41108 Federal Register / Vol. 62, No. 147 / Thursday, July 31, 1997 / Notices

6. Applicants represent that the terms

of the in-kind redemptions and

purchases are reasonable and fair and

do not involve overreaching on the part

of any person concerned and that the

interest of Customers and Participants

will not be diluted. The in-kind

redemptions and purchases will be done

at values consistent with the policies of

both the Replaced and Substitute Funds.

Both Aetna and the proposed subadviser

of the Substitute Funds will review all

the asset transfers to assure that the

assets meet the objectives of the

Substitute Fund and that they are

valued under the appropriate valuation

procedures of the Replace Funds and

the Substitute Fund. In-kind

redemptions and purchases will reduce

the brokerage costs that would

otherwise be incurred in connection

with the substitutions. The Applicants

represent that the transactions are

consistent with the policies of each

investment company involved and the

general purposes of the 1940 Act, and

comply with the requirements of section

17(b).

7. Applicants represent that the

combination of subaccounts is intended

to reduce administrative costs and

thereby benefit Customers with assets in

those subaccounts. The purchase and

sale transactions described in the

application will be effected based on the

net asset value of the Fund shares held

in the subaccounts and the value of the

units of the subaccount involved.

Therefore, there will be no change in

value to any Customer or Participant.

Conclusion

Applicants assert that, for the reasons

summarized above, the requested order

approving the substitution and related

transactions involving in-kind

redemptions and the combination of

certain separate account subaccounts

should be granted.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–20171 Filed 7–30–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22763; File No. 812–10398]

CUNA Mutual Life Insurance Company,

et al.

July 24, 1997.

AGENCY: Securities and Exchange

Commission (the ‘‘SEC’’ or

‘‘Commission’’).

ACTION: Notice of Application for

Exemptions under the Investment

Company Act of 1940 (the ‘‘1940 Act’’).

APPLICANTS: CUNA Mutual Life

Insurance Company (‘‘CUNA Mutual

Life’’), CUNA Mutual Life Variable

Account (‘‘Account’’), Ultra Series Fund

(‘‘Fund’’), CIMCO, Inc. (‘‘CIMCO’’),

CUNA Mutual Life Insurance Company

Pension Plan for Agents, CUNA Mutual

Life Insurance Company Pension Plan

for Home Office Employees, CUNA

Mutual Life Insurance Company 401(k)/

Thrift Plan for Agents, CUNA Mutual

Life Insurance Company 401(k)/Thrift

Plan for Home Office Employees, CUNA

Mutual Pension Plan, CUNA Mutual

Savings Plan and CUNA Mutual Thrift

Plan. (The seven plans shall be referred

to collectively as the ‘‘Plans.’’ CUNA

Mutual Life, the Account, the Fund,

CIMCO and the Plans shall be referred

to collectively as the ‘‘Applicants.’’)

RELEVANT 1940 ACT SECTIONS: Order

requested under section 6(c) of the 1940

Act for exemptions form sections 9(a),

13(a) and 15(b) of the 1940 Act, and

Rule 6e–3(T) thereunder; and an order

requested under section 17(b) of the

1940 Act for exemptions from section

17(a) of the 1940 Act.

SUMMARY OF APPLICATION: CUNA Mutual

Life, the Account and the Fund seek an

order exempting them and certain other

separate accounts established in the

future by CUNA Mutual Life, or any life

insurance company affiliate of CUNA

Mutual Life (‘‘future affiliated

accounts’’) and other separate accounts

established in the future by any other

life insurance company (‘‘future

unaffiliated accounts,’’and together with

the future affiliated accounts, the

‘‘future accounts’’), from the provisions

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

the 1940 Act, and Rule 6e–3(T)

thereunder, to the extent necessary to

permit the Account and the future

accounts to hold shares of the Fund at

the same time that the Fund offers its

shares to such future accounts, the Plans

or other qualified pension or retirement

plans (the ‘‘unaffiliated plans’’). In

addition, the Plans and CIMCO seek an

order exempting them from Section

17(a) of the 1940 Act to the extent

necessary to permit the Plans to

purchase certain classes of shares of the

Fund with investment securities of the

Plans.

FILING DATE: The application was filed

on October 15, 1996, and amended and

restated on May 9, 1997 and July 23,

1997.

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,

personally or by mail. Hearing requests

must be received by the Commission by

5:30 p.m. on August 18, 1997, 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.

Applicants, Linda L. Lilledahl, Esq.,

Associate General Counsel, CUNA

Mutual Group, 5910 Mineral Point

Road, Madison, WI 53701–0391.

FOR FURTHER INFORMATION CONTACT:

Megan Dunphy, Attorney, or Mark

Amorosi, Branch Chief, Office of

Insurance Products, Division of

Investment Management, 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.

Applications’ Representations

1. CUNA Mutual Life, former Century

Life of America, is principally engaged

in the offering of life insurance contracts

and is the depositor and sponsor of the

Account. On July 1, 1990, CUNA

Mutual Life entered into a permanent

affiliation with CUNA Mutual Insurance

Society (‘‘CUNA Mutual’’). All of the

directors of CUNA Mutual Life are also

directors of CUNA Mutual and many of

the senor executive officers of CUNA

Mutual Life hold similar positions with

CUNA Mutual. However, both

companies remain separate corporate

entities and their respective owners

retain their voting rights.

2. The Account, a separate account

registered under the 1940 Act as a unit

investment trust, was established on

August 16, 1993 to serve as a funding

vehicle to support variable life

insurance contracts issued by CUNA

Mutual Life. The Account is divided

into subaccounts and invests in shares

of open-end management investment

companies with one or more investment

portfolios or series, including the Fund.

3. The future accounts also would

need to rely on the exemptions

requested in the application. Any such

future accounts would be registered

under the 1940 Act as unit investment

trusts.
Federal Register / Vol. 62, No. 147 / Thursday, July 31, 1997 / Notices 41109

4. CUNA Mutual, a mutual life

insurance company, is principally

engaged in the offering of insurance

products and related services.

5. CIMCO is engaged primarily in the

business of providing investment

management and advice to insurance

company pension plans, investment

companies and other organizations.

CIMCO is registered under the

Investment Advisers Act of 1940, is the

investment adviser to the Fund, and

manages certain assets of the Plans.

CUNA Mutual Life and CUNA Mutual

Investment Corporation each own a onehalf interest in CIMCO. CUNA Mutual

Investment Corporation is a whollyowned subsidiary of CUNA Mutual.

6. The board of directors of CUNA

Mutual Life established CUNA Mutual

Life Insurance Company Pension Plan

For Agents, CUNA Mutual Life

Insurance Company Pension Plan For

Home Office Employees, CUNA Mutual

Life Insurance Company 401(k)/Thrift

Plan for Agents, and CUNA Mutual Life

Insurance Company 401(k)/Thrift Plan

for Home Office Employees (the ‘‘CUNA

Life Mutual Plans’’). Participation in a

CUNA Mutual Life Plan is open to

eligible employees of CUNA Mutual Life

and its subsidiaries or other companies

under common control with CUNA

Mutual Life and which has adopted a

CUNA Mutual life Plan. CUNA Mutual

Life Insurance Company 401(k)/Thrift

Plan for Agents and CUNA Mutual Life

Insurance Company 401(k)/Thrift Plan

for Home Office Employees (the ‘‘CUNA

Mutual Life Defined Contribution

Plans’’) are voluntary defined

contribution plans. CUNA Mutual Life

Insurance Company Pension Plan For

Agents and CUNA Mutual Life

Insurance Company Pension Plan for

Home Office Employees are defined

benefit plans.

7. The board of directors of CUNA

Mutual established CUNA Mutual

Pension Plan, CUNA Mutual Savings

Plan and CUNA Mutual Thrift Plan

(‘‘CUNA Mutual Plans’’). Participation

in a CUNA Mutual Plan is open to

eligible employees of CUNA Mutual and

its subsidiaries or other companies

under common control with CUNA

Mutual and which adopted a CUNA

Mutual Plan. The CUNA Mutual

Pension Plan is a defined benefit plan.

The CUNA Mutual Savings Plan and

CUNA Mutual Thrift Plan (the ‘‘CUNA

Mutual Defined Contribution Plans’’)

are voluntary defined contribution

plans.

8. All of the Plans are intended to

qualify under sections 401(a) and 501(a)

of the Internal Revenue Code of 1986, as

amended (the ‘‘Code’’). The CUNA

Mutual Life Defined Contribution Plans

and CUNA Mutual Defined Contribution

Plans include cash or deferred

arrangements intended to qualify under

section 401(k) of the Code. The Plans

also are subject to, and have been

designed to comply with, the provisions

of the Employee Retirement Income

Security Act of 1977 (‘‘ERISA’’).

9. Each of the Plans is funded by a

trust with an institutional trustee or by

an annuity contract issued by CUNA

Mutual Life or CUNA Mutual. CUNA

Mutual Life and CUNA Mutual retain

the right to establish different funding

arrangements or to appoint other

trustees. Each of the Plans is managed

and administered by a plan committee

and other fiduciaries appointed by

CUNA Mutual Life or CUNA Mutual, as

applicable (hereinafter, ‘‘plan

committees’’).

10. The unaffiliated plans will be

pension or retirement plans intended to

qualify under Section 401(a) and 501(a)

of the Code and will be subject to, and

will be designed to comply with, the

applicable provisions of ERISA. The

unaffiliated plans will not be affiliated

persons of the Applicants or affiliated

persons of such persons. The trustees

and the other fiduciaries of the

unaffiliated plans also will not be

affiliated persons of the Applicants or

affiliated persons of such persons.

11. The CUNA Mutual Thrift Plan

offers participants seven investment

options including, among others, the

following: a growth and income

investment portfolio, a capital

appreciation investment portfolio, a

bond investment portfolio a balanced

investment portfolio, and a money

market investment portfolio. The CUNA

Mutual Savings Plan offers participants

three investment options: a growth and

income investment portfolio, a bond

investment portfolio, and a money

market investment portfolio. The CUNA

Mutual Life Defined Contribution Plans

offer participants three investment

options: a capital appreciation

investment portfolio, a growth and

income investment portfolio and a

money market investment portfolio.

Assets of the other Plans are not held as

part of separate Plan investment

portfolios.

12. The Fund, an open-end

management investment company

organized as a Massachusetts business

trust on September 16, 1983, is a series

company that consists of six investment

portfolios: Capital Appreciation Stock

Fund, Growth and Income Stock Fund,

Balanced Fund, Bond Fund, Money

Market Fund and Treasury 2000 Fund.

13. The investment objective of the

Capital Appreciation Stock Fund is

long-term capital growth. The

investment objective of the Growth and

Income Stock Fund is long-term capital

growth, with income as a secondary

consideration. The investment objective

of the Balanced Fund is to achieve a

high total return through the

combination of income and capital

appreciation by investing in a broadly

diversified life of securities including

common stocks, bonds and money

market instruments. The investment

objective of the Bond Fund is to

generate a high level of current income,

consistent with the prudent limitation

of investment risk, through investment

in a diversified portfolio of fixedincome securities with maturities of up

to 30 years. The investment objective of

the Money Market Fund is to seek the

highest current income available from

money market instruments consistent

with the preservation of capital and

liquidity by maintaining a dollar

weighted average portfolio maturity

which does not exceed 90 days. The

investment objective of the Treasury

2000 Fund is to provide safety of capital

and a relative predictable payout upon

portfolio maturity, primarily by

investing in stripped Treasury

securities.

14. To date, the Fund has offered its

shares only to CUNA Mutual Life (as

seed money investments), the Account,

CUNA Mutual Life Variable Annuity

Account (‘‘Annuity Account’’), and

CUNA Mutual Life Group Variable

Annuity Account (‘‘Group Annuity

Account’’). The Fund offers each series

of shares to corresponding subaccounts

of the Account to support variable life

insurance contracts (‘‘VLI contracts’’)

and to the Annuity Account and the

Group Annuity Account to support

variable annuity contracts (‘‘VA

contracts,’’ and together with VLI

contracts, ‘‘variable contracts’’).

15. Changes in the tax law have

created the opportunity for the Fund to

substantially increase its assets based

through the sale of Fund shares to the

Plans and the unaffiliated plans. Section

817(h) of the Code imposes certain

diversification standards on the assets

underlying variable contracts. The Code

provides that variable contracts shall

not be treated as annuity contracts or

life insurance contracts for any period

in which the underlying assets are not,

in accordance with regulations

prescribed by the Treasury Department,

adequately diversified. On March 2,

1989, the Treasury Department issued

regulations which established

diversification requirements for the

investment portfolios underlying

variable contracts. Treas. Reg. § 1.817–5

(1989). The regulations provide that, to

meet the diversification requirements,
41110 Federal Register / Vol. 62, No. 147 / Thursday, July 31, 1997 / Notices

all of the beneficial interests in the

investment company must be held by

the segregated asset accounts for one or

more insurance companies. The

regulations do, however, contain certain

exceptions to this requirement, one of

which allows shares in 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 contracts. Treas. Reg.

§ 1.817–5(f)(3)(iii). As a result of this

exception to the general diversification

requirement, qualified pension and

retirement plans (such as the Plans or

the unaffiliated plans) may hold Fund

shares and select an investment

portfolio of the Fund as an investment

option without endangering the tax

status of CUNA Mutual Life’s VLI

contracts or VA contracts as life

insurance or annuities, respectively.

16. Applicants propose that, in one or

more discrete instances, the Plans

purchase Fund shares using investment

securities held by the Plans. The CUNA

Mutual Life Defined Contribution Plans

and the CUNA Mutual Defined

Contribution Plans would use

investment securities constituting a

separate Plan investment portfolio,

currently available to participants as an

investment option, to purchase Fund

shares, while the other Plans would use

securities held by the Plan but not as a

separate Plan investment portfolio.

17. Applicants state that the CUNA

Mutual Defined Contribution Plans and

the CUNA Mutual Life Defined

Contribution Plans will each use the

assets of their capital appreciation

investment portfolios to purchase shares

of the Fund’s Capital Appreciation

Stock Fund, use the assets of their

growth and income investment

portfolios to purchase shares of the

Fund’s Growth and Income Stock Fund,

use the assets of their bond investment

portfolios to purchase shares of the

Fund’s Bond Fund, use the assets of

their balanced investment portfolio to

purchase shares of the Fund’s Balanced

Fund and use the assets of the money

market investment portfolios to

purchase shares of the Fund’s Money

Market Fund. If the proposed

consolidations were to occur, the Plans

would initially acquire a substantial

majority of the outstanding shares of the

Fund’s Growth and Income Stock Fund,

Bond Fund and Money Market Fund as

well as a controlling interest in the

Fund’s Capital Appreciation Stock

Fund.

Applicants’ Legal Analysis

A. Request for Exemptions Under

Section 6(c)

(i) General Grounds for Relief

1. CUNA Mutual Life, the Account

and the Fund (the ‘‘Section 6(c)

Applicants’’) request that the

Commission issue an order pursuant to

section 6(c) of the 1940 Act exempting

them as well as any future accounts and

depositors and principal underwriters of

any future accounts from the provisions

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

the 1940 Act, and Rule 6e–3(T)(b)(15)

thereunder, to the extent necessary for

the Account and any future accounts to

hold shares of the Fund at the same time

that the Plans or the unaffiliated plans

hold shares of the Fund or for the

Account and any unaffiliated future

account to simultaneously hold shares

of the Fund.

2. CUNA Mutual Life and the Account

currently rely on the exemptions

provided by Rule 6e–3(T)(b)(15) under

the 1940 Act, which provides partial

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

15(a) and 15(b) of the 1940 Act for

certain VLI contracts. However, the

exemptions granted by the rule are

available only where: (i) the Fund offers

its shares exclusively to separate

accounts of CUNA Mutual Life or any

life insurance company affiliate of

CUNA Mutual Life offering either

scheduled premium variable life

insurance contracts or flexible premium

variable life insurance contracts, or

both; or (ii) the Fund offers its shares to

variable annuity separate accounts of

CUNA Mutual Life or of any life

insurance company affiliate of CUNA

Mutual Life. The Rule 6e–3(T)(b)(15)

exemptions would not be available to

CUNA Mutual Life, the Account or any

future accounts (affiliated or

unaffiliated) if the Fund were to sell its

shares to the Plans or to unaffiliated

plans.

3. In general, section 9(a) of the 1940

Act disqualifies any person convicted of

certain offenses, and any company

affiliated with that person, from acting

or serving in various capacities with

respect to a registered investment

company. Section 9(a)(3) provides that

it is unlawful for any company to serve

as investment adviser or principal

underwriter for any registered open-end

investment company if an affiliated

person of that company is subject to a

disqualification enumerated in sections

9(a) (1) or (2). However, Rule 6e–

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

exemptions from section 9(a), under

certain circumstances and subject to

certain conditions that limit the

application of the eligibility restrictions

of Section 9(a) to affiliated individuals

or companies that directly participate in

the management of the Fund.

4. The section 6(c) Applicants assert

that the partial relief provided by Rule

6e–3(T)(b)(15) effectively limits the

amount of monitoring of personnel that

CUNA Mutual Life and its affiliates (or

future account depositors and their

affiliates) would have to conduct to

ensure compliance with section 9 to that

which is appropriate in light of the

policy and purposes of section 9. The

section 6(c) Applicants further assert

that the rule recognizes 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 to provisions of section 9(a) to the

many hundreds of individuals in a large

insurance company complex, most of

whom typically have no involvement in

matters pertaining to investment

companies affiliated with that

organization.

5. Rule 6e–3(T)(b)(15)(iii) provides

partial exemptions from sections 13(a),

15(a) and 15(b) of the 1940 Act to permit

CUNA Mutual Life, under certain

limited circumstances, to: (i) disregard

the voting instructions of VLI contract

owners if following such instructions

would cause CUNA Mutual Life to make

(or refrain from making) certain

investments that would result in

changes in the subclassification or

investment objectives of the Fund; or (ii)

(subject to the provisions of paragraphs

(b)(5)(i) and (b)(7)(ii)(A) of Rule 6e–3(T))

approve or disapprove any contract

between the Fund and CIMCO (or

another investment adviser), when such

action is mandated by an insurance

regulatory authority.

6. The section 6(c) Applicants assert

that historically, the exclusivity

provision in Rule 6e–3(T)(b)(15) evolved

from the Commission’s concern about

possible divergent interests between or

among different classes of investors

(e.g., VA owners and VLI owners) in

mutual funds supporting variable life

insurance separate accounts. The unit

investment trust structure for

supporting VLI contracts created the

opportunity for a mutual fund

underlying a trust also to offer its shares

to a variable annuity separate account

(hereinafter, ‘‘mixed funding’’). This

structure also created the opportunity

for a mutual fund underlying such a

separate account also to offer its shares

to separate accounts of two or more

insurance companies that are not

affiliated persons of each other

(hereinafter, ‘‘shared funding’’).

7. The section 6(c) Applicants state

that the Commission addressed its
Federal Register / Vol. 62, No. 147 / Thursday, July 31, 1997 / Notices 41111

concerns about divergent interests

among investors when it adopted Rule

6e–2 (the primary exemptive rule for

scheduled premium variable life

insurance). Rule 6e–2 does not permit

mixed or shared funding. Several

insurers relying on Rule 6e–2 sought

and obtained individual exemptions to

permit mixed funding, subject to certain

conditions designed to identify and

resolve potential or existing conflicts of

interest among variable contract owners.

The section 6(c) Applicants maintain

that, ultimately, Rule 6e–3(T)(b)(15) was

designed to permit a separate account

supporting both flexible and scheduled

premium VLI contracts to share the

same underlying fund and engage in

mixed funding.

8. The section 6(c) Applicants

maintain that qualified retirement plan

investors in the Fund would have

substantially the same interests as

current variable contract owners. Like

variable contract owners, qualified

retirement plan investors are long-term

investors. Therefore, most can be

expected not to withdraw their assets

from the Plans or the unaffiliated plans.

In addition, since neither variable

contract owners nor Plan and

unaffiliated plan in investors would be

taxed on the investment return of their

respective investments in the Fund,

they would share a strong interest in the

Fund operating in a manner that

preserves its tax status.

9. The section 6(c) Applicants

represent that the Account and the

Plans are governed in similar ways as

would be future accounts and

unaffiliated plans. Plan committees (and

other plan fiduciaries) have a fiduciary

duty to participants that is similar to the

obligations that CUNA Mutual Life or

any other life insurance company has to

look after the interests of variable

contract owners.

10. The section 6(c) Applicants assert

that, because investors in the Plans and

unaffiliated plans would have beneficial

interests similar to those of current

investors, the addition of the Plans and

unaffiliated plans as shareholders of the

Fund and the addition of participants as

persons having beneficial interests in

the Fund should not increase the risk of

material irreconcilable conflicts among

and between investors. The section 6(c)

Applicants further assert that even if a

material irreconcilable conflict

involving the Plans or the unaffiliated

plans or their respective participants

arose, the fiduciaries of the Plans and

the trustees (or other fiduciaries) of the

unaffiliated plans can, if their fiduciary

duty to the participants requires it,

redeem the shares of the Fund held by

the Plans or the unaffiliated plans and

make alternative investments without

obtaining prior regulatory approval.

Similarly, the Plans and most, if not all,

of the unaffiliated plans may hold cash

or other liquid assets pending their

reinvestment in a suitable alternative

investment.

1. The section 6(c) Applicants

maintain that variable contract owners

would benefit from the expected

increase in net assets of the Fund’s

portfolios resulting from additional

investments by the Plans and

unaffiliated plans. Such additional

investments should lower some of the

costs of investing for variable contract

owners, promote economies of scale,

permit increased safety through greater

portfolio diversification, provide the

Fund’s investment adviser with greater

flexibility because of a larger portfolio,

and make the addition of new portfolios

in the future more feasible.

12. The section 6(c) Applicants note

that when the Commission last revised

Rule 6e–3(T) in 1987, the Treasury

Department had not issued Treasury

Regulation 1.817–5 which permits the

Fund to sell shares to qualified pension

or retirement plans without adversely

affecting the tax status of variable

contracts. The section 6(c) Applicants

submit that, although proposed

regulations had been published, the

Commission did not envision this

possibility when it last examined Rule

6e–3(T)(b)(15), and might well have

broadened the exclusivity provision of

the rule at that time to include plans

such as the Plans (or the unaffiliated

plans) had this possibility been

apparent.

(ii) Voting Rights

13. The section 6(c) Applicants do not

see any inherent conflicts arising

between or among the interests of

variable contract owners, or Plan

participants because of the potential for

the Plans to hold a controlling interest

in a portfolio of the Fund. If the

exemptions requested herein are

granted, the trustees or the plan

committee of each Plan would enter into

a participation agreement with the Fund

that contains certain conditions, as

discussed below. These conditions

would serve to enhance the ability of

the Fund’s board of trustees and CUNA

Mutual Life as well as depositors of

future accounts to protect the interests

of variable contract owners and

minimize any potential for material

conflicts between or among the interests

of plan investors on the one hand and

variable contract owners on the other.

14. The section 6(c) Applicants

maintain that there is no reason to

believe that the trustees or the plan

committees of the various Plans as a

group would vote in a manner that

would disadvantage variable contract

owners. Moreover, because a majority of

the Fund’s trustees will not be

interested persons of the Fund, the

trustees, the plan committees and other

affiliated persons of the Plans will not

be in a position to exercise undue

influence over the Fund or any of its

portfolios.

15. Also, with regard to resolving or

remedying possible material conflicts of

interest related to voting, the Plans’

investment in the Fund does not present

any complications not otherwise

occasioned by traditional mixed funding

as permitted by Rule 6e–3(T)(b)(15). The

section 6(c) Applicants submit that the

interests and opinions of Fund investors

may differ, but this does not mean that

inherent conflicts of interest exist

between or among such investors.

16. Section 403(a) of ERISA provides

that, with few exceptions, trustees of the

unaffiliated plans would have the

exclusive authority and responsibility

for exercising voting rights attributable

to their respective plan’s investment

securities. Where a named fiduciary

appoints an investment adviser, the

adviser has the authority and

responsibility to exercise such voting

rights unless the authority and

responsibility is reserved to the

trustee(s) or a non-trustee fiduciary.

17. The section 6(c) Applicants

generally expect many of the

unaffiliated plans to have their trustees

or other fiduciaries exercise, in their

discretion, voting rights attributable to

investment securities held by the

unaffiliated plans. Some of the

unaffiliated 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.

18. Where unaffiliated plans do not

provide participants with the right to

give voting instructions, the section 6(c)

Applicants do not see any potential for

material irreconcilable conflicts of

interest between variable contract

owners and unaffiliated plan investors

with respect to voting of Fund shares. In

this regard, the section 6(c) Applicants

submit that investment in the Fund by

the unaffiliated plans will not create any

of the voting complications occasioned

by traditional mixed and shared

funding, or by the Plans’ proposed

investment in the Fund.

19. Where unaffiliated plans provide

participants with the right to give voting

instructions, the section 6(c) Applicants

do not believe that participants in

unaffiliated plans generally or those in
41112 Federal Register / Vol. 62, No. 147 / Thursday, July 31, 1997 / Notices

a particular unaffiliated plan, either as

a single group or in combination with

participants in other unaffiliated plans,

would vote in a manner that would

disadvantage variable contract owners.

The purchase of Fund shares by the

unaffiliated plans that provide voting

rights does not present any

complications not otherwise occasioned

by mixed and shared funding.

20. In light of Treasury Regulation

1.817–5(f)(3)(iii) which specifically

permits ‘‘qualified pension or retirement

plans’’ and separate accounts to share

the same underlying management

investment company, the section 6(c)

Applicants have concluded that neither

the Code, nor other Treasury

Regulations or revenue rulings

thereunder, would create any inherent

conflicts of interest between or among

participants and variable contract

owners.

(iii) Tax Treatment of Distributions

21. Although there are differences in

the manner in which distributions from

the Plans or the unaffiliated plans and

distributions from variable contracts are

taxed, the section 6(c) Applicants

maintain that these differences will

have no impact on the Fund. The

Account, any future accounts, the Plans,

and the unaffiliated plans each will

purchase and redeem Fund shares at net

asset value in conformity with Rule

22c–1 under the 1940 Act.

(iv) Potential Future Conflicts Arising

From Tax Law Changes

22. The section 6(c) Applicants do not

see any greater potential for material

irreconcilable conflicts arising between

the interests of plan investors and other

Fund investors from possible future

changes in the federal tax laws than that

which already exists with regard to such

conflicts arising between VLI contract

owners and VA contract owners.

(v) Grounds for Relief for Shared

Funding

23. The section 6(c) Applicants

maintain that the holding of Fund

shares by separate accounts of

unaffiliated insurance companies would

not entail greater potential for material

irreconcilable conflicts arising between

or among the interests of VLI owners

and VA owners than does traditional

mixed funding. Likewise, the holding of

Fund shares by separate accounts of

unaffiliated insurance companies would

not create greater potential for material

irreconcilable conflicts arising between

or among the interests of variable

contract owners and plan investors than

would be the case if only separate

accounts of CUNA Mutual Life’s

insurance company affiliates and plan

investors held Fund shares.

24. The section 6(c) Applicants assert

that shared funding does not present

any issues that do not already exist

where a single insurance company is

licensed to do business in several, or all,

states. The section 6(c) Applicants note

that where insurers are domiciled in

different states, it is possible that the

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 in one or more

other states in which other insurance

companies are domiciled. The section

6(c) Applicants submit that this

possibility is no different from and no

greater than what exists where a single

insurer and its affiliates offer their

insurance products in several states.

25. The section 6(c) Applicants also

assert that the right of an insurance

company to disregard VLI contract

owner voting instructions does not raise

any issues different from those raised by

the authority of different state insurance

regulators over separate accounts.

Affiliation does not eliminate the

potential for divergent judgments by

such companies as to the advisability or

legality of a change in investment

policies, principal underwriting, or

investment adviser of an open-end

management investment company in

which their separate account invests.

The section 6(c) Applicants assert that

the potential for disagreement between

or among insurance companies is

limited by the requirement that the

insurance company’s disregard of voting

instructions be both reasonable and

based on specific good faith

determinations. Moreover, in the event

that a decision of CUNA Mutual Life or

the depositor of a future account to

disregard VLI contract owners’

instructions represents a minority

position or would preclude a majority

vote at a Fund shareholders meeting,

CUNA Mutual Life or such depositor

could be required, at the election of the

Fund, to withdraw its investment in that

Fund.

(vi) Conditions for Relief

Applicants represent and agree that if

the exemptions required in the

application pursuant to section 6(c) are

granted, CUNA Mutual Life and the

Account will only rely on such

exemptions to purchase and hold Fund

shares if the following conditions are

met:

1. The board of trustees of the Fund,

including a majority of those trustees who are

not interested persons of the Fund or

interested persons of such persons, adopts a

resolution approving the sale of Fund shares

to the Plans and the unaffiliated plans. for

this purpose, interested person means

‘‘interested persons’’ as defined by Section

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

thereunder, and as modified by any

applicable Commission orders, except that if

this condition is not met by reason of the

death, disqualification, or bona fide

resignation of any trustee or trustees, then the

operation of this condition shall be

suspended for (a) a period of 45 days of the

vacancy or vacancies may be filled by the

remaining trustees, (b) a period of 60 days if

a vote of shareholders is required to fill the

vacancy or vacancies, or (c) such longer

period as the Commission may prescribe by

order upon application.

2. The board of trustees of the Fund, a

majority of whom shall not be interested

persons of the Fund or interested persons of

such persons, shall monitor the Fund for the

existence of any material irreconcilable

conflicts between or among the interests of

VLI owners, VA owners and plan investors

and determine what action, if any, should be

taken in response to those 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 (c) a public ruling, private

letter ruling, no-action or interpretive letter,

or any similar action by insurance, tax, or

securities regulatory authorities, (d) the

manner in which the investments of any

Fund are being managed, (e) a difference in

voting instructions given by VLI owners, VA

owners and plan investors, (f) a decision by

CUNA Mutual Life to disregard variable

contract owner voting instructions, and (g) a

decision by a Plan trustee (or other Plan

fiduciary) to disregard voting instructions of

Plan participants.

3. CUNA Mutual Life will monitor its

operations and those of the Fund for the

purpose of identifying any material conflicts

or potential material conflicts between or

among the interests of plan investors, VA

owners and VLI owners.

4. CUNA Mutual Life and CIMCO will

report any such conflicts or potential

conflicts to the Fund’s board of trustees and

will provide the board at least annually, with

all information reasonably necessary for the

board to consider any issues raised by such

existing or potential conflicts. CUNA Mutual

Life will also assist the board in carrying out

this obligation including, but not limited to:

(a) informing the board whenever it

disregards VLI owner voting instructions,

and (b) providing such other information and

reports as the board may reasonably request.

CUNA Mutual Life will carry out these

obligations with a view only to the interests

of VA owners and VLI owners.

5. CUNA Mutual Life will provide ‘‘passthrough’’ voting privileges to VA owners and

VLI owners as long as the Commission

interprets the 1940 Act to require such

privileges in such cases. CUNA Mutual Life

will vote Fund shares held by it that are not

attributable to VA contract or VLI contract

reserves in the same proportion as

instructions received in a timely fashion from
Federal Register / Vol. 62, No. 147 / Thursday, July 31, 1997 / Notices 41113

VA owners and VLI owners and shall be

responsible for ensuring that the Account

and the Annuity Account each calculate

‘‘pass-through’’ votes in a consistent manner.

6. In the event that a conflict of interest

arise between VA owners or VLI owners and

plan investors, CUNA Mutual Life will, at its

own expense, take whatever action is

necessary to remedy such conflict as it

adversely affects VA owners or VLI owners

up to and including (1) establishing a new

registered management investment company,

and (2) withdrawing assets attributable to

reserves for the VA contracts or VLI contracts

subject to the conflict form the Fund and

reinvesting such assets in a different

investment medium (including another

portfolio of the Fund) or submitting the

question of whether such withdrawal should

be implemented to a vote of all affected VA

owners or VLI owners, and, as appropriate,

segregating the asset supporting the contracts

of any group of such owners that votes in

favor of such withdrawal, or offering to such

owners the option of making such a change.

CUNA Mutual Life will carry out the

responsibility to take the foregoing action

with a view only to the interests of VA

owners and VLI owners. Notwithstanding the

foregoing, CUNA Mutual Life will not be

obligated to establish a new funding medium

for any group of VA contracts or VLI

contracts if an offer to do so has been

declined by a vote of a majority of the VA

owners or VLI owners adversely affected by

the conflict.

7. If a material irreconcilable conflict arises

because of CUNA Mutual Life’s decision to

disregard the voting instructions of VLI

owners and that decision represents a

minority position or would preclude a

majority vote at any Fund shareholder

meeting, then, at the request of the Fund’s

board of trustees, CUNA Mutual Life will

redeem the shares of the Fund to which the

disregarded voting instructions relate. No

charge or penalty, however, will be imposed

in connection with such a redemption.

8. A majority vote of the disinterested

trustees of the Fund shall represent a

conclusive determination as to the existence

of a material irreconcilable conflict between

or among the interests of VLI owners, VA

owners and plan participants. A majority

vote of the disinterested trustees of the Fund

shall represent a conclusive determination as

to whether any proposed action adequately

remedies any material irreconcilable conflict

between or among the interests of VLI

owners, VA owners and plan participants.

The Fund shall notify CUNA Mutual Life,

depositors of future accounts, Plans and

unaffiliated plans in writing of any

determination of the foregoing type.

9. All reports sent by CUNA Mutual Life,

the depositors of the future accounts, the

Plans or the unaffiliated plans to the board

of trustees of the Fund or notices sent by the

board to CUNA Mutual Life, the depositors

of the future accounts, the Plans or the

unaffiliated plans notifying the recipient of

the existence of or potential for a material

conflict between the interests of VA owners,

VLI owners and plan investors as well as

board deliberations regarding conflicts or

potential conflicts shall be recorded in the

board meeting minutes of the Fund or other

appropriate records, and such minutes or

other records shall be made available to the

Commission upon request.

10. The Fund’s prospectus shall disclose

that (1) its shares are offered in connection

with mixed funding, shared funding and to

401(a) plans, (2) both mixed funding, shared

funding and investment by 401(a) plans in

the Fund may present certian conflicts of

interest between VA owners, VLI owners and

plan investors and (3) the Fund’s board of

trustees will monitor for the existence of any

material conflict of interest. The Fund shall

also notify the Plan trustees, the trustees of

unaffiliated plans, CUNA Mutual Life and

the life insurance company depositors of the

future accounts that similar prospectus

disclosure may be appropriate in separate

account prospectuses or any plan

prospectuses or other plan disclosure

documents.

11. CUNA Mutual Life and the Account

will continue to rely on Rule 6e–3(T)(b)(15)

and to comply with all of its conditions. In

the event that Rule 6e–3(T) is amended, or

any successor rule is adopted, CUNA Mutual

Life and the Account will instead comply

with such amended or successor rule.

12. Each Plan will execute a participation

agreement with the Fund requiring the

trustees or plan committees of the Plan to: (a)

monitor the Plan’s operations and those of

the Fund for the purpose of identifying any

material conflicts or potential material

conflicts between or among the interests of

plan investors, VA owners and VLI owners,

(b) report any such conflicts or potential

conflicts to the Fund’s board of trustees, and

(c) provide the board, at least annually, with

all information reasonably necessary for the

board to consider any issues raised by such

existing or potential conflicts and any other

information and reports that the board may

reasonably request, (d) ensure that the Plan

votes Fund shares as required by applicable

law and governing Plan documents.

13. In the event that a conflict of interest

arises between plan investors and VA owners

or other investors in the Fund, each Plan

will, at its own expense, take whatever action

is necessary to remedy such conflict as it

adversely affects that Plan or participants in

that Plan up to and including (1) establishing

a new registered management investment

company, and (2) withdrawing Plan assets

subject to the conflict from the Fund and

reinvesting such assets in a different

investment medium (including another

portfolio of the Fund) or submitting the

question of whether such withdrawal should

be implemented to a vote of all affected plan

participants, and, as appropriate, segregating

the assets of any group of such participants

that votes in favor of such withdrawal, or

offering to such participants the option of

making such a change. Each Plan will carry

out the responsibility to take the foregoing

action with a view only to the interests of the

plan investors in its Plan. Notwithstanding

the foregoing, no Plan will be obligated to

establish a new funding medium for any

group of participants if an offer to do so has

been declined by a vote of a majority of the

Plan’s participants adversely affected by the

conflict.

14. If a material irreconcilable conflict

arises because of a Plan trustee’s (or other

fiduciary’s) decision to disregard the voting

instructions of Plan participants (if such Plan

should provide voting rights to its

participants) and that decision represents a

minority position or would preclude a

majority vote at any shareholder meeting,

then, at the request of the Fund’s board of

trustees, the Plan will redeem the shares of

the Fund to which the disregarded voting

instructions relate. No charge or penalty,

however, will be imposed in connection with

such a redemption.

15. The Fund will comply with all the

provisions of the 1940 Act relating to security

holder (i.e., persons such as VLI owners and

VA owners or participants in plans that

provide participants with voting rights)

voting including Sections 16(a), 16(b) (when

applicable) and 16(c) (even though the Fund

is not a trust of the type described therein).

Applicants also represent that, with

regard to the reliance of the future

accounts (including their life insurance

company depositors) on the section (6(c)

exemptions requested in the

application, the Fund will only sell

shares to future accounts if the life

insurance company depositors enter

into a participation agreement with the

Fund requiring the depositor to comply

with conditions 3, 4, 5, 6, 7, 8 and 11

in the same manner as will CUNA

Mutual Life. Likewise, the Fund will

only sell shares to unaffiliated plans

holding 10% or more of the shares of

any investment portfolio of the Fund if

such plans enter into a participation

agreement with the Fund requiring the

trustees or other appropriate plan

fiduciaries to comply with conditions 8,

12, 13, and 14 in the same manner as

will the Plans.

B. Request for Exemptions Under

Section 17(b)

1. CIMCO and the Plans request that

the Commission issue an order pursuant

to section 17(b) of the 1940 Act

exempting them from the provisions of

section 17(a) of the 1940 Act to the

extent necessary to permit the Plans to

purchase shares of the Fund with

investment securities of the Plans.

Section 17(a)(1) of the 1940 Act, in

relevant part, prohibits any affiliated

person of a registered investment

company, or any affiliated person of

such person, acting as principal, from

knowingly selling any security or other

property to that company. Section

17(a)(2) of the 1940 Act generally

prohibits the persons described above,

acting as principals, from knowingly

purchasing any security or other

property from the registered investment

company.

2. Section 17(b) of the 1940 Act

provides that the Commission may,

upon application, grant an order
41114 Federal Register / Vol. 62, No. 147 / Thursday, July 31, 1997 / Notices

exempting any transaction from the

prohibitions of section 17(a) if the

evidence establishes that: (i) The terms

of the proposed transaction, including

the consideration to be paid or received,

are reasonable and fair and do not

involve overreaching on the part of any

person concerned; (ii) the proposed

transaction is consistent with the policy

of each registered investment company

concerned, as recited in its registration

statement and reports filed under the

1940 Act; and (iii) the proposed

transaction is consistent with the

general purposes of the 1940 Act.

3. Section 2(a)(3) of the 1940 Act

defines the term ‘‘affiliated person of

another person’’ in relevant part as: ‘‘(A)

any person directly or indirectly

owning, controlling, or holding with

power to vote, 5 per centum or more of

the outstanding voting securities of such

other person; (B) any person 5 per

centum or more of whose outstanding

voting securities are directly or

indirectly owned, controlled, or held

with power to vote, by such person; (C)

any person directly or indirectly

controlling, controlled by, or under

common control with, such other

person.* * *’’

4. CIMCO and the Plans assert that

since a person under common control

with a registered investment company is

an affiliated person of that investment

company, CIMCO and the CUNA

Mutual Life Plans are affiliated persons

of the Fund and of all of its investment

portfolios. In addition, because CUNA

Mutual Life owns of record more than

5% of the shares of each of the Fund’s

investment portfolios, CUNA Mutual

Life is an affiliated person of the Fund

and each of the Fund’s investment

portfolios. The Plans’ proposal to

purchase Fund shares with investment

securities would entail the sale of such

securities by the Plans (or by CIMCO

and the Plans), acting as principal, to

the Fund and therefore would

contravene section 17(a).

5. Because each person who is under

common control with a registered

investment adviser is an affiliated

person of that adviser, the CUNA

Mutual Plans are affiliated persons of an

affiliated person of the Fund.

6. CIMCO and the Plans assert that

because CUNA Mutual Life owns of

record all shares of the Fund and

because section 2(a)(9) of the 1940 Act

establishes a presumption that a person

owning 25% or more of another

person’s outstanding voting securities

controls the latter person, the Fund and

each of its investments portfolios is

arguably under the control of CUNA

Mutual Life notwithstanding the fact

that variable contract owners may be

considered the beneficial owners of any

such shares. CIMCO and the Plans

further submit that, because CIMCO and

the CUNA Mutual Life Plans are

controlled by CUNA Mutual Life, they,

the Fund, and the Fund’s portfolios are

under the common control of CUNA

Mutual Life. Because CIMCO is also

controlled by CUNA Mutual as are the

CUNA Mutual Plans, CIMCO and the

CUNA Mutual Plans are under common

control.

7. CIMCO and the Plans represent that

the terms of the proposed transactions

as set froth in the application, including

the consideration to be paid and

received: (i) Are reasonable and fair and

do not involve overreaching on the part

of any person concerned; (ii) are

consistent with the policies of the Fund

and of its Capital Appreciation Stock

Fund, Growth and Income Stock Fund,

Balanced Fund, Bond Fund and its

Money Market Fund, as recited in its

current registration statement and

reports filed under the 1940 Act; and

(iii) are consistent with the general

purposes of the 1940 Act.

8. Subject to certain enumerated

conditions, Rule 17a–7 under the 1940

Act exempts from the prohibitions of

section 17(a) a purchase or sale

transaction between: (i) Registered

investment companies or separate series

of registered investment companies,

which are affiliated persons, or affiliated

persons of affiliated persons, of each

other, (ii) between separate series of a

registered investment company; or (iii)

between a registered investment

company or a separate series of a

registered investment company and a

person which is an affiliated person of

such registered investment company (or

affiliated person of such person) solely

by reason of having a common

investment adviser or investment

advisers which are affiliated persons of

each other, common directors, and/or

common officers

9. CIMCO and the CUNA Mutual

Plans submit that they cannot rely on

Rule 17a–7 because they are not

affiliated persons of the Fund (or of the

Bond Fund, Money Market Fund or the

Treasury 2000 fund) solely by reason of

having acommon investment adviser or

affiliated investment advisers, common

directors, and/or common officers.

Likewise, the CUNA Mutual Plans

cannot rely on Rule17a–7 because they

are not affiliated persons of an affiliated

person of the Fund solely by reason of

having a common investment adviser or

affiliated investment advisers, common

directors, and/or common officers.

Moreover, CIMCO and the Plans also

note that since the proposed purchase of

Fund shares by the Plans involves the

purchase and sale of securities for

securities, the proposed transaction

does not meet the condition of Rule

17a–7 that the transaction be a purchase

or a sale for no consideration other than

cash payment against prompt delivery

of a security for which market

quotations are readily available.

10. CIMCO and the Plans maintain

that the terms of the proposed

transactions, including the

consideration to be received by the

Fund, are reasonable, fair, and do not

involve overreaching by investment

company affiliates principally because

the transactions will conform in all

material respects with the substance of

all but one of the conditions enumerated

in Rule 17a–7. CIMCO and the Plans

assert that where, as here, they or the

relevant investment company would

comply in substance with, but cannot

literally meet all of the requirements of,

Rule 17a–7, the Commission should

consider the extent to which they would

meet the Rule 17a–7 or other similar

conditions, and issue an order if the

protections of Rule 17a–7 would be

provided in substance.

11. CIMCO and the Plans submit that

the proposed transactions would offer to

the Fund the same degree of protection

from overreaching that Rule 17a–7 offers

to investment companies generally in

connection with qualifying noninvestment company affiliates of such

investment companies. Although the

transactions will not be for cash, each

will be effected based upon: (i) The

independent market price of the Plans’

investment securities valued as

specified in Rule 17a–7(b), and (ii) the

net asset value per share of the Capital

Appreciation Stock Fund, Growth and

Income Stock Fund, Balanced Fund,

Bond Fund or the Money Market Fund,

valued in accordance with the

procedures disclosed in the Fund’s

registration statement and as required

by Rule 22c–1 under the 1940 Act.

CIMCO and the Plans represent that no

brokerage commission, fee, or other

remuneration will be paid to any party

in connection with the proposed

transactions. In addition, although the

board of trustees of the Fund will not

adopt specific procedures to govern the

proposed transactions (because there

will be at most only one such

transaction for each Plan), it will

scrutinize and specifically approve by

resolution each such transaction,

including the price to be paid for the

Fund’s shares and the nature and

quality of the securities offered in

payment for such shares.

12. CIMCO and the Plans represent

that the proposed sale of additional

shares is consistent with the investment
Federal Register / Vol. 62, No. 147 / Thursday, July 31, 1997 / Notices 41115

policy of the Capital Appreciation Stock

Fund, Growth and Income Stock Fund,

Balanced Fund, Bond Fund and Money

Market Fund, as recited in the Fund’s

registration statement, and the sale of

shares for investment securities, as

contemplated by the proposed

transactions, is also consistent with

these investment policies provided that:

(i) The shares are sold at net asset value,

and (ii) the securities are of the type and

quality that each investment portfolio

would have acquired with the sale

proceeds had the shares been sold for

cash. As recited in the conditions listed

below, the Fund’s board of trustees will

examine the portfolios of each CUNA

Mutual Life and CUNA Mutual Defined

Contribution Plan, capital appreciation

stock investment portfolio, growth and

income stock investment portfolio,

balanced investment portfolio, bond

investment portfolio and money market

portfolio as well as any securities

offered by the other Plans and only

approve the proposed transactions if

they, including a majority of these

trustees who are not interested persons

of the Fund, or interested persons of

such persons, determine that (i) and (ii)

would be met.

13. The proposed transactions, as

described herein, are consistent with the

general purposes of the 1940 Act as

stated in the Findings and Declaration

of Policy in Section 1 of the 1940 Act.

The proposed transactions do not

present any of the conditions or abuses

that the 1940 Act was designed to

prevent.

14. CIMCO and the Plans also assert

that the proposed transactions, in

addition to meeting the standards of

Section 17(b) vis-a-vis the Fund, are fair

and reasonable to the Plans and are in

the best interests of the Plan

participants as determined by the plan

committees of each Plan. In particular,

CIMCO and the Plans submit that the

proposed transactions are consistent

with the policy and purpose of the Plans

as recited in each Plan’s plan

documents, and are consistent with the

provisions of ERISA (applicable to

defined contribution plans) regarding

reporting and disclosure, participation

and vesting, funding, fiduciary

responsibility, administration and

enforcement.

15. CIMCO and the Plans represent

that the plan committee of each Plan

will determine that the proposed

transactions are in the best interests of

participants in their Plan, and are

consistent with the policies and purpose

of the Plan as recited in the Plans

themselves. In particular, the plan

committee of each CUNA Mutual Life

Defined Contribution Plan and CUNA

Mutual Defined Contribution Plan will

determine that the Fund’s Capital

Appreciation Stock Fund has

substantially the same investment

objects as the Plans’ capital appreciation

stock investment portfolio, the Fund’s

Growth and Income Stock Fund has

substantially the same investment

objects as the Plans’ growth and income

stock investment portfolio, the Fund’s

Balanced Fund has substantially the

same investment objectives as the Plans’

balanced investment portfolio, the

Fund’s Bond Fund has substantially the

same investment objectives as the Plans’

bond investment portfolio, and that the

Fund’s Money Market Fund has

substantially the same investment

objectives as the Plans’ money market

investment portfolio.

16. CIMCO and the Plans represent

that Plan participants will benefit from

the fact that the expense of liquidating

Plan assets, purchasing Fund shares

with cash, and reinvesting the cash in

substantially the same assets, would be

avoided. CIMCO and the Plans further

represent that, in light of the fact that

the plan committees of the CUNA

Mutual Life and the CUNA Mutual

Defined Contribution Plans will have

determined that the Fund’s Capital

Appreciation Stock Fund, Growth and

Income Stock Fund, Balanced Fund,

Bond Fund and Money Market Fund

should replace the Plans’ current capital

appreciation stock investment portfolio,

growth and income stock investment

portfolio, balanced investment portfolio,

bond investment portfolio and money

market investment portfolio,

respectively, the proposed transactions

would greatly diminish the expense of

this replacement to Plan participants.

17. CIMCO and the Plans represent

that the proposed transactions are

consistent with the provisions of ERISA

applicable to defined contribution plans

regarding reporting and disclosure,

participation and vesting, funding,

fiduciary responsibility, administration

and enforcement.

18. CIMCO and the plans represent

and agree that if the exemptions

requested in the application pursuant to

section 17(b) of the 1940 Act are

granted, the Plans will purchase shares

of the Fund with investment securities

only if the following conditions are met:

1. The transactions are effected at the

‘‘independent current market price’’ of the

investment securities as that term is defined

in Rule 17a–7 under the 1940 Act, and at the

net asset value of appropriate Fund shares

next computed after the closing of the

transaction.

2. No brokerage commission, fee (except

for customary transfer fees), or other

remuneration is paid in connection with the

transactions.

3. The Fund’s board of trustees, including

a majority of those trustees who are not

interested persons of the Fund, or interested

persons of such persons, reviews the terms of

the transactions, the composition of the

investment portfolios of the Plans to be used

as the purchase price in the transactions, and

the value (and the valuation method) of the

investment securities comprising the

purchase price in the transactions; and

adopts a resolution determining separately

for each transaction, that the transaction is

reasonable and fair to the existing investors

in the appropriate Fund investment portfolio,

that the transaction would not subject the

Fund to overreaching and that the investment

securities offered by the Plan trustees on

behalf of each Plan in that transaction are

consistent with the investment objective,

policies and restrictions of the related Fund

investment portfolio.

4. The Fund agrees in writing that it will

maintain and preserve for a period of not less

than six years from the end of the fiscal year

in which the transaction occurs, the first two

years in an easily accessible place, a written

record of each such transaction setting forth

a description of the investment securities

used as the purchase price for Fund shares,

the terms of such transaction, and the

information and materials upon which the

determinations described in condition 3

above were made.

Conclusion

1. CIMCO and the Plans request an

order of the Commission pursuant to

section 17(b) of the 1940 Act, exempting

them from section 17(a) of the 1940 Act

to the extent necessary to permit the

Plans to purchase shares of the Fund

with investment securities of the Plans.

CIMCO and the Plans represent that, for

the reasons stated above, the terms of

the proposed transactions, including the

consideration to be paid and received,

are reasonable and fair to the Fund, to

its Capital Appreciation Stock Fund, its

Growth and Income Stock Fund, its

Balanced Fund, its Bond Fund and its

Money Market Fund, to shareholders

and the variable contract owners

invested in each of these Funds and do

not involve overreaching on the part of

any person concerned. Furthermore, the

proposed transactions will be consistent

with the policies of the Fund and of its

Capital Appreciation Stock Fund, its

Growth and Income Stock Fund, its

Balanced Fund, its Bond Fund and its

Money Market Fund as stated in the

Fund’s current registration statement

and reports filed under the 1940 Act

and with the general purposes of the

1940 Act.

2. In addition, the section 6(c)

Applicants request an order of the

Commission pursuant to section 6(c) of

the 1940 Act, exempting them and any

future accounts from the provisions of
41116 Federal Register / Vol. 62, No. 147 / Thursday, July 31, 1997 / Notices

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

the 1940 Act, and Rule 6e–3(T)(b)(15)

thereunder, to the extent necessary for

the Account and any future accounts to

hold shares of the Fund at the same time

that the Plans and the unaffiliated plans

hold shares of the Fund or for the

Account and any unaffiliated future

account simultaneously hold shares of

the Fund. The section 6(c) Applicants

submit that, for the reasons stated

above, the requested exemptions are

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–20048 Filed 7–30–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 35–26745]

Filings Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

July 25, 1997.

Notice is hereby given that the

following filing(s) has/have been made

with the Commission pursuant to

provisions of the Act and rules

promulgated thereunder. All interested

persons are referred to the application(s)

and/or declaration(s) for complete

statements of the proposed

transaction(s) summarized below. The

application(s) and/or declaration(s) and

any amendments thereto is/are available

for public inspection through the

Commission’s Office of Public

Reference.

Interested persons wishing to

comment or request a hearing on the

application(s) and/or declaration(s)

should submit their views in writing by

August 18, 1997, to the Secretary,

Securities and Exchange Commission,

Washington, DC 20549, and serve a

copy on the relevant applicant(s) and/or

declarant(s) at the address(es) specified

below. Proof of service (by affidavit or,

in case of an attorney at law, by

certificate) should be filed with the

request. Any request for hearing shall

identify specifically the issues of fact or

law that are disputed. A person who so

requests will be notified of any hearing,

if ordered, and will receive a copy of

any notice of order issued in the matter.

After said date, the application(s) and/

or declaration(s), as filed or as amended,

may be granted and/or permitted to

become effective.

Central Power and Light Company, et

al. (70–9075)

Central Power and Light Company,

539 North Carancahua Street, Corpus

Christi, Texas 78401–2802, Public

Service Company of Oklahoma, 212 East

Sixth Street, Tulsa, Oklahoma 74119–

1212, Southwestern Electric Power

Company, 428 Travis Street, Shreveport,

Louisiana 71156–0001, and West Texas

Utilities Company, 301 Cypress Street,

Abilene, Texas 79601–5820, each an

electric public-utility subsidiary

company (collectively, ‘‘Operating

Companies’’) of Central and South West

Corporation (‘‘CSW’’), a registered

holding company, and Central and

South West Services, Inc. (‘‘CSW

Services’’), Williams Tower 2, 2 West

2nd Street, Tulsa, Oklahoma 74103, a

service company subsidiary of CSW,

have filed an application under sections

9(a) and 10 of the Act and rule 54 under

the Act.

The Operating Companies, directly or

through CSW Services, propose to enter

into arrangements with one or more

providers (‘‘Plan Providers’’) of

warranty plans (‘‘Plans’’) for the

servicing and repair of appliances and

offer the Plans to their customers.

Applicants propose to offer Plans for

kitchen and laundry appliances,

heating, ventilation and air conditioning

systems, personal computer systems and

home entertainment video and audio

systems.

The Plans would be offered to

customers of the Operating Company

using marketing materials either

designed or approved by the Operating

Companies and mailed to customers

using the billing and mailing systems of

the Operating Companies. The Plans

would be legal obligations of the Plan

Providers, underwritten by such

insurance arrangements as the

Operating Companies might require.

The Plan Providers would be

responsible for responding to customers’

calls for service and for making

arrangements with adequately licensed

and insured service contractors to

perform the services covered by the

Plans. In certain cases, the Operating

Companies might qualify as service

contractors under the Plans.

The Operating Companies would bill

enrolled customers for monthly Plan

fees and remit the fees to the Plan

Providers. Either the Plan Providers

would pay a service and administration

fee to the Operating Companies, or the

Operating Companies would retain such

a fee out of the monthly Plan fees. The

Operating Companies would have no

responsibility for ensuring payment of

the monthly fees.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–20169 Filed 7–30–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22764; 811–3879]

Seilon, Inc.; Notice of Application

July 25, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Deregistration under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: Seilon, Inc. (‘‘Seilon’’).

RELEVANT ACT SECTION: Section 8(f).

SUMMARY OF APPLICATION: Applicant

seeks an order declaring that it has

ceased to be an investment company.

FILING DATE: The application was filed

on March 18, 1997, and amended on

July 9, 1997.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

August 19, 1997, and should be

accompanied by proof of service on

applicant, in the form of an affidavit 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 SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 5th

Street, NW., Washington, DC 20549.

Applicant, P.O. Box 411, 212 West Main

Street, Smithville, Missouri 64089.

FOR FURTHER INFORMATION CONTACT:

Deepak T. Pai, Staff Attorney, at (202)

942–0574, or Mercer E. Bullard, Branch

Chief, at (202) 942–0564 (Division of

Investment Management, Office of

Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch.