31238 Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–23233; File No. 812–11100]

Investors Mark Series Fund, Inc., et al.;

Notice of Application

June 1, 1998.

AGENCY: Securities and Exchange

Commission (the ‘‘Commission’’).

ACTION: Notice of Application for an

order pursuant to Section 6(c) of the

Investment Company Act of 1940

(‘‘1940 Act’’).

SUMMARY OF APPLICATION: Applicants

seek an order pursuant to Section 6(c)

of the 1940 Act for exemptions from the

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

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

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

to the extent necessary to permit shares

of any current or future series of the

Investors Mark Series Fund, Inc. (the

‘‘Fund’’) and shares of any other

investment company that is designed to

fund variable insurance products and

for which Investors Mark Advisors, LLC

(the ‘‘Adviser’’), or any of its affiliates,

may serve now or in the future, as

investment adviser, administrator,

manager, principal underwriter or

sponsor (the Fund and such other

investment companies referred to

collectively as the ‘‘Insurance Products

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

held by variable annuity and variable

life insurance separate accounts of both

affiliated and unaffiliated life insurance

companies (‘‘Participating Insurance

Companies’’), qualified pension and

retirement plans outside of the separate

account context (‘‘Qualified Plans’’ or

‘‘Plans’’), and the Adviser or any of its

affiliates.

APPLICANTS: Investors Mark Series Fund,

Inc. and Investors Mark Advisors, LLC.

FILING DATE: The application was filed

on April 3, 1998.

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 Commission 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 June 26,

1998, and should be 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 requester’s

interest, the reason for the request and

the issues contested. Persons who wish

to be notified of a hearing may request

notification by writing to the Secretary

of the Commission.

ADDRESS: Secretary, U.S. Securities and

Exchange Commission: 450 Fifth Street,

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

Applicants, c/o Blazzard, Grodd &

Hasenauer, P.C., 943 Post Road East,

Westport, Connecticut 06880, Attention:

Raymond A. O’Hara III, Esq.

FOR FURTHER INFORMATION CONTACT:

Susan M. Olson, Attorney, or Kevin M.

Kirchoff, Branch Chief, Office of

Insurance Products, Division of

Investment Management, at (202) 942–

0670.

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application is

available for a fee from the Public

Reference Branch of the Commission,

450 Fifth Street, N.W., Washington, D.C.

20549 (202–942–8090).

Applicants’ Representations

1. The Adviser, a Delaware limited

liability company, is registered as an

investment adviser under the

Investment Advisers Act of 1940 and

serves as the investment adviser for the

Fund.

2. The Fund, an open-end

management investment company, is a

Maryland corporation. The Fund

consists of ten series, nine of which are

currently offered. The Fund may in the

future issue shares of additional series.

3. Shares of the Fund are offered to

separate accounts of Participating

Insurance Companies to serve as

investment vehicles for variable annuity

and variable life insurance contracts

(including single premium, scheduled

premium, modified single premium and

flexible premium contracts)

(collectively, ‘‘Variable Contracts’’).

These separate accounts either will be

registered as investment companies

under the 1940 Act or will be exempt

from such registration.

4. The Participating Insurance

Companies will establish their own

separate accounts and design their own

Variable Contracts. Each Participating

Insurance Company will have the legal

obligation of satisfying all applicable

requirements under the federal

securities laws. The role of the

Insurance Products Funds will be

limited to that of offering their shares to

separate accounts of Participating

Insurance Companies and to Qualified

Plans and fulfilling the conditions set

forth in the application and described

later in this notice. Each Participating

Insurance Company will enter into a

fund participation agreement with the

Insurance Products Fund in which the

Participating Insurance Company

invests.

Applicants’ Legal Analysis

1. Applicants request that the

Commission issue an order under

Section 6(c) of the 1940 Act granting

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

15(a) and 15(b) thereof and Rules 6e–

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

to the extent necessary to permit shares

of the Insurance Products Funds to be

offered and sold to, and held by: (a)

variable annuity and variable life

insurance separate accounts of the same

life insurance company or of any

affiliated life insurance company

(‘‘mixed funding’’); (b) separate

accounts of unaffiliated life insurance

companies (including both variable

annuity and variable life separate

accounts) (‘‘shared funding’’); (c)

qualified pension and retirement plans

outside the separate account context;

and (d) the Adviser or any of its

affiliates (representing seed money

investments in the Insurance Products

Funds).

2. In connection with the funding of

scheduled premium variable life

insurance contracts issued through a

separate account registered under the

1940 Act as a unit investment trust,

Rule 6e–2(b)(15) provides partial

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

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

exemptions are available only where all

of the assets of the separate account

consist of the shares of one or more

registered management investment

companies which offer their shares

exclusively to variable life insurance

separate accounts of the life insurer or

any affiliated life insurance company.

Therefore, the relief granted by Rule 6e–

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

premium variable life insurance

separate account owns shares of a

management investment company that

also offers its shares to a variable

annuity separate account of the same

insurance company or an affiliated

insurance company. The relief granted

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

the scheduled premium variable life

insurance separate account owns shares

of an underlying management

investment company that also offers its

shares to a variable annuity account of

the same insurance company or an

affiliated insurance company or to

separate accounts funding variable

contracts of one or more unaffiliated life

insurance companies. The relief granted

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

if the shares of the Insurance Products

Funds also are sold to Qualified Plans.

3. In connection with the funding of

flexible premium variable life insurance
Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices 31239

contracts issued through a separate

account registered under the 1940 Act

as a unit investment trust, Rule 6e–

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

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

15(b) of the 1940 Act. These exemptions

are available only where all of the assets

of the separate account consist of the

shares of one or more registered

management investment companies

which offer their shares exclusively to

separate accounts of the life insurer, or

of any affiliated life insurance company,

offering either scheduled premium

variable life insurance contracts or

flexible premium variable life insurance

contracts, or both; or which also offer

their shares to variable annuity separate

accounts of the life insurer or of an

affiliated life insurance company.

Therefore, the exemptions provided by

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

underlying fund is engaged in mixed

funding, but are not available if the fund

is engaged in shared funding or if the

fund sell its shares to Qualified Plans.

4. Applicants state that the current tax

law permits the Insurance Products

Funds to increase their asset base

through the sale of shares to Plans.

Section 817(h) of the Internal Revenue

Code of 1986, as amended (the ‘‘Code’’),

imposes certain diversification

standards on the underlying assets of

Variable Contracts. The Code provides

that such contracts shall not be treated

as an annuity contract or life insurance

contract for any period (and any

subsequent period) during which the

investments are not adequately

diversified in accordance with

regulations prescribed by the Treasury

Department. Treasury regulations

provide that, to meet the diversification

requirements, all of the beneficial

interests in an investment company

must be held by the segregated asset

accounts of one or more insurance

companies. The regulations do contain

exceptions to this requirement,

however, one of which permits shares of

an investment company to be held by

the trustee of a qualified pension or

retirement plan without adversely

affecting the ability of shares in the

same investment company also to be

held by the separate accounts of

insurance companies in connection

with their variable annuity and variable

life contracts (Treas. Reg. § 1.817.–

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

5. Applicants state that the

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

preceded the issuance of these Treasury

regulations. Applicants assert that,

given the then current tax law, the sale

of shares of the same underlying fund to

separate accounts and to Plans could

not have been envisioned at the time of

the adoption of Rules 6e–2(b)(15) and

6e–3(T)(b)(15).

6. Applicants request relief for a class

or classes of persons and transactions

consisting of Participating Insurance

Companies and their scheduled

premium variable life insurance

separate accounts and flexible premium

variable life insurance separate accounts

(and, to the extent necessary, any

investment adviser, principal

underwriter and depositor of such

separate accounts) investing in any of

the Insurance Products Funds.

7. Section 6(c) authorizes the

Commission to grant exemptions from

the provisions of the 1940 Act, and rules

thereunder, if and to the extent that an

exemption is necessary or appropriate

in the public interest and consistent

with the protection of investors and the

purposes fairly intended by the policy

and provisions of the 1940 Act.

Applicants assert that the requested

exemptions are appropriate in the

public interest and consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the 1940 Act.

Disqualification

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

provides that it is unlawful for any

company to act as investment adviser to

or principal underwriter of any

registered open-end investment

company if an affiliated person of that

company is subject to a disqualification

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

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

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

exemptions from Section 9(a) under

certain circumstances, subject to the

limitations on mixed and shared

funding. These exemptions limit the

application of eligibility restrictions to

affiliated individuals or companies that

directly participate in the management

or administration of the underlying

investment company.

9. Applicants state that the relief from

Section 9(a) provided by Rules 6e–

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

limits the amount of monitoring

necessary to ensure compliance with

Section 9 to that which is appropriate in

light of the policy and purposes of

Section 9. Applicants assert that it is not

necessary for the protection of investors

or the purposes fairly intended by the

policy and provisions of the 1940 Act to

apply the provisions of Section 9(a) to

the many individuals who do not

directly participate in the

administration or management of the

Insurance Products Funds, who are

employed by the various unaffiliated

insurance companies (or affiliated

companies of Participating Insurance

Companies) that may utilize the

Insurance Products Funds as the

funding medium for Variable Contracts.

Applicants do not expect the

Participating Insurance Companies to

play any role in the management or

administration of the Insurance

Products Funds. Applicants assert,

therefore, that applying the restrictions

of Section 9(a) to individuals employed

by Participating Insurance Companies

serves no regulatory purpose.

10. Applicants state that the relief

requested should not be affected by the

proposed sale of Insurance Products

Funds to Qualified Plans because the

Plans are not investment companies and

will not be deemed affiliates solely by

virtue of their shareholdings.

Pass-Through Voting

11. Applicants submit that rule 6e–

2(b)(15)(iii) and 6e–3(T)(b)(15)(iii)

assume the existence of a ‘‘pass-through

voting’’ requirement with respect to

management investment company

shares held by a separate account.

Applicants state that Rule 6e–

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

provide exemptions from the passthrough voting requirements is limited

situations, assuming the limitations on

mixed and shared funding imposed by

the 1940 Act and the rules thereunder

are observed. More specifically, Rules

6e–2(b)(15)(iii)(A) and 6e–

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

insurance company may disregard the

voting instructions of its contract

owners in connection with the voting of

shares of an underlying investment

company if such instructions would

require such shares to be voted to cause

an underlying investment company to

make, or refrain from making, certain

investments which would result in

changes in the sub classification or

investment objectives of such company,

or to approve or disapprove any contract

between an investment company and its

investment adviser, when required to do

so by an insurance regulatory authority.

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

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

insurance company may disregard

contract owners’ voting instructions

with regard to changes initiated by the

contract owners in the investment

company’s investment policies,

principal underwriter or investment

adviser, provided that disregarding such

voting instructions is based on specific

good faith determinations.

12. Shares of the Insurance Products

Funds sold to Qualified Plans will be

held by the trustees of such Plans as

required by Section 403(a) of the

Employee Retirement Income Security

Act of 1974 (‘‘ERISA’’). Section 403(a)
31240 Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices

also provides that the trustees must

have exclusive authority and discretion

to manage and control the Plan with two

exceptions: (a) when the Qualified Plan

expressly provides that the trustees are

subject to the direction of a named

fiduciary who is not a trustee, in which

case the trustees are subject to proper

directions made in accordance with the

terms of the Plan and not contrary to

ERISA; and (b) when the authority to

manage, acquire or dispose of assets of

the Qualified Plan is delegated to one or

more investment managers pursuant to

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

of the two exceptions stated in Section

403(a) applies, the Qualified Plan

trustees have exclusive authority and

responsibility for voting proxies. Where

a named fiduciary appoints an

investment manager, the investment

manager has the responsibility to vote

the shares held unless the right to vote

such shares is reserved to the trustees or

the named fiduciary. The Qualified

Plans may have their trustees or other

fiduciaries exercise voting rights

attributable to investment securities

held by the Qualified Plans in their

discretion. Where a Qualified Plan does

not provide Qualified Plan participants

with the right to give voting

instructions, Applicants state that they

do not see any potential for

irreconcilable material conflicts of

interest between or among Variable

Contract holders and Plan participants

with respect to voting of the respective

Insurance Products Fund’s shares.

Accordingly, Applicants note that,

unlike the case with insurance company

separate accounts, the issue of the

resolution of material irreconcilable

conflicts with respect to voting is not

present with respect to Qualified Plans

since the Plans are not entitled to passthrough voting privileges. Even if a

Qualified Plan were to hold a

controlling interest in an Insurance

Products Fund, the Applicants do not

believe that such control would

disadvantage other investors in such

Insurance Products Fund to any greater

extent than is the case when any

institutional shareholder holds a

majority of the voting securities of any

open-end management investment

company. In this regard, the Applicants

submit that investment in an Insurance

Products Fund by a Qualified Plan will

not create any of the voting

complications occasioned by mixed

funding or shared funding.

13. Applicants state that some of the

Qualified Plans may provide for the

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

another named fiduciary to exercise

voting rights in accordance with

instructions from Qualified Plan

participants. Applicants state that, in

such cases, the purchase of shares by

such Qualified Plans does not present

any complications not otherwise

occasioned by mixed or shared funding.

Conflicts of Interest

14. Applicants state that no increased

conflict of interest would be presented

by the granting of the requested relief.

Applicants submit that share funding

does not present any issues that do not

already exist where a single insurance

company is licensed to do business in

several states. In this regard, Applicants

note that when different Participating

Insurance Companies are domiciled in

different states, it is possible that the

state insurance regulatory body in a

state in which one Participating

Insurance Company is domiciled could

require action that is inconsistent with

the requirements of other insurance

regulators in one or more other states in

which other Participating Insurance

Companies are domiciled. The

possibility, however, is no different or

greater than exists when a single insurer

and its affiliates offer their insurance

products in several states, as is currently

permitted.

15. Applicants state that affiliation

does not reduce the potential, if any

exists, for differences in state regulatory

requirements. In any event, the

conditions set forth in the application

and later in this notice (which are

adapted from the conditions included in

Rule 6e–3(T)(b)(15)) are designed to

safeguard against any adverse effects

that differences among state regulatory

requirements may produce. If a

particular state insurance regulator’s

decision conflicts with the majority of

other state regulators, the affected

insurer may be required to withdraw its

separate account’s investment in the

relevant Insurance Products Funds.

16. Applicants also assert that

affiliation does not eliminate the

potential, if any exists, for divergent

judgments as to when a Participating

Insurance Company could disregard

Variable Contract owner voting

instructions. The potential for

disagreement is limited by the

requirements that disregarding voting

instructions be reasonable and based on

specified good faith determinations.

However, if the Participating Insurance

Company’s decision to disregard

Variable Contract owner voting

instructions represents a minority

position or would preclude a majority

vote approving a particular change, such

Participating Insurance Company may

be required, at the election of the

relevant Insurance Products Fund, to

withdraw its separate account’s

investment in that Insurance Products

Fund and no charge or penalty will be

imposed upon the Variable Contract

owners as a result of such withdrawal.

17. Applicants submit that there is no

reason why the investment policies of

an Insurance Products Fund with mixed

funding would or should be materially

different from what those policies

would or should be if such Insurance

Products Fund or series thereof funded

only variable annuity or variable life

insurance contracts. In this regard,

Applicants note that a fund’s adviser is

legally obligated to manage the fund in

accordance with the fund’s investment

objectives, policies and restrictions as

well as any guidelines established by

the fund’s Board. Applicants submit

that no one investment strategy can be

identified as appropriate to a particular

insurance product or to a Plan. Each

pool of variable annuity and variable

life insurance contract owners is

composed of individuals of diverse

financial status, age, insurance and

investment goals. A fund supporting

even one type of insurance product

must accommodate these diverse factors

in order to attract and retain purchasers.

Applicants submit that permitting

mixed and shared funding will provide

economic support for the continuation

of the Insurance Products Funds. In

addition, permitting mixed and shared

funding also will facilitate the

establishment of additional series of

Insurance Products Funds serving

diverse goals.

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

the Code imposes certain diversification

standards on the underlying assets of

variable annuity contracts and variable

life insurance contracts held in the

portfolios of management investment

companies. Treasury Regulation

§ 1.817–5(f)(3)(iii), which established

diversification requirements for such

portfolios, specifically permits, among

other things, ‘‘qualified pension or

retirement plans’’ and insurance

company separate accounts to share the

same underlying investment company.

Therefore, Applicants assert that neither

the Code, nor the Treasury regulations,

nor the revenue rulings thereunder

present any inherent conflicts of interest

if the Qualified Plans, variable annuity

separate accounts, and variable life

insurance separate accounts all invest in

the same management investment

company.

19. While there are differences in the

manner in which distributions are taxed

for variable annuity contracts, variable

life insurance contracts and Plans,

Applicants state that the tax

consequences do not raise any conflicts
Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices 31241

of interest. When distributions are to be

made, and the separate account of the

Participating Insurance Company or

Qualified Plan cannot net purchase

payments to make the distributions, the

separate account or Qualified Plan will

redeem shares of the Insurance Products

Funds at their respective net asset

values. The Qualified Plan will then

make distributions in accordance with

the terms of the Plan and the

Participating Insurance Company will

make distributions in accordance with

the terms of the Variable Contract.

20. Applicants submit that the ability

of the Insurance Products Funds to sell

their respective shares directly to

Qualified Plans does not create a

‘‘senior security,’’ as such term is

defined under Section 18(g) of the 1940

Act, with respect to any Variable

Contract owner as opposed to a

participant under a Qualified Plan. As

noted above, regardless of the rights and

benefits of participants under the

Qualified Plans, or Variable Contract

owners under their Variable Contracts,

the Qualified Plans and the separate

accounts of Participating Insurance

Companies have rights only with

respect to their respective shares of the

Insurance Products Funds. They can

redeem such shares at their net asset

value. No shareholder of any of the

Insurance Products Funds has any

preference over any other shareholder

with respect to distribution of assets or

payments of dividends.

21. Applicants assert that there are no

conflicts between the Variable Contract

owners and the Plan participants with

respect to state insurance

commissioners’ veto powers over

investment objectives. The basic

premise of shareholder voting is that not

all shareholders may agree with a

particular proposal. While timeconsuming, complex transactions may

be undertaken to accomplish

redemptions and transfers by separate

accounts, trustees of Qualified Plans can

quickly redeem shares from Insurance

Products Funds and reinvest in other

funding vehicles without the same

regulatory impediments or, as in the

case with most Qualified Plans, even

hold cash or other liquid assets pending

suitable alternative investment.

Applicants maintain that even if there

should arise issues where the interests

of Variable Contract owners and the

interests of participants in Plans are in

conflict, the issues can be almost

immediately resolved because the

trustees of the Plans can, on their own,

redeem shares out of the Insurance

Products Funds.

22. Applicants submit that mixed and

shared funding should provide benefits

to Variable Contract owners by

eliminating a significant portion of the

costs of establishing and administering

separate funds. Participating Insurance

Companies will benefit not only from

the investment and administrative

expertise of the Adviser and the

subadvisers, but also from the cost

efficiencies and investment flexibility

afforded by a larger pool of assets.

Mixed and shared funding also would

permit a greater amount of assets

available for investment by the

Insurance Products Funds, thereby

promoting economies of scale, by

permitting increased safety through

greater diversification and by making

the addition of new series more feasible.

Therefore, making the Insurance

Products Funds available for mixed and

shared funding will encourage more

insurance companies to offer Variable

Contracts, and this should result in

increased competition with respect to

both Variable Contract design and

pricing, which can be expected to result

in more product variation and lower

charges.

23. Applicants assert that there is no

significant legal impediment to

permitting mixed and shared funding.

Separate accounts organized as unit

investment trusts historically have been

employed to accumulate shares of

mutual funds which have not been

affiliated with the depositor or sponsor

of the separate account. Applicants do

not believe that mixed and shared

funding, and sales to Qualified Plans,

will have any adverse federal income

tax consequences.

Applicants’ Conditions

Applicants have consented to the

following conditions:

1. A majority of each Insurance

Products Fund’s Board of Trustees or

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

of persons who are not ‘‘interested

persons’’ thereof, as defined by Section

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

thereunder and as modified by any

applicable orders of the Commission,

except that if this condition is not met

by reason of the death, disqualification,

or bona fide resignation of any Board

member, then the operation of this

condition shall be suspended: (a) for a

period of 45 days, if the vacancy or

vacancies may be filled by the Board; (b)

for a period of 60 days, if a vote of

shareholders is required to fill the

vacancy or vacancies; or (c) for such

longer period as the Commission may

prescribe by order upon application.

2. Each Insurance Products Fund’s

Board will monitor the fund for the

existence of any material irreconcilable

conflict between and among the

interests of the Variable Contract owners

of all separate accounts and of Plan

participants and Qualified Plans

investing in the Insurance Products

Funds, and determine what action, if

any, should be taken in response to such

conflicts. A material irreconcilable

conflict may arise for a variety of

reasons, including:

(a) an action by any state insurance

regulatory authority;

(b) a change in applicable federal or

state insurance, tax, or securities laws or

regulations, or a public ruling, private

letter ruling, no-action or interpretive

letter, or any similar action by

insurance, tax, or securities regulatory

authorities;

(c) an administrative or judicial

decision in any relevant proceeding;

(d) the manner in which the

investments of the funds are being

managed;

(e) a difference in voting instructions

given by variable annuity contract

owners, variable life insurance contract

owners and trustees of the Plans;

(f) a decision by a Participating

Insurance Company to disregard the

voting instructions of Variable Contract

owners; or

(g) if applicable, a decision by a

Qualified Plan to disregard the voting

instructions of Plan participants.

3. The Adviser (or any other

investment adviser of an Insurance

Products Fund), any Participating

Insurance Company and any Qualified

Plan that executes a fund participation

agreement upon becoming an owner of

10% or more of the assets of an

Insurance Products Fund (collectively,

‘‘Participants’’) will report any potential

or existing conflicts to the Board of any

relevant Insurance Products Fund.

Participants will be obligated to assist

the appropriate Board in carrying out its

responsibilities under these conditions

by providing the Board with all

information reasonably necessary for the

Board to consider any issues raised.

This responsibility includes, but is not

limited to, an obligation by each

Participating Insurance Company to

inform the Board whenever Variable

Contract owner voting instructions are

disregarded and, if pass-through voting

is applicable, an obligation by each

Qualified Plan to inform the Board

whenever it has determined to disregard

Plan participant voting instructions.

The responsibility to report such

information and conflicts and to assist

the Boards will be contractual

obligations of all Participating Insurance

Companies and Qualified Plans

investing in the Insurance Products

Funds under their respective

agreements governing participation in
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the Insurance Products Funds, and such

agreements shall provide that these

responsibilities will be carried out with

a view only to the interests of Variable

Contract owners and, if applicable, Plan

participants.

4. If a majority of an Insurance

Products Fund’s Board members, or a

majority of the disinterested Board

members, determine that a material

irreconcilable conflict exists, the

relevant Participating Insurance

Companies and Qualified Plans, at their

expense and to the extent reasonable

practicable (as determined by a majority

of the disinterested Board members),

shall take whatever steps are necessary

to remedy or eliminate the material

irreconcilable conflict. Such steps could

include: (a) Withdrawing the assets

allocable to some or all of the separate

accounts from the Insurance Products

Fund or any of its series and reinvesting

such assets in a different investment

medium, which may include another

series of the Insurance Products Fund or

another Insurance Products Fund; (b) in

the case of Participating Insurance

Companies, submitting the question as

to whether such segregation should be

implemented to a vote of all affected

Variable Contract owners and, as

appropriate, segregating the assets of

any appropriate group (i.e., variable

annuity or variable life insurance

contract owners of one or more

Participating Insurance Companies) that

votes in favor of such segregation, or

offering to the affected Variable Contract

owners the option of making such a

change; and (c) establishing a new

registered management investment

company or managed separate account.

If a material irreconcilable conflict

arises because of a decision by a

Participating Insurance Company to

disregard Variable Contract owner

voting instructions, and this decision

represents a minority position or would

preclude a majority vote, the

Participating Insurance Company may

be required, at the election of the

Insurance Products Fund, to withdraw

its separate account’s investment in

such fund, and no charge or penalty will

be imposed as a result of such

withdrawal. If a material irreconcilable

conflict arises because of a Qualified

Plan’s decision to disregard Plan

participant voting instructions, if

applicable, and that decision represents

a minority position or would preclude

a majority vote, the Qualified Plan may

be required, at the election of the

Insurance Products Fund, to withdraw

its investment in such fund, and no

charge or penalty will be imposed as a

result of such withdrawal. The

responsibility to take remedial action in

the event of a Board determination of a

material irreconcilable conflict and to

bear the cost of such remedial action

shall be a contractual obligation of all

Participating Insurance Companies and

Qualified Plans under their agreements

governing participation in the Insurance

Products Funds and these

responsibilities shall be carried out with

a view only to the interests of the

Variable Contract owners and, as

applicable, Plan participants. For

purposes of Condition 4, a majority of

the disinterested members of the

applicable Board shall determine

whether or not any proposed action

adequately remedies any material

irreconcilable conflict, but in no event

will an Insurance Products Fund or the

Adviser (or any other investment

adviser of the Insurance Products

Funds) be required to establish a new

funding medium for any Variable

Contract. No Participating Insurance

Company shall be required by Condition

4 to establish a new funding medium for

any Variable Contract if a majority of

Variable Contract owners materially

affected by the material irreconcilable

conflict vote to decline such offer. No

Qualified Plan shall be required by

Condition 4 to establish a new funding

medium for such Qualified Plan if: (a)

A majority of Plan participants

materially and adversely affected by the

material irreconcilable conflict vote to

decline such offer; or (b) pursuant to

governing plan documents and

applicable law, the Plan makes such

decision without Plan participant vote.

5. Participants will be informed

promptly in writing of a Board’s

determination of the existence of an

irreconcilable material conflict and its

implications.

6. Participating Insurance Companies

will provide pass-through voting

privileges to all Variable Contract

owners so long as the Commission

continues to interpret the 1940 Act as

requiring pass-through voting privileges

for Variable Contract owners.

Accordingly, such Participating

Insurance Companies, where applicable,

will vote shares of the Insurance

Products Fund held in their separate

accounts in a manner consistent with

voting instructions timely received from

Variable Contract owners. In addition,

each Participating Insurance Company

will vote shares of the Insurance

Products Fund held in its separate

accounts for which it has not received

timely voting instructions from contract

owners, as well as shares it owns, in the

same proportions as those shares for

which it has received voting

instructions. Participating Insurance

Companies will be responsible for

assuring that each of their separate

accounts investing in an Insurance

Products Fund calculates voting

privileges in a manner consistent with

all other Participating Insurance

Companies. The obligation to vote an

Insurance Products Fund’s shares and

calculate voting privileges in a manner

consistent with all other separate

accounts investing in the Insurance

Products Fund will be a contractual

obligation of all Participating Insurance

Companies under the agreements

governing participation in the Insurance

Products Fund. Each Plan will vote as

required by applicable law and

governing Plan documents.

7. As long as the Commission

continues to interpret the Act as

requiring pass-through voting privileges

for Variable Contract owners, the

Adviser (or any of its affiliates) will vote

is shares of any series of any Insurance

Products Fund in the same proportion

as all Variable Contract owners having

voting rights with respect to that series;

provided, however, that the Adviser (or

any of its affiliates) shall vote its shares

in such other manner as may be

required by the Commission or its staff.

8. All reports of potential or existing

conflicts received by a Board, and all

Board action with regard to: (a)

determining the existence of a conflict;

(b) notifying Participants of a conflict;

and (c) determining whether any

proposed action adequately remedies a

conflict, will be properly recorded in

the minutes of the meetings of the

appropriate Board or other appropriate

records. Such minutes or other records

shall be made available to the

Commission upon request.

9. Each Insurance Products Fund will

notify all Participating Insurance

Companies that separate account

prospectus disclosure regarding

potential risks of mixed and shared

funding may be appropriate. Each

Insurance Products Fund shall disclose

in its prospectus that: (a) its shares may

be offered to insurance company

separate accounts that fund both

variable annuity and variable life

insurance contracts, and to Qualified

Plans; (b) differences in tax treatment or

other considerations may cause the

interests of various Variable Contract

owners participating in the Insurance

Products Fund and the interests of

Qualified Plans investing in the

Insurance Products Fund to conflict;

and (c) the Board will monitor the

Insurance Products Fund for any

material conflicts and determine what

action, if any, should be taken.

10. Each Insurance Products Fund

will comply with all provisions of the
Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices 31243

1All existing investment companies that

currently intend to rely on the order have been

named as applicants, and any other existing or

future registered management investment

companies that subsequently rely on the order will

comply with the terms and conditions in the

application.

1940 Act requiring voting by

shareholders (for these purposes, the

persons having a voting interest in the

shares of the Insurance Products Funds).

In particular, each such Insurance

Products Fund either will provide for

annual shareholder meetings (except

insofar as the Commission may interpret

Section 16 of the 1940 Act not to require

such meetings) or comply with Section

16(c) of the 1940 Act (although none of

the Insurance Products Funds shall be

one of the trusts described in Section

16(c) of the 1940 Act), as well as with

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

when applicable, Section 16(b) of the

1940 Act. Further, each Insurance

Products Fund will act in accordance

with the Commission’s interpretation of

the requirements of Section 16(a) with

respect to periodic elections of Board

members and with whatever rules the

Commission may promulgate with

respect thereto.

11. If and to the extent that Rule 6e–

2 or Rule 6e–3(T) under the 1940 Act is

amended, or Rule 6e–3 under the 1940

Act is adopted, to provide exemptive

relief from any provision of the 1940

Act, or the rules promulgated

thereunder, with respect to mixed or

shared funding, on terms and conditions

materially different from any

exemptions granted in the order

requested in the application, then the

Insurance Products Funds and/or the

Participants, as appropriate, shall take

such steps as may be necessary to

comply with Rule 6e–2 or Rule 6e–3(T),

as amended, or proposed Rule 6e–3 as

adopted, to the extent such Rules are

applicable.

12. The Participants, at least annually,

shall submit to each Board such reports,

materials or data as each Board may

reasonably request so that such Boards

may fully carry out the obligations

imposed upon them by the conditions

stated in the application. Such reports,

materials and data shall be submitted

more frequently if deemed appropriate

by the Boards. The obligations of the

Participants to provide these reports,

materials and data upon reasonable

request of a Board shall be a contractual

obligation of all Participants under the

agreements governing their participation

in the Insurance Products Funds.

13. If a Qualified Plan or Plan

participant shareholder should become

a owner of 10% or more of the assets of

an Insurance Products Fund, such Plan

will execute a participation agreement

with such fund which includes the

conditions set forth herein to the extent

applicable. A Qualified Plan or Plan

participant will execute an application

containing an acknowledgment of this

condition upon such Plan’s initial

purchase of the shares of any Insurance

Products Fund.

Conclusion

For the reasons summarized 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 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15077 Filed 6–5–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC—23232; 812–10926]

Janus Investment Fund, et al.; Notice

of Application

June 1, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under the Investment Company

Act of 1940 (the ‘‘Act’’) under Section

12(d)(1)(J) of the Act for an exemption

from Sections 12(d)(1)(A) and (B) of the

Act, under Sections 6(c) and 17(b) of the

Act for an exemption from Sections

17(a) of the Act, and under Section

17(d) of the Act and Rule 17d–1 under

the Act to permit certain joint

transactions.

SUMMARY OF APPLICATION: The requested

order would supersede an existing order

to permit certain registered management

investment companies to invest excess

cash in affiliated money market funds in

excess of the limits of sections

12(d)(1)(A) and (B) of the Act.

APPLICANTS: Janus Investment Fund and

Janus Aspen Series (each a ‘‘Trust’’),

Janus Capital Corporation (‘‘Janus

Capital’’), and any other registered

management investment companies

advised by Janus Capital or an entity

controlling, controlled by, or under

common control with Janus Capital

(‘‘Future Funds’’).1

FILING DATES: The application was filed

on July 2, 1997, and amended on

December 31, 1997, and on April 27,

1998.

HEARING OR NOTIFICATION OF HEARING: An

order granting the requested relief will

be issued unless the SEC orders a

hearing. Interested persons may request

a hearing by writing to the SEC’s

Secretary and serving applicants with a

copy of the request, personally or by

mail. Hearing requests should be

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

June 25, 1998, and should be

accompanied by proof of service on

applicants, 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 who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, DC 20549.

Applicants, Janus Capital Corporation,

100 Fillmore Street, Denver, CO 80206–

4923.

FOR FURTHER INFORMATION CONTACT:

Lisa McCrea, Attorney Adviser, (202)

942–0562 or Nadya B. Roytblat,

Assistant Director, at (202) 942–0564

(Office of Investment Company

Regulation, Division of Investment

Management).

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, 450 5th Street,

N.W., Washington, DC, 20549 (tel. 202–

942–8090).

Applicants’ Representations

1. Janus Investment Fund and Janus

Aspen Series are open-end management

investment companies registered under

the Act. Janus Investment Fund and

Janus Aspen series currently offer

nineteen and twelve series (together

with Future Funds the ‘‘Funds’’),

respectively, three and one of which,

respectively, are subject to the

requirements of rule 2a–7 under the Act

(‘‘Money Market Funds’’). Janus Capital

serves as investment adviser to each

Fund, and is registered as an investment

adviser under the investment Advisers

Act of 1940.

2. The Funds have cash reserves that

have not been invested in portfolio

securities (‘‘Uninvested Cash’’),

including dividend payments, interest

received on portfolio securities,

unsettled securities transactions,

strategic reserves, matured investments,

proceeds from liquidation of portfolio

securities, or new investor capital. An

existing order permits the Funds

(‘‘Investing Funds’’) to invest their

Uninvested Cash in the Money Market

Funds so long as each Fund’s aggregate