60992 Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices

Dated: October 5, 2000.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–26375 Filed 10–12–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

Submission for OMB Review;

Comment Request

Upon Written Request, Copies Available

From: Securities and Exchange Commission,

Office of Filings and Information Services,

Washington, DC 20549.

Extension: Rule 23c–1, SEC File No. 270–

253, OMB Control No. 3235–0260.

Notice is hereby given that, pursuant

to the Paperwork Reduction Act of 1995

(44 U.S.C. 3501 et seq.), the Securities

and Exchange Commission (the

‘‘Commission’’) has submitted to the

Office of Management and Budget a

request for extension of the previously

approved collection of information

discussed below.

Rule 23c–1 under the Investment

Company Act of 1940, among other

things, permits a closed-end fund to

repurchase its securities for cash if in

addition to the other requirements set

forth in the rule: (i) payment of the

purchase price is accompanied or

preceded by a written confirmation of

the purchase; (ii) the asset coverage per

unit of the security to be purchased is

disclosed to the seller or his agent; and

(iii) if the security is a stock, the fund

has, within the preceding six months,

informed stockholders of its intention to

purchase stock. The Commission staff

estimates that approximately 19 closedend funds rely on Rule 23c–1 annually

to undertake approximately 115

repurchases of their securities. The

Commission staff estimates that, on

average, a fund spends approximately

2.5 hours on complying with the

paperwork requirements listed above

each time it undertakes a security

repurchase under the rule. The total

annual burden of the rule’s paperwork

requirements thus is estimated to be

287.5 hours.

In addition, the fund must file with

the Commission, during the first ten

days of the calendar month following

any month in which a purchase

permitted by Rule 23c–1 occurs, two

copies of a report of purchases made

during the month, together with a copy

of any written solicitation to purchase

securities given by or on behalf of the

fund to 10 or more persons. The burden

associated with filing Form N–23C–1,

the form for this report, has been

addressed in the submission for that

form.

The estimate of average burden hours

is made solely for the purposes of the

Paperwork Reduction Act, and is not

derived from a comprehensive or even

a representative survey or study of the

costs of Commission rules and forms.

Complying with the collection of

information requirements of the rule is

mandatory. The filings that the rule

requires to be made with the

Commission are available to the public.

An agency may not conduct or sponsor,

and a person is not required to respond

to, a collection of information unless it

displays a currently valid control

number.

Please direct general comments

regarding the above information to the

following persons: (i) Desk Officer for

the Securities and Exchange

Commission, Office of Information and

Regulatory Affairs, Office of

Management and Budget, New

Executive Office Building, Washington,

D.C. 20503; and (ii) Michael E. Bartell,

Associate Executive Director, Office of

Information Technology, Securities and

Exchange Commission, 450 Fifth Street,

NW., Washington, DC 20549. Comments

must be submitted to OMB within 30

days of this notice.

Dated: October 6, 2000.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–26378 Filed 10–12–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–24679; File No. 812–12026]

WM Variable Trust, et al., Notice of

Application

October 5, 2000.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’).

ACTION: Notice of Application for an

order of exemption under Section 6(c) of

the Investment Company Act of 1940

(‘‘the Act’’) for exemptions from the

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

and 15(b) of the Act and Rules 6e2(b)(15) and 6e-3(T)(b)(15) thereunder.

Summary of Application: WM

Variable Trust (the ‘‘Trust’’) and WM

Advisors, Inc. (the ‘‘Adviser’’)

(collectively, ‘‘Applicants’’) seek an

Order exempting them from Sections

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

and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)

thereunder to permit shares of the Trust

and any other investment company that

is designed for fund insurance products

and for which the Adviser or its

affiliates many serve as investment

manager, investment adviser,

investment sub-adviser, administrator,

manager, principal underwriter or

sponsor (‘‘Future Trusts’’) to be sold to

and held by (1) variable annuity and

variable life insurance separate accounts

of both affiliated and unaffiliated life

insurance companies; (2) qualified

pension and retirement plans outside of

the separate account context; and (3) the

Trust’s or Future Trust’s investment

adviser (representing seed money

investments in the Trust or Future

Trust).

Applicants: WM Variable Trust (the

‘‘Trust’’) and WM Advisors, Inc. (the

‘‘Adviser’’) are, collectively, referred to

herein as the ‘‘Applicants.’’

Filing Date: The Application was filed

on March 15, 2000, and amended on

July 26, 2000 and September 27, 2000.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the Commission orders a

hearing. Interested persons may request

a hearing on the application by writing

to the Secretary of the SEC and serving

Applicants with a copy of the request,

in person or by mail. Hearing requests

must be received by the Commission by

5:30 p.m. on October 30, 2000, and

accompanied by proof of service on the

Applicants in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the interest, the reason for the

request, and the issues contested.

Persons may request notification of the

date of a hearing by writing to the

Secretary of the SEC.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

N.W., Washington, D.C. 20549.

Applicants, c/o John T. West, WM

Advisors, Inc., 1201 Third Avenue,

22nd Floor, Seattle, WA 98101.

FOR FURTHER INFORMATION CONTACT:

Rebecca A. Marquigny, Senior Counsel,

or Keith Carpenter, Branch Chief, Office

of Insurance Products, Divison 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 SEC’s Public Reference

Branch.

Applicants’ Representations

1. The Trust is a business trust

organized under the laws of

Massachusetts on January 29, 1993. On

March 20, 1998, the Trust’s name was

changed from Sierra Variable Trust to

WM Variable Trust. The Trust filed its

registration under the Act as an openVerDate 11<MAY>2000 20:10 Oct 12, 2000 Jkt 194001 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 E:\FR\FM\13OCN1.SGM pfrm08 PsN: 13OCN1
Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices 60993

1Hereinafter, the term ‘‘Funds’’ means the Funds

and/or any future series of the Trust or a Future

Trust, as applicable.

end management investment company

on February 2, 1993. The Trust is

currently comprised of fifteen

investment portfolios (the ‘‘Funds’’),

although the Trust may create

additional investment portfolios and

issue shares representing beneficial

interests therein from time to time.1 On

February 2, 1993, the Trust filed a

Registration Statement on Form N–1A

under the Act and the Securities Act of

1933, as amended (the ‘‘1933 Act’’), to

register the sale of the Funds’ shares. At

the current time, the Trust has issued

only one class of shares of the Funds,

but may in the future offer two or more

classes of shares of the Funds. The Trust

may offer each series of its shares to

separate accounts, including Separate

Account D of American General Life

Insurance Company (the ‘‘Separate

Account’’), the sole separate account

currently investing in the Funds

(‘‘Participating Separate Accounts’’), of

various other life insurance companies

(‘‘Participating Insurance Companies’’)

and to pension and retirement plans

qualified under Section 401(a) of the

Internal Revenue Code of 1986, as

amended (the ‘‘Code’’) (‘‘Qualified

Plans’’). Such Participating Insurance

Companies and Qualified Plans are

described below. The Trust many also

offer each series of its shares to the

Adviser pursuant to Treasury

Regulations §1.817(f)(3)(ii).

2. Each variable life insurance

account (‘‘VLI Account’’) and variable

annuity account (‘‘VA Account’’) has

been or will be established as a

segregated asset account by a

Participating Insurance Company

pursuant to the insurance law of such

insurance company’s state of domicile.

As such, the assets of each are or will

be the property of the Participating

Insurance Company and the portion of

the assets of such an account equal to

the reserves and other contract

liabilities with respect to the account

are not and/or will not be chargeable

with liabilities arising out of any other

business that the insurance company

may conduct. The income, gains and

losses, realized or unrealized, from such

an account’s assets are and/or will be

credited to or charged against the

account without regard to other income,

gains or losses of the insurance

company. If, like the Separate Account,

a VA Account of a life insurance

company is registered as an investment

company, it will be a ‘‘separate

account’’ as defined by Rule 0-1(e) (or

any successor rule) under the Act and

will be registered as a unit investment

trust (‘‘UIT’’). If a VLI Account is

registered as an investment company, it

will be a separate account as described

in Rule 6e-2(a) or Rule 6e-3(T)(a) and

will be registered as a UIT. For purposes

of the Act, the life insurance company

that establishes such a registered VLI

Account or VA Account, like American

General Life Insurance Company

(‘‘AGL’’), is the depositor and sponsor of

the account as those terms have been

interpreted by the Commission with

respect to variable life insurance and

variable annuity separate accounts.

3. The Qualified Plans will be pension

or retirement plans intended to qualify

under Sections 401(a) and 501(a) of the

Code. Many of the Qualified Plans will

include a cash or deferred arrangement

(permitting salary reduction

contributions) intended to qualify under

Section 401(k) of the Code. The

Qualified Plans will also be subject to,

and will be designed to comply with,

the provisions of the Employee

Retirement Income Security Act of 1974,

as amended (‘‘ERISA’’). The Qualified

Plans therefore will be subject to

regulatory provisions under the Code

and ERISA regarding, for example,

reporting and disclosure, participation

and vesting, funding, fiduciary

responsibility, and enforcement.

4. The Adviser, which is registered as

an investment adviser under the

Investment Advisers Act of 1940, is the

investment adviser of the Fund. As

investment adviser to the Fund, the

Adviser has been engaged to

continuously furnish an investment

program for the Fund and to make or

cause to be made investment decisions

on behalf of the Fund and place or cause

to be placed all others for the purchase

and sale of portfolio securities.

5. The Trust proposes to offer and sell

shares of the Fund to Participating

Insurance Companies as an investment

vehicle for their VLI Accounts and VA

Accounts (collectively, ‘‘Variable

Accounts’’)(hereinafter, the term

‘‘Trust’’ refers to the Trust and/or any

Future Trust, as applicable). As

described more fully below, the Trust

will only sell its shares to registered VLI

Accounts and registered VA Accounts if

each Participating Insurance Company

sponsoring such a VLI Account or VA

Account enters into a participation

agreement with the Trust. The

participation agreements will define the

relationship between the Trust and each

Participating Insurance Company and

will memorialize, among other matters,

the fact that, except where the

agreement specifically provides

otherwise, the Participating Insurance

Company will remain responsible for

establishing and maintaining any VLI

Account or VA Account covered by the

agreement and for complying with all

applicable requirements of state and

federal law pertaining to such accounts

and to the sale and distribution of

variable life insurance contracts (‘‘VLI

Contracts’’) and variable annuity

contracts (‘‘VA Contracts,’’ and together

with VLI Contracts, ‘‘Variable

Contracts’’) issued through such

accounts. The participation agreements

also will memorialize, among other

matters, the fact that, with regard to

compliance with federal securities laws,

unless the agreement specifically states

otherwise, the Trust’s obligations relate

solely to offering and selling its shares

to VLI Accounts and VA Accounts

covered by the agreement and to

compliance with the conditions states in

this application.

6. The use of a common management

investment company (or investment

portfolio thereof) as an investment

medium for both VLI Accounts and VA

Accounts of the same insurance

company, or of two or more insurance

companies that are affiliated persons of

each other, is referred to herein as

‘‘mixed funding.’’ The use of a common

management investment company (or

investment portfolio thereof) as an

investment medium for VLI Accounts

and/or VA Accounts of two or more

insurance companies that are not

affiliated persons of each other, is

referred to herein as ‘‘shared funding.’’

7. The Trust may sell its shares

directly to Qualified Plans. Changes in

the federal tax law several years ago

made it possible for investment

companies such as the Trust to sell

shares to Qualified Plans to addition to

VLI Accounts and VA Accounts. Section

817(h) of the Code imposes certain

diversification standards on the assets

underlying Variable Contracts, such as

those in the Trust. The Code provides

that Variable Contracts will not be

treated as annuity contracts or life

insurance contracts, as the case may be,

for any period (or any subsequent

period) for which the underlying assets

are not adequately diversified in

accordance with regulations issued by

the Treasury Department. On March 1,

1989, the Treasury Department adopted

regulations (Treas. Reg. 1.817–5) (the

‘‘Regulations’’) which established

specific diversification requirements for

investment portfolios underlying

Variable Contracts. The Regulations

generally provide that, in order to meet

these diversification requirements, all of

the beneficial interests in the

investment company must be held by

the segregated asset accounts of one or

more life insurance companies.

60994 Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices

Notwithstanding this, the Regulations

contain an exception to this requirement

that permits trustees of a qualified

pension or retirement plan to hold

shares of an investment company, the

shares of which are also held by

insurance company segregated asset

accounts, without adversely affecting

the status of the investment company as

an adequately diversified underlying

investment for Variable Contracts issued

through such segregated asset accounts

(Treas. Reg. 1.817–5(f)(3)(iii)).

8. As a result, Qualified Plans may

select the Trust as an investment option

without endangering the tax status of

Variable Contracts as life insurance or

annuities. Trust shares sold to the

Qualified Plans would be held by the

Trustees of the Qualified Plans as

required by Section 403(a) of ERISA.

The Trustees or other fiduciaries of the

Qualified Plans may vote Trust shares

held by their Qualified Plans in their

own discretion or, if the applicable

Qualified Plan so provides, vote such

shares in accordance with instructions

from participants in such Plans. The use

of a common management investment

company (or investment portfolio

thereof) as an investment medium for

VLI Accounts, VA Accounts and

Qualified Plans is referred to herein as

‘‘extended mixed funding.’’

Applicants’ Legal Analysis

1. Rule 6e–2(b)(15) under the Act

provides partial exemptions for (1)

Section 9(a), which makes it unlawful

for certain individuals and companies to

act in certain capacities with respect to

registered investment companies, and

(2) Section 13(a), 15(a), and 15(b) of the

Act to the extent that those sections

might be deemed to require ‘‘passthrough’’ voting with respect to the

shares of a registered management

investment company underlying a UIT

(an ‘‘underlying fund’’) to VLI Accounts

supporting scheduled premium VLI

Contracts and to their life insurance

company depositors, investment

advisers, and principal underwriters.

The exemptions granted by the Rule are

available, however, only where the

Trust offers its shares exclusively to VLI

Accounts of a single Participating

Insurance Company or an affiliated

insurance company, and then, only

where scheduled premium VLI

Contracts are issued through such VLI

Accounts. Therefore, the relief granted

by Rule 6e–2(b)(15) is not available with

respect to a scheduled premium VLI

Account that owns shares of an

underlying fund that engages in mixed

funding by also offering its shares to a

VA Account or to a flexible premium

VLI Account of the same company or of

an affiliated life insurance company. In

addition, the relief granted by Rule 6e–

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

underlying fund engages in shared

funding by offering its shares to VA

Accounts of VLI Accounts of

unaffiliated life insurance companies.

Furthermore, Rule 6e–2(b)(15) does not

contemplate that shares of the

underlying fund might also be sold to

Qualified Plans, that is, that the

underlying fund will engage in

extended mixed funding.

2. Rule 6e–3(T)(b)(15) under the Act

provides partial exemptions from

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

the Act to VLI Accounts supporting

flexible premium variable life insurance

contracts and their life insurance

company depositors, investment

advisers and principal underwriters.

The exemptions granted by the Rule are

available, however, only where the

Trust offers its shares exclusively to

separate accounts of the Participating

Insurance Company, or of any affiliated

insurance company, offering either

scheduled premium contracts or flexible

premium contracts, or both, or which

also offer their shares to VA Accounts

of the Participating Insurance Company

or of an affiliated life insurance

company. Therefore, Rule 6e–3(T)(b)(15)

permits mixed funding with respect to

a flexible premium VLI Account, subject

to certain conditions. However, Rule

6e–3(T)(b)(15) does not permit shared

funding because the relief granted is not

available with respect to a VLI Account

that owns shares of an underlying fund

that also offers its shares to separate

accounts (including VA Accounts and

flexible premium and scheduled

premium VLI Accounts) of unaffiliated

Participating Insurance Companies.

Also, Rule 6e–3(T)(b)(15) does not

contemplate extended mixed funding.

3. In general, Section 9(a) of the Act

disqualifies any person convicted of

certain offenses and any person

enjoined from engaging in certain

activities because of misconduct, and

any company affiliated with any such

person, from acting or serving in various

capacities with respect to a registered

investment company. More specifically,

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).

4. Rule 6e–2(b)(15) and Rule 6e–

3(T)(b)(15) limit the application of the

eligibility restrictions of Section 9(a) to

affiliated persons of a life insurer who

directly participate in the management

of the underlying registered

management investment company

under certain circumstances, subject to

limitations on mixed and shared

funding. The relief provided by Rule

6e–2(b)(15)(i) and Rule 6e–3(T)(b)(15)(i)

permits persons who are affiliated

persons of a life insurer or its affiliates

who otherwise would be disqualified

under Section 9(a) to serve as an officer,

director, or employee of an underlying

fund, so long as any such person does

not participate directly in the

management or administration of such

underlying fund. In addition, Rule 6e–

2(b)(15)(ii) and Rule 6e–3(T)(b)(15)(ii)

permit a Participating Insurance

Company to serve as the underlying

fund’s investment adviser or principal

underwriter, provided that none of the

insurance company’s personnel who are

ineligible pursuant to Section 9(a) of the

Act participate in the management or

administration of the underlying fund.

5. In effect, the partial relief provided

by Rules 6e–2(b)(15) and 6e–3(T)(b)(15)

from the requirements of Section 9

limits the amount of monitoring of a

Participating Insurance Company’s

personnel that is necessary to ensure

compliance with Section 9 to that which

is appropriate in light of the policy and

purposes of Section 9. Rules 6e–2(b)(15)

and 6e–3(T)(b)(15) recognize that

applying the provisions of Section 9 to

the many individuals in a large

insurance company complex, most of

whom typically will have no

involvement in matters pertaining to

investment companies funding the

Participating Separate Accounts, is not

necessary or appropriate in the public

interest nor is it necessary for the

protection of investors or the purposes

fairly intended by the policy and

provisions of the Act. In addition, if the

eligibility restrictions of Section 9(a)

were to apply to the Participating

Insurance Companies, the increased

costs of ensuring compliance with

Section 9 would reduce the net rates of

return realized by contract owners.

Thus, the cost of compliance with

Section 9 would exceed the benefits, if

any, provided by compliance with such

eligibility restrictions. Moreover,

disallowing the relief permitted by

Rules 6e–2(b)(15) and Rule 6e–

3(T)(b)(15) because the underlying fund

engages in extended mixed funding

would serve no regulatory purpose. The

sale of shares of an underlying fund to

Qualified Plans does not change the fact

that the purposes of the Act are not

advanced by applying the prohibitions

of Section 9(a) to individuals who may

be involved in a life insurance complex

Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices 60995

but have no involvement in the

underlying fund.

6. Rule 6e–2(b)(15)(iii) and Rule 6e–

3(T)(b)(15)(iii) provide partial

exemptions from Sections 13(a), 15(a),

and 15(b) of the Act to the extent that

those sections might be deemed to

require ‘‘pass-through’’ voting with

respect to the shares of an underlying

fund, by allowing an insurance

company to disregard the voting

instructions of contract owners with

respect to several significant matters,

assuming the limitations on mixed and

shared funding are observed. Rules 6e–

2(b)(15)(iii)(A) and 6e–3(T)(b)(15)(iii)(A)

provide that a Participating Insurance

Company may disregard the voting

instructions of its contract owners if

such instructions would require an

underlying fund’s shares to be voted to

cause such underlying fund to make (or

to refrain from making) certain

investments which would result in

changes in the subclassification or

investment objectives of such

underlying fund or to approve or

disapprove any contract between such

underlying fund and an investment

adviser when required to do so by an

insurance regulatory authority (subject

to the provisions of paragraphs (b)(5)(i)

and (b)(7)(ii)(A) of the Rules).

7. Rules 6e–2(b)(15)(iii)(B) and 6e–

3(T)(b)(15)(iii)(A)(2) provide that a

Participating Insurance Company may

disregard contract owners’ voting

instructions if the contract owners

initiate any change in the underlying

fund’s investment objectives, principal

underwriter or any investment adviser

(provided that disregarding such voting

instructions is reasonable and subject to

the other provisions of paragraph

(b)(5)(ii) and (b)(7)(ii)(B) and (C) of the

Rules).

8. Rules 6e–2(b)(15) and 6e–

3(T)(b)(15) recognize that a Variable

Contract is primarily an insurance

contract, and as such is subject to

extensive state insurance regulation. In

adopting Rule 6e–2(b)(15)(iii), the

Commission recognized that state

insurance regulators have authority,

pursuant to state insurance laws or

regulations, to disapprove or require

changes in the underlying fund’s

investment policies, investment

advisers, or principal underwriters.

9. If the Trust serves as an investment

vehicle for mixed funding, extended

mixed funding or shared funding, the

exemptions otherwise provided by Rule

6e–2(b)(15) would not be available to

VLI Accounts and their Participating

Insurance Company depositors and

principal underwriters. Likewise, if the

Trust serves as an investment vehicle

for extended mixed funding or shared

funding, the exemptions otherwise

provided by Rule 6e–3(T)(b)(15) would

not be available to VLI Accounts and

their Participating Insurance Companies

and principal underwriters. Section 6(c)

of the Act authorizes the Commission to

exempt any person, security or

transaction or any class of persons,

securities or transactions from any

provision or provisions of the Act and/

or any rule under it if, and to the extent

that, such 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 Act.

10. Applicants submit that the

requested exemptions are 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 Act.

11. Applicants submit that the

presence of both VLI Accounts and VA

Accounts as shareholders of an

underlying fund will not lead to a

greater probability of material

irreconcilable conflicts than if the

underlying fund did not engage in

mixed funding. Similarly, shared

funding does not present any issues that

do not already exist where an

underlying fund sells its shares to a

single insurance company which sells

contracts in several states.

12. The presence of both VLI

Accounts and VA Accounts as

shareholders of an underlying fund will

not lead to a greater probability of

material irreconcilable conflicts than if

the underlying fund did not engage in

mixed funding. Each type of insurance

product is designed as a long-term

investment program. There is not reason

to believe that different features of

various types of contracts, including the

‘‘minimum death benefit’’ guarantee

under certain VLI Contracts, will lead to

different investment policies for

different types of Variable Contracts. To

the extent that the degree of risk may

differ as between VA Contracts and VLI

Contracts, the differing insurance

charges imposed, in effect, adjust any

such differences and equalize the

insurers’ exposure in either case.

13. In addition, if an underlying fund

engages in mixed funding, there is no

reason why the underlying fund would

be managed to favor one class of

investors over another. No one

investment strategy can be identified as

appropriate to a particular insurance

product. Each pool of VA and VLI

Contract owners is composed of

individuals of diverse financial status,

age, and insurance and investment

goals. An underlying fund supporting

even one type of insurance product

must accommodate those differences to

attract and retain purchasers.

14. Regardless of the type of

shareholder in the Trust, the investment

manager is or would be contractually

and otherwise obligated to manage the

Fund solely and exclusively in

accordance with that Fund’s investment

objectives, policies and restrictions as

well as any guidelines established by

the Board of Trustees responsible for

such Fund (the ‘‘Board’’). Thus, the

Fund will be managed in the same

manner as any other mutual funds and

there is not incentive for the Fund’s

investment manager to invest to benefit

a particular class of shareholders. In

addition, the Board has a fiduciary duty

to oversee the Fund’s investment

adviser and ensure that the Fund is

managed in a way that does not

discriminate against any of the Fund’s

shareholders.

15. Applicants maintain that qualified

retirement plan investors in the Trust

would have substantially the same

interests as do VLI Contract owners and

VA Contract owners. Like VLI and VA

Contract owners, qualified retirement

plan investors are long-term investors.

Therefore, most can be expected not to

withdraw their assets from the Qualified

Plans. Indeed, while they may utilize

more than one investment option under

a Variable Contract or the Qualified

Plans, both Variable Contract owners

and participants would make certain

sacrifices and face certain hurdles in

surrendering a contract or withdrawing

assets from a Qualified Plan. Variable

Contract owners in many circumstances

would sacrifice tax benefits, pay a

penalty tax under Section 72(q) of the

Code, and/or pay a surrender charge if

they surrender their contracts.

Similarly, participants may be permitted

to withdraw Qualified Plan assets only

in limited circumstances, would

sacrifice tax benefits on such

withdrawals, and may incur other

economic penalties under the terms of

the Qualified Plan. In addition, Section

72(t) of the Code may impose a tax

penalty on certain withdrawals from a

Qualified Plan even where permitted. Of

course, Variable Contract owners may

exchange one VLI Contract or VA

Contract for another without losing

possible tax benefits and participants

may generally transfer or roll over

vested Qualified Plan assets with the

same result, but both types of

transactions require significant contract

owner or Qualified Plan investor

initiative and can only be accomplished

in certain circumstances pursuant to

specific procedures.

60996 Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices

16. In addition, neither VLI and VA

Contract owners on the one hand nor

Qualified Plan investors on the other

would be taxed on the investment

return of their respective investments in

the Trust. Therefore, they would share

a strong interest in the Trust operating

in a manner that preserves this tax

status. For example, material conflicts

between these two groups of investors

regarding capital transactions would be

unlikely to occur. In this regard, ERISA

imposes general diversification

requirements on qualified pension or

retirement plan investments that are

wholly consistent with those required of

each Fund of the Trust under Section

817(h) of the Code.

17. VLI Accounts, VA Accounts and

the Qualified Plans are governed in

similar ways. Qualified Plan committees

(and other Qualified Plan fiduciaries)

have a fiduciary duty to participants

that is similar to the obligations that a

Participating Insurance Company has to

look after the interests of its VLI

Contract owners and VA Contract

owners. In this respect, applicants note

that Participating Insurance Companies

and their VLI Accounts would not

require any exemptions from the Act

other than those necessary for mixed

funding and shared funding if

participants in certain qualified pension

and retirement plans invest indirectly in

the Trust when their Qualified Plan

purchases a variable annuity contract

offered by a Participating Insurance

Company in the Qualified Plan market.

The various Qualified Plans may or may

not offer an annuity option.

18. In light of the fact that Qualified

Plan investors would have beneficial

interests in the Trust very similar to

those of VLI Contract owners and VA

Contract owners, applicants assert that,

provided that they (and VLI Accounts

and Participating Insurance Companies)

comply with the conditions explained

below, the addition of the Qualified

Plans as shareholders of the Trust and

the addition of participants as persons

having beneficial interests in the Trust

should not increase the risk of material

irreconcilable conflicts among and

between investors. Applicants further

assert that even if a material

irreconcilable conflict involving the

Qualified Plans or participants arose,

the trustees (or other fiduciaries) of the

Qualified Plans, unlike Participating

Insurance Companies, can, if their

fiduciary duty to the participants

requires it, redeem the shares of the

Trust held by the Qualified Plans and

make alternative investments without

obtaining prior regulatory approval.

Similarly, most, if not all, of the

Qualified Plans, unlike the VLI

Accounts or the VA Accounts, may hold

cash or other liquid assets pending their

reinvestment in a suitable alternative

investment.

19. Applicants maintain that VLI

Contract owners and VA Contract

owners would benefit from the expected

increase in net assets of the Funds of the

Trust occasioned by participant

investments. Not only should such

additional investments not increase the

likelihood of material irreconcilable

conflicts of interest between or among

different types of investors, but such

additional investments should reduce

some of the costs of investing for

Variable Contract owners. In particular,

additional investments would promote

economies of scale, permit increased

safety through greater portfolio

diversification, provide each Fund’s

investment adviser with greater

flexibility due to a larger portfolio and

make the addition of future new Funds

more feasible.

20. When the Commission last revised

Rule 6e–3(T) in 1987, the Treasury

Department had not issued the current

regulations (Treas. Reg. 1.817–5) which

make it possible for the Trust to sell

shares to qualified pension or retirement

plans without adversely affecting the tax

status of VLI Contracts and VA

Contracts. Applicants submit that,

although proposed regulations had been

published, the Commission did not

envision this possibility when it last

examined paragraph (b)(15) of the Rule

and might well have broadened the

exclusivity provision of that paragraph

at that time to include plans such as the

Qualified Plans had this possibility been

apparent. In this regard, the

Commission has recently issued several

orders under Section 6(c) granting the

same exemptions requested herein to

other applicants in very similar

circumstances.

21. In light of the fact that the

proposed Qualified Plan investments in

the Trust should not increase the

likelihood of material irreconcilable

conflicts and would otherwise benefit

VA Contract owners and VLI Contract

owners, and in light of the recent

supporting precedent, applicants

believe that the Commission should

grant the requested exemptions.

22. Applicants submit that the sale of

the shares of the Trust to Qualified

Plans will not increase the potential for

material irreconcilable conflicts of

interest between or among different

types of investors. Moreover, in

considering the appropriateness of the

requested relief, an analysis of the

following issues leads to the conclusion

that there are either no conflicts of

interest or that there exists the ability by

the affected parties to resolve the issues

without harm to the contract owners in

the Participating Separate Accounts or

to the participants under the Qualified

Plans.

23. Section 817(h) imposes certain

diversification standards on the

underlying assets of VA Contracts and

VLI 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 separate accounts to invest

in the same underlying fund without

jeopardizing the tax status of VLI and

VA Accounts. Therefore, neither the

Code, the Treasury Regulations, nor

Revenue Rulings thereunder present any

inherent conflicts of interest if Qualified

Plans, VA Accounts and VLI Accounts

all invest in the same underlying fund.

24. While there are differences in the

manner in which distributions are taxed

for VA Contracts, VLI Contracts and

Qualified Plans, the differing tax

consequences do not raise any conflicts

of interest. When distributions are to be

made and the Participating Separate

Account or the Qualified Plan cannot

net purchase payments to make the

distributions, the Participating Separate

Account or the Qualified Plan will

redeem shares of the Fund at their net

asset value. The Qualified Plan then

will 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.

Therefore, distributions and dividends

will be declared and paid by the Fund

without regard to the character of the

shareholder.

25. The ability of the Trust to sell its

shares directly to Qualified Plans does

not create a ‘‘senior security’’ as such

terms is defined under Section 18(g) of

the Act, with respect to any 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, the

Qualified Plans and the Participating

Separate Accounts have rights only with

respect to their respective shares of the

Trust. They can only redeem such

shares at their net assets value. No

shareholder of the Trust will have any

preference over any other shareholder

with respect to distribution of assets or

payment of dividends.

26. With respect to voting rights, it is

possible to provide an equitable means

of giving such voting rights to Variable

Contract owners and to the trustees of

Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices 60997

Qualified Plans. The transfer agent for

the Fund will inform each Participating

Insurance Company of its share

ownership in each Participating

Separate Account, as well as inform the

trustees of Qualified Plans of their

holdings. Each Participating Insurance

Company then will solicit voting

instructions in accordance with Rules

6e–2 and 6e–3(T), as applicable, and its

participation agreement with the

relevant Fund. Shares held by Qualified

Plans will be voted in accordance with

applicable law. The voting rights

provided to Qualified Plans with respect

to shares of the Trust will be no

different from the voting rights that are

provided to Qualified Plans with respect

to shares of funds sold to the general

public.

27. In addition, the veto power of

state insurance commissioners over an

underlying fund’s investment objectives

does not create any inherent conflicts of

interest between the contract owners of

the Participating Separate Accounts and

Qualified Plan participants. Applicants

note that the basic premise of corporate

democracy and shareholder voting is

that not all shareholders may agree with

a particular proposal. Although the

interests and opinions of shareholders

may differ, this does not mean that

inherent conflicts of interest exist

between or among such shareholders.

State insurance commissioners have

been given the veto power in

recognition of the fact that insurance

companies usually cannot simply

redeem their separate accounts out of

one fund and invest in another.

Generally, time-consuming, complex

transactions must be undertaken to

accomplish such redemptions and

transfers. In contract, the trustees of

Qualified Plans or the participants in

participant-directed Qualified Plans can

quickly decide to redeem their interest

in the Trust and reinvest in another

funding vehicle without the same

regulatory impediments faced by

separate accounts or, as is the case with

most Qualified Plans, even hold cash

pending suitable investment. Thus, even

if there should arise issues where the

interests of contract owners and the

interests of Qualified Plans are in

conflict, the issues can be almost

immediately resolved since the trustees

of (or participants in) the Qualified Plan

can, on their own, redeem their shares

from the Trust.

28. The holding of Trust 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 Contact

owners and VA Contract owners than

would mixed funding. Likewise, the

holding of Trust 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 Contract owners, VA

Contract owners and Qualified Plan

investors than would extended mixed

funding where only separate accounts of

affiliated Participating Insurance

Companies held such shares.

29. Historically, concern existed that

greater potential existed for material

irreconcilable conflicts between or

among the interests of VLI Contract

owners or VA Contract owners of

unaffiliated insurance companies

because such companies were more

likely than affiliated companies to be

domiciled in different states and the

different state insurance regulators

could impose divergent requirements on

such insurers with regard to

investments supporting Variable

Contracts. It was also believed by some

that unaffiliated insurance companies

were less likely than affiliated

companies to find ways to reconcile

material conflicts of interest that might

arise from conflicting state regulation. In

fact, shared funding by unaffiliated

companies does not increase the

potential for such material conflicts of

interest beyond that which would

otherwise exist for a single insurance

company that is licensed in many states

and therefore subject to the insurance

regulations of such jurisdictions. A

particular state insurance regulator

could require action of an insurer

domiciled or licensed in its jurisdiction

that conflicts with or is inconsistent

with the regulatory requirements of or

actions required by the regulator of

another state where that insurer is

domiciled or licensed. The fact that

different insurance companies are

domiciled in different states does not

enlarge or create significantly different

issues in connection with conflicting

state regulatory requirements.

Affiliation among or between such

insurance companies does not diminish

the potential for such issues to arise nor,

in light of the source of such issues,

does it dramatically increase the

likelihood of their being resolved.

30. Historically, concern also existed

that material irreconcilable conflicts

between or among the interests of VLI

Contract owners and/or VA Contract

owners of unaffiliated insurance

companies were more likely to arise in

the event that such companies exercised

their limited right to disregard VLI

owner voting instructions than would

be the case between or among affiliated

companies. In fact, the right of an

insurance company to disregard VLI

owner voting instructions does not raise

any issues different from those raised by

the authority of different state insurance

regulators over separate accounts.

Similarly, affiliation between or among

insurance companies does not diminish

or eliminate the potential for divergent

judgments by such companies as to the

advisability or legality of a change in

investment policies, principal

underwriter or investment adviser of a

mutual fund in which their separate

account invests. Applicants believe that

the potential for disagreement between

or among insurance companies is

limited by requirements in Rule 6e–2

and Rule 6e–3(T) that a company’s

disregard of voting instructions be

reasonable and based on specific good

faith determinations. Moreover, in the

event that a decision by a participating

life insurance company to disregard VLI

Contract owners’ voting instructions

represents a minority position or would

preclude a majority vote at a Trust

shareholder’s meeting, the company

could be required by the Trust’s Board

of Trustees to withdraw from the Trust.

31. Various factors, including the

costs of organizing and operating a

funding medium, the lack of expertise

with respect to investment management

(principally with respect to stock and

money market investments) and the lack

of name recognition by the public of

certain insurers as investment experts to

whom the public feels comfortable

entrusting their investment dollars, have

limited the number of insurance

companies that offer VA Contracts and

VLI Contracts. In particular, some

smaller life insurance companies may

not find it economically feasible, or

within their investment or

administrative expertise, to enter the

Variable Contract business on their own.

Use of the Funds of the Trust as a mixed

funding and shared funding vehicle for

Variable Contracts would reduce or

eliminate such concerns for small life

insurance companies.

32. Applicants submit that use of the

Trust as a common investment vehicle

for Variable Contracts would reduce or

alleviate the above-mentioned concerns

and that mixed and shared funding will

provide several benefits. Participating

Insurance Companies will benefit not

only from the investment and

administrative expertise of the Trust’s

investment adviser, but also from the

cost efficiencies and investment

flexibility afforded by a larger pool of

funds. Therefore, making the Trust

available for mixed and shared funding

may encourage more insurance

companies to offer Variable Contract

design and pricing, which can be

60998 Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices

expected to result in greater product

variation and lower charges. In addition,

Variable Contract owners would benefit

from the reduced costs to Participating

Insurance Companies of establishing

and administering separate accounts.

33. Regardless of the type of

shareholder in the Trust, the investment

manager is or would be contractually

and otherwise obligated to manage the

Fund solely and exclusively in

accordance with that Fund’s investment

objectives, policies and restrictions as

well as any guidelines established by

the Board of Trustees responsible for

such Fund (the ‘‘Board’’). Thus, the

Fund will be managed in the same

manner as any other mutual fund, and

there is no incentive for the Fund’s

investment manager to invest to benefit

a particular class of shareholders. In

addition, the Board has a fiduciary duty

to oversee the Fund’s investment

adviser and ensure that the Fund is

managed in a way that does not

discriminate against any of the Fund’s

shareholders.

34. Applicants see no legal

impediment to permitting the Trust to

serve as a vehicle for mixed funding,

extended mixed funding and shared

funding. The Commission has issued

numerous orders permitting mixed

funding, extended mixed funding and

shared funding. Therefore, applicants

believe that granting the exemptions

requested herein is in the public interest

and will not compromise the regulatory

purposes of Section 9(a), 13(a), 15(a) or

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

3(T) thereunder.

35. The Commission’s authority under

Section 6(c) of the Act to grant

exemptions from various provisions of

the Act and rules thereunder is broad

enough to permit orders of exemption

that cover classes of unidentified

parties. Applicants request an order of

the Commission that would exempt VLI

Accounts and their Participating

Insurance Companies and principal

underwriters as a class from the

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

and 15(b) of the Act and Rule 6e–2 or

Rule 6e–3(T)(b)(15) thereunder. The

exemption of these classes of parties is

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the Act because all of the potential

members of the class could obtain the

foregoing exemptions for themselves on

the same basis as the applicants, but

only at a cost to each of them that is not

justified by any public policy purpose.

As discussed below, the requested

exemptions would only extend to VLI

Accounts whose Participating Insurance

Companies enter into participation

agreements with the Trust; which

agreements would subject such VLI

Accounts to the conditions discussed

below. The Commission staff also would

have the opportunity to review

compliance with these conditions by

Participating Insurance Companies

when it reviews the 1933 Act

registration statements filed by each VLI

Account and VA Account before the

account could issue any Variable

Contracts. The Commission has

previously granted exemptions to

classes of similarly situated parties in

various contexts and from a wide

variety of circumstances, including class

exemptions in the context of mixed

funding, extended mixed funding and

shared funding.

Applicant’s Conditions

1. Applicants have consented to the

following conditions:

a. A majority of the Board of Trustees

of the Trust shall consist of persons who

are not ‘‘interested persons’’ of such

Trust, as defined by Section 2(a)(19) of

the Act, and rules thereunder, as

modified by any applicable orders of the

Commission, except that if this

condition is not met by reason of the

death, disqualification, or bona fide

resignation of any Trustee, then the

operation of this condition shall be

suspended for: (a) A period of 45 days

if the vacancy or vacancies may be filled

by the Board, (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.

b. The Board of Trustees will monitor

the Funds for the existence of any

material irreconcilable conflict among

the interests of the contract holders of

all Participating Separate Accounts and

of participants of Qualified Plans

investing in such Fund(s) 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 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 any Fund

are being managed, (e) a difference in

voting instructions given by VLI

Contract owners, VA Contract owners

and Qualified Plan investors or the

Trustees of Qualified Plans that do not

provide voting rights to their investors,

(f) a decision by a Participating

Insurance Company to disregard VLI

Contractor or VA Contract owner voting

instructions and (g) a decision by a Plan

trustee (or other plan fiduciary) to

disregard voting instructions of Plan

participants.

c. The Funds’ prospectus shall

disclose that (1) its shares are offered in

connection with mixed funding,

extended mixed funding and shared

funding, (2) due to differences in tax

treatment and other considerations

mixed funding, extended mixed funding

and shared funding may present certain

conflicts of interest between VA

Contract owners, VLI Contract owners

and Qualified Plan investors and (3) the

Trust’s Board of Trustees will monitor

the Funds for the existence of any

material irreconcilable conflict of

interest and determine what action, if

any, should be taken in response to such

a conflict. The Trust shall also notify the

Qualified Plan trustees and Participating

Insurance Companies that similar

prospectus disclosure may be

appropriate in Participating Separate

Account prospectuses or any Plan

prospectuses or other Plan disclosure

documents.

d. The Trust will comply with all of

the provisions of the Act relating to

security holder (i.e., persons such as VLI

Contract owners and VA Contract

owners or participants in Plans that

provide participants with voting rights)

voting including Section 16(a), 16(b)

(when applicable) and 16(c) (even

though the Trust is not a trust of the

type described therein).

e. The Adviser will report any

material irreconcilable conflicts or any

potential material irreconcilable

conflicts between or among the interests

of VLI Contract owners, VA Contract

owners and Plan participants to the

Trust’s Board of Trustees and will assist

the Board in carrying out the Board’s

responsibilities under these conditions.

Such assistance will include, but not be

limited to, providing the Board, at least

annually, with all information

reasonably necessary for the Board to

consider any issues raised by such

existing or potential conflicts. Any

shares of a Fund purchased by the

Adviser or its affiliates will be

automatically redeemed if and when the

Adviser’s investment advisory

agreement terminates, to the extent

required by applicable Treasury

regulations.

f. For so long as the Commission

interprets the Act to require ‘‘passthrough’’ voting privileges for Contract

owners whose Contracts are funded

through a separate account, the Adviser,

Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices 60999

or if applicable any of its affiliates, will

vote its shares of any Fund in the same

proportion as all Contract owners

having voting rights with respect to the

Fund; provided, however, that the

Adviser or any such affiliate shall vote

its shares in such other manner as may

be required by the Commission staff.

g. The Trust shall promptly notify the

Adviser, each Participating Insurance

Company and Qualified Plan in writing

of any determination of a material

irreconcilable conflict and its

implications. All reports sent by

Participating Insurance Companies or

Qualified Plans to the Board of Trustees

of the Trust or notices sent by the Board

of Trustees to Participating Insurance

Companies or Qualified Plans notifying

the recipient of the existence of or

potential for a material irreconcilable

conflict between the interests of VA

Contract owners, VLI Contract owners

and Plan participants as well as Board

deliberations regarding such conflicts or

such potential conflicts shall be

recorded in the board meeting minutes

of the Trust or other appropriate

records, and such minutes or other

records shall be made available to the

Commission upon request.

h. The Adviser, each Participating

Insurance Company and each Qualified

Plan owning more than 10% of the

outstanding shares of a Fund shall have

a contractual obligation, under the

agreements governing their participation

in the Funds, to provide at least

annually such reports and other

information relating to potential

conflicts as the Board may reasonably

request.

2. In addition to the foregoing

conditions, applicants consent to the

following conditions and represent and

agree that if the exemptions requested

herein are granted, the Trust will not

sell shares to any VLI Account unless

the account’s Participating Insurance

Company enters into a participation

agreement with the Trust containing

provisions that require the following:

a. A majority vote of the disinterested

trustees of the Trust shall represent a

conclusive determination as to the

existence of a material irreconcilable

conflict between or among the interests

of VLI Contract owners, VA Contract

owners and Qualified Plan investors.

For the purpose of number 5 below, a

majority vote of the disinterested

trustees of the Trust shall represent a

conclusive determination as to whether

any proposed action adequately

remedies any material irreconcilable

conflict between or among the interests

of VLI Contract owners, VA Contract

owners and Qualified Plan investors.

b. Each Participating Insurance

Company will monitor its operations

and those of the Trust for the purpose

of identifying any material

irreconcilable conflicts or potential

material irreconcilable conflicts

between or among the interests of

Qualified Plan investors, VA Contract

owners and VLI Contract owners.

c. Each Participating Insurance

Company will report any such conflicts

or potential conflicts to the Trust’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 or by

these conditions. Each Participating

Insurance Company will also assist the

Board in carrying out its responsibilities

under these conditions including, but

not limited to: (a) Informing the Board

whenever it disregards VLI Contract

owner or VA Contract owner voting

instructions, and (b) providing, at least

annually, such other information and

reports as the Board may reasonably

request. Each Participating Insurance

Company will carry out these

obligations with a view only to the

interests of owners of its VLI Contracts

and VA Contracts.

d. Each Participating Insurance

Company will provide ‘‘pass-through’’

voting privileges to owners of registered

VA Contracts and registered VLI

Contracts as long as the Act requires

such privileges in such cases.

Accordingly, such Participating

Insurance Companies, where applicable,

will vote Trust shares held in their

Participating Separate Accounts in a

manner consistent with voting

instructions timely received from

owners of such VLI and VA Contracts.

Each Participating Insurance Company

will vote Trust shares owned by itself

(i.e., that are not attributable to VA

Contract or VLI Contract reserves) in the

same proportion as instructions

received in a timely fashion from VA

Contract owners and VLI Contract

owners and shall be responsible for

ensuring that it and other Participating

Insurance Companies calculate ‘‘passthrough’’ votes for VLI Accounts and

VA Accounts in a consistent manner.

Each participating Issurance Company

also will vote Trust shares held in any

registered VLI Account or registered VA

account for which it has not received

timely voting instructions in the same

proportion as instructions received in a

timely fashion from VA Contract owners

and VLI Contract owners.

e. In the event that a material

irreconcilable conflict of interest arises

between VA Contract owners or VLI

Contract owners and Qualified Plan

participants, each Participating

Insurance Company will, at its own

expense, take whatever action is

necessary to remedy such conflict as it

adversely affects owners of its VA

Contracts or VLI Contracts 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 from the Trust and reinvesting

such assets in a different investment

medium (including another Fund of the

Trust) or submitting the question of

whether such withdrawal should be

implemented to a vote of all affected VA

Contract owners or VLI Contract

owners, and, as appropriate, segregating

the assets 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. Each Participating Insurance

Company will carry out the

responsibility to take the foregoing

action with a view only to the interests

of owners of its VA Contracts and VLI

Contracts. Notwithstanding the

foregoing, each Participating Insurance

Company 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 Contract

owners or VLI Contract owners

adversely affected by the conflict.

f. If a material irreconcilable conflict

arises because of a Participating

Insurance Company’s decision to

disregard the voting instructions of VLI

Contract owners or VA Contract owners

and that decision represents a minority

position or would preclude a majority

vote at any Fund shareholding meeting,

then, at the request of the Trust’s Board

of Trustees, the Participating Insurance

Company will redeem the shares of the

Trust to which the disregarded voting

instructions relate. No charge or

penalty, however, will be imposed in

connection with such a redemption.

g. Each Participating Insurance

Company and VLI Account will

continue to rely on Rule 6e–2(b)(15)

and/or Rule 6e–3(T)(b)(15), as

appropriate, and to comply with all of

the appropriate Rule’s conditions. In the

event that Rule 6e–2 and/or Rule 6e–

3(T) is amended, or any successor rule

is adopted, each Participating Insurance

Company and VLI Account will instead

comply with such amended or successor

rule.

h. Each participating insurance

company will maintain at its home

office available to the Commission a list

of its officers, directors and employees

who participate directly in the

61000 Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Notices

1Scottish Power’s other operations have been

segregated under SPUK, which is a foreign utility

company within the meaning of section 33 of the

Act.

management and administration of any

separate account organized as a UIT or

of any Fund. These individuals will

continue to be subject to the automatic

disqualification provisions of Section

9(a).

3. In addition to the foregoing

conditions, applicants consent to the

following conditions and represent and

agree that if the exemptions requested

herein are granted, the Trust will not

sell shares of any Fund to a Qualified

Plan if such sale would result in the

Qualified Plan owning 10% or more of

that Fund’s outstanding shares unless

the Qualified Plan first enters into a

participation agreement with the Trust

containing provisions that require the

following:

a. The trustees or plan committees of

the Qualified Plan will: (a) Monitor the

Qualified Plan’s operations and those of

the Trust for the purpose of identifying

any material irreconcilable conflicts or

potential material irreconcilable

conflicts between or among the interests

of Qualified Plan participants, VA

Contract owners and VLI Contract

owners, (b) report any such conflicts or

potential conflicts to the Trust’s Board

of Trustees, (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)

inform the Board whenever it (or

another fiduciary) disregards the voting

instructions of Qualified Plan

participants (of a Qualified Plan that

provides voting rights to its

participants), and (e) ensure that the

Qualified Plan votes Trust shares as

required by applicable law and

governing Qualified Plan documents.

The trustees or plan committees of the

Qualified Plan will carry out these

obligations with a view only to the

interests of Qualified Plan participants

in its Qualified Plan.

b. In the event that a material

irreconcilable conflict of interest arises

between Qualified Plan investors and

VA Contract owners, VLI Contract

owners or other investors in the Trust,

each Qualified Plan will, at its own

expense, take whatever action is

necessary to remedy such conflict as it

adversely affects that Qualified Plan or

participants in that Qualified Plan up to

and including (1) establishing a new

registered management investment

company, and (2) withdrawing

Qualified Plan assets subject to the

conflict from the Trust and reinvesting

such assets in a different investment

medium (including another Fund of the

Trust) or submitting the question of

whether such withdrawal should be

implemented to a vote of all affected

Quality Plan investors, 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 Qualified

Plan will carry out the responsibility to

take the foregoing action with a view

only to the interests of Qualified Plan

investors in its Qualified Plan.

Notwithstanding the foregoing, no

Qualified Plan will be obligated to

establish a new funding medium for any

group of participants or Qualified Plan

investors if an offer to do so has been

declined by a vote of a majority of the

Qualified Plan’s participants or

Qualified Plan investors adversely

affected by the conflict.

c. If a material irreconcilable conflict

arises because of a Qualified Plan

trustee’s (or other fiduciary’s) decision

to disregard the voting instructions of

Qualified Plan participants (of a

Qualified Plan that provides 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 Trust’s Board of Trustees,

the Qualified Plan will redeem the

shares of the Trust to which the

disregarded voting instructions relate.

No charge or penalty, however, will be

imposed in connection with such a

redemption.

4. Applicants also represent and agree

that if the exemptions requested herein

are granted, the Trust will not sell

shares of any Fund to a Qualified Plan

until the Qualified Plan executes an

application containing an

acknowledgment of the condition that

the Trust cannot sell shares of any Fund

to such Qualified Plan if such sale

would result in that Qualified Plan

owning 10% or more of that Fund’s

outstanding shares unless that Qualified

Plan first enters into a participation

agreement as described above.

Conclusion

For the reasons and upon the facts

stated above, Applicants assert that the

requested exemptions are appropriate in

the public interest and consistent with

the protection of investors and the

purposes fairly intended by the policy

and provisions of the Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–26279 Filed 10–12–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 35–27244]

Filings Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

October 6, 2000.

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 under the Act. 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 amendment(s) is/are available for

public inspection through the

Commission’s Branch 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

October 31, 2000, to the Secretary,

Securities and Exchange Commission,

Washington, D.C. 20549–0609, and

serve a copy on the relevant

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

the address(es) specified below. Proof of

service (by affidavit or, in the case of an

attorney at law, by certificate) should be

filed with the request. Any request for

hearing should identify specifically the

issues of facts 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 or

order issued in the matter. After October

31, 2000, the application(s) and/or

declaration(s), as filed or as amended,

may be granted and/or permitted to

become effective.

Scottish Power plc, et al. (70–9669)

Scottish Power plc (‘‘Scottish

Power’’), a foreign registered public

utility holding company; Scottish Power

UK plc, a first-tier utility subsidiary of

Scottish Power (‘‘SPUK’’); 1 Scottish

Power NA 1 Limited, Scottish Power

NA 2 Limited, and NA General

Partnership (together, ‘‘Intermediate

Companies’’), each of which is a

subsidiary of Scottish Power, all located

at 1 Atlantic Quay, Glasgow G2 8SP,

Scotland, United Kingdom; PacifiCorp,

an electric utility subsidiary of Scottish

Power; and PacifiCorp’s nonutility

subsidiaries (‘‘PacifiCorp Subsidiaries’’),

Centralia Mining Company, Energy