19428 Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. § 552, will be

available for inspection and copying at

the Commission’s Public Reference

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the NYSE. All submissions

should refer to File No. SR–NYSE–95–

11 and should be submitted by May 9,

1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–9526 Filed 4–17–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21000; 811–1522]

Centurion Growth Fund, Inc.; Notice of

Application

April 12, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Deregistration under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: Centurion Growth Fund, Inc.

RELEVANT ACT SECTIONS: Section 8(f).

SUMMARY OF APPLICATION: Applicant

requests an order declaring that it has

ceased to be an investment company.

FILING DATES: The application was filed

on March 2, 1995.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

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

May 8, 1995, and should be

accompanied by proof of service on

applicant in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 5th

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

Applicant, c/o Mutual Funds Service

Co., 600 Memorial Drive, Dublin, Ohio

43017.

FOR FURTHER INFORMATION CONTACT:

James M. Curtis, Senior Counsel, at

(202) 942–0563, or Robert A. Robertson,

Branch Chief, (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.

Applicant’s Representations

1. Applicant is registered as an openend management investment company

that was organized as a corporation

under the laws of Delaware on August

1, 1967 under the name America Future

Fund, Inc. On August 14, 1967,

applicant filed a notice of registration

pursuant to section 8(a) of the Act and

a registration statement under section

8(b) of the Act. On August 24, 1967,

applicant also filed a registration

statement under the Securities Act of

1933 on Form S–5. Applicant’s

registration statements both were

declared effective on February 8, 1968.

2. On April 22, 1994, the United

States District Court, Southern District

of Florida (the ‘‘Court’’), appointed

Daniel H. Aronson (the ‘‘Receiver’’) as

the receiver for applicant at the request

of the SEC after applicant’s investment

adviser and underwriter resigned and

all but one director and officer of

applicant had resigned.

3. On June 10, 1994, the Court

directed the Receiver to pursue a merger

of applicant with another investment

company on terms as advantageous as

possible to applicant’s shareholders.

After reviewing several proposals, the

Receiver selected the merger proposal

submitted by Vontobel USA, Inc., an

investment adviser, and The World

Funds, Inc., a diversified, open-end,

management investment company.

4. On November 23, 1994, the

Receiver and World Funds executed an

Agreement and Plan or Reorganization

(the ‘‘Plan’’), and the Receiver

appointed Vontobel as interim

investment adviser. The Court, by order

dated December 16, 1994, granted the

Receiver’s motion to approve the Plan.

No vote, consent, or other action by

applicant’s shareholders was required or

solicited in connection with the Plan

due to the Court’s jurisdiction and broad

powers of equity.

5. On December 27, 1994, pursuant to

the Plan, the U.S. Value Fund Series of

World Funds acquired all applicant’s

assets and goodwill, except for $65,000

in cash applicant retained to pay its

expenses related to the Plan and other

liabilities, in exchange for a number of

shares of common stock of the series

based on the relative net asset values of

such series and applicant. World Funds

then distributed to applicant’s

shareholders 730,811,301 shares of the

series pro rata based on the series’s net

asset value per share of $10.25.

6. The Receiver retained $65,000 to

pay applicant’s final costs, expenses,

debts, and liabilities. The Receiver has

been paying these expenses as they

come due and anticipates that such

expenses will exhaust the funds

withheld.

7. Applicant has no security holders,

assets, or other liabilities. Applicant is

not a party to any litigation or

administrative proceeding other than

those described above. Applicant is not

engaged and does not propose to engage

in any business activity other than those

necessary for the winding up of its

affairs.

8. On December 16, 1994, the Court

authorized the dissolution of applicant.

Applicant filed a Certificate of

Dissolution with the Secretary of State

of Delaware on December 29, 1994.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret M. McFarland,

Deputy Secretary.

[FR Doc. 95–9520 Filed 4–17–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21003; No. 812–9164]

Neuberger & Berman Advisers

Management Trust, et al.

April 12, 1995.

AGENCY: Securities and Exchange

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

ACTION: Notice of Application for an

Order under the Investment Company

Act of 1940 (‘‘1940 Act’’).

APPLICANTS: Neuberger & Berman

Advisers Management Trust (‘‘Trust’’),

Advisers Managers Trust (‘’Managers

Trust’’), Neuberger & Berman

Management Incorporated (‘‘Investment

Adviser’’), and Certain Life Insurance
Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices 19429

1A ‘‘master feeder’’ fund structure is a two-tiered

arrangement in which one or more investment

companies (or other collective investment vehicles)

(‘‘feeder funds’’) pool their assets by investing in a

single investment company having the same

investment objective (‘‘master fund’’). This

structure typically has been used to customize

distribution channels, fee structures and marketing

techniques while continuing to offer interests in the

same underlying investment portfolios.

2 Investment Company Act Release Nos. 18573

(Feb. 26, 1992) (Amended Order), 18506 (Jan. 29,

1992) (Notice), 16207 (Jan. 7, 1988) (Amended

Order), 16165 (Dec. 9, 1987) (Notice), 15324 (Sept.

23, 1986) (Order), and 15274 (Aug. 25, 1986

(Notice).

3Any assets invested by the general accounts of

Participating Insurance Companies will be in the

form of initial operating capital commonly known

as ‘‘seed money.’’

Companies (‘‘Participating Insurance

Companies’’) and their Separate

Accounts (‘‘Separate Accounts’’)

Investing in the Trust.

RELEVANT 1940 ACT SECTION: Order

requested under Section 6(c) granting

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

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

Rules 6e–2(b)(15) and 6e–3(T)(b)(15)

thereunder.

SUMMARY OF APPLICATION: Applicants

seek an order to permit shares of the

Trust (and/or any successor entity),

beneficial interests of Managers Trust,

and beneficial interests or shares of any

other investment company that is

designed to fund insurance products

and for which the Investment Adviser or

its affiliates may serve now or in the

future as investment adviser,

administrator, manager, principal

underwriter or sponsor, to be sold to

and held by: (a) separate accounts of

both affiliated and unaffiliated

Participating Life Insurance Companies

offering variable annuity contracts and

variable life insurance contracts; and (b)

qualified pension and retirement plans

(‘‘Qualified Plans’’).

FILING DATE: The application was filed

on August 16, 1994, and amended on

April 5, 1995 and April 10, 1995.

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 by writing to the

Commission’s Secretary and serving

Applicants with a copy of the request,

personally or by mail. Hearing requests

should be received by the Commission

by 5:30 p.m. on May 2, 1995, 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 requestor’s interest, the

reason for the request, and the issues

contested. Persons may request

notification of a hearing by writing to

the Secretary of the Commission.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 5th Street,

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

Applicants, c/o Stanley Egener,

President, Neuberger & Berman

Management Incorporated, 605 Third

Avenue, 2nd Floor, New York, New

York 10158–0006.

FOR FURTHER INFORMATION CONTACT:

Yvonne M. Hunold, Assistant Special

Counsel, or Wendy Friedlander, Deputy

Chief, at (202) 942–0670, Office of

Insurance Products (Division of

Investment Management).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application; the complete application is

available for a fee from the

Commission’s Public Reference Branch.

Applicants’ Representations

1. The Trust is a series Massachusetts

business trust that is registered under

the 1940 Act as a diversified, open-end

management investment company. The

Trust currently consists of six portfolios

(‘‘Trust Portfolios’’). A seventh Trust

Portfolio, the International Portfolio, is

scheduled to commence operations on

May 1, 1995. As more fully discussed

below, reorganization of the Trust

(‘‘Successor Trust’’) is anticipated to

take effect on May 1, 1995, with a

conversion date currently anticipated

for April 28, 1995. After the

reorganization, the Successor Trust will

become a ‘‘feeder’’ fund in a ‘‘masterfeeder’’ fund structure 1 by investing in

Managers Trust

2. Managers Trust is a New York

common law trust that offers shares of

its series of portfolios (‘‘Series’’) to

insurance company separate accounts

and to Qualified Plans. Upon

reorganization of the Trust, Managers

Trust will serve as a ‘‘master fund’’ in

a master-feeder structure in which the

Successor Trust will be a ‘‘feeder’’ fund.

3. Investment Adviser currently

manages and distributes shares of each

Trust Portfolio. Upon reorganization of

the Trust, Investment Adviser will serve

as administrator of the Successor Trust’s

portfolios and as administrator or

manager of Managers Trust’s Series.

Investment Adviser’s voting stock is

owned by general partners of Neuberger

& Berman, L.P. (‘‘Neuberger & Berman’’),

the sub-adviser to the Trust Portfolios.

Investment Adviser is not affiliated with

any of the Participating Insurance

Companies.

4. Participating Insurance Companies

are both affiliated and unaffiliated

insurance companies that currently

invest in the Trust through either their

general or Separate Accounts in

connection with the offering of both

variable annuities and variable life

insurance contracts (‘‘Contracts’’).

Separate Accounts of Participating

Insurance Companies are unit

investment trusts (‘‘UIT–Separate

Accounts’’) that are either registered

under the 1940 Act or exempt from

registration pursuant to Section 3(c)(11)

of the 1940 Act. U T–Separate Accounts

invest directly in the Trust, resulting in

a two-tier structure. Participating

Insurance Companies’ Separate

Accounts registered under the 1940 Act

as management investment companies

(‘‘Managed-Separate Accounts’’)

currently do not invest in the Trust.

Upon reorganization of the Trust, UIT–

Separate Accounts will invest in the

Successor Trust, which, in turn, will

invest in Managers Trust, resulting in a

three-tier structure. Managed-Separate

Accounts will invest directly in

Managers Trust, resulting in a two-tier

structure.

5. Trust shares currently are offered

pursuant to orders of the Commission

under Section 6(c) of the 1940 Act

exempting the Trust and Investment

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

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

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

The purpose of this application is to

extend the exemptive relief granted to

the Trust and Investment Adviser to the

successor entities of the Trust and to

certain other investment companies

(‘‘Other Investment Companies’’) that

may be used as underlying funds for

both UIT-Separate Accounts and

Qualified Plans.

(The Trust (and/or any successor

entity) and Other Investment Companies

hereinafter are referred to, collectively,

as ‘‘Insurance Products Funds.’’

Investment companies offering shares to

Insurance Products Funds, to ManagedSeparate Accounts, and to Qualified

Plans are referred to, collectively, as

‘‘Master Funds.’’ The term ‘‘Master

Funds’’ does not include ‘‘Insurance

Products Funds.’’ ‘‘Participating

Insurance Companies’’ refers to: (a)

insurance companies, the assets of

which currently are invested in the

Trust through either their general or

Separate Accounts, and which will be

invested in the successor to the Trust,

and/or one or more other Insurance

Products Funds, and/or more Master

Funds; and (b) insurance companies, the

assets of which, in the future, may be

invested through either their general or

Separate Accounts in the Trust (and/or

any successor entity) and/or one or

more other Insurance Products Funds,

and/or one or more Master Funds.) 3

6. As noted previously, the Trust will

be reorganized into the Successor Trust,
19430 Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices

4 Insurance Products Funds selling their shares to

Qualified Plans must meet certain diversification

requirements with respect to the portfolios

underlying their variable contracts. According to

Applicants, diversification requirements are

satisfied where all beneficial interests in an

investment company (master fund) are held by

Separate Accounts (feeders) of one or more insurers.

Under regulations prescribed by the Treasury

Department establishing diversification

requirements for investment portfolios underlying

variable contracts, the ability of these Separate

Accounts to hold shares in the same investment

company is not adversely affected if such shares are

held by the trustee of a Qualified Plan.

which will serve as a ‘‘feeder’’ fund in

a ‘‘master-feeder’’ fund structure. The

proposal by the Investment Adviser to

reorganize the Trust was approved by

the Board of Trustees of the Trust and,

on August 25, 1994, by shareholders of

the Trust. The Successor Trust will be

a series Delaware business trust

registered under the 1940 Act as an

open-end diversified management

investment company. The Successor

Trust, which will retain the Trust’s

present name, initially will consist of

seven portfolios (‘‘Successor

Portfolios’’). Each Successor Portfolio

will retain the same name and have

substantially the same investment

objective and policies as its current

corresponding Trust Portfolio.

Additional Successor Portfolios may be

added in the future.

7. Upon reorganization, each Trust

Portfolio will transfer all of its assets to

the corresponding Successor Portfolio.

In exchange, share of each Successor

Portfolio will be distributed to the

shareholders of the corresponding Trust

Portfolio on the basis of one Successor

Portfolio share for one outstanding Trust

Portfolio share, with the Successor

Portfolio assuming all of the liabilities

of that corresponding Trust Portfolio.

Each Successor Portfolio, in turn, will

invest all of its assets in a corresponding

Series of Managers Trust and offer its

shares to UIT-Separate Accounts of

Participating Insurance Companies and

to Qualified Plans, resulting in a threetier structure. Each Series of Managers

Trust will have the same investment

objectives and policies as the

corresponding Successor Portfolio.

Thereafter, the only investment

securities held by each Successor

Portfolio will be its interest in the

corresponding Series of Managers Trust.

In the future, Managed-Separate

Accounts of Participating Insurance

Companies will and certain Qualified

Plans may invest directly in the Master

Funds, thus resulting in a two-tier

structure with respect to these

arrangements.

8. Applicants assert that the primary

objective of the Trust’s restructuring

into a master-feeder fund structure is to

retain and increase assets in the Trust

and, ultimately, lower Contract owner’s

expenses. Applicants believe that

economies of scale may be achieved that

would benefit all shareholders.

Applicants state that, to the extent that

certain operating costs are relatively

fixed and currently are borne by a Trust

Portfolio alone, these expenses instead

would be borne by the Series and shared

by the corresponding Successor

Portfolio and any other investors

pooling their assets through investment

in the Series.

9. Investment Adviser will serve as

administrator of the Successor Portfolios

and as manager of the corresponding

Series of Managers Trust, except with

respect to the International Series of

Managers Trust. BNP–N&B Global Asset

Management L.P., an affiliate of

Investment Adviser, will act as

investment adviser for the International

Series, for which Investment Adviser

will serve as administrator. In addition,

Investment Adviser, or its affiliates, may

serve now or in the future as investment

adviser, administrator, manager,

principal underwriter or sponsor with

respect to the Insurance Products Funds

and the Master Funds. Investment

Adviser may provide services to

Managed-Separate Accounts or to

Qualified Plans that may, in the future,

function as ‘‘feeder’’ funds by investing

in the Master Funds. Investment

Adviser does not and will not act as

investment adviser to Qualified Plans

which have purchased or will purchase

shares of the Insurance Products Funds,

or beneficial interests in the Master

Funds. Investment Adviser is not

affiliated with any of the Participating

Insurance Companies.

10. Neuberger & Berman will be the

sub-adviser for the Series of Managers

Trust and may act as investment adviser

to Qualified Plans investing in the

Successor Trust, but is not permitted to

advise such Qualified Plans to invest in

the Successor Trust. Independent

fiduciaries of such Qualified Plans for

which Neuberger & Berman acts as

investment adviser may choose to invest

in the Successor Trust.

11. Qualified Plans, in the future, may

invest directly in the Master Funds and

may choose any Insurance Products

Funds or Master Funds as their sole

investment or as one of several

investments. Qualified Plan participants

may or may not be given an investment

choice depending on the terms of the

Plan. Shares of any of the Insurance

Products Funds, or beneficial interests

in the Master Funds, sold to such

Qualified Plans will be held by the

trustees of said Plans as mandated by

Section 403(a) of the Employee

Retirement Income Security Act of 1974

(‘‘ERISA’’). There is no pass-through

voting to the participants of such

Qualified Plans.

12. Section 817(h) of the Internal

Revenue Code of 1986, as amended,

(‘‘Code’’) imposes certain diversification

standards on the underlying assets of

variable annuity and variable life

insurance contracts.4 The Successor

Trust and Managers Trust, on behalf of

each Successor Portfolio and Series,

have applied to the Internal Revenue

Service (‘‘IRS’’) for a private letter ruling

with respect to certain tax issues arising

out of the proposed restructuring of the

Trust. The Successor Trust and

Managers Trust have requested that the

IRS rule, among other things, that the

‘‘look-through’’ rule of Section 817 of

the Code will be available for the

variable insurance contract

diversification test. In the event that the

requested IRS ruling is not received by

the conversion date, the Investment

Adviser expects to receive a favorable

opinion of counsel with respect to the

Section 817 and other relevant tax

issues, prepared solely for its use in

connection with the creation of the

master-feeder fund.

Applicants’ Legal Analysis

1. 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.

A. Rule 6e–2—Scheduled Premium

Variable Life Insurance Contracts

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 UIT Rule 6e–2(b)(15)

provides partial relief from Sections

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

Act. The exemptions granted to a

separate account by Rule 6e–2(b)(15) are

available only where all of the assets of

the separate account consist of the

shares of one or more registered

management investment companies

(‘‘Underlying Funds’’) offering their

shares ‘‘exclusively’’ to variable life

insurance separate accounts of the life

insurer, or of any affiliated life

insurance company, funding such

variable contracts. The relief provided

by Rule 6e–2 also is available to a
Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices 19431

5Applicants state that the sale of shares of the

same investment company to separate accounts and

to Qualified Plans was not contemplated at the time

of the adoption of Rules 6e–2 and 6e–3(T), given

the then-current tax laws. Further, the promulgation

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

preceded the issuance of the Treasury Regulations

permitting the trustee of a Qualified Plan to hold

shares of an investment company without adversely

affecting the ability of insurance company separate

accounts to hold shares of the same investment

company.

6Applicants state that no relief from Section 9(a)

is necessary with respect to the Qualified Plans

which are not investment companies.

separate account’s investment adviser,

principal underwriter and sponsor or

depositor. The relief granted by Rule

6e–2(b)(15), however, is not available

with respect to a scheduled premium

variable life insurance separate account

that owns shares of an underlying fund

that also offers its shares to a variable

annuity separate account of the same

company or of any other affiliated or

unaffiliated life insurance company.

The use of a common underlying fund

as the investment vehicle for both

variable annuity contracts and

scheduled or flexible premium variable

life insurance contracts is referred to as

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

underlying fund as the underlying

investment vehicle for separate accounts

of unaffiliated insurance companies is

referred to as ‘‘shared funding.’’ Rule

6e–2(b)(15), thus, precludes both mixed

funding and shared funding.

3. Moreover, because the relief under

Rule 6e–2(b)(15) is available only where

shares are offered exclusively to

separate accounts, additional exemptive

relief is necessary if shares of an

underlying fund also are offered to

Qualified Plans.5 Applicants assert that

the appropriateness of granting relief

under this provision is not affected by

the purchase of Insurance Products

Funds’ shares by Qualified Plans.

4. Rule 6e–2(b)(15) also does not

exempt Managed-Separate Accounts of

Participating Insurance Companies

functioning as ‘‘feeders’’ by virtue of the

acquisition of beneficial interests in a

Master Fund because such a ManagedSeparate Account would not be

registered as a UIT. Because under

certain circumstances the Master Funds

will solicit votes of their interest holders

with respect to items relating solely to

their operations, Applicants assert that

the exemptive relief granted by Rule 6e–

2(b)(15) should be extended to such

Managed-Separate Accounts to the

extent that they are required to vote on

issues affecting the Master Funds.

Applicants further assert that the

extension of this relief to ManagedSeparate Accounts of Participating

Insurance Companies is consistent with

the purpose and intent of Rule 6e–2.

Applicants submit that the relief granted

by Rule 6e–2 also is in no way affected

by the purchase of shares of the Master

Fund by Qualified Plans.

B. Rule 6e–3(T)—Flexible Premium

Variable Life Insurance Contracts

5. In connection with flexible

premium variable life insurance

contracts issued through a separate

account registered under the 1940 Act

as a UIT, Rule 6e–3(T)(b)(15) provides

partial exemptions from Sections 9(a),

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

The exemptions provided by Rule 6e–

3(T)(b)(15) also are available to a

separate account’s investment adviser,

principal underwriter and sponsor or

depositor. Rule 6e–3(T)(b)(15)

exemptions are available, however, only

if all of the assets of the separate

account consist of shares of one or more

underlying funds which offer their

shares exclusively to such separate

accounts of the life insurer, or its

affiliated life insurance companies,

offering either scheduled premium 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. Rule

6e–3(T) therefore permits ‘‘mixed

funding’’ for flexible premium variable

life insurance separate accounts, subject

to certain conditions, but does not

permit ‘‘shared funding.’’ Moreover,

because Rule 6e–3(T) relief is available

only where underlying fund shares are

offered exclusively to separate accounts,

additional exemptive relief is necessary

because shares of the Insurance

Products Funds also are sold to

Qualified Plans.

6. Rule 6e–3(T)(b)(15) also does not

exempt Managed-Separate Accounts of

Participating Insurance Companies

functioning as ‘‘feeders’’ by virtue of the

acquisition of beneficial interests in a

Master Fund, because such ManagedSeparate Account would not be

registered as a UIT. Applicants assert

that the exemptive relief granted by

Rule 6e–3(T)(b)(15) should be extended

to Managed-Separate Accounts of

Participating Insurance Companies to

the extent they are required to vote on

issues affecting the Master Funds,

which will solicit votes of their interest

holders under certain circumstances.

Applicants further assert that the

extension of this relief to the ManagedSeparate Accounts is consistent with the

purpose and intent of Rule 6e–3(T).

Applicants submit that the relief granted

by Rule 6e–3(T) also is in no way

affected by the purchase of shares of the

Insurance Products Funds by Qualified

Plans, or by the possible future purchase

of Master Funds shares by Qualified

Plans.

C. Request for Class Relief

7. Applicants request that the

Commission grant exemptive relief to a

class or classes of persons and

transactions, consisting of: (i) Insurers

and separate accounts (organized as

UITs) of Participating Insurance

Companies investing in Insurance

Products Funds; (ii) insurers and

separate accounts (organized as

managed separate accounts) of

Participating Insurance Companies

investing in Master Funds; and (iii) with

respect to (i) and (ii) above, each of their

investment advisers, principal

underwriters and depositors.

8. Applicants state that the requested

class relief is appropriate in the public

interest. Such relief will promote

competitiveness in the market by

eliminating the need to file redundant

exemptive applications, therefore,

reducing administrative expenses and

maximizing the efficient use of

resources. Applicants assert that the

delay and expense involved in having to

seek exemptive relief repeatedly would

impair their ability to take advantage

effectively of business opportunities as

they arise. Applicants submit that the

requested relief is consistent with the

purposes of the 1940 Act and the

protection of investors for the same

reasons. Finally, Applicants state that

were they required to seek repeated

exemptive relief with respect to the

issues addressed in the application, no

additional benefit or protection would

be provided to investors through the

redundant filings. Applicants submit

that they are not aware of any facts or

circumstances which would prevent the

extension of the relief requested to the

class of Managed-Separate Accounts of

Participating Insurance Companies

investing directly in the Master Funds.

D. Disqualification

9. Section 9(a) prohibits any company

from serving as investment adviser or

principal underwriter of any registered

open-end investment company if an

affiliated person of that company is

subject to a disqualification specified in

subparagraph (1) or (2) of that section.6

Paragraphs (b)(15)(i) and (ii) of Rules

6e–2 and 6e–3(T) provide partial

exemptions from Section 9(a) under

certain circumstances, subject to

limitations on mixed and shared

funding. These partial exemptions only

are available to UIT-Separate Accounts

and limit the disqualification to

affiliated individuals or companies

directly participating in the
19432 Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices

management or administration of the

underlying fund.

10. Applicants state that the partial

relief granted in paragraph (b)(15) of

Rules 6e–2 and 6e–3(T) from the

requirements of Section 9(a), in effect,

limits the monitoring of an insurer’s

personnel that would otherwise be

necessary to ensure compliance with

Section 9 to that which is appropriate in

light of the policy and purposes of that

Section. Applicants further state that

Rules 6e–2 and 6e–3(T) recognize that it

is not necessary for the protection of

investors or for the purposes of the 1940

Act to apply the provisions of Section

9(a) to the many individuals in an

insurance company complex, most of

whom typically will have no

involvement in matters pertaining to an

investment company in that

organization. Applicants represent that

Participating Insurance Companies are

not expected to play any role in the

management or administration of the

Trust (and/or any successor to the trust)

or of Managers Trust. Applicants

therefore submit that applying the

restrictions of Section 9(a) serves no

regulatory purpose.

E. Pass-Through Voting

11. Subparagraph (b)(15)(iii) of Rules

6e–2 and 6e–3(T) assume the existence

of a pass-through voting requirement

with respect to underlying fund shares

held by a separate account funding

variable insurance contracts. These

provisions are applicable to UITSeparate Accounts. The application

states that Participating Insurance

Companies will provide pass-through

voting privileges to all Contract owners

so long as the Commission interprets the

1940 Act to require such privileges.

12. Subparagraph (b)(15)(iii)(A) of

Rules 6e–2 and 6e–3(T) provides

exemptions from the pass-through

voting requirement with respect to

several significant matters, assuming

observance of the limitations on mixed

and shared funding imposed by the

1940 Act and the rules thereunder.

Subparagraph (b)(15)(iii)(A) of Rules 6e–

2 and 6e–3(T) provide that an insurance

company may disregard the voting

instructions of its contract owners with

respect to the investments of an

underlying investment company or any

contract between an investment

company and its adviser when required

to do so by an insurance regulatory

authority under certain specified

circumstances.

13. Subparagraph (b)(15)(iii)(B) of

Rules 6e–2 and 6e–3(T) provides that

the insurance company may disregard

contract owners’ voting instructions

with regard to changes initiated by the

contract holders in the investment

company’s investment policies,

principal underwriter or investment

adviser, provided that disregarding such

voting instructions is reasonable and

subject to the other provisions of

paragraphs (b)(15)(iii) and (b)(7)(ii)(B)

and (C) of each rule.

14. Applicants state that Rules 6e–2

and 6e–3(T) were adopted by the

Commission before the ‘‘master-feeder’’

structure was developed. Applicants

assert that a Separate Account’s

acquisition of Successor Trust shares or

of beneficial interests of the Master

Funds should not change the purpose

and intent of Rules 6e–2 and 6e–3(T).

Accordingly, Applicants further assert

that, because Master Funds from timeto-time solicit votes from their interest

holders with respect to certain issues

relating to their operations, the

exemption from pass-through voting

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

should be extended to the ManagedSeparate Accounts of Participating

Insurance Companies investing directly

in the Master Funds.

15. Applicants represent that the sale

of Insurance Products Funds’ shares to

Qualified Plans will not have any

impact on the relief requested. As noted

previously by Applicants, shares of the

Insurance Products Funds sold to

Qualified Plans will be held by their

trustees as mandated by Section 403(a)

of ERISA. Section 403(a) also provides

that the trustees must have exclusive

authority and discretion to manage and

control the Qualified Plan with two

exceptions: (1) when the Plan expressly

provides that the trustees are subject to

the direction of a named fiduciary who

is not a trustee, in which case the

trustees are subject to proper directions

made in accordance with the terms of

the Qualified Plan and not contrary to

ERISA, and (2) when the authority to

manage, acquire or dispose of assets of

the Qualified Plan is delegated to one or

more managers pursuant to Section

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

two exceptions stated in Section 403(a)

applies, Qualified Plan trustees have the

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 to the named

fiduciary. In any event, there is no passthrough voting to the participants of

such Qualified Plans and, thus, the

issue of the resolution of irreconcilable

conflicts with respect to voting is not

present with Qualified Plans.

F. No Increased Conflicts of Interests

16. Applicants assert that no

increased conflicts of interest would be

present if the Commission grants the

relief requested. Applicants further

assert that shared funding does not

present any issues that do not already

exist where a single insurance company

is licensed to do business in several

states. Applicants note that when

different Participating Insurance

Companies are domiciled in different

states, state insurance regulators in one

state could require action that is

inconsistent with the requirements of

insurance regulators in one or more

other states. That possibility, however,

is no different and no greater than that

which exists when a single insurer and

its affiliates offer their insurance

products in several states, as currently

is permitted.

17. Applicants argue that affiliations

do not reduce the potential, if any

exists, for differences in state regulatory

requirements. The conditions stated

below are adapted from the conditions

included in Rule 6e–3(T)(b)(15) and are

designed to safeguard against any

adverse effects that differences among

state regulatory requirements may

produce. If a particular state insurance

regulator’s policy conflicts with the

policies of a majority of other state

regulators, the affected insurer may be

required to withdraw its Separate

Account’s investments in the relevant

Insurance Products Fund or Master

Fund.

18. Applicants also argue that

affiliation does not eliminate the

potential, if any, for divergent

judgments as to when a Participating

Insurance Company could disregard

variable contract owner voting

instructions. Applicants assert that the

potential for disagreement is limited by

the requirement that a decision to

disregard voting instructions be

reasonable and based on specified good

faith determinations. If, however, a

Participating Insurance Company’s

decision to disregard Contract owner

voting instructions represents a

minority position, or would preclude a

majority vote approving a particular

change, Applicants represent that such

Participating Insurance Company may

be required, at the election of the

relevant Insurance Products Fund or

Master Fund, to withdraw its Separate

Account’s investment in that Fund and

no charge or penalty will be imposed as

a result of such withdrawal.

19. Applicants assert that there is no

reason why the investment policies of

an Insurance Products Fund or Master

Fund with mixed funding would or
Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices 19433

should be materially different from what

they would or should be if such

investment company or series thereof

funded only variable annuity or variable

life insurance contracts. Applicants

represent that Insurance Products Funds

or Master Funds will not be managed to

favor or disfavor any particular insurer

or type of Contract.

20. Applicants state that no one

investment strategy can be identified as

appropriate to a particular insurance

product because each pool of variable

contract owners is composed of

individuals of diverse financial status,

age, insurance and investment goals.

These diversities are of greater

significance than any differences in

insurance products. An underlying fund

supporting even one type of insurance

product must accommodate those

diverse factors.

21. Applicants note that Section

817(h) of the Code imposes certain

diversification standards on the

underlying assets of variable annuity

and variable life contracts held in the

portfolios of underlying funds. 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 share the same underlying

fund. Therefore, Applicants have

concluded that neither the Code, the

Treasury Regulations nor Revenue

Rulings thereunder recognize any

inherent conflicts of interest if Qualified

Plans and variable annuity and variable

life separate accounts all invest in the

same Underlying Fund.

22. Applicants also note that there are

differences in the manner in which

distributions are taxed for variable

annuities, variable life insurance

contracts and Qualified Plans.

Applicants assert, however, that the

differences in tax consequences do not

raise any conflicts of interest. When

distributions are to be made, and the

Separate Account or the Qualified Plan

cannot net purchase payments to make

the distributions, each will redeem

shares of the Trust (and/or any

successor entity to the Trust) at their net

asset value. The Qualified Plan will

then make distributions in accordance

with its terms and the life insurance

company will make distributions in

accordance with the terms of the

variable contract.

23. With respect to voting rights,

Applicants contend that it is possible to

provide an equitable means of giving

such voting rights to Contract owners

and to Qualified Plans. Applicants

represent that the transfer agent for the

Insurance Products Fund will inform

each Participating Insurance Company

of its Separate Accounts’ share

ownership and the trustees of each

Qualified Plan of their respective

holdings in the Fund. Each Participating

Insurance Company then will solicit

voting instructions in accordance with

Rules 6e–2 and 6e–3(T). The transfer

agent for the Master Funds will inform

each Insurance Products Fund and each

Participating Insurance Company with a

Managed-Separate Account invested in

a Master Fund, as well as the trustees of

any Qualified Plan so invested, of its

beneficial interest.

24. As with the Insurance Products

Funds, there will be certain issues on

which a shareholder vote is required

that relate solely to the operations of the

Managed-Separate Accounts for which

such Separate Account will solicit votes

of its contract owners. As to those issues

on which a vote is required that relates

to the operations of the Master Funds,

Applicants state that the Master Funds

will solicit votes of their interest

holders, which would include both the

Insurance Products Funds, the

Managed-Separate Accounts of

Participating Insurance Companies and

the trustees of any Qualified Plan.

Insurance Products Funds, in turn, will

solicit their shareholders, the UITSeparate Accounts of Participating

Insurance Companies, which will solicit

voting instructions from their contract

owners, as noted above. The ManagedSeparate Accounts will solicit proxies

from their Contract owners.

25. Applicants assert that the ability

of Insurance Products Funds or Master

Funds to sell their respective shares or

beneficial interests directly to Qualified

Plans does not create a ‘‘senior

security,’’ as defined under Section

18(g) of the 1940 Act, with respect to

any contract owner as compared to a

participant under a Qualified Plan.

Regardless of the rights and benefits of

participants under Qualified Plans, or

contract owners under variable

contracts, Qualified Plans and Separate

Accounts have rights only with respect

to their respective Insurance Products

Fund shares, which they can redeem

only at net asset value. No shareholder

of any of the Insurance Products Funds,

and no interest holder of any Master

Fund, has any preference over any other

shareholder or interest holder with

respect to distribution of assets or

payment of dividends.

26. Applicants further assert that

there are no conflicts between the

Contract owners and Qualified Plan

participants with respect to state

insurance commissioners’ veto powers

over the Insurance Products Funds’ or

Master Funds’ investment objectives.

The basic premise of shareholder voting

is that not all shareholders may agree

that there are any inherent conflicts of

interest between shareholders. The state

insurance commissioners have been

given veto power in recognition of the

fact that insurance companies cannot

redeem their Separate Accounts out of

one underlying fund and invest in

another fund but must undertake timeconsuming, complex transactions to

accomplish such redemptions and

transfers. Trustees of Qualified Plans

can redeem their shares in an Insurance

Products Fund, or beneficial interests in

a Master Fund, and reinvest in another

fund quickly and implement their

decisions without the same regulatory

impediments or, as is the case with most

Qualified Plans, even hold cash pending

reinvestment. Applicants assert that,

based on the foregoing, even if there

should arise issues where the interests

of contract owners and the interests of

Qualified Plans conflict, these issues

can be almost immediately resolved

because trustees of Qualified Plans can,

on their own, redeem the shares out of

the Insurance Products Funds or the

beneficial interests out of the Master

Fund.

27. Applicants further assert that the

potential for conflict is not increased by

allowing Managed-Separate Accounts to

invest directly in the Master Funds at

the same time as UIT-Separate Accounts

are invested in the Insurance Products

Funds. Because both types of Separate

Accounts are subject to the same state

insurance regulatory authority and the

same concerns with respect to funding

their contracts, one type of separate

account investing directly and the other

investing indirectly in the same

portfolio of securities does not increase

the potential for conflict with respect to

state insurance regulation and divergent

judgments as to when a Participating

Insurance Company can disregard

variable contract voting instructions.

The potential for conflict also is not

increased by the possible investment in

the Master Funds by Qualified Plans. As

noted above, in the event of a conflict,

Trustees of Qualified Plans can, on their

own, redeem their beneficial interests

out of the Master Funds.

G. General Grounds for Relief

28. Applicants assert that various

factors have kept certain insurance

companies from offering variable

annuity and variable life insurance

contracts. According to Applicants,

these factors include: the costs of

organizing and operating a funding

medium; a lack of expertise with respect

to investment management, principally

with respect to stock and money market
19434 Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices

7Actual expenses under the Distribution Plan for

the Trust Portfolio for the year ended December 31,

1994, ranged from 0.01% to 0.07% of average daily

net assets per Trust Portfolio.

investments; and the lack of public

name recognition as investment experts.

Applicants argue that use of Insurance

Products Funds and Master Funds as

common investment media for variable

contracts would ease those concerns.

Participating Insurance Companies

would benefit from the investment

advisory and administrative expertise of

the Investment Adviser and also from

the cost efficiencies and investment

flexibility afforded by a larger pool of

funds. Applicants state that making

Insurance Products Funds and Master

Funds available for mixed and shared

funding will encourage more insurance

companies to offer variable contracts,

such as the Contracts, which may then

increase competition with respect to

both the design and pricing of variable

insurance contracts. Applicants submit

that this can be expected to result in

greater product variation and lower

charges. Thus, Applicants argue that

Contract owners would benefit because

mixed and shared funding will

eliminate a significant portion of the

costs of establishing and administering

separate funds and that these savings

may be passed on to customers.

29. Moreover, Applicants assert that

the sale of Insurance Products Funds’

shares to Qualified Plans should

increase the amount of assets available

for investment by such Funds. This, in

turn, should promote economies of

scale, permit increased safety through

greater diversification, and make the

addition of new Series to Insurance

Products Funds more feasible.

30. Applicants state that they are not

aware of any facts or circumstances

which would prevent the extension of

the requested relief to master-feeder

arrangements that include the class of

Managed-Separate Accounts investing

directly in the Master Funds.

31. Applicants also state that they are

not aware of any rationale for excluding

Participating Insurance Companies from

the exemptive relief requested because

Insurance Products Funds also may sell

their respective shares, and Master

Funds may sell their beneficial shares,

to Qualified Plans. Applicants submit

that the relief provided under paragraph

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

not relate to Qualified Plans or to a

registered investment company’s ability

to sell its shares to such Plans.

Applicants state that they request

exemptive relief because the Separate

Accounts investing in Insurance

Products Funds are themselves

investment companies seeking relief

under Rules 6e–2 and 6e–3(T), and

Applicants do not wish to be denied

such relief if Insurance Products Funds

sell shares, or Master Funds sell

beneficial interests, to Qualified Plans.

32. Applicants assert that, for the

reasons stated below, 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.

33. Applicants represent that, under

the Trust’s current structure, each Trust

Portfolio pays a fee to the Investment

Adviser for both investment advisory

and administrative services. Under the

master-feeder fund structure, the

Investment Adviser would be paid an

administration fee by each Successor

Portfolio and a management fee by each

Series (with the exception of the

International Portfolio and the

corresponding International Series

which have not commenced investment

operations, have different advisory

arrangements, and have a different fee

structure). The combined management

and administration fees paid under the

master-feeder fund structure would be

higher than the current investment

advisory fee by 0.15% of average daily

net assets annually paid by the Trust.

Applicants represent that the Trust’s

Board of Trustees, after review of the

fees, expenses and profitability of the

Adviser, determined to approve the

increase in fees and concluded that

higher management and administration

fees were justified, even absent the

conversion to the master-feeder fund

structure. At the Special Meeting of

shareholders of the Trust, shareholders

approved the fee increase as part of their

approval of the conversion of the Trust

to the master-feeder fund structure.

Under the new master-feeder fund

structure, all of the Series would have

management fees that decline with

increasing assets. At present, only three

Trust Portfolios have such fee

structures. Applicants assert that the

introduction of such ‘‘breakpoints’’ for

all Series could ultimately benefit

shareholders by reducing the rate of

management fees over time as assets

grow.

34. Applicants further assert that

upon conversion to the master-feeder

fund structure, the Trust’s Distribution

Plan, adopted pursuant to Rule 12b–1

under the 1940 Act, will be eliminated.

The Distribution Plan currently permits

each Trust Portfolio to pay up to 0.25%

of its average daily net assets for certain

items relating to the sale of each Trust

Portfolio’s share.7 Applicants maintain

that the termination of the current

Distribution Plan and the adoption of a

new non-fee Distribution Plan,

approved by the shareholders of the

Trust at the Special Meeting, will

eliminate any separate payment for

distribution expenses.

Applicants’ Conditions

The Applicants have consented to the

following conditions:

1. A majority of the Trustees or Board

of Directors (each a ‘‘Board’’ and

collectively, ‘‘Boards’’) of each

Insurance Products Funds and Master

Fund will consist of persons who are

not ‘‘interested persons’’ thereof, as

defined by Section 2(a)(19) of the 1940

Act and Rules thereunder and as

modified by any applicable orders of the

Commission, except that, if this

condition is not met by reason of death,

disqualification, or bona fide resignation

of any trustee or director, then the

operation of this condition shall be

suspended: (a) for a period of 45 days,

if the vacancy or vacancies may be filled

by the Board; (b) for a period of 60 days,

if a vote of shareholders is required to

fill the vacancy or vacancies; or (c) for

such longer period as the Commission

may prescribe by order upon

application.

2. The Boards will monitor their

respective Insurance Products Funds

and Master Funds for the existence of

any material irreconcilable conflict

between the interests of the Contract

owners of all Separate Accounts

investing in the Insurance Products

Funds and Master Funds. A material

irreconcilable conflict may arise for a

variety of reasons, including: (a) State

insurance regulatory authority action;

(b) a change in applicable federal or

state insurance, tax, or securities laws or

regulations, or a public ruling, private

letter ruling, or any similar action by

insurance, tax, or securities regulatory

authorities; (c) an administrative or

judicial decision in any relevant

proceeding; (d) the manner in which the

investments of the Insurance Products

Funds and Master Funds are being

managed; (e) a difference in voting

instructions given by variable annuity

and variable life insurance Contract

owners or by Contract owners of

different Participating Insurance

Companies; or (f) a decision by a

Participating Insurance Company to

disregard voting instructions of contract

owners.

3. Participating Insurance Companies,

Investment Adviser (or any other

investment advisor of the Insurance

Products Funds and/or Master Funds),

and any Qualified Plan that executes a

fund participation agreement upon
Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices 19435

becoming an owner of 10% or more of

the assets of an Insurance Products

Fund or Master Funds (collectively,

‘‘Participants’’) will report any potential

or existing conflicts to the Boards.

Participants will be responsible for

assisting the appropriate Board in

carrying out its responsibilities under

these conditions by providing the Board

with all information reasonably

necessary for it to consider any issues

raised. This responsibility includes, but

is not limited to, an obligation by each

Participant to inform the Board

whenever variable contract owner

voting instructions are disregarded. The

responsibility to report such

information and conflicts and to assist

the Board will be a contractual

obligation of all Participants investing

in Insurance Products Funds and Master

Funds under their agreements governing

participation in such Funds, and such

agreements shall provide that these

responsibilities will be carried out with

a view only to the interests of the

Contract owners.

4. If a majority of the Board of an

Insurance Products Fund or Master

Fund, or majority of its disinterested

trustees or directors, determine that a

material irreconcilable conflict exists,

the relevant Participant, at its expense

and to the extent reasonably practicable

(as determined by a majority of

disinterested trustees or directors), will

take any steps necessary to remedy or

eliminate the irreconcilable material

conflict, including: (a) Withdrawing the

assets allocable to some or all of the

Separate Accounts from an Insurance

Products Fund or Master Fund or any

Series thereof and reinvesting those

assets in a different investment medium,

which may include another series of an

Insurance Products Fund or Master

Fund, or another Insurance Products

Fund or Master Fund, or 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 annuity Contract

owners of one or more Participants) that

votes in favor of such segregation, or

offering to the affected variable Contract

owners the option of making such a

change; and (b) establishing a new

registered management investment

company or managed separate account.

If a material irreconcilable conflict

arises because of a Participant’s decision

to disregard Contract owner voting

instructions, and that decision

represents a minority position or would

preclude a majority vote, the Participant

may be required, at the election of the

relevant Insurance Products Fund or

Master 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.

The responsibility to take remedial

action in the event of a Board

determination of an irreconcilable

material conflict and to bear the cost of

such remedial action shall be a

contractual obligation of all Participants

under their agreements governing their

participation in the Insurance Products

Funds and Master Funds. The

responsibility to take such remedial

action shall be carried out with a view

only to the interests of the Contract

owners.

For the 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 irreconcilable

material conflict, but in no event will

the relevant Insurance Products Fund or

Master Fund or the Investment Adviser

(or any other investment adviser of the

Insurance Products Funds and/or

Master Funds) be required to establish

a new funding medium for any variable

contract. Further, no Participant shall be

required by this condition (4) to

establish a new funding medium for any

variable contract if any offer to do so has

been declined by a vote of a majority of

Contract owners materially affected by

the irreconcilable material conflict.

5. Any Board’s determination of the

existence of an irreconcilable material

conflict and its implications shall be

made known promptly and in writing to

all Participants.

6. Participants will provide passthrough voting privileges to all Contract

owners so long as the Commission

continues to interpret the 1940 Act as

requiring pass-through voting privileges

for variable Contract owners. This

condition will apply to UIT-Separate

Accounts investing in Insurance

Products Funds and to ManagedSeparate Accounts investing in Master

Funds to the extent a vote is required

with respect to matters relating to the

Master Funds. Accordingly, the

Participants, where applicable, will vote

shares of an Insurance Products Fund or

Master Fund held in their separate

accounts in a manner consistent with

voting instructions timely received from

variable contract owners. Participants

will be responsible for assuring that

each of their Separate Accounts that

participates in the Insurance Products

Funds and Master Funds calculates

voting privileges in a manner consistent

with other Participants. The obligation

to calculate voting privileges in a

manner consistent with all other

Separate Accounts investing in the

Insurance Products Fund and Master

Fund will be a contractual obligation of

all Participants under the agreements

governing participation in the Insurance

Products Funds or Master Fund. Each

Participant will vote shares for which it

has not received timely voting

instructions, as well as shares it owns,

in the same proportion as it votes those

shares for which it has received voting

instructions.

7. All reports received by the Board of

potential or existing conflicts, 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 appropriate Board or

other appropriate records, such minutes

or other records shall be made available

to the Commission, upon request.

8. Each Insurance Products Fund and

Master Fund will notify all Participants

that Separate Accounts prospectus

disclosure (contained in Form N–4 with

respect to UIT-Separate Accounts

investing in Insurance Products Funds,

and in Form N–3 with respect to

Managed-Separate Accounts investing

in Master Funds) regarding potential

risks of mixed and shared funding may

be appropriate. Each Insurance Products

Fund shall disclose in its prospectus

that: (a) shares of the Fund may be

offered to insurance company separate

accounts of both annuity and life

insurance variable contracts, and to

qualified plans; (b) due to differences of

tax treatment and other considerations,

the interests of various contract owners

participating in the Funds and the

interests of Qualified Plans investing in

the Funds may conflict; and (c) the

Board will monitor the Funds for any

material conflicts and determine what

action, if any, should be taken.

9. Each Insurance Products Fund and

Master Fund will comply with all

provisions of the 1940 Act requiring

voting by shareholders (which, for these

purposes, shall be the persons having a

voting interest in the shares of the

Insurance Products Fund or Master

Fund), and in particular each such fund

either will either provide for annual

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)

(although the funds are not one of the

trusts described in this section), as well

as with Section 16(a) and, if applicable,

Section 16(b). Further, each Insurance

Products Fund and Master Fund will act

in accordance with the Commission’s

interpretation of the requirements of
19436 Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices

1Applicant’s board of directors determined that

the Plan was in the best interests of applicant and

that the interests of applicant’s existing

shareholders would not be diluted as a result of

effecting the transaction.

Section 16(a) with respect to periodic

elections of directors (or trustees) and

with whatever rules the Commission

may adopt with respect thereto.

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

Rule 6e–3(T) are amended, or Rule 6e–

3 is adopted, to provide exemptive relief

from any provision of the 1940 Act or

the rules thereunder with respect to

mixed and shared funding on terms and

conditions materially different from any

exemptions granted in the order

requested, then the Insurance Products

Fund, Master Funds and/or the

Participants, as appropriate, shall take

such steps as may be necessary to

comply with Rule 6e–2 and Rule 6e–

3(T), as amended, and Rule 6e–3, as

adopted, to the extent such Rules are

applicable.

11. No less than annually, the

Participants shall submit to the Boards

such reports, materials or data as such

Boards may reasonably request so that

the Boards may fully carry out the

obligations imposed upon them by these

conditions. Such reports, materials, and

data shall be submitted more frequently

if deemed appropriate by the applicable

Boards. The obligations of the

Participants to provide these reports,

materials, and data to the Boards, when

the appropriate Board so reasonably

requests, shall be a contractual

obligation of all Participants under the

agreements governing their participation

in the Insurance Products Funds and

Master Funds.

12. If a Qualified Plan becomes an

owner of 10% or more of the assets of

an Insurance Products Fund (or Master

Fund), such Qualified Plan shareholder

will execute a participation agreement

with the applicable Fund. A Qualified

Plan shareholder will execute an

application containing an

acknowledgment of this condition upon

such Qualified Plan’s initial purchase of

shares of the Insurance Products Fund,

or beneficial interests of a Master Fund.

Conclusion

For the reasons stated above,

Applicants assert that the requested

exemptions pursuant to Section 6(c) and

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, 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. 95–9517 Filed 4–17–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–20997; 811–3791]

SAFECO California Tax-Free Income

Fund, Inc.; Notice of Application

April 12, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Deregistration under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: SAFECO California Tax-Free

Income Fund, Inc.

RELEVENT ACT SECTION: Section 8(f).

SUMMARY OF APPLICATION: Applicant

requests an order declaring that it has

ceased to be an investment company

under the Act.

FILING DATE: The application was filed

on March 31, 1995.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

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

May 8, 1995, and should be

accompanied by proof of service on

applicant, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons may request notification of a

hearing by writing to the SEC‘s

Secretary.

ADDRESSES: Secretary, SEC, 450 5th

Street NW., Washington, DC 20549.

Applicant, SAFECO Plaza, Seattle, WA

98185.

FOR FURTHER INFORMATION CONTACT:

Felice R. Foundos, Staff Attorney, (202)

942–0571, or Robert A. Robertson,

Branch Chief, (202) 942–0564 (Division

of Investment Management, Office of

Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch.

Applicant’s Representations

1. Applicant is an open-end

management investment company

organized as a corporation under the

laws of the State of Washington. On July

1, 1983, applicant registered under the

Act as an investment company and filed

a registration statement under the

Securities Act of 1933 to register its

shares. The registration statement was

declared effective on October 20, 1983

and applicant’s initial public offering

commenced on that same date.

2. On May 6, 1993, applicant’s board

of directors approved a plan of

reorganization (the ‘‘Plan’’) between

applicant and SAFECO Tax-Exempt

Bond Trust (the ‘‘Trust’’) on behalf of its

series SAFECO California Tax-Free

Income Fund (the ‘‘Acquiring Fund’’).1

The Trust is an investment company

organized under the laws of Delaware.

3. By moving its assets from a

Washington corporation to a Delaware

trust, applicant expects its shareholders

to benefit from the adoption of new

methods of operations and employment

of new technologies that are expected to

reduce costs. For example, Washington

corporations are required to hold annual

meetings, whereas a series of the Trust

has no such requirement. Further,

Delaware trusts generally have greater

flexibility than Washington corporations

to respond to future contingencies,

allowing such trusts to operate under

the most advanced and cost efficient

form of organization. For example,

Delaware law authorizes electronic or

telephonic communications between a

Delaware trust and its shareholders. In

addition, as one of the several series of

the Trust, applicant’s shareholders

should enjoy certain expense savings

through economies of scale that would

not be available to a stand-alone entity.

4. On May 7, 1993, applicant filed

proxy materials with the SEC relating to

the proposed reorganization and

afterwards distributed such proxy

materials to its shareholders.

Applicant’s shareholders approved the

reorganization at a meeting held on

August 5, 1993.

5. Pursuant to the Plan, applicant

transferred all of its assets and liabilities

to the Acquiring Fund on September 30,

1993, in exchange for shares of the

Acquiring Fund. The exchange was

based on the relative net asset value of

applicant and the Acquiring Fund.

Immediately thereafter, applicant

distributed pro rata to its shareholders

the Acquiring Fund shares it received in

the reorganization. No brokerage

commissions were incurred in this

reorganization.