[Federal Register Volume 61, Number 229 (Tuesday, November 26, 1996)]
[Notices]
[Pages 60130-60135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30084]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22341; File No. 812-10198]
Wanger Advisors Trust, et al.
November 19, 1996.
AGENCY: Securities and Exchange Commission (the ``SEC'' or the
``Commission'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``1940 Act'').
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APPLICANTS: Wanger Advisors Trust (the ``Trust'') and Wanger Asset
Management, L.P. (the ``Adviser'').
RELEVANT 1940 ACT SECTIONS AND RULES: Order requested under Section
6(c) of the 1940 Act from the provisions of 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: Applicants seek an order to the extent
necessary to permit shares of the Trust and shares of any other
investment company or series thereof that is designed to fund variable
insurance products and for which the Adviser, or any of its affiliates,
may serve now or in the future as investment adviser, administrator,
manager, principal underwriter or sponsor (collectively, with the
Trust, the ``Funds'') to be sold to and held by: (a) The variable
annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (the
``Participating Insurance Companies''); and (b) certain qualified
pension and retirement plans outside of the separate account context
(the ``Qualified Plans'').
FILING DATES: The application was filed on June 12, 1996, and amended
and restated on November 15, 1996.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing on this application by writing to the
Secretary of the SEC and serving Applicants with a copy of the request,
personally or by mail. Hearing requests must be received by the
Commission by 5:30 p.m. on December 16, 1996, and accompanied by proof
of service on the Applicants in the form of an affidavit or, for
lawyers, a certificate of service. Hearing requests should state the
nature of the writer's interest, the reason for the request and the
issues contested. Persons may request notification of the date of a
hearing by writing to the Secretary of the SEC.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants: Wanger Asset Management, L.P., 227 West Monroe
Street, Suite 3000, Chicago, IL 60606, with copies to Janet D. Olsen,
Bell, Boyd & Lloyd, Three First National Plaza, Suite 3300, Chicago, IL
60602.
FOR FURTHER INFORMATION CONTACT:
Megan L. Dunphy, Law Clerk, or Patrice Pitts, Branch Chief, Office of
Insurance Products, Division of Investment Management, at (202) 942-
0670.
SUPPLEMENTARY INFORMATION: Following is a summary of the application;
the complete application is available for a fee from the Public
Reference Branch of the SEC.
Applicants' Representations
1. The Trust is a Massachusetts business trust which is registered
under the 1940 Act as an open-end, management investment company.
Currently, the Trust consists of two separate portfolios: Wanger U.S.
Small Cap Advisor and Wanger International Small Cap Advisor (each a
``Portfolio'' and together the ``Portfolios''). The Trust may offer
additional portfolios in the future. The Trust's initial registration
statement on Form N-1A was declared effective on March 10, 1995.
2. The Adviser is registered with the SEC under the Investment
Advisers Act of 1940, and is the investment adviser for each Portfolio.
The Adviser is a Delaware limited partnership. The general partner of
the Adviser is Wanger Asset Management, Ltd., a Delaware corporation.
3. The Trust currently offers its shares to, and its shares are
held by: (a) separate accounts registered with the SEC under the 1940
Act as unit investment trusts of life insurance company affiliates of
Phoenix Home Life Mutual Insurance Company, Safeco Life Insurance
Company and First Providian Life and Health Insurance Company
(collectively, the ``Companies'') and (b) Qualified Plans. The Trust
serves as the investment vehicle for variable annuity contracts issued
by the Companies.
4. The Funds intend to offer and sell their shares to variable
annuity and variable life separate accounts (``Separate Accounts'') of
Participating Insurance Companies, including the Companies and
insurance companies that are affiliated or unaffiliated therewith to
serve as an investment vehicle for various types of insurance
[[Page 60131]]
products. These products may include variable annuity contracts, single
premium variable life insurance contracts, scheduled premium variable
life insurance contracts, and flexible premium variable life insurance
contracts (collectively, the ``Contracts''). The Funds also intend to
offer their shares directly to Qualified Plans.
5. Each Participating Insurance Company will enter into a
participation agreement with the Trust or Fund in which such
Participating Insurance Company invests. Each Participating Insurance
Company will have the legal obligation of satisfying all requirements
applicable to it under the federal securities laws in connection with
any variable contract which it issues. The Funds will fulfill any
conditions that the Commission may impose upon granting the order
requested in the application.
6. The Adviser may act as an investment advisor, trustee or
custodian to Qualified Plans which invest in the Trust. The Adviser is
not permitted to advise such Qualified Plans to invest in the Trust,
although the independent fiduciaries of such Qualified Plans may choose
to invest in the Trust.
Applicants' 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 exemptions granted by Rule 6e-2(b)(15)
are available only where a management investment company underlying a
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 also offers its shares to a variable annuity
separate account of the same company or of any 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 the
same life insurance company or of any affiliated life insurance company
is referred to herein as ``mixed funding.''
2. 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 also offers its shares to
separate accounts funding variable annuity or variable life insurance
separate accounts of unaffiliated life insurance companies. The use of
a common management investment company as the underlying investment
medium for separate accounts of unaffiliated insurance companies is
referred to herein as ``shared funding.'' ``Mixed and share funding''
denotes the use of a common management investment company to fund the
variable annuity and variable life insurance separate accounts of
affiliated and unaffiliated insurance companies. Rule 6e-2(b)(15)
precludes mixed funding as well as shared funding.
3. Applicants state that because the relief under Rule 6e-2(b)(15)
is available only where shares are offered exclusively to separate
accounts of insurance companies, additional exemptive relief is
necessary if shares of the Funds are also to be sold to Qualified
Plans.
4. In connection with flexible premium variable life insurance
contracts issued through a UIT, Rule 6e-3(T)(b)(15) provides partial
exemptions from Section 9(a), and from Sections 13(a), 15(a), and 15(b)
of the 1940 Act. The exemptions granted by Rule 6e-3(T)(b)(15) are
available only where a UIT's underlying fund offers its shares
``exclusively to separate accounts of the life insurer, or any
affiliated life insurance company, offering either scheduled premium
variable life insurance contracts or flexible premium variable life
insurance 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)(b)(15)
permits mixed funding for flexible premium variable life insurance, but
does not permit shared funding.
5. Applicants state that because the relief under Rule 6e-3(T) is
available only where shares are offered exclusively to separate
accounts of insurance companies, additional exemptive relief is
necessary if shares of the Funds are also to be sold to Qualified
Plans.
6. Applicants therefore request that the Commission grant 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 mixed and shared funding.
7. Section 9(a) of the 1940 Act provides that it is unlawful for
any company to serve as investment adviser or principal underwriter of
any registered open-end investment company if an affiliated person of
that company is subject to a disqualification enumerated in Section 9
(a)(1) or (a)(2). Applicants state that the partial relief granted in
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) from the requirements of Section 9
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 that Section. Applicants state that Rules 6e-2 and 6e-3(T)
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 individuals in a large
insurance company complex, most of whom will have no involvement in
matters pertaining to investment companies that fund the Separate
Accounts that are managed, administered, or invested in by that
organization. Applicants note that the Participating Insurance
Companies are not expected to play any role in the management or
administration of the Funds. Accordingly, Applicants assert that there
is no regulatory reason to apply the requirements of Section 9(a) to
the many individuals in various unaffiliated insurance companies (or
affiliated companies of Participating Insurance Companies) that may
utilize the Funds as funding media for variable contracts.
Additionally, Applicants state that the relief requested should not be
affected by the sale of shares of the Funds to Qualified Plans.
8. Applicants state that 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.
9. Applicants state that Rules 6e-2(b)(15)(iii)(A) and 6e-3
(T)(b)(15)(iii)(A)(1) provide that an insurance company may disregard
voting instructions of its contract owners with respect to the
investments of any underlying investment company or any contract
between an investment company 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 the Rules).
10. Applicants state that Rules 6e-2(b)(15)(iii)(B) and 6e-
3(T)(b)(15)(iii)(A)(2) provide that the
[[Page 60132]]
insurance company may disregard the voting instructions of contract
owners in favor of any change in such company's investment objectives,
principal underwriter, or any investment adviser (subject to the other
provisions of paragraphs (b)(5)(ii) and (b)(7)(ii) (B) and (C) of the
Rules).
11. Applicants maintain, therefore, that in adopting Rule 6e-2 the
Commission expressly recognized that such exemptions from pass-through
voting requirements are necessary ``to assure the solvency of the life
insurer and performance of its contractual obligations by enabling an
insurance regulatory authority or the life insurer to act when certain
proposals reasonably could be expected to increase the risks undertaken
by the life insurer.'' \1\ Applicants state that flexible premium
variable life insurance contracts and variable annuity contracts are
subject to substantially the same state insurance regulatory authority
and, therefore, the corresponding provisions of Rule 6e-3(T)
undoubtedly were adopted in recognition of the same considerations as
the Commission applied in adopting Rule 6e-2. Applicants argue that
these considerations are no less important or necessary when an
insurance company funds its separate account on a mixed and shared
funding basis, and that such funding does not compromise the goals of
the insurance regulatory authorities or of the Commission.
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\1\ Investment Company Act Release No. 9104 (Dec. 30, 1975), 8
SEC Docket 932 (proposing Rule 6e-2).
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12. Applicants further represent that the Funds' sale of shares to
the Qualified Plans should not affect the relief requested in this
regard. Shares of the Funds sold to Qualified Plans are held by the
trustees of the Qualified Plans as mandated by Section 403(a) of the
Employee Retirement Income Security Act of 1974 (``ERISA''). Section
403(a) also provides that the trustee(s) must have exclusive authority
and discretion to manage and control the Qualified Plan with two
exceptions: (a) When the plan expressly provides that the trustee(s) is
(are) subject to the direction of a named fiduciary who is not a
trustee, in which case the trustee(s) is (are) subject to proper
directions made in accordance with the terms of the plan and not
contrary to ERISA; and (b) when the authority to manage, acquire or
dispose of assets of the plan is delegated to one or more investment
managers pursuant to Section 402(c)(3) of ERISA. Unless one of the two
exceptions stated in Section 403(a) applies, plan trustees have the
exclusive authority and responsibility for voting proxies. Where a
named fiduciary appoints an investment manager, the investment manager
has the responsibility to vote the shares held unless the right to vote
such shares is reserved to the trustees or to the named fiduciary. In
any event, there is no pass-through voting to the participants in such
Qualified Plans. Accordingly, Applicants note that, unlike the case
with insurance company separate accounts, the issue of the resolution
of material irreconcilable conflicts with respect to voting is not
present with Qualified Plans.
13. Applicants state that no increased conflicts of interest would
be presented by the granting of the requested relief. Applicants note
that where insurers 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. Applicants submit that this possibility is no different from
that which exists when a single insurer is licensed to do business in
several states.
14. Applicants further submit that affiliation does not reduce the
potential for differences among state regulatory requirements. In any
event, the conditions discussed below are designed 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 Fund.
15. Applicants also argue that affiliation does not eliminate the
potential for divergent judgments as to the advisability or legality of
a change in investment policies, principal underwriter, or investment
adviser initiated by owners of the Contracts. 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 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
investment in that Fund. No charge or penalty will be imposed as a
result of such withdrawal.
16. Applicants state 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. Applicants therefore argue that
there is no reason to believe that conflicts of interest would result
from mixed funding. Moreover, Applicants represent that the Funds will
not be managed to favor or disfavor any particular insurance company or
type of contract.
17. Applicants note that Section 817(h) of the Internal Revenue
Code of 1986, as amended (the ``Code''), imposes certain
diversification standards on the underlying assets of variable annuity
contracts and variable life insurance contracts held in the portfolios
of variable annuity contracts and variable life insurance contracts
held in the portfolios of management investment companies. Treasury
Regulation 1.817-5(f)(3)(iii), which established diversification
requirements for such portfolios, specifically permits ``qualified
pension or retirement plans'' and separate accounts to share the same
underlying management investment company. Therefore, Applicants have
concluded that neither the Code, nor the Treasury regulations nor the
revenue rulings thereunder present any inherent conflicts of interest
if Qualified Plans, variable annuity separate accounts and variable
life insurance separate accounts all invest in the same management
investment company.
18. Applicants further note that while there are differences in the
manner in which distributions from variable contracts and Qualified
Plans are taxed, these differences do not raise any conflicts of
interest. When distributions are to be made, and a Separate Account or
Qualified Plan is unable to net purchase payments to make the
distributions, the Separate Account and Qualified Plan will redeem
shares of the Funds at their respective net asset values. A Qualified
Plan will make distributions in accordance with the terms of the
Qualified Plan. A Participating Insurance Company will surrender values
from the Separate Account in accordance with the terms of the variable
contract.
19. Applicants submit that there is no greater potential for
material irreconcilable conflicts arising between the interests of
participants under the Qualified Plans and contract owners of Separate
Accounts from possible future changes in the federal tax laws than that
which already exists between variableannuity contract owners and
variable life insurance contract owners.
[[Page 60133]]
20. In connection with any meeting of shareholders, Applicants
represent that the Funds will inform each shareholder, including each
Separate Account and Qualified Plan, of information necessary for the
meeting, including their respective share of ownership in the
respective Funds. A Participating Insurance Company will then solicit
voting instructions consistent with the ``pass-through'' voting
requirement.
21. Applicants state that the ability of the Funds to sell their
shares directly to Qualified 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 Qualified Plan
participant. Regardless of the rights and benefits of participants
under Qualified Plans or contract owners under variable contracts, the
Qualified Plans and the Separate Accounts only have rights with respect
to their respective shares of the Funds. They can redeem such shares
only at their net asset value. No shareholder of the Funds has any
preference over any other shareholder with respect to distribution of
assets or payment of dividends.
22. Applicants submit that there are no conflicts between contract
owners of Separate Accounts and participants under Qualified Plans with
respect to the state insurance commissioners' veto powers over
investment objectives. The state insurance commissioners have been
given the veto power in recognition of the fact that insurance
companies usually cannot simply redeem their separate accounts out of
one fund and invest in another. Generally, time-consuming, complex
transactions must be undertaken to accomplish such redemptions and
transfers. Conversely, the trustees of Qualified Plans or the
participants in participant-directed Qualified Plans can make the
decision quickly and implement the redemption of their shares from the
Funds and reinvest in another funding vehicle, or even hold cash
pending suitable investment, without the same regulatory impediments.
Based on the foregoing, Applicants have concluded that even if there
should arise issues where the interests of contract owners and the
interests of Qualified Plans are in conflict, the issues can be almost
immediately resolved in that the trustees of (or participants in) the
Qualified Plans can, on their own, redeem the shares out of the Funds.
23. Applicants state that various factors have kept insurance
companies from offering variable annuity contracts and variable life
insurance contracts. These factors include the costs of organizing and
operating a funding medium, the lack of expertise with respect to
investment management (principally with respect to stock and money
market investments), and the lack of name recognition by the public as
investment professionals. Applicants argue that use of a Fund as a
common investment medium for variable contracts would alleviate these
concerns. Applicants submit that mixed and shared funding would benefit
Contract owners by: eliminating a significant portion of the costs of
establishing and administering separate funds; allowing for a greater
amount of assets available for investment by the Funds, thereby
promoting economies of scale which permit increased safety of
investments through greater diversification and make the addition of
new portfolios more feasible; and encouraging more insurance companies
to offer variable contracts which may result in increased competition
with respect to both variable contract design and pricing, which, in
turn, may be expected to result in more product variation and lower
charges.
Applicants' Conditions
If the requested Order is granted, Applicants consent to the
following conditions:
1. A majority of the Board of Trustees or Directors of each Fund
(each, a ``Board'') will consist of persons who are not ``interested
persons'' of that Fund, 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, except that if this condition is not met by reason of
the death, disqualification, or bona fide resignation of any trustee(s)
or director(s), then the operation of this condition will 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 vacancy or vacancies; or (c) for such longer
period as the Commission may prescribe by order upon application.
2. The Boards will monitor their respective Funds for the existence
of any material irreconcilable conflict among the interests of contract
owners of all Separate Accounts and the interests of participants under
Qualified Plans investing in the respective Funds, and determine what
action, if any, should be taken in response to such conflicts. 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 portfolio of the Funds are being
managed; (e) a difference in voting instructions given by variable
annuity contract owners and variable life insurance contract owners;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of contract owners; or (g) as applicable, a
decision by a Qualified Plan to disregard the voting instructions of
Qualified Plan participants.
3. The Adviser (or any other investment adviser of a Fund), any
Participating Insurance Company, and any Qualified Plan that executes a
Fund participation agreement upon becoming an owner of ten percent
(10%) or more of the assets of the Fund (referred to herein as a
``Participating Plan''), will report any potential or existing
conflicts to the Board. The Adviser, Participating Insurance Companies,
and Participating Plans will be responsible for assisting the Board in
carrying out its responsibilities under these conditions by providing
the Board with all information reasonably necessary for the Board to
consider any issues raised. This responsibility includes, but is not
limited to, an obligation of each Participating Insurance Company and
the Adviser to inform the Board whenever the Participating Insurance
Company has determined to disregard contract owners' voting
instructions, and, if pass-through voting is applicable, an obligation
of the Adviser and a Qualified Plan, to inform the Board whenever the
Qualified Plan has determined to disregard voting instructions of
Qualified Plan participants. The responsibility to report such
information and conflicts and to assist the Board will be contractual
obligations of the Adviser and of all Participating Insurance Companies
and Participating Plans 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 and, as applicable, Qualified Plan
participants.
4. If a majority of the Board of a Fund, or a majority of its
disinterested members, determines that a material irreconcilable
conflict exists, the Adviser and the relevant Participating Insurance
Companies and Participating Plans shall, as appropriate and at their
[[Page 60134]]
expense and to the extent reasonably practicable (as determined by a
majority of the disinterested members of the Board), take whatever
steps are necessary to remedy or eliminate the material irreconcilable
conflict, including: (a) Withdrawing the assets allocable to some or
all of the Separate Accounts from that Fund and reinvesting such assets
in a different investment medium, which may include another portfolio
of that Fund, or, submitting the question 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 contract owners, variable life insurance contract
owners, or 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 (b)
establishing a new registered management investment company (or series
thereof) or managed separate account. If a material irreconcilable
conflict arises because of a Participating Insurance Company's decision
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 Fund's
election, to withdraw its Separate Account's investment in that Fund,
and no charge or penalty will be imposed as a result of such
withdrawal. If a material irreconcilable conflict arises because of a
Participating Plan's decision to disregard plan participant voting
instructions, if applicable, and that decision represents a minority
position or would preclude a majority vote, the Participating Plan may
be required, at the election of the Fund, to withdraw its investment in
such Fund, and no charge or penalty will be imposed as a result of such
withdrawal. The responsibility to take remedial action in the event of
a determination by a Board of a material irreconcilable conflict, will
be a contractual obligation of the Adviser and all Participating
Insurance Companies and Participating Plans under their agreements
governing participation in the Funds and these responsibilities will be
carried out with a view only to the interests of Contracts owners and
Qualified Plan participants, as applicable.
5. For purposes of condition 4, a majority of the disinterested
members of the relevant Board will determine whether any proposed
action adequately remedies any material irreconcilable conflict, but in
no event will the relevant Fund or the Adviser (or any other investment
adviser of the Funds) be required to establish a new funding medium for
any variable contract. No Participating Insurance Company shall be
required by condition 4 to establish a new funding medium for any
variable contracts if an offer to do so has been declined by vote of a
majority of contract owners materially affected by the material
irreconcilable conflict.
6. A Board's determination of the existence of a material
irreconcilable conflict and its implications will be made known
promptly in writing to the Adviser and to all Participating Insurance
Companies and all Participating Plans.
7. Participating Insurance Companies will provide pass-through
voting privileges to all Contract owners so long as the Commission
continues to interpret the 1940 Act as requiring pass-through voting
privileges for variable 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 Fund shares held in its Separate Accounts
for which no timely voting instructions from Contract owners are
received, as well as Fund shares held in its general account or
otherwise attributed to it, in the same proportion as those shares for
which voting instructions are received. Participating Insurance
Companies will be responsible for assuring that each of their Separate
Accounts investing in a Fund calculates voting privileges in a manner
consistent with the Separate Accounts of other Participating Insurance
Companies investing in that Fund. The obligation to calculate voting
privileges in a manner consistent with all other Separate Accounts
investing in a Fund will be a contractual obligation of all
Participating Insurance Companies under their agreements governing
participation in that Fund. Each Participating Insurance Company will
vote shares for which it has not received timely voting instruction, as
well as shares it owns, in the same proportion as it votes those shares
for which it has received voting instructions. Each Qualified Plan will
vote as required by applicable law and governing Qualified Plan
documents.
8. Each Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders (which, for these purposes, will be
the persons having a voting interest in shares of the Funds), and in
particular each Fund will either provide for annual meetings (except
insofar as the Commission 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))
as well as with 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 Commission's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
9. Each Fund will notify all Participating Insurance Companies that
separate account prospectus disclosure regarding potential risks of
mixed and shared funding may be appropriate. Each Fund will disclose in
its prospectus that: (a) The Fund is intended to be a funding vehicle
for all types of variable annuity contracts and variable life insurance
contracts offered by various Participating Insurance Companies and for
Qualified Plans; (b) the interests of various Contract owners and
Qualified Plans investing in the Funds may conflict; and (c) the Board
will monitor its respective Fund for any material irreconcilable
conflict and determine what action, if any, should be taken in response
to such conflict.
10. If and to the extent that Rule 6e-2 or 6e-3(T) under the 1940
Act are amended, or Rule 6e-3 is adopted, to provide exemptive relief
from any provision of the 1940 Act or the rules promulgated thereunder
with respect to mixed or shared funding on terms and conditions
materially different from any exemptions granted in the order requested
in this application, then the Funds and/or Participating Insurance
Companies, as appropriate, will 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 such rules are applicable.
11. At least annually, the Adviser, and the Participating Insurance
Companies and Participating Plans will submit to the Boards such
reports, materials, or data as the Boards may reasonably request so
that the Boards may carry out fully the obligations imposed upon them
by the conditions contained in this application. Such reports,
materials, and data will be submitted more frequently if deemed
appropriate by the relevant Board. The obligation to provide these
reports, materials, and data to a Board, when it so reasonably
requests, will be a contractual obligation of the Adviser and of all
Participating Insurance Companies and Participating Plans
[[Page 60135]]
under their agreements governing participation in the Funds.
12. All reports received by a Board of potential or existing
conflicts, and all Board action with regard to determining the
existence of a conflict, notifying the Adviser and Participating
Insurance Companies and Participating Plans of a conflict, and
determining whether any proposed action adequately remedies a conflict,
will be properly recorded in the minutes of the Board or other
appropriate records. Such minutes or other records will be made
available to the Commission upon request.
13. None of the Funds will accept a purchase order from a Qualified
Plan if, after the entry of the order, such purchase would make the
Plan an owner of 10% or more of the assets of a Fund, unless such plan
executes a fund participation agreement with such Fund. A Qualified
Plan will execute an application containing an acknowledgment of this
condition at the time of its initial purchase of shares of the Funds,
or, if the Qualified Plan is already a Fund shareholder at the date of
this application, prior to the date of entry of the Commission order
pursuant thereto.
Conclusion
For the reasons stated above, Applicants represent 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 1940 Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-30084 Filed 11-25-96; 8:45 am]
BILLING CODE 8010-01-M
