[Federal Register Volume 82, Number 60 (Thursday, March 30, 2017)]
[Notices]
[Pages 15771-15774]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-06246]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32573; File No. 812-14489]


Transamerica Advisors Life Insurance Company, et al.

March 24, 2017.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice.

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    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'').


Applicants:  Transamerica Advisors Life Insurance Company (``TALIC'') 
and Transamerica Financial Life Insurance Company (``TFLIC'') (each a 
``Company'' and together, the ``Companies''), Merrill Lynch Life 
Variable Annuity Separate Account A (``Merrill Lynch A'') and ML of New 
York Variable Annuity Separate Account A (``ML of New York A'') (each, 
an ``Account'' and together, the ``Accounts''). The Companies and the 
Accounts are collectively referred to herein as the ``Applicants.''


Summary of Application:  Applicants seek an order pursuant to Section 
26(c) of the 1940 Act, approving the substitution of shares issued by 
certain series of Transamerica Series Trust (the ``Replacement Funds'') 
for shares of certain registered investment companies currently held by 
sub-accounts of the Accounts (the ``Existing Funds''), to support 
certain variable annuity contracts (collectively, the ``Contracts'') 
issued by the Companies.


Filing Date:  The application was filed on June 15, 2015, and was 
amended and restated on December 8, 2015; July 1, 2016; and November 
14, 2016.


Hearing or Notification of Hearing:  An order granting the requested 
relief 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 April 18, 2017 and should be accompanied by 
proof of service on the Applicants in the form of an affidavit or, for 
lawyers, a certificate of service. Pursuant to Rule 0-5 under the Act, 
hearing requests should state the nature of the writer's interest, any 
facts bearing upon the desirability of a hearing on the matter, 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 
Commission's Secretary.

ADDRESSES: Commission: Secretary, SEC, 100 F Street NE., Washington, DC 
20549-1090. Applicants: Alison C. Ryan, Associate General Counsel, 
Transamerica, 1150 South Olive Street, T-27-01, Los Angeles, CA 90015.

FOR FURTHER INFORMATION CONTACT:  Stephan N. Packs, Senior Counsel, at 
(202) 551-6853, or David J. Marcinkus, Branch Chief at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

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. TALIC is the depositor of Merrill Lynch A. TFLIC is the 
depositor of ML of New York A. Each Company is an indirect, wholly-
owned subsidiary of AEGON, N.V.
    2. Each Account is a ``separate account'' as defined by Rule 0-1(e) 
under the 1940 Act and each is

[[Page 15772]]

registered under the 1940 Act as a unit investment trust. Each Account 
is divided into sub-accounts, which reflect the investment performance 
of certain registered investment companies, including series of 
Transamerica Series Trust. The Accounts are administered and accounted 
for as part of the general business of the Companies. The application 
sets forth the registration statement file numbers for the security 
interests under the Contracts and the Accounts.
    3. The Contracts are individual variable annuity contracts. Each of 
the prospectuses for the Contracts discloses that the issuing Company 
reserves the right, subject to compliance with applicable law, to 
substitute shares of another registered open-end management investment 
company for shares of a registered open-end management investment 
company held by a sub-account of an Account.
    4. Transamerica Series Trust is an open-end management investment 
company of the series type that is registered with the Commission under 
the 1940 Act (File No. 811-04419).\1\ Shares of the series are 
registered under the Securities Act of 1933 (File No. 033-00507), and 
are sold to the separate accounts of life insurance companies to fund 
benefits under variable life policies or variable annuity contracts and 
to certain affiliated asset allocation funds.
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    \1\ Effective May 1, 2008, Transamerica Series Trust changed its 
name from AEGON/Transamerica Series Trust.
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    5. Transamerica Asset Management, Inc. (``TAM''), an investment 
adviser that is registered with the Commission, has overall 
responsibility for the management of each Replacement Fund. TAM 
delegates to a sub-adviser the responsibility for day-to-day management 
of the investments of each Replacement Fund, subject to TAM's 
oversight. TAM may, in the future, determine to provide the day to day 
management of any Replacement Fund without the use of a sub-adviser.
    6. Applicants propose, as set forth below, to substitute shares of 
the Replacement Funds for shares of the Existing Funds 
(``Substitutions'') to fund the Contracts:

------------------------------------------------------------------------
             Existing fund                       Replacement fund
------------------------------------------------------------------------
American Century Investments VP          Transamerica MFS International
 International Fund (Class I).            Equity VP (Initial Class).
Dreyfus Variable Investment Fund:        Transamerica WMC US Growth VP
 Appreciation Portfolio (Service          (Service Class).
 Shares).
Oppenheimer Capital Appreciation Fund/   Transamerica Jennison Growth VP
 VA (Service Shares).                     (Initial Class).
Oppenheimer Main Street Small Cap        Transamerica T. Rowe Price
 Fund[supreg]/VA (Service Shares).        Small Cap VP (Initial Class).
Wanger USA.............................  Transamerica T. Rowe Price
                                          Small Cap VP (Initial Class).
Columbia Variable Portfolio--Select      Transamerica T. Rowe Price
 Smaller-Cap Value Fund (Class 1).        Small Cap VP (Initial Class).
Pioneer Emerging Markets VCT Portfolio   Transamerica TS&W International
 (Class II Shares).                       Equity VP (Service Class).
Pioneer Fund VCT Portfolio (Class II     Transamerica JPMorgan Enhanced
 Shares).                                 Index VP (Initial Class).
------------------------------------------------------------------------

    7. The Applicants believe that the Replacement Funds have 
investment objectives, policies and risk profiles, as described in 
their prospectuses, that are substantially the same as, or sufficiently 
similar to, the corresponding Existing Funds to make those Replacement 
Funds appropriate candidates as substitutes. Applicants also state that 
the investment objectives and investment strategies of each Replacement 
Fund are similar to the corresponding Existing Fund, or each 
Replacement Fund's underlying portfolio construction and investment 
results are similar to those of the Existing Fund, and therefore the 
fundamental objectives, risk, and performance expectations of those 
Contract owners with interests in sub-accounts of the Existing Funds 
will continue to be met after the Substitutions.
    8. The investment objectives of each Existing Fund and its 
corresponding Replacement Fund are set out below. Additional 
information for each Existing Fund and Replacement Fund, including 
principal investment strategies, principal risks, and comparative 
performance history, can be found in the application.

------------------------------------------------------------------------
             Existing fund                       Replacement fund
------------------------------------------------------------------------
American Century Investments VP          Transamerica MFS International
 International Fund (Class I) seeks       Equity VP (Initial Class)
 capital growth.                          seeks capital growth.
Dreyfus Variable Investment Fund:        Transamerica WMC US Growth VP
 Appreciation Portfolio (Service          (Service Class) seeks to
 Shares) seeks long-term capital growth   maximize long-term growth.
 consistent with the preservation of
 capital. The fund's secondary goal is
 current income.
Oppenheimer Capital Appreciation Fund/   Transamerica Jennison Growth VP
 VA (Service Shares) seeks capital        (Initial Class) seeks long-
 appreciation.                            term growth of capital.
Oppenheimer Main Street Small Cap        Transamerica T. Rowe Price
 Fund[supreg]/VA (Service Shares) seeks   Small Cap VP (Initial Class)
 capital appreciation.                    seeks long-term growth of
                                          capital by investing primarily
                                          in common stocks of small
                                          growth companies.
Wanger USA seeks long-term capital
 appreciation.
Columbia Variable Portfolio--Select
 Smaller-Cap Value Fund (Class 1) seeks
 to provide shareholders with long-term
 capital growth.
Pioneer Emerging Markets VCT Portfolio   Transamerica TS&W International
 (Class II Shares) seeks long-term        Equity VP (Service Class)
 growth of capital.                       seeks maximum long-term total
                                          return, consistent with
                                          reasonable risk to principal,
                                          by investing in a diversified
                                          portfolio of common stocks of
                                          primarily non-U.S. issuers.
Pioneer Fund VCT Portfolio (Class II     Transamerica JPMorgan Enhanced
 Shares) seeks reasonable income and      Index VP (Initial Class) seeks
 capital growth.                          to earn a total return
                                          modestly in excess of the
                                          total return performance of
                                          the S&P 500[supreg] (including
                                          the reinvestment of dividends)
                                          while maintaining a volatility
                                          of return similar to the S&P
                                          500[supreg].
------------------------------------------------------------------------


[[Page 15773]]

    9. Applicants state that the Substitutions are designed to allow 
Contract Owners to continue their investment in similar or better 
investment options without interruption and at no additional cost to 
them. Contract owners with sub-account balances invested through the 
Separate Accounts in shares of the Replacement Funds will have the same 
or lower total expense ratios taking into account fund expenses 
(including Rule 12b-1 fees, if any). With respect to all of the 
proposed Substitutions, the combined management fee and Rule 12b-1 fees 
paid by the Replacement Fund are the same or lower than those of the 
corresponding Existing Fund. The application sets forth the fees and 
expenses of each Existing Fund and its corresponding Replacement Fund 
in greater detail.
    10. Applicants represent that as of the effective date of the 
Substitutions (``Effective Date'') shares of the Existing Funds will be 
redeemed for cash. The Companies, on behalf of each Existing Fund sub-
account of each relevant Account, will simultaneously place a 
redemption request with each Existing Fund and a purchase order with 
the corresponding Replacement Fund so that the purchase of Replacement 
Fund shares will be for the exact amount of the redemption proceeds. 
Thus, Contract values will remain fully invested at all times.
    11. The Substitutions will take place at relative net asset value 
(in accordance with Rule 22c-1 under the 1940 Act) with no change in 
the amount of any affected Contract owner's contract value, cash value, 
accumulation value, account value or death benefit or in dollar value 
of his or her investment in the applicable Accounts.\2\ No brokerage 
commissions or other fees will be paid by either the Existing Funds or 
the Replacement Funds or by affected Contract owners in connection with 
the Substitutions.
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    \2\ Applicants state that, because the Substitutions will occur 
at relative net asset value, and the fees and charges under the 
Contracts will not change as a result of the Substitutions, the 
benefits offered by the guarantees under the Contracts will be the 
same immediately before and after the Substitutions. Applicants also 
state that what effect the Substitutions may have on the value of 
the benefits offered by the Contract guarantees would depend, among 
other things, on the relative future performance of the Existing 
Funds and Replacement Funds, which Applicants cannot predict. 
Nevertheless, Applicants note that at the time of the Substitutions, 
the Contracts will offer a comparable variety of investment options 
with as broad a range of risk/return characteristics.
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    12. The affected Contract owners will not incur any 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. The 
Companies or their affiliates will pay all expenses and transaction 
costs of the Substitutions, including brokerage, legal, accounting, and 
other fees and expenses. The Substitutions will not cause the Contract 
fees and charges currently being paid by affected Contract owners to be 
greater after the Substitutions than before the Substitutions. 
Moreover, the Substitutions will not impose any tax liability on 
affected Contract owners.
    13. As described in the application, after notification of the 
Substitution and for 30 days after the Effective Date, affected 
Contract owners may reallocate the sub-account value of an Existing 
Fund to any other investment option available under their Contract 
without incurring any transfer charges.
    14. All Contract owners affected by the Substitutions will be 
notified of this application by means of supplements to the Contract 
prospectuses at least 30 days prior to the Effective Date. The notice 
will advise Contract owners that from the date of the notice until the 
Effective Date, owners are permitted to make one transfer of Contract 
value out of the Existing Fund sub-account to one or more other sub-
accounts without the transfer (or exchange) being treated as one of a 
limited number of transfers (or exchanges) permitted without a transfer 
charge. Among other information, the notice will inform affected 
Contract owners that the Companies will not exercise any rights 
reserved under any Contract to impose additional restrictions on 
transfers until at least 30 days after the Effective Date.
    15. If affected Contract owners reallocate account value during 
this 60 day period, there will be no charge for the reallocation of 
accumulated value from the Existing Fund sub-accounts and the 
reallocation will not count as a transfer when imposing any applicable 
restriction or limit under the Contract on transfers. Additionally, all 
affected Contract owners will be sent prospectuses of the applicable 
Replacement Funds at least 30 days before the Effective Date.
    16. Within five (5) business days after the Effective Date, 
affected Contract owners will be sent a written confirmation, which 
will include: (a) A confirmation that the Substitutions were carried 
out as previously notified; (b) a restatement of the information set 
forth in the pre-Substitution notice; and (c) values of the Contract 
owner's position in the (i) Existing Fund before the Substitution, and 
(ii) Replacement Fund after the Substitution.

Legal Analysis

    1. Applicants request that the Commission issue an order pursuant 
to Section 26(c) of the 1940 Act approving the Substitutions. Section 
26(c) 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. Section 26(c) 
requires the Commission to issue such an order if the evidence 
establishes that the substitution is consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of the 1940 Act.
    2. Applicants submit that the terms and conditions of the 
Substitutions meet the standards set forth in Section 26(c) and assert 
that the replacement of an Existing Fund with the corresponding 
Replacement Fund is consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the 1940 Act. 
As described in the application, for a period of two years following 
the Effective Date, the Companies or their affiliates will reimburse 
any Contract owner affected by the proposed Substitutions involving 
Replacement Funds and whose sub-account invests in the Replacement Fund 
to the extent a Replacement Fund's net annual operating expenses 
exceeds the net annual operating expenses of the corresponding Existing 
Fund. Applicants further assert that each Replacement Fund has similar 
investment objectives and investment strategies as the corresponding 
Existing Fund, or each Replacement Fund's underlying portfolio 
construction and investment results are similar to those of the 
corresponding Existing Fund. Accordingly, Applicants believe that the 
fundamental investment objectives, risk, and performance expectations 
of the affected Contract owners will continue to be met after the 
Substitutions.
    3. Applicants also maintain that it is in the best interests of the 
Contract owners to substitute the Replacement Fund for its 
corresponding Existing Fund. Applicants anticipate that the 
substitution of an Existing Fund with the corresponding Replacement 
Fund will result in a Contract that is administered and managed more 
efficiently, and one that is more competitive with other variable 
products. The rights of affected Contract owners and the obligations of 
the Companies under the Contracts will not be altered by the 
Substitutions. Affected Contract owners will not incur any additional 
tax liability or any additional

[[Page 15774]]

fees and expenses as a result of the Substitutions.
    4. Each of the prospectuses for the Contracts discloses that the 
issuing Company reserves the right, subject to compliance with 
applicable law, to substitute shares of another registered open-end 
management investment company for shares of an open-end management 
investment company held by a sub-account of an Account.
    5. Applicants also assert that none of the proposed Substitutions 
is of the type that Section 26(c) was designed to prevent. Unlike a 
traditional unit investment trust where a depositor 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 account values into other sub-accounts. Moreover, the 
Contracts will offer affected Contract owners the opportunity to 
transfer amounts out of the affected sub-accounts into any of the 
remaining sub-accounts without cost or other disadvantage. The 
Substitution, therefore, will not result in the type of costly forced 
redemptions that Section 26(c) was designed to prevent. Applicants also 
maintain that the Substitutions are unlike the type of substitutions 
which Section 26(c) was designed to prevent in that by purchasing a 
Contract, Contract owners select much more than a particular registered 
management open-end investment company in which to invest their account 
values. They also select the specific type of insurance coverage 
offered by the Companies under their Contracts as well as other rights 
and privileges set forth in the Contract.

Applicants' Conditions

    Applicants agree that any order of the Commission granting the 
requested relief will be subject to the following conditions:
    1. The proposed Substitutions will not be effected unless the 
Companies determine that: (a) The Contracts allow the substitution of 
shares of registered open-end investment companies in the manner 
contemplated by the application; (b) the Substitutions can be 
consummated as described in the application under applicable insurance 
laws; and (c) any regulatory requirements in each jurisdiction where 
the Contracts are qualified for sale have been complied with to the 
extent necessary to complete the Substitutions.
    2. The Companies or their affiliates will pay all expenses and 
transaction costs of the Substitutions, including legal and accounting 
expenses, any applicable brokerage expenses, and other fees and 
expenses. No fees or charges will be assessed to the Contract owners to 
effect the Substitutions.
    3. The proposed Substitutions will be effected at the relative net 
asset values of the respective shares in conformity with Section 22(c) 
of the 1940 Act and Rule 22c-1 thereunder without the imposition of any 
transfer or similar charges by Applicants. The Substitutions will be 
effected without change in the amount or value of any Contracts held by 
affected Contract owners.
    4. The proposed Substitutions will in no way alter the tax 
treatment of affected Contract owners in connection with their 
Contracts, and no tax liability will arise for affected Contract owners 
as a result of the Substitutions.
    5. The rights or obligations of the Companies under the Contracts 
of affected Contract owners will not be altered in any way.
    6. Affected Contract owners will be permitted to make at least one 
transfer of Contract value from the sub-account investing in the 
Existing Fund (before the Effective Date) or the Replacement Fund 
(after the Effective Date) to any other available investment option 
under the Contract without charge for a period beginning at least 30 
days before the Effective Date through at least 30 days following the 
Effective Date. Except as described in any market timing/short-term 
trading provisions of the relevant prospectus, the Company will not 
exercise any right it may have under the Contract to impose 
restrictions on transfers between the sub-accounts under the Contracts, 
including limitations on the future number of transfers, for a period 
beginning at least 30 days before the Effective Date through at least 
30 days following the Effective Date.
    7. All affected Contract owners will be notified, at least 30 days 
before the Effective Date about: (a) The intended substitution of 
Existing Funds with the Replacement Funds; (b) the intended Effective 
Date; and (c) information with respect to transfers as set forth in 
Condition 6 above. In addition, the Companies will deliver to all 
affected Contract owners, at least 30 days before the Effective Date, a 
prospectus for each applicable Replacement Fund.
    8. The Companies will deliver to each affected Contract owner 
within five (5) business days of the Effective Date a written 
confirmation which will include: (a) A confirmation that the 
Substitutions were carried out as previously notified; (b) a 
restatement of the information set forth in the pre-Substitution 
notice; and (c) values of the Contract owner's position in the (i) 
Existing Fund before the Substitution, and (ii) Replacement Fund after 
the Substitution.
    9. After the Effective Date, the Applicants agree not to change a 
Replacement Fund's sub-adviser without obtaining shareholder approval 
of either (a) the sub-adviser change or (b) the parties' continued 
ability to rely on their manager-of-managers exemptive order.
    10. For two years following the Effective Date the net annual 
expenses of each Replacement Fund that is a Transamerica Series Trust 
Fund will not exceed the net annual expenses of the corresponding 
Existing Fund as of the fund's most recent fiscal year. To achieve this 
limitation, the Replacement Fund's investment adviser will waive fees 
or reimburse the Replacement Fund in certain amounts to maintain 
expenses at or below the limit. Any adjustments will be made at least 
on a quarterly basis. In addition, the Insurance Companies will not 
increase the Contract fees and charges, including asset based charges 
such as mortality expense risk charges deducted from the sub-accounts 
that would otherwise be assessed under the terms of the Contracts for a 
period of at least two years following the Effective Date.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-06246 Filed 3-29-17; 8:45 am]
BILLING CODE 8011-01-P