[Federal Register Volume 65, Number 49 (Monday, March 13, 2000)]
[Notices]
[Pages 13344-13349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6079]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-24332; File No. 812-11942]


Calamos Advisors Trust, et al., Notice of Application

March 7, 2000.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of Application for an order of exemption under Section 
6(c) of the Investment Company Act of 1940 (``1940 Act'') for 
exemptions from the provisions of Section 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: Applicants seek and order to the extent 
necessary to permit shares of any current of future series of Calamos 
Advisors Trust (``Fund'') designed to fund insurance products and 
shares of any other investment company or series thereof now or in the 
future registered under the 1940 Act that is designed to fund insurance 
products and for which Calamos Asset Management, Inc. (``Calamos''), or 
any of its affiliates, may serve as investment adviser, administrator, 
manager, principal underwriter or sponsor (the Fund, together with such 
other investment companies are referred to, collectively, as the 
``Funds''), to be sold to and held by (1) variable annuity and variable 
life insurance separate accounts of both affiliated and unaffiliated 
life insurance companies; and (2) qualified pension and retirement 
plans.
    Applicants: Calamos Advisors Trust and Calamos Asset Management, 
Inc.

Filing Date: The application was filed on January 12, 2000, and amended 
on March 1,2000.
    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, in person or by mail. Hearing requests must be received by the 
Commission by 5:30 p.m. on March 31, 2000, and accompanied by proof of 
service on the Applicants in the form of an affidavit for lawyers, a 
certificate of service. Hearing requests should state the nature of 
your interest, the reason for the request, and the issues you contest. 
Persons may request notification of the date of a hearing by writing to 
the Secretary of the SEC.

ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, D.C. 
20549-0609. Applicants, c/o James S. Hamman, Jr., Esq., General 
Counsel, Calamos Asset Management, Inc., 1111 E. Warrenville Road, 
Naperville, Illinois 60563.

FOR FURTHER INFORMATION CONTACT: Ronald A. Holinsky, Attorney or Susan 
M. Olson, Branch Chief, Office of Insurance Products, Division of 
Investment Management, at (202) 942-0607.

SUPPLEMENTARY INFORMATION: Following is a summary of the application. 
The complete application is available for a fee from the SEC's Public 
Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 20549-0102 
(tel. (202) 942-8090).

Applicants' Representations

    1. The Fund is a Massachusetts business trust registered as an 
open-end management investment company. The Fund commenced operations 
on May 1, 1999 and currently consists of one series. Additional series 
may be added in the future.
    2. Calamos is registered as an investment adviser under the 
Investment Advisers Act of 1940 and will be the investment manager for 
the Fund.
    3. The Fund intends to offer its shares to separate accounts of 
both affiliated and unaffiliated insurance companies, supporting 
variable annuity and variable life insurance contracts. Separate 
accounts owning shares of the Fund and their insurance company 
depositors are referred to as ``Participating Separate Accounts'' and 
``Participating Insurance Companies,'' respectively.
    4. The Fund also intends to offer one or more series of its shares 
directly to qualified pension and retirement plans (``Plans'') outside 
the separate account context. The Plans will be pension or retirement 
plans intended to qualify under Sections 401(a) and 501(c) of the 
Internal Revenue Code of 1986, as amended (``Code''). The Fund's shares 
will be sold to Plans which are, or are designed to be, subject to the 
Employee Retirement Income Security Act of 1984 (``ERISA''), as 
amended. Participating Separate Accounts, Participating Insurance 
Companies, and Plans are collectively referred to as ``Participants''.
    5. The Participating Insurance Companies will establish their own 
Participating Separate Accounts and design their own contracts. Each

[[Page 13345]]

Participating Insurance Company will enter into a fund participation 
agreement with the Funds on behalf of its Participating Separate 
Account and will have the legal obligation of satisfying all 
requirements under state and federal law. The role of the Fund, so far 
as the federal securities laws are applicable, will be to offer their 
shares to separate accounts of Participating Insurance Companies and to 
Plans and to fulfill any conditions that the Commission may impose upon 
granting the order requested in the application.
    6. Plans may choose the Fund (or any series thereof) as their sole 
investment or as one of several investments. Plan participants may or 
may not be given an investment choice depending on the Plan itself. 
Shares of the Fund sold to Plans would be held by the trustee(s) of the 
Plans as mandated by Section 403(a) of ERISA. Calamos will not act as 
investment adviser to any of the Plans that will purchase shares of the 
Fund. There will be no pass-through voting to the participants in such 
Plans as it is not required to be provided under ERISA.

Applicants' Legal Analysis

    1. Applicants request that the Commission issue an order under 
Section 6(c) of the 1940 Act granting exemptive relief from Sections 
9(a), 13(a), and 15(a) and 15(b) of the 1940 Act and Rules 6e-2(b)(15) 
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares 
of the Fund to be offered and sold to variable annuity and variable 
life insurance separate accounts of both affiliated and unaffiliated 
insurance companies and to Plans.
    2. 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, 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 separate account (``underlying fund'') offers its shares 
``exclusively to variable life insurance separate accounts of the life 
insurer or any affiliated life insurance company * * *'' Therefore, the 
relief granted by Rule 6e-2(b)(15) is not available with respect to a 
scheduled premium variable life insurance separate account that owns 
shares of an underlying fund that also offers its shares to a variable 
annuity or flexible premium variable life insurance separate account of 
the same company or of any affiliated life insurance company. The use 
of a common management investment company as the underlying investment 
medium for both variable annuity and variable life insurance separate 
accounts of the same insurance company or of any affiliated life 
insurance company 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 investment 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 both 
variable annuity and variable life insurance separate accounts of the 
same insurance company or of any unaffiliated life insurance company is 
referred to herein as ``shared funding.''
    3. In connection with the funding of flexible premium variable life 
insurance contracts issued through a separate account, 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 by Rule 6e-
3(T)(b)(15) are available, however, 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 their shares to variable annuity separate accounts of the 
life insurer or of an affiliated life insurance company, or which offer 
their shares to any such life insurance company in consideration solely 
for advances made by the life insurer in connection with the operation 
of the separate account * * *'' Therefore, Rule 6e-3(T)(b)(15) permits 
mixed funding with respect to a flexible premium variable life 
insurance separate account. However, Rule 6e-3(T)(b)(15) 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 investment 
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 Rules 6e-2(b)(15) 
and 6e-3(T)(b)(15) is not affected by the purchase of shares of the 
Fund by a Plan. However, because the relief under Rules 6e-2(b)(15) and 
6e-3(T)(b)(15) is available only where shares of the underlying fund 
are offered exclusively to separate accounts, exemptive relief is 
necessary if shares of the Fund are also to be sold to Plans.
    5. Applicants state that the current tax law permits the Fund to 
increase its asset base through the sale of shares to Plans. Section 
817(h) of the Code imposes certain diversification standards on the 
underlying assets of the variable contracts. The Code provides that 
such contracts shall not be treated as an annuity contract or life 
insurance contract for any period during which the investments are not 
adequately diversified in accordance with regulations prescribed by the 
Treasury Department. Treasury regulations provide that, to meet the 
diversification requirements, all of the beneficial interests in an 
investment company must be held by the segregated asset accounts of one 
or more insurance companies. The regulations do contain certain 
exceptions to this requirement, however, one of which permits shares of 
an investment company to be held by the trustee of a Plan without 
adversely affecting the ability of shares in the same investment 
company also to be held by the separate accounts of insurance companies 
in connection with their variable contracts (Treas. Reg. Sec. 1.8 17-
5(f)(3)(iii)).
    6. Applicants state that the promulgation of Rules 6e-2(b)(15) and 
6e-3(T)(b)(15) preceded the issuance of these Treasury regulations 
which made it possible for shares of a Fund to be held by the trustee 
of a Plan without adversely affecting the ability of shares of the Fund 
to also be held by the separate accounts of insurance companies in 
connection with their variable life insurance contracts. Thus, 
Applicants assert that the sale of shares of a Fund to separate 
accounts through which variable life insurance contracts are issued 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.
    7. Applicants assert that if the Funds were to sell shares only to 
Plans or to separate accounts funding variable annuity contracts, no 
exemptive relief would be necessary. Applicants state that none of the 
relief provided under Rules 6e-2(b)(15) and 6e-3(T)(b)(15) relates to 
Plans or to a registered investment company's ability to sell its 
shares to such purchasers. Exemptive relief is requested in the 
application only because some of the separate accounts that will invest 
in the Fund (or series thereof) may themselves be investment companies 
that rely on Rules 6e-2 and 6e-3(T) and that desire to have the relief 
continue in place.
    8. In general, Section 9(a) of the 1940 Act disqualifies any person 
convicted of certain offenses, and any company

[[Page 13346]]

affiliated with that person, from serving in various capacities with 
respect to an underlying registered management investment company. More 
specifically, Section 9(a)(3) of the 1940 Act provides that it is 
unlawful for any company to act as 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 Sections 9(a)(1) or (2). Rules 6e-2(b)(15)(i) and (ii), 
and 6e-3(T)(b)(15)(i) and (ii) provide partial exemptions from Section 
9(a) under certain circumstances, subject to the limitations on mixed 
and shared funding. These exemptions limit the application of 
eligibility restrictions to affiliated individuals or companies that 
directly participate in the management of the underlying management 
investment company.
    9. Applicants state that the relief provided by Rules 6e-2(b)(15) 
and 6e-3(T)(b)(15) 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) 
are participating in the management or administration of the fund. 
Applicants state that the partial relief from Section 9(a) provided by 
Rules 6e-2(b)(15) and 6e-3(T)(b)(15), in effect, limits the amount of 
monitoring necessary to ensure compliance with Section 9 to that which 
is appropriate in light of the policy and purposes of Section 9. 
Applicants assert that it is not necessary for the protection of 
investors or the purposes fairly intended by the policy and provisions 
of the 1940 Act to apply the provisions of Section 9(a) to the many 
individuals in an insurance company complex, most of whom typically 
will have no involvement in matters pertaining to investment companies 
funding the separate accounts. Applicants assert that it also is 
unnecessary to apply the restrictions of Section 9(a) to the many 
individuals in various unaffiliated insurance companies (or affiliated 
companies of participating insurance companies) that may utilize the 
Funds as a funding medium for variable contracts. Moreover, Applicants 
state that the appropriateness of the relief requested will not be 
affected by the proposed sale of shares of the Fund to Plans, because 
the insulation of the Fund from those individuals who are disqualified 
under the 1940 Act remains in place.
    10. Applicants state that Rules 6e-2(b)(15)(iii) and 6e-
3(T)(b)(15)(iii) under the 1940 Act provide exemptions from the pass-
through voting requirements with respect to several significant 
matters, assuming the limitations on mixed and shared funding are 
observed.
    11. Applicants further represent that the sale of Fund shares to 
Plans should not affect the relief requested. With respect to Plans, 
there is no requirement to pass-through voting rights to Plan 
participants. Shares of the Funds sold to Plans would be held by the 
trustees of such Plans as mandated by Section 403(a) of ERISA. Section 
403(a) also provides that the trustees must have exclusive authority 
and discretion to manage and control the Plan with 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, the 
Plan trustees have exclusive authority and responsibility for voting 
proxies.
    12. Applicants state that where a named fiduciary appoints an 
investment manager, the investment manager has the responsibility to 
vote the shares held unless the right to vote such shares is reserved 
to the trustees or the named fiduciary. Accordingly, Applicants submit 
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 Plans since such Plans 
are not entitled to pass-through voting privileges.
    13. Applicants generally expect many Plans to have their trustee(s) 
or other fiduciaries exercise voting rights attributable to investment 
securities held by the Plan in their discretion. Some of the Plans, 
however, may provide for the trustee(s), or investment adviser(s) or 
another named fiduciary to exercise voting rights in accordance with 
instructions from participants. Applicants submit that where a Plan 
does not provide participants with the right to give voting 
instructions, there is no potential for material irreconcilable 
conflicts of interest between or among contract owners and Plan 
investors with respect to voting of the Fund's shares. Applicants 
further submit that where a Plan does provide participants with the 
right to give voting instructions, they see no reason to believe that 
participants in Plans generally, or those in a particular Plan, either 
as a single group or in combination with participants in other Plans, 
would vote in a manner that would disadvantage contract owners. The 
purchase of shares of the Fund by Plans that provide voting rights does 
not present any complications not otherwise occasioned by mixed and 
shared funding.
    14. Applicants submit that even if a Plan were to hold a 
controlling interest in the Fund, such control would not disadvantage 
other investors in the 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 fund by a Plan will not create 
any of the voting complications occasioned by mixed and shared funding. 
Unlike mixed or shared funding, Plan investor voting rights cannot be 
frustrated by veto rights of insurers or state regulators.
    15. Applicants state that no increased conflicts of interest would 
be presented by the granting of the requested relief. 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 different Participating 
Insurance Companies are domiciled in different states, it is possible 
that the state insurance regulatory body in a state in which one 
participating Insurance Company is domiciled could require action that 
is inconsistent with the requirements of other insurance regulators in 
one or more other states in which other Participating Insurance 
Companies are domiciled. Applicants submit that this possibility is no 
different or 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 in state regulatory requirements. In any 
event, the conditions 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 majority of 
other state regulators, the affected insurer may be required to 
withdraw its participating Separate Account's investment in the Fund.
    17. Applicants also argue that affiliation does not eliminate the 
potential, if any exists, for divergent judgments as to when a 
participating insurance Company could disregard contract owner voting 
instructions. Potential disagreement is limited by the

[[Page 13347]]

requirement that disregarding voting instructions be both reasonable 
and based on specified good faith determinations. however, if a 
participating insurance Company's decision to disregard Contract owner 
voting instructions represents a minority position or would preclude a 
majority vote approving a particular change, such participating 
Insurance Company may be required, at the election of the Fund, to 
withdraw its separate account, investment in the Fund. No charge or 
penalty will be imposed as a result of such a withdrawal.
    18. Applicants submit that there is no reason why the investment 
policies of the Fund with mixed funding would, or should, be materially 
different from what those policies would, or should, be if the Fund 
supported only variable annuity or only variable life insurance 
contracts. hence, Applicants state, there is no reason to believe that 
conflicts of interest would result from mixed funding. moreover, 
Applicants represent that the Fund will not be managed to favor or 
disfavor any particular insurer or type of contract.
    19. As noted above, Section 817(h) of the code imposes certain 
diversification standards on the assets underlying the variable 
contracts held in the portfolios of management investment companies. 
Treasury Regulation Section 1.817-5(f)(3)(iii), which establishes 
diversification requirements for such portfolios, specifically permits, 
among other things, ``qualified pension or retirement plans'' and 
separate accounts to share the same underlying management investment 
company. Therefore, Applicants assert that neither the Code, the 
Treasury regulations, nor the revenue rulings thereunder, recognize or 
proscribe any inherent conflicts of interest if qualified plans, 
variable annuity separate accounts, and variable life separate accounts 
all invest in the same management investment company.
    20. Applicants note that while there are differences in the manner 
in which distributions from variable contracts and Plans are taxed, the 
tax consequences do not raise any conflicts of interest. When 
distributions are to be made, and the Participating Separate Account or 
a Plan cannot net purchase payments to make the distributions, the 
Participating Separate Account or Plan will redeem shares of the Fund 
at their net asset value in conformity with Rule 22c-1 under the 1940 
Act to provide proceeds to meet distribution needs. The Plan will then 
make distributions in accordance with the terms of the Plan. The life 
insurance company will surrender values from the Separate Account into 
the general account to make distributions in accordance with the terms 
of the variable contract.
    21. Applicants state that the sale of shares to Plans should not 
increase the potential for material irreconcilable conflicts of 
interest between or among different types of investors. Applicants 
submit that there should be very little potential for such conflicts 
beyond that which would otherwise exist between variable annuity and 
variable life insurance contract owners.
    22. Applicants also state that it is possible to provide an 
equitable means of giving voting rights to Participating Separate 
Account contract owners and to Plans. The transfer agent for the Fund 
will inform each Participating Insurance Company of each Participating 
Separate Account's share ownership in the Fund, as well as inform the 
trustees of Plans of their holdings. The Participating Insurance 
company then will solicit voting instructions in accordance with Rules 
6e-2 and 6e-3 (T), as applicable, and its participation agreement with 
the Fund. Shares held by Plans will be voted in accordance with 
applicable law. The voting rights provided to Plans with respect to 
shares of the Fund would be no different from the voting rights that 
are provided to Plans with respect to shares of funds sold to the 
general public.
    23. Applicants submit that the ability of the Fund to sell its 
shares directly to Plans does not create a ``senior security,'' as such 
term is defined under Section 12(g) of the 1940 Act, with respect to 
any contract owner as opposed to a Plans participant. Regardless of the 
rights and benefits of Plan participants or contract owners, the Plans 
and the Participating Separate Accounts only have rights with respect 
to their respective shares of the Fund. No shareholder of the Fund has 
any preference over any other shareholder with respect to distribution 
of assets or payments of dividends.
    24. Applicants state that there are no conflicts between the 
contract owners of Participating Separate Accounts and Plan 
participants with respect to the state insurance commissioners' veto 
powers over investment objectives. The basic premise of shareholder 
voting is that shareholders may not all agree with a particular 
proposal. While interests and opinions of shareholders may differ, 
however, this does not mean that there are any inherent conflicts of 
interest between or among such shareholders. 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, complex and 
time-consuming transactions must be undertaken to accomplish such 
redemptions and transfers. Conversely, trustees of Plans can make the 
decision quickly and redeem their shares of the Fund and reinvest in 
another funding vehicle without the same regulatory impediments faced 
by separate accounts, or, as is the case with most Plans, even hold 
cash pending a suitable investment. Based on the foregoing, applicants 
represent that even should the interests of contract owners and the 
interests of Plans conflict, the conflicts can be resolved almost 
immediately because the trustees of the Plans can, independently, 
redeem shares out of the Fund.
    25. Applicants also assert that there does not appear to be any 
greater potential for material irreconcilable conflicts arising between 
the interests of Plan participants and contract owners of Participating 
Insurance Companies from possible future changes in the federal tax 
laws than that which already exists between variable annuity and 
variable life insurance contract owners.
    26. Applicants believe that the summary of the discussion contained 
herein demonstrates that the sale of shares of the Fund to qualified 
plans and variable contracts does not increase the risk of material 
irreconcilable conflicts of interest. Furthermore, Applicants state 
that the use of the Fund with respect to Plans is not substantially 
different from the Fund's current use, in that Plans, like variable 
contracts, are generally long-term retirement vehicles. In addition, 
applicants assert that regardless of the type of shareholder in the 
Fund, Calamos is or would be contractually or otherwise obligated to 
manage the Fund solely and exclusively in accordance with the Fund's 
investment objectives, policies and restrictions as well as any 
guidelines established by the Fund's Board of Trustees.
    27. Applicants assert that various factors have prevented more 
insurance companies from offering variable annuity and variable life 
insurance contracts than currently do so. These factors include the 
costs of organizing and operating a funding medium, the lack of 
expertise with respect to investment management, and the lack of public 
name recognition as investment professionals. In particular, 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.

[[Page 13348]]

Applicants assert that use of the Fund as a common investment medium 
for variable contracts would ameliorate these concerns. Participating 
Insurance companies would benefit not only from the investment advisory 
and administrative expertise of Calamos and its affiliates, but also 
from the cost efficiencies and investment flexibility afforded by a 
large pool of funds. Applicants submit that therefore, making the Fund 
available for mixed and shared funding will encourage more insurance 
companies to offer variable contracts. Applicants claim that this 
should result in increased competition with respect to both variable 
contract design and pricing, which can be expected to result in more 
product variation and lower charges. Moreover, the sale of the shares 
of the Fund to Plans should further increase the amount of assets 
available for investment by the Fund. This in turn, should inure to the 
benefit of contract owners by promoting economies of scale, by 
permitting greater safety through greater diversification, and by 
making the addition of new portfolios to the Fund more feasible.
    28. Applicants assert that there is no significant legal impediment 
to permitting mixed and shared funding and sales of Fund shares to 
Plans.

Applicant's Conditions

    Applicant consents to the following conditions if the application 
is granted:
    1. A majority of the Board of Trustees or Board of Directors 
(``Board'') of the Fund shall consist of persons who are not 
``interested persons'' of the Fund, as defined by Section 2(a)(19) of 
the Act and the Rules thereunder and as modified by any applicable 
orders of the Commission, except that if this condition is not met by 
reason of the death, disqualification, or bona fide resignation of any 
trustee or director, then the operation of this condition shall be 
suspended: (a) For a period of 45 days if the vacancy or vacancies may 
be filled by the Board; (b) for a period of 60 days if a vote of 
shareholders is required to fill the vacancy or vacancies; or (c) for 
such longer period as the Commission may prescribe by rule, or by order 
upon application.
    2. The Board will monitor the Fund for the existence of any 
material irreconcilable conflict among the interests of the contract 
owners of all separate accounts investing in the Fund and of Plan 
participants investing in the Fund. A material irreconcilable conflict 
may arise for a variety of reasons, including: (a) An action by any 
state insurance regulatory authority; (b) a change in applicable 
federal or state insurance, tax, or securities laws or regulations, or 
a public ruling, private letter ruling, no-action or interpretative 
letter, or any similar action by insurance, tax, or securities 
regulatory authorities; (c) an administrative or judicial decision in 
any relevant proceeding; (d) the manner in which the investments of any 
Fund or series are being managed; (e) a difference in voting 
instruction given by variable annuity contract owners and variable life 
insurance contract owners; (f) a decision by an insurer to disregard 
the voting instructions of contract owners; or (g) if applicable, a 
decision by a Plan to disregard voting instructions of Plan 
participants.
    3. In the event that a Plan or Plan participant shareholder should 
become an owner of 10% or more of the assets of the Fund, such Plan 
will execute a fund participation agreement including the conditions of 
the Application set forth herein, to the extent applicable. A Plan or 
Plan participant will execute an application containing an 
acknowledgement of this condition at the time of its initial purchase 
of shares of a Fund.
    4. Participating Insurance Companies, Calamos, any other investment 
adviser of the Fund, and any Plans that execute a fund participation 
agreement upon becoming an owner of 10% or more of the Fund's assets 
(``Participants'') will report any potential or existing conflicts to 
the Board. Participants 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 the Board to 
consider any issues raised. This responsibility includes, but is not 
limited to, an obligation by each Participating Insurance Company to 
inform the Board whenever it has determined to disregard contract owner 
voting instructions and, when pass-through voting is applicable, an 
obligation of each Plan to inform the Board whenever it has determined 
to disregard voting instructions from Plan participants. The 
responsibilities to report such information and conflicts and to assist 
the Board will be a contractual obligation of all Participating 
Insurance Companies and Plans under their agreements governing 
participation in the Fund, and such agreements shall provide, in the 
case of Participating Insurance Companies, that such responsibilities 
will be carried out with a view only to the interests of contract 
owners or, in the case of Plans, Plan participants.
    5. If it is determined by a majority of the Board, or a majority of 
its disinterested trustees or directors, that a material irreconcilable 
conflict exists, the relevant Participating Insurance Companies and 
Plans, at their expense and to the extent reasonably practicable (as 
determined by a majority of the disinterested trustees or directors), 
shall take whatever steps are necessary to remedy or eliminate the 
material irreconcilable conflict. Such steps could include: (a) 
withdrawing the assets allocable to some or all of the separate 
accounts from the Fund or any series thereof and reinvesting such 
assets in a different investment medium which may include another 
series of the Fund; (b) submitting the question as to 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., annuity or life insurance contract owners, or variable 
contract owners of one or more participating insurance companies) that 
votes in favor of such segregation, or offering to the affected 
contract owners the option of making such a change; and (c) 
establishing a new registered management investment company or managed 
separate account. If a material irreconcilable conflict arises because 
of an insurer's decision to disregard contract owner voting 
instructions and the decision represents a minority position or would 
preclude a majority vote, the insurer may be required, at the election 
of the Fund, to withdraw its separate account's investment in the Fund, 
and no charge or penalty will be imposed as a result of such 
withdrawal. If a material irreconcilable conflict arises because of a 
Plan's decision to disregard Plan participant voting instructions, if 
applicable, and that decision represents a minority position or would 
preclude a majority vote, the Plan may be required, at the election of 
the Fund, to withdraw its investment in such Fund, and no charge 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 a material irreconcilable 
conflict and bear the cost of such remedial action shall be a 
contractual obligation of all Participating Insurance Companies and 
Plans under their agreements governing participation in the Fund and 
these responsibilities will be carried out with a view only to the 
interests of the contract owners and Plan participants, as appropriate.
    6. For purposes of Condition 5, a majority of the disinterested 
members of the Board shall determine whether or not any proposed action 
adequately

[[Page 13349]]

remedies any material irreconcilable conflict but in no event will the 
Fund, or Calamos (or any other investment adviser) be required to 
establish a new funding medium for any variable contract. No 
Participating Insurance Company shall be required by Condition 5 to 
establish a new funding medium for any variable contract if an offer to 
do so has been declined by a vote of the majority of contract owners 
materially and adversely affected by the material irreconcilable 
conflict. No Plan shall be required by this Condition 5 to establish a 
new funding medium for such Plan if: (a) An offer to do so has been 
declined by a vote of a majority of Plan participants materially and 
adversely affected by the irreconcilable material conflict, or (b) 
pursuant to governing Plan documents and applicable law, the Plan makes 
such decision without a Plan participant vote.
    7. Participants will be informed promptly in writing of the Board's 
determination of the existence of a material irreconcilable conflict 
and its implications.
    8. Participating Insurance Companies will provide pass-through 
voting privileges to contract owners who invest in Participating 
Separate Accounts so long as the Commission continues to interpret the 
1940 Act as requiring pass-though voting privileges for contract 
owners. Accordingly, Participating Insurance Companies will vote shares 
of the Fund or series thereof held in Participating Separate Accounts 
in a manner consistent with voting instructions timely received from 
contract owners. In addition, each Participating Insurance Company will 
vote shares of the Fund, or series thereof, held in its separate 
accounts for which it has not received timely voting instructions as 
well as shares it owns, in the same proportion as those shares for 
which it has received voting instructions. Participating Insurance 
Companies will be responsible for assuring that each of their 
Participating Separate Accounts calculate voting privileges in a manner 
consistent with all other Participating Insurance Companies. The 
obligation to vote the Fund's shares and calculate voting privileges in 
a manner consistent with all other Participating Separate Accounts 
shall be a contractual obligation of all Participating Insurance 
Companies under the agreements governing participation in the Fund. 
Each Plan will vote as required by applicable law and governing Plan 
documents.
    9. The Fund will notify all Participating Insurance Companies and 
Plans that disclosure in separate account prospectuses or plan 
prospectuses or other plan disclosure documents regarding potential 
risks of mixed and shared funding may be appropriate. The Fund shall 
disclose in its prospectus that: (a) Its shares are offered to 
insurance company separate accounts which fund both annuity and life 
insurance contracts, (b) due to differences in tax treatment and other 
considerations, the interests of various contract owners participating 
in the Fund and the interest of Plans investing in the Fund may 
conflict, and (c) the Board will monitor for the existence of any 
material conflicts and determine what action, if any, should be taken.
    10. All reports of potential or existing conflicts of interest 
received by the Board, and all Board action with regard to: (a) 
determining the existence of a conflict; (b) notifying Participants of 
a conflict; and (c) 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.
    11. If and to the extent Rule 6e-2 Rule 6e-3(T) are amended, or 
Rule 6e-3 under the 1940 Act is adopted, to provide exemptive relief 
from any provision of the 1940 Act or the rules thereunder with respect 
to mixed or shared funding on terms and conditions materially different 
from any exemptions granted in the order requested by Applicants, then 
the Fund and/or Participating Insurance Companies, as appropriate, 
shall take such steps as may be necessary to comply with Rules 6e-2 and 
6e-3(T), as amended, and proposed Ruled 6e-3, as adopted, to the extent 
applicable.
    12. The Fund will comply with all provisions of the 1940 Act 
requiring voting by shareholders (for these purposes, the persons 
having a voting interest in the shares of the Fund). In particular, the 
Fund will either provide for annual meetings (except to the extent that 
the Commission may interpret Section 16 of the 1940 Act not to require 
such meetings) or comply with Section 16(c) of the 1940 Act (although 
the Fund is not one of the trusts described in Section 16(c) of the 
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 Board members and with whatever 
rules the Commission may promulgate with respect thereto.
    13. No less than annually, the Participants 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 Participants to 
provide these reports, materials, and data to the Board when it so 
reasonably requests shall be a contractual obligation of all 
Participants under the agreements governing their participation in the 
Fund.

Conclusion

    For the reasons and upon the facts stated 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.
Jonathan G. Katz,
Secretary.
[FR Doc. 00-6079 Filed 3-10-00; 8:45 am]
BILLING CODE 8010-01-M