[Federal Register Volume 59, Number 27 (Wednesday, February 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2962]
[[Page Unknown]]
[Federal Register: February 9, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20054; 812-8408]
Janus Aspen Series, et al.
February 3, 1994.
AGENCY: Securities and Exchange Commission (``SEC or the
``Commission'').
ACTION: Notice of application for exemptions under the Investment
Company Act of 1940 (the ``1940 Act'' or ``Act'').
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APPLICANTS: Janus Aspen Series (the ``Trust'') and Janus Capital
Corporation (``Janus Capital'').
relevant 1940 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: Applicants seek an order to the extent
necessary to permit shares of the Trust and shares of any other
investment company that is designed to fund insurance products and for
which Janus Capital, or any of its affiliates, serves as investment
adviser, administrator, manager, principal underwriter or sponsor (the
Trust and such other investment companies collectively, ``funds'') to
be sold to and held by (a) variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance
companies (``Participating Insurance Companies'') and (b) qualified
pension and retirement plans outside of the separate account context
(``Qualified Plan'' or ``Plans'').
filing DATE: The application was filed on May 21, 1993, and amended on
December 9, 1993.
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 the application by writing to the
Secretary of the SEC and serving the 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 February 28, 1994 and should be
accompanied by proof of service on the Applicants in the form of an
affidavit or, for lawyers, a certificate. hearing requests should state
the nature of 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 5th Street, NW., Washington, DC 20549.
Applicants, 100 Fillmore Street, suite 300, Denver, Colorado 80206-
4923.
for further information contact: Joyce M. Pickholz, Senior Attorney, or
Wendell Mr. Faria, Deputy Chief, on (202) 272-2060, Office of Insurance
Products (Division of Investment management).
supplementary information: Following is a summary of the application;
the complete application is available for a fee from the SEC's Public
Reference Branch.
Applicants' Representations
1. The Trust was organized as a business trust under the laws of
the State of Delaware on May 19, 1993. The Trust is a registered open-
end management investment company comprised of six separately managed
series. Additional series could be added to the Trust in the future.
2. Janus Capital is the investment adviser and administrator for
each of the Trust's series. Kansas City Southern Industries, Inc.
(``KCSI'') owns approximately 81% of the outstanding voting stock of
Janus Capital. KCSI is a publicly traded holding company whose primary
subsidiaries are engaged in transportation, financial services and real
estate.
3. Shares of each series of the Trust may be offered only to
insurance company separate accounts that fund variable annuity and
variable life insurance contracts (``Contracts''). The Trust initially
intends to offer its shares exclusively to variable annuity separate
accounts established by Western Reserve Life Assurance Co. of Ohio
(``Western Reserve'') or its affiliates and variable annuity separate
accounts established by insurance companies that are not affiliated
with Western Reserve. It is contemplated that, shares of each series of
the Trust also would be offered to one or more variable life insurance
separate accounts established by insurance companies that are not
affiliated with Western Reserve. It is anticipated that Participating
Insurance Companies will rely on Rule 6e-2 or 6e-3(T) under the 1940
Act. Shares or each series of the Trust also would be offered directly
to Qualified Plans outside of the separate account context.
4. Qualified Plans may choose any of the Funds as the sole
investment under the Plan or as one of several investments. Plan
participants may or may not be given an investment choice depending on
the Plan itself. Shares of any of the Funds sold to Qualified Plans
would be held by the trustee(s) of said Plans as mandated by Section
403(a) of the Employee Retirement Income Security Act (``ERISA'').
Janus Capital will not act as investment adviser to any of the
Qualified Plans that will purchase shares of any of the Funds.
5. The use of a common management investment company as the
underlying investment medium for both variable annuity and variable
life insurance separate accounts is commonly referred to as mixed
funding. The use of a common investment company as the underlying
investment medium for separate accounts of unaffiliated insurance
companies is commonly referred to as shared funding.
Applicants' Legal Analysis
1. In connection with scheduled premium variable life insurance
contracts issued through a separate account registered under the 1940
Act as a unit investment trust, Rule 6e-2(b)(15) provides partial
exemptions from Sections 9(a), 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 an underlying
investment company's shares. The exemptions granted to a separate
account by Rule 6e-2(b)(15) are available only where all of the assets
of the separate account consist of the shares of one or more registered
management investment companies which offer their 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
investment company that also offers its shares to a variable annuity
separate account of the same or of any affiliated or unaffiliated
insurance company. Also, the relief granted by Rule 6e-2(b)(15) is not
available if shares of the underlying investment company are offered to
variable annuity or variable life insurance separate accounts of
unaffiliated insurance companies. Moreover, because the relief under
Rule 6e-2(b)(15) is available only where shares are offered exclusively
to separate accounts, additional exemptive relief is necessary if the
shares of the Funds are also to be sold to Qualified Plans.
2. The Applicants state that the promulgation of Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) preceded the issuance of the Treasury Regulations
which made it possible for shares of an investment company to be held
by the trustee of a Qualified Plan without adversely affecting the
ability of shares in the same investment company to also be held by the
separate accounts of insurance companies in connection with their
variable contracts. Thus, the sale of shares of the same investment
company to separate accounts and Qualified Plans could not have been
envisioned at the time of the adoption of Rules 6e-2(b)(15) and 6e-
3(T)(b)(15), given the then-current tax law.
3. According to the Applicants, various factors have kept more
insurance companies from offering variable annuity and variable life
insurance Contracts than currently do so. 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 public
name recognition as investment experts. In particular, some smaller
life insurance companies may not find it economically feasible, or
within their investment or administrative expertise, to enter the
Contract business on their own. The Applicants submit that use of the
Funds as common investment media for Contracts would ameliorate these
concerns.
4. Applicants assert that Participating Insurance Companies would
benefit not only from the investment advisory and administrative
expertise of Janus Capital, but also from the cost efficiencies and
investment flexibility afforded by a large pool of funds. Therefore,
making the Funds available for mixed and shared funding will encourage
more insurance companies to offer Contracts. This should result in
increased competition with respect to both Contract design and pricing,
which can be expected to result in more product variation and lower
charges. Contract owners would benefit because mixed and shared funding
eliminates a significant portion of the costs of establishing and
administering separate funds. Moreover, sale of the shares of Funds to
Qualified Plans should result in an increased amount of assets
available for investment by such Funds. This, in turn, should inure to
the benefit of Contract owners by promoting economies of scale, by
permitting greater safety through greater diversification, and by
making the addition of new portfolios to the Trust more feasible.
5. In connection with flexible premium variable life insurance
contracts issued through a separate account registered under the 1940
Act as a unit investment trust, Rule 6e-3(T)(b)(15) provides partial
exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the Act to the
extent that those sections have been deemed by the Commission to
require ``pass-through'' voting with respect to an underlying
investment company's shares. The exemptions granted to a separate
account by Rule 6e-3(T)(b)(15) are available only where all of the
assets of the separate account consist of the shares of one or more
registered management investment companies which offer their shares
exclusively to separate accounts of the life insurer, or of 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) permits
mixed funding for flexible premium variable life insurance. 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 an
investment company that also offers its shares to separate accounts
(including flexible premium variable life insurance separate accounts)
of unaffiliated life insurance companies.
6. According to the Applicants, the relief granted by Rule 6e-3(T)
is in no way affected by the purchase of shares of the Funds by
Qualified Plans. However, because the relief under Rule 6e-3T) is
available only where shares are offered exclusively to separate
accounts, additional exemptive relief is necessary if the shares of the
Funds are also to be sold to Plans.
7. Applicants state that they are not aware of any stated rational
for the exclusion of separate accounts and investment companies engaged
in shared funding from the exemptive relief provided under Rules 6e-
2(b)(15) and 6e-3(T) (b)(15) or for the exclusion of separate accounts
and investment companies engage in mixed funding from the exemptive
relief provided under Rule 6e-2(b)(15). Similarly, Applicants are not
aware of any stated rationale for excluding Participating Insurance
Companies from the exemptive relief requested because the Funds may
also sell their respective shares to Qualified Plans. If the Funds were
to sell their respective shares only to Qualified Plans, no exemptive
relief would be necessary. The relief provided under Rules 6e-2(b)(15)
and 6e-3(T) (b)(15) does not relate to qualified pension and retirement
plans or to a registered investment company's ability to sell its
shares to such plans. Exemptive relief is requested in the application
only because the separate accounts investing in the Funds are
themselves investment companies seeking relief under Rules 6e-2 and 6e-
3(T) and do not wish to be denied such relief if the Funds sell shares
to Qualified Plans.
8. 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 (2). However, Rules 6e-2(b)(15) (i) and (ii) and 6e-
3(T)(b)(15) (i) and (ii) provide partial exemptions from Section 9(a)
under certain circumstances, subject to the limitations discussed above
on mixed and shared funding. These exemptions limit the
disqualification to affiliated individuals or companies that directly
participate in the management or administration of the underlying
investment company.
9. Applicants argue that the exemptions contained in Rules 6e-
2(b)(15) and 6e-3(T) (b)(15) recognize that it is unnecessary to apply
Section 9(a) to the thousands of individuals who may be involved in a
large insurance company but would have no connection with the
investment company funding the separate accounts. Applicants believe
that it is unnecessary to limit the applicability of the rules merely
because shares of the Funds may be sold in connection with mixed and
shared funding. The Participating Insurance Companies are not expected
to play any rule in the management or administration of the Funds.
Therefore, applying the restrictions of Section 9(e) serves no
regulatory purpose. Indeed, applying such restrictions would increase
the monitoring costs incurred by the Participating Insurance Companies
and, therefore, would reduce the net rates of return realized by
Contract owners. Moreover, the relief requested herein will in no way
be affected by the proposed sale of shares of Funds to Qualified Plans.
The insulation of the Trust from those individuals who are disqualified
under the Act remains in place. Since the Qualified Plans are not
investment companies and will not be deemed to be affiliated solely by
virtue of their shareholdings, no additional relief is necessary.
10. Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) assume that
Contract owners are entitled to pass-through voting privileges with
respect to investment company shares held by a related separate
account. However, if the limitations on mixed and shared funding are
satisfied, Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) provide
exemptions from the pass-through voting requirements in limited
situations.
11. Rules 6e-2(b)(15) (iii)(A) and 6e-3(T)(b) (15)(iii)(A) provide
that an insurance company may disregard the voting instructions of its
contract owners with respect to the investments of an underlying
investment company or any contract between an investment company and
its investment adviser, when an insurance regulatory authority so
requires. Rules 6e-2(b)(15) (iii)(B) and 6e-3(T)(b) (15)(iii)(B)
provide that the insurance company may disregard contract owners'
voting instructions with regard to changes initiated by the contract
holders in the investment company's investment policies, principal
underwriter or investment adviser. Under the rules, voting instructions
with respect to a change in investment policies may be disregarded only
if the insurance company makes a good faith determination that such
change would: (1) violate state law; (2) result in investments that
were not consistent with the investment objectives of the separate
account; or (3) result in investments that would vary from the general
quality and nature of investments and investment techniques used by
other separate accounts of the company or of an affiliated life
insurance company with similar investment objectives. Voting
instructions with respect to a change in an investment adviser may be
disregarded only if the insurance company makes a good faith
determination that: (1) the adviser's fee would exceed the maximum rate
that may be charged against the separate account's assets; (2) the
proposed adviser may be expected to employ investment techniques that
vary from the general techniques used by the current adviser; or (3)
the proposed adviser may be expected to manage the investment company's
investments in a manner that would be inconsistent with its investment
objectives or in a manner that would result in investments that vary
from certain standards.
12. Applicants submit that Rule 6e-2 recognizes that variable life
insurance contracts have important elements unique to insurance
contracts and are subject to extensive state regulation of insurance.
Thus, in adopting Rule 6e-2, the Commission expressly recognized that
exemptions from pass-through voting requirements were necessary to
assure the solvency of the life insurer and the 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. 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) (which apply to flexible premium insurance contracts and
which permit mixed funding) presumably were adopted in recognition of
the same considerations as the Commission applied in adopting Rule 6e-
2. These considerations are no less important or necessary when an
insurance company funds its separate accounts in connection with shared
and mixed funding. Such funding does not compromise the goals of the
insurance regulatory authorities or of the Commission. While the
Commission may have wished to reserve wide latitude with respect to the
once unfamiliar variable annuity product, that product is now familiar
and there appears to be no reason for the maintenance of prohibitions
against mixed and shared funding arrangements. Indeed, permitting such
arrangements eliminates needless duplication of start-up and
administrative expenses and potentially increases an investment
company's assets, thereby making effective portfolio management
strategies easier to implement, as well as promoting other economies of
scale.
13. In addition, Applicants assert that the Funds' sale of shares
to Qualified Plans will not have any impact on the relief requested.
Shares of the Funds sold to such Plans would be held by the trustees of
said Plans as mandated by Section 403(a) of ERISA. Section 403(a) also
provides that the trustee(s) must have exclusive authority and
discretion to manage and control the plan with two exceptions: (1) When
the plan expressly provides that the trustee(s) are subject to the
direction of a named fiduciary who is not a trustee, in which case the
trustees are subject to proper directions made in accordance with the
terms of the plan and not contrary to ERISA, and (2) 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 the
named fiduciary. In any event, there is no-pass through voting to the
participants in such plans. Accordingly, 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.
14. Applicants assert that no increased conflicts of interest would
be present if the Commission grants the requested exemptive relief.
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. For example, when 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. That possibility, however, is no different and no greater
than exists when a single insurer and its affiliates offer their
insurance products in several states, as currently is permitted.
15. According to the Applicants, affiliations do not reduce the
potential, if any exists, for differences in state regulatory
requirements. In any event, the conditions discussed below (which are
adapted from the conditions included in Rule 6e-3(T)(b)(15)) are
designed to safeguard against any adverse effects that differences
among state regulatory requirements 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. Similarly, 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. The
potential for disagreement is limited by the requirement that
disregarding voting instructions be reasonable and based on specified
good faith determinations. However, if a Participating Insurance
Company's decision to disregard Contract owner voting 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
separate account's investment in that fund and no charge or penalty
will be imposed as a result of such withdrawal.
17. 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 they would or should be if such investment company
or series thereof funded only variable annuity or only variable life
insurance Contracts. Hence, there is no reason to believe that
conflicts of interest would result from mixed funding. Moreover, the
Funds will not be managed to favor or disfavor any particular insurer
or type of Contract.
18. Section 817(h) of the Internal Revenue Code of 1986 (``Code'')
is the only section in the Code where separate accounts are discussed.
Section 817(h) imposes certain diversification standards on the
underlying assets of variable annuity contracts and variable life
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,
among other things, ``qualified pension or retirement plans'' and
separate accounts to share the same underlying management investment
company. Therefore, neither the Code, the Treasury Regulations nor
Revenue Rulings thereunder present any inherent conflicts of interest
if Qualified Plans, variable annuity separate accounts and variable
life separate accounts all invest in the same management investment
company.
19. Applicants submit that while there are differences in the
manner in which distributions are taxed for variable annuity contracts,
variable life insurance contracts and Qualified Plans, the tax
consequences do not raise any conflicts of interest. When distributions
are to be made, and the separate account or the Qualified Plan cannot
net purchase payments to make the distributions, the separate account
or the Plan will redeem shares of the Trust at their net asset value.
The Qualified Plan will then make distributions in accordance with the
terms of the Plan and the life insurance company will make
distributions in accordance with the terms of the variable contract.
20. Applicants state that the ability of Funds to sell their
respective 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
participant under a Qualified Plan. As noted above, regardless of the
rights and benefits of participants under the Qualified Plans, or
Contract holders under Contracts, the Qualified Plans and the separate
accounts have rights only with respect to their respective shares of
the Trust. They can only redeem such shares at their net asset value.
No shareholder of any of the Funds has any preference over any other
shareholder with respect to distribution of assets or payment of
dividends.
21. Applicants submit that there are no conflicts between the
Contract owners of the separate accounts and the participants under the
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 cannot simply redeem their separate accounts out of
one fund and invest in another. Time-consuming, complex transactions
must be undertaken to accomplish such redemptions and transfers. On the
other hand, trustees of Qualified Plans can make the decision quickly
and implement the redemption of their shares from a Fund and reinvest
in another funding vehicle without the same regulatory impediments or,
as is the case with most Plans, even hold cash pending suitable
investment. Based on the foregoing, even if there should arise issues
where the interests of Contract holders and the interests of Qualified
Plans are in conflict, the issues can be almost immediately resolved
because the trustees of the Qualified Plans can, on their own, redeem
the shares out of the Trust.
Applicants' Conditions
Applicants have consented to the following conditions if the
requested order is granted:
1. A majority of the Trustees or Board of Directors (each, a
``Board'') of each Fund 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, except that if this condition is not met by
reason of the death, disqualification, or bona fide resignation of any
trustee or director, 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 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 between the interests of the
Contract owners of all separate accounts investing in the Funds. An
irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal and state insurance, tax, or
securities laws or regulations, or a public ruling, private letter
ruling 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 the
Funds are being managed; (e) a difference in voting instructions given
by variable annuity Contract owners and variable life insurance
Contract owners; or (f) a decision by a Participating Insurance Company
to disregard the voting instructions of Contract owners.
3. Participating Insurance Companies and Janus Capital (or any
other investment adviser of a Fund) will report any such potential or
existing conflicts to the Board of any relevant Fund. Participating
Insurance Companies will be responsible for assisting the appropriate
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 includes, but is not limited
to, an obligation by a Participating Insurance Company to inform the
Board whenever it has determined to disregard Contract owner voting
instructions. The responsibility to report such information and
conflicts and to assist the Boards will be contractual obligations of
all insurers investing in Funds under their agreements governing
participation in the Funds, and these responsibilities will be carried
out with a view only to the interest of Contract owners. If it is
determined by a majority of the Board of a Fund, or by a majority of
its disinterested trustees or directors, that a material irreconcilable
conflict exists, the relevant Participating Insurance Companies will,
at their expense and to the extent reasonably practicable (as
determined by a majority of the disinterested trustees or directors),
take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a)
withdrawing the assets allocable to some or all of the separate
accounts from the Fund or any series and reinvesting such assets in a
different investment medium, which may include another series of a Fund
or another Fund, or 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 Contract owners or 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 (b) establishing a new
registered management investment company or managed separate account.
If a material irreconcilable conflict arises because of an insurer's
decision to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority
vote, the insurer may be required, at the election of the fund, to
withdraw its separate account's investment in such 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
Participating Insurance Companies under their agreements governing
participating in the Funds and these responsibilities will be carried
out with a view only to the interests of Contract owners.
4. For purposes of this condition 4, a majority of the
disinterested members of the applicable Board will 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 Contract. No Participating Insurance Company
shall be required by this condition 4 to establish a new funding medium
for any Contract if an offer to do so has been declined by vote of a
majority of Contract owners materially and adversely affected by the
irreconcilable material conflict.
5. Any Board's determination of the existence of an irreconcilable
material conflict and its implications will be made known promptly to
all Participating Insurance Companies.
6. Participating Insurance Companies will provide pass-through
voting privileges to all Contract owners so long as the Commission
interprets the 1940 Act to require pass-through voting privileges for
Contract owners. Accordingly, the Participating Insurance Companies
will vote shares of a Fund held in their separate accounts in a manner
consistent with voting instructions received from Contract owners.
Participating Insurance Companies will be responsible for assuring that
each of their separate accounts calculates voting privileges in a
manner consistent with other Participating Insurance Companies. The
obligation to calculate voting privileges in a manner consistent with
all other separate accounts investing in the Fund will be a contractual
obligation of all Participating Insurance Companies under the
agreements governing participation in the Fund. Each Participating
Insurance Company will vote shares for which it has not received voting
instructions as well as shares attributable to it in the same
proportion as it votes shares for which it has received instructions.
7. All reports of potential or existing conflicts received by a
Board, and all Board action with regard to determining the existence of
a conflict, notifying Participating Insurance Companies 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.
8. 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) Shares of the Fund are offered in
connection with mixed and shared funding, (b) mixed and shared funding
may present certain conflicts of interest, and (c) the Board of such
Fund will monitor for the existence of any material conflicts and
determine what action, if any, should be taken.
9. Each Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders (which, for these purposes, shall be
the persons having a voting interest in shares of the Fund), and, in
particular, each such Fund will either provide for annual meetings
(except to the extent that the Commission may interpret Section 16 of
the 1940 Act not to require such meetings) or comply with Section 16(c)
of the Act, (although the Funds are not within the trusts described in
Section 16(c) of the Act), as well as Section 16(a), and, if
applicable, Section 16(b) of the 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.
10. If and to the extent that Rules 6e-2 and 6e-3(T) are amended
(or if Rule 6e-3 under the Act is adopted) to provide exemptive relief
from any provisions of the Act of the rules there under with respect to
mixed and shared funding on terms and conditions materially different
from any exemptions granted in the order requested by Applicants, then
the Funds and the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and
6e3-(T), as amended, and rule 6e-3, as adopted, to the extent
applicable.
11. No less than annually, the Participating Insurance Companies
and/or Janus Capital shall submit to the Boards such reports,
materials, or data as such Boards may reasonably request so that the
Boards may carry out fully the obligations imposed upon them by the
conditions contained in the Application. Such reports, materials and
date shall be submitted more frequently if deemed appropriate by the
applicable Boards. The obligations of the Participating Insurance
Companies to provide these reports, materials and data to the Boards
shall be a contractual obligation of all Participating Insurance
Companies under the agreements governing their participation in the
Funds.
12. If a Qualified Plan shareholder should become an owner of 10%
or more of the assets of a Fund, such Qualified Plan shareholder will
execute a participation agreement with such Fund. A Qualified Plan
shareholder will execute an application containing an acknowledgment of
this condition at the time of its initial purchase of shares of the
Fund.
Conclusion
For the reasons and upon the facts stated above, Applicants believe
that the requested exemptions are appropriate in the public interest
and consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-2962 Filed 2-8-94; 8:45 am]
BILLING CODE 8010-01-M
