Document ID: SEC-2009-1230-0001
Agency: sec
Document Type: Notice
Title: MML Series Investment Fund, et al.; Notice of Application
Posted Date: 2009-08-27T04:00Z

[Federal Register: August 27, 2009 (Volume 74, Number 165)]
[Notices]               
[Page 43729-43737]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27au09-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-28849; File No. 812-13611]

 
MML Series Investment Fund, et al.; Notice of Application

August 20, 2009.
AGENCY: The Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an exemption 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: MML Series Investment Fund (``MML Trust''), MML Series 
Investment Fund II (``MML II Trust'') and Massachusetts Mutual Life 
Insurance Company (``MassMutual'') (collectively, ``Applicants'').

SUMMARY:  Summary of Application: Applicants request an order pursuant 
to Section 6(c) of the 1940 Act exempting each life insurance company 
separate account supporting variable life insurance contracts (``VLI 
Account'') (and its insurance company depositor) that may invest in 
shares of an existing portfolio of the MML Trust or the MML II Trust 
(an ``Existing Fund'') or a ``Future Fund,'' as defined below, from the 
provisions of 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 situations where 
such VLI Accounts hold shares of any Existing Fund or Future Fund 
(each, a ``Fund;'' collectively, the ``Funds'') when one or more of the 
following other types of investors also hold shares of the Funds: (1) a 
life insurance company separate account supporting variable annuity 
contracts (a ``VA Account''), (2) any VLI account, (3) a Fund's 
investment adviser or affiliated person of the investment adviser 
(representing seed money investments in the Fund), and/or (4) trustees 
of a qualified group pension or group retirement plan outside the 
separate account context. 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 VLI Accounts and to which 
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 December 15, 2008, 
and amended and restated on April 14, 2009 and August 12, 2009.
    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 September 14, 2009, 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, c/o Andrew M. Goldberg, 
Massachusetts Mutual Life Insurance Company, 1295 State Street, 
Springfield, MA 01111. Copy to Mary Thornton Payne, Sutherland Asbill & 
Brennan LLP, 1275 Pennsylvania Avenue, Washington, DC 20004-2415.

FOR FURTHER INFORMATION CONTACT: Mark Cowan, Senior Counsel, or Zandra 
Bailes, Branch Chief, Office of Insurance Products, Division of 
Investment Management at (202) 551-6795.

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, 100 F Street, NE., Washington, DC 
20549 ((202) 551-8090).

Applicants' Representations

    1. MML Trust was organized as a Massachusetts business trust on 
December 19, 1984. MML Trust is registered under the 1940 Act as an 
open-end management investment company (File No. 811-02224). MML Trust 
is a series investment company as defined by Rule 18f-2 under the Act 
and is currently comprised of twenty-seven series.
    2. Shares of the series of the MML Trust are offered solely to 
separate investment accounts established by MassMutual and its life 
insurance company subsidiaries. The MML Trust has filed a registration 
statement under the Securities Act of 1933 (the ``1933 Act'') on Form 
N-1A (File No. 2-39334) to register such shares. The Trust may 
establish additional series in the future and additional classes of 
shares for such series. Shares of MML Trust are not offered to the 
general public.
    3. MML II Trust was formed as a Massachusetts business trust on 
February 8, 2005. MML II Trust is registered under the 1940 Act as an 
open-end management investment company (File No. 811-21714). MML II 
Trust is a series investment company as defined by Rule 18f-2 under the 
Act and is currently comprised of ten series.
    4. Shares of the series of the MML II Trust are offered solely to 
separate investment accounts established by MassMutual and its life 
insurance company subsidiaries. The MML II Trust has filed a 
registration statement under the 1933 Act on Form N-1A (File No. 333-
122804) to register such shares. The Trust may establish additional 
series in the future and additional classes of shares for such series. 
Shares of MML II Trust are not offered to the general public.
    5. MassMutual is the investment adviser to the MML Trust and the 
MML II Trust and is responsible for providing all necessary investment 
management and administrative services. MassMutual is paid an 
investment management fee from each Fund's

[[Page 43730]]

average daily net assets. MassMutual contracts with subadvisers to help 
manage the Funds.
    6. The Existing Funds and Future Funds may offer their shares to 
VLI and VA Accounts of various life insurance companies 
(``Participating Insurance Companies'') to serve as an investment 
medium to support variable life insurance contracts and variable 
annuity contracts (together, ``Variable Contracts'') issued through 
such 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 Company, and that portion of the assets of such 
an Account equal to the reserves and other contract liabilities with 
respect to the 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 an Account's 
assets will be credited to or charged against the 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 1940 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 Account as those terms have 
been interpreted by the Commission with respect to variable life 
insurance and variable annuity separate accounts.
    7. The Participating Insurance Companies are currently MassMutual 
and MassMutual's affiliated life insurance companies: C. M. Life 
Insurance Company, and MML Bay State Life Insurance Company. Various 
other life insurance companies that are not affiliated persons of 
MassMutual may be Participating Insurance Companies in the future. 
MassMutual is an affiliated person of the MML Trust and MML II Trust.
    8. As described more fully below, the Funds will sell their shares 
to registered VLI and VA Accounts only if each Participating Insurance 
Company sponsoring such a VLI 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 or VA Account 
covered by the agreement and for complying with all applicable 
requirements of State and Federal law pertaining to such accounts and 
to the sale and distribution of variable contracts issued through such 
accounts. The participation agreements also memorialize or will 
memorialize, among other matters, the fact that, with regard to 
compliance with Federal securities laws, unless the agreement 
specifically states otherwise, the Funds' obligations relate solely to 
offering and selling their shares to VLI and VA Accounts covered.
    9. 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.''
    10. Applicants propose that each Existing Fund and any Future Fund 
may offer and sell its shares directly to a qualified group pension or 
group retirement plan (a ``Plan'' or ``Qualified Plan'') outside the 
separate account context. Federal tax law permits investment companies 
such as the Funds to increase their net assets by selling shares to 
Plans.
    11. 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 Plans. 
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.
    12. Applicants propose that any Fund may also sell shares to its 
investment adviser. The Treasury Regulations permit such sales as long 
as the return on shares held by the 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 an investment 
adviser are only made in connection with the creation or management of 
the Fund for the purpose of providing seed money for the Fund.
    13. The promulgation of Rules 6e-2(b)(15) and 6e-3(T)(b)(15) 
preceded the issuance of the Treasury Regulations permitting the shares 
of Funds to be held by a Qualified Plan or an adviser for the Fund 
without adversely affecting the ability of the VLI Account to also hold 
shares. The use of a common management investment company (or 
investment portfolio thereof) as an investment medium for VLI Accounts, 
VA Accounts, investment advisers, and Qualified Plans is referred to 
herein as ``extended mixed funding.''

Applicants' Legal Analysis

    1. Section 9(a)(2) of the 1940 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. Rule 6e-2(b)(15) under the 1940 Act provides partial exemptions 
from Sections 9(a), 13(a), 15(a), and 15(b) of the Act to VLI Accounts 
supporting scheduled premium VLI Contracts and to their life insurance 
company depositors. The exemptions granted by the Rule are available, 
however, only where a Fund offers its shares exclusively to VLI 
Accounts of the same Participating Insurance Company and/or of 
Participating Insurance Companies that are affiliated persons of the 
same Participating Insurance Company and then, only where scheduled 
premium VLI Contracts are issued through such VLI Accounts. Therefore, 
VLI Accounts, their depositors and their principal underwriters may not 
rely on the exemptions provided by Rule 6e-2(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, an unaffiliated investment adviser, any VA

[[Page 43731]]

Account or a Qualified Plan. In other words, Rule 6e-2(b)(15) does not 
provide exemptions when a scheduled premium VLI Account invests in 
shares of a management investment company that serves as a vehicle for 
mixed funding, extended mixed funding or shared funding.
    3. Accordingly, Applicants request an order of the Commission 
granting exemptions from Sections 9(a), 13(a), 15(a), and 15(b) of the 
1940 Act, and Rule 6e-2(b)(15) thereunder, in cases where a scheduled 
premium VLI Account holds shares of Funds and one or more of the 
following types of investors also hold shares of such Funds: (1) VA 
Accounts, (2) VLI Accounts, (3) a Fund's investment adviser (or an 
affiliated person of the investment adviser), and/or (4) a Qualified 
Plan.
    4. Rule 6e-3(T)(b)(15) under the 1940 Act provides partial 
exemptions from Sections 9(a), 13(a), 15(a), and 15(b) of the Act to 
VLI Accounts supporting flexible premium variable life insurance 
contracts and their life insurance company depositors. The exemptions 
granted by the Rule are available, however, only where a Fund offers 
its shares exclusively to VLI Accounts (through which either scheduled 
premium or flexible premium VLI Contracts are issued) of the same 
Participating Insurance Company and/or of Participating Insurance 
Companies that are affiliated persons of the same Participating 
Insurance Company, VA Accounts of the same Participating Insurance 
Company or of affiliated Participating Insurance Companies, or the 
general account of the same Participating Insurance Company or of 
affiliated Participating Insurance Companies. Therefore, VLI Accounts, 
their depositors and their principal underwriters may not rely on the 
exemptions provided by Rule 6e-3(T)(b)(15) if shares of the Fund are 
held by a VLI Account of an unaffiliated Participating Insurance 
Company, a VA Account of an unaffiliated Participating Insurance 
Company, an unaffiliated investment adviser, or a Qualified Plan. In 
other words, Rule 6e-3(T)(b)(15) provides exemptions when a VLI Account 
supporting flexible premium VLI Contracts invests in shares of a 
management investment company that serves as a vehicle for mixed 
funding but does not provide exemptions when such a VLI Account invests 
in shares of a management investment company that serves as a vehicle 
for extended mixed funding or shared funding.
    5. Accordingly, Applicants request an order of the Commission 
granting exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the 
1940 Act and Rule 6e-3(T)(b)(15) thereunder, in cases where a flexible 
premium VLI Account holds shares of Funds and one or more of the 
following types of investors also hold shares of such Funds: (1) VA 
Accounts, (2) VLI Accounts, (3) a Fund's investment adviser (or an 
affiliated person of the investment adviser), and/or (4) a Qualified 
Plan.
    6. As explained below, Applicants maintain that there is no policy 
reason for the sale of Fund shares to Qualified Plans to prohibit or 
otherwise limit a Participating Insurance Company from relying on the 
relief provided by Rules 6e-2(b)(15) and 6e-3(T)(b)(15). 
Notwithstanding, Rule 6e-2 and Rule 6e-3(T) each specifically provide 
that the relief granted thereunder is available only where shares of 
the underlying fund are offered exclusively to insurance company 
separate accounts. In this regard, Applicants request exemptive relief 
in cases where VLI Accounts hold shares of the Funds when shares of the 
Funds are also sold to Qualified Plans.
    7. Applicants are not aware of any reason for excluding separate 
accounts and investment companies engaged in shared funding from the 
exemptive relief provided under Rules 6e-2(b)(15) and 6e-3(T)(b)(15), 
or for excluding separate accounts and investment companies engaged in 
mixed funding from the exemptive relief provided under Rule 6e-
2(b)(15). Similarly, Applicants are not aware of any reason for 
excluding Participating Insurance Companies from the exemptive relief 
requested because the Funds may also sell their shares to qualified 
pension and retirement plans. Rather, Applicants assert that the 
proposed sale of shares of the Funds to Qualified Plans, in fact, 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.
    8. For the reasons explained below, Applicants have concluded that 
investment by Qualified Plans 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.
    9. Consistent with the Commission's authority under Section 6(c) of 
the 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 VLI Accounts investing in 
the Existing Funds and Future Funds, as well as their principal 
underwriters, that currently invest or in the future will invest in the 
Funds.
    10. There is ample precedent, in a variety of contexts, for 
granting exemptive relief not only to the applicants in a given case, 
but also to members of the class not currently identified that may be 
similarly situated in the future. Such class relief has been granted in 
various contexts and from a wide variety of the 1940 Act's provisions, 
including class exemptions in the context of mixed funding, extended 
mixed funding, and shared funding. Such class exemptions have included, 
among other things, exemptions permitting the sale of shares by unnamed 
underlying funds to VLI and VA Accounts of Participating Insurance 
Companies and Qualified Plans.
    11. Applicants note that the Commission has previously granted 
exemptive orders in cases where open-end management investment 
companies offer their shares directly to Qualified Plans in addition to 
offering their shares to separate accounts of affiliated or 
unaffiliated insurance companies which issue either or both variable 
annuity contracts or variable life insurance contracts. Applicants 
State that the order sought in their application is largely identical 
to these precedents with respect to the scope of the exemptions and the 
conditions proposed by the Applicants.
    12. 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. 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.
    13. 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

[[Page 43732]]

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 of the underlying 
investment company.
    14. The relief provided by Rules 6e-2(b)(15)(i) and 6e-
3(T)(b)(15)(i) permits a person that is disqualified under Sections 
9(a)(1) or (2) of the 1940 Act to serve as an officer, director, or 
employee of the life insurance company, or any of its affiliates, as 
long as that person does not participate directly in the management or 
administration of the underlying investment company. The relief 
provided by Rules 6e-2(b)(15)(ii) and 6e-3(T)(b)(15)(ii) under the Act 
permits the life insurance company to serve as the underlying 
investment company's investment adviser or principal underwriter, 
provided that none of the insurer's personnel who are ineligible 
pursuant to Section 9(a) participates in the management or 
administration of the investment company.
    15. In effect, the partial relief granted in Rules 6e-2(b)(15) and 
6e-3(T)(b)(15) under the Act from the requirements of Section 9 of the 
Act limits the amount of monitoring necessary to ensure compliance with 
Section 9 to that which is appropriate in light of the policy and 
purposes of Section 9. Those rules recognize that it is not necessary 
for the protection of investors or the purposes fairly intended by the 
policy and provisions of the Act to apply the provisions of Section 
9(a) to all individuals in a large insurance complex, most of whom will 
have no involvement in matters pertaining to investment companies in 
that organization. Applicants assert that it is also unnecessary to 
apply Section 9(a) of the Act to the many individuals in various 
unaffiliated insurance companies (or affiliated companies of 
Participating Insurance Companies) that may utilize the Funds as 
investment vehicles for VLI Accounts and VA Accounts. There is no 
regulatory purpose served in extending the monitoring requirements to 
embrace a full application of Section 9(a)'s eligibility restrictions 
because of mixed funding, extended mixed funding or shared funding. The 
Participating Insurance Companies and Qualified Plans are not expected 
to play any role in the management of the Funds. Those individuals who 
participate in the management of the Funds will remain the same 
regardless of which VA Accounts, VLI Accounts, insurance companies, 
investment advisers, or Qualified Plans use such Funds. Applying the 
monitoring requirements of Section 9(a) of the Act because of 
investment by VLI Accounts and Qualified Plans would be unjustified and 
would not serve any regulatory purpose. Furthermore, the increased 
monitoring costs could reduce the net rates of return realized by 
owners of VLI Contracts and Plan participants. Moreover, in the case of 
Qualified Plans, the Plans, unlike separate accounts, are not 
themselves investment companies, and therefore are not subject to 
Section 9 of the Act. Furthermore, it is not anticipated that a 
Qualified Plan would be an affiliated person of the Funds except by 
virtue of its holding 5% or more of a Fund's shares.
    16. Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) under the 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)).
    17. 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 
owners of its variable life insurance contracts 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)).
    18. In the case of a change in the investment policies of the 
underlying investment company, the insurance company, in order to 
disregard contract owner voting instructions, must make a good faith 
determination that such a change either would: (1) Violate State law, 
or (2) result in investments that either (a) would not be consistent 
with the investment objectives of its separate account, or (b) would 
vary from the general quality and nature of investments and investment 
techniques used by other separate accounts of the company, or of an 
affiliated life insurance company with similar investment objectives.
    19. 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.
    20. The sale of Fund shares to Qualified Plans or investment 
advisers will not have any impact on the exemptions requested herein 
regarding the disregard of pass-through voting rights. Shares sold to 
Qualified 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 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. For example, for many Plans, under Section 403(a) of 
Employee Retirement Income Security Act of 1974, as amended 
(``ERISA''), shares of a portfolio of an investment company sold to a 
Plan must be held by the trust(s) funding the Plan. Section 403(a) also 
provides that the trustee(s) of such trusts must have exclusive 
authority and discretion to manage and control the Plan, with two 
exceptions: (1) When the Plan expressly provides that the trustee(s) 
are subject to the direction of a named fiduciary who is not a trustee, 
in which case the trustee(s) are subject to proper directions made in 
accordance with the terms of the Plan and not contrary to ERISA, and 
(2) when the authority to manage, acquire, or dispose of assets of the 
Plan is delegated to one or more investment managers pursuant to 
Section 402(c)(3) of ERISA. For such Plans, unless one of the above two 
exceptions stated in Section 403(a) applies, Plan trustees have the 
exclusive authority and responsibility for voting

[[Page 43733]]

investment company shares (or related proxies) held by their Plan.
    21. If a named fiduciary to a Plan 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 trustee(s) or 
another named fiduciary. The Plans may have their trustee(s) or other 
fiduciaries exercise voting rights attributable to investment 
securities held by the Plans in their discretion. Some Plans, however, 
may provide for the trustee(s), an investment adviser (or advisers), or 
another named fiduciary to exercise voting rights in accordance with 
instructions from Plan participants.
    22. Where a Qualified Plan does not provide participants with the 
right to give voting instructions, Applicants do not see any potential 
for material irreconcilable conflicts of interest between or among the 
Variable Contract owners and Plan participants with respect to voting 
of the respective Fund shares. Accordingly, unlike the circumstances 
surrounding VLI Accounts and VA Accounts, because Plans are not 
required to pass through voting rights to participants, the issue of 
resolution of material irreconcilable conflicts of interest should not 
arise with respect to voting Fund shares.
    23. In addition, if a Qualified Plan were to hold a controlling 
interest in a Fund, Applicants do not believe that such control would 
disadvantage other investors in such Fund to any greater extent than is 
the case when any institutional shareholder holds a majority of the 
shares of any open-end management investment company. In this regard, 
Applicants submit that investment in a Fund by a Plan will not create 
any of the voting complications occasioned by VLI Account investments 
in the Fund. Unlike VLI Account investments, Plan voting rights cannot 
be frustrated by veto rights of Participating Insurance Companies or 
State insurance regulators.
    24. Where a Qualified Plan provides participants with the right to 
instruct the trustee(s) as to how to vote Fund shares, Applicants see 
no reason why such participants generally or those in a particular 
Plan, either as a single group or in combination with participants in 
other Plans, would vote in a manner that would disadvantage VLI 
Contract owners. The purchase of shares by Plans that provide voting 
rights does not present any complications not otherwise occasioned by 
mixed or shared funding.
    25. Similarly, the sale of Fund shares to an investment adviser 
will not have any impact on the exemptions requested herein regarding 
the disregard of pass-through voting rights. The exercise of voting 
rights by investment advisers does not raise the type of issues 
respecting disregard of voting rights that are raised by VLI Accounts. 
With respect to investment advisers, which are not registered as 
investment companies under the Act, there is no requirement to pass 
through voting rights.
    26. Applicants recognize that 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. Therefore, the Commission 
staff may have been concerned with the potentially different investment 
motivations of public shareholders and owners of variable life 
insurance contracts. There also may have been some concern with respect 
to the problems of permitting a State insurance regulatory authority to 
affect the operations of a publicly available mutual fund and the 
investment decisions of public shareholders.
    27. For reasons unrelated to the Act, however, Revenue Ruling 81-
225 (Sept. 25, 1981) effectively deprived variable annuity contracts 
funded by publicly available mutual funds of their tax-benefited 
status. The Tax Reform Act of 1984 codified the prohibition against the 
use of publicly available mutual funds as an investment vehicle for 
both variable annuity contracts and variable life insurance contracts. 
In particular, Section 817(h) of the Code, in effect, requires that the 
investments made by both variable annuity and variable life insurance 
separate accounts be ``adequately diversified.'' If such a separate 
account is organized as part of a ``two-tiered'' arrangement where the 
account invests in shares of an underlying open-end investment company 
(i.e., an underlying fund), the diversification test will be applied to 
the underlying fund (or to each of several underlying funds), rather 
than to the separate account itself, but only if ``all of the 
beneficial interests'' in the underlying fund ``are held by one or more 
insurance companies (or affiliated companies) in their general account 
or in segregated asset accounts.'' Accordingly, a separate account that 
invests in a publicly available mutual fund will not be adequately 
diversified for these purposes. As a result, any underlying fund, 
including the Funds, 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.
    28. 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. 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. The NAIC Model Regulation 
has long permitted the use of a single underlying fund for different 
separate accounts. Moreover, Article VI, Section 3 of the NAIC Model 
Regulation has been amended to remove a previous prohibition on one 
separate account investing in another separate account. Lastly, the 
NAIC Model Regulation does not distinguish between scheduled premium 
and flexible premium variable life insurance contracts. The NAIC Model 
Regulation, therefore, reflects the NAIC's apparent confidence that 
such combined funding is appropriate and that State insurance 
regulators can adequately protect the interests of owners of all 
variable contracts.
    29. Applicants assert that shared funding by unaffiliated insurance 
companies does not present any issues that do not already exist where a 
single insurance company is licensed to do business in several or all 
States. A particular State insurance regulator could require action 
that is inconsistent with the requirements of other States in which the 
insurance company offers its contracts. However, the fact that 
different insurers may be domiciled in different States does not create 
a significantly different or enlarged problem.
    30. 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

[[Page 43734]]

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.
    31. 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.
    32. 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.
    33. Applicants assert that there is no reason why the investment 
policies of an 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, whether flexible premium or scheduled premium 
VLI Contrasts. Each type of insurance contract is designed as a long-
term investment program.
    34. 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.
    35. 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.
    36. Applicants do not believe that the sale of the shares to Plans 
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.
    37. Applicants considered whether there are any issues raised under 
the Code, Treasury Regulations, or Revenue Rulings thereunder, if 
Qualified Plans, VA Accounts, and VLI Accounts all invest in the same 
Fund. Applicants have concluded that neither the Code, nor the Treasury 
Regulations nor Revenue Rulings thereunder, present any inherent 
conflicts of interest if Plans, VLI Accounts, and VA Accounts all 
invest in the same Fund.
    38. Applicants note that, while there are differences in the manner 
in which distributions from VLI Accounts and Qualified Plans are taxed, 
these differences have no impact on the Funds. When distributions are 
to be made, and a VLI Account or Plan is unable to net purchase 
payments to make distributions, the VLI Account or Plan will redeem 
shares of the relevant Fund at its net asset values in conformity with 
Rule 22c-1 under the 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 VLI Contract and a Plan will then make distributions in 
accordance with the terms of the Plan.
    39. Applicants considered whether it is possible to provide an 
equitable means of giving voting rights to VLI Contract owners and 
Plans. In connection with any meeting of Fund shareholders, the Fund's 
transfer agent will inform each Participating Insurance Company, 
investment adviser, and Qualified Plan of their 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 as required by either 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 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.
    40. Applicants do not believe that the ability of a Fund to sell 
its shares to its investment adviser or Qualified Plans gives rise to a 
senior security. ``Senior Security'' is defined in Section 18(g) of the 
Act to include ``any stock of a class having priority over any other 
class as to distribution of assets or payment of dividends.'' As noted 
above, regardless of the rights and benefits of participants under 
Plans and owners of VLI

[[Page 43735]]

Contracts, VLI Accounts, VA Accounts, Participating Insurance 
Companies, and Plans, only have, or will only have, rights with respect 
to their respective shares of a Fund. These parties can only redeem 
such shares at net asset value. No shareholder of a Fund has any 
preference over any other shareholder with respect to distribution of 
assets or payment of dividends.
    41. Applicants do not believe that the veto power of State 
insurance commissioners over certain potential changes to Fund 
investment objectives approved by owners of VLI Contracts creates 
conflicts between the interests of such owners and the interests of 
Plan participants. 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.
    42. Although Participating Insurance Companies may have to overcome 
regulatory impediments in redeeming shares of a Fund held by their VLI 
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 
VLI 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.
    43. Finally, Applicants considered whether there is a potential for 
future conflicts of interest between Participating Insurance Companies 
and Qualified 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 VLI Contract owners (or, for 
that matter, VA 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.
    44. Applicants recognize that the foregoing is not an all-inclusive 
list, but rather is representative of issues that they believe are 
relevant to their application. Applicants believe that the discussion 
contained therein demonstrates that the sale of Fund shares to 
Qualified Plans would not increase the risk of material irreconcilable 
conflicts between the interests of Plan participants and VLI 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, are generally long-term investors.
    45. Applicants assert that permitting a Fund to sell its shares to 
its investment adviser (or the adviser's affiliates) for the purpose of 
obtaining seed money will enhance management of each Fund without 
raising significant concerns regarding material irreconcilable 
conflicts among different types of investors. A potential source of 
initial capital is a Fund's investment adviser. However, provision of 
seed capital or the purchase of shares in connection with the 
management of a Fund by its investment adviser may be deemed to violate 
the exclusivity requirement of Rule 6e-2(b)(15) and/or Rule 6e-
3(T)(b)(15). Given the conditions of Treasury Regulation 1.817-5(f)(3) 
and the harmony of interest between a Fund, on the one hand, and its 
investment adviser (or affiliates), on the other, Applicants assert 
that little incentive for overreaching exists. Furthermore, such 
investment should not implicate the concerns discussed above regarding 
the creation of material irreconcilable conflicts. Instead, investments 
by an investment adviser (or its affiliates), will permit the orderly 
and efficient creation and operation of a Fund, and reduce the expense 
and uncertainty of using outside parties at the early stages of the 
Fund's operations.
    46. 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 VLI 
Accounts would reduce or eliminate these concerns. Mixed and shared 
funding should also provide several benefits to owners of VLI Contracts 
by eliminating a significant portion of the costs of establishing and 
administering separate underlying funds.
    47. Participating Insurance Companies will benefit not only from 
the investment and administrative expertise of the Funds' investment 
advisers and subadvisers, 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, mixed and 
shared funding will encourage more insurance companies to offer VLI 
Accounts. This should result in increased competition with respect to 
both VLI Account 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 Qualified 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 VLI Account owners by promoting 
economies of scale, permitting increased safety of investments through 
greater diversification, and making the addition of new Funds more 
feasible.
    48. Applicants also submit that, regardless of the type of 
shareholder in a Fund, its investment adviser (and the adviser's 
affiliates) are 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 its board of trustees (a ``Board''). Thus, 
each Fund will be managed in the same manner as any other mutual fund.
    49. Applicants note that VLI Accounts historically have been 
employed to accumulate shares of mutual funds that are not affiliated 
with the depositor or sponsor of the VLI Account. In particular, 
Applicants assert that sales of Fund shares, as described above, will 
not have any adverse Federal income tax consequences to other investors 
in such a Fund.
    50. In addition, Applicants assert that 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 order granting the requested relief shall 
be subject to the following conditions which shall apply to the Funds 
as well as any Future Fund that relies on the order:

[[Page 43736]]

    1. A majority of the Board of each Fund will consist of persons who 
are not ``interested persons'' of the Fund, 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. Each Board will monitor its respective Fund 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 investment 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 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 Fund, 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 Fund, 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 a Board, or a majority of 
the disinterested directors/trustees of such 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 Fund, 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 Fund, 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 Fund, 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 Fund will determine whether or 
not any proposed action adequately remedies any material irreconcilable 
conflict, but, in no event, will the Fund or its investment 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 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. A Board'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

[[Page 43737]]

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 Fund. 
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 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 investment adviser (or its affiliates) 
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 investment adviser (or affiliates) 
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 investment adviser (or affiliates) 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 Fund'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 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 Fund 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 Fund. 
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 Fund.
    13. All reports of potential or existing conflicts received by a 
Board, 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 Qualified 
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

    Applicants submit, for all the reasons explained above, 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 1940 Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-20599 Filed 8-26-09; 8:45 am]

BILLING CODE 8010-01-P