As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

12/21/17  Voya Retirement Ins & Annuity Co  40-OIP                 2:1.5M                                   Var Annuity Acct C o… Co
          Separate Account B of Voya Insurance & Annuity Co
          Separate Account NY B of Reliastar Life Insurance Co of NY
          Variable Annuity Account B of Voya Retirement Ins & Annuity Co
          Variable Annuity Account I of Voya Retirement Ins & Annuity Co
          Separate Account Eq of Voya Insurance & Annuity Co
          Separate Account U of Voya Insurance & Annuity Co

Document/Exhibit                   Description                      Pages   Size 

 1: 40-OIP      2017 Substitution Application                       HTML    746K 
 2: 40-OIP      PDF of 2017 Substitution Application --              PDF    495K 
                          substitutionapplication2017                            

 

 

 

 

I - THE APPLICATION

     ReliaStar Life Insurance Company of New York, Voya Insurance and Annuity Company, and Voya Retirement Insurance and Annuity Company, (each a “Company” and together, the “Companies”), ReliaStar Life Insurance Company of New York Separate Account NY-B, Separate Account B of Voya Insurance and Annuity Company, Separate Account EQ of Voya Insurance and Annuity Company, Separate Account U of Voya Insurance and Annuity Company, Variable Annuity Account B of Voya Retirement Insurance and Annuity Company and Variable Annuity Account I of Voya Retirement Insurance and Annuity Company (each, an “Account” and together, the “Accounts”) hereby submit this Application for an order of the Securities and Exchange Commission (the “Commission”), pursuant to Section 26(c), formerly Section (b), of the Investment Company Act of 1940, as amended (the “1940 Act”). The Companies and the Accounts are collectively referred to herein as the “Applicants.”

     The Applicants seek an order from the Commission permitting the substitution of securities issued by certain registered investment companies held by the Accounts, which securities support certain in force variable annuity contracts (collectively, the “Contracts”) issued by the Companies (the “Substitutions”). More particularly, the Applicants propose to substitute shares of certain series of Voya Investors Trust and Voya Variable Portfolios, Inc. (the “Replacement Funds”) for shares of certain series of Voya Investors Trust and Voya Partners, Inc., registered investment companies currently held by subaccounts of the Accounts (the “Existing Funds”) as follows:

 

II - GENERAL DESCRIPTION OF THE APPLICANTS, THE FUNDS

AND THE CONTRACTS

A. The Companies. Each of the Companies is an indirect, wholly-owned subsidiary of Voya Financial, Inc. (“Voya^®”), which is publically traded on the New York Stock Exchange under the symbol “VOYA”.

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     1. ReliaStar Life Insurance Company of New York (“ReliaStar NY”). ReliaStar NY is a stock life insurance company which was incorporated under the laws of the State of New York in 1917. Through an April 1, 2002 merger, ReliaStar NY’s operations include the business of First Golden American Life Insurance Company of New York (“First Golden”). ReliaStar NY is principally engaged in the business of issuing life insurance and annuities.

     ReliaStar NY is the depositor of Separate Account NY-B, a separate account that is registered with the Commission as a unit investment trust.

     2. Voya Insurance and Annuity Company (“Voya Insurance”). Voya Insurance is an Iowa stock life insurance company which was originally organized in 1973 under the insurance laws of Minnesota. Prior to September 1, 2014, Voya Insurance was known as ING USA Annuity and Life Insurance Company. Prior to January 1, 2004, Voya Insurance was known as Golden American Life Insurance Company (“Golden”). Through January 1, 2004 mergers, Voya Insurance’s operations include the business of Equitable Life Insurance Company of Iowa (“Equitable Life”), United Life and Annuity Insurance Company (“United Life and Annuity”), and USG Annuity and Life Company. Voya Insurance is principally engaged in the business of issuing annuities.

     Voya Insurance is the depositor of Separate Account B, Separate Account EQ, and Separate Account U, separate accounts that are registered with the Commission as unit investment trusts.

     3. Voya Retirement Insurance and Annuity Company (“Voya Retirement”). Voya Retirement is a stock life insurance company organized under the laws of the State of Connecticut in 1976 as Forward Life Insurance Company. Prior to September 1, 2014, Voya Retirement was known as ING Life Insurance and Annuity Company. Through a December 31, 1976 merger, Voya Retirement’s operations include the business of Aetna Variable Annuity Life Insurance Company (formerly known as Participating Annuity Life Insurance Company). Prior to May 1, 2002, Voya Retirement was known as Aetna Life Insurance and Annuity Company (“Aetna”). Through a December 31, 2005 merger, Voya Retirement’s operations include the business of ING Insurance Company of America (“ING America”). Voya Retirement is principally engaged in the business of issuing annuities.

     Voya Retirement is the depositor of Variable Annuity Account B and Variable Annuity Account I, separate accounts that are registered with the Commission as unit investment trusts.

B. The Accounts. Each of the Accounts is a segregated asset account of the Company that is the depositor of such Account, and is registered under the 1940 Act as a unit investment trust. Each of the respective Accounts is used by the Company of which it is a part to support the Contracts that it issues. The following Accounts support Contracts that will be affected by the Substitutions.¹

1	Separate accounts that support variable annuity contracts that will not be affected by the Substitutions are not identified herein.

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1. ReliaStar Life Insurance Company of New York Separate Account NY-B

(“ReliaStar NY NY-B”). ReliaStar NY NY-B (File No. 811-07935) was established by First Golden in 1996 in accordance with the laws of the State of New York to support certain Contracts. Contracts described in the following registration statements will be affected by the Substitutions (File Nos. 333-85326, 333-85618, 333-115515, 333-139695 and 333-145826).

     2. Separate Account B of Voya Insurance and Annuity Company (“Voya Insurance B”). Voya Insurance B (File No. 811-05626) was established by Golden in 1988 in accordance with the laws of the State of Minnesota to support certain Contracts. Contracts described in the following registration statements will be affected by the Substitutions (File Nos. 033-23351, 033-23458, 033-59261, 333-28679, 333-28755, 333-28769, 333-30180, 333-33914, 333-57218, 333-63692, 333-66757, 333-70600, 333-90516, 333-101481, 333-133944 and 333-202174).

     3. Separate Account EQ of Voya Insurance and Annuity Company (“Voya Insurance EQ”). Voya Insurance EQ (formerly Equitable Life Insurance Company of Iowa Separate Account A) (File No. 811-08524) was established by Equitable Life in 1988 in accordance with the laws of the State of Iowa to support certain Contracts. Contracts described in the following registration statement will be affected by the Substitutions (File No. 333-111686).

     4. Separate Account U of Voya Insurance and Annuity Company (“Voya Insurance U”). Voya Insurance U (formerly United Life and Annuity Separate Account One) (File No. 811-9026) was originally established by United Life and Annuity in 1994 in accordance with the laws of the State of Louisiana to support certain Contracts. Contracts described in the following registration statements will be affected by the Substitutions (File Nos. 333-111684 and 333-111685).

5. Voya Retirement Insurance and Annuity Company Variable Annuity Account B

(“Voya Retirement B”). Voya Retirement B (File No. 811-02512) was established by Aetna in 1976 as a continuation of the separate account established in 1974 in accordance with the laws of the State of Arkansas by Aetna Variable Annuity Life Insurance Company to support certain Contracts. Contracts described in the following registration statements will be affected by the Substitutions (File Nos. 033-34370, 333-09515 and 333-56297).

6. Voya Retirement Insurance and Annuity Company Variable Annuity Account I

(“Voya Retirement I”). Voya Retirement I (File No. 811-08582) was established by Aetna Insurance Company of America, a subsidiary of Aetna, in 1994 in accordance with the laws of the State of Connecticut to support certain Contracts. Contracts described in the following registration statement will be affected by the Substitutions (File No. 333-130825).

     Applicants, as authorized by Rule 0-4 under the 1940 Act, incorporate by reference each of the above referenced files to the extent necessary to support and supplement the descriptions and representations set out in this Application.

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     Each Account is administered and accounted for as part of the general business of the Company of which it is a part. The assets of each Account attributable to the Contracts issued through it are owned by each Company but are held separately from all other assets of that Company for the benefit of the owners of, and persons entitled to benefits under such Contracts. Pursuant to applicable state insurance law and to the extent provided in the Contracts, such assets equal to the reserves and other Contract liabilities with respect to an Account are not chargeable with liabilities arising out of any other business of the Company that is the depositor of the Account. Income, if any, gains and losses, realized or unrealized, from each Account are credited to or charged against the assets of that Account without regard to other income, gains or losses of its Company or any of its other segregated asset accounts. Each Account is a “separate account” as defined by Rule 0-1(e) under the 1940 Act.

     Each Account is divided into subaccounts, each of which invests exclusively in shares of an Existing Fund or another registered open-end management investment company. Each registered open-end management investment company has its own distinct investment objective(s) and policies.

     Each of the prospectuses for the Contracts discloses that the issuing Company reserves the right, subject to Commission approval and 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 subaccount of an Account whenever the Company, in its judgment, determines that investment in the registered open-end management investment company no longer suits the purpose of the Contract.

C. The Existing Funds. The funds listed below are designated as Existing Funds to be replaced with a Replacement Fund as Part of the Substitutions described in this Application. More information about the Existing Funds’ fees and expenses, investment objective and policies and historical performance can be found in the Section IV B. below.

     1. VY Baron Growth Portfolio. The VY Baron Growth Portfolio is a series of the Voya Partners, Inc. (“Voya Partners”), a Maryland corporation registered under the 1940 Act as a registered open-end management investment company (File No. 811-08319) and registered under the 1933 Act on Form N-1A (File No. 333-32575), which was last updated in an effective amendment to the registration statement filed on April 26, 2017.² The VY Baron Growth Portfolio is currently offered by prospectus dated May 1, 2017.

     Voya Investments serves as the investment adviser for the VY Baron Growth Portfolio. Voya Investments delegates to a subadviser, BAMCO, Inc., a registered investment adviser and a subsidiary of Baron Capital Group, Inc., the responsibility for day-to-day management of the investments of the VY Baron Growth Portfolio, subject to the Voya Investment’s oversight.

2	Applicants, as authorized by Rule 0-4 under the 1940 Act, incorporate this file by reference to the extent necessary to support and supplement the descriptions and representations set out in this Application.

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     2. VY Columbia Contrarian Core Portfolio. The VY Columbia Contrarian Core Portfolio is a series of the Voya Partners, a Maryland corporation registered under the 1940 Act as a registered open-end management investment company (File No. 811-08319) and registered under the 1933 Act on Form N-1A (File No. 333-32575), which was last updated in an effective amendment to the registration statement filed on April 26, 2017.² The VY Columbia Contrarian Core Portfolio is currently offered by prospectus dated May 1, 2017.

     Voya Investments serves as the investment adviser for the VY Columbia Contrarian Core Portfolio. Voya Investments delegates to a subadviser, Columbia Management Investment Advisers, LLC, a registered investment adviser and a wholly-owned subsidiary of Ameriprise Financial, Inc., the responsibility for day-to-day management of the investments of the VY Columbia Contrarian Core Portfolio, subject to the Voya Investment’s oversight.

     3. VY Invesco Comstock Portfolio. The VY Invesco Comstock Portfolio is a series of the Voya Partners, a Maryland corporation registered under the 1940 Act as a registered open-end management investment company (File No. 811-08319) and registered under the 1933 Act on Form N-1A (File No. 333-32575), which was last updated in an effective amendment to the registration statement filed on April 26, 2017.³ The VY Invesco Comstock Portfolio is currently offered by prospectus dated May 1, 2017.

     Voya Investments serves as the investment adviser for the VY Invesco Comstock Portfolio. Voya Investments delegates to a subadviser, Invesco Advisers, Inc., a registered investment adviser and a direct subsidiary of Invesco Ltd., the responsibility for day-to-day management of the investments of the VY Invesco Comstock Portfolio, subject to the Voya Investment’s oversight.

     4. VY T. Rowe Price Equity Income Portfolio. The VY T. Rowe Price Equity Income Portfolio is a series of the Voya Investors Trust, a Massachusetts business trust registered under the 1940 Act as a registered open-end management investment company (File No. 811-05629) and registered under the 1933 Act on Form N-1A (File No. 333-23512), which was last updated in an effective amendment to the registration statement filed on April 25, 2017.³ The VY T. Rowe Price Equity Income Portfolio is currently offered by prospectus dated May 1, 2017.

     Voya Investments serves as the investment adviser for the VY T. Rowe Price Equity Income Portfolio. Voya Investments delegates to a subadviser, T. Rowe Price Associates, Inc., a registered investment adviser and a wholly-owned subsidiary of T. Rowe Price Group, Inc., the responsibility for day-to-day management of the investments of the VY T. Rowe Price Equity Income Portfolio, subject to the Voya Investment’s oversight.

     5. VY JPMorgan Small Cap Core Equity Portfolio. The VY JPMorgan Small Cap Core Equity Portfolio is a series of the Voya Investors Trust, a Massachusetts business trust registered under the 1940 Act as a registered open-end management investment company (File No. 811-05629) and registered under the 1933 Act on Form N-1A (File No. 333-23512), which was last updated in an effective amendment to the registration statement filed on April 25, 2017.³

3	Applicants, as authorized by Rule 0-4 under the 1940 Act, incorporate this file by reference to the extent necessary to support and supplement the descriptions and representations set out in this Application.

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The VY JPMorgan Small Cap Core Equity Portfolio is currently offered by prospectus dated May 1, 2017.

     Voya Investments serves as the investment adviser for the VY JPMorgan Small Cap Core Equity Portfolio. Voya Investments delegates to a subadviser, J. P. Morgan Investment Management Inc., a registered investment adviser and an indirect wholly-owned subsidiary of JPMorgan Chase & Co., the responsibility for day-to-day management of the investments of the VY JPMorgan Small Cap Core Equity Portfolio, subject to the Voya Investment’s oversight.

     6. VY T. Rowe Price Growth Equity Portfolio. The VY T. Rowe Price Growth Equity Portfolio is a series of the Voya Partners, a Maryland corporation registered under the 1940 Act as a registered open-end management investment company (File No. 811-08319) and registered under the 1933 Act on Form N-1A (File No. 333-32575), which was last updated in an effective amendment to the registration statement filed on April 26, 2017.³ The VY T. Rowe Price Growth Equity Portfolio is currently offered by prospectus dated May 1, 2017.

     Voya Investments serves as the investment adviser for the VY T. Rowe Price Growth Equity Portfolio. Voya Investments delegates to a subadviser, T. Rowe Price Associates, Inc., a registered investment adviser and a wholly-owned subsidiary of T. Rowe Price Group, Inc., the responsibility for day-to-day management of the investments of the VY T. Rowe Price Growth Equity Portfolio, subject to the Voya Investment’s oversight.

D. The Replacement Funds. The Replacement Funds are series of Voya Variable Portfolios, Inc. or Voya Investors Trust. More information about each Replacement Fund’s fees and expenses, investment objective and policies and historical performance can be found in the Section IV B. below.

     1. Voya Variable Portfolios, Inc. (“Voya Variable Portfolios”). Voya Variable Portfolios, formerly known as ING Variable Portfolios, Inc. and before that as Aetna Variable Portfolios, Inc., was organized as a Maryland Corporation in 1996. Voya Variable Portfolios is registered under the 1940 Act as an open-end management investment company (File No. 811-05173). It is a series registered open-end management investment company as defined by Rule 18f-2 under the 1940 Act, and a separate series of shares of beneficial interest is issued in connection with each series. Each series included in this substitution application is currently offered by prospectuses dated May 1, 2017. Voya Variable Portfolios has registered these shares under the Securities Act of 1933 ( the “1933 Act”) on Form N-1A (File No. 333-05173) which was last updated in an effective amendment to the registration statement filed on April 27, 2017.⁴

     Voya Investments, LLC (“Voya Investments”), an Arizona limited liability company and an SEC registered investment adviser, serves as the investment adviser to each series of the Voya Variable Portfolios that is a Replacement Fund. Voya Investments maintains its offices at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258. Effective May 1, 2014, Voya Investments changed its name from ING Investments, LLC in relation to the overall rebranding of Voya and its subsidiaries.

4	Applicants, as authorized by Rule 0-4 under the 1940 Act, incorporate this file by reference to the extent necessary to support and supplement the descriptions and representations set out in this Application.

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     Voya Investments, subject to the direction of Voya Variable Portfolios Board of Directors (the “Board of Directors”), has overall responsibility for the management of each series of the Voya Variable Portfolios that is a Replacement Fund. Voya Investments provides or oversees all investment advisory and portfolio management services for each series that is a Replacement Fund and assists in managing and supervising all aspects of the general day-to-day business activities and operations of each series that is a Replacement Fund, including custodial, transfer agency, dividend disbursing, accounting, auditing, compliance and related services. Voya Investments delegates to a subadviser, Voya Investment Management Co. LLC (“Voya Investment Management”), an affiliate, the responsibility for day-to-day management of the investments of each series that is a Replacement Fund, subject to the Voya Investment’s oversight. Voya Investments also recommends the appointment of additional or replacement sub-advisers to the Board of Directors.

     For its services, Voya Investments receives advisory fees from each series that is a Replacement Fund. This fee is calculated for each series based on a percentage of its average net assets. From this advisory fee Voya Investments pays the fees of all sub-advisers.

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The following series of Voya Variable Portfolios will be used as Replacement Funds:

1.	Voya Russell Mid Cap Growth Index Portfolio
2.	Voya Russell Large Cap Value Index Portfolio
3.	Voya Russell Small Cap Index Portfolio
4.	Voya Russell Large Cap Growth Index Portfolio
2.	Voya Investors Trust. Voya Investors Trust, formerly known as the ING

Investors Trust and before that as GCG Trust, was organized as a Massachusetts business trust on August 3, 1988. Voya Investors Trust is registered under the 1940 Act as an open-end management investment company (File No. 811-05629). It is a series investment company as defined by Rule 18f-2 under the 1940 Act, and a separate series of shares of beneficial interest is issued in connection with each series. Each series included in this substitution application is currently offered by prospectus dated May 1, 2017. ING Investors Trust has registered these shares under the 1933 Act on Form N-1A (File No. 033-23512) which was last updated in an amendment to the registration statement filed on April 25, 2017.⁵

     Voya Investments, subject to the direction of Voya Investors Trust Board of Trustees (the “Board of Trustees”), has overall responsibility for the management of each series of the Voya Investors Trust that is a Replacement Fund. Voya Investments provides or oversees all investment advisory and portfolio management services for each series that is a Replacement Fund and assists in managing and supervising all aspects of the general day-to-day business activities and operations of each series that is a Replacement Fund, including custodial, transfer agency, dividend disbursing, accounting, auditing, compliance and related services. Voya Investments delegates to a subadviser, Voya Investment Management Co. LLC, an affiliate, the responsibility for day-to-day management of the investments of each series that is a Replacement Fund, subject to the Voya Investment’s oversight. Voya Investments also recommends the appointment of additional or replacement sub-advisers to the Board of Trustees.

     For its services, Voya Investments receives advisory fees from each series that is a Replacement Fund. This fee is calculated for each series based on a percentage of its average net assets. From this advisory fee Voya Investments pays the fees of all sub-advisers.

The following series of Voya Investors Trust will be used as a Replacement Fund:

1.	Voya U.S. Stock Index Portfolio

5	Applicants, as authorized by Rule 0-4 under the 1940 Act, incorporate this file by reference to the extent necessary to support and supplement the descriptions and representations set out in this Application.

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E. The Contracts. The terms and conditions, including charges and expenses, applicable to each Contract are described in the registration statements filed with the SEC for each. ⁶ The Contracts are issued as individual variable annuity contracts. As each Contract is structured, owners of the Contract (each a “Contract Owner”) may select one or more of the investment options available under the Contract by allocating premiums and transferring account value to that subaccount of the relevant Account that corresponds to the investment option desired. Thereafter, the account value of the Contract Owner will vary based on the investment experience of the selected subaccount(s). Generally, a Contract Owner may, during the life of each Contract, make unlimited transfers of account values among the subaccounts available under the Contract, subject to any administrative and/or transfer fees applicable under the Contracts and any limits related to frequent or disruptive transfers.

III - DESCRIPTION OF THE PROPOSED SUBSTITUTIONS

AND THE RELIEF REQUESTED

A. Summary of the Proposed Substitutions. Subject to the approval of the Commission under Section 26(c) of the 1940 Act, Applicants propose, as set forth in the following chart, to substitute shares of the Replacement Funds for those of the Existing Funds and transfer cash to the Replacement Funds.

 

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     No brokerage commissions, fees or other remuneration will be paid by any Existing Fund, Replacement Fund or any Contract Owner in connection with the Substitutions.

     With respect to the Existing Funds, the Applicants have determined that the investment objectives and the investment policies of the Replacement Funds are similar to those of the corresponding Existing Funds, or each Replacement Fund’s underlying portfolio construction and investment results are similar to those of the Existing Fund, and therefore the fundamental investment objectives of those Contract Owners with interests in subaccounts of the Existing Funds (individually, an “Affected Contract Owner” and, collectively, “Affected Contract Owners”) will continue to be met after the Substitutions.

     Additionally, as is detailed below, the overall expenses of the Replacement Funds are less than those of the corresponding Existing Funds. Applicants believe that, because the Replacement Funds will be offered over a substantially larger asset base than the Existing Funds, there is a potential that Affected Contract Owners will, over time, realize the benefits from additional economies of scale with respect to the advisory fees.

B. Purposes of the Proposed Substitutions. The principal purposes of the Substitutions are as follows:

     1. Implement Business Plan. The Substitutions are another step in the Companies’ overall business plan to make the Contracts more efficient to administer and oversee. This plan involves providing funds available through the Contracts that meet certain pricing, performance, and risk guidelines. Regarding pricing and performance, each Replacement Fund has lower fees and expenses than the corresponding Existing Fund with generally comparable performance. Regarding risk, by increasing the number and percentage of index funds available through the Contracts (all of the Replacement Funds are index funds), and consequently the Contract value in those index funds, the Companies’ ability to manage the business and hedge for the risks associated with the guarantees provided through the Contracts is improved.

     2. Reduction of Costs. The replacement of the Existing Funds, which are actively managed by unaffiliated investment subadvisers, with the Replacement Funds which are each directly managed by an affiliated investment adviser using a passive management approach will allow the Companies to reduce costs by consolidating administration of the Replacement Funds with its other funds. Changes to an Existing Fund by the unaffiliated subadviser now come unexpectedly and may require significant attention by the Existing Fund’s Board of Directors or Board of Trustees, as applicable, and corresponding product amendments, regulatory filings and/or immediate notification to Contract Owners. Such changes can be reduced and better planned or anticipated for the Replacement Funds so that costs are reduced by including any changes with other routine regulatory filings and mailings regularly sent to Contract Owners.

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     3. Due Diligence. The Companies have an on-going fund due diligence process through which they select, evaluate and monitor the funds available through the Contracts. This process contributes to the Companies’ ability to have competitive products and services and assist their customers in meeting their financial goals. The Substitutions will allow the Companies to respond to expense, performance and management matters that they have identified in their due diligence review of the funds available through the Contracts.

C. Implementation. Applicants will affect the Substitutions as soon as practicable following the issuance of the requested order. 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 subaccount 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. The proceeds of such redemptions will then be used to purchase the appropriate number of shares of the applicable Replacement Fund.

     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. No brokerage commissions, fees or other remuneration will be paid by either the Existing Funds or the Replacement Funds or by Affected Contract Owners in connection with the Substitutions. The transaction comprising the Substitutions will be consistent with the policies of each registered open-end management investment company involved and with the general purposes of the 1940 Act.

     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 legal and accounting expenses, any applicable brokerage expenses, and other fees and expenses. In addition, the Substitutions will not impose any tax liability on Affected Contract Owners. 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. Also, as described more fully below, after notification of the Substitutions and for 30 days after the Effective Date, Affected Contract Owners may reallocate the subaccount value of an Existing Fund to any other investment option available under their Contract without incurring any administrative costs or allocation (transfer) charges.

     All Affected Contract Owners will be notified of this Application by means of supplements to the Contract prospectuses shortly after the date the Application is first filed with the Commission. Among other information regarding the Substitutions, the supplements will inform Affected Contract Owners that beginning on the date of the supplements the Companies will not exercise any rights reserved by them under the Contracts to impose restrictions or fees on transfers from an Existing Fund (other than restrictions related to frequent or disruptive transfers) until at least 30 days after the Effective Date of the Substitutions. Following the date the order requested by this Application is issued, but at least 30 days before the Effective Date,

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Affected Contract Owners will receive a second supplement to the Contract prospectuses setting forth the intended Substitution of Existing Funds with Replacement Funds, the intended Effective Date of the Substitutions and advising Affected Contract Owners of their right, if they so choose, at any time during the period beginning 30 days before the Effective Date through at least 30 days following the Effective Date, to reallocate or withdraw accumulated value in the Existing Fund subaccounts under their Contracts or otherwise terminate their interest therein in accordance with the terms and conditions of their Contracts. 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 subaccounts and the reallocation will not count as a transfer when imposing any applicable restriction or limit under the Contract on transfers. The Companies will not exercise any right they may have under the Contracts to impose additional restrictions or fees on transfers from an Existing Fund under the Contracts (other than restrictions related to frequent or disruptive transfers) for a period beginning at least 30 days before the Effective Date through at least 30 days following the Effective Date of the Substitutions. Additionally, all Affected Contract Owners will be sent prospectuses of the applicable Replacement Funds at least 30 days before the Effective Date of the Substitutions.

     Within five (5) business days after the Effective Date, Affected Contract Owners will be sent a written confirmation (“Post-Substitution Confirmation”) indicating that shares of each applicable Existing Fund have been redeemed and that the shares of the corresponding Replacement Fund have been substituted. The Post-Substitution Confirmation will show how the allocation of the Contract Owner’s account value before and immediately following the Substitutions have changed as a result of the Substitutions and detail the transactions effected on behalf of the respective Affected Contract Owner because of the Substitutions.

D. Relief Requested. Applicants request that the Commission issue an order pursuant to Section 26(c) of the 1940 Act approving the Substitutions.

IV - APPLICANTS’ ANALYSIS IN SUPPORT OF REQUEST FOR AN ORDER PURSUANT TO SECTION 26(c) OF THE 1940 ACT

A. Relevant Statutory Provisions. Section 26(c) of the 1940 Act 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 investors and the purposes fairly intended by the policy and provisions of the 1940 Act.

     Section 26(c) was added to the 1940 Act by the Investment Company Amendments Act of 1970 then as Section 26(b). Prior to enactment of the 1970 amendments, a depositor of a unit investment trust could substitute new securities for those held by the trust by notifying the trust’s security holders of the substitution within five days of the substitution. In 1966, the Commission, concerned with the high sales charges then common to most unit investment trusts and the disadvantageous position in which such charges placed investors who did not want to

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remain invested in the substituted fund,⁷ recommended that Section 26 be amended to require that a proposed substitution of the underlying investments of a trust receive prior Commission approval. ⁸

     Congress responded to the Commission’s concerns by enacting Section 26(b) to require that the Commission approve all substitutions by the depositor of investments held by unit investment trusts. The Senate Report on the bill explained the purpose of the amendment as follows:

The proposed amendment recognizes that in case of the unit investment trust holding the securities of a single issuer notification to shareholders does not provide adequate protection since the only relief available to shareholders, if dissatisfied, would be to redeem their shares. A shareholder who redeems and reinvests the proceeds in another unit investment trust or in an open-end company would under most circumstances be subject to a new sales load. The proposed amendment would close this gap in shareholder protection by providing for Commission approval of the substitution. The Commission would be required to issue an order approving the substitution if it finds the substitution consistent with the protection of investors and provisions of the 1940 Act. ⁹

The substitution of shares held by each Account, as described above, appears to involve a

substitution of securities within the meaning of Section 26(c) of the 1940 Act. ¹⁰ Applicants assert that the terms and conditions of the Substitutions meet the standards set forth in Section 26(c) and 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. Applicants generally submit that the Substitutions meet the standards that the Commission and its staff have applied to similar substitutions that have been approved in the past. ¹¹ Applicants therefore request an order from the Commission pursuant to Section 26(c) approving the Substitutions.

7	In the years leading up to its 1966 recommendation, the Commission took the position that the substitution of portfolio securities of a unit investment trust constituted an offer of exchange under Section 11 of the 1940 Act requiring prior Commission approval. The Commission proposed Section 26(b) in order to specifically address substitutions by unit investment trusts that previously had been scrutinized under Section 11 of the 1940 Act.
	See House Committee Interstate and Foreign Commerce, Report on the Securities and Exchange Commission on Public Policy Implications of Investment Company Growth, H.R. Rep. No. 2337, 89th Cong., 2d Sess. 337 (1966).
8	See id.
9	S. Rep. No. 184, 91st Cong. 1st Sess. 41 (1969), reprinted in 1970 U.S. Code Cong. & Admin. News 4897, 4936 (1970).
10	While Section 26(b), by its terms, applies only to a unit investment trust holding the securities of one issuer, the Commission has interpreted Section 26(b) to apply to “a substitution of securities in any subaccount of a registered separate account.” Adoption of Permanent Exemptions from Certain Provisions of the Investment Company Act of 1940 for Registered Separate Accounts and Other Persons, Investment Company Act Rel. No.
	12678 (Sept. 21, 1982) (emphasis added).
11	See, e.g. Lincoln National Life Company, et al., (File No. 812-14063), Investment Company Act Release No. 30517 (May 14, 2013)(Order); AXA Equitable Life Insurance Company, et al., (File No. 812-14036), Investment Company Act Release No. 30405 (February 26, 2013)(Order); New York Life Insurance and Annuity Corporation, et al., (File No. 812-13903), Investment Company Act Release No. 29947 (February 14, 2012)(Order); Allianz Life Insurance Company of North America, et al., (File No. 812-13821), Investment Company Act Release No. 29716 (July 6, 2011)(Order); AXA Equitable Life Insurance Company, et al., (File No. 812-13686), Investment Company Act Release No. 29372 (July 29, 2010)(Order); Nationwide Life

15

 

B. Comparison of Fees and Expenses, Investment Objectives, Strategies and Risks, Expense Ratios and Total Return. At the time of the Substitutions the overall fees and expenses of each Replacement Fund will be less than those assessed by the corresponding Existing Fund. ¹² For each substitution, the share class of the Replacement Fund will be the same as the share class of the Existing Fund, except for those Contracts that already offer a cheaper share class of the Replacement Fund, the Substitutions will be into the cheaper share class rather than the same share class.

     Furthermore, each Replacement Fund has investment objectives and investment strategies that are similar to those of 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, the Applicants believe that the fundamental investment objectives of the Affected Contract Owners will continue to be met after the Substitutions.

Comparative information regarding fees and expenses (including management fee breakpoints),¹³ investment objectives and strategies, expense ratios and total return for the proposed Substitutions is as follows.

Insurance Company, et al., (File No. 812-13495), Investment Company Act Release No 28815 (July 8, 2009)(Order); Riversource Life Insurance Company, et al., (File No. 812-13492), Investment Company Act Release No. 28575 (December 30, 2008)(Order); ING USA Annuity and Life Insurance Company, et al., (File No. 812-13466), Investment Company Act Release No. 28285 (May 23, 2008) (Order); ING Life Insurance and Annuity Company, et al., (File No. 812-13361), Investment Company Act Release No. 27885 (July 16, 2007) (Order); ING Life Insurance and Annuity Company, et al., (File No. 812-13260), Investment Company Act Release No. 27445 (August 15, 2006) (Order); ING USA Annuity and Life Insurance Company, et al., (File No. 812-13148), Investment Company Act Release No. 27052 (August 30, 2005) (Order); ING Life Insurance and Annuity Company, et al., (File No. 812-13101), Investment Company Act Release No. 26711 (December 20, 2004) (Order); Security Life of Denver Insurance Company, et al., (File No. 812-11010), Investment Company Act Release No. 23291 (June 29, 1998) (Order).

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For two years following the Effective Date of the Substitutions the net annual expenses of each Replacement Fund will not exceed the net annual expenses of the corresponding Existing Fund as of that 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 Companies will not increase the Contract fees and charges including asset based charges such as mortality expense risk charges deducted from the subaccounts that would otherwise be assessed under the terms of the Contracts for a period of at least two years following the Effective Date of the Substitutions.

13

The tables show the operating expenses for the Replacement Fund and the Existing Fund as a ratio of expenses to average daily net assets. Unless otherwise noted, the fees and expenses of the Replacement Fund and the Existing Fund are based on net assets as of June 30, 2017.

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     1. Voya Russell Mid Cap Growth Index Portfolio for the VY Baron Growth Portfolio.

     a. Fees and Expenses. The comparative fees and expenses for each fund in this proposed substitution as of the most recently published shareholder report dated June 30, 2017, are as follows:

 

     b. Breakpoint Information. The comparative management fee breakpoint information for each fund in this proposed substitution is as follows:

 

 

17

 

     c. Investment Objectives, Strategies and Risks. A comparison of the investment objectives, strategies and risks from the prospectus of each fund in this proposed substitution is as follows:

 

Principal Investment Strategies – Principal Investment Strategies –

The Portfolio invests for the long term primarily Under normal market conditions, the Portfolio in equity securities in the form of common stock invests at least 80% of its net assets (plus of small-sized growth companies. The Sub- borrowings for investment purposes) in equity Adviser (“Sub-Adviser”) defines small-sized securities of companies, which are at the time of companies as those, at the time of purchase, with purchase, included in the Index; convertible market capitalizations up to the largest market securities that are convertible into stocks cap stock in the Russell 2000^® Growth Index at included in the Index; other derivatives whose reconstitution, or companies with market economic returns are, by design, closely capitalizations up to $2.5 billion, whichever is equivalent to the returns of the Index or its larger. The Portfolio will not sell positions just components; and exchange-traded funds that because their market values have increased. track the index. The Portfolio will provide Because of its long-term approach, the Portfolio shareholders with at least 60 days’ prior notice could have a significant percentage of its assets of any change in this investment policy. Under invested in securities that have appreciated normal market conditions, the Portfolio invests beyond their market capitalizations at the time of all or substantially all of its assets in these the Portfolio’s investment. securities.

The Portfolio may invest up to 20% of its assets The Portfolio currently invests principally in in foreign securities, including American common stocks and employs a “passive Depositary Receipts. The Portfolio may also management” approach designed to track the invest in real estate-related securities, including performance of the Index. real estate investment trusts.

The Portfolio may invest in other investment The Portfolio may invest in other investment companies, including exchange-traded funds, to companies to the extent permitted under the the extent permitted under the Investment Investment Company Act of 1940, as amended, Company Act of 1940, as amended, and the and the rules, regulations, and exemptive orders rules, regulations, and exemptive orders thereunder (“1940 Act”). thereunder (“1940 Act”).

The Sub-Adviser seeks to invest in businesses it The Index is an unmanaged index that measures believes have significant opportunities for the performance of the mid-cap growth segment

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growth, sustainable competitive advantages, of the U.S. equity universe. The Index includes strong, visionary management, and an attractive those Russell Midcap^® Index companies with valuation. The Portfolio purchases stocks that higher price-to-book ratios and higher forecasted the Sub-Adviser believes are undervalued growth values. The market capitalization of relative to their businesses’ long-term growth companies within the Index will change with prospects, future cash flows and asset values. market conditions. The market capitalization of The Sub-Adviser seeks to invest in businesses companies in the Index as of December 31, 2016 before their long-term growth prospects are ranged from $641 million to 57.5 billion. As of appreciated by other investors. The Portfolio February 28, 2017, portions of the Index were may make significant investments in companies focused in the consumer discretionary sector, the in which the Sub-Adviser has great conviction. healthcare sector, the information technology sector, and the industrials sector.

The Sub-Adviser may sell securities for a variety of reasons, such as to secure gains, limit losses, The Portfolio may not always hold all of the or redeploy assets into opportunities believed to same securities as the Index. The Portfolio may be more promising, among others. also invest in stock index futures as a substitute for the sale or purchase of securities in the Index The Portfolio may lend portfolio securities on a and to provide equity exposure to the Portfolio’s short-term or long-term basis, up to 33S% of its cash position. Although the Portfolio attempts to total assets. track, as closely as possible, the performance of the Index, the Portfolio does not always perform exactly like the Index. Unlike the Index, the Portfolio has operating expenses and transaction costs and therefore has a performance disadvantage versus the Index.

The sub-adviser (“Sub-Adviser”) may sell a
security when the security’s percentage
weighting in the Index is reduced, when the
security is removed from the Index, or for other
reasons.

The Portfolio may lend portfolio securities on a
short-term or long-term basis, up to 33S% of its
total assets.

Principal Risks – Principal Risks –

You could lose money on an investment in the You could lose money on an investment in the Portfolio. Any of the following risks, among Portfolio. Any of the following risks, among others, could affect Portfolio performance or others, could affect Portfolio performance or cause the Portfolio to lose money or to cause the Portfolio to lose money or to underperform market averages of other funds. underperform market averages of other funds.

Company: The price of a company’s stock Company: The price of a company’s stock could decline or underperform for many reasons could decline or underperform for many reasons including, among others, poor management, including, among others, poor management, financial problems, reduced demand for financial problems, reduced demand for company goods or services, regulatory fines and company goods or services, regulatory fines and judgments, or business challenges. If a company judgments, or business challenges. If a company

19

 

 

20

 

those of the Portfolio; as a result, an investment those of the Portfolio; as a result, an investment in the other investment companies may be in the other investment companies may be subject to additional or different risks than those subject to additional or different risks than those to which the Portfolio is typically subject. to which the Portfolio is typically subject.

Liquidity: If a security is illiquid, the Portfolio Liquidity: If a security is illiquid, the Portfolio might be unable to sell the security at a time might be unable to sell the security at a time when the Portfolio’s manager might wish to sell, when the Portfolio’s manager might wish to sell, or at all. Further, the lack of an established or at all. Further, the lack of an established secondary market may make it more difficult to secondary market may make it more difficult to value illiquid securities, exposing the Portfolio value illiquid securities, exposing the Portfolio to the risk that the price at which it sells illiquid to the risk that the price at which it sells illiquid securities will be less than the price at which securities will be less than the price at which they were valued when held by the Portfolio. they were valued when held by the Portfolio. The prices of illiquid securities may be more The prices of illiquid securities may be more volatile than more liquid investments. The risks volatile than more liquid investments. The risks associated with illiquid securities may be greater associated with illiquid securities may be greater in times of financial stress. The Portfolio could in times of financial stress. The Portfolio could lose money if it cannot sell a security at the time lose money if it cannot sell a security at the time and price that would be most beneficial to the and price that would be most beneficial to the Portfolio. Portfolio.

Securities Lending: Securities lending involves Securities Lending: Securities lending involves two primary risks: “investment risk” and two primary risks: “investment risk” and “borrower default risk.” When lending “borrower default risk.” When lending securities, the Portfolio will receive cash or U.S. securities, the Portfolio will receive cash or U.S. government securities as collateral. Investment government securities as collateral. Investment risk is the risk that the Portfolio will lose money risk is the risk that the Portfolio will lose money from the investment of the cash collateral from the investment of the cash collateral received from the borrower. Borrower default received from the borrower. Borrower default risk is the risk that the Portfolio will lose money risk is the risk that the Portfolio will lose money due to the failure of a borrower to return a due to the failure of a borrower to return a borrowed security. Securities lending may result borrowed security. Securities lending may result in leverage. The use of leverage may exaggerate in leverage. The use of leverage may exaggerate any increase or decrease in the net asset value, any increase or decrease in the net asset value, causing the Portfolio to be more volatile. The causing the Portfolio to be more volatile. The use of leverage may increase expenses and use of leverage may increase expenses and increase the impact of the Portfolio’s other risks. increase the impact of the Portfolio’s other risks.

Currency: To the extent that the Portfolio Convertible Securities: Convertible securities invests directly or indirectly in foreign (non- are securities that are convertible into or U.S.) currencies or in securities denominated in, exercisable for common stocks at a stated price or that trade in, foreign (non-U.S.) currencies, it or rate. Convertible securities are subject to the is subject to the risk that those foreign (non- usual risks associated with debt instruments, U.S.) currencies will decline in value relative to such as interest rate and credit risk. In addition, the U.S. dollar or, in the case of hedging because convertible securities react to changes in positions, that the U.S. dollar will decline in the value of the stocks into which they convert, value relative to the currency being hedged by they are subject to market risk.

21

 

 

22

 

 

 

Interest Rate: With bonds and other fixed rate
debt instruments, a rise in market interest rates
generally causes values to fall; conversely,
values generally rise as market interest rates fall.
The higher the credit quality of the instrument,
and the longer its maturity or duration, the more
sensitive it is likely to be to interest rate risk. In
the case of inverse securities, the interest rate
paid by the securities is a floating rate, which
generally will decrease when the market rate of
interest to which the inverse security is indexed
increases and will increase when the market rate
of interest to which the inverse security is
indexed decreases. As of the date of this
Prospectus, market interest rates in the United
States are at or near historic lows, which may
increase the Portfolio’s exposure to risks
associated with rising market interest rates.
Rising market interest rates could have
unpredictable effects on the markets and may
expose fixed-income and related markets to
heightened volatility. For funds that invest in
fixed-income securities, an increase in market
interest rates may lead to increased redemptions
and increased portfolio turnover, which could

23

 

reduce liquidity for certain investments,
adversely affect values, and increase costs.
Increased redemptions may cause the Portfolio
to liquidate portfolio positions when it may not
be advantageous to do so and may lower returns.
If dealer capacity in fixed-income markets is
insufficient for market conditions, it may further
inhibit liquidity and increase volatility in the
fixed-income markets. Further, recent and
potential future changes in government policy
may affect interest rates.

Mid-Capitalization Company: Investments in
mid-capitalization companies may involve
greater risk than is customarily associated with
larger, more established companies due to the
greater business risks of a limited operating
history, smaller size, limited markets and
financial resources, narrow product lines, less
management depth, and more reliance on key
personnel. Consequently, the securities of mid-
capitalization companies may have limited
market stability and may be subject to more
abrupt or erratic market movements than
securities of larger, more established growth
companies or the market averages in general.

An investment in the Portfolio is not a bank
deposit and is not insured or guaranteed by the
Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other government
agency.

     d. Comparison. The Applicants believe that while the Existing Fund and the Replacement Fund are slightly different from each other in the way they characterize their objective, principal investment strategies, benchmarks and risks, fundamentally each is primarily a mid-cap growth equity portfolio that exhibits a high correlation to the other with similar weighted average holdings from a Morningstar style box perspective, risks and investment results. Each falls within the Morningstar Mid-Cap Growth style box. The differences between the Existing Fund and the Replacement Fund are not necessarily larger than one would expect to be exhibited by two portfolios with similar benchmarks and principal investment strategies as there is significant investment flexibility within those constraints.

     The Existing Fund’s investment objective is capital appreciation, and the Replacement Fund seeks to track the Russell Midcap Growth Index (the “Index”). Under normal circumstances, the Existing Fund invests for the long term primarily in equity securities in the form of common stock of small-sized companies. The manager(s) of the Existing Fund purchase

24

 

stocks that they believe are undervalued relative to their businesses’ long-term growth prospectus, future cash flows, and asset values. The Replacement Fund seeks investment results (before fees and expenses) that correspond to the total return (which includes capital appreciation and income) of the Index. Under normal market conditions, the Replacement Fund invests at least 80% of its net assets in equity securities of companies, which are at the time of purchase, included in the Index. The Index is an unmanaged index that measures the performance of the mid-cap growth segment of the U.S. equities universe represented by those Russell MidCap Index companies with higher price-to-book ratios and higher forecasted growth values. The manager(s) of the Replacement Fund employ a “passive management” approach (replication method) designed to track the performance and holding characteristics of the Index.

     With respect to the Existing Fund’s and Replacement Fund’s investment objectives, each seeks to achieve some form of capital appreciation. The Replacement Fund, as an index fund, focuses on an index replication due to its passive nature.

     Even though there is no overlap of these benchmark holdings, over the past five years there is an 89% correlation in the monthly returns between the Existing Fund’s benchmark and the Replacement Fund’s benchmark. Additionally, there is a 91% correlation between the monthly returns of the Existing Fund and Replacement Fund. This means that the returns tend to move in a similar direction to each other, and this has a similar effect on the actual returns of the Existing Fund and the Replacement Fund. As shown in the performance tables below, during the three- and five-year periods the Replacement Portfolio has exhibited better performance to the Existing Portfolio at a meaningfully lower expense ratio.

     To summarize, the Applicants believe that while the Existing Fund and the Replacement Fund are slightly different from each other in the way they characterize their objective, principal investment strategies, benchmarks and risks, fundamentally both are primarily a mid-cap growth equity portfolios that exhibit a high correlation to the other such that each Affected Contract Owner’s fundamental investment objectives will continue to be met after the Substitution.

     e. Expense Ratios and Total Return. The net expense ratios and total return figures for each fund in this proposed substitution are as follows:

 

(1)	As of the most recently published shareholder report dated June 30, 2017.
(2)	As of September 30, 2017.

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     The Replacement Fund has outperformed the Existing Fund over the three-year and five-year periods. The Replacement Fund will also allow shareholders to benefit from a significantly lower net expense ratio. Although differences in risks and investment objectives and strategies exist, the Applicants believe that these differences do not introduce Affected Contract Owners to materially greater risks than before the Substitution.

     f. Post Substitution Net Assets. The estimated net assets of the Voya Russell Mid Cap Growth Index Portfolio – Class S and I immediately following the proposed substitution will be approximately $610,410,669 and $14,314,592, respectively. This is based on estimated net assets of the Replacement Fund immediately before the substitution ($283,506,946 for Class S and $14,191,482 for Class I) plus the corresponding Existing Fund’s actual net assets invested in the Accounts as of September 30, 2017 ($326,903,723 for Class S and $123,110 for Class I).

26

 

     2. Voya U.S. Stock Index Portfolio for the VY Columbia Contrarian Core Portfolio.

     a. Fees and Expenses. The comparative fees and expenses for each fund in this proposed substitution as of the most recently published shareholder report dated June 30, 2017, are as follows:

 

     b. Breakpoint Information. The comparative management fee breakpoint information for each fund in this proposed substitution is as follows:

 

     c. Investment Objectives, Strategies and Risks. A comparison of the investment objectives, strategies and risks from the prospectus of each fund in this proposed substitution is as follows:

Existing Fund
VY Columbia Contrarian Core Portfolio

Replacement Fund
Voya U.S. Stock Index Portfolio

Investment Objective – Investment Objective –

The Portfolio seeks total return consisting of The Portfolio seeks total return. long-term capital appreciation and current income.

Principal Investment Strategies – Principal Investment Strategies –

Under normal market conditions, the Portfolio Under normal market conditions, the Portfolio invests at least 80% of its net assets in common invests at least 80% of its net assets (plus

27

 

stocks. In addition, under normal market borrowings for investment purposes) in equity conditions, the Portfolio invests at least 80% of securities of companies included in the S&P

 

• Various measures of valuation, including exemptive orders thereunder (“1940 Act”). price-to-cash flow, price-to-earnings, price-

to-sales, price-to-book value and discounted The Sub-Adviser may sell securities for a variety cash flow. The Sub-Adviser believes that of reasons, such as to secure gains, limit losses, companies with lower valuations are or redeploy assets into opportunities believed to

28

 

 

• The financial condition and management of a company, including its competitive position, the quality of its balance sheet and earnings, its future prospects, and the potential for growth and stock price appreciation; and/or

• Overall economic and market conditions.

The Sub-Adviser may sell a security when the
security’s price reaches a target set by the Sub-
Adviser; if the Sub-Adviser believes that there is
deterioration in the issuer’s financial
circumstances or fundamental prospects; if other
investments are more attractive; or for other
reasons.

The Portfolio may lend portfolio securities on a
short-term or long-term basis, up to 33S% of its
total assets.

Principal Risks – Principal Risks –

You could lose money on an investment in the You could lose money on an investment in the Portfolio. Any of the following risks, among Portfolio. Any of the following risks, among others, could affect Portfolio performance or others, could affect Portfolio performance or cause the Portfolio to lose money or to cause the Portfolio to lose money or to underperform market averages of other funds. underperform market averages of other funds.

Company: The price of a company’s stock Company: The price of a company’s stock could decline or underperform for many reasons could decline or underperform for many reasons including, among others, poor management, including, among others, poor management, financial problems, reduced demand for financial problems, reduced demand for company goods or services, regulatory fines and company goods or services, regulatory fines and judgments, or business challenges. If a company judgments, or business challenges. If a company declares bankruptcy or becomes insolvent, its declares bankruptcy or becomes insolvent, its stock could become worthless. stock could become worthless.

Derivative Instruments: Derivative instruments Derivative Instruments: Derivative instruments are subject to a number of risks, including the are subject to a number of risks, including the risk of changes in the market price of the risk of changes in the market price of the underlying securities, credit risk with respect to underlying securities, credit risk with respect to the counterparty, risk of loss due to changes in the counterparty, risk of loss due to changes in

29

 

market interest rates and liquidity and volatility market interest rates and liquidity and volatility risk. The amounts required to purchase certain risk. The amounts required to purchase certain derivatives may be small relative to the derivatives may be small relative to the magnitude of exposure assumed by the Portfolio. magnitude of exposure assumed by the Portfolio. Therefore, the purchase of certain derivatives Therefore, the purchase of certain derivatives may have an economic leveraging effect on the may have an economic leveraging effect on the Portfolio and exaggerate any increase or Portfolio and exaggerate any increase or decrease in the net asset value. Derivatives may decrease in the net asset value. Derivatives may not perform as expected, so the Portfolio may not perform as expected, so the Portfolio may not realize the intended benefits. When used for not realize the intended benefits. When used for hedging purposes, the change in value of a hedging purposes, the change in value of a derivative may not correlate as expected with the derivative may not correlate as expected with the currency, security or other risk being hedged. currency, security or other risk being hedged. When used as an alternative or substitute for When used as an alternative or substitute for direct cash investments, the return provided by direct cash investments, the return provided by the derivative may not provide the same return the derivative may not provide the same return as direct cash investment. In addition, given their as direct cash investment. In addition, given their complexity, derivatives expose the Portfolio to complexity, derivatives expose the Portfolio to the risk of improper valuation. the risk of improper valuation.

Liquidity: If a security is illiquid, the Portfolio Liquidity: If a security is illiquid, the Portfolio might be unable to sell the security at a time might be unable to sell the security at a time when the Portfolio’s manager might wish to sell, when the Portfolio’s manager might wish to sell, or at all. Further, the lack of an established or at all. Further, the lack of an established secondary market may make it more difficult to secondary market may make it more difficult to value illiquid securities, exposing the Portfolio value illiquid securities, exposing the Portfolio to the risk that the price at which it sells illiquid to the risk that the price at which it sells illiquid securities will be less than the price at which securities will be less than the price at which they were valued when held by the Portfolio. they were valued when held by the Portfolio. The prices of illiquid securities may be more The prices of illiquid securities may be more volatile than more liquid investments. The risks volatile than more liquid investments. The risks associated with illiquid securities may be greater associated with illiquid securities may be greater in times of financial stress. The Portfolio could in times of financial stress. The Portfolio could lose money if it cannot sell a security at the time lose money if it cannot sell a security at the time and price that would be most beneficial to the and price that would be most beneficial to the Portfolio. Portfolio.

Market: Stock prices may be volatile or have Market: Stock prices may be volatile or have reduced liquidity in response to real or perceived reduced liquidity in response to real or perceived impacts of factors including, but not limited to, impacts of factors including, but not limited to, economic conditions, changes in market interest economic conditions, changes in market interest rates, and political events. Stock markets tend to rates, and political events. Stock markets tend to be cyclical, with periods when stock prices be cyclical, with periods when stock prices generally rise and periods when stock prices generally rise and periods when stock prices generally decline. Any given stock market generally decline. Any given stock market segment may remain out of favor with investors segment may remain out of favor with investors for a short or long period of time, and stocks as for a short or long period of time, and stocks as an asset class may underperform bonds or other an asset class may underperform bonds or other

30

 

 

31

 

 

32

 

Currency: To the extent that the Portfolio invests directly or indirectly in foreign (non-U.S.) currencies or in securities denominated in, or that trade in, foreign (non-U.S.) currencies, it is subject to the risk that those foreign (non-U.S.) currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged by the Portfolio through foreign currency exchange transactions.

Focused Investing: To the extent that the Portfolio invests a substantial portion of its assets in securities related to a particular industry, sector, market segment, or geographic area, its investments will be sensitive to developments in that industry, sector, market segment, or geographic area. The Portfolio is subject to the risk that changing economic conditions; changing political or regulatory conditions; or natural and other disasters affecting the particular industry, sector, market segment, or geographic area in which the Portfolio focuses its investments could have a significant impact on its investment performance and could ultimately cause the Portfolio to underperform, or its net asset value to be more volatile than, other funds that invest more broadly.

Foreign Investments: Investing in foreign (non-U.S.) securities may result in the Portfolio experiencing more rapid and extreme changes in value than a fund that invests exclusively in securities of U.S. companies due to: smaller markets; differing reporting, accounting, and auditing standards; nationalization, expropriation, or confiscatory taxation; foreign currency fluctuations, currency blockage, or replacement; potential for default on sovereign debt; or political changes or diplomatic developments, which may include the imposition of economic sanctions or other measures by the United States or other governments and supranational organizations. Markets and economies throughout the world are becoming

33

 

increasingly interconnected, and conditions or events in one market, country or region may adversely impact investments or issuers in another market, country or region.

Growth Investing: Prices of growth stocks are more sensitive to investor perceptions of the issuing company’s growth potential and may fall quickly and significantly if investors suspect that actual growth may be less than expected. There is a risk that funds that invest in growth-oriented stocks may underperform other funds that invest more broadly. Growth stocks tend to be more volatile than value stocks, and may underperform the market as a whole over any given time period.

Investment Model: A manager’s proprietary model may not adequately allow for existing or unforeseen market factors or the interplay between such factors. Portfolios that are actively managed, in whole or in part, according to a quantitative investment model can perform differently from the market as a whole based on the investment model and the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends. Issues in the construction and implementation of the investment models (including, for example, data problems and/or software issues) may create errors or limitations that might go undetected or are discovered only after the errors or limitations have negatively impacted performance. There is no guarantee that the use of these investment models will result in effective investment decisions for the Portfolio.

Value Investing: Securities that appear to be undervalued may never appreciate to the extent expected. Further, because the prices of value-oriented securities tend to correlate more closely with economic cycles than growth-oriented securities, they generally are more sensitive to changing economic conditions, such as changes in market interest rates, corporate earnings and industrial production. The manager may be wrong in its assessment of a company’s value and the securities the Portfolio holds may not

34

 

reach their full values. A particular risk of the Portfolio’s value approach is that some holdings may not recover and provide the capital growth anticipated or a security judged to be undervalued may actually be appropriately priced. The market may not favor value-oriented securities and may not favor equities at all. During those periods, the Portfolio’s relative performance may suffer. There is a risk that funds that invest in value-oriented stocks may underperform other funds that invest more broadly.

An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.

     d. Comparison. The Applicants believe that while the Existing Fund and the Replacement Fund are slightly different from each other in the way they characterize their objective, principal investment strategies, benchmarks, and risks, fundamentally each is primarily a large-cap equity portfolio that has exhibited a high correlation to the other from a Morningstar style box perspective, risks and investment results. Each falls within the Morningstar Large Blend style box. The Applicants note that the Existing Fund has been managed by Columbia under the current strategy since May 1, 2013 but that the Columbia Contrarian Core Fund (which is advised by Columbia in the same strategy as the Existing Fund) and the Replacement Fund have resided within the Morningstar Large Blend fund category, without exception, for at least the past 10 years. As of September 30, 2017, 71 of the Existing Fund’s 76 stock holdings were constituents of the Replacement Fund. The differences between the Existing Fund and the Replacement Fund are not necessarily larger than one would expect to be exhibited by two portfolios with substantially similar benchmarks and principal investment strategies, as there is significant investment flexibility within those constraints.

     Both the Existing Fund’s and Replacement Fund’s investment objective is to seek total return. Under normal market conditions, the Existing Fund invests at least 80% of its net assets in equity securities of U.S. companies with large (generally over $2 billion) market capitalizations that the investment team believes are undervalued and have the potential for long-term growth and current income. The managers of the Existing Fund combine fundamental and quantitative analysis with risk management in identifying investment opportunities and constructing a portfolio. Under normal market conditions, the Replacement Fund invests at least 80% of its net assets in equity securities of companies included in the S&P 500 Index (the “Index”). The Index is an unmanaged index that measures the performance of the large-cap segment of the U.S. equity universe. The Index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. The manager(s) of the Replacement Fund use a “passive management” approach (replication method) designed to track the performance and holding characteristics of the Index.

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     With respect to the Existing Fund’s and Replacement Fund’s investment objective, each seeks total return. The Replacement Fund, as an index fund, focuses on an index replication due to its passive nature.

     Furthermore, while the listed principal investment strategies of the Existing Fund and the Replacement Fund differ in language and breadth, at their core each is required to invest in more than 80% equity securities of a large cap companies. Although the Replacement Fund seeks to replicate the Index, as noted above, the Index it replicates consists of equity securities of large capitalization U.S. companies.

     The Existing Fund’s prospectus benchmark is the Russell 1000 Index, an unmanaged stock market index that represents the 1,000 largest publicly-held companies incorporated in America as measured by total market capitalization, and represents approximately 90% of the total market capitalization of all listed U.S. stocks. The Replacement Fund’s prospectus benchmark is the S&P 500 Index. While the Existing Fund and the Replacing Fund are benchmarked to different indices, holdings overlap between the two indices is typically around 90%, and their total returns for the trailing 10-year period ending September 30, 2017 were 99% correlated. The effective start date of the Existing Fund’s current investment team and process is May 1, 2013. As shown in the performance table below, during the one-year and ten-year periods, the Replacement Fund has exhibited better performance than the Existing Fund at a meaningfully lower expense ratio.

     To summarize, the Applicants believe that while the Existing Fund and the Replacement Fund are slightly different from each other in the way they characterize their investment objectives, principal investment strategies, and principal risks, fundamentally both are large cap core equity portfolios that have exhibited a high correlation of total returns and equivalent volatility such that each Affected Contract Owner’s fundamental investment objectives will continue to be met after the Substitution.

     e. Expense Ratios and Total Return. The net expense ratios and total return figures for each fund in this proposed substitution are as follows:

 

(1)	As of the most recently published shareholder report dated June 30, 2017.
(2)	As of September 30, 2017.
(3)	Performance prior to May 1, 2013 is attributable to Davis Selected Advisers, the then subadviser to the Existing Fund.

     The Replacement Fund has outperformed the Existing Fund over the one-year and ten-year periods, slightly underperformed the Existing Fund over the three-year period and underperformed over the 5-year period. The Replacement Fund will also allow shareholders to

36

 

benefit from a significantly lower net expense ratio. Although differences in risks and investment objectives and strategies exist, the Applicants believe that these differences do not introduce Affected Contract Owners to materially greater risks than before the Substitution.

     f. Post Substitution Net Assets. The estimated net assets of the Voya U.S. Stock Index Portfolio – Class S immediately following the proposed substitution will be approximately $343,218,885. This is based on estimated net assets of the Replacement Fund immediately before the substitution ($75,989,312 for Class S) plus the corresponding Existing Fund’s actual net assets invested in the Accounts as of September 30, 2017 ($267,229,573 for Class S).

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     3. Voya Russell Large Cap Value Index Portfolio for the VY Invesco Comstock Portfolio.

     a. Fees and Expenses. The comparative fees and expenses for each fund in this proposed substitution as of the most recently published shareholder report dated June 30, 2017, are as follows:

 

     b. Breakpoint Information. The comparative management fee breakpoint information for each fund in this proposed substitution is as follows:

 

 

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     c. Investment Objectives, Strategies and Risks. A comparison of the investment objectives, strategies and risks from the prospectus of each fund in this proposed substitution is as follows:

 

 

39

 

 

40

 

judgments, or business challenges. If a company judgments, or business challenges. If a company declares bankruptcy or becomes insolvent, its declares bankruptcy or becomes insolvent, its stock could become worthless. stock could become worthless.

Convertible Securities: Convertible securities Convertible Securities: Convertible securities are securities that are convertible into or are securities that are convertible into or exercisable for common stocks at a stated price exercisable for common stocks at a stated price or rate. Convertible securities are subject to the or rate. Convertible securities are subject to the usual risks associated with debt instruments, usual risks associated with debt instruments, such as interest rate and credit risk. In addition, such as interest rate and credit risk. In addition, because convertible securities react to changes in because convertible securities react to changes in the value of the stocks into which they convert, the value of the stocks into which they convert, they are subject to market risk. they are subject to market risk.

Credit: The price of a bond or other debt Credit: The price of a bond or other debt instrument is likely to fall if the issuer’s actual or instrument is likely to fall if the issuer’s actual or perceived financial health deteriorates, whether perceived financial health deteriorates, whether because of broad economic or issuer-specific because of broad economic or issuer-specific reasons. In certain cases, the issuer could be late reasons. In certain cases, the issuer could be late in paying interest or principal, or could fail to in paying interest or principal, or could fail to pay its financial obligations altogether. pay its financial obligations altogether.

Derivative Instruments: Derivative instruments Derivative Instruments: Derivative instruments are subject to a number of risks, including the are subject to a number of risks, including the risk of changes in the market price of the risk of changes in the market price of the underlying securities, credit risk with respect to underlying securities, credit risk with respect to the counterparty, risk of loss due to changes in the counterparty, risk of loss due to changes in market interest rates and liquidity and volatility market interest rates and liquidity and volatility risk. The amounts required to purchase certain risk. The amounts required to purchase certain derivatives may be small relative to the derivatives may be small relative to the magnitude of exposure assumed by the Portfolio. magnitude of exposure assumed by the Portfolio. Therefore, the purchase of certain derivatives Therefore, the purchase of certain derivatives may have an economic leveraging effect on the may have an economic leveraging effect on the Portfolio and exaggerate any increase or Portfolio and exaggerate any increase or decrease in the net asset value. Derivatives may decrease in the net asset value. Derivatives may not perform as expected, so the Portfolio may not perform as expected, so the Portfolio may not realize the intended benefits. When used for not realize the intended benefits. When used for hedging purposes, the change in value of a hedging purposes, the change in value of a derivative may not correlate as expected with the derivative may not correlate as expected with the currency, security or other risk being hedged. currency, security or other risk being hedged. When used as an alternative or substitute for When used as an alternative or substitute for direct cash investments, the return provided by direct cash investments, the return provided by the derivative may not provide the same return the derivative may not provide the same return as direct cash investment. In addition, given their as direct cash investment. In addition, given their complexity, derivatives expose the Portfolio to complexity, derivatives expose the Portfolio to the risk of improper valuation. the risk of improper valuation.

Interest Rate: With bonds and other fixed rate Interest Rate: With bonds and other fixed rate

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debt instruments, a rise in market interest rates debt instruments, a rise in market interest rates generally causes values to fall; conversely, generally causes values to fall; conversely, values generally rise as market interest rates fall. values generally rise as market interest rates fall. The higher the credit quality of the instrument, The higher the credit quality of the instrument, and the longer its maturity or duration, the more and the longer its maturity or duration, the more sensitive it is likely to be to interest rate risk. In sensitive it is likely to be to interest rate risk. In the case of inverse securities, the interest rate the case of inverse securities, the interest rate paid by the securities is a floating rate, which paid by the securities is a floating rate, which generally will decrease when the market rate of generally will decrease when the market rate of interest to which the inverse security is indexed interest to which the inverse security is indexed increases and will increase when the market rate increases and will increase when the market rate of interest to which the inverse security is of interest to which the inverse security is indexed decreases. As of the date of this indexed decreases. As of the date of this Prospectus, market interest rates in the United Prospectus, market interest rates in the United States are at or near historic lows, which may States are at or near historic lows, which may increase the Portfolio’s exposure to risks increase the Portfolio’s exposure to risks associated with rising market interest rates. associated with rising market interest rates.

Rising market interest rates could have Rising market interest rates could have unpredictable effects on the markets and may unpredictable effects on the markets and may expose fixed-income and related markets to expose fixed-income and related markets to heightened volatility. For funds that invest in heightened volatility. For funds that invest in fixed-income securities, an increase in market fixed-income securities, an increase in market interest rates may lead to increased redemptions interest rates may lead to increased redemptions and increased portfolio turnover, which could and increased portfolio turnover, which could reduce liquidity for certain investments, reduce liquidity for certain investments, adversely affect values, and increase costs. adversely affect values, and increase costs. Increased redemptions may cause the Portfolio Increased redemptions may cause the Portfolio to liquidate portfolio positions when it may not to liquidate portfolio positions when it may not be advantageous to do so and may lower returns. be advantageous to do so and may lower returns. If dealer capacity in fixed-income markets is If dealer capacity in fixed-income markets is insufficient for market conditions, it may further insufficient for market conditions, it may further inhibit liquidity and increase volatility in the inhibit liquidity and increase volatility in the fixed-income markets. Further, recent and fixed-income markets. Further, recent and potential future changes in government policy potential future changes in government policy may affect interest rates. may affect interest rates.

Liquidity: If a security is illiquid, the Portfolio Liquidity: If a security is illiquid, the Portfolio might be unable to sell the security at a time might be unable to sell the security at a time when the Portfolio’s manager might wish to sell, when the Portfolio’s manager might wish to sell, or at all. Further, the lack of an established or at all. Further, the lack of an established secondary market may make it more difficult to secondary market may make it more difficult to value illiquid securities, exposing the Portfolio value illiquid securities, exposing the Portfolio to the risk that the price at which it sells illiquid to the risk that the price at which it sells illiquid securities will be less than the price at which securities will be less than the price at which they were valued when held by the Portfolio. they were valued when held by the Portfolio. The prices of illiquid securities may be more The prices of illiquid securities may be more volatile than more liquid investments. The risks volatile than more liquid investments. The risks

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associated with illiquid securities may be greater associated with illiquid securities may be greater in times of financial stress. The Portfolio could in times of financial stress. The Portfolio could lose money if it cannot sell a security at the time lose money if it cannot sell a security at the time and price that would be most beneficial to the and price that would be most beneficial to the Portfolio. Portfolio.

Market: Stock prices may be volatile or have Market: Stock prices may be volatile or have reduced liquidity in response to real or perceived reduced liquidity in response to real or perceived impacts of factors including, but not limited to, impacts of factors including, but not limited to, economic conditions, changes in market interest economic conditions, changes in market interest rates, and political events. Stock markets tend to rates, and political events. Stock markets tend to be cyclical, with periods when stock prices be cyclical, with periods when stock prices generally rise and periods when stock prices generally rise and periods when stock prices generally decline. Any given stock market generally decline. Any given stock market segment may remain out of favor with investors segment may remain out of favor with investors for a short or long period of time, and stocks as for a short or long period of time, and stocks as an asset class may underperform bonds or other an asset class may underperform bonds or other asset classes during some periods. Additionally, asset classes during some periods. Additionally, legislative, regulatory or tax policies or legislative, regulatory or tax policies or developments in these areas may adversely developments in these areas may adversely impact the investment techniques available to a impact the investment techniques available to a manager, add to costs and impair the ability of manager, add to costs and impair the ability of the Portfolio to achieve its investment the Portfolio to achieve its investment objectives. objectives.

Market Capitalization: Stocks fall into three Market Capitalization: Stocks fall into three broad market capitalization categories - large, broad market capitalization categories - large, mid, and small. Investing primarily in one mid, and small. Investing primarily in one category carries the risk that, due to current category carries the risk that, due to current market conditions, that category may be out of market conditions, that category may be out of favor with investors. If valuations of large- favor with investors. If valuations of large-capitalization companies appear to be greatly out capitalization companies appear to be greatly out of proportion to the valuations of mid- or small- of proportion to the valuations of mid- or small-capitalization companies, investors may migrate capitalization companies, investors may migrate to the stocks of mid- and small-sized companies to the stocks of mid- and small-sized companies causing a fund that invests in these companies to causing a fund that invests in these companies to increase in value more rapidly than a fund that increase in value more rapidly than a fund that invests in larger companies. Investing in mid and invests in larger companies. Investing in mid and small-capitalization companies may be subject to small-capitalization companies may be subject to special risks associated with narrower product special risks associated with narrower product lines, more limited financial resources, smaller lines, more limited financial resources, smaller management groups, more limited publicly management groups, more limited publicly available information, and a more limited trading available information, and a more limited trading market for their stocks as compared with larger market for their stocks as compared with larger companies. As a result, stocks of mid- and small- companies. As a result, stocks of mid- and small-capitalization companies may be more volatile capitalization companies may be more volatile and may decline significantly in market and may decline significantly in market downturns. downturns.

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Value Investing: Securities that appear to be Value Investing: Securities that appear to be undervalued may never appreciate to the extent undervalued may never appreciate to the extent expected. Further, because the prices of value- expected. Further, because the prices of value-oriented securities tend to correlate more closely oriented securities tend to correlate more closely with economic cycles than growth-oriented with economic cycles than growth-oriented securities, they generally are more sensitive to securities, they generally are more sensitive to changing economic conditions, such as changes changing economic conditions, such as changes in market interest rates, corporate earnings and in market interest rates, corporate earnings and industrial production. The manager may be industrial production. The manager may be wrong in its assessment of a company’s value wrong in its assessment of a company’s value and the securities the Portfolio holds may not and the securities the Portfolio holds may not

44

 

 

45

 

extension risk. Prepayment risk is the risk that the issuer of a debt instrument will pay back the principal earlier than expected. This may occur when interest rates decline. Prepayment may expose the Portfolio to a lower rate of return upon reinvestment of principal. Also, if a debt instrument subject to prepayment has been purchased at a premium, the value of the premium would be lost in the event of prepayment. Extension risk is the risk that the issuer of a debt instrument will pay back the principal later than expected. This may occur when interest rates rise. This may negatively affect performance, as the value of the debt instrument decreases when principal payments are made later than expected. Additionally, the Portfolio may be prevented from investing proceeds it would have received at a given time at the higher prevailing interest rates.

Real Estate Companies and Real Estate Investment Trusts (“REITs”): Investing in real estate companies and REITs may subject the Portfolio to risks similar to those associated with the direct ownership of real estate, including losses from casualty or condemnation, changes in local and general economic conditions, supply and demand, market interest rates, zoning laws, regulatory limitations on rents, property taxes, and operating expenses in addition to terrorist attacks, war, or other acts that destroy real property. Investments in REITs are affected by the management skill and creditworthiness of the REIT. The Portfolio will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT in which it invests.

An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.

An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.

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     d. Comparison. The Applicants believe that while the Existing Fund and the Replacement Fund are slightly different from each other in the way they characterize their objective, principal investment strategies, benchmarks and risks, fundamentally each is primarily a large-cap equity fund that has exhibited a high correlation to the other from a Morningstar style box perspective and in terms of investment results. Each currently reside within the Morningstar Large Value equity style box. Furthermore, they each have resided within the Morningstar Large Value fund category, without exception, for at least the past 8 years since the Replacement Fund’s inception. The differences between the Existing Fund and the Replacement Fund are not necessarily larger than one would expect to be exhibited by two portfolios with the same benchmarks and principal investment strategies, as there is significant investment flexibility within those constraints.

     The Existing Fund’s investment objective is capital growth and income, and the Replacement Fund’s investment objective is to seek investment results that correspond to the total return (which includes capital appreciation and income) of the Russell Top 200^® Value Index (the “Index”). Under normal circumstances, the Existing Fund invests primarily in equity securities of well-established U.S. companies, of any market capitalization, that the portfolio managers believe are undervalued but have identifiable factors that might lead to improved valuations. The Replacement Fund invests at least 80% of its net assets in equity securities of companies that are included in the Russell Top 200 Value Index – an unmanaged index that measures the performance of stocks within the Index (200 largest U.S. publicly-held companies by market cap) that exhibit value characteristics. The manager(s) of the Replacement Fund use a “passive management” approach (replication method) designed to track the performance and holding characteristics of the Index.

     With respect to the Existing Fund’s and Replacement Fund’s primary investment objectives, each shares some combination of capital appreciation/growth and current/reasonable income language. The Replacement Fund, as an index fund, focuses on an index replication due to its passive nature.

     The Existing Fund’s prospectus benchmark is the Russell 1000 Value Index, an unmanaged stock market index that measures the performance of stocks within the Russell 1000 Index (1,000 largest publicly-held companies by market cap) that exhibit value characteristics; the Replacement Fund’s prospectus benchmark is the Russell Top 200 Value Index – an unmanaged index that measures the performance of stocks within the Russell Top 200 Index (200 largest U.S. publicly-held companies by market cap) that exhibit value characteristics. While the Existing Fund and the Replacement Fund are benchmarked to different indices, holdings overlap between the two indices – as measured by the sum of the minimum percentages of each fund’s common holding – was approximately 70% as of September 30, 2017, and their total returns for the trailing 10-year period ending September 30, 2017 were 99% correlated. As of September 30, 2017, 41 of the Existing Fund’s 76 stock holdings were constituents of the Replacement Fund.

     To summarize, the Applicants believe that while the Existing Fund and the Replacement Fund have differences in the way they characterize their investment objectives, principal investment strategies, and principal risks, fundamentally both are large-cap value equity portfolios that have tended to exhibit a moderately high level of holdings overlap and a high correlation of total returns, with slightly lower volatility exhibited by the Replacement Fund such

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that each Affected Contract Owner’s fundamental investment objectives will continue to be met after the Substitution.

     e. Expense Ratios and Total Return. The net expense ratios and total return figures for each fund in this proposed substitution are as follows:

 

(1)	As of the most recently published shareholder report dated June 30, 2017.
(2)	As of September 30, 2017.

     The Replacement Fund has outperformed the Existing Fund over the three-year period. The Replacement Fund will also allow shareholders to benefit from a significantly lower net expense ratio. Although differences in risks and investment objectives and strategies exist, the Applicants believe that these differences do not introduce Affected Contract Owners to materially greater risks than before the Substitution.

     f. Post Substitution Net Assets. Without taking into account the net assets associated with proposed substitution #4 involving the VY T. Rowe Price Equity Income Portfolio, the estimated net assets of the Voya Russell Large Cap Value Index Portfolio – Class S and I immediately following the proposed substitution will be approximately $518,115,807 and $102,968,527, respectively. This is based on estimated net assets of the Replacement Fund immediately before the substitution ($328,178,434 for Class S and $102,412,072 for Class I) plus the corresponding Existing Fund’s actual net assets invested in the Accounts as of September 30, 2017 ($189,937,373 for Class S and $556,455 for Class I).

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     4. Voya Russell Large Cap Value Index Portfolio for the VY T. Rowe Price Equity Income Portfolio.

     a. Fees and Expenses. The comparative fees and expenses for each fund in this proposed substitution as of the most recently published shareholder report dated June 30, 2017, are as follows:

 

     b. Breakpoint Information. The comparative management fee breakpoint information for each fund in this proposed substitution is as follows:

 

 

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     c. Investment Objectives, Strategies and Risks. A comparison of the investment objectives, strategies and risks from the prospectus of each fund in this proposed substitution is as follows:

 

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pursuing its investment objective, the sub- market cap that exhibit value characteristics. The

 

 

     and to provide equity exposure to the Portfolio’s The Portfolio may also invest in other cash position. Although the Portfolio attempts to investment companies, including exchange- track, as closely as possible, the performance of traded funds, to the extent permitted under the the Index, the Portfolio does not always perform Investment Company Act of 1940, as amended, exactly like the Index. Unlike the Index, the and the rules, regulations, and exemptive orders Portfolio has operating expenses and transaction thereunder (“1940 Act”). costs and therefore has a performance disadvantage versus the Index.

The Sub-Adviser typically employs a “value” approach in selecting investments. The Sub- The sub-adviser (“Sub-Adviser”) may sell a Adviser’s in-house research team seeks security when the security’s percentage companies that appear to be undervalued by weighting in the Index is reduced, when the various measures and may be temporarily out of security is removed from the Index, or for other favor, but have good prospects for capital reasons. appreciation and dividend growth.

     The Portfolio may lend portfolio securities on a In selecting investments, the Sub-Adviser short-term or long-term basis, up to 33S% of its generally looks for companies, in the aggregate, total assets. with one or more of the following: an established operating history; above-average dividend yield relative to the Index; low price/earnings ratio relative to the Index; a sound balance sheet and other positive financial characteristics; and low stock price relative to a company’s underlying value as measured by assets, cash flow or business franchises.

The Sub-Adviser may sell securities for a variety
of reasons, such as to secure gains, limit losses,
or redeploy assets into opportunities believed to
be more promising, among others.

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The Portfolio may lend portfolio securities on a
short-term or long-term basis, up to 33S% of its
total assets.

Principal Risks – Principal Risks –

You could lose money on an investment in the You could lose money on an investment in the Portfolio. Any of the following risks, among Portfolio. Any of the following risks, among others, could affect Portfolio performance or others, could affect Portfolio performance or cause the Portfolio to lose money or to cause the Portfolio to lose money or to underperform market averages of other funds. underperform market averages of other funds.

Company: The price of a company’s stock Company: The price of a company’s stock could decline or underperform for many reasons could decline or underperform for many reasons including, among others, poor management, including, among others, poor management, financial problems, reduced demand for financial problems, reduced demand for company goods or services, regulatory fines and company goods or services, regulatory fines and judgments, or business challenges. If a company judgments, or business challenges. If a company declares bankruptcy or becomes insolvent, its declares bankruptcy or becomes insolvent, its stock could become worthless. stock could become worthless.

Convertible Securities: Convertible securities Convertible Securities: Convertible securities are securities that are convertible into or are securities that are convertible into or exercisable for common stocks at a stated price exercisable for common stocks at a stated price or rate. Convertible securities are subject to the or rate. Convertible securities are subject to the usual risks associated with debt instruments, usual risks associated with debt instruments, such as interest rate and credit risk. In addition, such as interest rate and credit risk. In addition, because convertible securities react to changes in because convertible securities react to changes in the value of the stocks into which they convert, the value of the stocks into which they convert, they are subject to market risk. they are subject to market risk.

Credit: The price of a bond or other debt Credit: The price of a bond or other debt instrument is likely to fall if the issuer’s actual or instrument is likely to fall if the issuer’s actual or perceived financial health deteriorates, whether perceived financial health deteriorates, whether because of broad economic or issuer-specific because of broad economic or issuer-specific reasons. In certain cases, the issuer could be late reasons. In certain cases, the issuer could be late in paying interest or principal, or could fail to in paying interest or principal, or could fail to pay its financial obligations altogether. pay its financial obligations altogether.

Derivative Instruments: Derivative instruments Derivative Instruments: Derivative instruments are subject to a number of risks, including the are subject to a number of risks, including the risk of changes in the market price of the risk of changes in the market price of the underlying securities, credit risk with respect to underlying securities, credit risk with respect to the counterparty, risk of loss due to changes in the counterparty, risk of loss due to changes in market interest rates and liquidity and volatility market interest rates and liquidity and volatility risk. The amounts required to purchase certain risk. The amounts required to purchase certain derivatives may be small relative to the derivatives may be small relative to the magnitude of exposure assumed by the Portfolio. magnitude of exposure assumed by the Portfolio. Therefore, the purchase of certain derivatives Therefore, the purchase of certain derivatives

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may have an economic leveraging effect on the may have an economic leveraging effect on the Portfolio and exaggerate any increase or Portfolio and exaggerate any increase or decrease in the net asset value. Derivatives may decrease in the net asset value. Derivatives may not perform as expected, so the Portfolio may not perform as expected, so the Portfolio may not realize the intended benefits. When used for not realize the intended benefits. When used for hedging purposes, the change in value of a hedging purposes, the change in value of a derivative may not correlate as expected with the derivative may not correlate as expected with the currency, security or other risk being hedged. currency, security or other risk being hedged. When used as an alternative or substitute for When used as an alternative or substitute for direct cash investments, the return provided by direct cash investments, the return provided by the derivative may not provide the same return the derivative may not provide the same return as direct cash investment. In addition, given their as direct cash investment. In addition, given their complexity, derivatives expose the Portfolio to complexity, derivatives expose the Portfolio to the risk of improper valuation. the risk of improper valuation.

Interest Rate: With bonds and other fixed rate Interest Rate: With bonds and other fixed rate debt instruments, a rise in market interest rates debt instruments, a rise in market interest rates generally causes values to fall; conversely, generally causes values to fall; conversely, values generally rise as market interest rates fall. values generally rise as market interest rates fall. The higher the credit quality of the instrument, The higher the credit quality of the instrument, and the longer its maturity or duration, the more and the longer its maturity or duration, the more sensitive it is likely to be to interest rate risk. In sensitive it is likely to be to interest rate risk. In the case of inverse securities, the interest rate the case of inverse securities, the interest rate paid by the securities is a floating rate, which paid by the securities is a floating rate, which generally will decrease when the market rate of generally will decrease when the market rate of interest to which the inverse security is indexed interest to which the inverse security is indexed increases and will increase when the market rate increases and will increase when the market rate of interest to which the inverse security is of interest to which the inverse security is indexed decreases. As of the date of this indexed decreases. As of the date of this Prospectus, market interest rates in the United Prospectus, market interest rates in the United States are at or near historic lows, which may States are at or near historic lows, which may increase the Portfolio’s exposure to risks increase the Portfolio’s exposure to risks associated with rising market interest rates. associated with rising market interest rates. Rising market interest rates could have Rising market interest rates could have unpredictable effects on the markets and may unpredictable effects on the markets and may expose fixed-income and related markets to expose fixed-income and related markets to heightened volatility. For funds that invest in heightened volatility. For funds that invest in fixed-income securities, an increase in market fixed-income securities, an increase in market interest rates may lead to increased redemptions interest rates may lead to increased redemptions and increased portfolio turnover, which could and increased portfolio turnover, which could reduce liquidity for certain investments, reduce liquidity for certain investments, adversely affect values, and increase costs. adversely affect values, and increase costs. Increased redemptions may cause the Portfolio Increased redemptions may cause the Portfolio to liquidate portfolio positions when it may not to liquidate portfolio positions when it may not be advantageous to do so and may lower returns. be advantageous to do so and may lower returns. If dealer capacity in fixed-income markets is If dealer capacity in fixed-income markets is insufficient for market conditions, it may further insufficient for market conditions, it may further inhibit liquidity and increase volatility in the inhibit liquidity and increase volatility in the

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fixed-income markets. Further, recent and fixed-income markets. Further, recent and potential future changes in government policy potential future changes in government policy may affect interest rates. may affect interest rates.

Liquidity: If a security is illiquid, the Portfolio Liquidity: If a security is illiquid, the Portfolio might be unable to sell the security at a time might be unable to sell the security at a time when the Portfolio’s manager might wish to sell, when the Portfolio’s manager might wish to sell, or at all. Further, the lack of an established or at all. Further, the lack of an established secondary market may make it more difficult to secondary market may make it more difficult to value illiquid securities, exposing the Portfolio value illiquid securities, exposing the Portfolio to the risk that the price at which it sells illiquid to the risk that the price at which it sells illiquid securities will be less than the price at which securities will be less than the price at which they were valued when held by the Portfolio. they were valued when held by the Portfolio. The prices of illiquid securities may be more The prices of illiquid securities may be more volatile than more liquid investments. The risks volatile than more liquid investments. The risks associated with illiquid securities may be greater associated with illiquid securities may be greater in times of financial stress. The Portfolio could in times of financial stress. The Portfolio could lose money if it cannot sell a security at the time lose money if it cannot sell a security at the time and price that would be most beneficial to the and price that would be most beneficial to the Portfolio. Portfolio.

Market: Stock prices may be volatile or have Market: Stock prices may be volatile or have reduced liquidity in response to real or perceived reduced liquidity in response to real or perceived impacts of factors including, but not limited to, impacts of factors including, but not limited to, economic conditions, changes in market interest economic conditions, changes in market interest rates, and political events. Stock markets tend to rates, and political events. Stock markets tend to be cyclical, with periods when stock prices be cyclical, with periods when stock prices generally rise and periods when stock prices generally rise and periods when stock prices generally decline. Any given stock market generally decline. Any given stock market segment may remain out of favor with investors segment may remain out of favor with investors for a short or long period of time, and stocks as for a short or long period of time, and stocks as an asset class may underperform bonds or other an asset class may underperform bonds or other asset classes during some periods. Additionally, asset classes during some periods. Additionally, legislative, regulatory or tax policies or legislative, regulatory or tax policies or developments in these areas may adversely developments in these areas may adversely impact the investment techniques available to a impact the investment techniques available to a manager, add to costs and impair the ability of manager, add to costs and impair the ability of the Portfolio to achieve its investment the Portfolio to achieve its investment objectives. objectives.

Market Capitalization: Stocks fall into three Market Capitalization: Stocks fall into three broad market capitalization categories - large, broad market capitalization categories - large, mid, and small. Investing primarily in one mid, and small. Investing primarily in one category carries the risk that, due to current category carries the risk that, due to current market conditions, that category may be out of market conditions, that category may be out of favor with investors. If valuations of large- favor with investors. If valuations of large-capitalization companies appear to be greatly out capitalization companies appear to be greatly out of proportion to the valuations of mid- or small- of proportion to the valuations of mid- or small-

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causing the Portfolio to be more volatile. The causing the Portfolio to be more volatile. The use of leverage may increase expenses and use of leverage may increase expenses and increase the impact of the Portfolio’s other risks. increase the impact of the Portfolio’s other risks.

Value Investing: Securities that appear to be Value Investing: Securities that appear to be undervalued may never appreciate to the extent undervalued may never appreciate to the extent expected. Further, because the prices of value- expected. Further, because the prices of value-oriented securities tend to correlate more closely oriented securities tend to correlate more closely with economic cycles than growth-oriented with economic cycles than growth-oriented securities, they generally are more sensitive to securities, they generally are more sensitive to changing economic conditions, such as changes changing economic conditions, such as changes in market interest rates, corporate earnings and in market interest rates, corporate earnings and industrial production. The manager may be industrial production. The manager may be wrong in its assessment of a company’s value wrong in its assessment of a company’s value and the securities the Portfolio holds may not and the securities the Portfolio holds may not reach their full values. A particular risk of the reach their full values. A particular risk of the Portfolio’s value approach is that some holdings Portfolio’s value approach is that some holdings may not recover and provide the capital growth may not recover and provide the capital growth anticipated or a security judged to be anticipated or a security judged to be undervalued may actually be appropriately undervalued may actually be appropriately priced. The market may not favor value-oriented priced. The market may not favor value-oriented securities and may not favor equities at all. securities and may not favor equities at all. During those periods, the Portfolio’s relative During those periods, the Portfolio’s relative performance may suffer. There is a risk that performance may suffer. There is a risk that funds that invest in value-oriented stocks may funds that invest in value-oriented stocks may underperform other funds that invest more underperform other funds that invest more broadly. broadly.

Currency: To the extent that the Portfolio Concentration (Index): To the extent that the invests directly or indirectly in foreign (non- Portfolio’s index “concentrates,” as that term is U.S.) currencies or in securities denominated in, defined in the 1940 Act, its assets in the or that trade in, foreign (non-U.S.) currencies, it securities of a particular industry or group of is subject to the risk that those foreign (non- industries, the Portfolio will allocate its U.S.) currencies will decline in value relative to investments to approximately the same extent as the U.S. dollar or, in the case of hedging the index. As a result, the Portfolio may be positions, that the U.S. dollar will decline in subject to greater market fluctuation than a fund value relative to the currency being hedged by that is more broadly invested across industries. the Portfolio through foreign currency exchange Financial, economic, business, and other transactions. developments affecting issuers in a particular industry or group of industries, will have a Bank Instruments: Bank instruments include greater effect on the Portfolio, and if securities certificates of deposit, fixed time deposits, of a particular industry or group of industries as bankers’ acceptances, and other debt and a group fall out of favor, the Portfolio could deposit-type obligations issued by banks. underperform, or be more volatile than, funds Changes in economic, regulatory or political that have greater industry diversification. conditions, or other events that affect the banking industry may have an adverse effect on Index Strategy: The index selected may bank instruments or banking institutions that underperform the overall market. To the extent

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