[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