
[Federal Register: July 13, 2010 (Volume 75, Number 133)]
[Notices]               
[Page 39994-40000]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13jy10-121]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-29338; File No. 812-13686]

 
AXA Equitable Life Insurance Company, et al.; Notice of 
Application

July 7, 2010.
AGENCY: Securities and Exchange Commission (``SEC'' or the 
``Commission'').

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

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APPLICANTS: AXA Equitable Life Insurance Company (``AXA Equitable''), 
Separate Account 45 of AXA Equitable (``Separate Account 45''), 
Separate Account 49 of AXA Equitable (``Separate Account 49''), 
Separate Account A of AXA Equitable (``Separate Account A''), Separate 
Account FP of AXA Equitable (``Separate Account FP'') (together, ``AXA 
Equitable Separate Accounts''), MONY Life Insurance Company of America 
(``MLOA'') and MONY America Variable Account L (``MLOA Separate Account 
L'') (collectively, the ``Section 26 Applicants''), Separate Account 65 
of AXA Equitable (``Separate Account 65''), and the AXA Premier VIP 
Trust (the ``Trust'') (Separate Account 65 and the Trust, together with 
the Section 26 Applicants, the ``Section 17 Applicants'' or 
``Applicants'').

SUMMARY OF APPLICATION: The Section 26 Applicants request an order 
pursuant to Section 26(c) of the 1940 Act, approving the proposed 
substitution of securities of the Multimanager Aggressive Equity 
Portfolio (the ``Replacement Portfolio'') for securities of the 
Multimanager Large Cap Growth Portfolio (the ``Removed Portfolio'') 
(the ``Substitution''). Each of these portfolios currently serves as an 
underlying investment option for certain variable annuity contracts 
issued by AXA Equitable (``Annuity Contracts'') and/or variable life 
insurance policies issued by AXA Equitable and MLOA (``Life Insurance 
Contracts'') (collectively, the ``Contracts''), as more fully described 
below.\1\ The Section 17 Applicants also request an order pursuant to 
Section 17(b) of the 1940 Act exempting them

[[Page 39995]]

from Section 17(a) of the 1940 Act to the extent necessary to permit 
in-kind redemptions of securities issued by the Removed Portfolio and 
purchases of securities issued by the Replacement Portfolio (the ``In-
Kind Transactions'') in connection with the Substitution.
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    \1\ AXA Equitable and MLOA are sometimes referred to herein 
collectively as the ``Insurance Companies'' and individually as an 
``Insurance Company.'' MLOA Separate Account L and the AXA Equitable 
Separate Accounts are sometimes referred to herein collectively as 
the ``Separate Accounts'' and individually as a ``Separate 
Account.''

FILING DATE: The application was filed on August 27, 2009, and amended 
on December 18, 2009, March 29, 2010, and June 10, 2010. Applicants 
have agreed to file an amendment during the notice period, the 
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substance of which is reflected in this notice.

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 July 28, 2010, and should be accompanied by 
proof of service on Applicants in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the requester's interest, the reason for the request, and the 
issues contested. Persons who wish to be notified of a hearing may 
request notification by writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090. Applicants, c/o AXA Equitable Life 
Insurance Company, 1290 Avenue of the Americas, New York, NY 10104, 
Attn: Steven M. Joenk, Senior Vice President.

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

Applicants' Representations

    1. AXA Equitable is a New York stock life insurance company 
authorized to sell life insurance and annuities in 50 states, the 
District of Columbia, Puerto Rico and the Virgin Islands. AXA Equitable 
is an investment adviser registered under the Investment Advisers Act 
of 1940, as amended, and is a wholly owned subsidiary of AXA Financial, 
Inc. (``AXA Financial''). AXA Financial is an indirect, wholly owned 
subsidiary of AXA, which is a publicly traded French holding company.
    2. MLOA is an Arizona stock life insurance company licensed to sell 
life insurance and annuities in 49 states (not including New York), the 
District of Columbia, Puerto Rico, and the U.S. Virgin Islands. AXA 
Financial is the parent company of MLOA.
    3. AXA Equitable serves as depositor for Separate Account 45, 
Separate Account 49 and Separate Account A, which fund certain 
Contracts, and for Separate Account FP, which funds certain Life 
Insurance Contracts. AXA Equitable also serves as depositor for 
Separate Account 65, which funds group pension and profit-sharing plans 
under group Annuity Contracts issued by AXA Equitable (Separate Account 
65 is also an ``AXA Equitable Separate Account'' and may be referred to 
herein as a ``Separate Account'' and collectively with MLOA Separate 
Account L and the AXA Equitable Separate Accounts, the ``Separate 
Accounts'').
    4. Each AXA Equitable Separate Account is a segregated asset 
account of AXA Equitable and, except for Separate Account 65, is 
registered with the Commission as a unit investment trust under the 
1940 Act. Separate Account 65 is excluded from registration under the 
1940 Act pursuant to Section 3(c)(11) of the 1940 Act. Units of 
interest in the AXA Equitable Separate Accounts, except Separate 
Account 65, are registered under the Securities Act of 1933, as amended 
(``1933 Act''). Units of interest in Separate Account 65 are exempt 
from registration under the 1933 Act, pursuant to Section 3(a)(2) of 
the 1933 Act.
    5. MLOA serves as depositor for MLOA Separate Account L, which 
funds variable benefits available under certain Life Insurance 
Contracts issued by MLOA.
    6. MLOA Separate Account L is a segregated asset account of MLOA 
and is registered with the Commission as a unit investment trust under 
the 1940 Act. Units of interest in MLOA Separate Account L under the 
Life Insurance Contracts are registered under the 1933 Act.
    7. The Trust is organized as a Delaware statutory trust and is 
registered as an open-end management investment company under the 1940 
Act and its shares are registered under the 1933 Act on Form N-1A. The 
Trust is a series investment company and currently offers 21 separate 
series (each a ``Portfolio'' and collectively, the ``Portfolios'').
    8. The Trust currently offers two classes of shares, Class A and 
Class B shares. The Class A and Class B shares differ only in that 
Class B shares are subject to a distribution plan adopted and 
administered pursuant to Rule 12b-1 under the 1940 Act. The 12b-1 fees 
with respect to the Class B Shares of each Portfolio of the Trust 
currently are limited to an annual rate of 0.25% of the average daily 
net assets attributable to the Class B shares of the Portfolio and may 
be increased to an annual rate of 0.50% by the Board of Trustees 
without shareholder approval.
    9. AXA Equitable currently serves as investment manager 
(``Manager'') of each of the Portfolios. The Trust has received an 
exemptive order from the Commission that permits the Manager, or any 
entity controlling, controlled by, or under common control (within the 
meaning of Section 2(a)(9) of the 1940 Act) with the Manager, subject 
to certain conditions, including approval of the Board of Trustees of 
the Trust, and without the approval of shareholders, to appoint, 
dismiss, or replace investment sub-advisers (``Advisers'') and to amend 
investment advisory agreements.\2\ If a new Adviser is retained for a 
Portfolio, Contract owners would receive notice of any such action.
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    \2\ See EQ Advisors Trust and EQ Financial Consultants, Inc., 
Investment Company Act Release Nos. 23093 (March 30, 1998) (notice) 
and 23128 (April 24, 1998) (order).
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    10. Each Insurance Company, on its own behalf and on behalf of its 
Separate Accounts, proposes to exercise its contractual right to 
substitute a different underlying investment option for one of the 
current underlying investment options offered as a funding option under 
the Contracts. In particular, the Section 26 Applicants request an 
order from the Commission pursuant to Section 26(c) of the 1940 Act 
approving the proposed substitution (``Substitution'') of (i) Class A 
shares of the Multimanager Aggressive Equity Portfolio for Class A 
shares of the Multimanager Large Cap Growth Portfolio; and (ii) Class B 
shares of the Multimanager Aggressive Equity Portfolio for Class B 
shares of the Multimanager Large Cap Growth Portfolio.
    11. The Section 26 Applicants propose the Substitution as part of a 
continued and overall business plan by each of the Insurance Companies 
to make its Contracts more attractive to existing Contract owners, 
Participants or prospective purchasers, as the case may be, and more 
efficient to administer and oversee.

[[Page 39996]]

    12. Among the principal purposes of the Substitutions, the Section 
26 Applicants assert the proposed Substitution is designed and intended 
to simplify the prospectuses and related materials with respect to the 
Contracts and the investment options available through the Separate 
Accounts. The Section 26 Applicants believe that the Replacement 
Portfolio and the Removed Portfolio overlap and largely duplicate one 
another by having substantially similar investment objectives, policies 
and risks, and that consolidating the Removed Portfolio into the 
Replacement Portfolio would simplify the Contract prospectuses and 
related materials provided to Contract owners, thereby reducing the 
potential for Contract owner confusion.
    13. The Section 26 Applicants believe that the deletion of an 
overlapping investment option should not adversely affect Contract 
owners and Participants given that a similar investment option will 
remain available under the Contracts and the Contracts will offer the 
same number of investment options or, in those cases where the number 
of investment options is being reduced, continue to offer a significant 
number of alternative investment options offering a full range of 
investment objectives, strategies and Advisers (currently expected to 
range in number from 27 to 66 after the Substitution versus 28 to 67 
before the Substitution).
    14. The Removed Portfolio and the Replacement Portfolio have 
identical investment objectives and substantially similar investment 
policies. Each Portfolio seeks long-term growth of capital as its 
investment objective. Under normal circumstances, each Portfolio 
invests at least 80% of its net assets, plus borrowings for investment 
purposes, in equity securities. Under normal circumstances, the Removed 
Portfolio invests at least 80% of its net assets in the equity 
securities of U.S. large capitalization companies, and the Replacement 
Portfolio invests at least 80% of its net assets in equity securities, 
primarily investing in the securities of large capitalization growth 
companies but also investing, to a lesser extent, in the equity 
securities of small- and mid-capitalization growth companies. Although 
the Replacement Portfolio may invest in a broader range of companies to 
a greater extent than the Removed Portfolio, both Portfolios seek to 
achieve the same long-term investment goal by emphasizing investments 
in large capitalization U.S. companies.
    15. Each Portfolio invests primarily in common stocks, but may 
invest in other securities that its respective Advisers believe provide 
opportunities for capital growth, such as preferred stocks, warrants 
and securities convertible into common stock. In addition, each 
Portfolio may invest in derivatives: the Removed Portfolio may invest 
up to approximately 10% of its net assets in futures and options, while 
the Replacement Portfolio may invest up to 25% of its net assets in 
derivatives, such as exchange-traded futures and options contracts on 
indices or other similar instruments.
    16. To achieve its investment objectives, each Portfolio combines 
active and passive management strategies. With respect to each 
Portfolio, AXA Equitable allocates approximately 50% of the Portfolio's 
net assets to a portion of the Portfolio that seeks to achieve the 
total return performance of an index (the Russell 1000 Growth Index in 
the case of the Removed Portfolio and the Russell 3000 Growth Index for 
the Replacement Portfolio) while maintaining as minimal tracking error 
as possible (``Index Allocated Portion''). The Russell 1000 Growth 
Index includes those Russell 1000 companies (the 1,000 largest 
companies of the Russell 3000 Index) with higher price-to-book ratios 
and higher forecasted growth values, while the Russell 3000 Growth 
Index includes those Russell 3000 companies (the 3,000 largest U.S. 
securities) with higher price-to-book ratios and higher forecasted 
growth values. The Russell 3000 Growth Index generally has greater 
exposure to small- and mid-capitalization companies than the Russell 
1000 Growth Index, and thus has greater exposure to the risks of 
investing in such companies. However, the average weighted market 
capitalization of each Portfolio is almost the same (approximately 
$76.3 billion for the Russell 1000 Growth Index and approximately $70.7 
billion for the Russell 3000 Growth Index, each as of December 31, 
2009).
    17. With respect to each Portfolio, AXA Equitable allocates the 
remaining 50% of the Portfolio's net assets among the other portions of 
the Portfolio that are actively managed by multiple Advisers (the 
``Active Allocated Portions'') utilizing similar growth style 
strategies. The Active Allocated Portions of each Portfolio may invest, 
to a limited extent, in illiquid securities and in securities of 
foreign companies, including companies based in developing countries. 
The Replacement Portfolio's Active Allocated Portions may invest up to 
25% of their total assets in foreign securities. The Active Allocated 
Portions of the Removed Portfolio also may invest in foreign 
securities, to a limited extent, but have no stated limit. Given the 
similarity between the Portfolios' holdings and investment objectives 
and strategies, the Trust intends to retain the Advisers to the Active 
Allocated Portions of the Removed Portfolio to manage the assets of the 
Active Allocated Portions of the Removed Portfolio that are transferred 
to the Replacement Portfolio in connection with the Substitution.
    18. The Portfolios have substantially similar risk profiles. Each 
Portfolio is subject to the following principal risks: derivatives 
risk, equity risk, index strategy risk, large-cap company risk and 
leverage risk. The primary differences between the principal risks of 
the Portfolios are that the Replacement Portfolio also is subject to 
foreign securities risk, which is not a principal risk of the Removed 
Portfolio, and the Removed Portfolio also is subject to investment 
style risk, which is not a principal risk of the Replacement Portfolio. 
However, the Section 26 Applicants do not believe that these 
differences are significant. While the Replacement Portfolio has the 
flexibility to invest in foreign securities to a greater extent than 
the Removed Portfolio, each Portfolio's investments in foreign 
securities generally have been limited to a relatively small percentage 
of the Portfolio's assets. For instance, as of May 31, 2010, the 
Removed and Replacement Portfolios had invested approximately 1.8% and 
3.8%, respectively, in foreign securities. In addition, while the 
Removed Portfolio is subject to investment style risk because its 
Advisers primarily utilize growth investing styles, both of the 
Portfolios seek long-term growth of capital, invest in similar types of 
securities and generally are classified by third party mutual fund 
rating organizations as aggressive equity portfolios (e.g., Morningstar 
currently classifies each Portfolio as a large cap growth portfolio).
    19. As provided in the chart below, the Section 26 Applicants 
anticipate that the Replacement Portfolio's total annual operating 
expense ratio (taking into account any expense waivers or 
reimbursements) will be lower than that of the Removed Portfolio 
immediately after the Substitution. The chart below compares the 
advisory fees and total annual operating expenses of the Class A and 
Class B shares of the Removed Portfolio and the Replacement Portfolio 
for the fiscal year ended December 31, 2009. Class A shares of each 
Portfolio are not subject to plans adopted pursuant to Rule 12b-1 under 
the 1940 Act.

[[Page 39997]]



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                                                                   Removed portfolio      Replacement portfolio
                                                                 Multimanager large cap  Multimanager aggressive
                                                                    growth portfolio         equity portfolio
                                                                  (Class A) (percent)      (Class A)  (percent)
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Management Fee \3\............................................                     0.75                     0.59
Rule 12b-1 Fee................................................                      N/A                      N/A
Other Expenses................................................                     0.32                     0.23
                                                               -------------------------------------------------
    Total Expenses............................................                     1.07                     0.82
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                                                                   Removed portfolio      Replacement portfolio
                                                                 Multimanager large cap  Multimanager aggressive
                                                                    growth portfolio         equity portfolio
                                                                  (Class A) (percent)      (Class A)  (percent)
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Management Fee \3\............................................                     0.75                     0.59
Rule 12b-1 Fee................................................                     0.25                     0.25
Other Expenses................................................                     0.32                     0.23
                                                               -------------------------------------------------
    Total Expenses............................................                     1.32                     1.07
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    As of December 31, 2009, the assets of the Replacement Portfolio 
were approximately $1.34 billion, while the assets of the Removed 
Portfolio were approximately $270 million.
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    \3\ The management fee schedule for the Removed Portfolio on an 
annual basis is equal to 0.750% on the first $750 million, 0.700% on 
the next $1 billion, 0.675% on the next $3 billion, 0.650% on the 
next $5 billion and 0.625% thereafter. The management fee schedule 
for the Replacement Portfolio on an annual basis is equal to 0.600% 
on the first $750 million, 0.550% on the next $1 billion, 0.525% on 
the next $3 billion, 0.500% on the next $5 billion and 0.475% 
thereafter.
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    20. The Section 26 Applicants currently expect that the proposed 
Substitution will be carried out on or about August 1, 2010, or as soon 
as reasonably practicable thereafter (``Substitution Date'') and by 
supplements to the prospectuses for the Contracts and Separate 
Accounts, which were delivered to Contract owners and Participants at 
least thirty (30) days before the proposed Substitution, each Insurance 
Company will notify all Contract owners and Participants of its 
intention to take the necessary actions, including seeking the order 
requested by the application, to substitute shares of the Replacement 
Portfolio for the Removed Portfolio as described herein. The 
supplements advised Contract owners and Participants that, from the 
date of the supplement until the date of the proposed Substitution, 
Contract owners and Participants are permitted to make transfers of 
Contract value (or annuity unit value) out of a Removed Portfolio 
subaccount to one or more other subaccounts without the transfers (or 
exchanges) being treated as one of a limited number of permitted 
transfers (or exchanges) or a limited number of transfers (or 
exchanges) permitted without a transfer charge, as applicable. The 
supplements also will inform Contract owners and Participants that the 
Insurance Companies will not exercise any rights reserved under any 
Contract to impose additional restrictions on transfers until at least 
30 days after the proposed Substitution.\4\ The supplement also will 
advise Contract owners and Participants how to instruct the relevant 
Insurance Company, if so desired in light of the proposed Substitution, 
to reallocate Contract value from a Removed Portfolio subaccount to any 
other subaccount available for investment under their Contracts. In 
addition, the supplements will advise Contract owners and Participants 
that any Contract value remaining in a Removed Portfolio subaccount on 
the Substitution Date will be transferred to a Replacement Portfolio 
subaccount and that the proposed Substitution will take place at 
relative net asset value. The supplements will also advise Contract 
owners and Participants that for at least 30 days following the 
proposed Substitution, the Insurance Companies will permit Contract 
owners and Participants to make transfers of Contract value (or annuity 
unit value) out of a Replacement Portfolio subaccount to one or more 
other subaccounts without the transfers (or exchanges) being treated as 
one of a limited number of permitted transfers (or exchanges) or a 
limited number of transfers (or exchanges) permitted without a transfer 
charge, as applicable.
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    \4\ One exception to this is that the Insurance Companies may 
impose restrictions on transfers to prevent or limit disruptive 
transfer and other ``market timing'' activities by Contract owners, 
Participants or agents of Contract owners or Participants as 
described in the prospectuses for the Separate Accounts and the 
Portfolios.
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    21. Each Insurance Company also has sent or will send Contract 
owners and Participants prospectuses for the Replacement Portfolio 
prior to the Substitution. The Section 26 Applicants have sent or will 
send the appropriate prospectus supplement (or other notice, in the 
case of Contracts no longer actively marketed and for which there are a 
relatively small number of existing Contract owners or Participants), 
containing this disclosure to all existing Contract owners and 
Participants. Prospective purchasers and new purchasers of Contracts 
will be provided with a Contract prospectus and the supplement 
containing disclosure regarding the proposed Substitution, as well as a 
prospectus and supplement for the Replacement Portfolio. The Contract 
prospectus and supplement, and the prospectus and supplement for the 
Replacement Portfolio will be delivered to purchasers of new Contracts 
in accordance with all applicable legal requirements.
    22. In addition to the prospectus supplements distributed to 
Contract owners and Participants, within five business days after the 
Substitution Date, Contract owners and Participants will be sent a 
written notice of the Substitution informing them that the Substitution 
was carried out and that they may transfer all Contract value or cash 
value under a Contract in a subaccount invested in the Replacement 
Portfolio on the date of the notice to one or more other subaccounts 
available under their Contract at no cost and without regard to the 
usual limit on the frequency of transfers among the variable account 
options. The notice will also reiterate that (other than with respect 
to implementing policies and procedures designed to prevent

[[Page 39998]]

disruptive transfers and other market timing activity) each Insurance 
Company will not exercise any rights reserved by it under the Contracts 
to impose additional restrictions on transfers or, to the extent 
transfer charges apply to a Contract, to impose any charges on 
transfers until at least 30 days after the Substitution Date. The 
Insurance Companies will also send each Contract owner and Participant 
a current prospectus for the Replacement Portfolio if they have not 
previously received a current version.
    23. Each Insurance Company also is seeking approval of the proposed 
Substitution from any state insurance regulators whose approval may be 
necessary or appropriate. The proposed Substitution will take place at 
relative net asset value determined on the Substitution Date pursuant 
to Section 22 of the 1940 Act and Rule 22c-1 thereunder with no change 
in the amount of any Contract owner's or Participant's Contract value, 
cash value, or death benefit or in the dollar value of his or her 
investment in the Separate Accounts. The proposed Substitution will be 
effected by redeeming shares of the Removed Portfolio in cash and/or 
in-kind on the Substitution Date at their net asset value and using the 
proceeds of those redemptions to purchase shares of the Replacement 
Portfolio at their net asset value on the same date. All in-kind 
redemptions will be effected in accordance with the conditions set 
forth in the no-action letter issued by the staff of the Commission to 
Signature Financial Group, Inc. (pub. avail. Dec. 28, 1999).
    24. Moreover, the Section 26 Applicants state that Contract owners 
and Participants will not incur any fees or charges as a result of the 
proposed Substitution, nor will their rights or insurance benefits or 
the Insurance Companies' obligations under the Contracts be altered in 
any way. Consequently, all expenses incurred in connection with the 
proposed Substitution, including any brokerage, legal, accounting, and 
other fees and expenses, will be paid by the Insurance Companies. In 
addition, the proposed Substitution will not impose any tax liability 
on Contract owners or Participants. The proposed Substitution will not 
cause the Contract fees and charges currently being paid by Contract 
owners and Participants to be greater after the Substitution than 
before the Substitution; all Contract-level fees will remain the same 
after the Substitution. In addition, because the Substitution will not 
be treated as a transfer for purposes of assessing transfer charges or 
computing the number of permissible transfers under the Contracts, no 
fees will be charged on the transfers made at the time of the 
Substitution.
    25. The Section 26 Applicants represent that with respect to those 
Contract owners or Participants on the date of the Substitution, the 
Insurance Companies will reimburse the subaccounts investing in the 
Replacement Portfolio for a period of two years after the date of the 
Substitution, on the last business day of each fiscal period (not to 
exceed a fiscal quarter), such that the sum of the Replacement 
Portfolio's total operating expense ratio (taking into account any 
expense waivers and reimbursements) and subaccount expense ratio 
(asset-based fees and charges deducted on a daily basis from subaccount 
assets and reflected in the calculations of subaccount unit value) for 
such period will not exceed, on an annualized basis, the sum of the 
Removed Portfolio's total operating expense ratio (taking into account 
any expense waivers and reimbursements) and subaccount expense ratio 
for fiscal year 2009.

Applicants' Legal Analysis

    1. Section 26(c) of the 1940 Act prohibits the depositor of a 
registered unit investment trust that invests in the securities of a 
single issuer from substituting the securities of another issuer 
without Commission approval. Section 26(c) provides that ``[t]he 
Commission shall issue an order approving such substitution if the 
evidence establishes that it is consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of this title.''
    2. The Section 26 Applicants assert that the proposed Substitution 
involves a substitution of securities within the meaning of Section 
26(c) of the 1940 Act and therefore request an order from the 
Commission pursuant to Section 26(c) approving the proposed 
Substitutions.
    3. The Section 26 Applicants state they have reserved the right 
under the Contracts to substitute shares of another underlying 
investment option for one of the current underlying investment options 
offered as a funding option under the Contracts both to protect 
themselves and their Contract owners and Participants in situations 
where either might be harmed or disadvantaged by events affecting the 
issuer of the securities held by a Separate Account and to preserve the 
opportunity to replace such shares in situations where a substitution 
could benefit the Insurance Companies and their respective Contract 
owners and Participants.
    4. The Section 26 Applicants argue that the Removed Portfolio and 
the Replacement Portfolio have identical investment objectives and 
substantially similar investment policies and risks. In addition, the 
Section 26 Applicants clarify that the proposed Substitution retains 
for Contract owners and Participants the investment flexibility that is 
a central feature of the Contracts. The Section 26 Applicants assert 
that any impact on the investment programs of affected Contract owners 
and Participants, including the appropriateness of the available 
investment options, should therefore be negligible.
    5. Furthermore, the Section 26 Applicants claim that the 
Substitution will permit the Insurance Companies to present information 
to their Contract owners and Participants in a simpler and more concise 
manner. It is anticipated that after the Substitution, Contract owners 
and Participants will be provided with disclosure documents that 
contain a simpler presentation of the available investment options 
under their Contracts.
    6. In addition, the Section 26 Applicants point out that as a 
result of the proposed Substitution, Contract owners and Participants 
with subaccount balances currently invested in the Removed Portfolio 
will have a lower total operating expense ratio after the Substitution 
as Contract owners or Participants with subaccount balances invested in 
the Replacement Portfolio. In this regard, each Insurance Company has 
agreed to impose certain expense limits, as discussed earlier in the 
application, to ensure that Contract owners and Participants do not 
incur higher expenses as a result of the Substitution for a period of 
two years after the Substitution.
    7. In addition to the foregoing, the Section 26 Applicants 
generally submit that the proposed Substitution meets the standards 
that the Commission and its staff have applied to similar substitutions 
that the Commission previously has approved. The Section 26 Applicants 
also submit that the proposed Substitution is not of the type that 
Section 26(c) was designed to prevent. Unlike traditional unit 
investment trusts where a depositor could only substitute investment 
securities in a manner that permanently affected all the investors in 
the trust, the Contracts provide each Contract owner or Participant 
with the right to exercise his or her own judgment, and transfer 
Contract values and cash values into and among other investment options 
available to Contract owners or Participants under their Contracts.

[[Page 39999]]

Additionally, the Section 26 Applicants assert that the proposed 
Substitution will not reduce in any manner the nature or quality of the 
available investment options.
    8. Moreover, the Section 26 Applicants will offer Contract owners 
and Participants the opportunity to transfer amounts out of the 
affected subaccounts without any cost or other penalty (other than 
those necessary to implement policies and procedures designed to 
prevent disruptive transfer and other market timing activity) that may 
otherwise have been imposed for a period beginning on the date of the 
supplement notifying Contract owners and Participants of the proposed 
Substitution and ending no earlier than thirty (30) days after the 
Substitution. The proposed Substitution, therefore, will not result in 
the type of costly forced redemption that Section 26(c) was designed to 
prevent.
    9. The Section 26 Applicants also note that the proposed 
Substitution is also unlike the type of substitution that Section 26(c) 
was designed to prevent in that by purchasing a Contract or 
participating in a group Contract, Contract owners and Participants 
select much more than a particular underlying fund in which to invest 
their Contract values; they also select the specific type of insurance 
coverage offered by the Section 26 Applicants under the applicable 
Contract, as well as numerous other rights and privileges set forth in 
the Contract. Contract owners and Participants also may have considered 
the Insurance Company's size, financial condition, and its reputation 
for service in selecting their Contract. These factors will not change 
as a result of the proposed Substitution, nor will the annuity, life or 
tax benefits afforded under the Contracts held by any of the affected 
Contract owners or Participants.
    10. The Section 17 Applicants request an order pursuant to Section 
17(b) of the 1940 Act exempting them from the provisions of Section 
17(a) of the 1940 Act to the extent necessary to permit them to carry 
out the In-Kind Transactions in connection with the proposed 
Substitution.
    11. Section 17(a)(1) of the 1940 Act, in relevant part, prohibits 
any affiliated person of a registered investment company, or any 
affiliated person of such a person, acting as principal, from knowingly 
selling any security or other property to that company. Section 
17(a)(2) of the 1940 Act generally prohibits the same persons, acting 
as principals, from knowingly purchasing any security or other property 
from the registered investment company.
    12. Section 17(b) of the 1940 Act provides that the Commission may, 
upon application, issue an order exempting any proposed transaction 
from the provisions of Section 17(a) if: (i) the terms of the proposed 
transactions are reasonable and fair and do not involve overreaching on 
the part of any person concerned; (ii) the proposed transactions are 
consistent with the policy of each registered investment company 
concerned; and (iii) the proposed transactions are consistent with the 
general purposes of the 1940 Act.
    13. The Removed Portfolio and the Replacement Portfolio may be 
deemed to be affiliated persons of one another, or affiliated persons 
of an affiliated person. Shares held by a separate account of an 
insurance company are legally owned by the insurance company. Thus, the 
Insurance Companies and their affiliates collectively own substantially 
all of the shares of the Trust. Accordingly, the Trust and its 
respective Portfolios may be deemed to be under the control of the 
Insurance Companies notwithstanding the fact that the Contract owners 
and Participants may be considered the beneficial owners of those 
shares held in the Separate Accounts. If the Trust is under the common 
control of the Insurance Companies, then each Insurance Company is an 
affiliated person or an affiliated person of an affiliated person of 
the Trust and its respective Portfolios. If the Trust and its 
respective Portfolios are under the control of the Insurance Companies, 
then the Trust and its respective affiliates are affiliated persons of 
the Insurance Companies.
    14. Regardless of whether the Insurance Companies can be considered 
to control the Trust and its Portfolios, the Insurance Companies may be 
deemed to be affiliated persons of the Trust and its Portfolios, 
including the Removed Portfolio and the Replacement Portfolio, because 
the Insurance Companies (which are under common control) and their 
affiliates own of record more than 5% of the outstanding shares. 
Likewise, each of the Trust's Portfolios may be deemed to be an 
affiliated person of each Insurance Company. As a result of these 
relationships, the Removed Portfolio may be deemed to be an affiliated 
person of an affiliated person (the Insurance Companies or the Separate 
Accounts) of the Replacement Portfolio, and vice versa.
    15. The proposed In-Kind Transactions could be seen as the indirect 
purchase of shares of the Replacement Portfolio with portfolio 
securities of the Removed Portfolio and the indirect sale of portfolio 
securities of the Removed Portfolio for shares of the Replacement 
Portfolio. Pursuant to this analysis, the proposed In-Kind Transactions 
also could be categorized as a purchase of shares of the Replacement 
Portfolio by the Removed Portfolio, acting as principal, and a sale of 
portfolio securities by the Removed Portfolio, acting as principal, to 
the Replacement Portfolio. In addition, the proposed In-Kind 
Transactions could be viewed as a purchase of securities from the 
Removed Portfolio and a sale of securities to the Replacement Portfolio 
by each Insurance Company (or the Separate Accounts), acting as 
principal. If categorized in this manner, the proposed In-Kind 
Transactions may be deemed to contravene Section 17(a) due to the 
affiliated status of these participants.
    16. The Section 17 Applicants assert that the In-Kind Transactions 
will be effected at the respective net asset values of the Removed 
Portfolio and the Replacement Portfolio, as determined in accordance 
with the procedures disclosed in the registration statement for the 
Trust and as required by Rule 22c-1 under the 1940 Act. The In-Kind 
Transactions will not change the dollar value of any Contract owner's 
or Participant's investment in any of the Separate Accounts, the value 
of any Contract, the accumulation value or other value credited to any 
Contract, or the death benefit payable under any Contract. Immediately 
after the proposed In-Kind Transactions, the value of a Separate 
Account's investment in the Replacement Portfolio will equal the value 
of its investments in the Removed Portfolio (together with the value of 
any pre-existing investments in the Replacement Portfolio) immediately 
before the In-Kind Transactions.
    17. Rule 17a-7 under the 1940 Act exempts from the prohibitions of 
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

[[Page 40000]]

each other, common directors, and/or common officers.
    18. However, one of the conditions enumerated in Rule 17a-7 
requires that the transaction be a purchase or sale for no 
consideration other than cash payment against prompt delivery of a 
security for which market quotations are readily available. If the 
proposed In-Kind Transactions are viewed as purchases and sales of 
securities, the consideration in the proposed redemptions of shares of 
the Removed Portfolio and the proposed purchases of shares of the 
Replacement Portfolio would not be cash, but rather, the portfolio 
securities received from the Removed Portfolio.
    19. The Section 17 Applicants will ensure that the Trust will carry 
out the proposed In-Kind Transactions in conformity with the conditions 
of Rule 17a-7, except that the consideration paid for the securities 
being purchased or sold will not be cash.
    20. For the reasons stated above, the Section 17 Applicants submit 
that the terms of the proposed In-Kind Transactions, 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. Furthermore, the Section 17 Applicants represent 
that the proposed In-Kind Transactions will be consistent with the 
policies of the Removed and corresponding Replacement Portfolios, as 
recited in their respective current registration statements, and that 
the proposed In-Kind Transactions are consistent with the general 
purposes of the 1940 Act and do not present any conditions or abuses 
that the 1940 Act was designed to prevent.

Conclusion

    For the reasons set forth in the application, the Applicants each 
respectively request that the Commission issue an order of approval 
pursuant to Section 26(c) of the 1940 Act and an order of exemption 
pursuant to Section 17(b) of the 1940 Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16987 Filed 7-12-10; 8:45 am]
BILLING CODE 8010-01-P

