Annuity Contracts. The subaccounts investing in the
Substituted Portfolios are currently available for the allocation of
additional purchase payments and transfer of contract value under the
Account 10 Contracts for existing and new Contract owners, and will
continue to be available to such Contract owners until the time the
Substitutions occur.
5. The terms and conditions, including charges and expenses,
applicable to the Account 10 Contracts are described in the
registration statements relating to such Contracts. Pursuant to the
Account 10 Contracts, RiverSource Life reserves the right to substitute
shares of one portfolio for shares of another. In the prospectuses for
the Account 10 Contracts, RiverSource Life also reserves the right to
substitute shares of one portfolio for shares of another.
6. The terms of the Account 10 Contracts and the prospectuses for
the Account 10 Contracts also permit owners to transfer contract value
among the subaccounts. Currently, subject to certain restrictions,
owners may redistribute contract value among the accounts without
charge at any time until annuity payouts begin, and once per contract
year among the subaccounts after annuity payouts begin. RiverSource
Life does not assess a transfer charge. RiverSource Life also has
market timing policies and procedures that may operate to limit
transfers. If the Account 10 Contract offers a fixed account and GPA
account, RiverSource Life may impose restrictions on transfers to and
from the fixed account and GPA account.
7. RiverSource Life established Variable Life Separate Account on
October 16, 1985 pursuant to the provisions of Minnesota law. Variable
Life Separate Account meets the definition of ``separate account''
under the federal securities laws. Variable Life Separate Account is
registered with the Commission under the 1940 Act as a unit investment
trust (File No. 811-4298). The assets of Variable Life Separate Account
support certain Contracts that offer Substituted Portfolios as
investment options (the ``Variable Life Separate Account Contracts''),
and interests in Variable Life Separate Account offered through such
Contracts have been registered under the 1933 Act on Form N-4.
8. RiverSource Life is the legal owner of the assets in Variable
Life Separate Account. The assets of Variable Life Separate Account are
not chargeable with liabilities arising out of any other RiverSource
Life business. Income, capital gains and/or capital losses, whether or
not realized, from assets allocated to Variable Life Separate Account
are credited to or charged against the account without regard to the
income, capital gains, and/or capital losses arising out of any other
RiverSource Life business. Variable Life Separate Account is segmented
into subaccounts, and certain subaccounts invest in the Substituted
Portfolios.
9. The majority of the Variable Life Separate Account Contracts
involved in the Substitution are no longer offered for sale, except
RiverSource Single Premium Variable Life, RiverSource Variable Life
Universal Life IV and RiverSource Variable Life Universal Life IV--
Estate Series. The subaccounts investing in the Substituted Portfolios
are currently available for the allocation of additional purchase
payments and transfer of contract value under the Variable Life
Separate Account Contracts for existing and new Contract owners, and
will continue to be available to such Contract owners until the time
the Substitutions occur.
10. The terms and conditions, including charges and expenses,
applicable to the Variable Life Separate Account Contracts are
described in the registration statements relating to such
[[Page 75477]]
Contracts. Pursuant to the Variable Life Separate Account Contracts,
RiverSource Life reserves the right to substitute shares of one
portfolio for shares of another. In the prospectuses for the Variable
Life Separate Account Contracts, RiverSource Life also reserves the
right to substitute shares of one portfolio for shares of another.
11. The terms of the Variable Life Separate Account Contracts and
the prospectuses for the Variable Life Separate Account Contracts also
permit owners to transfer contract value among the subaccounts.
Currently, subject to certain restrictions, owners may redistribute
contract value among the accounts without charge. RiverSource Life does
not assess a transfer charge. RiverSource Life also has market timing
policies and procedures that may operate to limit transfers. If the
Variable Life Separate Account Contract offers a fixed account,
RiverSource Life may impose restrictions on transfers to and from the
fixed account.
12. RiverSource Life of NY is a stock life insurance company
organized in 1972 under the laws of the state of New York and is
located at 20 Madison Avenue Extension, Albany, New York 12203. It is a
wholly-owned subsidiary of RiverSource Life. RiverSource Life of NY
conducts a conventional life insurance business. Its primary products
currently include fixed and variable annuity contracts and life
insurance policies. These products are distributed through individual
insurance agents, financial planners, and broker-dealers to both the
tax qualified and non-tax-qualified markets. As of December 31, 2007,
RiverSource Life of NY's assets were in excess of $ 5.32 billion. For
purposes of the 1940 Act, RiverSource Life of NY is the depositor and
sponsor of the Variable Annuity Account NY and Account 8 NY as those
terms have been interpreted by the Commission with respect to variable
annuity and variable life insurance separate accounts.
13. RiverSource Life of NY established Variable Annuity Account NY
on April 17, 1996 pursuant to the provisions of New York law. Variable
Annuity Account NY meets the definition of ``separate account'' under
the federal securities laws. Variable Annuity Account NY is registered
with the Commission under the 1940 Act as a unit investment trust (File
No. 811-07623). The assets of Variable Annuity Account NY support
certain Contracts that offer Substituted Portfolios as investment
options (the ``Variable Annuity Account NY Contracts''), and interests
in Variable Annuity Account NY offered through such Contracts have been
registered under the 1933 Act on Form N-4.
14. RiverSource Life of NY is the legal owner of the assets in
Variable Annuity Account NY. The assets of Variable Annuity Account NY
are not chargeable with liabilities arising out of any other
RiverSource Life of NY business. Income, capital gains and/or capital
losses, whether or not realized, from assets allocated to Variable
Annuity Account NY are credited to or charged against the account
without regard to the income, capital gains, and/or capital losses
arising out of any other RiverSource Life of NY business. Variable
Annuity Account NY is segmented into subaccounts, and certain
subaccounts invest in the Substituted Portfolios.
15. The majority of the Variable Annuity Account NY Contracts
involved in the Substitution are no longer offered for sale, except
RiverSource Retirement Advisor 4 Advantage Variable Annuity,
RiverSource Retirement Advisor 4 Select Variable Annuity and
RiverSource Retirement Advisor 4 Access Variable Annuity Contracts. The
subaccounts investing in the Substituted Portfolios are currently
available for the allocation of additional purchase payments and
transfer of contract value under the Variable Annuity Account NY
Contracts for existing and new Contract owners, and will continue to be
available to such Contract owners until the time the Substitutions
occur.
16. The terms and conditions, including charges and expenses,
applicable to the Variable Annuity Account NY Contracts are described
in the registration statements relating to such Contracts. Pursuant to
the Variable Annuity Account NY Contracts, RiverSource Life of NY
reserves the right to substitute shares of one portfolio for shares of
another. In the prospectuses for the Variable Annuity Account NY
Contracts, RiverSource Life of NY also reserves the right to substitute
shares of one portfolio for shares of another.
17. The terms of the Variable Annuity Account NY Contracts and the
prospectuses for the Variable Annuity Account NY Contracts also permit
owners to transfer contract value among the subaccounts. Currently,
subject to certain restrictions, owners may redistribute contract value
among the accounts without charge at any time until annuity payouts
begin, and once per contract year among the subaccounts after annuity
payouts begin. RiverSource Life of NY does not assess a transfer
charge. RiverSource Life of NY also has market timing policies and
procedures that may operate to limit transfers. If the Variable Annuity
Account NY Contract offers a fixed account, RiverSource Life of NY may
impose restrictions on transfers to and from the fixed account.
18. RiverSource Life of NY established Account 8 NY on September
12, 1985 pursuant to the provisions of New York law. Account 8 NY meets
the definition of ``separate account'' under the federal securities
laws. Account 8 NY is registered with the Commission under the 1940 Act
as a unit investment trust (File No. 811-5213). The assets of Account 8
NY support certain Contracts that offer Substituted Portfolios as
investment options (the ``Account 8 NY Contracts''), and interests in
Account 8 NY offered through such Contracts have been registered under
the 1933 Act on Form N-4.
19. RiverSource Life of NY is the legal owner of the assets in
Account 8 NY. The assets of Account 8 NY are not chargeable with
liabilities arising out of any other RiverSource Life of NY business.
Income, capital gains and/or capital losses, whether or not realized,
from assets allocated to Account 8 NY are credited to or charged
against the account without regard to the income, capital gains, and/or
capital losses arising out of any other RiverSource Life of NY
business. Account 8 NY is segmented into subaccounts, and certain
subaccounts invest in the Substituted Portfolios.
20. The majority of the Account 8 NY Contracts involved in the
Substitution are no longer offered for sale, except RiverSource
Succession Select Variable Life Insurance and RiverSource Variable Life
Universal Life IV and RiverSource Variable Life Universal Life IV--
Estate Series Contracts. The subaccounts investing in the Substituted
Portfolios are currently available for the allocation of additional
purchase payments and transfer of contract value under the Account 8 NY
Contracts for existing and new Contract owners, and will continue to be
available to such Contract owners until the time the Substitutions
occur.
21. The terms and conditions, including charges and expenses,
applicable to the Account 8 NY Contracts are described in the
registration statements relating to such Contracts. Pursuant to the
Account 8 NY Contracts, RiverSource Life of NY reserves the right to
substitute shares of one portfolio for shares of another. In the
prospectuses for the Account 8 NY Contracts, RiverSource Life of NY
also reserves the right to substitute shares of one portfolio for
shares of another.
22. The terms of the Account 8 NY Contracts and the prospectuses
for the
[[Page 75478]]
Account 8 NY Contracts also permit owners to transfer contract value
among the subaccounts. Currently, subject to certain restrictions,
owners may redistribute contract value among the accounts without
charge at any time until annuity payouts begin, and once per contract
year among the subaccounts after annuity payouts begin. RiverSource
Life of NY does not assess a transfer charge. RiverSource Life of NY
also has market timing policies and procedures that may operate to
limit transfers. If the Account 8 NY Contract offers a fixed account,
RiverSource Life of NY may impose restrictions on transfers to and from
the fixed account.
23. The proposed substitutions are as follows: (i) Class I shares
of the American Century VP Value Fund of the American Century Variable
Portfolios for shares of RiverSource VP--Diversified Equity Income Fund
of the RiverSource Variable Series Trust; (ii) Class II Shares of the
Pioneer Equity Income VCT Portfolio of the Pioneer Variable Contracts
Trust for shares of RiverSource VP--Diversified Equity Income Fund of
the RiverSource Variable Series Trust; (iii) Class IB Shares of the
Putnam VT International New Opportunities Fund of the Putnam Variable
Trust for Series II Shares of the AIM V.I. International Growth Fund of
the AIM Variable Insurance Funds; (iv) Service Shares of the Dreyfus
VIF International Value Portfolio of the Dreyfus Variable Investment
Fund for Class B shares of the AllianceBernstein VPS International
Value Portfolio of the AllianceBernstein Variable Products Series Fund;
(v) Service Shares of the Lazard Retirement International Equity
Portfolio of the Lazard Retirement Series for Class B shares of the
AllianceBernstein VPS International Value Portfolio of the
AllianceBernstein Variable Products Series Fund; (vi) Service Class
shares of the MFS[supreg] Total Return Series of the MFS[supreg]
Variable Insurance Trust for shares of RiverSource VP--Balanced Fund of
the RiverSource Variable Series Trust; (vii) Class 1 shares of the
FTVIPT Templeton Developing Markets Securities Fund of the Franklin
Templeton Variable Insurance Products Trust for shares of Threadneedle
VP--Emerging Markets Fund of the RiverSource Variable Series Trust; and
(viii) Class 2 shares of the FTVIPT Templeton Foreign Securities Fund
of the Franklin Templeton Variable Insurance Products Trust for Class 2
shares of the Evergreen VA International Equity Fund of the Evergreen
Variable Annuity Trust.
24. The Applicants represent that each of the Replacement
Portfolios has substantially similar investment objectives, principal
investment strategies, and risk characteristics to those of its
corresponding Substituted Portfolio as stated in their respective
prospectuses and/or Statements of Additional Information (``SAI'') and
as set out in the application.
25. The Applicants represent that each of the Replacement
Portfolios' total net operating expenses and aggregate investment
management fees and 12b-1 fees, for the year ended December 31, 2007,
expressed as an annual percentage of average daily net assets, are no
higher than those of its corresponding Substituted Portfolio (except
for the Threadneedle VP--Emerging Markets Fund, which has slightly
higher total net operating expenses than the FTVIPT Templeton
Developing Markets Securities Fund, Class 1), as set forth in the
following chart:
BILLING CODE 8011-01-P
[[Page 75479]]
[GRAPHIC] [TIFF OMITTED] TN11DE08.006
[[Page 75480]]
[GRAPHIC] [TIFF OMITTED] TN11DE08.007
[[Page 75481]]
[GRAPHIC] [TIFF OMITTED] TN11DE08.008
BILLING CODE 8011-01-P
26. Applicants represent that the Substitutions proposed herein are
part of an overall business goal of the Companies to make the Contracts
more attractive to Contract owners by providing a diverse array of
investment options that are neither redundant nor duplicative in terms
of the investment types and styles of the mutual funds underlying such
options. The Companies believe that a more concentrated and streamlined
array of investment options could result in increased operational and
administrative efficiencies and economies of scale for the Companies.
The Companies also believe that Contracts that offer too many similar
investment options may be unnecessarily confusing to Contract owners
and may increase the Companies' costs of administering the Contracts.
27. Applicants represent that the Companies chose the Replacement
Portfolios with the goal of ensuring that Contract owners would be
provided with similar investment options under their Contracts
following the Substitutions, based on an analysis of investment
objectives, strategies, risks, performance, fees and expenses.
28. Applicants represent that for all but one Substitution, the
expense ratio of the Replacement Portfolio is lower than that of the
corresponding Substituted Portfolio. Applicants also represent that for
a vast majority of the
[[Page 75482]]
Substitutions, the Replacement Portfolio is larger than or of a
comparable size to the corresponding Substituted Portfolio. Applicants
note that a high level of assets means various fund costs (such as
legal, accounting, printing and trustee fees) are spread over a larger
base, with each Contract owner potentially bearing a smaller portion of
the cost than would be the case if the Replacement Portfolio were
smaller in size. Applicants also note that for many of the Replacement
Portfolios, assets will increase as a result of the Substitutions, in
some cases significantly, and thus it is anticipated that with such an
increase, operating expenses will decrease.
29. Ultimately, given all of the factors discussed above, the
Companies concluded that the Substituted Portfolios offered under the
Contracts warranted replacement. Accordingly, the Applicants seek the
Commission's approval under Section 26(c) to engage in the substitution
transactions described below.
30. The Companies will effect the Substitutions following the
issuance of the requested order as follows. As of the effective date of
the Substitutions (``Effective Date''), each Separate Account will
either redeem shares of the applicable Substituted Portfolios in-kind
or the Substituted Portfolios will liquidate portfolio securities as
necessary and shares of the Replacement portfolio will be purchased
with cash. In either event, the proceeds of such redemptions will then
be used to purchase shares of the corresponding class of the
Replacement Portfolio, with each subaccount of the applicable Separate
Account investing the proceeds of its redemption from the Substituted
Portfolios in the applicable class of the Replacement Portfolio.
31. Redemption requests and purchase orders will be placed
simultaneously so that contract values will remain fully invested at
all times. All redemptions of shares of the Substituted Portfolios and
purchases of shares of the Replacement Portfolio will be effected in
accordance with Section 22(c) of the 1940 Act and Rule 22c-1
thereunder.
32. The Substitutions will take place at relative net asset value
as of the Effective Date with no change in the amount of any Contract
owner's contract value or death benefit or in the dollar value of his
or her investments in any of the subaccounts. Contract owners will not
incur any additional fees or charges as a result of the Substitutions,
nor will their rights or the Companies' obligations under the Contracts
be altered in any way, and the Substitutions will not change Contract
owners' insurance benefits under the Contracts. All expenses incurred
in connection with the Substitutions, including legal, accounting,
transactional, and other fees and expenses, including brokerage
commissions, will be paid by RiverSource Life or RiverSource Life of
NY. In addition, the Substitutions will not impose any tax liability on
Contract owners. The Substitutions will not cause the Contract fees and
charges currently paid by existing Contract owners to be greater after
the Substitutions than before the Substitutions. Neither RiverSource
Life nor RiverSource Life of NY will exercise any right it may have
under the Contracts to impose restrictions on transfers under the
Contracts for a period of at least thirty (30) days following the
Substitutions. The only exception to this would be restrictions that
RiverSource Life or RiverSource Life of NY may impose to prevent or
restrict ``market timing'' activities by Contract owners or their
agents.
33. The Companies represent that, with respect to Contracts
outstanding on the Effective Date, the Companies will reimburse, on the
last business day of each fiscal period (not to exceed a fiscal
quarter), during the twenty-four months following the Effective Date,
the subaccounts investing in each applicable Replacement Portfolio to
the extent that the sum of the Replacement Portfolio's net operating
expenses (taking into account any expense waiver or reimbursement) and
the Separate Account expenses for such period exceed, on an annualized
basis, the sum of the corresponding Substituted Portfolio's net
operating expenses (taking into account any expense waiver or
reimbursement) and the Separate Account expenses for the fiscal year
ended December 31, 2007. In addition, for twenty-four months following
the Effective Date, the Companies will not increase asset-based fees or
charges for Contracts outstanding on the Effective Date.
34. Applicants represent that the procedures to be implemented are
sufficient to assure that each Contract owner's cash values immediately
after the Substitutions shall be equal to the cash value immediately
before the Substitutions.
35. Applicants represent that under the Manager of Managers Order
applicable to the RiverSource Funds, a vote of the shareholders is not
necessary to change a subadviser of the applicable Replacement
Portfolio, except for changes involving an affiliated subadviser.
Notwithstanding, after the Effective Date of the Substitutions, the
Applicants agree not to change the Replacement Portfolio's subadviser,
add a new subadviser, or otherwise rely on the Manager of Managers
Order without first obtaining shareholder approval of either the
subadviser change or the Replacement Portfolio's continued ability to
rely on the Manager of Managers Order.
36. Applicants note that Contract owners were notified of the
initial application by means of a prospectus supplement for each of the
Contracts stating that the Applicants filed the initial application and
seek approval for the Substitutions (``Pre-Substitution Notice''). The
Pre-Substitution Notice set forth the anticipated Effective Date and
advised Contract owners that contract values attributable to
investments in the Substituted Portfolios will be transferred to the
Replacement Portfolio, without charge (including sales charges or
surrender charges) and without counting toward the number of transfers
that may be permitted without charge, on the Effective Date. The Pre-
Substitution Notice stated that, from the date the initial application
was filed with the Commission through the date thirty (30) days after
the Substitutions, Contract owners may make one transfer of contract
value from the subaccounts investing in the Substituted Portfolios
(before the Substitutions) or the Replacement Portfolio (after the
Substitutions) to one or more other subaccount(s) without charge
(including sales charges or surrender charges) and without that
transfer counting against their contractual transfer limitations.
37. Applicants represent that all Contract owners will have
received a copy of the most recent Replacement Portfolio prospectus
prior to the Substitutions.
38. Applicants represent that within five (5) days following the
Substitutions, Contract owners affected by the Substitutions will be
notified in writing that the Substitutions were carried out. This
notice will restate the information set forth in the Pre-Substitution
Notice.
Applicants' Legal Analysis
1. Section 26(c) of the 1940 Act (formerly, Section 26(b))
prohibits any depositor or trustee of a unit investment trust that
invests exclusively in the securities of a single issuer from
substituting the securities of another issuer without the approval of
the Commission. Section 26(c) provides that such approval shall be
granted by order of the Commission, if the evidence establishes that
the substitution is consistent with the protection of
[[Page 75483]]
investors and the purposes of the 1940 Act.
2. Section 26(c) was intended to provide for Commission scrutiny of
proposed substitutions which could, in effect, force shareholders
dissatisfied with the substitute security to redeem their shares,
thereby possibly incurring a loss of the sales load deducted from
initial premium, an additional sales load upon reinvestment of the
proceeds of redemption, or both. The section was designed to forestall
the ability of a depositor to present holders of interest in a unit
investment trust with situations in which a holder's only choice would
be to continue an investment in an unsuitable underlying security, or
to elect a costly and, in effect, forced redemption. For the reasons
described below, the Applicants submit that the Substitutions meet the
standards set forth in Section 26(c) and that, if implemented, the
Substitutions would not raise any of the aforementioned concerns that
Congress intended to address when the 1940 Act was amended to include
this provision. In addition, the Applicants submit that the proposed
Substitutions meet the standards that the Commission and its Staff have
applied to substitutions that have been approved in the past.
3. The replacement of the Substituted Portfolios with the
Replacement Portfolio is consistent with the protection of Contract
owners and the purposes fairly intended by the policy and provisions of
the 1940 Act and, thus, meets the standards necessary to support an
order pursuant to Section 26(c) of the 1940 Act.
4. Although not always identical, the investment objectives and
principal investment strategies of the Replacement Portfolio are
substantially similar to those of the corresponding Substituted
Portfolio.
5. The total operating expenses, prior to expense waivers and
reimbursements, of the applicable class of the Replacement Portfolios
were lower than those of the corresponding Substituted Portfolio as a
December 31, 2007, except for the Threadneedle VP--Emerging Markets
Fund, which has slightly higher total net operating expenses than the
FTVIPT Templeton Developing Markets Securities Fund, Class 1. For a
two-year period following the date of the Substitutions the Companies
will ensure that total net operating expenses of the applicable class
of all Replacement Portfolios, together with Separate Account expenses,
will not exceed, on an annualized basis, the total net operating
expenses of the corresponding Substituted Portfolio, together with
Separate Account expenses, as of December 31, 2007.
6. Applicants request an order of the Commission pursuant to
Section 26(c) of the 1940 Act approving the Substitutions. The
Applicants submit that, for all the reasons stated above, the
Substitutions are consistent with the protection of investors and the
purposes fairly intended by the policy of the Contracts and provisions
of the 1940 Act.
7. The Section 17(b) Applicants also request that the Commission
issue an order pursuant to Section 17(b) of the 1940 Act exempting them
from Section 17(a) of the 1940 Act to the extent necessary to permit
RiverSource Life or RiverSource Life of NY to carry out the
Substitutions by redeeming shares issued by the Substituted Portfolios
in-kind and using the distributed securities to purchase shares issued
by the applicable Replacement Portfolios.
8. Section 17(a)(l) and (a)(2) of the 1940 Act generally prohibit
any affiliated person of a registered investment company, or any
affiliated person of an affiliated person, from selling any security or
other property to such registered investment company and from
purchasing any security or other property from such registered
investment company. As described below, RiverSource Life and
RiverSource Life of NY anticipate that the Substitutions will be done
(in whole or in part) by redeeming shares of the Substituted Portfolios
in-kind rather than in cash and then using those assets to purchase
shares of the Replacement Portfolio. Redemptions and purchases in-kind
involve the purchase of property from a registered investment company
and the sale of property to a registered investment company by
RiverSource Life, RiverSource Life of NY, and RiverSource Funds, each
arguably an affiliated person of those investment companies.
9. Pursuant to Section 17(a)(1) of the 1940 Act, the Section 17(b)
Applicants may be considered affiliates of one or more of the
Replacement Portfolios involved in such Substitutions, based upon the
definition of ``affiliated person'' under Section 2(a)(3) of the 1940
Act. In addition to the Companies' affiliation with each Replacement
Portfolio of the RiverSource Funds, the Companies, through their
Separate Accounts, in the aggregate own 5% or more of the outstanding
shares of the following Replacement Portfolios: AllianceBernstein VPS
International Value Portfolio and Evergreen VA International Equity
Fund. Therefore, arguably each Company is an affiliated person of these
Replacement Portfolios. Because the Substitutions involving these
Replacement Portfolios and the Replacement Portfolios of the
RiverSource Funds may be effected, in whole or in part, by means of in-
kind redemptions and subsequent purchases of shares, and also by means
of in-kind transactions, these Substitutions may be deemed to involve
one or more purchases or sales of securities or property between
affiliates.
10. Section 17(b) of the 1940 Act provides that the Commission may,
upon application, grant an order exempting any transaction from the
prohibitions of Section 17(a) if the evidence establishes that: (1) The
terms of the proposed transaction, including the consideration to be
paid or received, are reasonable and fair and do not involve
overreaching on the part of any person concerned; (2) the proposed
transaction is consistent with the policy of each registered investment
company concerned, as recited in its registration statement and records
filed under the 1940 Act; and (3) the proposed transaction is
consistent with the general purposes of the 1940 Act.
11. Rule 17a-7 under the 1940 Act exempts from Section 17(a),
subject to certain enumerated conditions, a purchase or sale
transaction between registered investment companies or separate series
of registered investment companies, which are affiliated persons, or
affiliated persons of affiliated persons, of each other, between
separate series of a registered investment company, or between a
registered investment company or a separate series of a registered
investment company and a person which is an affiliated person of such
registered investment company (or affiliated person of such person)
solely by reason of having a common investment adviser or investment
advisers which are affiliated persons of each other, common directors,
and/or common officers.
12. The Section 17(b) Applicants submit that the terms of the
Substitutions, including the consideration to be paid and received, as
described in the Application, are reasonable and fair and do not
involve overreaching on the part of any person concerned. The Section
17(b) Applicants also submit that the Substitutions are consistent with
the policies of the applicable fund companies and their portfolios, as
recited in the current registration statements and reports filed by
them under the 1940 Act. Finally, the Section 17(b) Applicants submit
that the proposed Substitutions are consistent with the general
purposes of the 1940 Act.
[[Page 75484]]
13. RiverSource Life and RiverSource Life of NY assert that the
terms under which the in-kind redemptions and purchases will be
effected are reasonable and fair and do not involve overreaching on the
part of any person principally because the applicable Substitutions
will comply in substance with all but one of the principal conditions
enumerated in Rule 17a-7. The use of in-kind transactions will not
cause Contract owner interests to be diluted. The proposed transactions
will take place at relative net asset value as of the Effective Date in
conformity with the requirements of Section 22(c) of the 1940 Act and
Rule 22c-1 thereunder with no change in the amount of any Contract
owner's contract value or death benefit or in the dollar value of his
or her investment in any of the Separate Accounts. Contract owners will
not suffer any adverse tax consequences as a result of the
Substitutions. Fees and charges under the Contracts will not increase
because of the Substitutions.
14. Even though the Section 17(b) Applicants may not rely on Rule
17a-7 because they cannot meet all of its conditions, the Section 17(b)
Applicants submit that the Rule's conditions outline the type of
safeguards that result in transactions that are fair and reasonable to
registered investment company participants and preclude overreaching in
connection with an investment company by its affiliated persons. The
Section 17(b) Applicants will carry out the proposed in-kind purchases
in conformity with all of the conditions of Rule 17a-7 and the
procedures adopted thereunder, except that the consideration paid for
the securities being purchased or sold may not be entirely cash.
Nevertheless, the circumstances surrounding the proposed Substitutions
will be such as to offer the same degree of protection to the
Replacement Portfolio from overreaching that Rule 17a-7 provides to it
generally in connection with its purchase and sale of securities under
that Rule in the ordinary course of its business.
15. In particular, the proposed Substitutions will not be effected
at a price that is disadvantageous to the Substituted Portfolios or the
Replacement Portfolios. Although the Substitutions may not be entirely
for cash, each will be effected based upon (1) the independent market
price of the portfolio securities valued as specified in paragraph (b)
of Rule 17a-7, and (2) the net asset value per share of each Portfolio
involved valued in accordance with the procedures disclosed in its
registration statement and as required by Rule 22c-1 under the 1940
Act. Moreover, consistent with Rule 17a-7(d), no brokerage commissions,
fees, or other remuneration will be paid in connection with the in-kind
transactions. All in-kind redemptions from a Substituted Portfolio of
which any of the Substitution Applicants is an affiliated person will
be effected in accordance with the conditions set forth in the
Commission's no-action letter issued to Signature Financial Group, Inc.
(available December 28, 1999).
16. Consistent with Section 17(b) and Rule 17a-7(c), any in-kind
redemptions and purchases for purposes of the Substitutions will be
transacted in a manner consistent with the investment objectives and
policies of the applicable Substituted Portfolios and the Replacement
Portfolios, as recited in their registration statements. The adviser or
any subadviser to each Replacement Portfolio will review the securities
holdings of the Substituted Portfolios to determine whether their
portfolio holdings would be suitable investments for the corresponding
Replacement Portfolio in the overall context of that Portfolio's
investment objectives and policies and consistent with the management
of that Portfolio. The adviser or any subadviser to each Replacement
Portfolio will conduct its review of the Substituted Portfolios'
securities holdings in the same manner that a board of directors would
normally follow in accordance with Rule 17a-7. The adviser or any
subadviser to each Replacement Portfolio will only accept those
securities as consideration for its shares that it would have acquired
in a cash transaction. The Section 17(b) Applicants state that
securities to be paid out as redemption proceeds and subsequently
contributed to the Replacement Portfolios to effect the contemplated
in-kind purchases of shares will be valued based on the normal
valuation procedures of the redeeming and purchasing Portfolios. The
redeeming and purchasing values will be the same. If the adviser or any
subadviser to any Replacement Portfolio declines to accept particular
portfolio securities of the corresponding Substituted Portfolio for
purchase in-kind of shares of that corresponding Portfolio, the
applicable Substituted Portfolio will liquidate portfolio securities as
necessary and shares of the corresponding Replacement Portfolio will be
purchased with cash.
17. Applicants represent that the Substitutions, as described
herein, are consistent with the general purposes of the 1940 Act as
stated in the Findings and Declaration of Policy in Section 1 of the
1940 Act. The proposed transactions do not present any of the
conditions or abuses that the 1940 Act was designed to prevent.
Securities to be paid out as redemption proceeds and subsequently
contributed to the Replacement Portfolio to effect the contemplated in-
kind purchases of shares will be valued based on the normal valuation
procedures of the redeeming Substituted Portfolios and purchasing
Replacement Portfolio. Therefore, there will be no change in value to
any Contract owner as a result of the Substitutions. The Commission has
granted relief to others based on similar facts.
18. The Section 17(b) Applicants request an order of the Commission
pursuant to Section 17(b) of the 1940 Act exempting them from Section
17(a) of the 1940 Act to the extent necessary to permit the Companies
to carry out certain of the Substitutions by redeeming shares issued by
each applicable Substituted Portfolio in-kind and using the securities
distributed as redemption proceeds to purchase shares issued by the
applicable Replacement Portfolios. The Section 17(b) Applicants submit
that, for all of the reasons stated above, the terms of the proposed
in-kind redemptions and purchases, including the consideration to be
paid or received, are reasonable and fair to Contract owners and do not
involve overreaching on the part of any person; and furthermore,
granting the relief required herein for the proposed Substitutions that
may be effected by means of in-kind redemptions and purchases of shares
is appropriate, in the public interest, and consistent with the
policies of each Portfolio and the general purposes of the 1940 Act.
Applicants' Conditions
For purposes of the approval sought pursuant to Section 26(c) of
the 1940 Act, the Substitutions described in the application will not
be completed unless all of the following conditions, and all other
conditions and representations set forth in the Application, are met:
1. The Commission shall have issued an order (i) approving the
Substitutions under Section 26(c) of the 1940 Act as necessary to carry
out the transactions described in the application; and (ii) exempting
any in-kind redemptions and purchases from the provisions of Section
17(a) of the 1940 Act as necessary to carry out the transactions
described in the application.
2. Each Contract owner will have been sent (i) prior to the
Effective Date, a copy of the effective prospectus for the Replacement
Portfolio, (ii) prior to the Effective Date, a Pre-Substitution Notice
describing the terms of the Substitutions
[[Page 75485]]
and the rights of the Contract owners in connection with the
Substitutions, and (iii) within five (5) days after the Substitutions
occur, a notice informing Contract owners affected by the Substitutions
that the Substitutions were carried out and restating the information
set forth in the Pre-Substitution Notice.
3. The Companies shall have satisfied themselves that (i) the
Contracts allow the substitution of the Portfolios in the manner
contemplated by the Substitutions and related transactions described
herein, (ii) the transactions can be consummated as described in the
application under applicable insurance laws, and (iii) any applicable
regulatory requirements in each jurisdiction where the Contracts are
qualified for sale have been complied with to the extent necessary to
complete the transaction.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-29312 Filed 12-10-08; 8:45 am]
BILLING CODE 8011-01-P
