[Federal Register Volume 61, Number 181 (Tuesday, September 17, 1996)]
[Notices]
[Pages 48991-48996]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23702]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22212; File No. 812-10088]
John Hancock Declaration Trust, et al.; Exemption Application
September 10, 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: John Hancock Declaration Trust (the ``Trust'') and John
Hancock Advisers, Inc. (the ``Adviser'').
RELEVANT 1940 ACT SECTIONS: 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 any current or future series of the Trust
and shares of any other investment company that is designed to fund
variable insurance products and for which the Adviser, or any of its
affiliates, may serve as investment advisor, administrator, manager,
principal underwriter or sponsor (collectively, with the Trust, the
``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 (the ``Participating Insurance Companies'');
and (b) certain qualified pension and retirement plans outside of the
separate account context (the ``Eligible Plans'').
FILING DATE: The application was filed on April 17, 1996, and amended
on August 29, 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 October 7, 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, John Hancock Declaration Trust, c/o Anne C. Hodsdon,
President, 101 Huntington Avenue, Boston, Massachusetts, 02199.
FOR FURTHER INFORMATION CONTACT:
Martha H. Platt, Senior Attorney, or Patrice Pitts, Special Counsel,
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 registered under the
1940 Act as an open-end diversified management investment company. The
Trust's registration statement on Form N-1A was declared effective on
August 12, 1996. The Trust currently is composed of ten separate
portfolios: John Hancock V.A. International Fund; John Hancock V.A.
Emerging Growth Fund; John Hancock V.A. Discovery Fund; John Hancock
V.A. Diversified Core Equity Fund; John Hancock V.A. Sovereign
Investors Fund; John Hancock V.A. 500 Index Fund; John Hancock V.A.
Sovereign Bond Fund; John Hancock V.A. Strategic Income Fund; John
Hancock V.A. Global Income Fund; and John Hancock V.A. Money Market
Fund. Additional portfolios may be added in the future.
2. The Adviser is registered with the SEC under the Investment
Advisers Act of 1940, and will be the investment manager for each of
the Trust's portfolios. The Adviser is an indirectly wholly-owned
subsidiary of the John Hancock Mutual Life Insurance Company. The
Adviser has engaged other registered investment advisers (``Sub-
Advisers'') to conduct the investment programs of certain Trust
[[Page 48992]]
portfolios and has entered into investment sub-advisory agreements with
each Sub-Adviser.
3. The Trust intends to offer its shares to separate accounts
(``Separate Accounts''), of both affiliated and unaffiliated insurance
companies, supporting variable annuity and variable life insurance
contracts. Insurance companies whose separate accounts will own shares
of one or more portfolios of the Funds are referred to herein as
``Participating Insurance Companies.'' 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.
4. The Trust also intends to offer one or more portfolios of its
shares directly to Eligible Plans. The Funds' shares sold to Eligible
Plans which are subject to the Employee Retirement Income Security Act
of 1984, as amended, may be held by the trustee(s) of the Eligible
Plans.
5. The Adviser has no plans to offer investment advisory services
to Eligible Plans or Eligible Plan participants (``Participants''), and
will not act as investment adviser to any of the Eligible Plans that
will purchase shares of the Trust.
Applicants' Legal Analysis
1. In connection with scheduled premium variable life insurance
contracts invested in 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 14(b) of the 1940 Act.
Rule 6e-2(b)(15), paragraphs (i) and (ii) provide partial conditional
exemptions from Section 9(a) of the 1940 Act, and Rule 6e-2(b)(15)(iii)
provides a partial exemption from Sections 13(a), 15(a), and 15(b) of
the 1940 Act to the extent those sections have been deemed by the
Commission to require ``pass-through'' voting with respect to an
underlying fund's shares.
2. The exemptions granted 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 a management company that also offers its shares to
a variable annuity separate account or a flexible premium variable life
insurance separate account of the same company or any affiliated
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 is referred to herein as ``mixed
funding.'' In addition, the relief granted by Rule 6e-2(b)(15) is not
available if shares of the underlying management company are offered to
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.''
3. 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 Section 9(a), and 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 an
underlying Fund's shares. The exemptions granted 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 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. 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 flexible premium variable life insurance
separate accounts) of unaffiliated life insurance companies.
4. Applicants state that the relief granted by the existing Rules
6e-2(b)(15) and 6e-3(T)(b)(15) is not affected by the purchase of
shares of the Funds by an Eligible Plan. Applicants also state that
exemptive relief is requested with respect to sale of shares to
Eligible Plans because the separate accounts investing in the Funds are
themselves investment companies seeking relief and do not wish to be
denied such relief if the Funds sell shares to Eligible Plans.
5. Rules 6e-2(B)(15)(i) and 6e-3(T)(b)(15)(i) provide, in effect,
that the eligibility restrictions of Section 9(a) do not apply to an
officer, director, or employee of an insurance company or any of its
affiliates, who does not participate directly in the management or
administration of the underlying fund. Rules 6e-2(b)(15)(ii) and 6e-
3(T)(b)(15)(ii) provide, in effect, that the fact that any individual
disqualified under Section 9(a) (1) or (2) is affiliated with the
insurance company would not, by virtue of Section 9(a)(3), disqualify
the insurance company from serving in any capacity with respect to an
underlying fund, provided that the disqualified individual did not
participate directly in the management or administration of the fund.
6. 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 that Section's policy and purposes.
Applicants state 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 individuals in a large insurance company complex, most
of whom will have no involvement in matters pertaining to investment
companies managed, administered, or invested in by that organization.
Those individuals who participate in the management or administration
of the Funds will remain the same regardless of which separate accounts
or insurance companies use the Funds. Accordingly, Applicants state
that applying the requirements of Section 9(a) because of investment by
other insurers' separate accounts would be unjustified and would not
serve any regulatory purpose. Therefore, Applicants submit that it is
unnecessary to apply section 9(a) to individuals in various
unaffiliated insurance companies (or affiliated companies of
Participating Insurance Companies) that may utilize a Fund as the
funding medium for variable contracts. Additionally, Applicants state
that for the same reasons as set forth above with respect to
investments by separate accounts, there is no regulatory purpose to be
served in extending the monitoring requirements because of investment
in the Funds by Plans.
[[Page 48993]]
7. Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) assume the
existence of a pass-through voting requirement with respect to
management investment company shares held by a separate account. Pass-
through voting privileges will be provided with respect to all contract
owners so long as the Commission interprets the 1940 Act to require
pass-through voting privileges for contract owners.
8. Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) provide
exemptions from the pass-through voting requirement with respect to
several significant matters, assuming the limitations on mixed and
shared funding are observed. Rules 6e-2(b)(15)(iii)(A) and 6e-
3(T)(b)(15)(iii)(A)(1) provide that the insurance company may disregard
the voting instructions of its contract owners with respect to the
investments of an underlying fund or 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 the Rules). Rules 6e-2(b)(15)(iii)(B) and 6e-
3(T)(b)(15)(iii)(A)(2) provide that the insurance company may disregard
the voting instructions of contract owners in favor of any change in
such company's investment policies, 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).
9. The prohibitions on mixed and shared funding might reflect
concerns regarding possible divergent interests between or among
different classes of investors. However, Applicants state that the
possibility of divergent interest should not be increased substantially
by virtue of mixed and shared funding or investment by Eligible Plans,
and further that compliance with the conditions set forth below will
minimize the risk that a divergence of interests will result in any
adverse impact upon investors.
10. Applicants submit that there is no reason why the investment
policies of any portfolio of the Funds would or should be materially
different from what it would or should be if it funded only annuity
contracts or only scheduled or flexible premium life insurance
contracts. Each type of insurance product is designed as a long-term
investment program. The Funds' portfolio swill not be managed to favor
or disfavor any particular Participating Insurance Company or type of
insurance product. There is no reason to believe that different
features of various types of contracts, including the ``minimum death
benefit'' guarantee under certain variable life insurance contracts,
will lead to different investment policies for different types of
variable contracts. To the extent that the degree of risk may differ as
between variable annuity contracts and variable life insurance
contracts, the differing insurance charges imposed, in effect, adjust
any such differences and equalize the insurers' exposure in either
case. No one investment strategy can be identified as appropriate to a
particular insurance product. Each pool of variable annuity contract
owners and variable life insurance contract owners is composed of
individuals of diverse financial status, age, and insurance and
investment goals. A fund supporting even one type of insurance product
must accommodate those factors in order to attract and retain
purchasers.
11. Applicants note that while there are differences in the manner
in which distributions from variable contracts and Eligible Plans are
taxed, these differences will have no impact on the Funds and therefore
the tax consequences do not raise any conflicts of interest. When
distributions are to be made, and a Separate Account or Eligible Plan
is unable to net purchase payments to make the distributions, the
Separate Account and Eligible Plan will redeem shares of the Funds in
the same manner and using the same procedures as each other. Each will
redeem shares of the Funds at their net asset value in conformity with
Rule 22c-1 under the 1940 Act (without the imposition of any sales
charge) to provide proceeds to meet distribution needs. An Eligible
Plan will make distributions in accordance with the terms of the
Eligible Plan. A Participating Insurance Company will make
distributions in accordance with the terms of the variable contract.
Distributions and dividends will be declared and paid by the Funds
without regard to the character of the shareholder. Based upon the
foregoing, Applicants have concluded that the tax consequences of
distributions from variable contracts and Eligible Plans do not raise
any conflicts of interest with respect to the use of the Funds.
12. In connection with any meeting of shareholders, the Funds will
inform each shareholder, including each Separate Account and Eligible
Plan, of information necessary for the meeting. A Participating
Insurance Company will then solicit voting instructions consistent with
the ``pass-through'' voting requirement. Separate Accounts and Eligible
Plans will each have the opportunity to exercise voting rights with
respect to their shares in the Funds, although only the Separate
Accounts are required to follow the pass-through voting procedure. The
voting rights provided to Eligible Plans with respect to shares of the
Fund would be no different from the voting rights that are provided to
Eligible Plans with respect to shares of mutual funds sold to the
general public.
13. Applicants submit that there are no conflicts between contract
owners of Separate Accounts and Participants 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
Eligible Plans or Participants in participant-directed Eligible Plans
can make the decision quickly and implement the redemption of their
shares from the Funds and reinvest in another funding vehicle without
the same regulatory impediments or, or is the case with most Eligible
Plans, even hold cash pending suitable investment. Based on the
foregoing, Applicants have concluded that even if there should arise
issues where the interests of contract owners and the interests of
Eligible Plans are in conflict, the issues can be almost immediately
resolved in that the trustees of the Eligible Plans can, on their own,
redeem the shares out of the Funds.
14. Applicants submit that there is no greater potential for
material irreconcilable conflicts arising between the interests of
Participants and contract owners of Separate Accounts from possible
future changes in the federal tax laws than that which already exists
between variable annuity contract owners and variable life insurance
contract owners.
15. Applicants state that the ability of the Funds to sell their
shares directly to Eligible 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.
``Senior security'' is defined under Section 18(g) of the 1940 Act to
include ``any stock of a class having priority over any other class as
to distribution of assets or payment of dividends.'' As noted above,
regardless of the rights and benefits of Participants or contract
owners under variable annuity and variable life insurance contracts,
the Eligible Plans and the variable annuity separate
[[Page 48994]]
accounts and variable life insurance separate accounts only have rights
with respect to their respective shares of the Funds. They can only
redeem such shares 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.
16. Applicants state that various factors have kept more insurance
companies from offering variable annuity contracts and variable life
insurance contracts than currently offer such 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 experts to whom the public
feels comfortable entrusting their investment dollars. For example,
some smaller life insurance companies may not find it economically
feasible, or within their investment or administrative expertise, to
enter the variable contract business on their own. Use of a Fund as a
common investment medium for variable contracts would reduce or
eliminate these concerns.
17. Mixed and shared funding, as well as investment in the Funds by
Eligible Plans, should provide several benefits to contract owners. The
Separate Accounts of Participating Insurance Companies will benefit
only from the investment and administrative expertise available through
the Funds, but also from the cost efficiencies and investment
flexibility afforded by a larger pool of funds. It would permit a
greater amount of assets available for investment, thereby promoting
economies of scale, permitting greater diversification, and making the
addition of new portfolios more feasible. Additionally, making the
Funds available for mixed and shared funding will encourage more
insurance companies to offer variable contracts, an this should result
in increased competition with respect to both various contract design
and pricing, which can 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 ho 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
Eligible Plans investing in the respective 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 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
investment 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; and (g) if applicable, a decision by a Participating
Eligible Plan (as defined below) to disregard the voting instructions
of Participants.
3. The Adviser (or any other investment adviser of a Fund), any
Participating Insurance Company, and any Eligible 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 Eligible Plan''), will report any potential or existing
conflicts to the Board. The Adviser, Participating Insurance Companies,
and Participating Eligible Plans will assist 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 includes, but is not limited to, an obligation by
each Participating Insurance Company to inform the Board whenever
contract owner voting instructions are disregarded and an obligation by
each Participating Eligible Plan to inform the Board whenever
Participant voting instructions are disregarded. The responsibility to
report such information and conflicts and to assist the Board will be a
contractual obligation of all Participating Insurance Companies and
Participating Eligible 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 Participants, as
applicable.
4. If it is determined by a majority of the Board, or a majority of
its disinterested directors, that a material irreconcible conflict
exists with respect to a portfolio of a Fund, the relevant
Participating Insurance Companies and Participating Eligible Plans
will, at their expense and to the extent reasonably practicable (as
determined by a majority of the disinterested directors, of that Fund),
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 that
Fund or any portfolio thereof 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. 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 (or any portfolio thereof, and no charge or
penalty will be imposed as a result of such withdrawal. If a material
irreconcilable conflict arises because of a Participating Eligible
Plan's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority
vote, the Participating Eligible Plan may be required, at the Fund's
election, to withdraw its investment in that Fund (or any portfolio
thereof), and no charge
[[Page 48995]]
or penalty will be imposed as a result of such withdrawal. To the
extent permitted by applicable law, the responsibility to take remedial
action in the event of a Board determination of an irreconcilable
material conflict and to bear the cost of such remedial action will be
a contractual obligation of all Participating Insurance Companies and
Participating Eligible Plans 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
Participants, as applicable.
5. For purposes of Condition 4, a majority of the disinterested
members of the Board will determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no
event will a Fund or the Adviser (or any other investment adviser of a
Fund) be required to establish a new funding medium for any variable
contract. No Participating Insurance Company will be required by this
Condition 4 to establish a new funding medium for any variable 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. No Participating Eligible Plan will be required by
Condition 4 to establish a new funding medium for such Eligible Plan if
(a) an offer to do so has been declined by vote of a majority of
Participants materially and adversely affected by the irreconcilable
material conflict or (b) pursuant to governing Eligible Plan documents
and applicable law, the Participating Eligible Plan may make such
decision without Participant vote.
6. The Board's determination of the existence of an irreconcilable
material conflict and its implications will be made known promptly in
writing to the Advisor and to all Participating Insurance Companies and
all Participating Eligible Plans.
7. Participating Insurance Companies will pass through the voting
privileges of Fund shares to all contract owners so long as the
Commission continues to interpret the 1940 Act as requiring 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 voting instructions
timely received from contract owners. Each Participating Insurance
Company will vote Fund shares held in its Separate Accounts for which
voting instructions from contract owners are not timely 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 timely 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 Eligible Plan will vote as required by applicable
law and governing Eligible 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 Fund), 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, 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 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 Eligible Plans; (b) material
irreconcilable conflicts may possibly arise among various contract
owners and Participants; and (c) the Board will monitor events in order
to identify the existence of any material irreconcilable conflict 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 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 applicable.
11. The Adviser, and the Participating Insurance Companies and
Participating Eligible Plans will at least annually submit to the Board
such reports, materials, or data as the Board may reasonably request so
that the Board may fully carry out the obligations imposed upon it by
the conditions contained in this Application, and said reports,
materials, and data will be submitted more frequently if deemed
appropriate by the Board. The obligations of the Participating
Insurance Companies and Participating Eligible Plans to provide these
reports, materials, and data to the Board, when it so reasonably
requests, will be a contractual obligation of all Participating
Insurance Companies and Participating Eligible Plans under their
agreements governing their participation in the Funds.
12. All reports received by the 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 Eligible 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, and such minutes or other records will be made
available to the Commission upon request.
13. If an Eligible Plan should become an owner of ten percent (10%)
or more of the assets of a Fund, such Eligible Plan will execute a
participation agreement with that Fund including the conditions set
forth herein to the extent applicable. An Eligible Plan will execute an
application containing an acknowledgment of this condition at the time
of its initial purchase of shares of the Funds.
Conclusion
For the reasons set forth 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.
[[Page 48996]]
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-23702 Filed 9-16-96; 8:45 am]
BILLING CODE 8010-01-M