
[Federal Register Volume 77, Number 16 (Wednesday, January 25, 2012)]
[Notices]
[Pages 3810-3818]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-1482]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-29923; File No. 812-13902]


New York Life Insurance and Annuity Corporation, et al., Notice 
of Application

January 19, 2012.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

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

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

    Applicants: New York Life Insurance and Annuity Corporation 
(``NYLIAC'') and NYLIAC Variable Annuity Separate Account--I (``VA 
I''), NYLIAC Variable Annuity Separate Account--II (``VA II''), NYLIAC 
Variable Annuity Separate Account--III (``VA III''), NYLIAC Variable 
Annuity Separate Account--IV (``VA IV''), NYLIAC Variable Universal 
Life Separate Account--I (``VUL I''), NYLIAC Corporate Sponsored 
Variable Universal Life Separate Account--I (``Corporate VUL I''), 
NYLIAC Private Placement Variable Universal Life Separate Account--I 
(``Private VUL I''), and NYLIAC Private Placement Variable Universal 
Life Separate Account--II (``Private VUL II'') (collectively, the 
``Separate Accounts'' and, together with NYLIAC, the ``Section 26 
Applicants''); and Mainstay VP Funds Trust (``MVPFT'' and, together 
with NYLIAC and the Separate Accounts, the ``Section 17 Applicants''). 
The Section 26 Applicants and the Section 17 Applicants are 
collectively referred to herein as the ``Applicants.''
    Summary of Application: The Section 26 Applicants seek an order 
approving the substitution of shares of certain series of MVPFT (the 
``Replacement Portfolios'') for shares of series of other registered 
investment companies (the ``Existing Portfolios'') held by the Separate 
Accounts to fund certain group and individual variable annuity 
contracts (``VA Contracts'') and variable universal life insurance 
policies (``VUL Policies'') issued by NYLIAC (collectively, the 
``Contracts''). The Section 17 Applicants seek an order pursuant to 
Section 17(b) of the 1940 Act to the extent necessary to permit them to 
effectuate the Substitutions by redeeming all or a portion of the 
securities of one or more of the Existing Portfolios in-kind and using 
those securities received to purchase shares of the Replacement 
Portfolios (as defined herein) (the ``In-Kind Transactions'').

[[Page 3811]]

    Filing Date: The application was filed on May 10, 2011 and amended 
applications were filed on December 30, 2011, and January 18, 2012 (as 
amended, the ``Application'').
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Secretary of 
the Commission and serving the Applicants with a copy of the request, 
personally or by mail. Hearing requests should be received by the 
Commission by 5:30 p.m. on February 13, 2012, and should be accompanied 
by proof of service on the Applicants in the form of an affidavit or, 
for lawyers, a certificate of service. Hearing requests should state 
the nature of the requester's interest, the reason for the request, and 
the issues contested. Persons who wish to be notified of a hearing may 
request notification by writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090. Applicants: New York Life Insurance and 
Annuity Corporation and its Separate Accounts, 51 Madison Avenue, New 
York, New York 10010, Attn: Charles A. Whites, Esq.; MainStay VP Funds 
Trust c/o New York Life Investment Management LLC, 169 Lackawanna 
Avenue, Parsippany, New Jersey 07054, Attn: Kevin M. Bopp, Esq. Copy to 
Jorden Burt, LLP, 1025 Thomas Jefferson Street, NW., Suite 400 East, 
Washington, DC, 20007, Attn: Richard T. Choi, Esq.

FOR FURTHER INFORMATION CONTACT: Patrick Scott, Senior Counsel, at 
(202) 551-6763 or Zandra Bailes, Branch Chief, at (202) 551-6759, 
Office of Insurance Products, Division of Investment Management, SEC.

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 for an 
Applicant using the Company name box, at http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.

Applicants' Representations

    1. NYLIAC is a Delaware stock life insurance company that is 
licensed to sell life, accident and health insurance, and annuities in 
the District of Columbia and all states.
    2. NYLIAC serves as the depositor of the Separate Accounts, which 
are segregated asset accounts of NYLIAC established under Delaware law 
pursuant to resolutions of NYLIAC's Board of Directors to fund the 
Contracts.
    3. Each Separate Account, except for Private VUL I and II, is 
registered under the 1940 Act as a unit investment trust. Private VUL I 
and II are exempt from registration under the 1940 Act pursuant to 
Sections 3(c)(1) and 3(c)(7) thereof. Each Separate Account meets the 
definition of ``separate account'' contained in Section 2(a)(37) of the 
1940 Act.
    4. Interests under the Contracts, except for Contracts issued 
through Private VUL I and II, are registered under the Securities Act 
of 1933, as amended (the ``1933 Act''). Contracts issued through 
Private VUL I and II are sold without registration under the 1933 Act 
in reliance on the private offering exemption of Section 4(2) of the 
1933 Act and Regulation D thereunder. Additional information regarding 
the Contracts affected by the Substitutions, including the applicable 
registration statements in which they are described, is set out in the 
Application.
    5. Each Separate Account is divided into subaccounts (each a 
``Subaccount,'' collectively, the ``Subaccounts''). Each Subaccount 
invests in the shares of a single portfolio of an underlying mutual 
fund (``Portfolio''). Contract owners and participants in group 
Contracts (each a ``Contract Owner'' and collectively, the ``Contract 
Owners'') may allocate some or all of their Contract value (``Contract 
value'') to one or more Subaccounts that are available as investment 
options under the Contracts.
    6. Under the Contracts, NYLIAC reserves the right to substitute, 
for the shares of a Portfolio held in any Subaccount, the shares of 
another Portfolio. The prospectuses or offering documents, as 
applicable, for the Contracts include disclosure of this reservation of 
right.
    7. MVPFT is a Delaware statutory trust that is registered with the 
Commission as an open-end management investment company under the 1940 
Act (File No. 811-03833-01). MVPFT currently consists of 21 series 
(``Series''), each of which generally offers two classes of shares, 
namely the Initial Class and Service Class. The Initial and Service 
Classes differ only in that the Service Class shares are subject to a 
distribution plan adopted and administered pursuant to Rule 12b-1 under 
the 1940 Act, which plan imposes a 12b-1 fee equal to an annual rate of 
0.25% of the average daily net assets attributable to the Service 
Class. Shares of the Series are registered under the 1933 Act (File No. 
002-86082). On July 7, 2011, MVPFT filed an amendment to its Form N-1A 
registration statement to register the Replacement Portfolios under the 
1940 Act and the offering of their shares under the 1933 Act.
    8. New York Life Investment Management LLC (``New York Life 
Investments'' or the ``Manager''), an indirect wholly-owned subsidiary 
of New York Life, serves as the investment manager of each Series of 
MVPFT. MVPFT has received an order from the Commission that, subject to 
certain conditions, including approval of the MVPFT Board of Trustees 
(``Board''), including Trustees who are not ``interested persons,'' as 
defined in Section 2(a)(19) of the 1940 Act, and without the approval 
of shareholders, to: (i) Engage a new or additional sub-adviser 
(``Subadvisor'') for each Series; (ii) enter into and materially amend 
existing sub-advisory agreements; and (iii) terminate and replace 
Subadvisors (File No. 812-13257; the ``Manager of Managers Order'').
    9. NYLIAC, on behalf of itself and its Separate Accounts, proposes 
to exercise its contractual right to substitute Portfolio shares held 
in Subaccounts of its Separate Accounts by replacing shares of the 
Existing Portfolios listed below with shares of the corresponding 
Replacement Portfolios listed below:

------------------------------------------------------------------------
    Substitution         Existing Portfolio       Replacement Portfolio
------------------------------------------------------------------------
1...................  Van Eck VIP Global Hard   MainStay VP Van Eck
                       Assets Fund--Initial      Global Hard Assets
                       Class.                    Portfolio--Initial
                                                 Class
2...................  Janus Aspen Balanced      MainStay VP Janus
                       Portfolio--Institutiona   Balanced Portfolio--
                       l Shares.                 Initial Class*
                      Janus Aspen Balanced      MainStay VP Janus
                       Portfolio--Service        Balanced Portfolio--
                       Shares.                   Service Class
3...................  MFS Utilities Series--    MainStay VP MFS
                       Initial Class.            Utilities Portfolio--
                                                 Initial Class
                      MFS Utilities Series--    MainStay VP MFS
                       Service Class.            Utilities Portfolio--
                                                 Service Class
4...................  T. Rowe Price Equity      MainStay VP T. Rowe
                       Income Portfolio--I.      Price Equity Income
                                                 Portfolio--Initial
                                                 Class
                      T. Rowe Price Equity      MainStay VP T. Rowe
                       Income Portfolio--II.     Price Equity Income
                                                 Portfolio--Service
                                                 Class

[[Page 3812]]

 
5...................  PIMCO Real Return         MainStay VP PIMCO Real
                       Portfolio--Administrati   Return Portfolio--
                       ve Class.                 Initial Class
                      PIMCO Real Return         MainStay VP PIMCO Real
                       Portfolio--Advisor        Return Portfolio--
                       Class.                    Service Class
6...................  Universal Institutional   MainStay VP DFA/DuPont
                       Funds, Inc. (``UIF'')     Capital Emerging
                       Emerging Markets Equity   Markets Equity
                       Portfolio--Class I.       Portfolio--Initial
                                                 Class
                      UIF Emerging Markets      MainStay VP DFA/DuPont
                       Equity Portfolio--Class   Capital Emerging
                       II.                       Markets Equity
                                                 Portfolio--Service
                                                 Class
7...................  Alger Small Cap Growth    MainStay VP Eagle Small
                       Portfolio--Class I-2      Cap Growth Portfolio--
                       Shares.                   Initial Class*
                      Alger Small Cap Growth    MainStay VP Eagle Small
                       Portfolio--Class S        Cap Growth Portfolio--
                       Shares.                   Service Class
8...................  Royce Small-Cap           MainStay VP Eagle Small
                       Portfolio--Investment     Cap Growth Portfolio--
                       Class.                    Initial Class*
9...................  Calvert VP SRI Balanced   MainStay VP Janus
                       Portfolio.                Balanced Portfolio--
                                                 Initial Class*
------------------------------------------------------------------------
* For VA Contracts, following the Proposed Substitutions, the Initial
  Class of these Replacement Portfolios will be available only to those
  VA Contract Owners who had Contract values allocated to the
  Subaccounts investing in the Institutional or Class I-2 shares, as
  applicable, of the corresponding Existing Portfolios on the
  Substitution Date. VA Contract Owners who transfer their entire
  Contract value out of the Subaccounts corresponding to these
  Replacement Portfolios will not be permitted to transfer back in.

    10. The investment objectives of each Existing Portfolio and its 
corresponding Replacement Portfolio are set out below. Additional 
information for each Existing Portfolio and Replacement Portfolio, 
including principal investment strategies, principal risks, asset 
sizes, and comparative performance history can be found in the 
Application.

------------------------------------------------------------------------
           Existing Portfolio                 Replacement Portfolio
------------------------------------------------------------------------
The Van Eck VIP Global Hard Assets Fund  The MainStay VP Van Eck Global
 seeks long-term capital appreciation     Hard Assets Portfolio seeks
 by investing primarily in hard asset     long-term capital appreciation
 securities. Income is a secondary        by investing primarily in hard
 consideration.                           asset securities. Income is a
                                          secondary consideration.
The Janus Aspen Balanced Portfolio       The MainStay VP Janus Balanced
 seeks long-term capital growth,          Portfolio seeks long-term
 consistent with preservation of          capital growth, consistent
 capital and balanced by current income.  with preservation of capital
                                          and balanced by current
                                          income.
The MFS Utilities Series' investment     The MainStay VP MFS Utilities
 objective is to seek total return.       Portfolio seeks total return.
The T. Rowe Price Equity Income          The MainStay VP T. Rowe Price
 Portfolio seeks to provide substantial   Equity Income Portfolio seeks
 dividend income as well as long-term     to provide substantial
 growth of capital through investments    dividend income as well as
 in the common stocks of established      long-term growth of capital
 companies.                               through investments in the
                                          common stocks of established
                                          companies.
The PIMCO Real Return Portfolio seeks    The MainStay VP PIMCO Real
 maximum real return, consistent with     Return Portfolio seeks maximum
 preservation of real capital and         real return, consistent with
 prudent investment management.           preservation of real capital
                                          and prudent investment
                                          management.
The Universal Institutional Funds Inc.   The MainStay VP DFA/DuPont
 (``UIF'') Emerging Markets Equity        Capital Emerging Markets
 Portfolio seeks long-term capital        Equity Portfolio seeks long-
 appreciation by investing primarily in   term capital appreciation.
 growth-oriented equity securities of
 issuers in emerging market countries.
The Alger Small Cap Growth Portfolio     The MainStay VP Eagle Small Cap
 seeks long-term capital appreciation.    Growth Portfolio seeks long-
                                          term capital appreciation.
The Royce Small-Cap Portfolio's          The MainStay VP Eagle Small Cap
 investment goal is long-term growth of   Growth Portfolio seeks long-
 capital.                                 term capital appreciation.
The Calvert VP SRI Balanced Portfolio    The MainStay VP Janus Balanced
 seeks to achieve a competitive total     Portfolio seeks long-term
 return through an actively managed       capital growth, consistent
 portfolio of stocks, bonds, and money    with preservation of capital
 market instruments which offer income    and balanced by current
 and capital growth opportunity and       income.
 which satisfy the investment criteria,
 including financial, sustainability
 and social responsibility factors.
------------------------------------------------------------------------

    11. The management fees and other expenses of each Existing 
Portfolio and corresponding Replacement Portfolio as of December 31, 
2010, are set out below. The data for the Existing Portfolios are shown 
as a percentage of average daily net assets as of December 31, 2010. 
The data for the Replacement Portfolios are estimates for the current 
year based on anticipated asset levels following the Substitutions.

                                                 Substitution 1
----------------------------------------------------------------------------------------------------------------
                                                     Existing Portfolio                 Replacement Portfolio
                                       -------------------------------------------------------------------------
                                                                                      MainStay VP Van Eck Global
                                            Van Eck VIP Global Hard Assets Fund         Hard Assets Portfolio
----------------------------------------------------------------------------------------------------------------
Initial Class/Initial Class...........
    Management Fee....................  First $500 million: 1.00...................                         0.89
                                        Next $250 million: 0.90.
                                        Over $750 million: 0.70.
                                        Current: 0.89.
    12b-1 Fee.........................  0.00.......................................                         0.00
    Other Expenses....................  0.08.......................................                         0.07
    Total Gross Expenses..............  0.97.......................................                         0.96

[[Page 3813]]

 
    Expense Waiver....................  0.00.......................................                         0.00
    Total Net Expenses................  0.97.......................................                         0.96
----------------------------------------------------------------------------------------------------------------


                                                 Substitution 2
----------------------------------------------------------------------------------------------------------------
                                                             Existing Portfolio         Replacement Portfolio
                                                       ---------------------------------------------------------
                                                            Janus Aspen Balanced      MainStay VP Janus Balanced
                                                                 Portfolio                    Portfolio
----------------------------------------------------------------------------------------------------------------
Institutional Shares/Initial Class:
    Management Fee....................................                         0.55                         0.55
    12b-1 Fee.........................................                         0.00                         0.00
    Other Expenses....................................                         0.03                         0.05
    Total Gross Expenses..............................                         0.58                         0.60
    Expense Waiver....................................                         0.00                         0.02
    Total Net Expenses................................                         0.58                         0.58
Service Shares/Service Class:
    Management Fee....................................                         0.55                         0.55
    12b-1 Fee.........................................                         0.25                         0.25
    Other Expenses....................................                         0.03                         0.05
    Total Gross Expenses..............................                         0.83                         0.85
    Expense Waiver....................................                         0.00                         0.02
    Total Net Expenses................................                         0.83                         0.83
----------------------------------------------------------------------------------------------------------------


                                                 Substitution 3
----------------------------------------------------------------------------------------------------------------
                                                     Existing Portfolio                 Replacement Portfolio
                                       -------------------------------------------------------------------------
                                                                                      MainStay VP MFS Utilities
                                                    MFS Utilities Series                      Portfolio
----------------------------------------------------------------------------------------------------------------
Initial Class/Initial Class:
    Management Fee....................  First $1 billion: 0.75                                              0.73
                                        Over $1 billion: 0.70......................
                                        Current: 0.73..............................
    12b-1 Fee.........................  0.00.......................................                         0.00
    Other Expenses....................  0.08.......................................                         0.05
    Total Gross Expenses..............  0.81.......................................                         0.78
    Expense Waiver....................  0.00.......................................                         0.00
    Total Net Expenses................  0.81.......................................                         0.78
Service Class/Service Class:
    Management Fee....................  0.73.......................................                         0.73
    12b-1 Fee.........................  0.25.......................................                         0.25
    Other Expenses....................  0.08.......................................                         0.05
    Total Gross Expenses..............  1.06.......................................                         1.03
    Expense Waiver....................  0.00.......................................                         0.00
    Total Net Expenses................  1.06.......................................                         1.03
----------------------------------------------------------------------------------------------------------------


                                                 Substitution 4
----------------------------------------------------------------------------------------------------------------
                                             Existing Portfolio                 Replacement Portfolio
                                       -------------------------------------------------------------------------
                                        T. Rowe Price Equity Income    MainStay VP T. Rowe Price Equity Income
                                                 Portfolio                            Portfolio
----------------------------------------------------------------------------------------------------------------
Class I/Initial Class:
    Management Fee....................                         0.85  First $500 million: 0.80.
                                        ...........................  Over $500 million: 0.775.
                                        ...........................  Effective Rate: 0.80.
    12b-1 Fee.........................                         0.00  0.00.
    Other Expenses....................                         0.00  0.05.
    Total Gross Expenses..............                         0.85  0.85.
    Expense Waiver....................                         0.00  0.05.
    Total Net Expenses................                         0.85  0.80.
Class II/Service Class:
    Management Fee....................                         0.85  First $500 million: 0.80.
                                        ...........................  Over $500 million: 0.775.

[[Page 3814]]

 
                                        ...........................  Effective Rate: 0.80.
    12b-1 Fee.........................                         0.25  0.25.
    Other Expenses....................                         0.00  0.05.
    Total Gross Expenses..............                         1.10  1.10.
    Expense Waiver....................                         0.00  0.05.
    Total Net Expenses................                         1.10  1.05.
----------------------------------------------------------------------------------------------------------------


                             Substitution 5
------------------------------------------------------------------------
                               Existing Portfolio        Replacement
                             ----------------------       Portfolio
                                                   ---------------------
                                PIMCO Real Return     MainStay VP PIMCO
                                    Portfolio            Real Return
                                                          Portfolio
------------------------------------------------------------------------
Administrative Class/Initial
 Class:
    Management Fee..........                  0.50                  0.50
    Service Fees............                  0.15                  0.00
    Other Expenses..........                  0.01                  0.13
    Total Gross Expenses....                  0.66                  0.63
    Expense Waiver..........                  0.00                  0.00
    Total Net Expenses......                  0.66                  0.63
Adviser Class/Service Class:
    Management Fee..........                  0.50                  0.50
    12b-1 Fee...............                  0.25                  0.25
    Other Expenses..........                  0.01                  0.13
    Total Gross Expenses....                  0.76                  0.88
    Expense Waiver..........                  0.00                  0.12
    Total Net Expenses......                  0.76                  0.76
------------------------------------------------------------------------


                             Substitution 6
------------------------------------------------------------------------
                                      Existing           Replacement
                                     Portfolio            Portfolio
                                ----------------------------------------
                                                      MainStay VP DFA/
                                    UIF EMERGING       DuPont Capital
                                   Markets Equity     Emerging Markets
                                     Portfolio        Equity Portfolio
------------------------------------------------------------------------
Class I/Initial Class:
    Management Fee.............  First $500                         1.20
                                  million: 1.25.
                                 Next $500
                                  million: 1.20.
                                 Next $1.5
                                  billion: 1.15.
                                 Over $2.5
                                  billion: 1.00.
                                 Current: 1.22....
    12b-1 Fee..................  0.00.............                  0.00
    Other Expenses.............  0.39.............                  0.17
    Total Gross Expenses.......  1.61.............                  1.37
    Expense Waiver.............  0.01.............                  0.00
    Total Net Expenses.........  1.60.............                  1.37
Class II/Service Class:
    Management Fee.............  1.22.............                  1.20
    12b-1 Fee..................  0.35.............                  0.25
    Other Expenses.............  0.39.............                  0.17
    Total Gross Expenses.......  1.96.............                  1.62
    Expense Waiver.............  0.31.............                  0.00
    Total Net Expenses.........  1.65.............                  1.62
------------------------------------------------------------------------


                                                 Substitution 7
----------------------------------------------------------------------------------------------------------------
                                                             Existing Portfolio         Replacement Portfolio
                                                       ---------------------------------------------------------
                                                           Alger Small Cap Growth    MainStay VP Eagle Small Cap
                                                                 Portfolio                 Growth Portfolio
----------------------------------------------------------------------------------------------------------------
Class I-2/Initial Class:
    Management Fee....................................                         0.81                         0.81
    12b-1 Fee.........................................                         0.00                         0.00
    Other Expenses....................................                         0.14                         0.08

[[Page 3815]]

 
    Total Gross Expenses..............................                         0.95                         0.89
    Expense Waiver....................................                         0.00                         0.00
    Total Net Expenses................................                         0.95                         0.89
Class S Shares/Service Class:
    Management Fee....................................                         0.81                         0.81
    12b-1 Fee.........................................                         0.25                         0.25
    Other Expenses....................................                         0.16                         0.08
    Total Gross Expenses..............................                         1.22                         1.14
    Expense Waiver....................................                         0.00                         0.00
    Total Net Expenses................................                         1.22                         1.14
----------------------------------------------------------------------------------------------------------------


                             Substitution 8
------------------------------------------------------------------------
                               Existing Portfolio        Replacement
                             ----------------------       Portfolio
                                                   ---------------------
                                 Royce Small-Cap      MainStay VP Eagle
                                    Portfolio         Small Cap Growth
                                                          Portfolio
------------------------------------------------------------------------
Investment Class/Initial
 Class:
    Management Fee..........                  1.00                  0.81
    12b-1 Fee...............                  0.00                  0.00
    Other Expenses..........                  0.06                  0.08
    Total Gross Expenses....                  1.06                  0.89
    Expense Waiver..........                  0.00                  0.00
    Total Net Expenses......                  1.06                  0.89
------------------------------------------------------------------------


                                                 Substitution 9
----------------------------------------------------------------------------------------------------------------
                                                     Existing Portfolio                 Replacement Portfolio
                                       -------------------------------------------------------------------------
                                                                                      MainStay VP Janus Balanced
                                             Calvert VP SRI Balanced Portfolio                Portfolio
----------------------------------------------------------------------------------------------------------------
Undesignated Shares/Initial Class:
    Management Fee*...................  First $500 million: 0.70...................                         0.55
                                        Next $500 million: 0.65.
                                        Over $1 billion: 0.60.
                                        Current: 0.70.
    12b-1 Fee.........................  0.00.......................................                         0.00
    Other Expenses....................  0.21.......................................                         0.05
    Total Gross Expenses..............  0.91.......................................                         0.60
    Expense Waiver....................  0.00.......................................                         0.02
    Total Net Expenses................  0.91.......................................                         0.58
----------------------------------------------------------------------------------------------------------------
* Fee shown for Existing Portfolio includes administrative fee of 0.275.

    12. NYLIAC represents that it will not to increase Separate Account 
expenses under the Contracts affected by the Proposed Substitutions 
during any period that the contractual limitation on Portfolio expenses 
described in Section II.D.4 of the Application, is in place.
    13. The Substitutions are part of an ongoing effort by NYLIAC to 
not only make its Contracts more attractive to existing and prospective 
Contract Owners, but also to make the Contracts easier to administer. 
The Section 26 Applicants believe the Proposed Substitutions will help 
to accomplish these goals for several reasons. The Substitutions are 
expected to result in the same or lower Portfolio operating expenses, 
either on a gross basis or on a net basis as the result of contractual 
expense waivers. In addition, the Substitutions will result in fewer 
and more uniform disclosures and communications, which the Section 26 
Applicants believe will enable Contract Owners to more easily locate, 
compare, and evaluate the information about their investment options 
under the Contracts. Because the Replacement Portfolios are managed by 
an affiliate of NYLIAC, greater coordination and consolidation can 
occur regarding the delivery of prospectuses, supplements, and other 
disclosures and communications, thereby reducing the volume of mailings 
a Contract Owner might otherwise receive. Subject to shareholder 
approval of the Manager of Managers arrangement, the Substitutions also 
will result in more investment options under the Contracts having the 
improved portfolio manager selection afforded by MVPFT's Manager of 
Managers Order. Moreover, the Substitutions will enable NYLIAC to more 
efficiently administer those aspects of the Contracts that pertain to 
Portfolios by enabling NYLIAC to work principally with its affiliate, 
New York Life Investments, rather than several third party investment 
advisers (``Advisers'') in different locations with different policies, 
procedures, systems, and availability. Substitutions 7, 8, and 9

[[Page 3816]]

also will simplify the Portfolio offerings by eliminating overlapping 
offerings that largely duplicate one another by having substantially 
similar investment objectives, strategies, and risks.
    14. The Section 26 Applicants currently expect that the 
Substitutions will be carried out on or about February 17, 2012, or on 
a later date for certain VUL Policies due to administrative reasons 
(each a ``Substitution Date'').
    15. The Substitutions will be described in supplements to the 
applicable prospectuses for the Contracts filed with the Commission or 
in other supplemental disclosure documents (collectively, 
``Supplements'') and delivered to all affected Contract Owners at least 
30 days before each applicable Substitution Date.
    16. Each Supplement will give the relevant Contract Owners notice 
of NYLIAC's intent to substitute shares of the Existing Portfolios as 
described in the Application on the Substitution Date. Each Supplement 
also will advise Contract Owners that from the date of the Supplement 
until the Substitution Date, Contract Owners are permitted to transfer 
all of or a portion of their Contract value out of any Subaccount 
investing in an Existing Portfolio (``Existing Portfolio Subaccount'') 
to any other available Subaccounts offered under their Contracts 
without the transfer being counted as a transfer for purposes of 
transfer limitations and fees that would otherwise be applicable under 
the terms of the Contracts.
    17. In addition, each Supplement will (a) Instruct Contract Owners 
how to submit transfer requests in light of the Proposed Substitutions; 
(b) advise Contract Owners that any Contract value remaining in an 
Existing Portfolio Subaccount on the Substitution Date will be 
transferred to a Subaccount investing in the corresponding Replacement 
Portfolio (``Replacement Portfolio Subaccount''), and that the 
Substitutions will take place at relative net asset value; (c) inform 
Contract Owners that for at least thirty (30) days following the 
Substitution Date, NYLIAC will permit Contract Owners to make transfers 
of Contract value out of each Replacement Portfolio Subaccount to any 
other available Subaccounts offered under their Contracts without the 
transfer being counted as a transfer for purposes of transfer 
limitations and fees that would otherwise be applicable under the terms 
of the Contracts; and (d) inform Contract Owners that, except as 
described in the market timing limitations section of the relevant 
prospectus, NYLIAC will not exercise any rights reserved by it under 
the Contracts to impose additional restrictions on transfers out of a 
Replacement Portfolio Subaccount for at least thirty (30) days after 
the Substitution Date.
    18. NYLIAC will send Contract Owners the prospectus for the 
Replacement Portfolios in accordance with applicable legal 
requirements. The prospectus for the Replacement Portfolio will 
disclose and explain the substance and effect of the Manager of 
Managers Order and will disclose that the Replacement Portfolios may 
not rely on the Order without first obtaining shareholder approval. No 
Replacement Portfolio will rely on the Manager of Managers Order unless 
such action is approved by a majority of each Replacement Portfolio's 
outstanding voting securities, as defined in the 1940 Act, at a meeting 
whose record date is after the Proposed Substitutions have been 
effected.
    19. Within five (5) business days after the Substitution Date, 
Contract Owners will be sent a written confirmation of the completed 
Substitutions in accordance with Rule 10b-10 under the Securities 
Exchange Act of 1934, as amended. The confirmation statement will 
include or be accompanied by a statement that reiterates the free 
transfer rights disclosed in the Supplements.
    20. Each Substitution will take place at the applicable Existing 
and Replacement Portfolios' relative per share net asset values 
determined on the Substitution Date in accordance with Section 22 of 
the 1940 Act and Rule 22c-1 thereunder. Accordingly, the Substitutions 
will have no negative financial impact on any Contract Owner. Each 
Substitution will be effected by having each Existing Portfolio 
Subaccount redeem its Existing Portfolio shares in cash and/or in-kind 
(as described in the Application) on the Substitution Date at net asset 
value per share and purchase shares of the appropriate Replacement 
Portfolio at net asset value per share calculated on the same date. In 
the event that either the Manager or the relevant Subadvisor of a 
Replacement Portfolio declines to accept, on behalf of the Replacement 
Portfolio, securities redeemed in-kind by an Existing Portfolio, such 
Existing Portfolio shall instead provide cash equal to the value of the 
declined securities so that Contract Owners' Contract values will not 
be adversely impacted or diluted.
    21. NYLIAC or an affiliate will pay all expenses and transaction 
costs reasonably related to the Substitutions, including all legal, 
accounting, and brokerage expenses relating to the Substitutions, the 
above-described disclosure documents, and the Application. No costs of 
the Substitutions will be borne directly or indirectly by Contract 
Owners. Affected Contract Owners will not incur any fees or charges as 
a result of the Substitutions, nor will their rights or the obligations 
of NYLIAC under the Contracts be altered in any way. The Substitutions 
will not cause the fees and charges under the Contracts currently being 
paid by Contract Owners to be greater after the Substitutions than 
before the Substitutions.
    22. The Manager will enter into a written contract with the 
Replacement Portfolios whereby during the two years following the 
Substitution Date the annual net operating expenses of each Replacement 
Portfolio will not exceed the annual net operating expenses of each 
corresponding Existing Portfolio for the fiscal year ended December 31, 
2010.

Applicants' Legal Analysis

    1. Section 26(c) of the 1940 Act makes it unlawful for any 
depositor or trustee of a registered unit investment trust holding the 
security of a single issuer to substitute another security for such 
security unless the Commission approves the substitution. Section 26(c) 
requires the Commission to issue an order approving a substitution if 
the evidence establishes that it is consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of the 1940 Act.
    2. The Section 26 Applicants assert that the terms and conditions 
of the Substitutions are consistent with the principles and purposes of 
Section 26(c) and do not entail any of the abuses that Section 26(c) is 
designed to prevent. The Substitutions will not result in the type of 
costly forced redemption that Section 26(c) was intended to guard 
against and, for the following reasons, are consistent with the 
protection of investors and the purposes fairly intended by the 1940 
Act:
    (a) The costs reasonably related to the Substitutions will be borne 
by NYLIAC or an affiliate and will not be borne by Contract Owners. No 
charges will be assessed to the Contract Owners to effect the 
Substitutions.
    (b) The Substitutions will be effected, in all cases, at the 
relative net asset values of the shares of the Existing and Replacement 
Portfolios, without the imposition of any transfer or similar charge 
and with no change in the amount of any Contract Owner's Contract 
value.
    (c) The Substitutions will not cause the fees and charges under the 
Contracts currently being paid by Contract

[[Page 3817]]

Owners to be greater after the Substitutions than before the 
Substitutions, and in each case will result in Contract Owners' 
Contract values being moved to a Replacement Portfolio with the same or 
lower total expenses than those of the corresponding Existing 
Portfolio.
    (d) Expense limits will be in place for two years following the 
Substitution Date to assure that Contract Owners investing in 
Replacement Portfolio Subaccounts will not incur expenses following the 
Substitutions that are higher than what they were prior to the 
Substitutions when they invested in the Existing Portfolio Subaccounts.
    (e) All affected Contract Owners will be given notice of the 
Substitutions prior to the Substitution Date and will have an 
opportunity to reallocate their Contract value among other available 
Subaccounts without the imposition of any charge or limitation (unless 
such transfers are made in connection with market timing or other 
disruptive trading activity), thereby minimizing the likelihood of 
being invested through a Subaccount in an undesired Portfolio.
    (f) The Substitutions will in no way alter the insurance benefits 
to Contract Owners or the contractual obligations of NYLIAC.
    (g) The Substitutions will in no way alter the tax treatment of 
Contract Owners in connection with their Contracts, and no tax 
liability will arise for Contract Owners as a result of the 
Substitutions.
    (h) No Replacement Portfolio will rely on the Manager of Managers 
Order unless such action is approved by a majority of each Replacement 
Portfolio's outstanding voting securities, as defined in the 1940 Act, 
at a meeting whose record date is after the Proposed Substitutions have 
been effected.
    4. The Section 17 Applicants request that the Commission issue an 
order pursuant to Section 17(b) of the 1940 Act exempting them from the 
provisions of Section 17(a) of the 1940 Act to the extent necessary to 
permit them to carry out the In-Kind Transactions.
    5. 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.
    6. 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 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 reports 
filed under the 1940 Act; and (3) the proposed transaction is 
consistent with the general purposes of the 1940 Act.
    7. Certain Existing and Replacement Portfolios 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. Currently, NYLIAC, 
through its Separate Accounts, owns more than 25% of the shares of each 
Existing Portfolio other than the PIMCO Real Return Portfolio (NYLIAC 
currently owns less than 5% of the PIMCO Real Return Portfolio), and 
therefore may be deemed to be a control person of these Existing 
Portfolios. In addition, New York Life Investments, as the Manager of 
the Replacement Portfolios, may be deemed to be a control person 
thereof. Because NYLIAC and New York Life Investments are under common 
control, entities that they control likewise may be deemed to be under 
common control, and thus affiliated persons of each other, 
notwithstanding the fact that the Contract Owners may be considered the 
beneficial owners of those shares held in the Separate Accounts.
    8. These Existing Portfolios and the Replacement Portfolios also 
may be deemed to be affiliated persons of affiliated persons. This 
result follows from the fact that, regardless of whether NYLIAC can be 
considered to control these Existing and Replacement Portfolios, NYLIAC 
may be deemed to be an affiliated person thereof because it, through 
its Separate Accounts, owns of record 5% or more of the outstanding 
shares of such Portfolios. In addition, NYLIAC may be deemed an 
affiliated person of the Replacement Portfolios because its affiliate, 
New York Life Investments, may be deemed to control the Replacement 
Portfolios by virtue of serving as their investment adviser. As a 
result of these relationships, each of these Existing Portfolios may be 
deemed to be an affiliated person of an affiliated person (NYLIAC or 
the Separate Accounts) of the Replacement Portfolios, and vice versa.
    9. The proposed In-Kind Transactions, therefore, could be seen as 
the indirect purchase of shares of a Replacement Portfolio with 
portfolio securities of the corresponding Existing Portfolio and 
conversely the indirect sale of portfolio securities of the Existing 
Portfolio for shares of the corresponding Replacement Portfolio. The 
proposed In-Kind Transactions also could be categorized as a purchase 
of shares of the Replacement Portfolio by the Existing Portfolio, 
acting as principal, and a sale of portfolio securities by the Existing 
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 Existing Portfolio and a sale of 
securities to the Replacement Portfolio by NYLIAC (or the Separate 
Accounts), acting as principal. If characterized in this manner, the 
proposed In-Kind Transactions may be deemed to contravene Section 17(a) 
due to the affiliated status of these entities.
    10. The Section 17 Applicants maintain that the terms of the 
proposed In-Kind Transactions, including the consideration to be paid 
and received, as described in this Application, are reasonable and fair 
and do not involve overreaching on the part of any person concerned 
because: (1) The proposed In-Kind Transactions will be effected at the 
respective net asset values of the Existing Portfolio and the 
Replacement Portfolio involved, as determined in accordance with the 
procedures disclosed in their respective registration statements and as 
required by Rule 22c-1 under the 1940 Act, and, therefore, will not 
adversely affect or dilute the interests of Contract Owners; and (2) 
the proposed In-Kind Transactions will comply with the conditions set 
forth in Rule 17a-7 and the 1940 Act, other than the requirement 
relating to cash consideration. Even though the proposed In-Kind 
Transactions will not comply with the cash consideration requirement of 
paragraph (a) of Rule 17a-7, the terms of the proposed In-Kind 
Transactions will offer to the relevant Existing and Replacement 
Portfolios the same degree of protection from overreaching that Rule 
17a-7 generally provides in connection with the purchase and sale of 
securities under that Rule in the ordinary course of business. In 
particular, the Section 17 Applicants cannot effect the proposed In-
Kind Transactions at a price that is disadvantageous to either an 
Existing Portfolio or a Replacement Portfolio, and the proposed In-Kind 
Transactions will not occur absent an exemptive order from the 
Commission.
    11. The Section 17 Applicants also submit that the proposed In-Kind

[[Page 3818]]

Transactions will be consistent with the policies of each of the 
Existing Portfolios and the Replacement Portfolios involved in such 
Transactions, as recited in their current registration statement and 
reports filed with the Commission. Finally, the Section 17 Applicants 
submit that the proposed In-Kind Transactions are consistent with the 
general purposes of the 1940 Act.

Conclusion

    For the reasons set forth in the Application, the Section 26 
Applicants request that the Commission issue an order of approval 
pursuant to Section 26(c) of the 1940 Act and the Section 17 
Applications request 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.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-1482 Filed 1-24-12; 8:45 am]
BILLING CODE 8011-01-P


