Document ID: SEC-2008-1669-0001
Agency: sec
Document Type: Notice
Title: RiverSource Life Insurance Company, et al., Notice of Application
Posted Date: 2008-12-11T05:00Z

[Federal Register: December 11, 2008 (Volume 73, Number 239)]
[Notices]               
[Page 75475-75485]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11de08-103]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-28527; File No. 812-13492]

 
RiverSource Life Insurance Company, et al., Notice of Application

December 4, 2008.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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    Applicants: RiverSource Life Insurance Company (``RiverSource 
Life''), RiverSource Life Insurance Co. of New York (``RiverSource Life 
of NY'' and, together with RiverSource Life, the ``Companies''), 
RiverSource Variable Account10 (``Account 10''), RiverSource Variable 
Life Separate Account (``Variable Life Separate Account''), RiverSource 
of New York Variable Annuity Account (``Variable Annuity Account NY'') 
and RiverSource of New York Account 8 (``Account 8 NY'') (except for 
the Companies, each a ``separate account'' as defined in Section 
2(a)(37) of the Investment Company Act of 1940, as amended (the ``1940 
Act''); the separate accounts are collectively referred to herein as 
the ``Separate Accounts'') (all foregoing parties collectively referred 
to herein as the ``Applicants''); and RiverSource Variable Series Trust 
(``RiverSource VS Trust,'' and together with the Applicants, the 
``Section 17(b) Applicants'').
    Filing Date: The application was filed on February 11, 2008, and 
amended and restated on October 30, 2008.
    Summary of Application: Applicants request an order of the 
Commission, pursuant to Section 26(c) of the 1940 Act, approving the 
substitution of shares

[[Page 75476]]

of certain investment portfolios (``Substituted Portfolios'') for 
shares of certain other investment portfolios (``Replacement 
Portfolios'') under certain variable life insurance policies and/or 
variable annuity contracts (``Contracts''), each issued through a 
Separate Account. The Section 17(b) Applicants seek an order of 
exemption pursuant to Section 17(b) of the 1940 Act from Section 17(a) 
of the 1940 Act to the extent necessary to permit the Companies to 
carry out the Substitutions.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Secretary of 
the Commission and serving Applicants with a copy of the request, 
personally or by mail. Hearing requests should be received by the 
Commission by 5:30 p.m. on December 29, 2008, and should be accompanied 
by proof of service on Applicants, in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the writer's interest, the reason for the request, and the 
issues contested. Persons may request notification of a hearing by 
writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street, 
NW., Washington, DC 20549. Applicants, c/o Rodney Jay Vessels, Esq., 
RiverSource Life Insurance Company, 829 Ameriprise Financial Center, 
Minneapolis, Minnesota 55474, with copy to Stephen E. Roth, Esq., 
Sutherland Asbill & Brennan LLP, 1275 Pennsylvania Avenue, NW., 
Washington, DC 20004-2415.

FOR FURTHER INFORMATION CONTACT: Mark A. Cowan, Senior Counsel, or 
Zandra Y. Bailes, Branch Chief, Office of Insurance Products, Division 
of Investment Management, at (202) 551-6795.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application is available for a fee from the 
Public Reference Branch of the Commission, 100 F Street, NE., 
Washington, DC 20549 (202-551-8090).

Applicants' Representations

    1. RiverSource Life is a stock life insurance company organized in 
1957 under the laws of the state of Minnesota and is located at 70100 
Ameriprise Financial Center, Minneapolis, MN 55474. It is a wholly-
owned subsidiary of Ameriprise Financial, Inc.
    2. RiverSource Life established Account 10 on August 23, 1995 
pursuant to the provisions of Minnesota law. Account 10 meets the 
definition of ``separate account'' under the federal securities laws. 
Account 10 is registered with the Commission under the 1940 Act as a 
unit investment trust (File No. 811-07355). The assets of Account 10 
support certain Contracts that offer Substituted Portfolios as 
investment options (the ``Account 10 Contracts''), and interests in 
Account 10 offered through such Contracts have been registered under 
the Securities Act of 1933 (``1933 Act'') on Form N-4.
    3. RiverSource Life is the legal owner of the assets in Account 10. 
The assets of Account 10 are not chargeable with liabilities arising 
out of any other RiverSource Life business. Income, capital gains and/
or capital losses, whether or not realized, from assets allocated to 
Account 10 are credited to or charged against the account without 
regard to the income, capital gains, and/or capital losses arising out 
of any other RiverSource Life business. Account 10 is segmented into 
subaccounts, and certain subaccounts invest in the Substituted 
Portfolios.
    4. A majority of Account 10 Contracts involved in the Substitution 
are no longer offered for sale, except for RiverSource Retirement 
Advisor 4 Advantage Variable Annuity, RiverSource Retirement Advisor 4 
Select Variable Annuity and RiverSource Retirement Advisor 4 Access 
Variable Annuity Contracts. The subaccounts investing in the 
Substituted Portfolios are currently available for the allocation of 
additional purchase payments and transfer of contract value under the 
Account 10 Contracts for existing and new Contract owners, and will 
continue to be available to such Contract owners until the time the 
Substitutions occur.
    5. The terms and conditions, including charges and expenses, 
applicable to the Account 10 Contracts are described in the 
registration statements relating to such Contracts. Pursuant to the 
Account 10 Contracts, RiverSource Life reserves the right to substitute 
shares of one portfolio for shares of another. In the prospectuses for 
the Account 10 Contracts, RiverSource Life also reserves the right to 
substitute shares of one portfolio for shares of another.
    6. The terms of the Account 10 Contracts and the prospectuses for 
the Account 10 Contracts also permit owners to transfer contract value 
among the subaccounts. Currently, subject to certain restrictions, 
owners may redistribute contract value among the accounts without 
charge at any time until annuity payouts begin, and once per contract 
year among the subaccounts after annuity payouts begin. RiverSource 
Life does not assess a transfer charge. RiverSource Life also has 
market timing policies and procedures that may operate to limit 
transfers. If the Account 10 Contract offers a fixed account and GPA 
account, RiverSource Life may impose restrictions on transfers to and 
from the fixed account and GPA account.
    7. RiverSource Life established Variable Life Separate Account on 
October 16, 1985 pursuant to the provisions of Minnesota law. Variable 
Life Separate Account meets the definition of ``separate account'' 
under the federal securities laws. Variable Life Separate Account is 
registered with the Commission under the 1940 Act as a unit investment 
trust (File No. 811-4298). The assets of Variable Life Separate Account 
support certain Contracts that offer Substituted Portfolios as 
investment options (the ``Variable Life Separate Account Contracts''), 
and interests in Variable Life Separate Account offered through such 
Contracts have been registered under the 1933 Act on Form N-4.
    8. RiverSource Life is the legal owner of the assets in Variable 
Life Separate Account. The assets of Variable Life Separate Account are 
not chargeable with liabilities arising out of any other RiverSource 
Life business. Income, capital gains and/or capital losses, whether or 
not realized, from assets allocated to Variable Life Separate Account 
are credited to or charged against the account without regard to the 
income, capital gains, and/or capital losses arising out of any other 
RiverSource Life business. Variable Life Separate Account is segmented 
into subaccounts, and certain subaccounts invest in the Substituted 
Portfolios.
    9. The majority of the Variable Life Separate Account Contracts 
involved in the Substitution are no longer offered for sale, except 
RiverSource Single Premium Variable Life, RiverSource Variable Life 
Universal Life IV and RiverSource Variable Life Universal Life IV--
Estate Series. The subaccounts investing in the Substituted Portfolios 
are currently available for the allocation of additional purchase 
payments and transfer of contract value under the Variable Life 
Separate Account Contracts for existing and new Contract owners, and 
will continue to be available to such Contract owners until the time 
the Substitutions occur.
    10. The terms and conditions, including charges and expenses, 
applicable to the Variable Life Separate Account Contracts are 
described in the registration statements relating to such

[[Page 75477]]

Contracts. Pursuant to the Variable Life Separate Account Contracts, 
RiverSource Life reserves the right to substitute shares of one 
portfolio for shares of another. In the prospectuses for the Variable 
Life Separate Account Contracts, RiverSource Life also reserves the 
right to substitute shares of one portfolio for shares of another.
    11. The terms of the Variable Life Separate Account Contracts and 
the prospectuses for the Variable Life Separate Account Contracts also 
permit owners to transfer contract value among the subaccounts. 
Currently, subject to certain restrictions, owners may redistribute 
contract value among the accounts without charge. RiverSource Life does 
not assess a transfer charge. RiverSource Life also has market timing 
policies and procedures that may operate to limit transfers. If the 
Variable Life Separate Account Contract offers a fixed account, 
RiverSource Life may impose restrictions on transfers to and from the 
fixed account.
    12. RiverSource Life of NY is a stock life insurance company 
organized in 1972 under the laws of the state of New York and is 
located at 20 Madison Avenue Extension, Albany, New York 12203. It is a 
wholly-owned subsidiary of RiverSource Life. RiverSource Life of NY 
conducts a conventional life insurance business. Its primary products 
currently include fixed and variable annuity contracts and life 
insurance policies. These products are distributed through individual 
insurance agents, financial planners, and broker-dealers to both the 
tax qualified and non-tax-qualified markets. As of December 31, 2007, 
RiverSource Life of NY's assets were in excess of $ 5.32 billion. For 
purposes of the 1940 Act, RiverSource Life of NY is the depositor and 
sponsor of the Variable Annuity Account NY and Account 8 NY as those 
terms have been interpreted by the Commission with respect to variable 
annuity and variable life insurance separate accounts.
    13. RiverSource Life of NY established Variable Annuity Account NY 
on April 17, 1996 pursuant to the provisions of New York law. Variable 
Annuity Account NY meets the definition of ``separate account'' under 
the federal securities laws. Variable Annuity Account NY is registered 
with the Commission under the 1940 Act as a unit investment trust (File 
No. 811-07623). The assets of Variable Annuity Account NY support 
certain Contracts that offer Substituted Portfolios as investment 
options (the ``Variable Annuity Account NY Contracts''), and interests 
in Variable Annuity Account NY offered through such Contracts have been 
registered under the 1933 Act on Form N-4.
    14. RiverSource Life of NY is the legal owner of the assets in 
Variable Annuity Account NY. The assets of Variable Annuity Account NY 
are not chargeable with liabilities arising out of any other 
RiverSource Life of NY business. Income, capital gains and/or capital 
losses, whether or not realized, from assets allocated to Variable 
Annuity Account NY are credited to or charged against the account 
without regard to the income, capital gains, and/or capital losses 
arising out of any other RiverSource Life of NY business. Variable 
Annuity Account NY is segmented into subaccounts, and certain 
subaccounts invest in the Substituted Portfolios.
    15. The majority of the Variable Annuity Account NY Contracts 
involved in the Substitution are no longer offered for sale, except 
RiverSource Retirement Advisor 4 Advantage Variable Annuity, 
RiverSource Retirement Advisor 4 Select Variable Annuity and 
RiverSource Retirement Advisor 4 Access Variable Annuity Contracts. The 
subaccounts investing in the Substituted Portfolios are currently 
available for the allocation of additional purchase payments and 
transfer of contract value under the Variable Annuity Account NY 
Contracts for existing and new Contract owners, and will continue to be 
available to such Contract owners until the time the Substitutions 
occur.
    16. The terms and conditions, including charges and expenses, 
applicable to the Variable Annuity Account NY Contracts are described 
in the registration statements relating to such Contracts. Pursuant to 
the Variable Annuity Account NY Contracts, RiverSource Life of NY 
reserves the right to substitute shares of one portfolio for shares of 
another. In the prospectuses for the Variable Annuity Account NY 
Contracts, RiverSource Life of NY also reserves the right to substitute 
shares of one portfolio for shares of another.
    17. The terms of the Variable Annuity Account NY Contracts and the 
prospectuses for the Variable Annuity Account NY Contracts also permit 
owners to transfer contract value among the subaccounts. Currently, 
subject to certain restrictions, owners may redistribute contract value 
among the accounts without charge at any time until annuity payouts 
begin, and once per contract year among the subaccounts after annuity 
payouts begin. RiverSource Life of NY does not assess a transfer 
charge. RiverSource Life of NY also has market timing policies and 
procedures that may operate to limit transfers. If the Variable Annuity 
Account NY Contract offers a fixed account, RiverSource Life of NY may 
impose restrictions on transfers to and from the fixed account.
    18. RiverSource Life of NY established Account 8 NY on September 
12, 1985 pursuant to the provisions of New York law. Account 8 NY meets 
the definition of ``separate account'' under the federal securities 
laws. Account 8 NY is registered with the Commission under the 1940 Act 
as a unit investment trust (File No. 811-5213). The assets of Account 8 
NY support certain Contracts that offer Substituted Portfolios as 
investment options (the ``Account 8 NY Contracts''), and interests in 
Account 8 NY offered through such Contracts have been registered under 
the 1933 Act on Form N-4.
    19. RiverSource Life of NY is the legal owner of the assets in 
Account 8 NY. The assets of Account 8 NY are not chargeable with 
liabilities arising out of any other RiverSource Life of NY business. 
Income, capital gains and/or capital losses, whether or not realized, 
from assets allocated to Account 8 NY are credited to or charged 
against the account without regard to the income, capital gains, and/or 
capital losses arising out of any other RiverSource Life of NY 
business. Account 8 NY is segmented into subaccounts, and certain 
subaccounts invest in the Substituted Portfolios.
    20. The majority of the Account 8 NY Contracts involved in the 
Substitution are no longer offered for sale, except RiverSource 
Succession Select Variable Life Insurance and RiverSource Variable Life 
Universal Life IV and RiverSource Variable Life Universal Life IV--
Estate Series Contracts. The subaccounts investing in the Substituted 
Portfolios are currently available for the allocation of additional 
purchase payments and transfer of contract value under the Account 8 NY 
Contracts for existing and new Contract owners, and will continue to be 
available to such Contract owners until the time the Substitutions 
occur.
    21. The terms and conditions, including charges and expenses, 
applicable to the Account 8 NY Contracts are described in the 
registration statements relating to such Contracts. Pursuant to the 
Account 8 NY Contracts, RiverSource Life of NY reserves the right to 
substitute shares of one portfolio for shares of another. In the 
prospectuses for the Account 8 NY Contracts, RiverSource Life of NY 
also reserves the right to substitute shares of one portfolio for 
shares of another.
    22. The terms of the Account 8 NY Contracts and the prospectuses 
for the

[[Page 75478]]

Account 8 NY Contracts also permit owners to transfer contract value 
among the subaccounts. Currently, subject to certain restrictions, 
owners may redistribute contract value among the accounts without 
charge at any time until annuity payouts begin, and once per contract 
year among the subaccounts after annuity payouts begin. RiverSource 
Life of NY does not assess a transfer charge. RiverSource Life of NY 
also has market timing policies and procedures that may operate to 
limit transfers. If the Account 8 NY Contract offers a fixed account, 
RiverSource Life of NY may impose restrictions on transfers to and from 
the fixed account.
    23. The proposed substitutions are as follows: (i) Class I shares 
of the American Century VP Value Fund of the American Century Variable 
Portfolios for shares of RiverSource VP--Diversified Equity Income Fund 
of the RiverSource Variable Series Trust; (ii) Class II Shares of the 
Pioneer Equity Income VCT Portfolio of the Pioneer Variable Contracts 
Trust for shares of RiverSource VP--Diversified Equity Income Fund of 
the RiverSource Variable Series Trust; (iii) Class IB Shares of the 
Putnam VT International New Opportunities Fund of the Putnam Variable 
Trust for Series II Shares of the AIM V.I. International Growth Fund of 
the AIM Variable Insurance Funds; (iv) Service Shares of the Dreyfus 
VIF International Value Portfolio of the Dreyfus Variable Investment 
Fund for Class B shares of the AllianceBernstein VPS International 
Value Portfolio of the AllianceBernstein Variable Products Series Fund; 
(v) Service Shares of the Lazard Retirement International Equity 
Portfolio of the Lazard Retirement Series for Class B shares of the 
AllianceBernstein VPS International Value Portfolio of the 
AllianceBernstein Variable Products Series Fund; (vi) Service Class 
shares of the MFS[supreg] Total Return Series of the MFS[supreg] 
Variable Insurance Trust for shares of RiverSource VP--Balanced Fund of 
the RiverSource Variable Series Trust; (vii) Class 1 shares of the 
FTVIPT Templeton Developing Markets Securities Fund of the Franklin 
Templeton Variable Insurance Products Trust for shares of Threadneedle 
VP--Emerging Markets Fund of the RiverSource Variable Series Trust; and 
(viii) Class 2 shares of the FTVIPT Templeton Foreign Securities Fund 
of the Franklin Templeton Variable Insurance Products Trust for Class 2 
shares of the Evergreen VA International Equity Fund of the Evergreen 
Variable Annuity Trust.
    24. The Applicants represent that each of the Replacement 
Portfolios has substantially similar investment objectives, principal 
investment strategies, and risk characteristics to those of its 
corresponding Substituted Portfolio as stated in their respective 
prospectuses and/or Statements of Additional Information (``SAI'') and 
as set out in the application.
    25. The Applicants represent that each of the Replacement 
Portfolios' total net operating expenses and aggregate investment 
management fees and 12b-1 fees, for the year ended December 31, 2007, 
expressed as an annual percentage of average daily net assets, are no 
higher than those of its corresponding Substituted Portfolio (except 
for the Threadneedle VP--Emerging Markets Fund, which has slightly 
higher total net operating expenses than the FTVIPT Templeton 
Developing Markets Securities Fund, Class 1), as set forth in the 
following chart:
BILLING CODE 8011-01-P

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[GRAPHIC] [TIFF OMITTED] TN11DE08.007

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[GRAPHIC] [TIFF OMITTED] TN11DE08.008

BILLING CODE 8011-01-P
    26. Applicants represent that the Substitutions proposed herein are 
part of an overall business goal of the Companies to make the Contracts 
more attractive to Contract owners by providing a diverse array of 
investment options that are neither redundant nor duplicative in terms 
of the investment types and styles of the mutual funds underlying such 
options. The Companies believe that a more concentrated and streamlined 
array of investment options could result in increased operational and 
administrative efficiencies and economies of scale for the Companies. 
The Companies also believe that Contracts that offer too many similar 
investment options may be unnecessarily confusing to Contract owners 
and may increase the Companies' costs of administering the Contracts.
    27. Applicants represent that the Companies chose the Replacement 
Portfolios with the goal of ensuring that Contract owners would be 
provided with similar investment options under their Contracts 
following the Substitutions, based on an analysis of investment 
objectives, strategies, risks, performance, fees and expenses.
    28. Applicants represent that for all but one Substitution, the 
expense ratio of the Replacement Portfolio is lower than that of the 
corresponding Substituted Portfolio. Applicants also represent that for 
a vast majority of the

[[Page 75482]]

Substitutions, the Replacement Portfolio is larger than or of a 
comparable size to the corresponding Substituted Portfolio. Applicants 
note that a high level of assets means various fund costs (such as 
legal, accounting, printing and trustee fees) are spread over a larger 
base, with each Contract owner potentially bearing a smaller portion of 
the cost than would be the case if the Replacement Portfolio were 
smaller in size. Applicants also note that for many of the Replacement 
Portfolios, assets will increase as a result of the Substitutions, in 
some cases significantly, and thus it is anticipated that with such an 
increase, operating expenses will decrease.
    29. Ultimately, given all of the factors discussed above, the 
Companies concluded that the Substituted Portfolios offered under the 
Contracts warranted replacement. Accordingly, the Applicants seek the 
Commission's approval under Section 26(c) to engage in the substitution 
transactions described below.
    30. The Companies will effect the Substitutions following the 
issuance of the requested order as follows. As of the effective date of 
the Substitutions (``Effective Date''), each Separate Account will 
either redeem shares of the applicable Substituted Portfolios in-kind 
or the Substituted Portfolios will liquidate portfolio securities as 
necessary and shares of the Replacement portfolio will be purchased 
with cash. In either event, the proceeds of such redemptions will then 
be used to purchase shares of the corresponding class of the 
Replacement Portfolio, with each subaccount of the applicable Separate 
Account investing the proceeds of its redemption from the Substituted 
Portfolios in the applicable class of the Replacement Portfolio.
    31. Redemption requests and purchase orders will be placed 
simultaneously so that contract values will remain fully invested at 
all times. All redemptions of shares of the Substituted Portfolios and 
purchases of shares of the Replacement Portfolio will be effected in 
accordance with Section 22(c) of the 1940 Act and Rule 22c-1 
thereunder.
    32. The Substitutions will take place at relative net asset value 
as of the Effective Date with no change in the amount of any Contract 
owner's contract value or death benefit or in the dollar value of his 
or her investments in any of the subaccounts. Contract owners will not 
incur any additional fees or charges as a result of the Substitutions, 
nor will their rights or the Companies' obligations under the Contracts 
be altered in any way, and the Substitutions will not change Contract 
owners' insurance benefits under the Contracts. All expenses incurred 
in connection with the Substitutions, including legal, accounting, 
transactional, and other fees and expenses, including brokerage 
commissions, will be paid by RiverSource Life or RiverSource Life of 
NY. In addition, the Substitutions will not impose any tax liability on 
Contract owners. The Substitutions will not cause the Contract fees and 
charges currently paid by existing Contract owners to be greater after 
the Substitutions than before the Substitutions. Neither RiverSource 
Life nor RiverSource Life of NY will exercise any right it may have 
under the Contracts to impose restrictions on transfers under the 
Contracts for a period of at least thirty (30) days following the 
Substitutions. The only exception to this would be restrictions that 
RiverSource Life or RiverSource Life of NY may impose to prevent or 
restrict ``market timing'' activities by Contract owners or their 
agents.
    33. The Companies represent that, with respect to Contracts 
outstanding on the Effective Date, the Companies will reimburse, on the 
last business day of each fiscal period (not to exceed a fiscal 
quarter), during the twenty-four months following the Effective Date, 
the subaccounts investing in each applicable Replacement Portfolio to 
the extent that the sum of the Replacement Portfolio's net operating 
expenses (taking into account any expense waiver or reimbursement) and 
the Separate Account expenses for such period exceed, on an annualized 
basis, the sum of the corresponding Substituted Portfolio's net 
operating expenses (taking into account any expense waiver or 
reimbursement) and the Separate Account expenses for the fiscal year 
ended December 31, 2007. In addition, for twenty-four months following 
the Effective Date, the Companies will not increase asset-based fees or 
charges for Contracts outstanding on the Effective Date.
    34. Applicants represent that the procedures to be implemented are 
sufficient to assure that each Contract owner's cash values immediately 
after the Substitutions shall be equal to the cash value immediately 
before the Substitutions.
    35. Applicants represent that under the Manager of Managers Order 
applicable to the RiverSource Funds, a vote of the shareholders is not 
necessary to change a subadviser of the applicable Replacement 
Portfolio, except for changes involving an affiliated subadviser. 
Notwithstanding, after the Effective Date of the Substitutions, the 
Applicants agree not to change the Replacement Portfolio's subadviser, 
add a new subadviser, or otherwise rely on the Manager of Managers 
Order without first obtaining shareholder approval of either the 
subadviser change or the Replacement Portfolio's continued ability to 
rely on the Manager of Managers Order.
    36. Applicants note that Contract owners were notified of the 
initial application by means of a prospectus supplement for each of the 
Contracts stating that the Applicants filed the initial application and 
seek approval for the Substitutions (``Pre-Substitution Notice''). The 
Pre-Substitution Notice set forth the anticipated Effective Date and 
advised Contract owners that contract values attributable to 
investments in the Substituted Portfolios will be transferred to the 
Replacement Portfolio, without charge (including sales charges or 
surrender charges) and without counting toward the number of transfers 
that may be permitted without charge, on the Effective Date. The Pre-
Substitution Notice stated that, from the date the initial application 
was filed with the Commission through the date thirty (30) days after 
the Substitutions, Contract owners may make one transfer of contract 
value from the subaccounts investing in the Substituted Portfolios 
(before the Substitutions) or the Replacement Portfolio (after the 
Substitutions) to one or more other subaccount(s) without charge 
(including sales charges or surrender charges) and without that 
transfer counting against their contractual transfer limitations.
    37. Applicants represent that all Contract owners will have 
received a copy of the most recent Replacement Portfolio prospectus 
prior to the Substitutions.
    38. Applicants represent that within five (5) days following the 
Substitutions, Contract owners affected by the Substitutions will be 
notified in writing that the Substitutions were carried out. This 
notice will restate the information set forth in the Pre-Substitution 
Notice.

Applicants' Legal Analysis

    1. Section 26(c) of the 1940 Act (formerly, Section 26(b)) 
prohibits any depositor or trustee of a unit investment trust that 
invests exclusively in the securities of a single issuer from 
substituting the securities of another issuer without the approval of 
the Commission. Section 26(c) provides that such approval shall be 
granted by order of the Commission, if the evidence establishes that 
the substitution is consistent with the protection of

[[Page 75483]]

investors and the purposes of the 1940 Act.
    2. Section 26(c) was intended to provide for Commission scrutiny of 
proposed substitutions which could, in effect, force shareholders 
dissatisfied with the substitute security to redeem their shares, 
thereby possibly incurring a loss of the sales load deducted from 
initial premium, an additional sales load upon reinvestment of the 
proceeds of redemption, or both. The section was designed to forestall 
the ability of a depositor to present holders of interest in a unit 
investment trust with situations in which a holder's only choice would 
be to continue an investment in an unsuitable underlying security, or 
to elect a costly and, in effect, forced redemption. For the reasons 
described below, the Applicants submit that the Substitutions meet the 
standards set forth in Section 26(c) and that, if implemented, the 
Substitutions would not raise any of the aforementioned concerns that 
Congress intended to address when the 1940 Act was amended to include 
this provision. In addition, the Applicants submit that the proposed 
Substitutions meet the standards that the Commission and its Staff have 
applied to substitutions that have been approved in the past.
    3. The replacement of the Substituted Portfolios with the 
Replacement Portfolio is consistent with the protection of Contract 
owners and the purposes fairly intended by the policy and provisions of 
the 1940 Act and, thus, meets the standards necessary to support an 
order pursuant to Section 26(c) of the 1940 Act.
    4. Although not always identical, the investment objectives and 
principal investment strategies of the Replacement Portfolio are 
substantially similar to those of the corresponding Substituted 
Portfolio.
    5. The total operating expenses, prior to expense waivers and 
reimbursements, of the applicable class of the Replacement Portfolios 
were lower than those of the corresponding Substituted Portfolio as a 
December 31, 2007, except for the Threadneedle VP--Emerging Markets 
Fund, which has slightly higher total net operating expenses than the 
FTVIPT Templeton Developing Markets Securities Fund, Class 1. For a 
two-year period following the date of the Substitutions the Companies 
will ensure that total net operating expenses of the applicable class 
of all Replacement Portfolios, together with Separate Account expenses, 
will not exceed, on an annualized basis, the total net operating 
expenses of the corresponding Substituted Portfolio, together with 
Separate Account expenses, as of December 31, 2007.
    6. Applicants request an order of the Commission pursuant to 
Section 26(c) of the 1940 Act approving the Substitutions. The 
Applicants submit that, for all the reasons stated above, the 
Substitutions are consistent with the protection of investors and the 
purposes fairly intended by the policy of the Contracts and provisions 
of the 1940 Act.
    7. The Section 17(b) Applicants also request that the Commission 
issue an order pursuant to Section 17(b) of the 1940 Act exempting them 
from Section 17(a) of the 1940 Act to the extent necessary to permit 
RiverSource Life or RiverSource Life of NY to carry out the 
Substitutions by redeeming shares issued by the Substituted Portfolios 
in-kind and using the distributed securities to purchase shares issued 
by the applicable Replacement Portfolios.
    8. Section 17(a)(l) and (a)(2) of the 1940 Act generally prohibit 
any affiliated person of a registered investment company, or any 
affiliated person of an affiliated person, from selling any security or 
other property to such registered investment company and from 
purchasing any security or other property from such registered 
investment company. As described below, RiverSource Life and 
RiverSource Life of NY anticipate that the Substitutions will be done 
(in whole or in part) by redeeming shares of the Substituted Portfolios 
in-kind rather than in cash and then using those assets to purchase 
shares of the Replacement Portfolio. Redemptions and purchases in-kind 
involve the purchase of property from a registered investment company 
and the sale of property to a registered investment company by 
RiverSource Life, RiverSource Life of NY, and RiverSource Funds, each 
arguably an affiliated person of those investment companies.
    9. Pursuant to Section 17(a)(1) of the 1940 Act, the Section 17(b) 
Applicants may be considered affiliates of one or more of the 
Replacement Portfolios involved in such Substitutions, based upon the 
definition of ``affiliated person'' under Section 2(a)(3) of the 1940 
Act. In addition to the Companies' affiliation with each Replacement 
Portfolio of the RiverSource Funds, the Companies, through their 
Separate Accounts, in the aggregate own 5% or more of the outstanding 
shares of the following Replacement Portfolios: AllianceBernstein VPS 
International Value Portfolio and Evergreen VA International Equity 
Fund. Therefore, arguably each Company is an affiliated person of these 
Replacement Portfolios. Because the Substitutions involving these 
Replacement Portfolios and the Replacement Portfolios of the 
RiverSource Funds may be effected, in whole or in part, by means of in-
kind redemptions and subsequent purchases of shares, and also by means 
of in-kind transactions, these Substitutions may be deemed to involve 
one or more purchases or sales of securities or property between 
affiliates.
    10. Section 17(b) of the 1940 Act provides that the Commission may, 
upon application, grant an order exempting any transaction from the 
prohibitions of Section 17(a) if the evidence establishes that: (1) The 
terms of the proposed transaction, including the consideration to be 
paid or received, are reasonable and fair and do not involve 
overreaching on the part of any person concerned; (2) the proposed 
transaction is consistent with the policy of each registered investment 
company concerned, as recited in its registration statement and records 
filed under the 1940 Act; and (3) the proposed transaction is 
consistent with the general purposes of the 1940 Act.
    11. Rule 17a-7 under the 1940 Act exempts from Section 17(a), 
subject to certain enumerated conditions, a purchase or sale 
transaction between registered investment companies or separate series 
of registered investment companies, which are affiliated persons, or 
affiliated persons of affiliated persons, of each other, between 
separate series of a registered investment company, or between a 
registered investment company or a separate series of a registered 
investment company and a person which is an affiliated person of such 
registered investment company (or affiliated person of such person) 
solely by reason of having a common investment adviser or investment 
advisers which are affiliated persons of each other, common directors, 
and/or common officers.
    12. The Section 17(b) Applicants submit that the terms of the 
Substitutions, including the consideration to be paid and received, as 
described in the Application, are reasonable and fair and do not 
involve overreaching on the part of any person concerned. The Section 
17(b) Applicants also submit that the Substitutions are consistent with 
the policies of the applicable fund companies and their portfolios, as 
recited in the current registration statements and reports filed by 
them under the 1940 Act. Finally, the Section 17(b) Applicants submit 
that the proposed Substitutions are consistent with the general 
purposes of the 1940 Act.

[[Page 75484]]

    13. RiverSource Life and RiverSource Life of NY assert that the 
terms under which the in-kind redemptions and purchases will be 
effected are reasonable and fair and do not involve overreaching on the 
part of any person principally because the applicable Substitutions 
will comply in substance with all but one of the principal conditions 
enumerated in Rule 17a-7. The use of in-kind transactions will not 
cause Contract owner interests to be diluted. The proposed transactions 
will take place at relative net asset value as of the Effective Date in 
conformity with the requirements of Section 22(c) of the 1940 Act and 
Rule 22c-1 thereunder with no change in the amount of any Contract 
owner's contract value or death benefit or in the dollar value of his 
or her investment in any of the Separate Accounts. Contract owners will 
not suffer any adverse tax consequences as a result of the 
Substitutions. Fees and charges under the Contracts will not increase 
because of the Substitutions.
    14. Even though the Section 17(b) Applicants may not rely on Rule 
17a-7 because they cannot meet all of its conditions, the Section 17(b) 
Applicants submit that the Rule's conditions outline the type of 
safeguards that result in transactions that are fair and reasonable to 
registered investment company participants and preclude overreaching in 
connection with an investment company by its affiliated persons. The 
Section 17(b) Applicants will carry out the proposed in-kind purchases 
in conformity with all of the conditions of Rule 17a-7 and the 
procedures adopted thereunder, except that the consideration paid for 
the securities being purchased or sold may not be entirely cash. 
Nevertheless, the circumstances surrounding the proposed Substitutions 
will be such as to offer the same degree of protection to the 
Replacement Portfolio from overreaching that Rule 17a-7 provides to it 
generally in connection with its purchase and sale of securities under 
that Rule in the ordinary course of its business.
    15. In particular, the proposed Substitutions will not be effected 
at a price that is disadvantageous to the Substituted Portfolios or the 
Replacement Portfolios. Although the Substitutions may not be entirely 
for cash, each will be effected based upon (1) the independent market 
price of the portfolio securities valued as specified in paragraph (b) 
of Rule 17a-7, and (2) the net asset value per share of each Portfolio 
involved valued in accordance with the procedures disclosed in its 
registration statement and as required by Rule 22c-1 under the 1940 
Act. Moreover, consistent with Rule 17a-7(d), no brokerage commissions, 
fees, or other remuneration will be paid in connection with the in-kind 
transactions. All in-kind redemptions from a Substituted Portfolio of 
which any of the Substitution Applicants is an affiliated person will 
be effected in accordance with the conditions set forth in the 
Commission's no-action letter issued to Signature Financial Group, Inc. 
(available December 28, 1999).
    16. Consistent with Section 17(b) and Rule 17a-7(c), any in-kind 
redemptions and purchases for purposes of the Substitutions will be 
transacted in a manner consistent with the investment objectives and 
policies of the applicable Substituted Portfolios and the Replacement 
Portfolios, as recited in their registration statements. The adviser or 
any subadviser to each Replacement Portfolio will review the securities 
holdings of the Substituted Portfolios to determine whether their 
portfolio holdings would be suitable investments for the corresponding 
Replacement Portfolio in the overall context of that Portfolio's 
investment objectives and policies and consistent with the management 
of that Portfolio. The adviser or any subadviser to each Replacement 
Portfolio will conduct its review of the Substituted Portfolios' 
securities holdings in the same manner that a board of directors would 
normally follow in accordance with Rule 17a-7. The adviser or any 
subadviser to each Replacement Portfolio will only accept those 
securities as consideration for its shares that it would have acquired 
in a cash transaction. The Section 17(b) Applicants state that 
securities to be paid out as redemption proceeds and subsequently 
contributed to the Replacement Portfolios to effect the contemplated 
in-kind purchases of shares will be valued based on the normal 
valuation procedures of the redeeming and purchasing Portfolios. The 
redeeming and purchasing values will be the same. If the adviser or any 
subadviser to any Replacement Portfolio declines to accept particular 
portfolio securities of the corresponding Substituted Portfolio for 
purchase in-kind of shares of that corresponding Portfolio, the 
applicable Substituted Portfolio will liquidate portfolio securities as 
necessary and shares of the corresponding Replacement Portfolio will be 
purchased with cash.
    17. Applicants represent that the Substitutions, as described 
herein, are consistent with the general purposes of the 1940 Act as 
stated in the Findings and Declaration of Policy in Section 1 of the 
1940 Act. The proposed transactions do not present any of the 
conditions or abuses that the 1940 Act was designed to prevent. 
Securities to be paid out as redemption proceeds and subsequently 
contributed to the Replacement Portfolio to effect the contemplated in-
kind purchases of shares will be valued based on the normal valuation 
procedures of the redeeming Substituted Portfolios and purchasing 
Replacement Portfolio. Therefore, there will be no change in value to 
any Contract owner as a result of the Substitutions. The Commission has 
granted relief to others based on similar facts.
    18. The Section 17(b) Applicants request an order of the Commission 
pursuant to Section 17(b) of the 1940 Act exempting them from Section 
17(a) of the 1940 Act to the extent necessary to permit the Companies 
to carry out certain of the Substitutions by redeeming shares issued by 
each applicable Substituted Portfolio in-kind and using the securities 
distributed as redemption proceeds to purchase shares issued by the 
applicable Replacement Portfolios. The Section 17(b) Applicants submit 
that, for all of the reasons stated above, the terms of the proposed 
in-kind redemptions and purchases, including the consideration to be 
paid or received, are reasonable and fair to Contract owners and do not 
involve overreaching on the part of any person; and furthermore, 
granting the relief required herein for the proposed Substitutions that 
may be effected by means of in-kind redemptions and purchases of shares 
is appropriate, in the public interest, and consistent with the 
policies of each Portfolio and the general purposes of the 1940 Act.

Applicants' Conditions

    For purposes of the approval sought pursuant to Section 26(c) of 
the 1940 Act, the Substitutions described in the application will not 
be completed unless all of the following conditions, and all other 
conditions and representations set forth in the Application, are met:
    1. The Commission shall have issued an order (i) approving the 
Substitutions under Section 26(c) of the 1940 Act as necessary to carry 
out the transactions described in the application; and (ii) exempting 
any in-kind redemptions and purchases from the provisions of Section 
17(a) of the 1940 Act as necessary to carry out the transactions 
described in the application.
    2. Each Contract owner will have been sent (i) prior to the 
Effective Date, a copy of the effective prospectus for the Replacement 
Portfolio, (ii) prior to the Effective Date, a Pre-Substitution Notice 
describing the terms of the Substitutions

[[Page 75485]]

and the rights of the Contract owners in connection with the 
Substitutions, and (iii) within five (5) days after the Substitutions 
occur, a notice informing Contract owners affected by the Substitutions 
that the Substitutions were carried out and restating the information 
set forth in the Pre-Substitution Notice.
    3. The Companies shall have satisfied themselves that (i) the 
Contracts allow the substitution of the Portfolios in the manner 
contemplated by the Substitutions and related transactions described 
herein, (ii) the transactions can be consummated as described in the 
application under applicable insurance laws, and (iii) any applicable 
regulatory requirements in each jurisdiction where the Contracts are 
qualified for sale have been complied with to the extent necessary to 
complete the transaction.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-29312 Filed 12-10-08; 8:45 am]

BILLING CODE 8011-01-P