40146 Federal Register / Vol. 65, No. 126 / Thursday, June 29, 2000 / Notices

1The Fund’s series are: Potomac OTC Plus Fund,

Potomac OTC/Short Fund, Potomac 30 Plus Fund,

Potomac 30/Short Fund, Potomac Small Cap Plus

Fund, Potomac Small Cap/Short Fund, Potomac

Internet Plus Fund, Potomac Internet/Short Fund,

Potomac U.S. Plus Fund, Potomac U.S./Short Fund,

Potomac Japan Plus Fund, Potomac Japan/Short

Fund and Potomac Money Market Fund.

G–251a’s and 305 G–251b’s are

completed annually.

FOR FURTHER INFORMATION CONTACT: To

request more information or to obtain a

copy of the information collection

justification, forms, and/or supporting

material, please call the RRB Clearance

Officer at (312) 751–3363. Comments

regarding the information collection

should be addressed to Ronald J.

Hodapp, Railroad Retirement Board, 844

N. Rush Street, Chicago, Illinois 60611–

2092. Written comments should be

received within 60 days of this notice.

Chuck Mierzwa,

Clearance Officer.

[FR Doc. 00–16488 Filed 6–28–00; 8:45 am]

BILLING CODE 7905–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. IC–24544; File No. 812–12048]

Investment Company Act of 1940;

Potomac Insurance Trust, et al.

June 22, 2000.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order of exemption under section 6(c) of

the Investment Company Act of 1940

(‘‘1940 Act’’) for exemption from

sections 9(a), 13(a), 15(a) and 15(b) of

the 1940 Act and Rules 6e–2(b)(15) and

6e–3(T)(b)(15) thereunder.

SUMMARY OF APPLICATION: Applicants

seek an order pursuant to section 6(c) of

the 1940 Act for exemptions from the

provisions of sections 9(a), 13(a) and

15(b) of the 1940 Act and Rules 6e–

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

to the extent necessary to permit shares

of any current or future series of the

Fund and shares of any other

investment company that is designed to

fund variable insurance products and

for which Rafferty Asset Management,

LLC (‘‘Rafferty’’), or any of its affiliates,

may serve now or in the future, as

investment adviser (the Fund and such

other investment companies referred to

collectively as the ‘‘Insurance Products

Funds’’) to be offered and sold to, and

held by variable annuity and variable

life insurance separate accounts of both

affiliated and unaffiliated insurance

companies (‘‘Participating insurance

Companies’’), qualified pension and

retirement plans outside of the separate

account context (‘‘Qualified Plans’’),

and Rafferty or any of its affiliates

(representing seed money investments

in the insurance Products

Funds)(‘‘Order’’).

APPLICANTS: Potomac Insurance Trust

(‘‘Fund’’) and Rafferty Asset

Management, LLC (‘‘Rafferty’’)

FILING DATE: This application was filed

on March 24, 2000.

HEARING OF NOTIFICATION OF HEARING: An

Order granting the application will be

issued unless the Commission orders a

hearing. Interested persons may request

a hearing is the application or ask to be

notified if a hearing is ordered. Any

requests must be received by the

Commission by 5:30 p.m. on July 17,

2000. You may request a hearing in

writing, giving the nature of your

interest, the reason for your request, and

the issues you contest, and accompany

such request with proof of service on

the Applicants in the form of an

affidavit or, for lawyers, a certificate of

service. Persons who wish to be notified

of a hearing may request notification by

writing to the Commission’s Secretary.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

NW., Washington, DC 20549.

Applicants, Daniel D. O’Neill, Esq.,

Managing Director, Rafferty Asset

Management, LLC, 1311 Mamaroneck

Avenue, White Plains, New York 10605.

FOR FURTHER INFORMATION CONTACT:

Lorna MacLeod, Senior Counsel, or

Keith Carpenter, Branch Chief, Office of

Insurance Products, Division of

Investment Management, at (202) 942–

0670.

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application, the complete Application is

available for a fee from the

Commission’s Public Reference Branch,

450 Fifth Street, NW., Washington, DC

20549–0102 (tel. (202) 942–8090).

Applicants’ Representations

1. The Fund is a Massachusetts

business trust registered under the 1940

Act as an open-end management

company. The Fund currently is

comprised of thirteen separately

managed series, each of which has its

own investment objective and policies.1

Each series offers Class A and Class B

shares, each of which have a different

expense structure. Additional series

could be added in the future.

2. Rafferty is registered under the

Investment Advisers Act of 1940 and

serves as the investment adviser for the

Fund.

3. Shares of the Insurance Products

Funds are or will be offered to separate

accounts of Participating Insurance

Companies to serve as investment

vehicles for variable annuity and

variable life insurance contracts

(including single, premium, scheduled

premium, modified single premium and

flexible premium contracts)

(collectively, ‘‘Variable Contracts’’).

These separate accounts either will be

registered as investment companies

under the 1940 Act or will be exempt

from such registration. Shares of the

Insurance Product Funds also are or will

be offered to Qualified Plans.

4. The Participating Insurance

Companies establish their own separate

accounts and design their own Variable

Contracts. Each Participating Insurance

Company will have the legal obligation

of satisfying all applicable requirements

under the federal securities laws. The

role of the Insurance Products Funds

will be limited to that of offering their

shares to separate accounts of

Participating Insurance Companies and

to Qualified Plans and fulfilling the

conditions set forth in the application

and described later in this notice. Each

Participating Insurance Company will

enter into a fund participating

agreement with the Insurance Products

Fund in which the Participating

Insurance Company invests.

Applicants’ Legal Analysis

1. Applicants request that the

Commission issue an order under

section 6(c) of the 1940 Act granting

exemptions from sections 9(a), 13(a),

15(a) and 15(b) thereof and Rules 6e–

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

to the extent necessary to permit shares

of the Insurance Products Funds to be

offered and sold to, and held by (a)

variable annuity and variable life

insurance separate accounts of the same

life insurance company or of any

affiliated life insurance company

(‘‘mixed funding’’); (b) separate

accounts of unaffiliated life insurance

companies (including both variable

annuity and variable life separate

accounts) (‘‘shared funding’’); (c)

qualified pension and retirement plans

outside the separate account context;

and (d) the Adviser or any of its

affiliates (representing seed money

investments in the Insurance Products

Funds).

2. In connection with the funding of

scheduled premium variable life

insurance contracts issued through a

separate account registered under the

1940 Act as a unit investment trust,

Rule 6e–2(b)(15) provides partial

exemptions from section 9(a), 13(a),

15(a) and 15(b) of the 1940 Act. These

Federal Register / Vol. 65, No. 126 / Thursday, June 29, 2000 / Notices 40147

exemptions are available only where all

of the assets of the separate account

consists 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 of

any affiliated life insurance company.

Therefore, the relief granted by Rule 6e–

2(b)(15) is not available if the scheduled

premium variable life insurance

separate account owns shares of a

management investment company that

also offers its shares to a variable

annuity separate account of the same

insurance company or an affiliated

insurance company. In addition, the

relief granted by Rule 6e–2(b)(15) is not

available if the scheduled premium

variable life insurance separate account

owns shares of an underlying

management investment company that

also offers its shares to separate

accounts funding variable contracts of

one or more unaffiliated life insurance

companies. The relief granted by Rule

6e–2(b)(15) also is not available if the

shares of the Insurance Products Funds

also are sold to Qualified Plans.

3. In connection with the funding of

flexible premium variable life insurance

contracts issued through a separate

account registered under the 1940 Act

as a 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 are

available only where all of the assets of

the separate account consists of the

shares of one or more registered

management investment companies

which offer their shares exclusively to

separate accounts of the life insurer, or

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.

Therefore, the exemptions provided by

Rule 6e–3(T)(b)(15) are available if the

underlying fund is engaged in mixed

funding, but are not available if the fund

is engaged in shared funding or if the

fund sells its shares to Qualified Plans.

4. Applicants state that the current tax

law permits the Insurance Products

Funds to increase their assets base

through the sale of shares to Qualified

Plans. Section 817(h) of the Internal

Revenue Code of 1986, as amended (the

‘‘Code’’), imposes certain diversification

standards on the underlying assets of

Variable Contracts. The Code provides

that such contracts shall not be treated

as an annuity contract or life insurance

contract for any period (and any

subsequent period) during which the

investments are not adequately

diversified in accordance with

regulations prescribed by the Treasury

Department. Treasury regulations

provide that, to meet the diversification

requirements, all of the beneficial

interests in an investment company

must be held by the segregated assets

accounts of one or more insurance

companies. The regulations do contain

certain exceptions to this requirement,

however, one of which permits shares of

an investment company to be held by

the trustee of a qualified pension or

retirement plan without adversely

affecting the ability of shares in the

same investment company also to be

held by the separate accounts of

insurance companies in connection

with their variable annuity and variable

life contracts (Treas. Reg.

1.817.5(f)(3)(iii)).

5. Applicants state that the

promulgation of Rules 6e–2 and 6e–3(T)

preceded the issuance of these Treasury

regulations. Applicants assert that,

given the then current tax law, the sale

of shares of the same underlying fund to

separate accounts and to Plans could

not have been envisioned at the time of

the adoption of rules 6e–2(b)(15) and

6e–3(T)(b)(15).

6. Applicants request relief for a class

or classes of persons and transactions

consisting of Participating Insurance

Companies and their scheduled

premium variable life insurance

separate accounts and flexible premium

variable life insurance separate accounts

(and, to the extent necessary, any

investment adviser, principal

underwriter and depositor of such

separate accounts) investing in any of

the Insurance Products Funds.

7. Section 6(c) authorizes the

Commission to grant exemptions from

the provisions of the 1940 Act, and rules

thereunder, if and to the extent that an

exemption is necessary or appropriate

in the public interest and consistent

with the protection of investors and the

purposes fairly intended by the policy

and provisions of the 1940 Act.

Applicants assert that the requested

exemptions are appropriate in the

public interest and consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the 1940 Act.

8. Section 9(a)(3) of the 1940 Act

provides that it is unlawful for any

company to act as investment adviser to

or principal underwriter of any

registered open-end investment

company if an affiliated person of that

company is subject to a disqualification

enumerated in Sections 9(a)(1) or (2).

Rules 6e–2(b)(15)(i) and (ii), and 6c–

3(T)(b)(15)(i) and (ii) provide partial

exemptions from section 9(a) under

certain circumstances, subject to the

limitations on mixed and shared

funding. These exemptions limit the

application of eligibility restrictions to

affiliated individuals or companies that

directly participate in the management

or administration of the underlying

investment company.

9. Applicants state that the relief from

section 9(a) provided by Rules 6e–

2(b)(15) and 6c–3(T)(b)(15), in effect,

limits the amount of monitoring

necessary to ensure compliance with

section 9 to that which is appropriate in

light of the policy and purposes of

Section 9. Applicants assert that it is not

necessary for the protection of investors

or the purposes fairly intended by the

policy and provisions of the 1940 Act to

apply the provisions of section 9(a) to

the many individuals who do not

directly participate in the

administration or management of the

Insurance Products Funds, who are

employed by the various unaffiliated

insurance companies (or affiliated

companies of Participating Insurance

Companies) that may utilize the

Insurance Products Funds as the

funding medium for Variable Contracts.

Applicants do not expect the

Participating Insurance Companies to

play any role in the management or

administration of the Insurance

Products Funds. Applicants assert,

therefore, that applying the restrictions

of section 9(a) to individuals employed

by Participating Insurance Companies

serves no regulatory purpose.

10. Applicants state that the relief

requested should not be affected by the

proposed sale of Insurance Products

Funds to Qualified Plans because such

plans are not investment companies and

will not be deemed affiliates solely by

virtue of their shareholdings.

11. Applicants submit that Rule 6e–

2(b)(15)(iii) and 6e–3(T)(b)(15)(iii)

assume the existence of a ‘‘pass-through

voting’’ requirement with respect to

management investment company

shares held by a separate account.

Applicants state that Rule 6e–

2(b)(15)(iii) and 6e–3(T)(b)(15)(iii)

provide exceptions from the passthrough voting requirements in limited

situations, assuming the limitations on

mixed and shared funding imposed by

the 1940 Act and the rules thereunder

are observed. More specifically, Rules

6e–2(b)(15)(iii)(A) and 6e–

3(T)(b)(15)(iii)(A) provide that the

insurance company may disregard the

voting instructions of its contract

owners in connection with the voting of

shares of an underlying investment

company if such instructions would

40148 Federal Register / Vol. 65, No. 126 / Thursday, June 29, 2000 / Notices

require such shares to be voted to cause

an underlying investment company to

make, or refrain from making, certain

investments which would result in

changes in the sub-classification or

investment objectives of such company,

or to approve or disapprove any contract

between an investment company and its

investment adviser, when required to do

so by an insurance regulatory authority.

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

6e–3(T)(b)(15)(iii)(B) provide that an

insurance company may disregard

contract owners’ voting instructions

with regard to changes initiated by the

contract owners in the investment

company’s investment policies,

principal underwriter or investment

adviser, provided that disregarding such

voting instructions is based on specific

good faith determinations.

12. Shares of the Insurances Products

funds sold to Qualified Plans will be

held by the trustees of such plans as

required by section 403(a) of the

Employee Retirement Income Security

Act of 1974 (‘‘ERISA’’). Section 403(a)

also provides that the trustees must

have exclusive authority and discretion

to manage and control the Qualified

Plan with two exceptions: (a) when the

Qualified 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

Qualified Plan and not contrary to

ERISA; and (b) when the authority to

manage, acquire or dispose of assets of

the Qualified Plan is delegated to one or

more investment managers pursuant to

section 402(c)(3) of ERISA. Unless one

of the two exceptions stated in section

403(a) applies, the Qualified Plan

trustees have exclusive authority and

responsibility for voting proxies. Where

a named fiduciary appoints an

investment manager, the investment

manager has the responsibility to vote

the shares held unless the right to vote

such shares is reserved to the trustees or

the named fiduciary. The Qualified

Plans may have their trustees or other

fiduciaries exercise voting rights

attributable to investment securities

held by the Qualified Plans in their

discretion. Where a Qualified Plan does

not provide its participants with the

right to give voting instructions,

Applicants state that they do not see any

potential for irreconcilable material

conflicts of interest between or among

Variable Contract holders and Plan

participants with respect to voting of the

respective Insurance Products Funds

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 Qualified Plans

since such plans are not entitled to passthrough voting privileges. Even if a

Qualified Plan were to hold a

controlling interest in an insurance

Products Fund, the Applicants do not

believe that such control would

disadvantage other investors in such

Insurance Products 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, the Applicants

submit that investment in an Insurance

Products Fund by a Qualified Plan will

not create any of the voting

complications occasioned by mixed

funding or shared funding.

13. Applicants state that some of the

Qualified Plans may provide for the

trustee(s), an investment adviser(s) or

another named fiduciary to exercise

voting rights in accordance with

instructions from Qualified Plan

participants. Applicants state that, in

such cases, the purchase of shares by

such Qualified Plans does not present

any complications not otherwise

occasioned by mixed or shared funding.

14. Applicants state that no increased

conflict of interest would be presented

by the granting of the requested relief.

Applicants submit that shared funding

does not present any issues that do not

already exist where a single insurance

company is licensed to do business in

several states. In this regard, Applicants

note that 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 other insurance

regulators in one or more other states in

which other Participating Insurance

Companies are domiciled. The

possibility however, is no different or

greater than exists when a single insurer

and its affiliates offer their insurance

products in several states, as is currently

permitted.

15. Applicants state that affiliation

does not reduce the potential if any

exists, for differences in state regulatory

requirements. In any event, the

conditions set forth in the application

and later in this notice (which are

adapted from the conditions included in

Rule 6e–3(T)(b)(5)) are designed to

safeguard against any adverse effects

that differences among state regulatory

requirements may produce. If a

particular sate 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 Insurance Products Funds.

16. Applicants also assert that

affiliation does not eliminate the

potential, if any exists, for divergent

judgments as to when a Participating

Insurance Company could disregard

Variable Contract owner voting

instructions. The potential for

disagreement is limited by the

requirements that disregarding voting

instructions be reasonable and based on

specified good faith determinations.

However, if the Participating Insurance

Company’s decision to disregard

Variable Contract owner voting

instructions represents a minority

position or would preclude a majority

vote approving a particular change, such

Participating Insurance Company may

be required, at the election of the

relevant Insurance Products Fund, to

withdraw its separate account’s

investment in that Insurance Products

Fund and no charge or penalty will be

imposed upon the Variable Contract

owners as a result of such withdrawal.

17. Applicants submit that there is no

reason why the investment policies of

an Insurance Products Fund with mixed

funding would or should be materially

different from what those policies

would or should be if such Insurance

Products Fund or series thereof funded

only variable annuity or variable life

insurance contracts. In this regard,

Applicants note that a fund’s adviser is

legally obligated to manage the fund in

accordance with the fund’s investment

objectives, policies and restrictions as

well as any guidelines established by

the fund’s board. Applicants submit that

no one investment strategy can be

identified as appropriate to a particular

insurance product or to a Plan. Each

pool of variable annuity and variable

life insurance contract owners is

composed of individuals of diverse

financial status, age, insurance and

investment goals. A fund supporting

even one type of insurance product

must accommodate these diverse factors

in order to attract and retain purchasers.

Applicants submit that permitting

mixed and shared funding will provide

economic support for the continuation

of the Insurance Products Funds. In

addition, permitting mixed and shared

funding also will facilitate the

establishment of additional series of

Insurance Product Funds serving

diverse goals.

18. As noted above, section 817(h) of

the Code imposes certain diversification

standards on the underlying assets of

variable annuity contracts and variable

Federal Register / Vol. 65, No. 126 / Thursday, June 29, 2000 / Notices 40149

life insurance contracts held in the

portfolios of management investment

companies. Treasury Regulation 1.817–

5(f)(3)(iii), which established

diversification requirements for such

portfolios, specifically permits, among

other things, ‘‘qualified pension or

retirement plans’’ and insurance

company separate accounts to share the

same underlying investment company.

Therefore, Applicants assert that neither

the Code, nor the Treasury regulations,

nor the revenue rulings thereunder

present any inherent conflicts of interest

if the Qualified Plans, variable annuity

separate accounts, and variable life

insurance separate accounts all invest in

the same management investment

company.

19. While there are differences in the

manner in which distributions are taxed

for variable annuity contracts, variable

life insurance contracts and Qualified

Plans, Applicants state that the tax

consequences do not raise any conflict

of interests. When distributions are to be

made, and the separate account of the

Participating Insurance Company or

Qualified Plan cannot net purchase

payments to make the distributions, the

separate account or Qualified Plan will

redeem shares of the Insurance Products

Funds at their respective net asset

values. The Qualified Plan will then

make distributions in accordance with

the terms of the Qualified Plan and the

Participating Insurance Company will

make distributions in accordance with

the terms of the Variable Contract.

20. Applicants submit that the ability

of the Insurance Products Funds to sell

their respective shares directly to

Qualified Plans does not create a

‘‘senior security,’’ as such term is

defined under section 18(g) of the 1940

Act, with respect to any Variable

Contract owner as opposed to a

participant under a Qualified Plan. As

noted above, regardless of the rights and

benefits of participants under the

Qualified Plans, or Variable Contract

owners under their Variable Contracts,

the Qualified Plans and the separate

accounts of Participating Insurance

Companies have rights only with

respect to their respective shares of the

Insurance Products Funds. They can

redeem such shares at their net asset

value. No shareholder of any of the

Insurance Products Funds has any

preference over any other shareholder

with respect to distribution of assets or

payments of dividends.

21. Applicants assert that there are no

conflicts between the Variable Contract

owners and the Plan participants with

respect to state insurance

commissioners’ veto powers over

investment objectives. The basic

premise of shareholder voting is that not

all shareholders may agree with a

particular proposal. While timeconsuming, complex transactions must

be undertaken to accomplish

redemptions and transfers by separate

accounts, trustees of Qualified Plans can

quickly redeem shares from Insurance

Products Funds and reinvest in other

funding vehicles without the same

regulatory impediments or, as in the

case with most Qualified Plans, even

hold cash or other liquid assets pending

suitable alternative investment.

Applicants maintain that even if there

should arise issues where the interest of

Variable Contract owners and the

interests of participants in Plans are in

conflict, the issues can be almost

immediately resolved because the

trustees of the Plans can, on their own,

redeem shares out of the Insurance

Products Funds.

22. Applicants submit that mixed and

shared funding should provide benefits

to Variable Contract owners 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 Adviser and any subadvisers, but also from the cost

efficiencies and investment flexibility

afforded by a larger pool of assets.

Mixed and shared funding also would

permit a greater amount of assets

available for investment by the

Insurance Products Funds, thereby

promoting economics of scale, by

permitting increased safety through

greater diversification and by making

the addition of new series more feasible.

Therefore, making the Insurance

Products Funds available for 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.

Applicants’ Conditions

To the extent required by the

Commission, Applicants consent to the

following conditions.

1. A majority of each Insurance

Products Fund’s Board of Trustees or

Directors (each, a ‘‘Board’’) shall 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 Board

member, 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. Each Board will monitor its

respective Insurance Products Funds for

the existence of any material

irreconcilable conflict between and

among the interests of the Variable

Contract owners of all Participating

Separate Accounts and Qualified Plans

participants investing in the Insurance

Products Funds, 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, 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

Insurance Products Funds are being

managed; (e) a difference in voting

instructions given by variable annuity

contract owners and variable life

insurance contract owners and trustees

of the Qualified Plans; (f) a decision by

a Participating Insurance Company to

disregard the voting instructions of

contract owners; or (g) if applicable, a

decision by a Qualified Plan to

disregard the voting instructions of its

participants.

3. Rafferty (or any other investment

adviser of an Insurance Products Fund),

any Participating Insurance Company

and any Qualified Plan that executes a

fund participating agreement upon

becoming an owner of 10% or more of

an Insurance Product Fund

(‘‘Participants’’) will report any

potential or existing conflicts to the

Board of any relevant Insurance

Products Fund. Participants will be

obligated to assist 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 responsibility

includes, but is not limited to, an

obligation of each Participating

Insurance Company to inform the Board

whenever Variable Contract owner

voting instructions are disregarded and,

if pass-through voting is applicable, an

obligation by each Qualified Plan to

40150 Federal Register / Vol. 65, No. 126 / Thursday, June 29, 2000 / Notices

inform the Board whenever it has

determined to disregard Qualified Plan

participant voting instructions. The

responsibilities to report such

information and conflicts and to assist

the Boards will be contractual

obligations of all Participating Insurance

Companies and Qualified Plans

investing in the Insurance Products

Funds under their respective

agreements governing participation in

the Insurance Products Funds, and such

agreements shall provide that these

responsibilities will be carried out with

a view only to the interests of Variable

Contract owners and, if applicable,

Qualified Plan participants.

4. If a majority of an Insurance

Products Fund’s Board members, or a

majority of the disinterested Board

members, determine that a material

irreconcilable conflict exists, the

relevant Participating Insurance

Companies and Qualified Plans, at their

expense and to the extent reasonably

practicable (as determined by a majority

of the disinterested Board members),

shall 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 Insurance Products

Fund or any series thereof and

reinvesting such assets in a different

investment medium, which may include

another series of an Insurance Products

Fund; (b) in the case of Participating

Insurance Companies, submitting the

question of whether such segregation

should be implemented to a vote of all

affected Variable Contract owners and,

as appropriate, segregating the assets of

any appropriate group (i.e., variable

annuity or variable life insurance

contract owners of one or more

Participating Insurance Companies) that

votes in favor of such segregation, or

offering to the affected Variable Contract

owners the option of making such a

change, and (c) establishing a new

registered management investment

company or managed separate account.

If a material irreconcilable conflict

arises because of a decision by a

Participating Insurance Company to

disregard Variable Contract owner

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

Insurance Products Fund, to withdraw

its 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 Qualified

Plan participants’ voting instructions, if

applicable, and that decision represents

a minority position or would preclude

a majority vote, the Qualified Plan may

be required, at the election of the

Insurance Products 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 shall be a

contractual obligation of all

Participating Insurance Companies and

Qualified Plans under their agreements

governing participation in the Insurance

Products Funds and these

responsibilities shall be carried out with

a view only to the interests of the

Variable Contract owners and, as

applicable, Qualified Plan participants.

For purposes of this Condition 4, a

majority of the disinterested members of

the applicable Board shall determine

whether or not any proposed action

adequately remedies any material

irreconcilable conflict, but in no event

will the Insurance Products Fund or

Rafferty (or any other investment

adviser of the Insurance Products

Funds) be required to establish a new

funding medium for any Variable

Contract. No Participating Insurance

Company shall be required by this

Condition 4 to establish a new funding

medium for any Variable Contract if a

majority of Variable Contract owners

materially and adversely affected by the

material irreconcilable conflict vote to

decline such offer. No Qualified Plan

shall be required by Condition 4 to

establish a new funding medium for

such Qualified Plan if (a) a majority of

Qualified Plan participants materially

and adversely affected by the material

irreconcilable conflict vote to decline

such offer or (b) pursuant to governing

Qualified Plan documents and

applicable law, the Qualified Plan

makes such decision without Qualified

Plan participant vote.

5. Participants will be informed

promptly in writing of a Board’s

determination of existence of a material

irreconcilable conflict and its

implications.

6. Participating Insurance Companies

will provide pass-through voting

privileges to all Variable Contract

owners so long as the Commission

interprets the 1940 Act to require passthrough voting for Variable Contracts

owners. Accordingly, such Participating

Insurance Companies, where applicable,

will vote shares of the Insurance

Products Fund held in their

Participating Separate Accounts in a

manner consistent with voting

instructions timely received from

Variable Contract owners. In addition,

each Participating Insurance Company

will vote shares of the Insurance

Products Fund held in its Participating

Separate Account for which it has not

received timely voting instructions from

Variable Contract owners, as well as

shares it owns, in the same proportion

as those shares for which it has received

voting instructions. Participating

Insurance Companies will be

responsible for assuring that each of

their Participating Separate Accounts

investing in an Insurance Products Fund

calculates voting privileges in a manner

consistent with all other Participating

Insurance Companies. The obligation to

vote an Insurance Products Fund’s

shares and calculate voting privileges in

a manner consistent with all other

separate accounts investing in the

Insurance Products Fund will be a

contractual obligation of all

Participating Insurance Companies

under the agreements governing

participating in the Insurance Products

Fund. Each Qualified Plan will vote as

required by applicable law and

governing Qualified Plan documents.

7. As long as the Commission

continues to interpret the 1940 Act as

requiring pass-through voting privileges

for Variable Contract owners, Rafferty

(or any of its affiliates) will vote its

shares in any series of any Insurance

Products Fund in the same proportion

as all Variable Contract owners having

voting rights with respect to that series;

provided, however, that Rafferty (or any

of its affiliates) shall vote its shares in

such other manner as may be required

by the Commission or its staff.

8. 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 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

appropriate Board or other appropriate

records. Such minutes or other records

shall be made available to the

Commission upon request.

9. Each Insurance Products Fund will

notify all Participating Insurance

Companies that separate account

prospectus disclosure regarding the

potential risks of mixed and shared

funding may be appropriate. Each

Insurance Products Fund shall disclose

in its prospectus that: (a) Its shares may

be offered to insurance company

separate accounts that fund both

variable annuity and variable life

Federal Register / Vol. 65, No. 126 / Thursday, June 29, 2000 / Notices 40151

insurance contracts, and to Qualified

Plans; (b) differences in tax treatment or

other considerations may cause the

interests of various Variable Contract

owners participating in an Insurance

Products Fund and the interests of

Qualified Plans investing in that

Insurance Product Fund to conflict; and

(c) the Board will monitor the Insurance

Product Fund for any material conflicts

and determine what action, if any,

should be taken.

10. Each Insurance Products fund will

comply with all provisions of the 1940

Act requiring voting by shareholders

(for these purposes, the persons having

a voting interest in shares of the

Insurance Products Fund). In particular,

each such Insurance Products Fund

either will provide for annual

shareholder meetings (except insofar as

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 none of the

Insurance Products Fund shall be one of

the trusts described in section 16(c) of

the 1940 Act), as well as with sections

16(a) of the 1940 Act and, if and when

applicable, section 16(b) of the 1940

Act. Further, each insurance Products

Fund will act in accordance with the

Commission’s interpretation of the

requirements of section 16(a) with

respect to periodic elections of Board

members and with whatever rules the

Commission may promulgate with

respect thereto.

11. If and to the extent that 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 in this Application, then the

Insurance Products Funds and/or

Participants, as appropriate, shall take

such steps as may be necessary to

comply with Rules 6e–2 and 6e–3(T), as

amended, and Rule 6e–3, as adopted, to

the extent such Rules are applicable.

12. The Participants, at least annually,

shall submit to the Board such reports,

materials, or data as the Board may

reasonably request so that such Board

may fully carry out the obligations

imposed upon them by the conditions

stated in this Application. Such reports,

materials, and data shall be submitted

more frequently if deemed appropriate

by the applicable Board. The obligations

of the Participants to provide these

reports, materials, and data to the

Boards shall be a contractual obligation

of all Participants under the agreements

governing their participation in the

Insurance Products Funds.

13. If a Qualified Plan or Qualified

Plan participant should become an

owner of 10% or more of the assets of

an Insurance Products Fund, such

Qualified Plan will execute a fund

participation agreement which includes

the conditions set forth herein to the

extent applicable. A Qualified Plan or

Qualified Plan participant will execute

an application containing an

acknowledgment of this condition upon

such plan’s initial purchase of shares of

any Insurance Products Fund.

Conclusion

For the reasons stated above,

Applicants believe that the requested

exemptions, in accordance with the

standards of section 6(c) of the 1940

Act, are appropriate in the public

interest and consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–16417 Filed 6–28–00; 8:45 am]

BILLING CODE 8010–01–M

SOCIAL SECURITY ADMINISTRATION

Agency Information Collection

Activities: Proposed Request and

Comment Request

In compliance with Public Law 104–

13, the Paperwork Reduction Act of

1995, SSA is providing notice of its

information collections that require

submission to the Office of Management

and Budget (OMB). SSA is soliciting

comments on the accuracy of the

agency’s burden estimate; the need for

the information; its practical utility;

ways to enhance its quality, utility and

clarity; and on ways to minimize burden

on respondents, including the use of

automated collection techniques or

other forms of information technology.

I. The information collections listed

below will be submitted to OMB within

60 days from the date of this notice.

Therefore, comments and

recommendations regarding the

information collections would be most

useful if received by the Agency within

60 days from the date of this

publication. Comments should be

directed to the SSA Reports Clearance

Officer at the address listed at the end

of this publication. You can obtain a

copy of the collection instruments by

calling the SSA Reports Clearance

Officer on (410) 965–4145, or by writing

to him at the address listed at the end

of this publication.

1. Application for Lump Sum Death

Payment—0960–0013. The information

collected on form SSA–8 by the Social

Security Administration is required to

authorize payment of a lump-sum death

benefit to a widow, widower, or

children as defined in Section 202(i) of

the Social Security Act. The

respondents are widows, widowers or

children who apply for a lump-sum

death payment.

Number of respondents ................ 43,850

Frequency of response ................. 1

Average burden per response ...... 10 mins.

Estimated annual burden ............. 7308 hrs.

2. Application for Special Age 72-orOver Monthly Payments—0960–0096.

Form SSA–19–F6 is needed by the

Social Security Administration (SSA) to

determine whether an individual is

entitled to Special Age-72 payments.

Eligibility requirements will be

evaluated by the data collected on this

form. The respondents are individuals

who attained age 72 before 1972.

Number of respondents ................ 10

Frequency of response ................. 1

Average burden per response ...... 20 mins.

Estimated annual burden ............. 3 hrs.

3. Request for Self-Employment

Information, Request for Employee

Information, Request for Employer

Information—0960–0508. SSA needs the

information collected on Forms SSA–

L2765, SSA–L3365 and SSA–L4002 in

order to credit the reported earnings to

the proper earnings record. When W–2

wage data for an individual cannot be

identified, the data are placed in the

earnings suspense file, and SSA sends

decentralized correspondence (DECOR)

to the employee (in certain instances to

the employer) in an attempt to obtain

his/her correct name and SSN. The

respondents are employees, employers

or self-employed individuals being

requested to furnish additional

information for individuals for whom

earnings were reported.

Number of respondents ............ 3,000,000

Frequency of response ............. 1

Average burden per response .. 10 mins.

Estimated annual burden ......... 500,000 hrs.

4. State Agency Report of Obligations

for SSA Disability Programs—0960–

0421. The data collected on Form SSA–

4513 are necessary for detailed analysis

and evolution of costs incurred by

Disability Determination Services (DDS)

in making disability determinations for

SSA. The data collected also help to