[Federal Register Volume 77, Number 238 (Tuesday, December 11, 2012)]
[Notices]
[Pages 73700-73705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-29858]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-30292; File No. 812-14059]


Mutual of America Life Insurance Company, et al; Notice of 
Application

December 5, 2012.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

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

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APPLICANTS: Mutual of America Life Insurance Company (``Mutual of 
America''), Wilton Reassurance Life Company of New York (``Wilton,'' 
and, together with Mutual of America Life Insurance Company, the 
``Insurance Companies''), Mutual of America Separate Account No. 2 (the 
``Annuity Account''), Mutual of America Separate Account No. 3 (the 
``Life Account''), American Separate Account No. 2 (the ``American 
Annuity Account''), and American Separate Account No. 3 (the ``American 
Life Account,'' and together with the Annuity Account, the Life 
Account, and the American Annuity Account, the ``Separate Accounts''). 
The Insurance Companies and the Separate Accounts are referred to 
herein collectively as the ``Substitution Applicants.'' The Insurance 
Companies, the Separate Accounts, and Mutual of America Investment 
Corporation (``Investment Corporation'') are also collectively referred 
to as the ``Section 17 Applicants.''

SUMMARY OF APPLICATION: The Substitution Applicants seek an order 
pursuant to Section 26(c) of the 1940 Act, approving the substitution 
of shares of: (a) the Vanguard International Portfolio (``Replacement 
International Fund'') of the Vanguard Variable Insurance Fund 
(``Vanguard Fund'') for Class A Shares of the DWS International VIP 
Fund (``Replaced International Fund'') of the DWS Variable Series I 
(``DWS Fund''), and (b) the Mutual of America Bond Fund (``Replacement 
Bond Fund'') of Investment Corporation for Class A Shares of the DWS 
Bond VIP Fund (``Replaced Bond Fund'') of the DWS Fund, under certain 
variable life insurance and annuity contracts issued by the Companies 
(collectively, the ``Contracts''). The Replacement International Fund 
and the Replacement Bond Fund are sometimes referred to collectively as 
``Replacement Funds,'' and the Replaced International Fund and the 
Replaced Bond Fund are sometimes referred to collectively as ``Replaced 
Funds.'' The Section 17 Applicants seek an order pursuant to Section 
17(b) of the 1940 Act exempting them from Section 17(a) of the Act to 
the extent necessary to permit them to engage in certain in-kind 
transactions in connection with the substitution.

FILING DATE: The application was filed on July 17, 2012, and the 
amended and restated application was filed on November 21, 2012.

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 December 28, 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, SEC, 100 F Street NE., Washington, DC 20549-1090. 
Applicants: Mutual of America Life Insurance Company, Mutual of America 
Separate Account No. 2, Mutual of America Separate Account No. 3, 
Wilton Reassurance Life Company of New York, American Separate Account 
No. 2, American Separate Account No. 3, and Mutual of America 
Investment Corporation, all located at 320 Park Avenue, New York, New 
York 10022-68391.

FOR FURTHER INFORMATION CONTACT: Deborah D. Skeens, Senior Counsel, or 
Michael L. Kosoff, Branch Chief, Office of Insurance Products, Division 
of Investment Management, at (202) 551-6795.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or 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. The Insurance Companies, on their own behalf and on behalf of 
their respective separate accounts, propose to substitute Class A 
shares of the Replacement Funds for shares of the Replaced Funds held 
by the Separate Accounts to fund the Contracts.
    2. Mutual of America is the depositor and sponsor of the Annuity 
Account and the Life Account. Wilton is the depositor and sponsor of 
the American Annuity Account and the American Life Account.
    3. Each of the Annuity Account, the Life Account, the American 
Annuity Account, and the American Life Account is a ``separate 
account'' as defined by Rule 0-1(e) under the Act and each is 
registered under the Act as a unit investment trust for the purpose of 
funding the Contracts. Security interests under the Contracts have been 
registered under the Securities Act of 1933. The application sets forth 
the registration statement file numbers for the Contracts and the 
Separate Accounts.
    4. The DWS Fund and the Vanguard Fund are registered open-end 
management investment companies of the series type (File Number 002-
96461

[[Page 73701]]

and 033-32216, respectively). Investment Corporation is a registered 
open-end management investment company of the series type (File Number 
033-06486) which only sells its shares to the separate accounts of 
Mutual of America and Wilton that are used for their variable annuity 
and variable life insurance contracts, including the Replacement Bond 
Fund.
    5. The substitution will replace an investment option (i.e., the 
Replaced Bond Fund) managed by an entity that is not affiliated with 
the Substitution Applicants as of the date hereof (other than by way of 
certain of the Substitution Applicants owning more than 5% of the 
shares of the Replaced Funds) with an investment option (i.e., the 
Replacement Bond Fund) that is managed by an investment manager that is 
affiliated with Mutual of America. Neither Investment Corporation nor 
Replacement Bond Fund's investment adviser, Mutual of America Capital 
Management Corporation (``Capital Management'') is affiliated with 
Wilton or its separate account. Both the Replaced International Fund 
and the Replacement International Fund are managed by entities that are 
not affiliated with the Substitution Applicants as of the date hereof 
(other than by way of certain of the Substitution Applicants owning 
more than 5% of the shares of the Replacement Funds).
    6. The Contracts are flexible premium variable annuity and variable 
universal life insurance contracts. Under each of the Contracts (the 
proper form of which is provided to every Contract owner) as well as 
the prospectus for each Contract, the issuing Company reserves the 
right to substitute shares of one fund for shares of another fund 
managed by either the same investment adviser, or by a different 
investment adviser.
    7. Applicants represent that the Replacement International Fund has 
an investment objective virtually identical to that of the Replaced 
International Fund--the Replacement Fund seeks long-term capital 
appreciation and the Replaced Fund seeks long-term growth of capital. 
Additionally, the Applicants state that the principal investment 
strategies of each Fund are substantially similar. Both Funds primarily 
invest in the common stock of foreign companies (i.e., non-US domiciled 
companies) and are generally well diversified both with respect to 
geographic region and industry. Both may also invest in depositary 
receipts and convertible securities. Both Funds permit exposure to 
emerging markets and have historically allocated assets to this segment 
of the market. A comparison of the investing strategies, risks, and 
performance of the Replaced International Fund and the Replacement 
International Fund is included in the application. The following table 
compares the fees and expenses of the Replaced International Fund 
(Class A shares) and the Replacement International Fund (Class A 
shares) as of the year ended December 31, 2011 and the six months ended 
June 30, 2012. Neither the Replaced International Fund nor the 
Replacement International Fund is subject to a distribution plan or 
shareholder service plan adopted under Rule 12b-1 of the Act. Neither 
the Replaced International Fund nor the Replacement International Fund 
impose a redemption fee.

----------------------------------------------------------------------------------------------------------------
                                                    Replaced International Fund   Replacement International Fund
                                                 ---------------------------------------------------------------
                                                    DWS International VIP Fund      Vanguard International Fund
                                                 ---------------------------------------------------------------
                                                                    Six months                      Six months
                                                  Year ended 12/   ended  6/30/   Year ended 12/    ended 6/30/
                                                       31/11           2012            31/11           2012
                                                     (percent)       (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Advisory Fees...................................            0.79            0.79            0.46            0.46
Distribution/Service (12b-1) Fee................            0.00            0.00            0.00            0.00
Other Expenses..................................            0.21            0.22            0.05            0.05
                                                 ---------------------------------------------------------------
    Total Annual Fund Operating Expenses........            1.00            1.01            0.51            0.51
----------------------------------------------------------------------------------------------------------------
Less Contractual Fee Waivers and Expense                    0.00            0.00            0.00            0.00
 Reimbursements.................................
Net Annual Fund Operating Expenses..............            1.00            1.01            0.51            0.51
Portfolio Turnover Rate.........................          174              51              33              26
----------------------------------------------------------------------------------------------------------------

    8. The Applicants state that the Replacement Bond Fund has an 
investment objective similar to that of the Replaced Bond Fund. Both 
Funds have objectives that relate to current income as well as 
preservation of capital. While the Replaced Bond Fund also seeks to 
maximize total return, and invests for capital appreciation in addition 
to current income, its investment approach, security selection process 
and higher portfolio turnover rates have resulted in a more risky 
investment strategy than that of the Replacement Bond Fund (as further 
discussed below). Both Funds pursue their investment objectives by 
primarily investing, under normal market conditions, in publicly-
traded, investment-grade debt securities. Each invests in investment 
grade bonds issued by US corporations or by the US Government or its 
agencies, such as bonds, notes, debentures, zero coupon securities and 
mortgage-backed securities. Further, the Replacement Bond Fund and the 
Replaced Bond Fund both utilize the same benchmark, the Barclay's 
Capital U.S. Aggregate Bond Index, to measure their relative investment 
performance. A comparison of the investing strategies, risks, and 
performance of the Replaced Bond Fund and the Replacement Bond Fund is 
included in the application. The following table compares the fees and 
expenses of the Replaced Bond Fund (Class A shares) and the Replacement 
Bond Fund (Class A shares) as of the year ended December 31, 2011 and 
the six months ended June 30, 2012. Neither the Replaced Bond Fund nor 
the Replacement Bond Fund is subject to a distribution plan or 
shareholder service plan adopted under Rule 12b-1 of the Act. Neither 
the Replaced Bond Fund nor the Replacement Bond Fund impose a 
redemption fee.

[[Page 73702]]



----------------------------------------------------------------------------------------------------------------
                                                             Replaced Bond Fund          Replacement Bond Fund
                                                       ---------------------------------------------------------
                                                                DWS Bond Fund           Mutual of America Bond
                                                       ------------------------------            Fund
                                                                                     ---------------------------
                                                        Year ended 12/   Six months                  Six months
                                                            31/11       ended 6/30/    Year ended    ended 6/30/
                                                          (percent)         2012        12/31/11        2012
                                                                         (percent)      (percent)     (percent)
----------------------------------------------------------------------------------------------------------------
Advisory Fees.........................................     0.39           0.39         0.40         \1\ 0.40
Distribution/Service (12b-1) Fee......................     0.00           0.00         0.00          0.00
Other Expenses........................................     0.23           0.22         0.15          0.17
                                                       ---------------------------------------------------------
    Total Annual Fund Operating Expenses..............     0.62           0.61         0.55          0.57
----------------------------------------------------------------------------------------------------------------
Less Contractual Fee Waivers and Expense                   0.00           0.00         0.00          0.00
 Reimbursements.......................................
Net Annual Fund Operating Expenses....................     0.62           0.61         0.55          0.57
Portfolio Turnover....................................   219            144           30            16.97
----------------------------------------------------------------------------------------------------------------
\1\ Applicants represent that if an order of the Commission is granted pursuant to Section 26(c) of the Act
  approving the substitution described herein, then on or before the date of substitution, the investment
  adviser to the Replacement Bond Fund will amend its investment advisory contract to reduce its advisory fee by
  0.01% to equal 0.39% of average daily net assets for all shareholders of the fund.

    9. The Substitution Applicants state that the proposed substitution 
is part of the Companies' ongoing efforts to provide the Contracts with 
investment options that have: (1) A competitive fee structure relative 
to other funds in the same asset class peer group; (2) demonstrated the 
ability to achieve competitive long-term investment returns relative to 
other funds in the same asset class peer group; and (3) contributed to 
and enhanced the goal of offering an attractive array of investment 
options covering many various investment styles, objectives, and 
categories in the risk/return spectrum. The Substitution Applicants 
further state that substituting the Replacement Funds for the Replaced 
Funds will provide Contract owners with investment options that have 
not only virtually identical investment objectives and substantially 
similar principal investment strategies and principal investment risks 
to their respective Replaced Fund, but are, overall, less expensive 
relative to other funds in their respective asset classes, better 
positioned to achieve consistent long-term above-average investment 
performance, and have substantially greater potential for continued 
growth in assets under management. Substitution Applicants further 
state that following the substitution Contract owners will have 
reasonable continuity with respect to their investment expectations. 
For these reasons and the reasons discussed below, the Substitution 
Applicants believe that substituting the Replacement Funds for the 
Replaced Funds is appropriate and in the best interest of Contract 
owners.
    10. As shown in more detail in the application, the total operating 
expense ratios for the Replacement International Fund and Replacement 
Bond Fund are lower than the net expense ratio for Class A shares of, 
respectively, the Replaced International Fund and the Replaced Bond 
Fund. Substitution Applicants also state that the Replacement 
International Fund outperformed the Replaced International Fund 
significantly and consistently for the one-, five-, and ten-year 
periods ended June 30, 2012. Similarly, Substitution Applicants state 
that the Replacement Bond Fund outperformed the Replaced Bond Fund 
significantly and consistently for the one-, five-, and ten-year 
periods ended June 30, 2012. Applicants assert that the Replacement 
Funds are appropriate replacements for the Replaced Funds for each 
Contract, and that each Replacement Fund represents an investment 
option that is appropriate and suitable given the investment 
objectives, principal investment strategies, and principal investment 
risks of the corresponding Replaced Fund and that offers the 
opportunity for lower fees and expenses and higher long-term investment 
returns in the future. Moreover, Applicants further assert that the 
replacement of the Replacement Funds with the Replaced Funds is 
consistent with the protection of Contract owners and the purposes 
fairly intended by the policy and provisions of the Act and, thus, 
meets the standards necessary to support an order pursuant to Section 
26(c) of the Act.
    11. By supplements to the Contract prospectuses, the Companies have 
notified existing Contract owners (and will notify new Contract owners 
who purchase a Contract subsequent to the date of the supplement but 
prior to the date of substitution) of their intention to take the 
necessary actions, including seeking the order requested by this 
Application, to carry out the proposed substitution as described 
herein. The supplements advised Contract owners that the Companies 
intended to file an application to seek approval of the substitution, 
and that if the substitution is approved, any Contract value allocated 
to a subaccount investing in a Replaced Fund on the date of 
substitution would be automatically transferred to the subaccount 
investing in the corresponding Replacement Fund. In addition, the 
supplements disclosed that any Contract owner not wanting his or her 
entire Contract value in the Replaced Fund(s) to be automatically 
transferred to the respective Replacement Fund on the date of 
substitution should consider transferring the Contract value in the 
Replaced Fund(s) to other investment options available under the 
Contract or, subject to the provisions of the Employer's Plan or the 
applicable Contract, to another provider prior to the date of 
substitution. The supplements also disclosed to Contract owners that 
the Companies do not impose charges in connection with the transfer 
among or withdrawal from any of the investment options available under 
the Contract, nor do they impose restrictions on transfers (other than 
frequent transfer restrictions). Finally, the supplements disclosed 
that the Companies would bear all expenses related to the substitution, 
and that there would be no tax consequences for Contract owners as a 
result of the substitution. Within five days following the date of 
substitution, Contract owners affected by the substitution will be 
notified in writing that the substitution was carried out. This notice 
will restate the information set forth in the prospectus supplements 
described above. The current prospectus for each Replacement Fund will 
have been provided to all Contract owners prior to the date of 
substitution and all Contract

[[Page 73703]]

owners will have been given sufficient advance notice of the date on 
which the substitution will take effect.
    12. The proposed substitution will take place at relative net asset 
value 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.
    13. It is anticipated that the proposed substitution will occur on 
or about March 22, 2013. The Companies' separate accounts may carry out 
the proposed substitution by redeeming some or all shares of the 
Replaced Funds in-kind on a pro-rata basis, such that each Replacement 
Fund will receive an approximate proportionate share of every security 
position in the corresponding Replaced Fund's portfolio in accordance 
with the conditions set forth in the Commission's no-action letter 
issued to Signature Financial Group, Inc. (available December 28, 1999) 
(``Signature Letter''). The adviser(s) to each Replacement Fund will 
review the proportionate share of securities holdings of the 
corresponding Replaced Fund to determine whether its portfolio holdings 
would be suitable investments for the Replacement Fund in the overall 
context of that Fund's investment objectives and policies and 
consistent with the management of that Fund. If a Replacement Fund 
declines to accept particular securities of the corresponding Replaced 
Fund for the purchase of in-kind of shares of the Replacement Fund, 
then the Replaced Fund will liquidate those portfolio securities and 
shares of the Replacement Funds will be purchased with cash equal in 
value to the liquidated portfolio securities. In either event, the 
proceeds of such redemptions will be used to purchase shares of the 
Replacement Funds. 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 Replaced Funds 
and purchases of shares of the Replacement Funds will be effected in 
accordance with Section 22(c) of the Act and Rule 22c-1 thereunder.
    14. Contract owners will not incur any fees or charges as a result 
of the substitution, nor will their rights or the Companies' 
obligations under the Contracts be altered in any way, and the 
substitution will not change Contract owners' insurance benefits under 
the Contracts. All applicable expenses incurred in connection with the 
substitution, including brokerage commissions and legal, accounting, 
and other fees and expenses, will be paid by the Companies. In 
addition, the substitution will not impose any tax liability on 
Contract owners. The substitution will not cause the Contract fees and 
charges currently being paid by existing Contract owners to be greater 
after the substitution than before the substitution. Because the 
Contracts do not limit the number of transfers permitted among 
investment options (other than certain limitations to deter frequent 
trading activity), and do not impose (or reserve the right to impose) 
any charges or fees for transfers or withdrawals, Contract owners will 
be able to transfer Contract value from the subaccounts investing in 
the Replaced Funds (before the date of substitution) or the Replacement 
Funds (after the date of substitution) to other investment options 
without restriction. Certain Contract owners may also transfer their 
Contract value, subject to the provisions of their Employer's Plan or 
the applicable Contract, to a new provider without charge.
    15. With respect to the substitution involving the Replaced Bond 
Fund and the Replacement Bond Fund, for those who are Contract owners 
on the date of the proposed substitution, each Company will reimburse, 
on the last business day of each fiscal period (not to exceed a fiscal 
quarter) during the twenty-four months following the date of the 
proposed substitution, Contract owners investing in the Replacement 
Bond Fund to the extent that the sum of the Replacement Bond Fund's 
total annual fund operating expenses as expressed as a percentage of 
the average assets of the fund (after any applicable fee waiver and/or 
expense reimbursement) and subaccount expenses for such period exceed, 
on an annualized basis, the sum of the corresponding Replaced Bond 
Fund's total annual fund operating expenses (after any applicable fee 
waiver and/or expense reimbursement) and subaccount expenses for the 
fiscal year preceding the date of the proposed substitution. In 
addition, for twenty-four months following the proposed substitution, 
each Company will not increase Contract charges or asset-based fees of 
the subaccount investing in the Replacement Bond Fund for Contracts 
outstanding on the date of the proposed substitution.
    16. With respect to the substitution involving the Replaced 
International Fund and the Replacement International Fund, the 
Applicants represent that they will not receive, for three years from 
the date of the substitution, any direct or indirect benefits paid by 
the Replacement International Fund, its advisors or underwriters (or 
their affiliates), in connection with assets attributable to Contracts 
affected by the substitution, at a higher rate than Applicants have 
received from the corresponding Replaced International Fund, its 
advisors or underwriters (or their affiliates), including without 
limitation Rule 12b-1 fees, shareholder service, administration, or 
other service fees, revenue sharing, or other arrangements in 
connection with such assets. Applicants represent that the substitution 
involving the Replaced International Portfolio and the Replacement 
International Portfolio and the selection of the Replacement 
International Fund were not motivated by any financial consideration 
paid or to be paid by the Replacement International Fund, its advisors, 
underwriters, or their respective affiliates.
    17. Additionally, with respect to the Replacement Bond Fund, the 
Applicants represent that, if an order of the Commission is granted 
pursuant to Section 26(c) of the Act approving the substitution 
described herein, then on or before the date of substitution, Capital 
Management, the adviser to the Replacement Bond Fund, will amend its 
investment advisory contract to reduce its advisory fee by 0.01% to 
equal 0.39% of average daily net assets. In other words, on or before 
the date of substitution, the advisory fee for the Replacement Bond 
Fund will be equal to the advisory fee of the Replaced Bond Fund. 
Applicants further represent that, following this reduction, the 
advisory fee for the Replacement Bond Fund will not be increased 
without first obtaining shareholder approval.
    18. The Companies are also seeking approval of the proposed 
substitution from any state insurance regulators whose approval may be 
necessary or appropriate.

Legal Analysis and Conditions

Section 26(c) Relief

    1. The Substitution Applicants request that the Commission issue an 
order pursuant to Section 26(c) of the Act approving the proposed 
substitution. Section 26(c) of the Act requires the depositor of a 
registered unit investment trust holding the securities of a single 
issuer to obtain Commission approval before substituting the securities 
held by the trust.
    2. Applicants assert that the proposed substitution is not the type 
of substitution that Section 26(c) was designed to prevent. Unlike 
traditional unit investment trusts where a depositor

[[Page 73704]]

could only substitute an investment security in a manner which 
permanently affected all the investors in the trust, the Contracts 
provide each Contract owner with the right to exercise his or her own 
judgment and transfer Contract values into other subaccounts and the 
fixed account. Moreover, the Contracts will offer Contract owners the 
opportunity to transfer amounts out of the affected subaccounts into 
any of the remaining subaccounts without cost or limitation. In 
addition, Contract owners always have the right to change their 
allocations at any time without restrictions or charges of any sort. 
The proposed substitution, therefore, will not result in the type of 
costly forced redemption that Section 26(c) was designed to prevent. In 
addition, Contract owners have the right to transfer their Contract 
value, subject to the provisions of their Employer's Plan or the 
applicable Contract, to a new provider and the Companies will not 
impose a fee or charge for such transfer.
    3. The Substitution Applicants submit that the proposed 
substitution meets the standards set forth in Section 26(c) and that, 
if implemented, the substitution would not raise any of the concerns 
that Congress intended to address when the Act was amended to include 
this provision. In addition, the Applicants submit that the proposed 
substitution meets the standards that the Commission and its Staff have 
applied to substitutions that have been approved in the past.

Section 17(b) Relief

    1. The Section 17 Applicants request an order under Section 17(b) 
of the Act exempting them from the provisions of Section 17(a) to the 
extent necessary to permit the Companies to carry out the proposed 
substitution as described herein.
    2. Section 17(a)(1) of the Act, in relevant part, prohibits any 
affiliated person of a registered investment company, or any affiliated 
person of such person, acting as principal, from knowingly selling any 
security or other property to that company. Section 17(a)(2) of the Act 
generally prohibits the persons acting as principals, from knowingly 
purchasing any security or other property from the registered 
investment company.
    3. Shares held by an insurance company separate account are legally 
owned by the insurance company. Thus, because Investment Corporation 
sells its shares exclusively to the Companies' separate accounts, the 
Companies collectively own all of the shares of Investment Corporation, 
and separately Mutual of America owns at least 25% of the shares of the 
Replacement Bond Fund. Accordingly, Investment Corporation and its 
portfolios, including the Replacement Bond Fund, are arguably under the 
control of the Companies, as per Section 2(a)(9) (notwithstanding the 
fact that the Contract Owners are the beneficial owners of those shares 
held in the separate accounts). If Investment Corporation is under the 
control of the Companies, then each Company is an affiliated person of 
Investment Corporation and its portfolios, including the Replacement 
Bond Fund. If Investment Corporation and its portfolios are under the 
control of the Companies, then Investment Corporation and its 
respective affiliates are affiliated persons of the Companies. 
Moreover, Mutual of America owns of record more than 5% of the shares 
of the Replacement Bond Fund, and therefore Mutual of America is an 
affiliated person of Investment Corporation and the Replacement Bond 
Fund. Likewise, Investment Corporation and the Replacement Bond Fund 
are each an affiliated person of Mutual of America. Further, Mutual of 
America indirectly controls Capital Management, its wholly-owned 
indirect subsidiary, and Capital Management is therefore controlled by 
Mutual of America. Furthermore, because Capital Management, as the 
investment adviser to Investment Corporation, is an affiliated person 
of Investment Corporation, Mutual of America and Investment Corporation 
(and its portfolios) is each an affiliated person of an affiliated 
person of the other. Finally, Mutual of America owns of record more 
than 5% of the shares of the Replacement International Fund. Therefore 
Mutual of America is an affiliated person of the Replacement 
International Fund and the Replacement International Fund is an 
affiliated person of Mutual of America. Because the proposed 
substitution may be effected, in whole or in part, by means of in-kind 
redemptions and subsequent purchases of shares, the proposed 
substitution may be deemed to involve one or more purchases or sales of 
securities or property between affiliated persons. The proposed 
substitution may involve a transfer of portfolio securities by the 
Replaced Funds to the Companies; immediately thereafter, the Companies 
would purchase shares of the Replacement Funds with the portfolio 
securities received from the Replaced Funds. Accordingly, as the 
Companies and the Replacement Funds could be viewed as affiliated 
persons of one another, it is conceivable that this aspect of the 
proposed substitution could be viewed as being prohibited by Section 
17(a). The 17(a) Applicants have determined that it is prudent to seek 
relief from Section 17(a) in the context of this Application for the 
in-kind purchases and sales of the Replacement Funds' shares.
    4. The 17(a) Applicants submit that the terms of the proposed in-
kind purchases of shares of the Replacement Funds, 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 persons concerned. The 17(a) Applicants also submit 
that the proposed in-kind purchases will be consistent with the 
investment policies of the Vanguard Fund, the DWS Fund, and the 
Investment Corporation, and the Replaced and Replacement Funds, as 
recited in the current registration statements and reports filed by 
them under the Act. Finally, the 17(a) Applicants submit that the 
proposed substitution is consistent with the general purposes of the 
Act. The 17(a) Applicants assert that, to the extent that the in-kind 
purchases are deemed to involve principal transactions among affiliated 
persons, the procedures described below should be sufficient to assure 
that the terms of the proposed transactions are reasonable and fair to 
all Contract owners. The 17(a) Applicants maintain that the terms of 
the proposed in-kind purchase transactions, including the consideration 
to be paid and received by each fund involved, are reasonable, fair and 
do not involve overreaching on the part of any person principally 
because the transactions will conform with all but one of the 
conditions enumerated in Rule 17a-7. The proposed transactions will 
take place at relative net asset values as of the date of substitution 
in conformity with the requirements of Section 22(c) of the 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 
substitution. The fees and charges under the Contracts will not 
increase because of the substitution. Even though the 17(a) Applicants 
may not rely on Rule 17a-7, the 17(a) Applicants believe 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

[[Page 73705]]

with an investment company by its affiliated persons.
    5. The boards of the Replacement Funds have adopted procedures, as 
required by paragraph (e)(1) of Rule 17a-7, pursuant to which their 
series may purchase and sell securities to and from their affiliates. 
The 17(a) Applicants will carry out the proposed in-kind purchases in 
conformity with all of the conditions of Rule 17a-7 and the Replacement 
Funds' procedures adopted thereunder, except that the consideration 
paid for the securities being purchased or sold may not be entirely 
cash. The investment advisers of the Replacement Funds will examine any 
securities received from an in-kind redemption, and accept any 
securities that they would otherwise have purchased for cash for the 
respective portfolio to hold. The circumstances surrounding the 
proposed substitution will be such as to offer the Replacement Funds 
the same degree of protection from overreaching that Rule 17a-7 
provides to them generally in connection with their purchase and sale 
of securities under that Rule in the ordinary course of their business. 
In particular, the proposed transactions will not be effected at a 
price that is disadvantageous to the Replacement Funds. Although the 
transactions 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 Fund involved valued in accordance with 
the procedures disclosed in its registration statement and as required 
by Rule 22c-1 under the Act. Moreover, consistent with Rule 17a-7(d), 
no brokerage commissions, fees, or other cost or remuneration will be 
paid in connection with the proposed transactions, except for any 
brokerage commissions paid in connection with the liquidation of the 
securities that are not distributed as part of the in-kind redemption, 
which will be borne by the Companies and not by the Contract owners.
    6. Applicants state that, consistent with Section 17(b) and Rule 
17a-7(c), any in-kind redemptions and purchases for purposes of the 
proposed substitution will be transacted in a manner consistent with 
the investment objectives and policies of the Vanguard Fund, the DWS 
Fund, and the Investment Corporation, as recited in their registration 
statements. Any in-kind redemptions will be effected on a pro-rata 
basis, where each Replacement Fund will receive an approximate 
proportionate share of every security position in the corresponding 
Replaced Fund's portfolio in accordance with the Signature Letter. The 
adviser(s) to each Replacement Fund will review the proportionate share 
of securities holdings of the corresponding Replaced Fund to determine 
whether such holdings would be suitable investments for the Replacement 
Fund in the overall context of that Fund's investment objectives and 
policies and consistent with the management of that Fund. If the 
adviser declines to accept particular portfolio securities of the 
Replaced Fund for purchase in-kind of shares of the Replacement Fund, 
the Replaced Fund will liquidate those portfolio securities as 
necessary and shares of the Replacement Fund will be purchased with 
cash equal in value to the liquidated portfolio securities. In 
addition, the redeeming and purchasing values of such securities will 
be the same.

Conclusion

    For the reasons and upon the facts set forth above and in the 
application, the Substitution Applicants and the Section 17 Applicants 
believe that the requested orders meet the standards set forth in 
Section 26(c) of the Act and Section 17(b) of the Act, respectively, 
and should therefore, be granted.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29858 Filed 12-10-12; 8:45 am]
BILLING CODE 8011-01-P