[Federal Register Volume 62, Number 12 (Friday, January 17, 1997)]
[Notices]
[Pages 2697-2701]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-1160]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22459; File No. 812-10294]


SoGen Variable Funds, Inc., et al. January 10, 1997

AGENCY: The Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of Application for an Exemption pursuant to the 
Investment Company Act of 1940 (``1940 Act'').

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APPLICANTS: SoGen Variable Funds, Inc. (the ``Company''), Societe 
Generale Asset Management Corp. (the ``Adviser'') and certain life 
insurance companies and their separate accounts investing now or in the 
future in the Company.

RELEVANT 1940 ACT SECTIONS: Order requested pursuant to section 6(c) 
for exemptions from sections 9(a), 13(a), 15(a), and 15(b) thereof and 
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder.

SUMMARY OF THE APPLICATION: Applicants seek an order to permit shares 
of the Company to be sold to and held by separate accounts funding 
variable annuity and variable life insurance contracts issued by both 
affiliated and unaffiliated life insurance companies (``Participating 
Insurance Companies'') or qualified pension and retirement plans 
outside the separate account context (``Plans'').

FILING DATES: The application was filed on August 12, 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 by writing to the Secretary of the 
Commission 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 February 4, 1997, and must be accompanied by 
proof of service on Applicants in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the requestor's interest, the reason for the request, and the 
issues contested. Persons may request notification of a hearing by 
writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549. Applicants, c/o Philip J. Bafundo, 
Societe Generale Asset Management Corp., 1221 Avenue of the Americas, 
New York, New York 10020.

FOR FURTHER INFORMATION CONTACT: Veena K. Jain, Attorney, or Kevin M. 
Kirchoff, Branch 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 is available for a fee from the 
Public Reference Branch of the Commission.

Applicants' Representations

    1. The Company, incorporated in Maryland, is registered under the 
1940 Act as an open-end management investment company. The Company 
currently consists of one series, the SoGen Overseas Variable Fund (the 
``Fund,'' together with future series of the Company, the ``Funds''). 
Additional series may be established.
    2. The Adviser, an indirect, majority-owned subsidiary of Societe 
Generale, is registered pursuant to the 1940 Act as an investment 
adviser and is the investment adviser to the Company.
    3. Shares of the Funds will be offered initially to the Continental 
Assurance Company and Valley Forge Life Insurance Company, and 
eventually to Participating Insurance Companies and Plans, to serve as 
investment vehicles for insurance contracts, which may include variable 
annuity contracts, variable life insurance contracts and variable group 
life insurance contracts (collectively, ``Contracts'').
    4. 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 Contract issued by such 
Company.
    5. The Advisory will not act as investment adviser to any of the 
Plans that will purchase shares of the Company. There will be no pass-
through voting to the participants in such Plans.

Applicants' Legal Analysis

    1. Section 6(c) authorizes the Commission to grant exemptions from 
the provisions of the 1940 Act, and rules thereunder, if and to the 
extent that an exemption is necessary or appropriate in the public 
interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the 1940 Act.
    2. Applicants request that the Commission issue an order under 
Section 6(c) of the 1940 Act exempting them from sections 9(a), 13(a), 
15(a), and 15(b) thereof and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) 
thereunder to the extent necessary to permit ``mixed'' and ``shared'' 
funding, as defined below.
    3. In connection with the funding of scheduled premium variable 
life insurance contracts issued through a separate account registered 
under the 1940 Act as a unit investment trust (``UIT''), Rule 6e-
2(b)(15) provides partial exemptions from sections 9(a), 13(a), 15(a) 
and 15(b) of the 1940 Act. The exemptions granted by Rule 6e-2(b)(15) 
are available, however, only where the management investment company 
underlying the UIT offers its shares ``exclusively to variable life 
insurance separate accounts of the life insurer, or of any affiliated 
life insurance company.''

[[Page 2698]]

    4. The relief granted by Rule 6e-2(b)(15), thus, is not available 
with respect to a variable life insurance separate account that owns 
shares of an underlying fund that also offers its shares to a variable 
annuity or a flexible premium variable life insurance separate account 
of the same company or of any other 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 of the same insurance company or of any affiliated 
life insurance company is referred to as ``Mixed Funding.'' The relief 
granted by Rule 6e-2(b)(15) is also not available with respect to a 
variable life insurance separate account that owns shares of an 
underlying fund that also offers its shares to separate accounts 
funding Contracts of one or more unaffiliated life insurance companies. 
The use of a common management investment company as the underlying 
investment medium for variable annuity and/or variable life insurance 
separate accounts of unaffiliated insurance companies is referred to as 
``Shared Funding.'' Rule 6e-2(b)(15), therefore, precludes Mixed and 
Shared Funding.
    5. In connection with 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 exemptions granted to a separate account by Rule 6e-3(T)(b)(15) are 
available only where the UIT's underlying fund offers its shares 
``exclusively to separate accounts of the life insurer, or of any 
affiliated life insurance company, offering either scheduled contracts 
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.'' Rule 6e-3(T)(b)(15) thus permits 
Mixed Funding but does not permit Shared Funding.
    6. Applicants state that because the relief under Rule 6e-2(b)(15) 
and Rule 6e-3(T)(b)(15) is available only where shares are offered 
exclusively to separate accounts, additional exemptive relief is also 
necessary if shares of the Funds are to be also sold to Plans. 
Applicant assert that the relief granted by paragraphs (b)(15) of Rules 
6e-2 and 6e-3(T) should not be affected by the proposed sale of the 
Funds to Plans.
    7. Applicants submit that Mixed and Shared Funding should benefit 
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 Company, 
thereby promoting economies of scale, permitting greater safety though 
greater diversification, and/or making the addition of Funds more 
feasible; and (c) encouraging more insurance companies to offer 
Contracts, resulting in increased competition with respect to both 
Contract design and pricing, which can be expected to result in more 
product variation and lower charges. Each Fund of the Company will be 
managed to attempt to achieve the Fund's investment objectives and not 
to favor or disfavor any participating insurer or type of insurance 
product.
    8. Applicants state that Section 817(h) of the Internal Revenue 
Code, as amended, (``Code'') imposes certain diversification 
requirements on the underlying assets of Contracts. The Code provides 
that such Contracts shall not be treated as annuity contracts or life 
insurance contracts for any period (and any subsequent period) for 
which the investments are not, in accordance with regulations 
prescribed by the Treasury Department, adequately diversified. On March 
2, 1989, the Treasury Department issued regulations which established 
diversification requirements for the investment portfolios underlying 
Contracts. Treas. Reg. 1.817-5 (1989). 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 Plans without adversely 
effecting the ability of shares in the same investment company to also 
be held by the separate accounts of insurance companies in connection 
with their Contracts. Treas. Reg. 1.817-5(f)(3)(iii).
    9. Applicants state that the promulgation of Rules 6e-2 and 6e-3(T) 
under the 1940 Act preceded the issuance of these Treasury regulations 
and that 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), given the 
then-current tax law.

Disqualification

    10. 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 
enumerated in section 9(a) (1) or (2). Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) provide exemptions from section 9(a) under certain 
circumstances. 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 63-3(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) participates in the 
management or administration of the fund.
    11. Applicants state that the partial relief from section 9(a) of 
the 1940 Act found in Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, 
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. Applicants assert that those rules 
reflect a recognition that it is not necessary for the protection of 
investors or the purposes fairly intended by the policy or provisions 
of the 1940 Act to apply the provisions of section 9(a) to the many 
individuals in an insurance company complex, most of whom typically 
will have no involvement in matters pertaining to investment companies 
in that organization. It is also unnecessary to apply section 9 (a) to 
the many individuals in various unaffiliated insurance companies (or 
affiliated companies of Participating Insurance Companies) that may 
utilize the Company as the funding medium for Contracts. Therefore, 
Applicants assert, applying the restrictions of section 9(a) serves no 
regulatory purpose. Applicants also state that the relief requested 
should not be affected by the proposed sale of shares of the Funds to 
the Plans because the Plans are not investment companies and are not, 
therefore, to section 9(a).

Pass-Through Voting

    12. 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.
    13. Rule 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) under the 1940 
Act provide exemptions from the pass-through voting requirement 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

[[Page 2699]]

its Contract owners with respect to the investments of an underlying 
fund, when required to do so by an insurance regulatory authority. 
Rules 6e-2(b)(15)(iii)(B) and 6e-3(T)(b)(15)(iii)(B) also provide that 
the insurance company may disregard voting instructions of its Contract 
owners if the Contract owners initiate any change in the investment 
company's investment policies, principal underwriter, or any investment 
adviser, provided that disregarding such voting instructions is 
reasonable and subject to the other provisions of paragraphs 
(b)(15)(ii) and (b)(7)(ii) (B) and (C) of each rule.
    14. Applicants state that shares of the Funds sold to Plans will be 
held by the trustees of such Plans as required by section 403(a) of the 
Employee Retirement Income Security Act (``ERISA''). Section 403(a) 
also provides that the trustees must have exclusive authority and 
discretion to manage and control the Plan with two exceptions: (a) when 
the Plan expressly provides that the trustees 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 (b) when the authority 
to manage, acquire or dispose of assets of the Plan is delegated to one 
or more investment managers pursuant to section 402(c)(3) of ERISA. 
Unless one of the two exceptions stated in section 403(a) applies, Plan 
trustees have the exclusive authority and responsibility for voting 
proxies. Where a named fiduciary appoints an investment manager, the 
investment manager has the responsibility to vote the shares held 
unless the right to vote such shares is reserved to the trustees or to 
the named fiduciary. In any event, there is no pass-through voting to 
the participants in such Plans. Accordingly, Applicants note that, 
unlike the case with insurance company separate accounts, the issue of 
the resolution of material irreconcilable conflicts with respect to 
voting is not present with Plans because the Plans are not entitled to 
pass-through voting privileges.

Conflicts of Interest

    15. Applicants assert 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. Applicants note that where 
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. Applicants submit that this 
possibility is no different and no greater than exists where a single 
insurer and its affiliates offer their insurance products in several 
states.
    16. Applicants further submit that affiliation does not reduce the 
potential for differences among state regulatory requirements. In any 
event, the conditions (adapted from the conditions included in Rule 6e-
3(T)(b)(15) discussed below) are designed to safeguard against any 
adverse effects that these differences may produce. If a particular 
state insurance regulator's decision conflicts with the decisions of a 
majority of other state regulators, the affected insurer may be 
required to withdraw its separate account's investment in the relevant 
Funds. The requirement will be provided for in agreements that will be 
entered into by Participating Insurance Companies with respect to their 
participating in the Company.
    17. Applicants also argue that affiliation does not eliminate the 
potential, if any exists, for divergent judgments as to the 
advisability or legality of a change in investment policies, principal 
underwriter, or investment adviser initiated by Contract owners. 
Potential disagreement is limited by the requirement that the 
Participating Insurance Company's disregard of voting instructions be 
both reasonable and based on specific good faith determinations. 
However, if a Participating Insurance Company's decision to disregard 
Contract owner instructions represents a minority position or would 
preclude a majority vote approving a particular change, such 
Participating Insurance Company may be required, at the election of the 
relevant Fund, to withdraw its investment in that Fund. No charge or 
penalty will be imposed as a result of such withdrawal. The requirement 
will be provided for in agreements that will be entered into by 
Participating Insurance Companies with respect to their participating 
in the Company.
    18. Applicants submit 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, whether flexible premium or 
scheduled premium policies. Moreover, Applicants represent that the 
Funds will not be managed to favor or disfavor any particular insurance 
company or type of Contract.
    19. Applicants note that Section 817(h) of the Code imposes certain 
diversification standards on the underlying assets of Contracts held in 
the portfolios of management investment companies. Treasury regulation 
1.817-5(f)(3)(iii), which established diversification requirements for 
such portfolios, specifically permits ``qualified pension or retirement 
plans'' and separate accounts to share the same underlying investment 
company. Therefore, Applicants have concluded that neither the Code, 
nor the Treasury regulations, nor the revenue rulings thereunder, 
present any inherent conflicts of interest if Plans, variable annuity 
separate accounts and variable life insurance separate accounts all 
invest in the same management investment company.
    20. Applicants note that while there are differences in the manner 
in which distributions are taxed for Contracts and Plans, these tax 
consequences do not raise any conflicts of interest. When distributions 
are to be made, and the separate account or the Plan cannot net 
purchase payments to make the distributions, the separate account or 
the Plan will redeem shares of the Company at their net asset value. 
The Plan will then make distributions in accordance with the terms of 
the Plan. A Participating Insurance Company will make distributions in 
accordance with the terms of the Contract.
    21. With respect to voting rights, Applicants state that it is 
possible to provide an equitable means of giving such voting rights to 
Contract owners and to Plans. Applicants represent that the transfer 
agent for the Company will inform each Participating Insurance Company 
of its share ownership as well as inform the trustees of Plans of their 
holdings. A Participating Insurance Company will then solicit voting 
instructions in accordance with Rules 6e-2 and 6e-3(T).
    22. Applicants argue that the ability of the Funds to sell their 
respective 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 Plan 
participants and Contract owners under their respective Plans and 
Contracts, the Plans and separate accounts have rights only with 
respect to their shares of the Funds. Such shares may be redeemed only 
at net asset value. No shareholder of the Company has any preference 
over any other shareholder with respect to

[[Page 2700]]

distribution of assets or payment of dividends.
    23. Applicants state that there are no conflicts of interest 
between Contract owners and Plan participants with respect to the state 
insurance commissioners' veto powers over investment objectives. The 
state insurance commissioners have been given the veto power to prevent 
insurance companies indiscriminately redeeming their separate accounts 
out of one Fund and investing those assets 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 the Company 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, Applicants represent that even should there arise issues 
where the interests of Contract owners and the interests of the Plans 
and Plan participants conflict, the issues can be almost immediately 
resolved in that trustees of the Plans can, independently, redeem 
shares out of the Company.

Applicants' Conditions

    Applicants have consented to the following conditions:
    1. A majority of the Board of Directors (``Board'') of the Company 
shall consist of persons who are not ``interested persons'' of the 
Funds, as defined by section 2(a)(19) of the 1940 Act and rules 
thereunder, and as modified by any applicable orders of the Commission, 
except that, if this condition is not met by reason of death, 
disqualification, or bona fide resignation of any 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 Board will monitor the Company for the existence of any 
material irreconcilable conflict between and among the interests of 
Contract owners of all separate accounts investing in the Company. 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 interpretive 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 the Company are managed; (e) a 
difference in voting instructions given by owners of variable annuity 
and variable life insurance contracts; or (f) a decision by an insurer 
to disregard voting instructions of Contract owners.
    3. Participating Insurance Companies and the Adviser, and any Plan 
that executes a participation agreement upon becoming an owner of 10 
percent or more of the issued and outstanding shares of the Company 
(collectively, ``Participating Parties'') will report any potential or 
existing conflicts of which it becomes aware to the Board. 
participating Parties will be responsible for assisting the Board in 
carrying out its responsibilities under these conditions by providing 
the Board with all information reasonably necessary for it to consider 
any issues raised. This responsibility includes, but is not limited to, 
an obligation by a Participating Insurance Company to inform the Board 
whenever contract owner 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 Parties 
investing in the Company under their agreements governing participation 
in the Company, and such agreements shall provide that these 
responsibilities will be carried out with a view only to the interests 
of the Contract owners and, if applicable, Plan participants.
    4. If it is determined by a majority of the Board, or by a majority 
of its disinterested directors, that a material irreconcilable conflict 
exists, the relevant Participating parties shall, at their expense and 
to the extent reasonably practicable (as determined by a majority of 
disinterested directors), take whatever steps are necessary to remedy 
or eliminate the material irreconcilable conflict, including: (a) 
Withdrawing the assets allocable to some or all of the separate 
accounts from the Company or any Fund therein and reinvesting such 
assets in a different investment medium, which may include another 
Fund, if any, of the Company 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 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; (b) withdrawing the assets 
allocable to some or all of the Plans from the Company and reinvesting 
those assets in a different investment medium; and (c) establishing a 
new registered management investment company or managed separate 
account. If a material irreconcilable conflict arises because 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 insurer may be required, at the 
Company's election, to withdraw its separate account's investment in 
the Company, 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 the existence of a material 
irreconcilable conflict and bearing the cost of such remedial action, 
shall be a contractual obligation of all Participating Parties under 
their agreements governing participation in the Company, and these 
responsibilities will be carried out with a view only to the interests 
of the Contract owners and, as applicable, Plan participants. For 
purposes of this Condition Four, a majority of the disinterested 
members of the Board will determine whether or not any proposed action 
adequately remedies any material irreconcilable conflict, but in no 
event will the Company or the Adviser or any Plan be required to 
establish a new funding medium for any Contract. No Participating 
Insurance Company shall be required by this Condition Four to establish 
a new funding medium for any Contract if an offer to do so has been 
declined by a vote of a majority of Contract owners materially 
adversely affected by the material irreconcilable conflict.
    5. All Participating Parties will be promptly informed in writing 
of the Board's determination that a material irreconcilable conflict 
exists and its implications.
    6. Participating Insurance Companies will provide pass-through 
voting privileges to all Contract owners so long as the Commission 
continues to interpret the 1940 Act as requiring pass-through voting 
privileges for 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 timely 
received from Contract owners. Participating Insurance Companies will 
be responsible for assuring that each of

[[Page 2701]]

their separate accounts calculates voting privileges in a manner 
consistent with all other Participating Insurance Companies. The 
obligation to calculate voting privileges in a manner consistent with 
all other separate accounts investing in the Company will be a 
contractual obligation of all participating Insurance Companies under 
the agreements governing participation in the Company. Each 
Participating Insurance Company will vote shares for which it has not 
received voting instructions as well as shares it owns in the same 
proportion as it votes shares for which it has received instructions.
    7. 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 Participating Parties 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. The Company will notify all Participating Insurance Companies 
that separate account prospectus disclosure regarding potential risks 
of Mixed and Shared Funding may be appropriate. The Company shall 
disclose in its prospectus that: (a) Its shares are offered to Plans 
and to separate accounts that fund all types of Contracts offered by 
various insurance companies; (b) material irreconcilable differences 
may arise; and (c) the Board will monitor events in order to identify 
any material conflicts of interest and determine what action, if any, 
should be taken.
    9. The Company 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 the shares of the Company) and 
in particular, the Company 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, if annual meetings are not held, 
comply with section 16(c) of the 1940 Act (although the Company is one 
of the trusts described in section 16(c) of the 1940 Act), as well as 
with section 16(a) and, if and when applicable, section 16(b) of the 
1940 Act. Further, the Fund will act in accordance with the 
Commission's interpretation of the requirements of section 16(a) with 
respect to periodic elections of directors (or trustees) and with 
whatever rules the Commission may promulgate with respect thereto.
    10. If an to the extent Rule 6e-2 or Rule 6e-3(T) is am emended, or 
Rule 6e-3 is adopted, to provide exemptive relief from any provision 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 Applicants, then the 
Company and/or the Participating Parties, as appropriate, shall take 
such steps as may be necessary to comply with Rule 6e-2 or Rule 6e-
3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules 
are applicable.
    11. No less than annually, the Participating Parties shall submit 
to the Board such reports, materials, or data as the Board may 
reasonable request so that it may carry out fully the obligations 
imposed upon them by the conditions stated in the application. Such 
reports, materials, and data shall be submitted more frequently if 
deemed appropriate by the Board. The obligations of Participating 
Parties to provide these reports, materials, and data to the Board 
shall be a contractual obligation of all Participating Parties under 
the agreements governing their participation in the Company.
    12. In the event that a Plan shareholder should ever become an 
owner of 10 percent or more of the assets of the Company, that Plan 
shareholder will execute a fund participating agreement with the 
Company. A Plan shareholder will execute an application containing an 
acknowledgement of this condition at the time of the initial purchase 
of shares of the Company.

Conclusion

    For the reasons summarized above, Applicants assert 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 1940 Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-1160 Filed 1-16-97; 8:45 am]
BILLING CODE 8010-01-M