Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Notices 3261

1Annual and periodic reports to the Commission

become part of its public files and, therefore, are

available for use by prospective investors and

shareholders.

compliance with Rule 498. Compliance

with the rule’s standardized format

assists investors in evaluating and

comparing funds.

It is estimated that approximately 176

initial profiles and 129 updated profiles

are filed with the Commission annually.

The Commission estimates that each

profile contains on average 1.25

portfolios, resulting in 220 portfolios

filed annually on initial profiles and 161

portfolios filed annually on updated

profiles. The number of burden hours

for preparing and filing an initial profile

per portfolio is 25. The number of

burden hours for preparing and filing an

updated profile per portfolio is 10. The

total burden hours for preparing and

filing initial and updated profiles under

Rule 498 is 7,110, representing a

decrease of 6,640 hours from the prior

estimate of 13,750. The reduction in

burden hours is attributable to the lower

number of profiles actually prepared

and filed as compared to the previous

estimates.

Rule 30a–1 Under the Investment

Company Act of 1940, Annual Reports

Rule 30a–1 (17 CFR 270.30a–1)

requires that investment companies

registered under the Investment

Company Act file annual and periodic

reports with the Commission and send

to the Commission copies of their

reports to shareholders. These

requirements are designed to ensure that

the Commission has enough information

in its files to effectively monitor the

operations of each company and to

provide investors with the kind of

current information that is necessary to

detect problems in the operations of the

company.1

There is no burden associated with

complying with Rule 30a–1. The

respondent’s reporting burdens and cost

burden under Rule 30a–1 is associated

with Form N–SAR. Those burdens and

costs are discussed in the submission

for Form N–SAR.

The estimates of average burden hours

are made solely for the purposes of the

Paperwork Reduction Act and are not

derived from a comprehensive or even

representative survey or study of the

cost of Commission rules and forms.

Written comments are invited on: (a)

Whether the proposed collection of

information is necessary for the proper

performance of the functions of the

agency, including whether the

information will have practical utility,

(b) the accuracy of the agency’s estimate

of the burden of the collection of

information; (c) ways to enhance the

quality, utility, ad clarity of the

information collected; and (d) ways to

minimize the burden of the collection of

information on respondents, including

through the use of automated collection

techniques or other forms of information

technology. Consideration will be given

to comments and suggestions submitted

in writing within 60 days of this

publication.

Please direct your written comments

to Michael E. Bartell, Associate

Executive Director, Office of

Information Technology, Securities and

Exchange Commission, 450 Fifth Street,

NW, Washington, DC 20549.

Dated: January 11, 2000.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 1284 Filed 1–19–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–24251; File No. 812–11768]

Third Avenue Variable Series Trust and

ESQF Advisers, Inc.

January 12, 2000.

AGENCY: Securities and Exchange

Commission (the ‘‘SEC’’ or the

‘‘Commission’’).

ACTION: Notice of application for an

order under Section 6(c) of the

Investment Company Act of 1940 (the

‘‘1940 Act’’) for exemptions from the

provisions of Sections 9(a), 13(a), 15(a)

and 15(b) of the 1940 Act and Rules 6e–

2(b)(15) and 6e–3(T)(b)(15) thereunder.

SUMMARY OF APPLICATION: Applicants

seek an order to permit shares of any

current or future series of the Third

Avenue Variable Series Trust designed

to fund insurance products (‘‘Insurance

Funding Series’’) 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

ESQF, Advisers, Inc., or any of its

affiliates (‘‘Affiliates’’), may in the

future serve as investment adviser,

administrator, manager, principal

underwriter or sponsor (the Insurance

Funding Series and each other

investment company hereinafter

referred to, collectively, as the

‘‘Funds’’), to be sold to and held by: (a)

Variable annuity and variable life

insurance separate accounts of both

affiliated and unaffiliated life insurance

companies; and (b) qualified pension

and retirement plans outside of the

separate account context.

APPLICANTS: Third Avenue Variable

Series Trust (the ‘‘Trust’’) and ESQF

Advisers, Inc. (the ‘‘Adviser’’).

FILING DATE: The application was filed

on September 3, 1999, and amended

and restated on November 16, 1999.

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 February 7, 2000, and

accompanied by proof of service on the

Applicants in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the interest, the reason for the request

and the issues contested. Persons may

request notification of the date of a

hearing by writing to the Secretary of

the SEC.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW, Washington, DC 20549–

0609. Applicants, Third Avenue

Variable Series Trust, c/o Ian M.

Kirschner, 767 Third Avenue, New

York, New York 10017–2023.

FOR FURTHER INFORMATION CONTACT:

Zandra Y. Bailes, Senior Counsel, or

Susan M. Olson, Branch Chief, Division

of Investment Management, Office of

Insurance Products, at (202) 942–0670.

SUPPLEMENTARY INFORMATION: Following

is a summary of the application. The

complete application is available for a

fee from the Public Reference Branch of

the SEC, 450 Fifth Street, NW,

Washington, DC 20549 (tel. (202) 942–

8090).

Applicants’ Representations

1. The Trust is a Delaware business

trust registered as an open-end

diversified management investment

company. The Trust currently is

composed of one series, Third Avenue

Value Portfolio. Additional portfolios

may be added in the future.

2. The Adviser is registered under the

Investment Advisers Act of 1940 and

will be the investment manager for the

Trust.

3. The Trust intends to offer its shares

to separate accounts of both affiliated

and unaffiliated insurance companies

(‘‘Participating Insurance Companies’’),

supporting variable annuity and

variable life insurance contracts.

4. The Trust also intends to offer one

or more portfolios of its shares directly

to qualified pension and retirement

plans (‘‘Eligible Plans’’ or ‘‘Plans’’)

3262 Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Notices

outside the separate account context.

The Funds’ shares sold to Eligible Plans

which are subject to the Employee

Retirement Income Security Act of 1984

(‘‘ERISA’’), as amended, may be held by

the trustee(s) of the Eligible Plans.

5. The Participating Insurance

Companies will establish their own

separate accounts and design their own

Contracts. Each Participating Insurance

Company will have the legal obligation

of satisfying all requirements applicable

to such insurance company under the

federal securities laws. Each

Participating Insurance Company will

enter into a fund participation

agreement with the Funds in which the

Participating Insurance Company

invests. The role of the Funds, so far as

the federal securities laws are

applicable, will be to offer their shares

to separate accounts of Participating

Insurance Companies and to Eligible

Plans and to fulfill any conditions that

the Commission may impose upon

granting the order requested in the

application.

Applicants’ Legal Analysis

1. 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) under the 1940 Act

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 of any affiliated life

insurance company’’ (emphasis

supplied). 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 a 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

separate accounts of unaffiliated life

insurance companies is referred to

herein as ‘‘shared funding.’’

2. In connection with the funding of

flexible premium variable life insurance

contracts issued through a separate

account registered under the 1940 Act

as unit investment trust, Rule 6e–

3(T)(b)(15) provides partial exemptions

from Sections 9(a), 13(a), 15(a) and 15(b)

of the 1940 Act. These exemptions,

however, are available only where the

separate account’s underlying fund

offers its shares ‘‘exclusively to separate

accounts of the life insurer, or of any

affiliated life insurance company,

offering either scheduled [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 variable life insurance.

However, Rule 6e–3(T) does not permit

shared funding because the relief

granted by Rule 6e–3(T)(b)(15) is not

available with respect to a flexible

premium variable life insurance

separate account that owns shares of a

management investment company that

also offers its shares to separate

accounts (including flexible premium

variable life insurance separate

accounts) of unaffiliated life insurance

companies.

3. Applicants state that the relief

granted by Rules 6e–2(b)(15) and

6e3(T)(b)(15) is not affected by the

purchase of shares of the Funds by an

Eligible Plan. However, because the

relief under Rules 6e–2(b)(15) and

6e3(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 Funds are also to be sold to Eligible

Plans.

4. Applicants state that Section 817(h)

of the Internal Revenue Code of 1986, as

amended (the ‘‘Code’’), imposes certain

diversification standards on the assets

underlying variable annuity contracts

and variable life insurance contracts

issued by insurance company separate

accounts and held in the portfolios of

management investment companies.

The Code provides that such contracts

will not be treated as annuity contracts

or life insurance contracts for any

period (or any subsequent period) for

which the investments are not, in

accordance with regulations issued by

the Treasury Department, adequately

diversified. On March 2, 1989, the

Treasury Department issued regulations

(Treas. Reg. 1.817–5)(the ‘‘Regulations’’)

which established specific

diversification requirements for

investment portfolios underlying

variable annuity and variable life

contracts. The Regulations generally

provide that, in order to meet these

diversification requirements, all of the

beneficial interests in the underlying

investment companies. However, the

Regulations also contain an exception to

this requirement that allows shares of an

investment company to be held by a

qualified pension or 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 annuity and variable

life contracts (Treas. Reg. 1.817–

5(f)(3)(iii)).

5. Applicants also note that the

promulgation of Rules 6e–2(b)(15) and

6e,(T)(b)(15) preceded the issuance of

the Regulations, which made is possible

for shares of an investment company to

be held by an Eligible 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 Contracts. Thus, the sale of

shares of the same investment company

to separate accounts and eligible plans

could not have been envisioned at the

time of the adoption of Rules 6e–2(b)(1)

and 6e–3(T)(b)(15), given the thencurrent tax law.

6. In general, Section 9(A) of the 1940

Act disqualifies any person convicted of

certain offenses, and any company

affiliated with that person, from serving

in various capacities with respect to an

underlying registered management

investment company. More specifically,

Section 9(a)(3) provides that it is

unlawful for any company to serve 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) of (2) of the 1940 Act. Rules

6e2(b)(15)(i) and (ii) and 6e3(T)(b)(15)(i)

and (ii) provide exemptions from

Section 9(a) under certain

circumstances, subject to the limitations

of 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 fund.

7. Applicants state that the partial

relief granted in Rules 6e–2(b)(15) and

6e–3(T)(b)(15) from the requirements of

Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Notices 3263

Section 9 of the 1940 Act limits, in

effect, the mount of monitoring of an

insurer’s personnel that would

otherwise be necessary to ensure

compliance with Section 9 to that which

is appropriate in light of the policy and

purposes of Section 9. Applicants state

that those Rules recognize that it is

unnecessary to apply Section 9(a) to the

thousands of individuals who may be

involved in a large insurance company

but would have no connection with the

investment company funding the

separate accounts. Those individuals

who participate in the management or

administration of the funds will remain

the same regardless of which separate

accounts or insurance companies use

the Funds. Applicants maintain that

applying the requirements of Section

9(a) because of investment by other

insurers’ separate accounts would not

serve any regulatory purpose. Therefore,

Applicants submit that it is unnecessary

to apply Section 9(a) to individuals in

various unaffiliated insurance

companies (or affiliated companies or

Participating Insurance Companies) that

may utilize a Fund as a funding medium

for variable contracts. Additionally,

Applicants state that for the same

reasons as set forth above with respect

to investments by separate accounts,

there is no regulatory purpose to be

served in extending the monitoring

requirements because of investment in

the Funds by Plans.

8. Applicants state the Rules

6e2(b)(15)(iii) and 6e–3(T)(b)(15)(iii)

under the 1940 Act provide exemptions

from the pass-through voting

requirement with respect to several

significant matters, assuming the

limitations on mixed and shared

funding are observed. More specifically,

Rules 6e–2(b)2(b)(15)(iii)(A) and

6e3(T)(b)(15)(iii)A provide that the

insurance company may disregard the

footing instructions of its contract

owners with respect to the investment

of an underlying fund or any contract

between a fund and its investment

adviser, when required to do so by an

insurance regulatory authority and

subject to the provisions of paragraphs

(b)(5)(i) and (b)(7)(ii)(A) of the Rules. In

addition, Rules 6e–2(b)(15)(iii)(B) and

6e3(T)(b)(15)(iii)(A)(2) provide that the

insurance company may disregard

voting instruction of contract owners in

favor of any change in such company’s

investment policies, principal

underwriter or any investment adviser

(subject to the other provisions of

paragraphs (b)(5)(ii) and (b)(7)(ii)(B) and

(C) of the Rules).

9. With respect to Eligible Plans,

which are not registered as investment

companies under the 1940 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

Plan assets to certain specified persons.

Applicants state that shares of the

Funds sold to Eligible Plans will be held

by the trustees of such Plans as required

by Section 403(a) of ERISA. Section

403(a) also provides that the trustee(s)

must have exclusive authority and

discretion to manage and control

Eligible Plans with two exceptions: (a)

When the Eligible 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 Eligible Plan and not contrary to

ERISA; and (b) when the authority to

manage, acquire or dispose of assets of

the Eligible Plan is delegated to one or

more investment managers pursuant to

Section 403(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.

10. 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. The Eligible Plans

may have their trustee(s) or other

fiduciaries exercise voting rights

attributable to investment securities

held by the Eligible Plans in their

discretion. Some of the Eligible 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 Plan participants.

11. Where an Eligible Plan does not

provide participants with the right to

give voting instructions, Applicants

submit that there is no potential for

material irreconcilable conflicts of

interest between or among Contract

holders and Plan participants with

respect to voting of the respective

Fund’s shares. Accordingly, Applicants

note that unlike the case with insurance

company separate accounts, the issue of

the resolution of material irreconcilable

conflicts with respect to voting is not

present with respect to such Eligible

Plans since the Eligible Plans are not

entitled to pass-through voting

privileges.

12. Even if an Eligible Plan were to

hold a controlling interest in a Fund,

Applicants argue that such control

would not 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 the 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.

13. Where an Eligible Plan provides

Plan participants with the right to give

voting instructions, Applicants see no

reason to believe the participants in

Eligible Plans generally or those in a

particular Plan, either as a single group

or in combination with participants in

other Eligible Plans, would vote in a

manner that would disadvantage

Contract holders. The purchase of

shares of the Funds by Eligible Plans

that provide voting rights does not

present any complications not otherwise

occasioned by mixed or shared funding.

14. Applicants assert that no

increased conflicts of interest would be

presented by the granting of the

requested relief. 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. When 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

insurance regulators of other states in

which other Participating Insurance

Companies are domiciled. Applicants

submit that the possibility also exists

when a single insurer and its affiliates

offer their insurance products in several

states, as in currently permitted.

15. Applicants state that affiliations

do not reduce the potential for

differences in state regulatory

requirements. In any event, Applicants

submit that the conditions set forth in

the application and included in this

notice are designed to safeguard against

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 may be required to withdraw its

separate account’s investment in the

relevant Funds.

16. Applicants further assert that

affiliation does not eliminate the

potential for divergent judgments as to

when a Participating Insurance

Company could disregard Contract

holder voting instructions. The potential

3264 Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Notices

for disagreement is limited by the

requirements in Rules 6e–2 and 6–3(T)

that an insurance company’s disregard

of voting instructions be reasonable and

based on specific good faith

determinations. However, if the

Participating Insurance Company’s

decision to disregard Contract holder

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 relevant Fund, to

withdraw its separate account’s

investment in that Fund, and no charge

or penalty would be imposed upon

Contract holders as a result of such

withdrawal.

17. Applicants submit that no reason

exists why investment policies of the

Fund with mixed funding would or

should be materially different from what

they would or should be if the Funds or

series thereof funded only variable

annuity contracts or only variable life

insurance contracts, rather than

Contracts and Eligible Plans. Applicants

represent that the Funds will not be

managed to favor or disfavor any

particular insurer or type of Contract.

18. Applicants state that they do not

see any greater potential for material

irreconcilable conflicts arising between

the interests of Plan Participants under

the Eligible Plans and holders of

Contracts issued by separate accounts of

Participating Insurance Companies from

possible future changes in the federal

tax laws than that which already exist

between variable annuity contract

holders and variable life insurance

contract holders.

19. Applicants note that while there

are differences in the manner in which

distributions are taxed for variable

annuity contracts, variable life

insurance contracts and Eligible Plans,

the tax consequences do not raise any

conflicts of interest. When distributions

are to be made, and the Eligible Plan or

variable annuity or variable life

insurance separate accounts cannot net

purchase payments to make the

distributions, the separate account or

Eligible Plan will redeem shares of the

Funds at their net asset value. The

Eligible Plan will make distributions in

accordance with the terms of the Plan.

The life insurance company will make

distributions in accordance with the

terms of the variable contract.

20. With respect to voting rights,

Applicants state that it is possible to

provide an equitable means of giving

voting rights to Contract holders and to

Eligible Plans. Applicants represent that

the Fund will inform each shareholder,

including each separate account and

Eligible Plan, of information necessary

for the shareholder meeting, including

their respective share of ownership in

the Fund. A Participating Insurance

Company will then solicit voting

instructions in accordance with the

‘‘pass-through’’ voting requirements of

Rules 6e–2 and 6e–3(T).

21. Applicants submit that there are

no conflicts between the Contract

holders of the separate accounts and the

participants under Eligible Plans with

respect to state insurance

commissioners’ veto powers over

investment objectives. State insurance

commissioners have been given the veto

power to prevent, among other things,

insurance companies indiscriminately

redeeming their separate accounts out of

one fund and investing in another.

Generally, time-consuming complex

transactions must be undertaken to

accomplish such redemptions and

transfers. Conversely, the Eligible Plans

can quickly redeem shares from a Fund

and reinvest in another funding vehicle

without the same regulatory

impediments or, as is the case with most

Plans, even hold cash pending suitable

investment. Therefore, Applicants

conclude that even if there should arise

issues where the interests of Contract

holders and the interests of Eligible

Plans and Plan Participants conflict, the

issues can be almost immediately

resolved because Eligible Plans can, on

their own, redeem the shares out of the

Funds.

22. Applicants assert that many

insurance companies have been

hindered in entering the market for

offering variable annuity and variable

life insurance contracts. These factors

include the costs of organizing and

operating a funding medium, the lack of

expertise with respect to investment

management (principally with respect to

stock and money market investments)

and the lack of name recognition by the

public as investment experts. In

particular, some smaller life insurance

companies may not find it economically

feasible, or within their investment or

administrative expertise, to enter the

Contract business on their own.

Applicants submit that the use of the

Funds as common investment media for

Contracts would lower these barriers.

23. Applicants assert that

Participating Insurance Companies

would benefit not only from the

investment and administrative expertise

of the Adviser and its Affiliates, 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 will encourage more insurance

companies to offer Contracts, and

accordingly should result in increased

competition with respect to both

Contract design and pricing, which can

be expected to result in more product

variation and lower charges. Applicants

state that Contract holders would

benefit because mixed and shared

funding eliminates a significant portion

of the costs of establishing and

administering separate funds.

Applicants also assert that the sale of

shares of the Funds to Eligible Plans

should result in an increased amount of

assets available for investment by such

Funds. This may benefit Contract

holders by promoting economies of

scale, by permitting greater safety of

investments through greater

diversification, and by making the

addition of new portfolios to the Funds

more feasible.

Applicants’ Conditions

Applicants have consented to the

following conditions:

1. A majority of the Trustees or Board

of Directors (each, a ‘‘Board’’) of the

Trust and each Fund will consist of

persons who are not ‘‘interested

persons’’ thereof, as defined by Section

2(a)(19) of the 1940 Act, and the rules

thereunder, and as modified by any

applicable orders of the Commission,

except that if this condition is not met

by reason of the death, disqualification

or bona fide resignation of any trustee

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 order upon application.

2. The Boards will monitor their

respective Funds for the existence of

any material irreconcilable conflict

between and among the interests of the

Contract holders of all separate accounts

and of Plan participants and Eligible

Plans investing in the Funds and

determine what action, if any, should be

taken in response to any such conflicts.

A material irreconcilable conflict may

arise for a variety of reasons, including:

(a) any 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, noaction or interpretive letter, or any

similar action by insurance, tax or

securities regulatory authorities; (c) an

administrative or judicial decision in

any relevant proceeding; (d) the manner

in which the investments of the Funds

are being managed; (e) a difference in

voting instructions given by variable

Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Notices 3265

annuity and variable life insurance

contract holders and trustees of the

Plans; (f) a decision by a Participating

Insurance Company to disregard the

voting instructions of Plan participants.

3. The Adviser (or any investment

adviser of a Fund), any Participating

Insurance Company, and any Plan that

executes a fund participation agreement

upon becoming an owner of 10% or

more of the issued and outstanding

shares of a Fund (such Plans referred to

hereafter as ‘‘Participating Plans’’) will

be required to report any potential or

existing conflicts to the Board of the

relevant Fund. The Adviser (or any

other investment adviser of a Fund),

Participating Insurance Companies and

Participating Plans will be responsible

for assisting the appropriate Board in

carrying out its responsibilities under

these conditions by providing the Board

with all information reasonably

necessary for the Board to consider any

issues raised. This includes, but is not

limited to, an obligation by a

Participating Insurance Company to

inform the Board whenever it has

determined to disregard Contract holder

voting instructions, and, if pass-through

voting is applicable an obligation by a

Participating Plan to inform the Board

whenever it has determined to disregard

Plan participant voting instructions. The

responsibility to report such conflicts

and information, and to assist the

Boards will be contractual obligations of

all Participating Insurance Companies

and Participating Plans investing in the

Funds under their agreements governing

participation in the Funds, and such

agreements, shall provide that these

responsibilities will be carried out with

a view only to the interests of the

Contract holders, and if applicable, Plan

participants.

4. If a majority of the Board of a Fund,

or a majority of its disinterested trustees

or directors, determine that a material

irreconcilable conflict exists, the

relevant Participating Insurance

Companies, at their expense and to the

extent reasonably practicable (as

determined by a majority of the

disinterested trustees or directors), will

be required to 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 and

reinvesting such assets in a different

investment medium, which may include

another series of the Trust or another

Fund; (b) in the case of Participating

Insurance Companies, submitting the

questions of whether such segregation

should be implemented to a vote of all

affected Contract holders and, as

appropriate, segregating the assets of

any appropriate group (i.e., variable

annuity or variable life insurance

Contract holders of one or more

Participating Insurance Companies) that

votes in favor of such segregation, or

offering to the affected Contract holders

the option of making such a change; and

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 Contract holders’

voting instructions and that decision

represents a minority position or would

preclude a majority vote, the

Participating Insurance Company may

be required, at the election of the Fund,

to withdraw its separate account’s

investment in such Fund, with no

change or penalty imposed as a result of

such withdrawal. If a material

irreconcilable conflict arises because of

a Participating 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

Participating Plan may be required, at

the election of the Fund, to withdraw its

investment in such Fund, with no

charge or penalty imposed as a result of

such withdrawal. To the extent

permitted by applicable law, the

responsibility of taking remedial action

in the event of a Board determination of

a material irreconcilable conflict and

bearing the cost of such remedial action,

will be contractual obligation of all

Participating Insurance Companies and

Participating Plans under the

agreements governing participation in

the Funds, and these responsibilities

will be carried out with a view only to

the interests of Contract holders and

Plan participants, as applicable.

For purposes of this Condition 4, a

majority of the disinterested members of

the applicable Board will determine

whether or not any proposed action

adequately remedies any material

irreconcilable conflict, but in no event

will a Fund, or the Adviser (or any other

investment adviser of the Funds) be

required to establish a new funding

medium for any Contract. No

Participating Insurance Company will

be required by this Condition 4 to

establish a new funding medium for any

Contract if a majority of Contract

holders materially and adversely

affected by the irreconcilable material

conflict vote to decline this offer. No

Participating Plan shall be required by

this Condition 4 to establish a new

funding medium for such Plan if: (a) A

majority of Plan participants materially

and adversely affected by the

irreconcilable material conflict vote to

decline such offer, or (b) pursuant to

governing plan documents and

applicable law, the Participating Plan

makes such decision with a Plan

participant plan.

5. The Adviser, all Participating

Insurance Companies with respect to a

Fund and Participating Plans with

respect to a Fund will be promptly

informed in writing of any

determination by the Board of such

Fund that a material irreconcilable

conflict exists and its implications.

6. Participating Insurance Companies

will be required to provide pass-through

voting privileges to all Contract holders

so long as the Commission interprets the

1940 Act to require pass-through voting

privileges for Contract holders.

Accordingly, the Participating Insurance

Companies will vote shares of a Fund

held in their separate accounts in a

manner consistent with voting

instructions timely received from

Contract holders. Participating

Insurance Companies shall be

responsible for assuring that each of

their separate accounts calculates voting

privileges in a manner consistent with

all other Participating Insurance

Companies. The obligation to calculate

voting privileges in a manner consistent

with all other separate accounts

investing in the fund will be a

contractual obligation of all

Participating Insurance Companies

under the agreements governing

participation in the Fund. Each

Participating Insurance Company will

be required to vote shares for which it

has not received voting instructions as

well as shares attributable to it, in the

same proportions as it votes shares for

which it has received instructions. Each

Participating Plan will vote as required

by applicable law governing plan

documents.

7. All reports of potential or existing

conflicts received by a Board and all

Board action with regard to determining

the existence of a conflict, notifying the

Adviser, Participating Insurance

Companies and Participating Plans of a

conflict and determining whether any

proposed action adequately remedies a

conflict, will be properly recorded in

the minutes of the appropriate Board or

other appropriate records, and such

minutes or other records will be made

available to the Commission upon

request.

8. Each Fund will notify all

Participating Insurance Companies and

Participating Plans that disclosure in

separate account prospectuses or plan

prospectuses or other plan disclosure

documents regarding potential risks of

3266 Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Notices

mixed and shared funding may be

appropriate. Each Fund will disclose in

its prospectus that: (a) shares of the

Fund may be offered to insurance

company separate accounts of both

annuity and life insurance variable

contracts, and to Plans; (b) due to

differences of tax treatment and other

considerations, the interests of various

Contract holders participating in the

Fund and the interests of Plans

investing in the Fund may conflict; and

(c) the Board will monitor such Fund for

any material conflicts of interest and

determine what action, if any, should be

taken.

9. Each Fund will comply with all

provisions of the 1940 Act requiring

voting by shareholders (which, for these

purposes, shall be the persons having a

voting interest in the shares of the

respective Fund), and, in particular,

each 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

Funds are not within the trusts

described in Section 16(c) of the 1940

Act), as well as with Section 16(a), and,

if applicable, Section 16(b) of the 1940

Act. Further, each Fund will act in

accordance with the Commission’s

interpretation of the requirements of

Section 16(a) with respect to periodic

elections of directors (or trustees) and

with whatever rules the Commission

may promulgate with respect thereto.

10. If and to the extent Rules 6e–2 and

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

promulgated 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 Funds

shall and the Participating Insurance

Companies, as appropriate, shall be

required to take such steps as may be

necessary to comply with Rules 6e–2

and 6e–3(T), as amended, or Rule 6e–3,

as adopted, to the extent applicable.

11. No less than annually, the Adviser

(or any other investment adviser of a

Fund) the Participating Insurance

Companies and Participating Plans shall

submit to the Boards such reports,

materials or data as such Boards may

reasonably request so that the Boards

may fully carry out obligations imposed

upon them by the conditions contained

in the application. Such reports,

materials and data shall be submitted

more frequently if deemed appropriate

by the applicable Boards. The

obligations of the Adviser, Participating

Insurance Companies and Participating

Plans to provide these reports, materials

and data to the Boards, shall be a

contractual obligation of the Adviser, all

Participating Insurance Companies and

Participating Plans under their

agreements governing participation in

the Funds.

12. If a Plan or Plan participating

shareholder should become an owner of

10% or more of the issued and

outstanding shares of a Fund, such Plan

will execute a participation agreement

with such Fund, including the

conditions set forth herein to the extent

applicable. A Plan or Plan participant

shareholder will execute an application

containing an acknowledgment of this

condition at the time of its initial

purchase of shares of the Fund.

Conclusion

For the reasons summarized above,

Applicants assert that the requested

exemptions are necessary and

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–1285 Filed 1–19–00; 8:45 am]

BILLING CODE 8010–01–M

STATE DEPARTMENT

[Public Notice #3188]

Overseas Security Advisory Council

(OSAC) Meeting Notice; Closed

Meeting

The Department of State announces a

meeting of the U.S. State Department—

Overseas Security Advisory Council on

February 15, 16, and 17, at the Westin

Hotel, Fort Lauderdale, Florida.

Pursuant to section 10(d) of the Federal

Advisory Committee Act and 5 U.S.C.

552b(c)(1) and (4), it as been determined

the meeting will be closed to the public.

Matters relative to classified national

security information as well as

privileged commercial information will

be discussed. The agenda will include

updated committee reports, a world

threat overview and a round table

discussion that calls for the discussion

of classified and corporate proprietary/

security information as well as private

sector physical and procedural security

policies and protective programs at

sensitive U.S. Government and private

sector locations overseas.

For more information contact Marsha

Thurman, Overseas Security Advisory

Council, Department of State,

Washington, D.C. 20522–1003, phone:

202–663–0533.

Dated: January 7, 2000.

Peter E. Bergin,

Director of the Diplomatic Security Service.

[FR Doc. 00–1366 Filed 1–20–00; 8:45 am]

BILLIING CODE 4710–24–p

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

Notice of Intent To Rule on Application

(00–02–C–00–SWF) To Impose and Use

a Passenger Facility Charge (PFC) at

Stewart International Airport,

Newburgh, NJ

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Notice of intent to rule on

application.

SUMMARY: This correction revises

information from the previously

published notice.

In notice document 99–29903

beginning on page 62243 in the issue of

Tuesday, November 16, 1999, under the

header section, first paragraph, the

notice of intent to rule on application

number should be, ‘‘(00–02–C–00–

SWF)’’. Also under Supplementary

Information section, third paragraph,

application number should be, ‘‘00–02–

C–00–SWF’’.

DATES: Comments must be received on

or before February 22, 2000.

FOR FURTHER INFORMATION CONTACT: Dan

Vornea, Project Manager, New York

Airports District Office, 600 Old

Country Road, Suite 446, Garden City,

N.Y. 11530.

Issued in Garden City, New York on

November 24, 1999.

Thomas Felix,

Manager, Planning & Programming Branch,

Eastern Region.

[FR Doc. 00–868 Filed 1–19–00; 8:45 am]

BILLING CODE 4910–13–M

DEPARTMENT OF TRANSPORTATION

Maritime Administration

[Docket No. MARAD–2000–6790]

Information Collection Available for

Public Comments and

Recommendations

ACTION: Notice and request for

comments.