Document ID: SEC-2007-1256-0001
Agency: sec
Document Type: Notice
Title: Financial Investors Variable Insurance Trust et al., Notice of Application September 4, 2007
Posted Date: 2007-09-11T04:00Z

[Federal Register: September 11, 2007 (Volume 72, Number 175)]
[Notices]               
[Page 51869-51874]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11se07-110]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27965; File No. 812-13359]

 
Financial Investors Variable Insurance Trust et al., Notice of 
Application September 4, 2007

AGENCY: Securities and Exchange Commission (``SEC'' or the 
``Commission'').

ACTION: Notice of application (``Application'') for exemption, pursuant 
to section 6(c) of the Investment Company Act of 1940, as amended (the 
``1940 Act''), 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.

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    Applicants: Ibbotson Conservative ETF Asset Allocation Portfolio, 
Ibbotson Income and Growth ETF Asset Allocation Portfolio, Ibbotson 
Balanced ETF Asset Allocation Portfolio, Ibbotson Growth ETF Asset 
Allocation Portfolio, Ibbotson Aggressive Growth ETF Asset Allocation 
Portfolio (collectively, the ``Existing Funds''), each a series of 
Financial Investors Variable Insurance Trust (the ``Trust''), any other 
series established from time to time under the Trust (collectively with 
the Existing Funds, the ``Insurance Funds''), and any future investment 
company that is designed to fund insurance products and for which ALPS 
Advisers, Inc. (the ``Investment Adviser''), any successor in interest 
(collectively with the Investment Adviser, the ``Investment 
Advisers''), or any affiliates of the Investment Advisers may serve as 
investment manager, investment adviser, subadviser, administrator, 
principal underwriter or sponsor (funds advised by such Investment 
Advisers herein also referred to collectively as the ``Insurance 
Funds'') (the Trust, the Existing Funds, the Insurance Funds, the 
Investment Adviser, and the Investment Advisers, referred to 
collectively as the ``Applicants'').
    Summary of Application: The Applicants request an order exempting 
certain life insurance companies on behalf of their separate accounts 
that currently invest or may hereafter invest in the Insurance Funds to 
the extent necessary to permit shares of the Existing Funds (the 
``Shares'') and the Insurance Funds to be sold to and held by: (i) 
Separate accounts funding variable annuity contracts and variable life 
insurance policies (collectively ``Variable Contracts'') issued by both 
affiliated life insurance companies and unaffiliated life insurance 
companies; (ii) trustees of qualified group pension and group 
retirement plans outside of the separate account context (``Qualified 
Plans''); (iii) separate accounts that are not registered as investment 
companies under the 1940 Act pursuant to exemptions from registration 
under section 3(c) of the 1940 Act; (iv) any Adviser to an Insurance 
Fund that is permitted to hold shares in an Insurance Fund consistent 
with the requirements of regulations issued by the Treasury Department 
(individually a ``Treasury Regulation'' and collectively the ``Treasury 
Regulations''), specifically Treasury Regulation Section 1.817-5 for 
the purpose of providing seed capital to an Insurance Fund; and (v) any 
other Participating Insurance Company permitted to hold shares of an 
Insurance Fund (``General Accounts'').
    Filing Date: The Application was filed on January 26, 2007, and 
amended and restated on May 21, 2007.
    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 26, 2007, 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 requester's interest, the reason for the 
request, and the issues contested. Persons who wish to be notified of a 
hearing may request notification by writing to the Secretary of the 
Commission.

ADDRESSES: The Commission: Secretary, Securities and Exchange 
Commission, 100 F Street, NE., Washington, DC 20549-1090; Applicants: 
c/o Jeffrey T. Pike, Esq., Secretary, Financial Investors Variable 
Insurance Trust, 1290 Broadway, Suite 1100, Denver, Colorado 80203.

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

[[Page 51870]]

SUPPLEMENTARY INFORMATION: The following is a summary of the 
Application. The complete Application is available for a fee from the 
SEC's Public Reference Branch, 100 F Street, NE., Room 1580, 
Washington, DC 20549 (telephone (202) 551-8090).

Applicants' Representations

    1. Each Insurance Fund is, or will be, registered under the 1940 
Act as an open-end management investment company. The Trust (File No. 
811-21987) is registered under the 1940 Act as a non-diversified 
management investment company. Applicants state that the Trust's shares 
are registered under the Securities Act of 1933, as amended (the ``1933 
Act'') (File No. 333-139186) and the investment adviser to the Trust, 
ALPS Advisers, Inc. is registered with the Commission as an investment 
adviser under the Investment Advisers Act of 1940, as amended.
    2. Applicants state that the Existing Funds intend to, and other 
Insurance Funds may in the future, offer Shares to separate accounts of 
affiliated and unaffiliated insurance companies funding variable 
annuity or variable life products. Applicants state that these separate 
accounts are, or will be, registered as investment companies under the 
1940 Act or will be exempt from such registration (individually a 
``Separate Account'' and collectively the ``Separate Accounts''). 
Insurance companies whose Separate Account(s) may now or in the future 
own Shares are referred to herein as ``Participating Insurance 
Companies.''
    3. Applicants propose that the Funds be permitted to offer and/or 
sell shares to Separate Accounts funding Variable Contracts issued by 
Participating Insurance Companies. Applicants represent that the 
Participating Insurance Companies at the time of their investment in 
the Insurance Funds either have established or will establish their own 
Separate Accounts and design their own Variable Contracts. Each 
Participating Insurance Company has or will have the legal obligation 
of satisfying all applicable requirements under both state and federal 
law. Applicants represent that each Participating Insurance Company on 
behalf of its Separate Accounts has entered or will enter into an 
agreement with each Insurance Fund in which it invests concerning 
participation by the Participating Insurance Company in such Insurance 
Fund (a ``Participation Agreement''). The role of the Insurance Funds 
under this agreement, insofar as the federal securities laws are 
applicable, will consist of, among other things, offering shares to the 
Separate Accounts and complying with any conditions that the Commission 
may impose.
    4. Applicants propose that the Insurance Funds also be permitted to 
offer and/or sell Shares to Qualified Plans administered by a Trustee. 
Section 817(h) of the Internal Revenue Code of 1986, as amended (the 
``Code''), imposes certain diversification standards on the underlying 
assets of Separate Accounts funding Variable Contracts. The Code 
provides that Variable Contracts shall not be treated as an annuity 
contract or life insurance policy for any period (or any subsequent 
period) for which the underlying assets are not, in accordance with 
regulations prescribed by the Treasury Department, (individually, a 
``Treasury Regulation'' and collectively the ``Treasury Regulations''), 
adequately diversified. On March 2, 1989, the Treasury Department 
issued Treasury Regulations (Treas. Reg. Section 1.817-5) that 
established diversification requirements for Variable Contracts, which 
require the Separate Accounts upon which these contracts or policies 
are based to be diversified as provided in the Treasury Regulations. In 
the case of Separate Accounts that invest in underlying investment 
companies, the Treasury Regulations provide a ``look through'' rule 
that permits the Separate Account to look to the underlying investment 
company for purposes of meeting the diversification requirements, 
provided that the beneficial interests in the investment company are 
held only by the segregated asset accounts of one or more insurance 
companies. However, the Treasury Regulations also contain certain 
exceptions to this requirement, one of which allows shares in an 
investment company to be held by the trustee of a qualified pension or 
retirement plan without adversely affecting the tax status of Variable 
Contracts (Treas. Reg. Section 1.817-5(f)(3)(iii)). Another exception 
allows the investment manager of the investment company and certain 
companies related to the investment manager to hold shares of the 
investment company, an exception that is often used to provide the 
capital required by section 14(a) of the 1940 Act.
    5. Applicants also propose that the Funds be permitted to offer 
and/or sell shares to an Adviser for the purpose of providing initial 
capital to an Insurance Fund and to General Accounts. The Regulations 
permit such sales to an Adviser and to General Accounts so long as the 
return on shares held by each is computed in the same manner as for 
shares held by the Separate Accounts, and the Adviser and the General 
Accounts do not intend to sell shares of the Portfolio held by it to 
the public. The Treasury Regulations impose an additional restriction 
on sales to investment advisers, who may hold shares only in connection 
with the creation of an Insurance Fund. Applicants anticipate that 
sales in reliance on these provisions of the Treasury Regulations will 
be made to an Adviser for the purpose of providing the initial capital 
for a Fund and that any Shares purchased by an Adviser will be redeemed 
immediately if and when the Adviser's investment advisory agreement 
terminates.

Applicants' Legal Analysis

    1. In connection with the funding of scheduled premium variable 
life insurance contracts issued through a Separate Account registered 
as a unit investment trust (``UIT'') under the 1940 Act, Rule 6e-
2(b)(15) provides partial exemptions from sections 9(a), 13(a), 15(a) 
and 15(b) of the 1940 Act. 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 UIT, if an affiliated person of that company is 
subject to a disqualification enumerated in section 9(a)(1) or (2) of 
the 1940 Act. Sections 13(a), 15(a) and 15(b) of the 1940 Act have been 
deemed by the Commission to require ``pass-through'' voting with 
respect to an underlying investment company's shares. Rule 6e-2(b)(15) 
provides these exemptions apply only where all of the assets of the UIT 
are shares of management investment companies ``which offer their 
shares exclusively to variable life insurance separate accounts of the 
life insurer or of any affiliated life insurance company.'' Therefore, 
the relief granted by Rule 6e-2(b)(15) is not available with respect to 
a scheduled premium life insurance Separate Account that owns shares of 
an underlying fund that also offers its shares to a variable annuity 
Separate Account or flexible premium variable life insurance Separate 
Account of the same company or any other affiliated insurance company. 
The use of a common management investment company as the underlying 
investment vehicle for both variable annuity and variable life 
insurance separate accounts of the same life insurance company or of 
any affiliated life insurance company is referred to herein as ``mixed 
funding.''
    2. The relief granted by Rule 6e-2(b)(15) also is not available 
with respect to a scheduled premium variable

[[Page 51871]]

life insurance Separate Account that owns shares of an underlying fund 
that also offers its shares to Separate Accounts funding Variable 
Contracts of one or more unaffiliated life insurance companies. The use 
of a common management investment company as the underlying investment 
vehicle for variable annuity and/or variable life insurance Separate 
Accounts of unaffiliated life insurance companies is referred to herein 
as ``shared funding.''
    3. Moreover, because the relief under Rule 6e-2(b)(15) is available 
only where shares are offered exclusively to variable life insurance 
Separate Accounts of a life insurer or any affiliated life insurance 
company, additional exemptive relief is necessary if the Shares are 
also to be sold to Qualified Plans, an Adviser and General Accounts 
(collectively, ``Eligible Purchasers''). Applicants note that if the 
Shares were sold only to Separate Accounts funding variable annuity 
contracts and/or Eligible Purchasers, exemptive relief under Rule 6e-
2(b)(15) would not be necessary. The relief provided for under this 
section does not relate to Eligible Purchasers or to a registered 
investment company's ability to sell its shares to Eligible Purchasers. 
The use of a common management investment company as the underlying 
investment vehicle for Separate Accounts funding Variable Contracts 
issued by affiliated and unaffiliated insurance companies, and for 
Eligible Purchasers, is referred to herein as ``extended mixed and 
shared funding.''
    4. In connection with flexible premium variable life insurance 
contracts issued through a separate account registered under the 1940 
Act as a UIT, Rule 6e-3(T)(b)(15) provides partial exemptions from 
sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act. The exemptions 
granted by Rule 6e-3(T)(b)(15) are available only where all the assets 
of the Separate Account consist of the shares of one or more registered 
management investment companies that offer to sell their shares 
``exclusively to separate accounts of the life insurer, or of any 
affiliated life insurance companies, offering either scheduled 
contracts or flexible contracts, or both; or which also offer their 
shares to variable annuity separate accounts of the life insurer or of 
an affiliated life insurance company or which offer their shares to any 
such life insurance company in consideration solely for advances made 
by the life insurer in connection with the operation of the separate 
account.'' Therefore, Rule 6e-3(T)(b)(15) permits mixed funding but 
does not permit shared funding.
    5. Moreover, because the relief under Rule 6e-3(T) is available 
only where shares are offered exclusively to variable life insurance 
separate accounts of a life insurer or any affiliated life insurance 
company, additional exemptive relief is necessary if the shares of the 
Portfolios are also to be sold to Eligible Purchasers, as described 
above. Applicants note that if the Shares were sold only to Separate 
Accounts funding variable annuity contracts and/or Eligible Purchasers, 
exemptive relief under Rule 6e-3(T)(b)(15) would not be necessary. The 
relief provided for under this section does not relate to Eligible 
Purchasers or to a registered investment company's ability to sell its 
shares to Eligible Purchasers.
    6. Applicants maintain, as discussed below, that there is no policy 
reason for the sale of the Portfolios' shares to Eligible Purchasers to 
result in a prohibition against, 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). However, because the relief under Rules 
6e-2(b)(15) and 6e-3(T)(b)(15) is available only when shares are 
offered exclusively to Separate Accounts, additional exemptive relief 
may be necessary if the shares of the Portfolios are also to be sold to 
Eligible Purchasers. Applicants therefore request relief in order to 
have the Participating Insurance Companies enjoy the benefits of the 
relief granted in Rules 6e-2(b)(15) and 6e-3(T)(b)(15) even where 
Eligible Purchasers are investing in the relevant Insurance Fund. 
Applicants note that if the Shares were to be sold only to Eligible 
Purchasers, and/or Separate Accounts funding variable annuity 
contracts, exemptive relief under Rule 6e-2(b)(15) and Rule 6e-
3(T)(b)(15) would be unnecessary. The relief provided for under Rules 
6e-2(b)(15) and 6e-3(T)(b)(15) does not relate to Eligible Purchasers, 
or to a registered investment company's ability to sell its shares to 
Eligible Purchasers.
    7. 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, the Application requests relief for the class 
consisting of Participating Insurance Companies and their Separate 
Accounts (and to the extent necessary, investment advisers, principal 
underwriters and depositors of such Separate Accounts).
    8. In effect, the partial relief granted in Rules 6e-2(b)(15) and 
6e-3(T)(b)(15) under the 1940 Act from the requirements of section 9 of 
the 1940 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 1940 Act to apply the 
provisions of section 9(a) to 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 1940 Act to the many 
individuals in various unaffiliated insurance companies (or affiliated 
companies of Participating Insurance Companies) that may utilize the 
Insurance Funds as investment vehicles for Variable Contracts. 
Applicants argue that there is no regulatory purpose in extending the 
monitoring requirements to embrace a full application of section 9(a)'s 
eligibility restrictions because of mixed funding or shared funding and 
sales to Qualified Plans, an Adviser or General Accounts. Applicants 
represent that the Participating Insurance Companies and Qualified 
Plans are not expected to play any role in the management of the 
Insurance Funds. Applicants argue that those individuals who 
participate in the management of the Insurance Funds will remain the 
same regardless of which Separate Accounts or Qualified Plans invest in 
the Insurance Funds. Applying the monitoring requirements of section 
9(a) of the 1940 Act because of investment by Separate Accounts of 
Participating Insurance Companies or 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 contract owners and Qualified Plan holders.
    9. Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) under the 1940 
Act provide exemptions from the pass-through voting requirement with 
respect to several significant matters, assuming the limitations on 
mixed and shared funding are observed. Rules 6e-2(b)(15)(iii)(A) and 
6e-3(T)(b)(15)(iii)(A) provide that the insurance company may disregard 
the voting instructions of its contract owners with respect to the 
investments of an underlying fund, or any contract between such a fund 
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), respectively, under the 
1940 Act). Rules 6e-2(b)(15)(iii)(B) and 6e-3(T)(b)(15)(iii)(A)(2) 
provide that the insurance company may disregard the

[[Page 51872]]

voting instructions of its contract owners if the contract owners 
initiate any change in an underlying fund'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), respectively, of Rules 6e-2 and 6e-3(T) under the 1940 
Act).
    10. Rule 6e-2 under the 1940 Act recognizes that a variable life 
insurance contract, as an insurance contract, has important elements 
unique to insurance contracts and is subject to extensive state 
regulation of insurance. In adopting Rule 6e-2(b)(15)(iii), the 
Commission expressly 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. The Commission also expressly 
recognized that state insurance regulators have authority to require an 
insurer to draw from its general account to cover costs imposed upon 
the insurer by a change approved by contract owners over the insurer's 
objection. The Commission, therefore, deemed such exemptions necessary 
``to assure the solvency of the life insurer and performance of its 
contractual obligations by enabling an insurance regulatory authority 
or the life insurer to act when certain proposals reasonably could be 
expected to increase the risks undertaken by the life insurer.'' In 
this respect, flexible premium variable life insurance contracts are 
identical to scheduled premium variable life insurance contracts. 
Applicants, therefore, assert that the corresponding provisions of Rule 
6e-3(T) under the 1940 Act undoubtedly were adopted in recognition of 
the same factors.
    11. Applicants also assert that the sale of Shares to Qualified 
Plans, an Adviser and General Accounts will not have any impact on the 
relief requested herein. With respect to the Qualified Plans, which are 
not registered as investment companies under the 1940 Act, shares of a 
portfolio of an investment company sold to a Qualified Plan must be 
held by the trustees of the Qualified Plan pursuant to section 403(a) 
of the Employee Retirement Income Security Act, as amended (``ERISA''). 
Applicants note that (1) Section 403(a) of ERISA endows Qualified Plan 
trustees with the exclusive authority and responsibility for voting 
proxies provided neither of two enumerated exceptions to that provision 
applies; (2) some of the Qualified Plans may provide for the 
trustee(s), an investment adviser (or advisers), or another named 
fiduciary to exercise voting rights in accordance with instructions 
from participants; and (3) there is no requirement to pass through 
voting rights to Qualified Plan participants.
    12. Applicants argue that an Investment Manager and General 
Accounts are similar in that they are not subject to any pass-through 
voting requirements. Applicants therefore conclude that, unlike the 
case with insurance company Separate Accounts, the issue of resolution 
of material irreconcilable conflicts with respect to voting is not 
present with Eligible Purchasers.
    13. Applicants represent that where a Qualified Plan does not 
provide participants with the right to give voting instructions, the 
trustee or named fiduciary has responsibility to vote the shares held 
by the Qualified Plan. In this circumstance, the trustee has a 
fiduciary duty to vote the shares in the best interest of the Qualified 
Plan participants. Accordingly, even if an Adviser or an affiliate of 
an Adviser were to serve in the capacity of trustee or named fiduciary 
with voting responsibilities, an Adviser or its affiliates would have a 
fiduciary duty to vote relevant Shares in the best interest of the 
Qualified Plan participants.
    14. Further, Applicants assert that even if a Qualified Plan were 
to hold a controlling interest in a Portfolio, Applicants do not 
believe that such control would disadvantage other investors in such 
Portfolio to any greater extent than is the case when any institutional 
shareholder holds a majority of the voting securities of any open-end 
management investment company. In this regard, Applicants submit that 
investment in a Portfolio by a Qualified Plan will not create any of 
the voting complications occasioned by mixed funding or shared funding. 
Unlike mixed funding or shared funding, Applicants argue that Qualified 
Plan investor voting rights cannot be frustrated by veto rights of 
insurers or state regulators.
    15. Where a Qualified Plan provides participants with the right to 
give voting instructions, Applicants see no reason to believe that 
participants in Qualified Plans generally or those in a particular 
Qualified Plan, either as a single group or in combination with 
participants in other Qualified Plans, would vote in a manner that 
would disadvantage Variable Contract holders. Applicants assert that 
the purchase of Shares by Qualified Plans that provide voting rights 
does not present any complications not otherwise occasioned by mixed or 
shared funding.
    16. Applicants do not believe that sale of the Shares to Qualified 
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 which would otherwise exist between Variable Contract 
owners.
    17. Applicants assert that permitting an Insurance Fund to sell its 
shares to an Adviser or to the General Account of a Participating 
Insurance Company will enhance management of each Insurance Fund 
without raising significant concerns regarding material irreconcilable 
conflicts. Unlike the circumstances of many investment companies that 
serve as underlying investment media for variable insurance products, 
the Fund may be deemed to lack an insurance company ``promoter'' for 
purposes of Rule 14a-2 under the 1940 Act. Accordingly, the Fund and 
any other such Future Funds or Portfolios that are established as new 
registrants will be subject to the requirements of section 14(a) of the 
1940 Act, which generally requires that an investment company have a 
net worth of $100,000 upon making a public offering of its shares. 
Portfolios also will require more limited amounts of initial capital in 
connection with the creation of new series and the voting of initial 
shares of such series on matters requiring the approval of 
shareholders. A potential source of the requisite initial capital is a 
Portfolio's adviser or a Participating Insurance Company. Either of 
these parties may have an interest in making the requisite capital 
investments and in participating with an Insurance Fund in its 
organization. Applicants note, however, that the provision of seed 
capital or the purchase of shares in connection with the management of 
an Insurance Fund by its investment adviser or by a Participating 
Insurance Company may be deemed to violate the exclusivity requirement 
of Rule 6e-2(b)(15) and/or Rule 6e-3(T)(b)(15).
    18. Given the conditions of Treas. Reg. Section 1.817-5(f)(3) and 
the harmony of interest between an Insurance Fund, on the one hand, and 
an Adviser or a Participating Insurance Company, on the other, 
Applicants assert that little incentive for overreaching exists. 
Furthermore, Applicants assert such investment should not implicate the 
concerns discussed above regarding the creation of material 
irreconcilable conflicts. Instead, Applicants argue that permitting 
investments by an Adviser, or by General Accounts, will permit the 
orderly and efficient creation of an Insurance Fund, and reduce the 
expense

[[Page 51873]]

and uncertainty of using outside parties at the early stages of the 
Insurance Fund's operations.

Applicants' Conditions

    Applicants agree that the order granting the requested relief shall 
be subject to the following conditions:
    1. A majority of the Board of Trustees (the ``Board'') of each 
Insurance Fund will consist of persons who are not ``interested 
persons'' of the Insurance 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 the 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 Insurance Fund will monitor the Insurance Fund 
for the existence of any material irreconcilable conflict between the 
interests of the contract owners of all Separate Accounts and 
participants of all Qualified Plans investing in the Insurance 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 interpretative 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 Insurance Fund are being 
managed; (e) a difference in voting instructions given by variable 
annuity contract owners, variable life insurance contract owners, and 
trustees of the Qualified Plans; (f) a decision by a Participating 
Insurance Company to disregard the voting instructions of contract 
owners; or (g) if applicable, a decision by a Qualified Plan to 
disregard the voting instructions of Qualified Plan participants.
    3. Participating Insurance Companies (on their own behalf, as well 
as by virtue of any investment of General Account assets in an 
Insurance Fund), an Adviser, and any trustee on behalf of a Qualified 
Plan that executes a Participation Agreement upon becoming an owner of 
10 percent or more of the assets of an Insurance Fund (collectively, 
``Participants'') will report any potential or existing conflicts to 
the Board of the relevant Insurance Fund. Participants 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 of each Participating Insurance Company to inform the Board 
whenever contract owner voting instructions are disregarded, and, if 
pass-through voting is applicable, an obligation by each Trustee for a 
Qualified Plan to inform the Board whenever it has determined to 
disregard Qualified 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 Agreements with the 
relevant Insurance Fund, and these responsibilities will be carried out 
with a view only to the interests of the contract owners. The 
responsibility to report such information and conflicts, and to assist 
the Board, also will be contractual obligations of all Qualified Plans 
under their Participation Agreements, and such agreements will provide 
that these responsibilities will be carried out with a view only to the 
interests of Qualified Plan participants.
    4. If it is determined by a majority of the Board of an Insurance 
Fund, 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 the Separate 
Accounts from the relevant Insurance Fund and reinvesting such assets 
in a different investment vehicle including another Insurance Fund, 
submitting the question as to whether such segregation should be 
implemented to a vote of all affected contract or policy owners and, as 
appropriate, segregating the assets of any appropriate group (i.e., 
variable annuity contract owners or variable life insurance contract 
owners of one or more Participating Insurance Companies) that votes in 
favor of such segregation, or offering to the affected contract owners 
the option of making such a change; and (b) establishing a new 
registered management investment company or managed separate account. 
If a material irreconcilable conflict arises because of a decision by a 
Participating Insurance Company to disregard contract or policy 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 relevant Insurance 
Fund, to withdraw such Participating Insurance Company's Separate 
Account investment in the Insurance 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 the relevant Insurance Fund, and these 
responsibilities will be carried out with a view only to the interests 
of contract owners and Qualified Plan participants. For purposes of 
this Condition 4, a majority of the disinterested directors/ trustees 
of the Board of each Insurance Fund will determine whether or not any 
proposed action adequately remedies any material irreconcilable 
conflict, but in no event will the Insurance Fund or an Adviser, as 
relevant, be required to establish a new funding vehicle for any 
Variable Contract. 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 or policy owners materially and adversely affected by 
the material irreconcilable conflict. Further, no Qualified Plan will 
be required by this Condition 4 to establish a new funding vehicle for 
the Qualified Plan if: (a) A majority of the Qualified Plan 
participants materially and adversely affected by the irreconcilable 
material conflict vote to decline such offer; or (b) pursuant to 
documents governing the Qualified Plan, the Qualified Plan makes such 
decision without a Qualified Plan participant vote.
    5. The Board of each Insurance Fund's determination of the 
existence of a material irreconcilable conflict and its implications 
will be made known in writing promptly to all Participants.
    6. As to Variable Contracts issued by Separate Accounts registered 
under the 1940 Act, Participating Insurance Companies will provide 
pass-through voting privileges to all Variable Contract owners as 
required by the 1940 Act as

[[Page 51874]]

interpreted by the Commission. However, as to Variable Contracts issued 
by unregistered Separate Accounts, pass-through voting privileges will 
be extended to contract owners to the extent granted by the issuing 
insurance company. Accordingly, such Participants, where applicable, 
will vote the Shares held in their Separate Accounts in a manner 
consistent with voting instructions timely received from Variable 
Contract owners. Participating Insurance Companies will be responsible 
for assuring that each Separate Account investing in the relevant 
Insurance Fund calculates voting privileges in a manner consistent with 
other Participants. The obligation to calculate voting privileges as 
provided in the Application will be a contractual obligation of all 
Participating Insurance Companies under their Participation Agreement 
with the relevant Insurance Fund. Each Participating Insurance Company 
will vote shares for which it has not received timely voting 
instructions, as well as shares held in its General Account or 
otherwise attributed to it, in the same proportion as it votes those 
shares for which it has received voting instructions. Each Qualified 
Plan will vote as required by applicable law and governing Qualified 
Plan documents.
    7. As long as the 1940 Act requires pass-through voting privileges 
to be provided to Variable Contract owners, an Adviser, who has 
provided seed capital for the Insurance Fund, and any General Account 
will vote their respective Shares in the same proportion as all 
variable contract owners having voting rights with respect to that 
Insurance Fund; provided, however, that an Adviser or any General 
Account shall vote its Shares in such other manner as may be required 
by the Commission or its staff.
    8. Each Insurance Fund will comply with all provisions of the 1940 
Act requiring voting by shareholders, which, for these purposes, shall 
be the persons having a voting interest in the Shares, and, in 
particular, the Insurance Fund will either provide for annual meetings 
(except to the extent that the Commission may interpret section 16 of 
the 1940 Act not to require such meetings) or comply with section 16(c) 
of the 1940 Act (although each Insurance Fund is not, or will not be, 
one of those trusts of the type described in section 16(c) of the 1940 
Act), as well as with section 16(a) of the 1940 Act and, if and when 
applicable, section 16(b) of the 1940 Act. Further, each Insurance 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. An Insurance Fund will make its Shares available to the Separate 
Accounts and Qualified Plans at or about the time it accepts any seed 
capital from an Adviser or General Account of a Participating Insurance 
Company.
    10. Each Insurance Fund has notified, or will notify, all 
Participants that Separate Account prospectus disclosure or Qualified 
Plan prospectuses or other Qualified Plan disclosure documents 
regarding potential risks of mixed and shared funding may be 
appropriate. Each Insurance Fund will disclose, in its prospectus that: 
(a) Shares of the Existing Funds may be offered to Separate Accounts 
funding both variable annuity contracts and variable life insurance 
policies and, if applicable, to Qualified Plans; (b) due to differences 
in tax treatment and other considerations, the interests of various 
contract owners participating in the Insurance Fund and the interests 
of Qualified Plans investing in the Insurance Fund, if applicable, may 
conflict; and (c) the Insurance 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 conflict.
    11. If and to the extent that Rule 6e-2 and Rule 6e-3(T) under the 
1940 Act are amended, or proposed Rule 6e-3 under the 1940 Act is 
adopted, to provide exemptive relief from any provision of the 1940 
Act, or the rules promulgated thereunder, with respect to mixed or 
shared funding, on terms and conditions materially different from any 
exemptions granted in the order requested in the Application, then each 
Insurance Fund and/or Participating Insurance Companies, as 
appropriate, shall take such steps as may be necessary to comply with 
Rules 6e-2 and 6e-3(T), or Rule 6e-3, as such rules are applicable.
    12. Each Participant, at least annually, will submit to the Board 
of Each Insurance Fund such reports, materials, or data as a 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 the Application. Such reports, materials, and 
data will be submitted more frequently if deemed appropriate by the 
Board of an Insurance Fund. The obligations of the Participants to 
provide these reports, materials, and data to the Board, when it so 
reasonably requests, will be a contractual obligation of all 
Participants under their Participation Agreements with the relevant 
Insurance Fund.
    13. All reports of potential or existing conflicts received by the 
Board of each Insurance Fund, 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 Insurance Fund will not accept a purchase order from a 
Qualified Plan if such purchase would make the Qualified Plan an owner 
of 10 percent or more of the assets of the Insurance Fund unless the 
Trustee for such Qualified Plan executes an agreement with the 
Insurance Fund governing participation in the Insurance Fund that 
includes the conditions set forth herein to the extent applicable. A 
Trustee for a Qualified Plan will execute an application containing an 
acknowledgement of this condition at the time of its initial purchase 
of Shares.

Conclusions

    Applicants submit that, for the reasons summarized above and to the 
extent necessary or appropriate to provide for the transactions 
described herein, the requested 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, in accordance with the standards of section 
6(c) of the 1940 Act, are 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. E7-17786 Filed 9-10-07; 8:45 am]

BILLING CODE 8010-01-P