[Federal Register Volume 64, Number 174 (Thursday, September 9, 1999)]
[Notices]
[Pages 49035-49039]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23389]



[[Page 49035]]

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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-23988; File No. 812-11620]


Maxim Series Funds, Inc. and GW Capital Management, LLC; Notice 
of Application

September 1, 1999.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application for an amended order under Section 6(c) 
of the Investment Company Act of 1940 (the ``1940 Act'') granting 
exemptive 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.

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    Summary of Application: Applicatns seek an amended order to permit 
shares of any current of future series of the Maxim Series Fund, Inc. 
to be sold to and held by qualified pension and retirement plans 
outside the separate account context (``Qualified Plans'').
    Applicants: Maxim Series Fund, Inc. (``Maxim Fund'' or ``Fund'') 
and GW Capital Management, LLC (the ``Adviser'').
    Filing Date: The application was filed on May 26, 1999 and amended 
and restated on August 25, 1999.
    Hearing or Notification of Hearing: An amended order granting the 
application was 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, in person or by mail. Hearing requests must be received by the 
Commission by 5:30 p.m. on September 27, 1999, 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 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 Commission.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW, Washington, DC 20549-
0609. Applicants, c/o Beverly A. Byrne, Esquire, Great-West Life & 
Annuity Insurance Company, 8515 East Orchard Road, Englewood, Colorado 
80111.

FOR FURTHER INFORMATION CONTACT: Ann L. Vlcek, Senior Counsel, or Susan 
M. Olson, 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 SEC, 450 Fifth Street, NW, Washington, 
DC 20549-0102 (tel. (202) 942-8090).

Applicant's Representations

    1. The Adviser serves as investment adviser to each portfolio of 
the Fund. The Adviser is wholly-owned subsidiary of Great-West Life & 
Annuity Insurance Company, which in turn is a wholly-owned subsidiary 
of the Great-West Life Assurance Company.
    2. The Fund, a registered, open-end management investment company, 
was incorporated in Maryland in 1981. The Fund currently consists of 28 
series. In the future, additional series of shares may be added to the 
Fund. Shares of the Maxim Fund are currently offered to separate 
accounts (``Participating Separate Accounts'') of both affiliated and 
unaffiliated life insurance companies (``Participating Insurance 
Companies'') to serve as investment vehicles for variable annuity and 
variable life insurance contracts (collectively, ``Variable 
Contracts'').
    3. On September 2, 1993, the Commission issued an order granting 
exemptive relief to permit shares of the Maxim Fund to be sold to and 
held by variable annuity and variable life insurance separate accounts 
of both affiliated and unaffiliated life insurance companies 
(Investment Company Act Release No. 19676, the ``Original Order''). 
Applicants represent that all of the facts asserted in the application 
for the Original Order and any amendments thereto remain true and 
accurate in all material respects to the extent that such facts are 
relevant to any relief on which Applicants continue to rely. Applicants 
state that the Original Order did not address the sale of shares of the 
Maxim Fund to Qualified Plans outside the separate account context.
    4. Applicants state that changes in the federal tax law have 
created the opportunity for the Maxim Fund to increase its asset base 
through the sale of shares of Qualified Plans. Applicants state that 
Section 817(h) of the Internal Revenue Code of 1986, as amended (the 
``Code''), imposes certain diversification standards on the assets 
underlying Variable Contracts. Treasury Regulations generally require 
that, to meet the diversification requirements, all of the beneficial 
interests in the underlying investment company must be held by the 
segregated asset accounts of one or more life insurance companies. 
Notwithstanding this, Applicants note that the Treasury Regulations 
also contain an exception to this requirement that permits trustees of 
a Qualified Plan to hold shares of an investment company, the shares of 
which are also held by insurance company segregated asset accounts, 
without adversely affecting the status of the investment company as an 
adequately diversified underlying investment of Variable Contracts 
issued through such segregated asset accounts.
    5. Applicants state that the promulgation of Rules 6e-2(b)(15) and 
6e-3(T)(b)(15) under the 1940 Act preceded the issuance of these 
Treasury Regulations. Thus, applicants assert that the sale of shares 
of the same investment company to both separate accounts and Qualified 
Plans was not contemplated at the time of the adoption of Rules 6e-
2(b)(15) and 6e-3(T)(b)(15).

Applicants' Legal Analysis

    1. Applicants request that the Commission issue an amended order 
pursuant to Section 6(c) of the 1940 Act, granting exemptive relief, to 
the extent necessary, 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 to permit shares of any current or future series 
of the Maxim Fund to be sold to and held by Qualified Plans under the 
conditions set forth herein. Applicants submit 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.
    2. The Maxim Fund previously requested and received relief from 
Sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and Rules 6e-
2(b)(15) and 6e-3(T)(b)(15) thereunder to the extent necessary to 
permit mixed and shared funding by the Original Order did not address 
the sale of shares to Qualified Plans. Applicants submit that it is 
appropriate for the Commission to grant this same relief in connection 
with the sale of shares of Maxim Fund to Qualified Plans.
    3. Section 6(c) of the 1940 Act provides in part that the 
Commission, by order upon application, may conditionally or 
unconditionally exempt any person, security or transaction, or any 
class or classes of persons, securities or transactions from any 
provisions of the 1940 Act or the rules or regulations thereunder, if 
and to the extent that such 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.
    In connection with the funding of scheduled premium variable life 
insurance contracts issued through a separate account registered under 
the

[[Page 49036]]

1940 Act as a unit investment trust (``UIT''), Rule 6e-2(b)(15) 
provides partial exemptions from various provisions of the 1940 Act, 
including the following: (1) Section 9(a), which makes it unlawful for 
certain individuals to act in the capacity of employee, officer, or 
director for a UIT, by limiting the application of the eligibility 
restrictions in Section 9(a) to affiliated persons directly 
participating in the management of a registered management investment 
company; and (2) Sections 13(a), 15(a) and 15(b) of the 1940 Act to the 
extent that those sections might be deemed to require ``pass-through'' 
voting with respect to an underlying fund's shares, by allowing an 
insurance company to disregard the voting instructions of contract 
owners in certain circumstances.
    These exemptions are available, however, only where the management 
investment company underlying the separate account (the ``underlying 
fund'') offers its shares ``exclusively to variable life insurance 
separate accounts of the life insurer, or of any affiliated life 
insurance company.'' Therefore, Rule 6e-2 does not permit either mixed 
funding or shared funding because the relief granted by Rule 6e-
2(b)(15) is not available with respect to a scheduled premium variable 
life insurance separate account that owns shares of an underlying fund 
that also offers its shares to a variable annuity or a flexible premium 
variable life insurance separate account of the same company or of any 
affiliated life insurance company. Rule 6e-2(b)(15) also does not 
permit the sale of shares of the underlying fund to Qualified Plans 
outside of the separate account context.
    4. In connection with flexible premium variable life insurance 
contracts issued through a separate account registered under the 1940 
Act as a UIT, Rule 6e-3(T)(b)(15) also provides partial exemption from 
Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act. These 
exemptions, however, 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 contracts or flexible contracts, or both; or which 
also offer its shares to variable annuity separate accounts of the life 
insurer or of an affiliated insurance company. Therefore, Rule 6e-(T) 
permits mixed funding but does not permit shared funding and also does 
not permit the sale of shares of the underlying fund to Qualified 
Plans. As noted above, the Original Order granted the Maxim Fund 
exemptive relief to permit mixed and shared funding, but did not 
expressly address the sale of its shares to Qualified Plans outside of 
the separate account context.
    5. Applicants note that if an underlying fund were to sell shares 
only to Qualified Plan, exemptive relief under Rule 6e-2 and Rule 6e-
3(T) would not be necessary. Applicants state that the relief for under 
Rule 6e-(b)(15) and Rule 6e-3(T)(b)(15) does not relate to qualified 
pension and retirement plans or to a registered investment company's 
ability to sell its shares to such plans.
    6. Applicants state that changes in the federal tax law have 
created the opportunity for the Maxim Fund to increase its asset base 
through the sale of shares to Qualified Plans. Section 817(h) of the 
Code imposes certain diversification standards on the assets underlying 
Variable Contracts. Treasury Regulations generally require that, to 
meet the diversification requirements, all of the beneficial interests 
in the underlying investment company must be held by the segregated 
asset accounts of one or more life insurance companies. Notwithstanding 
this, Applicants not that the /Treasury Regulations also contain an 
exception to this requirement that permits trustees of a Qualified Plan 
to hold shares of an investment company, the shares of which are also 
held by insurance company segregated asset account, whithout adversely 
affecting the status of the investment company as an adequately 
diversified underlying investment of Variable Contracts issued through 
such segregated asset accounts (Treas. Reg. 1.817-5(f)(3)(iii)).
    7. Applicants state that the promulgation of Rules 6e-2(b)(15) and 
6e-3(T)(b)(15) under the 1940 Act preceded the issuance of these 
Treasury Regulations. Thus, the sale of shares of the same investment 
company to both separate accounts and Qualified Plans was not 
contemplated at the time of the adoption of Rules 6e-(b)(15) and 6e-
3(T)(b)(15).
    8. Section 9(a) of the 1940 Act provides that is unlawful for any 
company to serve as investment adviser or principal underwriter of any 
registered open-end investment company if an affiliated person of that 
company is subject to a disqualification enumerated in Sections 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, subject to the limitations on 
mixed and shared funding. These exemptions limit the application of the 
eligibility restrictions to affiliated individuals or companies that 
directly participate in the management of the underlying portfolio 
investment company.
    9. Applicants state that the relief granted in Rules 6e-2(b)(15) 
and 6e-3(T)(b)(15) from the requirements of Section 9 limits, in 
effect, the amount of monitoring of an insurer's personnel that would 
otherwise be necessary to ensure compliance with Section 9 to that what 
is appropriate in light of the policy and purposes of Section 9. 
Applicants submit 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 of apply the provisions of 
Section 9(a) to the many individuals involved in an insurance company 
complex most of whom typically will have no involvement in matters 
pertaining to investment companies funding the separate accounts.
    10. The Maximum Fund previously requested and received relief from 
Section 9(a) and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) to the extent 
necessary to permit mixed and shared funding. Applicants submit that 
the relief previously granted from Section 9(a) to the Maximum Fund 
will in no way be affected by the proposed sales of shares to Qualified 
Plans outside of the separate account context. Those individuals who 
participate in the management or administration of the Maxim Fund will 
remain the same regardless of whether Qualified Plans invest therein. 
Applicants maintain that more broadly applying the requirements of 
Section 9(a) because of investments by Qualified Plans would serve no 
regulatory purpose. Moreover, Qualified Plans, unlike separate 
accounts, are not themselves investment companies, and therefore are 
not subject to Section 9 of the 1940 Act.
    11. Applicants state that 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) 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 contract owners' voting instructions if

[[Page 49037]]

the contract owners initiate certain changes in an underlying fund'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)(5)(ii) and 
(b)(7)(ii)(B) and (C) of the Rules). Applicants request relief from 
these provisions to the extent necessary to permit shares of the Maxim 
Fund to be sold to and held by Qualified Plans consistent with the 
foregoing provisions regarding a Participating Insurance company's 
ability to disregard voting instructions under certain circumstances.
    12. Applicants assert that Qualified Plans, which are not 
registered as investment companies under the 1940 Act, have no 
requirement to pass through the voting rights to plan participants. 
Applicants state that applicable law expressly reserves voting rights 
to certain specified persons. Under Section 403(a) of the Employee 
Retirement Income Security Act (``ERISA''), shares of a fund sold to a 
Qualified Plan must be held by the trustees of the Qualified Plan. 
Section 403(a) also provides that the trustee(s) must have exclusive 
authority and discretion to manage and control the Qualified Plan with 
two exceptions: (1) when the Qualified Plan expressly provides that the 
trustee(s) are subject to the direction of a named fiduciary who is not 
a trustee, in which case the trustees are subject to proper directions 
made in accordance with the terms of the Qualified Plans and not 
contrary to ERISA: and (2) when the authority to manage, acquire or 
dispose of assets of the Qualified Plan is delegated to one or more 
investment managers pursuant to Section 402(c)(3) of ERISA. Unless one 
of the two above exceptions stated in Section 403(a) applies, Qualified 
Plan trustees have the exclusive authority and responsibility for 
voting proxies. Where a named fiduciary to a Qualified Plan appoints an 
investment manager, the investment manager has the responsibility to 
vote the shares held unless the right to vote such shares is reserved 
to the trustees or the named fiduciary. Where a Qualified Plan does not 
provide participants with the right to give voting instructions, 
Applicants do not see any potential for material irreconcilable 
conflicts of interest between or among variable contract holders and 
Qualified Plan investors with respect to voting of the respective 
Fund's shares. Accordingly, Applicants state 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 respect to such Qualified Plans (outside of the separate account 
context) since the Qualified Plans are not entitled to pass-through 
voting privileges.
    13. Even if a Qualified Plan were to hold a controlling interest in 
an underlying fund, Applicants believe that such control would not 
disadvantage other investors in such underlying fund to any greater 
extent than is the case when any institutional shareholder holds a 
majority of the voting securities of any open-end management investment 
company. In this regard, Applicants submit that investment in the Maxim 
Fund by a Qualified Plan will not create any of the voting 
complications occasioned by mixed funding or shared funding. Unlike 
mixed or shared funding, Qualified Plan investor voting rights cannot 
be frustrated by veto rights of insurers or state regulators.
    14. Applicants state that some of the Qualified Plans, however, may 
provide for the trustee(s), an investment adviser (or advisers), or 
another named fiduciary to exercise voting rights in accordance with 
instructions from participants. Where a Qualified Plan provides 
participants with the right to give voting instructions, Applicants see 
no reason to believe that participants in Qualified Plans generally or 
those in a particular Qualified Plan, either as a single group or in 
combination with participants in other Qualified Plans, would vote in a 
manner that would disadvantage Variable Contract holders. In sum, 
Applicants maintain that the purchase of shares of the Maxim Fund by 
Qualified Plans that provide voting rights does not present any 
complications not otherwise occasioned by mixed or shared funding.
    15. Applicants state that they do not believe that the sale of the 
shares of the Maxim Fund to Qualified Plans outside of the separate 
account context will increase the potential for material irreconcilable 
conflicts of interest between among different types of investors. In 
particular, Applicants see very little potential for such conflicts 
beyond that which would otherwise exist between variable annuity and 
variable life insurance contract owners.
    As noted above, Section 817(h) of the Code imposes certain 
diversification standards on the underlying assets of variable 
contracts held in an underlying mutual fund. The Code provides that a 
variable contract shall not be treated as an annuity contract or life 
insurance, as applicable, for any period (and any subsequent period) 
for which the investments are not, in accordance with regulations 
prescribed by the Treasury Department, adequately diversified. 
Applicants believe that the Treasury Regulations discussed above 
specifically permit ``qualified pension or retirement plans'' and 
separate accounts to invest in the same underlying fund. For this 
reason, Applicants have concluded that neither the Code nor the 
Treasury Regulations or revenue rulings thereunder presents any 
inherent conflict of interest.
    16. Applicants note that while there are differences in the manner 
in which distributions from Variable Contracts and Qualified Plans are 
taxed, these differences will have no impact on the Maxim Fund. When 
distributions are to be made, and a Participating Separate Account or 
Qualified Plan is unable to net purchase payments to make the 
distributions, the Participating Separate Account or Qualified Plan 
will redeem underlying fund shares at 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. A Qualified 
Plan will make distributions in accordance with the terms of the 
Qualified Plan.
    17. Applicants maintain that it is possible to provide an equitable 
means of giving voting rights to Participating Separate Account 
contract owners and to Qualified Plans. In connection with any meeting 
of shareholders, the Fund will inform each shareholder, including each 
Participating Insurance Company and Qualified Plan, of information 
necessary for the meeting, including their respective share of 
ownership in the Fund. Each Participating Insurance Company will then 
solicit voting instructions in accordance with Rules 6e-2 and 6e-3(T), 
as applicable, and its participating agreement with the Fund. Shares 
held by Qualified Plans will be voted in accordance with applicable 
law. The voting rights provided to Qualified Plans with respect to 
shares of the Fund would be no different from the voting rights that 
are provided to Qualified Plans with respect to shares of funds sold to 
the general public.
    18. Applicants have concluded that even if there should arise 
issues with respect to a state insurance commissioner's veto powers 
over investment objectives where the interests of contract owners and 
the interests of Qualified Plans are in conflict, the issues can be 
almost immediately resolved since the trustees of (or participants in) 
the Qualified Plans can, on their own, redeem the shares out of the 
Fund. Applicants note that the insurance commissioners have been given 
to veto power in recognition

[[Page 49038]]

of the fact that insurance companies usually cannot simply redeem their 
separate accounts out of one fund and invest in another. Generally, 
time-consuming, complex transactions must be undertaken to accomplish 
such redemptions and transfers. Conversely, the trustees of Qualified 
Plans or the participants in participant-directed Qualified Plans can 
make the decision quickly and redeem their interest in the Fund and 
reinvest in another funding vehicle without the same regulatory 
impediments faced by separate accounts or, as is the case with most 
Qualified Plans, even hold cash pending suitable investment.
    19. Applicants also state that they do not see any greater 
potential for material irreconcilable conflicts arising between the 
interests of participants under Qualified Plans and contract owners of 
Participating 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.
    20. Applicants state that the sale of shares of the Maxim Fund to 
Qualified Plans outside of the separate account context would permit a 
greater amount of assets available for investment by the Maxim Fund, 
thereby promoting economies of scale, by permitting increased safety 
through asset diversification, and by making the addition of new series 
more feasible. Applicants assert that making the Maxim Fund available 
to Qualified Plans will encourage more insurance companies to offer 
Variable Contracts. Applicants believe that this should result in 
increased competition with respect to both Variable Contract design and 
pricing, which in turn can be expected to result in more produce 
variation and lower charges to investors.
    21. Applicants assert that, regardless of the type of shareholders 
in each portfolio of the Maxim Fund, the Adviser is or would be 
contractually and otherwise obligated to manage each portfolio solely 
and exclusively in accordance with that portfolio's investment 
objectives, policies and restrictions as well as any guidelines 
established by the Board of Directors of the Fund (the ``Board''). The 
Adviser works with a pool of money and (except in a few instances where 
this may be required in order to comply with state insurance laws) does 
not take into account the identity of the shareholders. Thus, each 
portfolio of the Fund will be managed in the same manner as any other 
mutual fund. Applicants therefore see no significant legal impediment 
to permitting the sale of shares of the portfolios of Maxim Fund to 
Qualified Plans.
    22. Applicants state that the Commission has permitted this relief 
in connection with sales to Qualified Plans. Applicants state that the 
amended order sought in the application is identical to precedent with 
respect to the conditions Applicants proposes for the sales to 
Qualified Plans.

Applicants' Conditions

    If the requested amended order is granted, Applicants consent to 
the following conditions (in addition to the conditions applicable 
pursuant to the Original Order):
    1. Any Qualified Plan that executes a fund participation agreement 
upon becoming an owner of 10% or more of the assets of a portfolio (or 
class thereof) of the Maxim Fund (a ``Qualified Plan Participant'') 
shall report any potential or existing conflicts to the Board. Such 
Qualified Plan Participants will be responsible for assisting the Board 
in carrying out its responsibilities under these conditions by 
providing the Board will all information reasonably necessary for the 
Board to consider any issues raised. This responsibility includes, but 
is not limited to, an obligation on the part of each Qualified Plan 
Participant to inform the Board whenever voting instructions relating 
to the Maxim Fund are disregarded. The responsibility to report such 
conflicts and information, and to assist the Board will be contractual 
obligations of such Qualified Plan Participants under the agreement 
governing participation in the Fund and such agreement shall provide 
that such responsibilities will be carried out with a view only to the 
interests of participants in a Qualified Plan.
    2. The Board will monitor the Fund for the existence of any 
material irreconcilable conflict among the interests of the contract 
owners of all the separate accounts investing in the Fund and 
participants in Qualified Plans 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 
interpretive letter, or any similar action by insurance, tax or 
securities regulatory authorities; (c) an administrative or judicial 
decision in any relative proceeding; (d) the manner in which the 
investments of the Fund are being managed; (e) a difference in voting 
instructions given by variable annuity and variable life insurance 
contract owners; (f) a decision by a Participating Insurance Company to 
disregard the voting instructions of contract owners; or (g) if 
applicable, a decision by a Qualified Plan to disregard the voting 
instructions of its participants.
    3. If it is determined by a majority of the Board of the Maxim 
Fund, or by a majority of its disinterested directors, that a material 
irreconcilable conflict exists, the relevant Qualified Plans shall, at 
their own expense and to the extent reasonably practicable (as 
determined by a majority of the disinterested trustees or directors), 
take whatever steps are necessary to remedy or eliminate the material 
irreconcilable conflict. Such steps should include: (a) Withdrawing the 
assets allocable to some or all of the Qualified Plans from the Fund or 
any portfolio thereof and reinvesting such assets in a different 
investment medium, which may include another portfolio of the Fund; and 
(b) establishing a new registered management investment company or 
managed separate account.
    4. If a material irreconcilable conflict arises because of a 
Qualified Plan's decision to disregard voting instructions of 
participants, if applicable, and that decision represents a minority 
position or would preclude a majority vote, the Qualified Plan may be 
required, at the election of the Fund (or portfolio thereof), to 
withdraw its investment in the Fund, and no charge or penalty will be 
imposed as a result of such withdrawal. To the extent permitted by 
applicable law, the responsibility of taking remedial action in the 
event of a Board determination of a material irreconcilable conflict 
and bearing the cost of such remedial action, will be a contractual 
obligation of all Qualified Plans under any agreement governing 
participation in the Fund, and these responsibilities will be carried 
out with a view only to the interests of participants in a Qualified 
Plan. For purposes of this condition, 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 Fund or the Adviser be required to establish a new 
funding medium for any Qualified Plan. Further, no Qualified Plan shall 
be required by this condition to establish a new funding medium for any 
Qualified Plan if: (a) a majority of its participants materially and 
adversely affected by the irreconcilable material conflict vote to 
decline such offer, or
    (b) pursuant to governing Qualified Plan documents and applicable 
law, the

[[Page 49039]]

Qualified Plan makes such decision without a vote of its participants.
    5. The Board's determination of the existence of a material 
irreconcilable conflict and its implications will be made known 
promptly and in writing to Qualified Plans.
    6. Each Qualified Plan will vote as required by applicable law 
governing Qualified Plan documents.
    7. All reports of potential or existing conflicts received by a 
Board and all Board actions with regard to determining the existence of 
a conflict of interest, notifying Qualified 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 shall be made 
available to the Commission upon request.
    8. The Maxim Fund will disclose in its prospectus that: (a) shares 
of the Fund may be offered to insurance company separate accounts on a 
mixed and shared basis and to Qualified Plans; (b) material 
irreconcilable conflicts may arise between the interests of Variable 
Contract owners participating in the Fund and the interests of 
Qualified Plans investing in the Fund; and (c) the Board of the Fund 
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 material irreconcilable conflict.
    9. No less than annually, Qualified Plan Participants that have 
executed a participation agreement upon becoming an owner of 10% or 
more of the assets of a Portfolio (or a class thereof) of Maxim Fund 
shall submit to the 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 shall be submitted more 
frequently if deemed appropriate by the Board. The obligations of the 
Qualified Plan Participants to provide these reports, materials and 
data shall be a contractual obligation of all the Qualified Plan 
Participants under the agreements governing their participation in the 
Funds.
    10. The Fund will not accept a purchase order from a Qualified Plan 
if such purchase would make the Qualified Plan shareholder an owner of 
10% or more of the assets of the Fund (or portfolio thereof) unless 
such Qualified Plan executes a fund participation agreement with the 
Fund, including the conditions set forth herein to the extent 
applicable. A Qualified Plan will execute a shareholder participation 
agreement containing an acknowledgment of this condition at the time of 
its initial purchase of shares of such Fund.

Conclusions

    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. 99-23389 Filed 9-8-99; 8:45 am]
BILLING CODE 8010-01-M