[Federal Register Volume 61, Number 7 (Wednesday, January 10, 1996)]
[Notices]
[Pages 755-760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-369]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21650; File No. 812-9764]
The One Group Investment Trust
January 3, 1996.
AGENCY: U.S. Securities and Exchange Commission (``SEC'' or
``Commission'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``1940 Act'').
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APPLICANT: The One Group Investment Trust (``Trust'').
RELEVANT ACT SECTIONS: Order requested under Section 6(c) for
exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder.
SUMMARY OF APPLICATION: Applicant seeks an order granting exemptions to
the extent necessary to permit shares of the Trust and all future open-
end investment companies for which Banc One Investment Advisors
Corporation (``Advisor''), or any affiliate thereof, serves as manager,
principal underwriter, or sponsor and whose shares are sold to separate
accounts of insurance companies and qualified pension and retirement
plans (the ``Future Funds'') (the Trust and the Future Funds
collectively are referred to as the ``Fund(s)'') to be sold to and held
by (i) variable annuity and variable life insurance company separate
accounts of both affiliated and unaffiliated life insurance companies
(``Participating Insurance Companies'') and (ii) qualified pension and
retirement plans (``Plans'') outside the separate account context.
FILING DATE: The application was filed on September 14, 1995 and will
be amended during the notice period.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the Secretary of the SEC and serving
Applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on January 29,
1996, and should be accompanied by proof of service on Applicant in the
form of an affidavit or, for lawyers, a certificate of service. Hearing
requests should state the nature of the writer's interest, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the
Secretary of the SEC.
ADDRESSES: SEC, Secretary, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicant, Michael V. Wible, Esq., Banc One Corporation, 100 E.
Broad Street, Columbus, OH 43271-0158.
[[Page 756]]
FOR FURTHER INFORMATION CONTACT: Edward P. Macdonald, Staff Attorney,
or Wendy Friedlander, Deputy Chief (Office of Insurance Products),
Division of Investment Management, at (202) 942-0670.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the Public Reference Branch of the SEC.
Applicant's Representations
1. The Trust, a Massachusetts business trust organized on June 7,
1993, is registered under the 1940 Act as an open-end diversified
management investment company. The Trust currently consists of four
Portfolios. The Board of Trustees may establish additional Portfolios
at any time, each with its own investment objective and policies
(``Future Investment Portfolios'').
2. Advisor, a registered investment adviser under the Investment
Advisors Act of 1940, serves as investment adviser to the Trust and
will serve as investment adviser to the Funds. Advisor is an indirect,
wholly-owned subsidiary of BANC ONE CORPORATION, an interstate bank
holding company incorporated in the State of Ohio. Nationwide Financial
Services, Inc. a wholly-owned subsidiary of Nationwide Life Insurance
Company, will serve as administrator of each Fund.
3. Shares of the Trust currently are offered only to Nationwide VA
Separate Account-C, a separate account of Nationwide Life and Annuity
Insurance Company (``Nationwide''), to fund the benefits of the
OneR Investors AnnuitySM, a variable annuity contract issued
by Nationwide. It is intended, however, that shares of the Funds will
be offered to separate accounts of other insurance companies, including
insurance companies that are not affiliated with Nationwide.
4. Applicant states that, upon the granting of the order requested
in the application, the Funds intend to offer shares of their existing
Portfolios and Future Investment Portfolios to separate accounts of
Participating Insurance Companies the (``Separate Accounts'') to serve
as the investment vehicle for various types of insurance products,
which may include variable annuity contracts, single premium variable
life insurance contracts, scheduled premium variable life insurance
contracts, and flexible premium variable life insurance contracts. The
funds also may be used as investment vehicles for Plans.
Applicant's Legal Analysis
1. In connection with the funding of scheduled premium variable
life insurance contracts issued through a separate account registered
under the 1940 Act as a unit investment trust (``UIT''), Rule 6e-
2(b)(15) provides partial exemptions from Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act. The relief provided by Rule 6e-2 is
available to a separate account's investment adviser, principal
underwriter, and sponsor or depositor. The exemptions granted by Rule
6e-2(b)(15) are available only where the management investment company
underlying the UIT (``Underlying Fund'') offers its shares
``exclusively to variable life insurance separate accounts of the life
insurer, or of any affiliated life insurance company.'' Therefore, the
relief granted by Rule 6e-2(b)(15) is not available with respect to a
scheduled premium variable life insurance separate account that owns
shares of an underlying fund that offers its shares to a variable
annuity separate account of the same company or of any other affiliated
or unaffiliated life insurance company. The use of a common management
investment company as the underlying investment medium for both
variable annuity and variable life insurance separate accounts of a
single insurance company (or of two or more affiliated insurance
companies) is referred to as ``mixed funding.''
2. In addition, the relief granted by Rule 6e-2(b)(15) is not
available with respect to a scheduled premium life insurance separate
account that owns shares of an Underlying Fund that also offers its
shares to separate accounts funding variable contracts to one or more
unaffiliated life insurance companies. The use of a common management
investment company as the underlying investment medium for variable
annuity and variable life insurance separate accounts of unaffiliated
insurance companies is referred to as ``shared funding.''
3. Applicant notes that the relief under Rule 6e-2(b)(15) is
available only where shares are offered exclusively to separate
accounts, and that additional exemptive relief is necessary if shares
of the Funds also are to be sold to Plans.
4. In connection with the funding of flexible premium variable life
insurance contracts issued through a UIT, Rule 6e-3(T)(b)(15) provides
partial exemptions from Sections 9(a), 13(a), 15(a), and 15(b) of the
1940 Act. The relief provided by Rule 6e-3(T)(b)(15) also is available
to a separate account's investment adviser, principal underwriter, and
sponsor or depositor. The exemptions granted by Rule 6e-3(T) are
available only where the Separate Account's Underlying Fund offers its
shares ``exclusively to separate accounts of the life insurer, or of
any affiliated life insurance company, offering either scheduled or
flexible contracts, or both; or which also offer their shares to
variable annuity separate accounts of the life insurer or of an
affiliated life insurance company. * * * '' Therefore, Rule 6e-3(T)
permits mixed funding with respect to a flexible premium variable life
insurance separate account, subject to certain conditions. However,
Rule 6e-3(T) does not permit shared funding because the relief granted
by Rule 6e-3(T)(b)(15) is not available with respect to a flexible
premium variable life insurance separate account that owns shares of a
management company that also offers its shares to separate accounts
(including variable annuity and flexible premium and scheduled premium
variable life insurance separate accounts) of unaffiliated life
insurance companies.
5. Applicant notes that the relief under Rule 6e-3(T) is available
only where shares of an Underlying Fund are offered exclusively to
separate accounts, and that additional relief is necessary if shares of
the Funds also are to be sold to Plans.
6. Applicant states that changes in the tax law have created the
opportunity for each Fund to increase its asset base through the sale
of shares of the Fund to Plans. Applicant states that Section 817(h) of
the Internal Revenue Code of 1986, as amended (the ``Code''), imposes
certain diversification standards on the underlying assets of the
contracts held in the Funds. The Code provides that such contracts
shall not be treated as annuity contracts or life insurance contracts
for any period in which the investments are not, in accordance with
regulations prescribed by the Treasury Department, adequately
diversified. On March 2, 1989, the Department of the Treasury issued
regulations (Treas. Reg. 1.817-5 (1989)) which established
diversification requirements for the investment portfolios underlying
variable contracts. The regulations provide that, to meet the
diversification requirements, all of the beneficial interests in the
investment company must be held by the segregated asset accounts of one
or more insurance companies. The regulations do, however, contain
certain exceptions to this requirement, one of which allows shares in
an investment company to be held by the trustee of a qualified pension
or retirement plan without adversely affecting the ability of shares in
the same investment company to also
[[Page 757]]
be held by the separate accounts of insurance companies in connection
with their variable contracts. (Treas. Reg. Sec. 1.817-5(f)(3)(iii)).
7. Applicant states that the promulgation of Rule 6e-2 and 6e-3(T)
under the 1940 Act preceded the issuance of these Treasury regulations
and assert that, given the then current tax law, the sale of shares of
the same investment company to both separate accounts and Plans could
not have been envisioned at the time of the adoption of Rules 6e-
2(b)(15) and 6e-3(T)(b)(15).
8. Applicant therefore requests relief from Sections 9(a), 13(a),
15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Funds to be offered and sold in connection with both mixed and shared
funding.
9. Section 9(a) of the 1940 Act provides that it is unlawful for
any company to serve as an investment adviser to, or principal
underwriter for, any registered open-end investment company if an
affiliated person of that company is subject to a disqualification
specified in Section 9(a) (1) or (2) of the 1940 Act. Rules 6e-2(b)(15)
(i) and (ii), and 6e-3(T)(b)(15) (i) and (ii), provide exemptions from
Section 9(a) under certain circumstances, subject to the limitations on
mixed and shared funding. The relief provided by Rules 6e-2(b)(15)(i)
and 6e-3(T)(b)(15)(i) permits a person disqualified under Section 9(a)
to serve as an officer, director, or employee of the life insurer, or
any of its affiliates, so long as that person does not participate
directly in the management or administration of the Underlying Fund.
The relief provided by Rules 6e-2(b)(15)(ii) and 6e-3(T)(b)(15)(ii)
permits the life insurer to serve as the Underlying Fund's investment
adviser or principal underwriter, provided that none of the insurer's
personnel who are ineligible pursuant to Section 9(a) participate in
the management or administration of the Underlying Fund.
10. Applicant states that the partial relief from Section 9(a)
found in Rules 6e-2(b)(15) and 6e-3(T)(b)(15), in effect, limits the
amount of monitoring necessary to ensure compliance with Section 9 to
that which is appropriate in light of the policy and purposes of
Section 9. Applicant states that those rules recognize that it is not
necessary for the protection of investors or the purposes fairly
intended by the policy and provisions of the 1940 Act to apply the
provisions of Section 9(a) to the many individuals employed by the
Participating Insurance Companies, most of whom will have no
involvement in matters pertaining to investment companies within that
organization. Applicant submits that there is no regulatory reason to
apply the provision of Section 9(a) to the many individuals in the
Participating Insurance Companies that may utilize the Funds as the
funding medium for variable contracts. The application states that the
relief requested will not be affected by the proposed sale of shares of
the Funds to Plans. The insulation of the Funds from individuals
disqualified under the 1940 Act remains in place. Applicant asserts
that since the Plans are not investment companies no additional relief
is necessary.
11. Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) under the 1940
Act assume the existence of a pass-through voting requirement with
respect to management investment company shares held by a separate
account. The application states that Participating Insurance Companies
will provide pass-through voting privileges to all Contract owners so
long as the SEC interprets the 1940 Act to require such privileges.
12. Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) provide partial
exemptions from Sections 13(a), 15(a), and 15(b) of the 1940 Act to the
extent that those sections have been deemed by the Commission to
require pass-through voting with respect to management investment
company shares held by a separate account, to permit the insurance
company to disregard the voting instructions of its contract owners in
certain limited circumstances.
Rules 6e-2(b)(15)(iii)(A) and 6e-3(T)(b)(15)(iii)(A) provide that
the insurance company may disregard the voting instructions of its
contract owners in connection with the voting of an Underlying Fund if
such instructions would require such shares to be voted to cause such
companies to make, or refrain from making, certain investments which
would result in changes in the subclassification or investment
objectives of such companies, or to approve or disapprove any contract
between a Fund and its investment adviser, when required to do so by an
insurance regulatory authority, subject to the provisions of paragraphs
(b)(5)(i) and (b)(7)(ii)(A) of each Rule.
Rules 6e-2(b)(15)(iii)(B) and 6e-3(T)(b)(15)(iii)(A)(2) provide
that the insurance company may disregard contract owners' voting
instructions if the contract owners initiate any change in such
company's investment policies or any principal underwriter or
investment adviser, providing that disregarding such voting
instructions is reasonable and subject to the other provisions of
paragraphs (b)(5)(ii) and (b)(7)(ii) (B) and (C) of each Rule.
13. Applicant further represents that the sale of shares by a Fund
to the Plans does not impact the relief requested in this regard.
Shares of the Funds sold to Plans would be held by the trustees of such
Plans as required by Section 403(a) of ERISA. Section 403(a) also
provides that the trustees must have exclusive authority and discretion
to manage and control the Plan with certain exceptions not relevant
herein. Accordingly, Plan trustees have exclusive authority and
responsibility for voting proxies on behalf of a Plan.
14. Applicant states that no increased conflicts of interest would
be present by the granting of the requested relief. Applicant asserts
that shared funding does not present any issues that do not already
exist where a single insurance company is licensed to do business in
several states. Applicant notes that where different Participating
Insurance Companies are domiciled in different states, it is possible
that the state insurance regulatory body in a state in which one
Participating Insurance Company is domiciled could require action that
is inconsistent with the requirements of insurance regulators in one or
more other states in which other Participating Insurance Companies are
domiciled. Applicant states that this possibility is no different or
greater than exists where a single insurer and its affiliates offer
their insurance products in several states.
15. Applicant argues that affiliation does not reduce the potential
for differences in state regulatory requirements. In any event, the
conditions (adapted from the conditions included in Rule 6e-
3(T)(b)(15)) are designed to safeguard against any adverse effects that
these differences may produce. If a particular state insurance
regulator's decision conflicts with the majority of other state
regulators, the affected insurer may be required to withdraw its
separate account's investment in the relevant Funds.
16. Applicant also argues that affiliation does not eliminate the
potential, if any exists, for divergent judgments as to when a
Participating Insurance Company could disregard contract owner voting
instructions. Potential disagreement is limited by the requirement that
the Participating Insurance Company's disregard of voting instructions
be both reasonable and based on specified good faith determinations.
However, if a Participating Insurance Company's decision to disregard
contract owner instructions represents a minority
[[Page 758]]
position or would preclude a majority vote approving a particular
change, such Participating Insurance Company may be required, at the
election of the relevant Fund, to withdraw its separate account's
investment in that Fund. No charge or penalty will be imposed as a
result of such a withdrawal.
17. Applicant states that there is no reason why the investment
policies of a Fund with mixed funding would, or should, be materially
different from what those policies would, or should, be if such
investment company or series thereof funded only variable annuity or
variable life insurance contracts. Applicant therefore argues that
there is no reason to believe that conflicts of interest would result
from mixed funding. Moreover, Applicant represents that the Funds will
not be managed to favor or disfavor any particular insurance company or
type of Contract.
18. Applicant notes that no single investment strategy can be
identified as appropriate to a particular insurance product. Each pool
of variable annuity and variable life insurance contract owners is
composed of individuals of diverse financial status, age, insurance and
investment goals. An investment company supporting even one type of
insurance product must accommodate those diverse factors in order to
attract and retain purchasers.
19. Applicant further notes that Section 817(h) of the Code is the
only section in the Code where separate accounts are discussed. Section
817(h) imposes certain diversification standards on Underlying Fund
assets and Treasury Regulation 1.817-5(f)(3)(iii) specifically permits
``qualified pension or retirement plans'' and separate accounts to
share the same underlying management investment company. Therefore,
neither the Code, the Treasury regulations nor the revenue rulings
thereunder present any inherent conflicts of interest if all invest in
the same management investment company.
20. While there are differences in the manner in which
distributions are taxed for variable annuity contracts, variable life
insurance contracts and Plans, Applicant states that these tax
consequences do not raise any conflicts of interest. When distributions
are to be made, and the separate account or the Plan is unable to net
purchase payments to make the distributions, the separate account or
the Plan will redeem shares of the Funds at their respective net asset
value. The Plan will then make distributions in accordance with the
terms of the Plan. The life insurance company will surrender values
from the separate account into the general account to make
distributions in accordance with the terms of the variable contract.
21. With respect to voting rights, Applicant states that it is
possible to provide an equitable means of giving such voting rights to
contract owners and to Plans. Applicant represents that the transfer
agent for each Fund will inform each Participating Insurance Company of
its share ownership in each Separate Account, as well as inform the
trustees of the Plans of their holdings. Each Participating Insurance
Company will then solicit voting instructions in accordance with Rules
6e-2 and 6e-3(T).
22. Applicant argues that the ability of the Funds to sell their
shares directly to Plans does not create a ``senior security,'' as such
term is defined under Section 18(g) of the 1940 Act, with respect to
any contract owner as opposed to a participant under a Plan. Regardless
of the rights and benefits of participants and contract owners under
the respective Plans and Contracts, the Plans and the separate accounts
have rights only with respect to their respective shares of the Funds.
Such shares may be redeemed only at net asset value. No shareholder of
any of the Funds has any preference over any other shareholder with
respect to distributions of assets or payment of dividends.
23. Finally, Applicant asserts that there are no conflicts between
contract owners and participants under the Plans with respect to the
state insurance commissioners' veto powers over investment objectives.
State insurance commissioners have been given the veto power in
recognition of the fact that insurance companies cannot simply
indiscriminately redeem their separate accounts out of one fund and
invest those monies in another fund. Generally, to accomplish such
redemptions and transfers, complex and time consuming transactions must
be undertaken. Conversely, trustees of Plans can make the decision
quickly and implement redemption of shares from a Fund and reinvest the
monies in another funding vehicle without the same regulatory
impediments or, as is the case with most Plans, even hold cash pending
a suitable investment. Based on the foregoing, Applicant represents
that even should there arise issues where the interests of contract
owners and the interests of Plan conflict, the issue can be almost
immediately resolved in that trustees of the Plans can, independently,
redeem shares out of the Funds.
24. Applicant states that various factors have kept certain
insurance companies from offering variable annuity and variable life
insurance contracts. According to Applicant, these factors include: the
cost of organizing and operating an investment funding medium; the lack
of expertise with respect to investment managers; and the lack of
public name recognition of certain insurers as investment
professionals. Applicant argues the use of the Funds as common
investment media for the Contracts would ease these concerns. Applicant
submits that mixed and shared funding should benefit variable contract
owners by: (a) eliminating a significant portion of the costs of
establishing and administering separate funds; (b) allowing for a
greater amount of assets available for investment by the Funds, thereby
promoting economies of scale, permitting greater safety through greater
diversification, and/or making the addition of new portfolios more
feasible; and (c) encouraging more insurance companies to offer their
variable contract, resulting in increased competition with respect to
both the design and the pricing, which can be expected to result in
more product variation and lower charges. Each Fund will be managed to
attempt to achieve its investment objectives and not to favor or
disfavor any particular Participating Insurance Company or type of
insurance product.
25. Applicant asserts that there is no significant legal impediment
to permitting mixed and shared funding. Applicant states that separate
accounts organized as UITs have historically been employed to
accumulate shares of mutual funds which have not been affiliated with
the depositor or sponsor of the separate account. Applicant also
asserts that mixed and shared funding will have no adverse federal
income tax consequences.
Applicants' Conditions
Applicant has consented to the following conditions:
1. A majority of the Board of Directors or Trustees of each Fund
(each a ``Board'') will consist of persons who are not ``interested
persons'' thereof, as defined by Section 2(a)(19) of the 1940 Act and
the Rules thereunder and as modified by any applicable orders of the
Commission (``disinterested directors''), excepted that if this
condition is not met by reason of death, disqualification, or bona fide
resignation of any director(s) or trustee(s), then the operation of
this condition shall be suspended: (a) for a period of 45 days if the
vacancy or vacancies may be filled by the Board; (b) for a period of 60
days if a vote of shareholders is required to fill the
[[Page 759]]
vacancy or vacancies; or (c) for such longer period as the Commission
may prescribe by order upon application.
2. The Board of each Fund will monitor the Fund for the existence
of any material irreconcilable conflict between the interests of
contract owners of all Separate Accounts investing in the Fund. A
material irreconcilable conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable Federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any series are being managed; (e) a
difference in voting instructions given by variable annuity and
variable life insurance contract owners; and (f) a decision by a
Participating Insurance Company to disregard the voting instructions of
contract owners.
3. In the event that a Plan should become an owner of 10% or more
of the assets of a Fund, such Plan will execute a participation
agreement with the Fund including the conditions set forth herein to
the extent applicable. A Plan will execute an application with each of
the Funds, including Future Funds, that contains acknowledgement of
this condition at the time of its initial purchase of shares of the
Fund.
4. Participating Insurance Companies, the Advisor, and any Plan
that executes a fund participation agreement upon becoming an owner of
10% or more of the assets of a Fund (collectively, the
``Participants'') will report any potential or existing conflicts to
the respective responsible Board(s). Participants will be responsible
for assisting the Board(s) in carrying out its responsibilities under
these conditions by providing the Board(s) with all information
reasonably necessary for the Board(s) to consider any issues raised.
This includes, but is not limited to, an obligation by the Advisor and
each Participating Insurance Company to inform the respective
responsible Board(s) whenever contract owner voting instructions are
disregarded. The responsibility to report such information and
conflicts and to assist the Board(s) will be a contractual obligation
of all Participants investing in the Funds under their agreements
governing participation in each Fund, and such agreements will provide
that these responsibilities will be carried out with a view only to the
interests of contract owners.
5. If it is determined by a majority of the Board, or a majority of
its disinterested directors or trustees, that a material irreconcilable
conflict exists, the relevant Participating Insurance Companies and
Plans will, at their expense and to the extent reasonably practical (as
determined by a majority of the disinterested directors or trustees)
take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (a) withdrawing
the assets allocable to some or all of the Separate Accounts from the
affected Fund or any portfolio thereof and reinvesting such assets in a
different investment medium, which may include another portfolio of
that Fund or another Fund; (b) submitting the question of whether such
segregation should be implemented to a vote of all affected contract
owners and, as appropriate, segregating the assets of any appropriate
group (i.e., variable annuity and variable life insurance contract
owners of one or more Participating Insurance Companies) that votes in
favor of such segregation, or offering to the affected contract owners
the option of making such a change; and (c) establishing a new
registered management investment company or managed separate account.
If a material irreconcilable conflict arises because of a decision by a
Participating Insurance Company to disregard contract owner voting
instructions and that decision represents a minority position or would
preclude a majority vote, the Participating Insurance Company may be
required, at the election of the Fund, to withdraw its Separate
Account's investment in that Fund, and no charge or penalty will be
imposed as a result of such withdrawal. The responsibility of taking
remedial action in the event of a Board determination of an
irreconcilable material conflict and bearing the cost of such remedial
action will be a contractual obligation of all Participants under their
agreements governing participation in the Funds, and these
responsibilities will be carried out with a view only to the interests
of contract owners and Plan participants, as applicable.
For purposes of this Condition Five, a majority of the
disinterested directors or trustees of the Board shall determine
whether or not any proposed action adequately remedies any
irreconcilable material conflict, but in no event will the Fund be
required to establish a new funding medium for any variable contract.
No Participating Insurance Company shall be required by this Condition
Five to establish a new funding medium for any variable contract if any
offer to do so has been declined by vote of a majority of the contract
owners materially adversely affected by the material irreconcilable
conflict.
6. A Board's determination of the existence of a material
irreconcilable conflict and its implications shall be made known in
writing promptly to all Participants.
7. Participating Insurance Companies will provide pass-through
voting privileges of Fund shares to all variable contract owners so
long as the SEC interprets the 1940 Act to require pass-through voting
privileges for contract owners. Accordingly, Participating Insurance
Companies will vote shares of the Funds held in their Separate Accounts
in a manner consistent with timely voting instructions received from
contract owners. Each Participating Insurance Company will vote shares
of the Funds held in their Separate Accounts for which it has not
received timely voting instructions from contract owners, as well as
shares of a Fund which the participating Insurance Company itself owns,
in the same proportion as those shares of the Fund for which voting
instructions from contract owners are timely received. Participating
Insurance Companies will be responsible for assuring that each of their
Separate Accounts participating in the Funds calculates voting
privileges in a manner consistent with other Participants. The
obligation to calculate voting privileges in a manner consistent with
all other Separate Accounts investing in the Funds shall be a
contractual obligation of all Participating Insurance Companies under
their agreement governing participation in the Funds.
8. Each Fund will comply with all the provisions of the 1940 Act
requiring voting by shareholders and in particular each Fund will
either provide for annual meetings (except insofar as the SEC may
interpret Section 16 of the 1940 Act not to require such meetings), or
comply with Section 16(c) of the 1940 Act (although the Fund is not one
of the trusts described in Section 16(c) of the 1940 Act), as well as
Section 16(a) of the 1940 Act and, if applicable, Section 16(b) of the
1940 Act. Further, each Fund will act in accordance with the SEC's
interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the SEC may
promulgate with respect thereto.
9. Each Fund will disclose in its prospectus that: (a) The Fund is
intended to be the funding vehicle for all types of variable annuity
and
[[Page 760]]
variable life insurance contracts offered by various insurance
companies and Plans; (b) material irreconcilable conflicts may possibly
arise; and (c) the Fund's Board will monitor events in order to
identify the existence of any material irreconcilable conflicts and
determine what action, if any, should be taken in response to such
conflict. Each Fund will notify all Participating Insurance Companies
that Separate Account prospectus disclosure regarding potential risks
of mixed and shared funding may be appropriate.
10. If and to the extent that Rules 6e-2 and 6e-3(T) under the 1940
Act are amended (or if Rule 6e-3 under the 1940 Act is adopted) to
provide exemptive relief from any provisions of the 1940 Act or the
Rules thereunder with respect to mixed and shared funding on terms and
conditions materially different from any exemptions granted in the
order requested by Applicant, then the Funds and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent applicable.
11. The Participants, at least annually, shall submit to each
Fund's Board such reports, materials, or data as the Board may
reasonably request so that the Board may carry out fully the
obligations imposed upon it by the conditions contained in the
Application. Such reports, materials and data will be submitted more
frequently if deemed appropriate by the Board. The obligations of the
Participants to provide these reports, materials and data to the Board
shall be a contractual obligation of the Participants under their
agreements governing their participation in the Funds.
12. All reports of potential or existing conflicts of interest
received by a Board, and all Board action with regard to determining
the existence of a conflict, notifying the Participants of a conflict,
and determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the appropriate
Board or other appropriate records, and such minutes or other records
shall be made available to the Commission upon request.
Conclusion
For the reasons set forth above, Applicant represents that the
exemptions requested are necessary and appropriate in the public
interest and consistent with the protection of investors and purposes
fairly intended by the policy and provisions of the Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-369 Filed 1-9-96; 8:45 am]
BILLING CODE 8010-01-M
