[Federal Register Volume 67, Number 109 (Thursday, June 6, 2002)]
[Notices]
[Pages 39077-39086]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14137]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-25597; File No. 812-12777]


Metropolitan Series Fund, Inc., et al.; Notice of Application

May 30, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order pursuant to Section 6(c) of 
the Investment Company Act of 1940 (the ``Act'') for exemptions from 
the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Act and 
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder.

-----------------------------------------------------------------------

    Applicants: Metropolitan Series Fund, Inc. (``Metropolitan 
Series'') and MetLife Advisers, LLC (``MetLife Advisers'') (together, 
the ``Applicants'')
    Summary of Application: Applicants seek an order pursuant to 
Section 6(c) of the Investment Company Act of 1940, as amended (the 
``Act'') exempting each life insurance company separate account 
supporting variable life insurance contracts (and its insurance company 
depositor) that may invest in shares of an existing portfolio of the 
Metropolitan Series (an ``Existing Fund'') or a ``Future Fund,'' as 
defined below, from the provisions of Sections 9(a), 13(a), 15(a), and 
15(b) of the Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, 
to the extent necessary to permit such separate accounts (``VLI 
accounts'') to hold shares of any Existing Fund or Future Fund (each, a 
``Fund'; collectively, the ``Funds'') when the following other types of 
investors also hold shares of that Fund: (1) A VLI account of a life 
insurance company that is not an affiliated person of the insurance 
company depositor of any VLI account, (2) a Fund's investment adviser 
(representing seed money investments in the Fund), (3) a life insurance 
company separate account supporting variable annuity contracts (a ``VA 
account''), and/or (4) a qualified pension or retirement plan (a 
``Plan'' or ``Qualified Plan''), as defined below.
    Filing Date: The application was filed on February 8, 2002, and 
amended and restated on May 23, 2002.
    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 should be received by the 
Commission by 5:30 p.m. on June 24, 2002, and should be accompanied by 
proof of service on Applicants, in the form of an affidavit

[[Page 39078]]

or, for lawyers, a certificate of service. Hearing requests should 
state the nature of the writer's interest, the reason for the request, 
and the issues contested. Persons may request notification of a hearing 
by writing to the Secretary of the Commission.
    ADDRESSES:Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW, Washington, DC 20549-0609. Applicants, c/o Thomas M. Lenz, 
Esq. and Christopher A. Martin, Esq., Metropolitan Life Insurance 
Company, 501 Boylston Street, Boston, MA 02116. Copy to Stephen E. 
Roth, Esq., Sutherland Asbill & Brennan LLP, 1275 Pennsylvania Avenue, 
NW, Washington, DC 20004-2415.

FOR FURTHER INFORMATION CONTACT: Martha Atkins, Senior Counsel, or 
William J. Kotapish, Assistant Director, at (202) 942-0670, Office of 
Insurance Products, Division of Investment Management.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the Public Reference Branch of the Commission, 450 5th Street, NW, 
Washington, DC 20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. As used herein, a Future Fund is any investment company (or 
investment portfolio or series thereof), other than an Existing Fund, 
designed to be sold to VLI accounts and to which Applicants or their 
affiliates may in the future serve as investment advisers, investment 
subadvisers, investment managers, administrators, principal 
underwriters, or sponsors. As used herein, Plan or Qualified Plan means 
any trust, plan, account, contract, or annuity described in Sections 
401(a), 403(a), 403(b), 408(a), 408(b), 414(d), 457(b), 408(k), and 
501(c)(18) of the Internal Revenue Code of 1986, as amended (the 
``Code''), and any other trust, plan, account, contract, or annuity 
that is determined to be within the scope of Treasury Regulation 1.817-
5(f)(3)(iii).
    2. The Metropolitan Series, a Maryland corporation formed on 
November 23, 1982, is registered under the Act as an open-end 
management investment company and is comprised of 23 portfolios. As of 
December 31, 2001, the Metropolitan Series had 3 billion shares of 
authorized common stock at $0.01 par value per share. Each of the 
Existing Funds is managed by a Board of Directors (``Board''), and 
Metropolitan Life Insurance Company (``MetLife''), a New York domiciled 
life insurance company and wholly owned subsidiary of MetLife, Inc., a 
publicly owned Delaware corporation, serves as the principal 
underwriter and distributor of the Existing Funds.
    3. MetLife Advisers, a Delaware limited liability company, is the 
investment adviser for the Metropolitan Series and is registered as an 
investment adviser under the Investment Advisers Act of 1940, as 
amended. MetLife Advisers, an indirect wholly owned subsidiary of 
MetLife, became the investment manager of each portfolio of the 
Metropolitan Series on May 1, 2001. Prior to that time, MetLife served 
as investment manager to the Metropolitan Series. Prior to January 1, 
2001, MetLife Advisers was a Massachusetts corporation called New 
England Investment Management, Inc., which was an indirect wholly owned 
subsidiary of MetLife. On January 1, 2001, New England Investment 
Management, Inc. converted to a limited liability company named New 
England Investment Management LLC pursuant to Delaware law. New England 
Investment Management LLC changed its name to MetLife Advisers, LLC on 
May 1, 2001.
    4. The Existing Funds and Future Funds may offer their shares to 
VLI and VA accounts (``Participating Separate Accounts'') of various 
life insurance companies (``Participating Insurance Companies'') to 
serve as an investment medium to support variable life insurance 
contracts and variable annuity contracts (together, ``Variable 
Contracts'') issued through such accounts. Each VLI and VA account is 
or will be established as a segregated asset account by a Participating 
Insurance Company pursuant to the insurance law of the Company's state 
of domicile. As such, the assets of each are or will be the property of 
the Participating Insurance Company and that portion of the assets of 
such an account equal to the reserves and other contract liabilities 
with respect to the account is or will not be chargeable with 
liabilities arising out of any other business that the Participating 
Insurance Company may conduct. The income, gains, and losses, realized 
or unrealized from such an account's assets are or will be credited to 
or charged against the account without regard to other income, gains, 
or losses of the Participating Insurance Company. If a VLI or VA 
account is registered as an investment company, it is or will be a 
``separate account'' as defined by Rule 0-1(e) (or any successor rule) 
under the Act and will be registered as a unit investment trust. For 
purposes of the Act, the Participating Insurance Company that 
establishes such a registered VLI or VA account is the depositor and 
sponsor of the account as those terms have been interpreted by the 
Commission with respect to variable life insurance and variable annuity 
separate accounts.
    5. The Funds will sell their shares to registered VLI and VA 
accounts only if each Participating Insurance Company sponsoring such a 
VLI or VA account enters into a participation agreement with the Fund. 
The participation agreements define or will define the relationship 
between each Fund and each Participating Insurance Company and 
memorialize or will memorialize, among other matters, the fact that, 
except where the agreement specifically provides otherwise, the 
Participating Insurance Company will remain responsible for 
establishing and maintaining any VLI or VA account covered by the 
agreement and for complying with all applicable requirements of State 
and Federal law pertaining to such accounts and to the sale and 
distribution of variable contracts issued through such accounts. The 
participation agreements also memorialize or will memorialize, among 
other matters, the fact that, with regard to compliance with Federal 
securities laws, unless the agreement specifically states otherwise, 
the Fund's obligations relate solely to offering and selling its shares 
to VLI and VA accounts covered.
    6. The use of a common management investment company (or investment 
portfolio thereof) as an investment medium for both VLI and VA accounts 
of the same insurance company, or of two or more insurance companies 
that are affiliated persons of each other, is referred to herein as 
``mixed funding.'' The use of a common management investment company 
(or investment portfolio thereof) as an investment medium for VLI and/
or VA accounts of two or more insurance companies that are not 
affiliated persons of each other is referred to herein as ``shared 
funding.''
    7. Applicants propose that each Existing Fund and any Future Fund 
may offer and sell its shares directly to Qualified Plans. Changes in 
the Federal tax law have created the opportunity for each Existing Fund 
and any Future Fund to substantially increase its net assets by selling 
shares to Qualified Plans. Most of the plans will be pension or 
retirement plans intended to qualify under Sections 401(a) and 501(a) 
of the Code. Many of the plans will include a cash or deferred 
arrangement (permitting salary reduction contributions) intended to 
qualify under Section 401(k) of the Code. The plans that qualify under 
Sections 401(a) and 501(a) will also be subject to, and will

[[Page 39079]]

be designed to comply with, the provisions of the Employee Retirement 
Income Security Act of 1974, as amended (``ERISA''), applicable to 
either defined benefit or to defined contribution profit-sharing plans, 
specifically ``Title I--Protection of Employee Benefit Rights.'' These 
plans therefore will be subject to regulatory provisions under the Code 
and ERISA regarding, for example, reporting and disclosure, 
participation and vesting, funding, fiduciary responsibility, and 
enforcement. Existing Fund and any Future Fund shares sold to such 
Qualified Plans would be held by the Trustees of said Plans as required 
by Section 403(a) of ERISA. As noted elsewhere in this Application, 
pass through voting is generally not required to be provided to 
participants in Qualified Plans pursuant to ERISA.
    8. Section 817(h) of the Code imposes certain diversification 
standards on the assets underlying Variable Contracts, such as those in 
the Existing Series. The Code provides that Variable Contracts will not 
be treated as annuity contracts or life insurance contracts, as the 
case may be, for any period (or any subsequent period) for which the 
underlying assets are not, in accordance with regulations issued by the 
Treasury Department, adequately diversified. On March 3, 1989, the 
Treasury Department issued regulations (Treas. Reg. 1.817-5) which 
established specific diversification requirements for investment 
portfolios underlying Variable Contracts. The regulations generally 
provide that, in order to meet these diversification requirements, all 
of the beneficial interests in the investment company must be held by 
the segregated asset accounts of one or more life insurance companies. 
Notwithstanding this, the regulations also contain an exception to this 
requirement that permits trustees of a qualified pension or retirement 
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 for Variable Contracts 
issued through such segregated asset accounts (Treas. Reg. 1.817-
5(f)(3)(iii)).
    9. As a result of this exception to the general diversification 
requirement, qualified pension and retirement plans may select the 
Funds as investment options without endangering the tax status of 
Variable Contracts issued through Participating Separate Accounts as 
life insurance or annuities, respectively. The use of a common 
management investment company (or investment portfolio thereof) as an 
investment medium for VLI accounts, VA accounts, and Qualified Plans, 
is referred to herein as ``extended mixed and shared funding.''

Applicants' Legal Analysis

    1. In connection with the funding of scheduled premium variable 
life insurance contracts issued through a separate account registered 
under the Act as a unit investment trust, Rule 6e-2(b)(15) under the 
Act provides partial exemptions from Sections 9(a), 13(a), 15(a), and 
15(b) of the Act. Section 9(a) of the Act provides that it is unlawful 
for any company to serve as an 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 Section 9(a)(1) or (2). Rules 6e-2(b)(15)(i) and (ii) 
provide partial exemptions from Section 9(a) of the Act, and Rule 6e-
2(b)(15)(iii) provides a partial exemption from Sections 13(a), 15(a), 
and 15(b) of the Act to the extent those sections have been deemed by 
the Commission to require ``pass-through'' voting with respect to an 
underlying fund's shares.
    2. The exemptions granted to a registered VLI account by Rule 6e-
2(b)(15) are available only where all of the assets of the separate 
account consist of the shares of one or more registered management 
investment companies which offer their shares ``exclusively to variable 
life insurance separate accounts of the life insurer or of any 
affiliated life insurance company,'' and then, only where scheduled 
premium variable life insurance contracts are issued through such VLI 
accounts. Therefore, the relief granted by Rule 6e-2(b)(15) is not 
available with respect to a scheduled premium VLI account that owns 
shares of a management company that also offers its shares to a VA 
account of the same insurance company or any other insurance company. 
Likewise, the relief granted by Rule 6e-2(b)(15) is not available with 
respect to a scheduled premium VLI account that owns shares of a 
management company that also offers its shares to a VLI account of the 
same insurance company or any other insurance company that issues 
flexible premium variable life insurance contracts.
    3. In addition, the relief granted by Rule 6e-2(b)(15) under the 
Act is not available with respect to a scheduled premium VLI account 
that owns shares of an underlying management company that also offers 
its shares to VLI or VA accounts funding Variable Contracts of one or 
more unaffiliated life insurance companies. Furthermore, Rule 6e-
2(b)(15) does not contemplate that shares of the underlying fund might 
also be sold to Qualified Plans.
    4. In connection with flexible premium variable life insurance 
contracts issued through a separate account registered under the Act as 
a unit investment trust, Rule 6e-3(T)(b)(15) under the Act provides 
partial exemptions from Section 9(a), and from Sections 13(a), 15(a), 
and 15(b) of the Act to the extent that those sections have been deemed 
by the Commission to require ``pass-through'' voting with respect to an 
underlying fund's shares. The exemptions granted to a separate account 
by Rule 6e-3(T)(b)(15) are available only where all of the assets of 
the separate account consist of the shares of one or more registered 
management investment companies which offer their shares ``exclusively 
to separate accounts of the life insurer, or of any affiliated life 
insurance company, offering either scheduled [premium variable life 
insurance] contracts or flexible [premium variable life insurance] 
contracts, or both; or which also offer their shares to variable 
annuity separate accounts of the life insurer or of an affiliated life 
insurance company'' (emphasis supplied). Therefore, Rule 6e-3(T) 
permits mixed funding with respect to a flexible premium VLI account, 
subject to certain conditions. Rule 6e-3(T), however, 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 VLI account that owns 
shares of a management company that also offers its shares to separate 
accounts (including variable annuity and flexible premium and scheduled 
premium variable life insurance separate accounts) of unaffiliated life 
insurance companies. Also, Rule 6e-3(T) does not contemplate extended 
mixed and shared funding.
    5. Applicants maintain, as discussed below, that there is no policy 
reason for the sale of Fund shares to Qualified Plans to prohibit or 
otherwise limit a Participating Insurance Company from relying on the 
relief provided by Rules 6e-2(b)(15) and 6e-3(T)(b)(15). 
Notwithstanding, Rule 6e-2 and Rule 6e-3(T) each specifically provide 
that the relief granted thereunder is available only where shares of 
the underlying fund are offered exclusively to insurance company 
separate accounts. In this regard, Applicants request exemptive relief 
to the extent necessary to permit shares of the Funds to be sold to 
Qualified Plans while allowing

[[Page 39080]]

Participating Insurance Companies and their VLI accounts to enjoy the 
benefits of the relief granted in Rules 6e-2(b)(15) and 6e-3(T)(b)(15).
    6. Applicants note that if the Funds were to sell their shares only 
to Qualified Plans, exemptive relief under Rule 6e-2 and Rule 6e-3(T) 
would not be necessary. The relief provided for under Rule 6e-2(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. Applicants also note that the 
promulgation of Rules 6e-2(b)(15) and 6e-3(T)(b)(15) preceded the 
issuance of the Treasury Regulations which made it possible for shares 
of an investment company to be held by the trustee of a qualified 
pension and retirement plan without adversely affecting the ability of 
shares in the same investment company to also be held by the separate 
accounts of insurance companies in connection with their variable 
contracts. 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-2(b)(15) and 6e-3(T)(b)(15).
    7. Applicants are not aware of any reason for excluding separate 
accounts and investment companies engaged in shared funding from the 
exemptive relief provided under Rules 6e-2(b)(15) and 6e-3(T)(b)(15), 
or for excluding separate accounts and investment companies engaged in 
mixed funding from the exemptive relief provided under Rule 6e-
2(b)(15). Similarly, Applicants are not aware of any reason for 
excluding Participating Insurance Companies from the exemptive relief 
requested because the Funds may also sell their shares to qualified 
pension and retirement plans. Rather, Applicants assert that the 
proposed sale of shares of the Funds to Qualified Plans, in fact, may 
allow for the development of larger pools of assets resulting in the 
potential for greater investment and diversification opportunities, and 
for decreased expenses at higher asset levels resulting in greater cost 
efficiencies.
    8. Applicants recognize that the reason the Commission did not 
grant more extensive relief in the area of mixed and shared funding 
when it adopted Rule 6e-3(T) is because of the Commission's uncertainty 
in this area with respect to such issues as conflicts of interest. 
Applicants believe that Commission concern is not warranted in the 
context of permitting Qualified Plans to invest in the Funds. 
Applicants have concluded that the addition of Qualified Plans as 
eligible shareholders should not increase the risk of material 
irreconcilable conflicts among shareholders. Even if a material 
irreconcilable conflict involving Qualified Plans arose, the trustees 
of (or participants in) the Qualified Plans could simply redeem their 
shares and make alternative investments.
    9. Consistent with the Commission's authority under Section 6(c) of 
the Act to grant exemptive orders to a class or classes of persons and 
transactions, Applicants request relief for the class consisting of 
Participating Insurance Companies and their VLI accounts investing in 
the Existing Funds and Future Funds as well as their principal 
underwriters that currently invest or in the future will invest in the 
Funds.
    10. There is ample precedent, in a variety of contexts, for 
granting exemptive relief not only to the applicants in a given case, 
but also to members of the class not currently identified that may be 
similarly situated in the future. Such class relief has been granted in 
various contexts and from a wide variety of the Act's provisions, 
including class exemptions in the context of mixed and shared funding. 
Such class exemptions have included, among other things, exemptions 
permitting the sale of shares by unnamed underlying funds to 
Participating Separate Accounts and Qualified Plans.
    11. The Commission has previously granted exemptive orders 
permitting open-end management investment companies to offer their 
shares directly to Qualified Plans in addition to offering their shares 
to separate accounts of affiliated or unaffiliated insurance companies 
which issue either or both variable annuity contracts or variable life 
insurance contracts. The Order sought in this Application is identical 
to these precedents in all material respects with regard to the 
conditions Applicants proposed be imposed on Participating Separate 
Accounts and Qualified Plans in connection with investment in the 
Funds. The Commission has also granted exemptions similar to those 
requested herein where a fund's shares would not be sold directly to 
Qualified Plans. Applicants believe that the same polices and 
considerations that led the Commission to grant such exemption to other 
applicants are present here.
    12. Section 9(a) of the Act provides that it 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 Section 9(a)(1) 
or (2). Rules 6e-2(b)(15)(i) and (ii) and Rule 6e-3(T)(b)(15)(i) and 
(ii) under the Act provide exemptions from Section 9(a) under certain 
circumstances, subject to 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 management company.
    13. Rules 6e-2(b)(15)(i) and 6e-3(T)(b)(15)(i) under the Act 
provide, in effect, that the fact that an individual disqualified under 
Section 9(a)(1) or (2) of the Act is an officer, director, or employee 
of an insurance company, or any of its affiliates, would not, by virtue 
of Section 9(a)(3) of the Act, disqualify the insurance company or any 
of its affiliates from serving in any capacity with respect to an 
underlying investment company, provided that the disqualified 
individual did not participate directly in the management or 
administration of the underlying investment company. Similarly, Rules 
6e-2(b)(15)(ii) and 6e-3(T)(b)(15)(ii) under the Act provide, in 
effect, that the fact that any company disqualified under Section 
9(a)(1) or (2) of the Act is affiliated with the insurance company 
would not, by virtue of Section 9(a)(3) of the Act, disqualify the 
insurance company from serving in any capacity with respect to an 
underlying investment company, provided that the disqualified company 
did not participate directly in the management or administration of the 
investment company.
    14. The partial relief granted in Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) under the Act from requirements of Section 9 of the Act 
limits, in effect, the amount of monitoring of an insurer's personnel 
that would otherwise be necessary to ensure compliance with Section 9. 
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 Act to 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. Those Rules further recognize 
that it also is unnecessary to apply Section 9(a) of the Act to 
individuals in various unaffiliated insurance companies (or affiliated 
companies of Participating Insurance Companies) that may use a Fund as 
the funding medium for Variable Contracts. There is no regulatory 
purpose in extending the Section 9(a) monitoring requirements because 
of mixed or shared funding.

[[Page 39081]]

    15. Those individuals who participate in the management or 
administration of the Funds will remain the same regardless of which 
Separate Accounts, insurance companies, or Qualified Plans use such 
Funds. Applying the requirements of Section 9(a) of the Act because of 
investment by the separate accounts of other insurers and Qualified 
Plans would be unjustified and would not serve any regulatory purpose. 
Furthermore, the increased monitoring costs would reduce the net rates 
of return realized by contractowners. Moreover, in the case of 
Qualified Plans, the Plans, unlike separate accounts, are not 
themselves investment companies, and therefore are not subject to 
Section 9 of the Act. Furthermore, it is not anticipated that a 
Qualified Plan would be an affiliated person of the Funds except by 
virtue of its holding 5% or more of a Fund's shares.
    16. Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) under the Act 
assume the existence of a pass-through voting requirement with respect 
to management investment company shares held by a separate account. 
Pass-through voting privileges will be provided with respect to all 
registered variable contractowners so long as the Commission interprets 
the Act to require pass-through voting privileges for variable 
contractowners.
    17. 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 discussed above 
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 contractowners with respect to the 
investments of an underlying fund, or any contract between a fund and 
its investment adviser, when required to do so by an insurance 
regulatory authority (subject to the provisions of paragraphs (b)(5)(i) 
and (b)(7)(ii)(A) of the Rules). Rules 6e-2(b)(15)(iii)(B) and 6e-
3(T)(b)(15)(iii)(A)(2) provide that the insurance company may disregard 
the voting instructions of contractowners if such instructions would 
result in 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), (b)(7)(ii)(B), and 
(b)(7)(ii)(C) of the Rules).
    18. Rules 6e-2 and 6e-3(T) under the Act recognize that a variable 
life insurance contract, as an insurance contract, has important 
elements unique to insurance contracts, and is subject to extensive 
state regulation of insurance. In adopting Rule 6e-2(b)(15)(iii), the 
Commission recognized that state insurance regulators have authority, 
pursuant to state insurance laws or regulations, to disapprove or 
require changes in investment policies, investment advisers, or 
principal underwriters. The Commission also expressly recognized that 
state insurance regulators have authority to require an insurer to draw 
from its general account to cover costs imposed upon the insurer by a 
change approved by contractowners over the insurer's objection. The 
Commission, therefore, deemed such exemptions necessary ``to assure the 
solvency of the life insurer and performance of its contractual 
obligations by enabling an insurance regulatory authority or the life 
insurer to act when certain proposals reasonably could be expected to 
increase the risks undertaken by the life insurer.'' In this respect, 
Rule 6e-3(T)'s corresponding provisions for flexible premium variable 
life insurance undoubtedly were adopted in recognition of the same 
factors.
    19. With respect to the Qualified Plans, which are not registered 
as investment companies under the Act, there is no requirement to pass 
through voting rights to plan participants. Indeed, to the contrary, 
applicable law expressly reserves voting rights associated with the 
assets of most Plans to certain specified persons. Under Section 403(a) 
of ERISA, shares of a fund sold to a Qualified Plan covered by ERISA 
must be held by the trustees of the Plan. Section 403(a) also provides 
that the trustee(s) must have exclusive authority and discretion to 
manage and control the Plan with two exceptions: (1) When the 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 
Plan and not contrary to ERISA, and (2) 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 above two exceptions stated in Section 403(a) applies, Plan 
trustees have the exclusive authority and responsibility for voting 
proxies. Where a named fiduciary to an ERISA-covered 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. The 
Qualified Plans may have their trustee(s) or other fiduciaries exercise 
voting rights attributable to investment securities held by the 
Qualified Plans in their discretion. Some of the ERISA-covered 
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.
    20. 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 Plan investors with respect to voting of 
the respective Fund's shares. Accordingly, 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 since the Qualified Plans are not 
entitled to pass-through voting privileges.
    21. Even if a Qualified Plan were to hold a controlling interest in 
a Fund, Applicants do not believe that such control would disadvantage 
other investors in such 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 a Fund by a Plan will not 
create any of the voting complications occasioned by mixed funding or 
shared funding. Unlike mixed or shared funding, Plan investor voting 
rights cannot be frustrated by veto rights of insurers or state 
regulators.
    22. 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, the purchase of 
shares of the Funds by Qualified Plans that provide voting rights does 
not present any complications not otherwise occasioned by mixed or 
shared funding.
    23. The prohibitions on mixed and shared funding might reflect some 
concern with possible divergent

[[Page 39082]]

interests among different classes of investors. When Rule 6e-2 under 
the Act was adopted, variable annuity separate accounts could invest in 
mutual funds whose shares also were offered to the general public. 
Therefore, at the time of the adoption of Rule 6e-2, the Commission 
staff contemplated underlying funds with public shareholders and with 
variable life insurance separate account shareholders. The Commission 
staff may have been concerned with the potentially different investment 
motivations of public shareholders and variable life insurance 
contractowners. There also may have been some concern with respect to 
the problems of permitting a state insurance regulatory authority to 
affect the operations of a publicly available mutual fund and to affect 
the investment decisions of public shareholders.
    24. However, for reasons unrelated to the Act, IRS Revenue Ruling 
81-225 (September 25, 1981) effectively deprived most variable 
annuities funded by publicly available mutual funds of their tax-
benefited status. The Tax Reform Act of 1984 codified the prohibition 
against the use of publicly available mutual funds as an investment 
medium for most variable contracts (including variable life contracts) 
in new Section 817(h). Section 817(h) of the Code, in effect, requires 
that the investments made by variable annuity and variable life 
insurance separate accounts be ``adequately diversified.'' If a 
separate account is organized as a unit investment trust that invests 
in a single fund or series, the separate account will not be 
diversified. In this situation, however, Section 817(h) of the Code 
provides, in effect, that the diversification test will be applied at 
the underlying fund level, rather than at the separate account level, 
but only if ``all of the beneficial interests'' in the underlying fund 
``are held by one or more insurance companies (or affiliated companies) 
in their general account or in segregated asset accounts.'' 
Accordingly, a unit investment trust separate account that invests 
solely in a publicly available mutual fund will generally not be 
adequately diversified. In addition, any underlying mutual fund, 
including the Funds, that sells shares to separate accounts, in effect, 
would be precluded from selling its shares to the public. Consequently, 
there will be no public shareholders of the Funds.
    25. Shared funding by unaffiliated insurance companies does not 
present any issues that do not already exist where a single insurance 
company is licensed to do business in several or all states. Where 
insurers are domiciled in different states, it is possible that the 
particular state insurance regulatory body in a state in which one 
insurance company is domiciled could require action that is 
inconsistent with the requirements of insurance regulators of other 
states in which other insurance companies are domiciled. The fact that 
a single insurer and its affiliates offer their insurance products in 
different states does not create a significantly different or enlarged 
problem.
    26. Shared funding by unaffiliated insurers is, in this respect, no 
different than the use of the same investment company as the funding 
vehicle for affiliated insurers, which Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) permit under various circumstances. Affiliated insurers may 
be domiciled in different states and be subject to differing state law 
requirements. Affiliation does not reduce the potential, if any exists, 
for differences in state regulatory requirements. In any event, the 
conditions set forth below are designed to safeguard against, and 
provide procedures for resolving, any adverse effects that differences 
among state regulatory requirements may produce. For instance, if a 
particular state insurance regulator's decision conflicts with the 
majority of other state regulators, the affected insurer(s) will be 
required to withdraw its Participating Separate Account's investment in 
the relevant Fund.
    27. The right of an insurance company under Rules 6e-2(b)(15) and 
6e-3(T)(b)(15) under the Act to disregard contractowners' voting 
instructions does not raise any issues different from those raised by 
the authority of state insurance administrators over separate accounts. 
Under Rules 6e-2(b)(15) and 6e-3(T)(b)(15), an insurer can disregard 
contractowner voting instructions only with respect to certain 
specified items. 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 contractowners. The potential for disagreement is 
limited by the requirements in Rules 6e-2 and 6e-3(T) under the Act 
that the insurance company's disregard of voting instructions be 
reasonable and based on specific good-faith determinations.
    28. However, a particular insurer's disregard of voting 
instructions, nevertheless, could conflict with the majority of 
contractowner voting instructions. The insurer's action could arguably 
be different from the determination of all or some of the other 
insurers (including affiliated insurers) that the contractholders' 
voting instructions should prevail, and could either preclude a 
majority vote approving the change or represent a minority view. If the 
insurer's judgment represents a minority position or would preclude a 
majority vote, the insurer may be required, at the election of the 
relevant Fund, to withdraw the Participating Separate Account's 
investment in such Fund, and no charge or penalty would be imposed as a 
result of such withdrawal. There is no reason why the investment 
policies of the Funds would or should be materially different from what 
these policies would or should be if it funded only variable annuity 
contracts or variable life insurance policies, whether flexible premium 
or scheduled premium policies. Each type of insurance product is 
designed as a long-term investment program.
    29. The Funds will not be managed to favor or disfavor any 
particular Participating Insurance Company or type of Variable 
Contract. There is no reason to believe that different features of 
various types of contracts, including the ``minimum death benefit'' 
guarantee under certain variable life insurance contracts, will lead to 
different investment policies for different types of variable 
contracts. To the extent that the degree of risk may differ as between 
variable annuity contracts and variable life insurance policies, the 
different insurance charges imposed, in effect, adjust any such 
differences and equalize the insurers' exposure in either case. No one 
investment strategy can be identified as appropriate to a particular 
insurance product. Each pool of variable annuity and variable life 
insurance contractowners is composed of individuals of diverse 
financial status, age, and insurance and investment goals. A fund 
supporting even one type of insurance product must accommodate those 
factors in order to attract and retain purchasers. Permitting mixed and 
shared funding will provide economic justification for the continuation 
of the Existing Funds and any Future Funds. Also, permitting mixed and 
shared funding will facilitate the establishment of additional Future 
Funds serving diverse goals. The broader base of contractowners can be 
expected to provide economic justification for the creation of 
additional portfolios with a greater variety of investment objectives 
and policies.
    30. Applicants do not believe that the sale of the shares of the 
Funds to Qualified Plans will increase the

[[Page 39083]]

potential for material irreconcilable conflicts of interest between or 
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 
contractowners. Moreover, in considering the appropriateness of the 
requested relief, Applicants have analyzed the following issues to 
assure themselves that there were either no conflicts of interest or 
that there existed the ability by the affected parties to resolve the 
issues without harm to the contractowners in the Participating Separate 
Accounts or to the participants under the Qualified Plans.
    31. Applicants considered whether there are any issues raised under 
the Code or the Treasury Regulations or Revenue Rulings thereunder if 
Qualified Plans, VLI accounts, and VA accounts all invest in the same 
underlying fund. 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.
    32. Treasury Department Regulations issued under Section 817(h) 
provide that, in order to meet the statutory 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. However, the Regulations contain certain exceptions to this 
requirement, one of which allows shares in an underlying mutual fund to 
be held by the trustees of a qualified pension or retirement plan 
without adversely affecting the ability of shares in the underlying 
fund also to be held by separate accounts of insurance companies in 
connection with their variable contracts. (Treas. Reg. 1.817-
5(f)(3)(iii)). Thus, Treasury Regulations 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, present any inherent conflicts of interest.
    33. 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 Funds. When 
distributions are to be made, and a Separate Account or Qualified Plan 
is unable to net purchase payments to make the distributions, the 
Separate Account and Qualified Plan will redeem shares of the Funds at 
their respective net asset value in conformity with Rule 22c-1 under 
the Act (without the imposition of any sales charges) to provide 
proceeds to meet distribution needs. A Variable Contract will make 
distributions in accordance with the terms of the Contract. Likewise, a 
Qualified Plan will make distributions in accordance with the terms of 
the Plan.
    34. Moreover, there is analogous precedent for a situation in which 
the same funding vehicle was used for contractowners subject to 
different tax rules, without any apparent conflicts. Prior to the Tax 
Reform Act of 1984, a number of insurance companies offered variable 
annuity contracts on both a qualified and non-qualified basis through 
the same separate account. Underlying reserves of both qualified and 
non-qualified contracts therefore were commingled in the same separate 
account. However, long-term capital gains incurred in such separate 
accounts were taxed on a different basis than short-terms gains and 
other income with respect to the reserves underlying non-qualified 
contracts. A tax reserve at the estimated tax rate was established in 
the separate account affecting only the non-qualified reserves. To the 
best of Applicants' knowledge, that practice was never found to have 
violated any fiduciary standards. Accordingly, Applicants have 
concluded that the tax consequences of distributions with respect to 
Participating Separate Accounts and Qualified Plans do not raise any 
material irreconcilable conflicts of interest with respect to the use 
of an Existing Fund or any Future Fund.
    35. Applicants considered whether it is possible to provide an 
equitable means of giving voting rights to Participating Separate 
Account contractowners and to Qualified Plans, and determined it is 
possible, as indicated below. In connection with any meeting of 
shareholders, the Funds 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 relevant Fund. Each Participating Insurance Company 
will then solicit voting instructions in accordance with Rules 6e-2 and 
6e-3(T), as applicable, and its participation agreement with the 
relevant 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 Funds 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.
    36. Applicants also considered whether there are any conflicts 
between the contractowners of the Participating Separate Accounts and 
Qualified Plan participants with respect to the state insurance 
commissioners' veto powers over investment objectives. Applicants note 
that the basic premise of corporate democracy and shareholder voting is 
that not all shareholders may agree with a particular proposal. 
Although the interests and opinions of shareholders may differ, this 
does not mean that inherent conflicts of interest exist between or 
among 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, 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 Funds 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.
    37. Based on the foregoing, Applicants have concluded that even if 
there should arise issues where the interests of contractowners 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 Funds.
    38. Finally, Applicants considered whether there is a potential for 
future conflicts of interest between Participating Separate Accounts 
and Qualified Plans created by future changes in the tax laws. 
Applicants do not see any greater potential for material irreconcilable 
conflicts arising between the interests of participants under Qualified 
Plans and contractowners of Participating Separate Accounts from 
possible future changes in the Federal tax laws than that which already 
exist between variable annuity contractowners and variable life 
insurance contractowners.
    39. Applicants recognize that the foregoing is not an all-inclusive 
list but rather is representative of issues which

[[Page 39084]]

they believe are relevant to this Application. Applicants believe that 
the discussion contained herein demonstrates that the sale of shares of 
the Funds to Qualified Plans does not increase the risk of material 
irreconcilable conflicts of interest. Further, Applicants submit that 
the use of the Funds with respect to Qualified Plans is not 
substantially dissimilar from the Funds' current use, in that Qualified 
Plans, like Variable Contracts, are generally long-term retirement 
vehicles.
    40. Applicants note that when the Commission last revised Rule 6e-
3(T) in 1987, the Treasury Department had not issued the current 
regulations (Treas. Reg. 1.817-5) which currently make it possible for 
shares of the Funds to be sold to Qualified Plans without adversely 
affecting the tax status of the insurer's Variable Contracts. 
Applicants submit that, although proposed regulations had been 
published, the Commission did not envision this possibility when it 
last examined (b)(15) of Rule 6e-3(T) and might well have broadened the 
exclusivity provision of that paragraph at that time to include 
Qualified Plans had this possibility been apparent.
    41. Various factors have limited the number of insurance companies 
that offer variable annuities and variable life insurance contracts. 
These factors include the costs of organizing and operating a fund's 
medium, the lack of expertise with respect to investment management 
(principally with respect to stock and money market investments), and 
the lack of name recognition by the public of certain insurers as 
investment experts with whom the public feels comfortable entrusting 
their investment dollars. For example, some smaller life insurance 
companies may not find it economically feasible, or within their 
investment or administrative expertise, to enter the variable contract 
business on their own.
    42. Use of the Funds as common investment vehicles for Variable 
Contracts would reduce or alleviate the above-mentioned concerns. Mixed 
and shared funding, including extended mixed and shared funding, also 
should provide several benefits to variable contractowners by 
eliminating a significant portion of the costs of establishing and 
administering separate funds. Participating Insurance Companies will 
benefit not only from the investment and administrative expertise of 
the Funds' investment advisers and subadvisers, but also from the cost 
efficiencies and investment flexibility afforded by a large pool of 
funds. Therefore, making the Funds available for mixed and shared 
funding and extended mixed and shared funding will encourage more 
insurance companies to offer variable contracts, and 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.
    43. Mixed and shared funding and extended mixed and shared funding 
benefits variable contractowners by eliminating a significant portion 
of the costs of establishing and administering separate funds. 
Applicants also assert that the sale of shares of the Funds to 
Qualified Plans in addition to Separate Accounts of Participating 
Insurance Companies will result in an increased amount of assets 
available for investment by such Funds. This may benefit variable 
contractowners through greater diversification and by making the 
addition of new portfolios more feasible.
    44. Applicants assert that, regardless of the type of shareholder 
in any of the Funds, the investment advisers and subadvisers are or 
would be contractually obligated to manage such Fund solely and 
exclusively in accordance with that Fund's investment objectives, 
policies, and restrictions as well as any guidelines established by the 
Board. The investment advisers and subadvisers of each Fund work with a 
pool of money and do not take into account the identity of the 
shareholders. Thus, the Existing Funds are and any Future Fund will be 
managed in the same manner as any other mutual fund.
    45. Applicants see no significant legal impediment to permitting 
mixed and shared funding and extended mixed and shared funding. 
Separate accounts organized as unit investment trusts historically have 
been employed to accumulate shares of mutual funds which have not been 
affiliated with the depositor or sponsor of the separate account and 
Applicants believe, as indicated above, that mixed and shared funding 
and extended mixed and shared funding will have no adverse federal 
income tax consequences.
    46. Applicants also note that the Commission has issued orders 
permitting mixed funding and shared funding. Applicants' proposal for 
mixed and shared funding and extended mixed and shared funding complies 
in all material respects with the same conditions consented to by the 
applicants for such orders. Therefore, granting the exemptions 
requested herein is in the public interest and, as discussed above, 
will not compromise the regulatory purposes of Sections 9(a), 13(a), 
15(a), and 15(b) of the Act or Rules 6e-2 or 6e-3(T) thereunder.

Applicants' Conditions for Relief

    If the requested order is granted, Applicants consent to the 
following conditions:
    1.A majority of the members of the Board of each Fund will consist 
of persons who are not ``interested persons'' of such Fund, as defined 
by Section 2(a)(19) of the Act, and the Rules thereunder, 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 director or directors, then the operation of 
this condition will be suspended: (a) for a period of 45 days if the 
vacancy or vacancies may be filled by the Board; (b) for a period of 60 
days if a vote of shareholders is required to fill the vacancy or 
vacancies; or (c) for such longer period as the Commission may 
prescribe by order upon application or by future rule.
    2. Each Board will monitor its respective Fund for the existence of 
any material irreconcilable conflict between and among the interests of 
the contractholders of all Participating Separate Accounts and of 
participants of Qualified Plans investing in such Fund and determine 
what action, if any, should be taken in response to such conflicts. 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 such Fund are being managed; (e) a 
difference in voting instructions given by variable annuity 
contractowners, variable life insurance contractowners, and trustees of 
the Plans; (f) a decision by a Participating Insurance Company to 
disregard the voting instructions of contractowners; or (g) if 
applicable, a decision by a Qualified Plan to disregard the voting 
instructions of Plan participants.
    3. MetLife Advisers (or any investment adviser to a Fund), and any 
Participating Insurance Companies and Qualified Plan that executes a 
participation agreement, upon becoming an owner of 10 percent or more 
of the assets of any Fund (collectively, ``Participants'') will report 
any potential or existing conflicts to the relevant

[[Page 39085]]

Board. Such Participants will be responsible for assisting the relevant 
Board in carrying out the Board's responsibilities under these 
conditions by providing the Board with all information reasonably 
necessary for the Board to consider any issues raised. This includes, 
but is not limited to, an obligation by each Participating Insurance 
Company to inform the relevant Board whenever contractowner voting 
instructions are disregarded, and, if pass-through voting is 
applicable, an obligation by each Qualified Plan to inform the Board 
whenever it has determined to disregard Plan participant voting 
instructions. The responsibility to report such information and 
conflicts, and to assist the Board, will be contractual obligations of 
all Participating Insurance Companies under their participation 
agreements with the Funds, and these responsibilities will be carried 
out with a view only to the interests of the contractowners. The 
responsibility to report such information and conflicts, and to assist 
the Board, also will be contractual obligations of all Qualified Plans 
with participation agreements, and such agreements will provide that 
these responsibilities will be carried out with a view only to the 
interests of Plan participants.
    4. If it is determined by a majority of a Board, or a majority of 
the disinterested members of such Board, that a material irreconcilable 
conflict exists, then the relevant Participating Insurance Company or 
Plan will, at its expense and to the extent reasonably practicable (as 
determined by a majority of the disinterested members of the Board), 
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 Participating Separate Accounts from 
the relevant Fund and reinvesting such assets in a different investment 
medium, which may include another such Fund, (b) in the case of 
Participating Insurance Companies, submitting the question as to 
whether such segregation should be implemented to a vote of all 
affected contractowners and, as appropriate, segregating the assets of 
any appropriate group (i.e., annuity contractowners or life insurance 
contractholders of one or more Participating Insurance Companies) that 
votes in favor of such segregation, or offering to the affected 
contractowners the option of making such a change; and (c) establishing 
a new registered management investment company or managed separate 
account. If a material irreconcilable conflict arises because of a 
decision by a Participating Insurance Company to disregard 
contractowner voting instructions, and that decision represents a 
minority position or would preclude a majority vote, then the 
Participating Insurance Company may be required, at the election of the 
relevant Fund, to withdraw such Participating Insurance Company's 
separate account's investment in such Fund, and no charge or penalty 
will be imposed as a result of such withdrawal. If a material 
irreconcilable conflict arises because of a Qualified 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 
relevant Fund, to withdraw its investment in such Fund, and no charge 
or penalty will be imposed as a result of such withdrawal. The 
responsibility to take remedial action in the event of a Board 
determination of a material irreconcilable conflict and to bear the 
cost of such remedial action will be a contractual obligation of all 
Participants under their agreements governing participation in the 
relevant Fund and this responsibility, in the case of Participating 
Insurance Companies, will be carried out with a view only to the 
interests of contractowners and in the case of Qualified Plans, will be 
carried out with a view only to the interests of Plan participants. For 
purposes of this Condition 4, a majority of the disinterested members 
of a Board will determine whether or not any proposed action adequately 
remedies any material irreconcilable conflict, but, in no event, will 
any Fund or MetLife Advisers (or any other investment adviser to a 
Fund), as relevant, be required to establish a new funding medium for 
any Variable Contract. No Participating Insurance Company will be 
required by this Condition 4 to establish a new funding medium for any 
Variable Contracts if an offer to do so has been declined by the vote 
of a majority of the contractowners materially and adversely affected 
by the material irreconcilable conflict. Further, no Qualified Plan 
will be required by this Condition 4 to establish a new funding medium 
for the Plan if (a) a majority of the Plan participants materially and 
adversely affected by the irreconcilable material conflict vote to 
decline such offer, or (b) pursuant to documents governing the 
Qualified Plan, the Plan makes each decision without a Plan participant 
vote.
    5. A Board's determination of the existence of a material 
irreconcilable conflict and its implications will be made known in 
writing promptly to all Participants.
    6. Participating Insurance Companies will provide pass-through 
voting privileges to all variable contractowners whose contracts are 
funded through a registered separate account so long as the Commission 
continues to interpret the Act as requiring such pass-through voting 
privileges. Accordingly, such Participating Insurance Companies, where 
applicable, will vote shares of the applicable Fund held in its 
Participating Separate Accounts in a manner consistent with voting 
instructions timely received from contractowners. Participating 
Insurance Companies will be responsible for assuring that each 
Participating Separate Account investing in a Fund calculates voting 
privileges in a manner consistent with other Participating Insurance 
Companies. The obligation to vote a Fund's shares and calculate voting 
privileges in a manner consistent with all other Participating Separate 
Accounts in a Fund will be a contractual obligation of all 
Participating Insurance Companies under their agreements governing 
their participation in the Fund. Each Participating Insurance Company 
will vote shares for which it has not received timely voting 
instructions as well as shares attributable to it in the same 
proportion as it votes those shares for which it has received voting 
instructions. Each Qualified Plan will vote as required by applicable 
law and governing Plan documents.
    7. As long as the Commission continues to interpret the Act as 
requiring pass-through voting privileges to be provided to variable 
contractowners, MetLife Advisers or any of its affiliates will vote its 
shares of any Fund in the same proportion as all variable contract 
owners having voting rights with respect to the relevant Fund.
    8. Each Fund will comply with all provisions of the Act requiring 
voting by shareholders (including persons who have a voting interest in 
the shares of the Fund), and, in particular, each such Fund will either 
provide for annual meetings (except to the extent that the Commission 
may interpret Section 16 of the Act not to require such meetings) or 
comply with Section 16(c) of the Act (although the Funds are not, or 
will not be, the type of trust described in Section 16(c) of the Act), 
as well as with Section 16(a) of the Act and, if and when applicable, 
Section 16(b) of the Act. Further, each such Fund will act in 
accordance with the Commission's interpretation of the requirements of 
Section 16(a) with respect to periodic

[[Page 39086]]

elections of directors and with whatever rules the Commission may 
promulgate with respect thereto.
    9. Each Fund will notify all Participating Insurance Companies and 
all Qualified Plans that disclosure in separate account prospectuses or 
any Qualified Plan prospectuses or other Plan disclosure documents 
regarding potential risks of mixed and shared funding may be 
appropriate. Each such Fund will disclose in its prospectus that: (a) 
shares of such Fund may be offered to insurance company separate 
accounts of both variable annuity and variable life insurance contracts 
and to Qualified Plans; (b) due to differences in tax treatment and 
other considerations, the interests of various contractowners 
participating in such Fund and the interests of Qualified Plans 
investing in such Funds may conflict; and (c) such Fund's Board will 
monitor events in order to identify the existence of any material 
irreconcilable conflicts and determine what action, if any, should be 
taken in response to any such conflict.
    10. If and to the extent that Rule 6e-2 or Rule 6e-3(T) under the 
Act are amended, or proposed Rule 6e-3 under the Act is adopted, to 
provide exemptive relief from any provision of the Act, or the rules 
promulgated thereunder, with respect to mixed or shared funding on 
terms and conditions materially different from any exemptions granted 
in the Order requested in this Application, then the Funds and/or the 
Participants, as appropriate, shall take such steps as may be necessary 
to comply with Rules 6e-2 or 6e-3(T), as amended, or Rule 6e-3, as 
adopted, as such rules are applicable.
    11. The Participants, at least annually, will submit to the Board 
of each Fund such reports, materials, or data as a Board may reasonably 
request so that the directors of the Board may fully carry out the 
obligations imposed upon a Board by the conditions contained in this 
Application, and said reports, materials and data will be submitted 
more frequently if deemed appropriate by a Board. The obligations of 
the Participants to provide these reports, materials, and data to a 
Board, when it so reasonably requests, will be a contractual obligation 
of all Participants under their agreements governing participation in 
the Funds.
    12. All reports of potential or existing conflicts received by a 
Board, and all Board action with regard to (a) determining the 
existence of a conflict, (b) notifying Participants of the existence of 
a conflict, and (c) determining whether any proposed action adequately 
remedies a conflict, will be properly recorded in the minutes of the 
meetings of the relevant Board or other appropriate records, and such 
minutes or other records shall be made available to the Commission upon 
request.
    13. A Fund will not accept a purchase order from a Qualified Plan 
if such purchase would make the Plan shareholder an owner of 10 percent 
or more of the assets of such Fund unless such Plan executes an 
agreement with the relevant Fund governing participation in such Fund 
that includes the conditions set forth herein to the extent applicable. 
A Qualified Plan will execute an application containing an 
acknowledgement of this condition at the time of its initial purchase 
of shares of any such Fund.

Conclusion

    For the Commission, by the Division of Investment Management, 
pursuant to the delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-14137 Filed 6-5-02; 8:45 am]
BILLING CODE 8010-01-P