Document ID: SEC-2014-1747-0001
Agency: sec
Document Type: Notice
Title: Applications: SunAmerica Series Trust, et al.
Posted Date: 2014-10-17T04:00Z

[Federal Register Volume 79, Number 201 (Friday, October 17, 2014)]
[Notices]
[Pages 62473-62480]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-24684]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31281; File No. 812-14226]

SunAmerica Series Trust, et al.; Notice of Application

October 10, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application pursuant to Section 6(c) of the 
Investment Company Act of 1940, as amended (the ``1940 Act'' or 
``Act''), seeking 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.

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    Applicants: SunAmerica Series Trust, Seasons Series Trust, Anchor 
Series Trust, VALIC Company I, and VALIC Company II (each referred to 
herein as a ``Trust,'' and collectively as the ``Trusts''), SunAmerica 
Asset Management LLC (formerly, SunAmerica Asset Management Corp. 
(``SAAMCo''), and The Variable Annuity Life Insurance Company 
(``VALIC'') (together with SAAMCo and the Trusts, the ``Applicants'').
    Summary of Application: Applicants request an order granting 
exemptions from Sections 9(a), 13(a), 15(a), and 15(b) of the Act and 
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, in cases where a life 
insurance company separate account supporting variable life insurance 
contracts (``VLI Account'') holds shares of an existing portfolio of a 
Trust (an ``Existing Fund'') or a ``Future Fund,'' \1\ as defined below 
(any Existing Fund or Future Fund is referred to herein as a ``Fund'', 
and collectively as the ``Funds''), and one or more of the following 
other types of investors also hold shares of the Funds: (1) any life 
insurance company separate account supporting variable annuity 
contracts,

[[Page 62474]]

whether or not registered as an investment company with the Commission 
(a ``VA Account''), (2) any VLI Account, whether or not registered as 
an investment company with the Commission, (3) the investment adviser 
or any subadviser to a Fund or affiliated persons of the investment 
adviser or subadviser (representing seed money investments in the Fund) 
(``Advisers''), (4) any general account of an insurance company 
depositor of VA Accounts and/or VLI Accounts (representing seed money 
investments in the Fund) (``General Account''); and/or (5) any 
qualified group pension or group retirement plan administered by a 
trustee outside the separate account context (a ``Plan'' or ``Qualified 
Plan'').
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    \1\ As used herein, a ``Future Fund'' is any investment company 
(or investment portfolio or series thereof), other than an Existing 
Fund, designed to be sold to VA Accounts and/or VLI Accounts and to 
which the Applicants or their affiliates may in the future serve as 
investment advisers, investment subadvisers, investment managers, 
administrators, principal underwriters, or sponsors.

DATES: Filing Date: The application was filed on October 25, 2013, and 
amended and restated on January 30, 2014, and September 4, 2014.
    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 Secretary of 
the Commission 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 November 4, 2014, 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 may request notification of a hearing by 
writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-1090. Applicants, AIG Life and Retirement c/o 
Mark Matthes, Associate General Counsel, 2919 Allen Parkway, 4th Floor, 
Houston, TX 77019.

FOR FURTHER INFORMATION CONTACT: Sonny Oh, Senior Counsel, or Joyce M. 
Pickholz, Branch Chief, Disclosure Review Office (Insured Investments), 
Division of Investment Management at (202) 551-6795.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or for an 
applicant using the Company name box, at http://www.sec.gov/search.htm, 
or by calling (202) 551-8090.

Applicants' Representations

    1. SunAmerica Series Trust was formed as a Massachusetts business 
trust on September 11, 1992, and is registered under the Act as an 
open-end management investment company (Reg. File No. 811-07238). The 
Trust is a series investment company as defined by Rule 18f-2 under the 
Act and is currently comprised of forty (40) Funds. The Trust issues a 
separate series of shares of beneficial interest for each of its Funds 
and has filed a registration statement under the Securities Act of 
1933, as amended (the ``1933 Act'') on Form N-1A (Reg. File No. 33-
52742) to register such shares. The Trust may establish additional 
Funds in the future and additional classes of shares for such Funds. 
Shares of the Funds of the SunAmerica Series Trust are not and will not 
be offered to the general public.
    2. Seasons Series Trust was formed as a Massachusetts business 
trust on October 10, 1995, and is registered under the Act as an open-
end management investment company (Reg. File No. 811-07725). The Trust 
is a series investment company as defined by Rule 18f-2 under the Act 
and is currently comprised of twenty-one (21) Funds. The Trust issues a 
separate series of shares of beneficial interest for each of its Funds 
and has filed a registration statement under the 1933 Act on Form N-1A 
(Reg. File No. 333-08653) to register such shares. The Trust may 
establish additional Funds in the future and additional classes of 
shares for such Funds. Shares of the Funds of the Seasons Series Trust 
are not and will not be offered to the general public.
    3. Anchor Series Trust was formed as a Massachusetts business trust 
on August 26, 1983, and is registered under the Act as an open-end 
management investment company (Reg. File No. 811-03836). The Trust is a 
series investment company as defined by Rule 18f-2 under the Act and is 
currently comprised of eight (8) Funds. The Trust issues a separate 
series of shares of beneficial interest for each of its Funds and has 
filed a registration statement under the 1933 Act on Form N-1A (Reg. 
File No. 2-86188) to register such shares. The Trust may establish 
additional Funds in the future and additional classes of shares for 
such Funds. Shares of the Funds of the Anchor Series Trust are not and 
will not be offered to the general public.
    4. VALIC Company I (``VC I'') was formed as a Maryland corporation 
on December 7, 1984 and is registered under the Act as an open-end 
management investment company (Reg. File No. 811-03738). VC I is a 
series investment company as defined by Rule 18f-2 under the Act and is 
currently comprised of thirty-four (34) separate Funds. VC I issues a 
separate series of shares for each of its Funds and has filed a 
registration statement under the 1933 Act on Form N-1A (Reg. File No. 
2-83631) to register such shares. VC I may establish additional Funds 
in the future and additional classes of shares for such Funds. Shares 
of the Funds of VC I are not and will not be offered to the general 
public.
    5. VALIC Company II (``VC II'') was organized as a Delaware 
statutory trust on May 6, 1998, and is registered under the Act as an 
open-end management investment company (Reg. File No. 811-08789). VC II 
is a series investment company as defined by Rule 18f-2 under the Act 
and is currently comprised of fifteen (15) separate Funds. VC II issues 
a separate series of shares of beneficial interest for each of its 
Funds and has filed a registration statement under the 1933 Act on Form 
N-1A (Reg. File No. 333-53589) to register such shares. VC II may 
establish additional Funds in the future and additional classes of 
shares for such Funds. Shares of the Funds of VC II are not and will 
not be offered to the general public.
    6. SAAMCo serves as the investment adviser and manager for all the 
Funds of the SunAmerica Series Trust, Seasons Series Trust, and Anchor 
Series Trust and serves as the subadviser to certain Funds of VC I and 
VC II. SAAMCo is an indirectly and wholly owned subsidiary of American 
International Group, Inc. (``AIG'').
    7. VALIC serves as the investment adviser to VC I and VC II and is 
a stock life insurance company originally organized as The Variable 
Annuity Life Insurance Company of America, located in Washington, DC 
and re-organized under the laws of the state of Texas on August 20, 
1968. VALIC is an indirectly and wholly owned subsidiary of AIG and is 
registered as an investment adviser under the Advisers Act.
    8. The Funds propose to offer their shares to VLI Accounts and VA 
Accounts of various life insurance companies (each a ``Participating 
Insurance Company,'' and collectively, the ``Participating Insurance 
Companies'') to serve as an investment medium to support variable life 
insurance contracts (``VLI Contracts'') and variable annuity contracts 
(``VA Contracts'') (together, ``Variable Contracts'') issued through 
such VLI and VA Accounts. Each VLI Account and VA Account is or will be 
established as a segregated asset account by a Participating Insurance 
Company pursuant to the insurance law of the insurance company's state 
of domicile. As such, the assets of each will be the property of the 
Participating Insurance

[[Page 62475]]

Company, and that portion of the assets of such a VLI or VA Account 
equal to the reserves and other contract liabilities with respect to 
the VLI or VA Account will not be chargeable with liabilities arising 
out of any other business that the insurance company may conduct. The 
income, gains and losses, realized or unrealized, from such a VLI or VA 
Account's assets will be credited to or charged against the VLI or VA 
Account without regard to other income, gains or losses of the 
Participating Insurance Company. If a VLI Account or VA Account is 
registered as an investment company, it will be a ``separate account'' 
as defined by Rule 0-1(e) (or any successor rule) under the Act and 
will be registered as a unit investment trust. For purposes of the Act, 
the Participating Insurance Company that establishes such a registered 
VLI Account or VA Account is the depositor and sponsor of the VLI or VA 
Account as those terms have been interpreted by the Commission with 
respect to variable life insurance and variable annuity separate 
accounts.
    9. The Participating Insurance Companies are currently American 
General Life, The United States Life Insurance Company in the City of 
New York (``USLIC''), and VALIC. Each Participating Insurance Company 
is an indirect subsidiary of AIG. Various other life insurance 
companies that are not affiliated persons of American General Life, 
USLIC, and VALIC may be, or in the future become, Participating 
Insurance Companies. At the current time, the following VLI Accounts 
and VA Accounts of American General Life, USLIC, and VALIC invest in 
one or more of the Trusts: American General Life: Separate Account 8, 
Separate Account 101, Separate Account 102, Separate Account A, 
Separate Account D, Separate Account II, Separate Account IV, Separate 
Account VA-2, Separate Account VL-R, Separate Account VL-U LIS, 
Separate Account VUL, and A.G. Separate Account A; USLIC: Separate 
Account USL VA-R, Separate Account USL VL-R and Separate Account USL B; 
and VALIC: Separate Account A.
    10. Each Fund will sell its shares to VLI Accounts and VA Accounts 
only if each Participating Insurance Company sponsoring such a VLI 
Account or VA Account enters into a participation agreement with the 
Fund. The participation agreements define or will define the 
relationship between each Fund and each Participating Insurance Company 
and memorialize or will memorialize, among other matters, the fact 
that, except where the agreement specifically provides otherwise, the 
Participating Insurance Company will remain responsible for 
establishing and maintaining any VLI Account or VA Account covered by 
the agreement and for complying with all applicable requirements of 
state and federal law pertaining to such VLI and VA Accounts and to the 
sale and distribution of Variable Contracts issued through such VLI and 
VA Accounts. The role of each Fund under this arrangement, with regard 
to the federal securities laws, will consist of offering and selling 
shares of the Fund to the VLI Accounts and VA Accounts and fulfilling 
any conditions that the Commission may impose in granting the requested 
order.
    11. The use of a common management investment company (or 
investment portfolio thereof) as an investment medium for both VLI 
Accounts and VA Accounts of the same Participating Insurance Company, 
or of two or more insurance companies that are affiliated persons of 
each other, is referred to herein as ``mixed funding.'' The use of a 
common management investment company (or investment portfolio thereof) 
as an investment medium for VLI Accounts and/or VA Accounts of two or 
more Participating Insurance Companies that are not affiliated persons 
of each other, is referred to herein as ``shared funding.''
    12. Applicants propose that each Fund offer and sell its shares 
directly to Plans and assert that Federal tax law permits investment 
companies such as the Funds to increase their net assets by selling 
shares to Plans.
    13. Plans may invest in shares of an investment company as the sole 
investment under the Plan, or as one of several investments. Plan 
participants may or may not be given an investment choice depending on 
the terms of the Plan itself. The trustees or other fiduciaries of a 
Plan may vote investment company shares held by the Plan in their own 
discretion or, if the applicable Plan so provides, vote such shares in 
accordance with instructions from participants in such Plan. Applicants 
have no control over whether trustees or other fiduciaries of Plans, 
rather than participants in the Plans, have the right to vote under any 
particular Plan. Each Plan must be administered in accordance with the 
terms of the Plan and as determined by its trustee or trustees.
    14. Applicants propose that any Fund may also sell shares to its 
Adviser. The Treasury Regulations permit such sales as long as the 
return on shares held by an Adviser is computed in the same manner as 
shares held by VLI Accounts and VA Accounts, the Adviser does not 
intend to sell the shares to the public, and sales to the Adviser are 
only made in connection with the creation or management of the Fund for 
the purpose of providing seed money for the Fund.
    15. Applicants propose that any Fund may also sell shares to a 
General Account of a Participating Insurance Company. The Treasury 
Regulations permit such sales as long as the return on shares held by a 
General Account is computed in the same manner as for shares held by 
VLI Accounts and VA Accounts and the Participating Insurance Company 
does not intend to sell the shares to the public.
    16. The use of a common management investment company (or 
investment portfolio thereof) as an investment medium for VLI Accounts, 
VA Accounts, Plans, Advisers, and General Accounts is referred to 
herein as ``extended mixed funding.''

Applicants' Legal Analysis

    1. Section 9(a)(3) of the Act makes it unlawful for any company to 
serve as an investment adviser or principal underwriter of any 
investment company, including a unit investment trust, if an affiliated 
person of that company is subject to disqualification enumerated in 
Section 9(a)(1) or (2) of the Act. Sections 13(a), 15(a), and 15(b) of 
the Act have been deemed by the Commission to require ``pass-through'' 
voting with respect to an underlying investment company's shares.
    2. Rules 6e-2(b)(15) and 6e-3(T)(b)(15) under the Act provide 
partial exemptions from Sections 9(a), 13(a), 15(a), and 15(b) of the 
Act to VLI Accounts supporting certain VLI Contracts and to their life 
insurance company depositors under limited circumstances, as described 
in the application. Therefore, VLI Accounts, their depositors and their 
principal underwriters may not rely on the exemptions provided by Rules 
6e-2(b)(15) and 6e-3(T)(b)(15) if shares of the Fund are held by a VLI 
Account through which flexible premium VLI Contracts are issued, a VLI 
Account of an unaffiliated Participating Insurance Company, a General 
Account of a Participating Insurance Company, an Adviser, any VA 
Account, or a Plan. Accordingly, Applicants request an order of the 
Commission granting exemptions from Sections 9(a), 13(a), 15(a), and 
15(b) of the Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, 
to the extent necessary to permit a scheduled premium VLI Account to 
hold shares of Funds when one or more of the following types of 
investors also hold shares of the Funds: (1) VA Accounts and VLI 
Accounts

[[Page 62476]]

(supporting scheduled premium or flexible premium VLI Contracts) of 
affiliated and unaffiliated Participating Insurance Companies, (2) 
General Accounts, (3) Advisers, or (4) Plans.
    3. Applicants maintain that there is no public policy reason why 
VLI Accounts and their Participating Insurance Company depositors (or 
principal underwriters) should not be able to rely on the exemptions 
provided by Rules 6e-2(b)(15) and 6e-3(T)(b)(15) just because shares of 
Funds held by the VLI Accounts are also held by VA Accounts, other VLI 
Accounts, an Adviser, a General Account, or a Qualified Plan. Rather, 
Applicants assert that the proposed sale of Fund shares to Qualified 
Plans, Advisers, and General Accounts may allow for the development of 
larger pools of assets, resulting in the potential for greater 
investment and diversification opportunities and for decreased expenses 
at higher asset levels resulting in greater cost efficiencies. 
Similarly, Applicants believe that the proposed sale of Fund shares to 
Advisers and General Accounts of Participating Insurance Companies for 
seed money may result in the creation of more Funds as investment 
options for certain VA Contracts and VLI Contracts than would otherwise 
be the case.
    4. For the reasons explained below, Applicants have concluded that 
investments by Qualified Plans, Advisers, and General Accounts in the 
Funds should not increase the risk of material irreconcilable conflicts 
between owners of VLI Contracts and other types of investors or between 
owners of VLI Contracts issued by unaffiliated Participating Insurance 
Companies.
    5. Consistent with the Commission's authority under Section 6(c) of 
the 1940 Act to grant exemptive orders to a class or classes of persons 
and transactions, Applicants request exemptions for a class consisting 
of Participating Insurance Companies and their VA and VLI Accounts 
investing in the Funds, as well as their principal underwriters.
    6. Section 6(c) of the 1940 Act provides, in part, that the 
Commission, by order upon application, may conditionally or 
unconditionally exempt any person, security or transaction, or any 
class or classes of persons, securities or transactions, from any 
provision or provisions of the Act, or any rule or regulation 
thereunder, if and to the extent that such exemption is necessary or 
appropriate in the public interest and consistent with the protection 
of investors and the purposes fairly intended by the policy and 
provisions of the Act. The Applicants submit that the exemptions 
requested are appropriate in the public interest and consistent with 
the protection of investors and the purposes fairly intended by the 
policy and provisions of the Act. Accordingly, the Applicants hereby 
request that the Commission issue an order under Section 6(c) of the 
1940 Act for the exemptions requested herein.
    7. Section 9(a)(3) of the 1940 Act provides, among other things, 
that it is unlawful for any company to serve 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 
enumerated in Sections 9(a)(1) or (2). Rules 6e-2(b)(15)(i) and (ii) 
and Rules 6e-3(T)(b)(15)(i) and (ii) under the Act provide exemptions 
from Section 9(a) under certain circumstances, subject to the 
limitations discussed above on mixed funding, extended mixed funding, 
and shared funding. These exemptions limit the application of the 
eligibility restrictions to affiliated individuals or companies that 
directly participate in management or administration of the underlying 
investment company.
    8. Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) under the 1940 
Act provide exemptions from pass-through voting requirements with 
respect to several significant matters, assuming the limitations on 
mixed funding, extended mixed funding, and shared funding are observed. 
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 variable 
life insurance contract owners with respect to the investments of an 
underlying investment company, or any contract between such an 
investment company and its investment adviser, when required to do so 
by an insurance regulatory authority (subject to the provisions of 
paragraphs (b)(5)(i) and (b)(7)(ii)(A) of Rules 6e-2 and 6e-3(T)).
    9. Rules 6e-2(b)(15)(iii)(B) and 6e-3(T)(b)(15)(iii)(A)(2) provide 
that an insurance company may disregard the voting instructions of 
variable life insurance contract owners if such owners initiate any 
change in an underlying investment company's investment policies, 
principal underwriter or any investment adviser (provided that 
disregarding such voting instructions is reasonable and subject to the 
other provisions of paragraphs (b)(5)(ii), (b)(7)(ii)(B) and 
(b)(7)(ii)(C) of Rules 6e-2 and 6e-3(T)).
    10. Both Rule 6e-2 and Rule 6e-3(T) generally recognize that a 
variable life insurance contract is primarily a life insurance contract 
containing many important elements unique to life insurance contracts 
and subject to extensive state insurance regulation. In adopting 
subparagraph (b)(15)(iii) of these Rules, the Commission implicitly 
recognized that state insurance regulators have authority, pursuant to 
state insurance laws or regulations, to disapprove or require changes 
in investment policies, investment advisers, or principal underwriters.
    11. Applicants represent that the sale of Fund shares to Qualified 
Plans, Advisers, and General Accounts will not have any impact on the 
exemptions requested herein regarding the disregard of pass-through 
voting rights. Shares sold to Plans will be held by such Plans. The 
exercise of voting rights by Plans, whether by trustees, participants, 
beneficiaries, or investment managers engaged by the Plans, does not 
raise the type of issues respecting disregard of voting rights that are 
raised by VLI Accounts. With respect to Plans, which are not registered 
as investment companies under the 1940 Act, there is no requirement to 
pass through voting rights to Plan participants. Indeed, to the 
contrary, applicable law expressly reserves voting rights associated 
with Plan assets to certain specified persons.
    12. Similarly, the sale of Fund shares to an Adviser and to the 
General Accounts of Participating Insurance Companies will not have any 
impact on the exemptions requested herein regarding the disregard of 
pass-through voting rights. The exercise of voting rights by Advisers 
and the General Accounts of Participating Insurance Companies does not 
raise the type of issues respecting disregard of voting rights that are 
raised by VLI Accounts. Neither Advisers nor General Accounts are 
registered as investment companies under the Act, and are not subject 
to any pass-through voting requirements.
    13. Applicants recognize that the Commission's primary concern with 
respect to mixed funding, extended mixed funding, and shared funding 
issues is the potential for irreconcilable conflicts between the 
interests of owners of variable life insurance contracts and those of 
other investors in an open end investment company serving as an 
investment vehicle for such contracts. The prohibitions on mixed and 
shared funding might reflect concern regarding possible different 
investment motivations among investors. When Rule 6e-2 was first 
adopted, variable annuity separate accounts could invest in mutual 
funds whose shares were also offered to the general public. However, 
now, under the Internal Revenue Code of 1986, as amended (the 
``Code''), any underlying

[[Page 62477]]

funds, including a Fund, that sells shares to VA Accounts or VLI 
Accounts, would, in effect, be precluded from also selling its shares 
to the public. Consequently, the Funds may not sell their shares to the 
public.
    14. Applicants assert that the rights of an insurance company or a 
state insurance regulator to disregard the voting instructions of 
owners of Variable Contracts is not inconsistent with either mixed 
funding or shared funding. Applicants argue that the National 
Association of Insurance Commissioners Variable Life Insurance Model 
Regulation (the ``NAIC Model Regulation'') suggests that it is unlikely 
that insurance regulators would find an underlying fund's investment 
policy, investment adviser or principal underwriter objectionable for 
one type of Variable Contract but not another type.
    15. Applicants assert that shared funding by unaffiliated insurers, 
in this respect, is no different than the use of the same investment 
company as the funding vehicle for affiliated insurers, which Rules 6e-
2(b)(15) and 6e-3(T)(b)(15) permit. Affiliated insurers may be 
domiciled in different states and be subject to differing state law 
requirements. Affiliation does not reduce the potential, if any exists, 
for differences in state regulatory requirements. In any event, the 
conditions set forth below are designed to safeguard against, and 
provide procedures for resolving, 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, then the affected Participating Insurance Company 
will be required to withdraw its separate account investments in the 
relevant Fund. This requirement will be provided for in the 
Participation Agreement that will be entered into by Participating 
Insurance Companies with the relevant Fund.
    16. Rules 6e-2(b)(15) and 6e-3(T)(b)(15) give Participating 
Insurance Companies the right to disregard the voting instructions of 
VLI Contract owners in certain circumstances. This right derives from 
the authority of state insurance regulators over VLI Accounts and VA 
Accounts. Under Rules 6e-2(b)(15) and 6e-3(T)(b)(15), a Participating 
Insurance Company may disregard VLI Contract owner voting instructions 
only with respect to certain specified items. Affiliation does not 
eliminate the potential, if any exists, for divergent judgments as to 
the advisability or legality of a change in investment policies, 
principal underwriter or investment adviser initiated by such Contract 
owners. The potential for disagreement is limited by the requirements 
in Rules 6e-2 and 6e-3(T) that the Participating Insurance Company's 
disregard of voting instructions be reasonable and based on specific 
good faith determinations.
    17. A particular Participating Insurance Company's disregard of 
voting instructions, nevertheless, could conflict with the voting 
instructions of a majority of VLI Contract owners. The Participating 
Insurance Company's action possibly could be different than the 
determination of all or some of the other Participating Insurance 
Companies (including affiliated insurers) that the voting instructions 
of VLI Contract owners should prevail, and either could preclude a 
majority vote approving the change or could represent a minority view. 
If the Participating Insurance Company's judgment represents a minority 
position or would preclude a majority vote, then the Participating 
Insurance Company may be required, at the relevant Fund's election, to 
withdraw its VLI Accounts' and VA Accounts' investments in the relevant 
Fund. No charge or penalty will be imposed as a result of such 
withdrawal. This requirement will be provided for in the Participation 
Agreement entered into by the Participating Insurance Companies with 
the relevant Fund.
    18. Applicants argue that there is no reason why the investment 
policies of a Fund would or should be materially different from what 
these policies would or should be if the Fund supported only VA 
Accounts or VLI Accounts supporting flexible premium or scheduled 
premium VLI Contracts. Each type of insurance contract is designed as a 
long-term investment program.
    19. Each Fund will be managed to attempt to achieve its specified 
investment objective, and not favor or disfavor any particular 
Participating Insurance Company or type of insurance contract. There is 
no reason to believe that different features of various types of 
Variable Contracts will lead to different investment policies for each 
or for different VLI Accounts and VA Accounts. The sale of Variable 
Contracts and ultimate success of all VA Accounts and VLI Accounts 
depends, at least in part, on satisfactory investment performance, 
which provides an incentive for each Participating Insurance Company to 
seek optimal investment performance.
    20. Furthermore, no single investment strategy can be identified as 
appropriate to a particular Variable Contract. Each ``pool'' of VLI 
Contract and VA Contract owners is composed of individuals of diverse 
financial status, age, insurance needs and investment goals. A Fund 
supporting even one type of Variable Contract must accommodate these 
diverse factors in order to attract and retain purchasers. Permitting 
mixed and shared funding will provide economic support for the 
continuation of the Funds. Mixed and shared funding will broaden the 
base of potential Variable Contract owner investors, which may 
facilitate the establishment of additional Funds serving diverse goals.
    21. Applicants do not believe that the sale of the shares to 
Qualified Plans, Advisers, and General Accounts will increase the 
potential for material irreconcilable conflicts of interest between or 
among different types of investors. In particular, Applicants see very 
little potential for such conflicts beyond those that would otherwise 
exist between owners of VLI Contracts and VA Contracts. Applicants 
submit that either there are no conflicts of interest or that there 
exists the ability by the affected parties to resolve such conflicts 
consistent with the best interests of VLI Contract owners, VA Contract 
owners, and Plan participants.
    22. Applicants considered whether there are any issues raised under 
the Code, Treasury Regulations, or Revenue Rulings thereunder if VA 
Accounts, VLI Accounts, Advisers, General Accounts and Qualified Plans 
all invest in the same Fund. However, the Applicants have concluded 
that neither the Code, nor the Treasury Regulations nor Revenue Rulings 
thereunder, present any inherent conflicts of interest if VA Accounts, 
VLI Accounts, Advisers, General Accounts and Qualified Plans all invest 
in the same Fund.
    23. Applicants note that, while there are differences in the manner 
in which distributions from VLI Accounts, VA Accounts, and Plans are 
taxed, these differences have no impact on the Funds. When 
distributions are to be made, and a VLI Account, VA Account, or Plan is 
unable to net purchase payments to make distributions, the VLI Account, 
VA Account, or Plan will redeem shares of the relevant Fund at its net 
asset value in conformity with Rule 22c-1 under the 1940 Act (without 
the imposition of any sales charge) to provide proceeds to meet 
distribution needs. A Participating Insurance Company will then make 
distributions in accordance with the terms of its Variable Contracts, 
and a Plan will then make distributions in accordance with the terms of 
the Plan.
    24. Applicants considered whether it is possible to provide an 
equitable

[[Page 62478]]

means of giving voting rights to all Variable Contract owners, 
Qualified Plans, Advisers and General Accounts, and determined that it 
is possible. In connection with any meeting of Fund shareholders, the 
soliciting Fund will inform each Participating Insurance Company (with 
respect to its VLI Accounts, VA Accounts and General Account), Adviser, 
and Qualified Plan of its share holdings and provide other information 
necessary for such shareholders to participate in the meeting (e.g., 
proxy materials). Each Participating Insurance Company then will 
solicit voting instructions from owners of VLI Contracts and VA 
Contracts in accordance with Rules 6e-2 or 6e-3(T), or Section 
12(d)(1)(E)(iii)(aa) of the Act, as applicable, and its Participation 
Agreement with the relevant Fund. Shares of a Fund that are held by an 
Adviser or a General Account will generally be voted in the same 
proportion as all votes cast on behalf of all Variable Contract owners 
having voting rights. However, an Adviser or General Account will vote 
its shares in such other manner as may be required by the Commission or 
its staff. Shares held by Plans will be voted in accordance with 
applicable law. The voting rights provided to Plans with respect to the 
shares would be no different from the voting rights that are provided 
to Plans with respect to shares of mutual funds sold to the general 
public. Furthermore, if a material irreconcilable conflict arises 
because of a 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 Plan may be required, 
at the election of the relevant Fund, to withdraw its investment in the 
Fund, and no charge or penalty will be imposed as a result of such 
withdrawal.
    25. Applicants do not believe that the veto power of state 
insurance commissioners over certain potential changes to Fund 
investment objectives approved by Variable Contract owners creates 
conflicts between the interests of such owners and the interests of 
Plan participants, Advisers or General Accounts. Applicants note that a 
basic premise of corporate democracy and shareholder voting is that not 
all shareholders may agree with a particular proposal. Their interests 
and opinions may differ, but this does not mean that inherent conflicts 
of interest exist between or among such shareholders or that occasional 
conflicts of interest that do occur between or among them are likely to 
be irreconcilable.
    26. Although Participating Insurance Companies may have to overcome 
regulatory impediments in redeeming shares of a Fund held by their VLI 
and VA Accounts, the Plans and the participants in participant-directed 
Plans can make decisions quickly and redeem their shares in a Fund and 
reinvest in another investment company or other funding vehicle without 
impediments, or as is the case with most Plans, hold cash pending 
suitable investment. As a result, conflicts between the interests of 
Variable Contract owners and the interests of Plans and Plan 
participants can usually be resolved quickly since the Plans can, on 
their own, redeem their Fund shares. Advisers and General Accounts can 
similarly redeem their shares of a Fund and make alternative 
investments at any time.
    27. Finally, Applicants considered whether there is a potential for 
future conflicts of interest between Participating Insurance Companies 
and Plans created by future changes in the tax laws. Applicants do not 
see any greater potential for material irreconcilable conflicts arising 
between the interests of Variable Contract owners and Plan participants 
from future changes in the federal tax laws than that which already 
exists between VLI Contract owners and VA Contract owners.
    28. Applicants recognize that the foregoing is not an all-inclusive 
list, but rather is representative of issues that they believe are 
relevant to this application. Applicants believe that the discussion 
contained herein demonstrates that the sale of Fund shares to Plans 
would not increase the risk of material irreconcilable conflicts 
between the interests of Plan participants and Variable Contract owners 
or other investors. Further, Applicants submit that the use of the 
Funds with respect to Plans is not substantially dissimilar from each 
Fund's current and anticipated use, in that Plans, like VLI Accounts 
and VA Accounts, are generally long-term investors.
    29. Applicants assert that permitting a Fund to sell its shares to 
an Adviser or to a General Account will enhance management of each Fund 
without raising significant concerns regarding material irreconcilable 
conflicts among different types of investors.
    30. Various factors have limited the number of insurance companies 
that offer Variable Contracts. These factors include the costs of 
organizing and operating a funding vehicle, certain insurers' lack of 
experience with respect to investment management, and the lack of name 
recognition by the public of certain insurance companies as investment 
experts. In particular, some smaller life insurance companies may not 
find it economically feasible, or within their investment or 
administrative expertise, to enter the Variable Contract business on 
their own. Use of the Funds as a common investment vehicle for Variable 
Contracts would reduce or eliminate these concerns. Mixed and shared 
funding should also provide several benefits to owners of Variable 
Contracts by eliminating a significant portion of the costs of 
establishing and administering separate underlying funds.
    31. Applicants state that Participating Insurance Companies will 
benefit not only from the investment and administrative expertise of 
the Funds' Adviser, but also from the potential cost efficiencies and 
investment flexibility afforded by larger pools of funds. Mixed and 
shared funding also would permit a greater amount of assets available 
for investment by a Fund, thereby promoting economies of scale, by 
permitting increased safety through greater diversification, or by 
making the addition of new Funds more feasible. Therefore, making the 
Funds available for mixed and shared funding will encourage more 
insurance companies to offer Variable Contracts. This should result in 
increased competition with respect to both Variable Contract design and 
pricing, which can in turn be expected to result in more product 
variety. Applicants also assert that sale of shares in a Fund to Plans, 
in addition to VLI Accounts and VA Accounts, will result in an 
increased amount of assets available for investment in a Fund. This may 
benefit Variable Contract owners by promoting economies of scale, 
permitting increased safety of investments through greater 
diversification, and making the addition of new Funds more feasible.
    32. Applicants also submit that, regardless of the type of 
shareholder in a Fund, an Adviser is or would be contractually and 
otherwise obligated to manage the Fund solely and exclusively in 
accordance with that Fund's investment objectives, policies and 
restrictions, as well as any guidelines established by the applicable 
Trust's board of trustees or directors (a ``Board''). Thus, each Fund 
will be managed in the same manner as any other mutual fund.
    33. Applicants assert that sales of Fund shares, as described 
above, will not have any adverse federal income tax

[[Page 62479]]

consequences to other investors in such a Fund.
    34. In addition, Applicants note that the Commission has issued 
numerous orders permitting mixed funding, extended mixed funding, and 
shared funding. Therefore, granting the exemptions requested herein is 
in the public interest and, as discussed above, will not compromise the 
regulatory purposes of Sections 9(a), 13(a), 15(a), or 15(b) of the Act 
or Rules 6e-2 or 6e-3(T) thereunder.

Applicants' Conditions

    Applicants agree that the Commission order requested herein shall 
be subject to the following conditions:
    1. A majority of the Board of each Trust will consist of persons 
who are not ``interested persons'' of the Trust (``disinterested 
directors/trustees''), 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 
death, disqualification or bona fide resignation of any trustee or 
trustees, then the operation of this condition will be suspended: (a) 
for a period of 90 days if the vacancy or vacancies may be filled by 
the Board, (b) for a period of 150 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 or by 
future rule.
    2. The Board of each Trust will monitor its respective Funds for 
the existence of any material irreconcilable conflict between and among 
the interests of the owners of all VLI Contracts and VA Contracts and 
participants of all Plans investing in the Fund, 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 Fund are being managed; (e) a 
difference in voting instructions given by VA Contract owners, VLI 
Contract owners, and Plans or Plan participants; (f) a decision by a 
Participating Insurance Company to disregard the voting instructions of 
contract owners; or (g) if applicable, a decision by a Plan to 
disregard the voting instructions of Plan participants.
    3. Participating Insurance Companies (on their own behalf, as well 
as by virtue of any investment of General Account assets in a Fund), 
any Adviser to a Fund, and any Plan that executes a Participation 
Agreement upon its becoming an owner of 10% or more of the net assets 
of a Fund (collectively, ``Participants'') will report any potential or 
existing conflicts to the relevant Board. Each Participant will be 
responsible for assisting the Board in carrying out the Board's 
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 
trustee for a 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 Board, will be 
a contractual obligation of all Participating Insurance Companies under 
their Participation Agreement with a Trust, and these responsibilities 
will be carried out with a view only to the interests of the Variable 
Contract owners. The responsibility to report such information and 
conflicts, and to assist the Board, also will be contractual 
obligations of all Plans under their Participation Agreement with a 
Trust, and such agreements will provide that these responsibilities 
will be carried out with a view only to the interests of Plan 
participants.
    4. If it is determined by a majority of the Board of a Trust, or a 
majority of the disinterested directors/trustees of the Board, that a 
material irreconcilable conflict exists, then the relevant Participant 
will, at its expense and to the extent reasonably practicable (as 
determined by a majority of the disinterested directors/trustees), take 
whatever steps are necessary to remedy or eliminate the material 
irreconcilable conflict, up to and including: (a) Withdrawing the 
assets allocable to some or all of their VLI Accounts or VA Accounts 
from the Fund and reinvesting such assets in a different investment 
vehicle including another Fund; (b) in the case of a Participating 
Insurance Company, 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., VA Contract owners or VLI Contact owners of 
one or more Participating Insurance Companies) that votes in favor of 
such segregation, or offering to the affected Contract owners the 
option of making such a change; (c) withdrawing the assets allocable to 
some or all of the Plans from the affected Fund and reinvesting them in 
a different investment medium; and (d) establishing a new registered 
management investment company or managed separate account. If a 
material irreconcilable conflict arises because of a decision by a 
Participating Insurance Company to disregard Variable Contract owner 
voting instructions, and that decision represents a minority position 
or would preclude a majority vote, then the Participating Insurance 
Company may be required, at the election of the Trust, to withdraw such 
Participating Insurance Company's VA Account and VLI Account 
investments in the Fund, and no charge or penalty will be imposed as a 
result of such withdrawal. If a material irreconcilable conflict arises 
because of a 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 Plan may be required, 
at the election of the Trust, to withdraw its investment in the 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 will be a contractual obligation of 
all Participants under their Participation Agreement with a Trust, and 
these responsibilities will be carried out with a view only to the 
interests of Variable Contract owners or, as applicable, Plan 
participants.
    For purposes of this Condition 4, a majority of the disinterested 
directors/trustees of the Board of each Trust will determine whether or 
not any proposed action adequately remedies any material irreconcilable 
conflict, but, in no event, will the Fund or its Adviser be required to 
establish a new funding vehicle for any Variable Contract or Plan. No 
Participating Insurance Company will be required by this Condition 4 to 
establish a new funding vehicle for any Variable Contract if any offer 
to do so has been declined by vote of a majority of the Contract owners 
materially and adversely affected by the material irreconcilable 
conflict. Further, no Plan will be required by this Condition 4 to 
establish a new funding vehicle for the Plan if: (a) A majority of the 
Plan

[[Page 62480]]

participants materially and adversely affected by the irreconcilable 
material conflict vote to decline such offer, or (b) pursuant to 
documents governing the Plan, the Plan trustee makes such decision 
without a Plan participant vote.
    5. The Board of each Trust's determination of the existence of a 
material irreconcilable conflict and its implications will be made 
known in writing promptly to all Participants.
    6. Participating Insurance Companies will provide pass-through 
voting privileges to all Variable Contract owners whose Contracts are 
issued through registered VLI Accounts or registered VA Accounts for as 
long as required by the Act as interpreted by the Commission. However, 
as to Variable Contracts issued through VA Accounts or VLI Accounts not 
registered as investment companies under the Act, pass-through voting 
privileges will be extended to owners of such Contracts to the extent 
granted by the Participating Insurance Company. Accordingly, such 
Participating Insurance Companies, where applicable, will vote the 
shares of each Fund held in their VLI Accounts and VA Accounts in a 
manner consistent with voting instructions timely received from 
Variable Contract owners. Participating Insurance Companies will be 
responsible for assuring that each of their VLI and VA Accounts 
investing in a Fund calculates voting privileges in a manner consistent 
with all other Participating Insurance Companies investing in that 
Fund.
    The obligation to calculate voting privileges as provided in this 
application shall be a contractual obligation of all Participating 
Insurance Companies under their Participation Agreement with the Trust. 
Each Participating Insurance Company will vote shares of each Fund held 
in its VLI or VA Accounts for which no timely voting instructions are 
received, as well as shares held by its General Account or otherwise 
attributed to it, in the same proportion as those shares for which 
voting instructions are received. Each Plan will vote as required by 
applicable law, governing Plan documents and as provided in this 
application.
    7. As long as the Act requires pass-through voting privileges to be 
provided to Variable Contract owners or the Commission interprets the 
Act to require the same, a Fund's Adviser or any General Account will 
vote their shares of the Fund in the same proportion as all votes cast 
on behalf of all Variable Contract owners having voting rights; 
provided, however, that such an Adviser or General Account shall vote 
its shares in such other manner as may be required by the Commission or 
its staff.
    8. Each Fund will comply with all provisions of the Act requiring 
voting by shareholders (which, for these purposes, shall be the persons 
having a voting interest in its shares), and, in particular, the Fund 
will either provide for annual meetings (except to the extent that the 
Commission may interpret Section 16 of the Act not to require such 
meetings) or comply with Section 16(c) of the Act (although each Fund 
is not, or will not be, one of those trusts of the type described in 
Section 16(c) of the Act), as well as with Section 16(a) of the Act 
and, if and when applicable, Section 16(b) of the Act. Further, each 
Fund will act in accordance with the Commission's interpretations of 
the requirements of Section 16(a) with respect to periodic elections of 
directors/trustees and with whatever rules the Commission may 
promulgate thereto.
    9. A Fund will make its shares available to the VLI Accounts, VA 
Accounts, and Plans at or about the time it accepts any seed capital 
from its Adviser or from a General Account of a Participating Insurance 
Company.
    10. Each Fund has notified, or will notify, all Participants that 
disclosure regarding potential risks of mixed and shared funding may be 
appropriate in VLI Account and VA Account prospectuses or Plan 
documents. Each Fund will disclose, in its prospectus that: (a) Shares 
of the Fund may be offered to both VA Accounts and VLI Accounts and, if 
applicable, to Plans, (b) due to differences in tax treatment and other 
considerations, the interests of various Variable Contract owners 
participating in the Fund and the interests of Plan Participants 
investing in the Fund, if applicable, may conflict, and (c) the Trust's 
Board will monitor events in order to identify the existence of any 
material irreconcilable conflicts and to determine what action, if any, 
should be taken in response to any such conflicts.
    11. If and to the extent Rule 6e-2 and Rule 6e-3(T) under the Act 
are amended, or proposed Rule 6e-3 under the Act is adopted, to provide 
exemptive relief from any provision of the Act, or the rules 
thereunder, with respect to mixed or shared funding, on terms and 
conditions materially different from any exemptions granted in the 
order requested in this application, then each Fund and/or 
Participating Insurance Companies, as appropriate, shall take such 
steps as may be necessary to comply with Rules 6e-2 or 6e-3(T), as 
amended, or Rule 6e-3, to the extent such rules are applicable.
    12. Each Participant, at least annually, shall submit to the Board 
of each Trust such reports, materials or data as the Board reasonably 
may request so that the directors/trustees of the Board may fully carry 
out the obligations imposed upon the Board by the conditions contained 
in this application. Such reports, materials and data shall be 
submitted more frequently if deemed appropriate by the Board of a 
Trust. The obligations of the Participants to provide these reports, 
materials and data to the Board, when it so reasonably requests, shall 
be a contractual obligation of all Participants under their 
Participation Agreement with the Trust.
    13. All reports of potential or existing conflicts received by the 
Board of each Trust, and all Board action with regard to determining 
the existence of a conflict, notifying Participants of a conflict and 
determining whether any proposed action adequately remedies a conflict, 
will be properly recorded in the minutes of the Board or other 
appropriate records, and such minutes or other records shall be made 
available to the Commission upon request.
    14. Each Fund will not accept a purchase order from a Plan if such 
purchase would make the Plan an owner of 10 percent or more of the net 
assets of the Fund unless the Plan executes an agreement with the Fund 
governing participation in the Fund that includes the conditions set 
forth herein to the extent applicable. A Plan will execute an 
application containing an acknowledgement of this condition at the time 
of its initial purchase of shares.

Conclusion

    For all of the reasons explained above, Applicants submit that the 
exemptions requested are appropriate in the public interest and 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-24684 Filed 10-16-14; 8:45 am]
BILLING CODE 8011-01-P