Northern Lights Variable Trust, et al.;, 44625-44633 [2011-18817]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 76, Number 143 (Tuesday, July 26, 2011)]
[Notices]
[Pages 44625-44633]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18817]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-29729; File No. 812-13863]


Northern Lights Variable Trust, et al.; Notice of Application

July 19, 2011.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application pursuant to Section 6(c) of the 
Investment Company Act of 1940, as amended (the ``1940 Act or Act''), 
seeking exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the 
1940 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder.

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APPLICANTS: Northern Lights Variable Trust (the ``Fund'') and Gemini 
Fund Services, LLC (``Gemini'') (collectively, ``Applicants'').

SUMMARY OF APPLICATION: Applicants request an order pursuant to Section 
6(c) of the 1940 Act to permit shares of an existing portfolio of the 
Fund and shares of any future investment company (``Shares'') that is 
designed to fund VA Accounts and/or VLI Accounts (as defined below) and 
for which Gemini or any of its affiliates may serve in the future as 
investment adviser, sub-adviser, manager, administrator, principal 
underwriter or sponsor (``Insurance Fund'' and collectively with the 
Fund, ``Insurance Funds'') to be sold and held by: (i) Separate 
accounts registered as investment companies or 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 that 
fund variable annuity contracts (``VA Accounts'') and variable life 
insurance contracts (``VLI Accounts'') (VA Accounts and VLI Accounts 
together ``Separate Accounts'') issued by both affiliated life 
insurance companies and unaffiliated life insurance companies 
(``Participating Insurance Companies''); (ii) trustees of qualified 
group pension and group retirement plans outside of the Separate 
Account context (``Qualified Plans''); (iii) investment adviser(s) or 
affiliated person(s) of the investment adviser(s) to a series of an 
Insurance Fund (the ``Adviser''), for the purpose of providing seed 
capital to a series of an Insurance Fund; and (iv) general accounts of 
insurance company depositors of VA Accounts and/or VLI Accounts 
(``General Accounts'').

DATES: Filing Date: The application was filed on January 25, 2011, and 
amended and restated on July 15, 2011.
    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 August 15, 2011, 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. Northern Lights Variable Trust, c/o 
Emile Molineaux, Esquire, Gemini Fund Services, LLC, 450 Wireless 
Boulevard, Hauppage, New York 11788-0132, copies to JoAnn Strasser, 
Esquire, Thompson Hine LLP, 312 Walnut Street, Cincinnati, Ohio 45202.

FOR FURTHER INFORMATION CONTACT: Michelle Roberts, Senior Counsel, or 
Joyce M. Pickholz, 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 may be obtained via the 
Commission's Web site by searching for the file number, or for an 
applicant using the Company name box, at https://www.sec.gov/search.htm, 
or by calling (202) 551-8090.

Applicants' Representations

    1. The Fund was organized as a Delaware statutory trust on November 
2, 2005 and is registered under the 1940 Act as an open-end management 
investment company (File No. 811-21853). The Fund is a series 
investment company as defined by Rule 18f-2 under the 1940 Act and is 
currently comprised of fourteen portfolios managed by seven different 
investment advisers and three subadvisers. The portfolios share a 
single Board of Trustees (``Board'') and service providers for example, 
auditors and fund counsel. The investment advisers are not affiliated 
with Gemini and may or may not be affiliated with each other.
    2. Shares of the portfolios will not be sold to the general public, 
but will be offered to Separate Accounts of a Participating Insurance 
Company, Qualified Plans, the Adviser for seed money and General 
Accounts.
    3. Gemini provides administrative, fund accounting and transfer 
agent services to the portfolios, subject to the supervision of the 
Board. Gemini may provide individuals to serve as officers of the 
Insurance Funds, which officers may be directors, officers or employees 
of Gemini or its affiliates. Gemini is paid a fee for its services, 
which may consist of a base fee, a per account fee and/or an asset-
based fee.
    4. The Insurance Funds may offer their Shares to Separate Accounts 
of Participating Insurance Companies to serve as an investment medium 
to support variable life insurance contracts (``VLI Contracts'') and 
variable annuity contracts (``VA Contracts'') (together, ``Variable 
Contracts'') issued through such accounts. If a Separate Account is 
registered as an investment company under the 1940 Act, or is exempt 
from such registration under Section 3(c) of the 1940 Act, it will be a 
``separate account'' as defined by Rule 0-1(e) (or any successor rule) 
under the 1940 Act. For purposes of the Act, the Participating 
Insurance Company that

[[Page 44626]]

establishes such a Separate 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.
    5. As described more fully below, the Insurance Funds will sell 
Shares to Separate Accounts only if each Participating Insurance 
Company sponsoring such a Separate Account enters into a participation 
agreement (a ``Participation Agreement'') with such Insurance Fund. The 
Participation Agreement will govern participation by the Participating 
Insurance Company in such Insurance Fund and will memorialize, among 
other matters, the fact that the Participating Insurance Company will 
remain responsible for establishing and maintaining any Separate 
Account covered by the Participation 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 role of the Insurance Funds under this 
arrangement insofar as federal securities laws are applicable, will 
consist of offering Shares to the Separate Accounts and fulfilling any 
conditions that the Commission may impose upon granting the order.
    6. 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.''
    7. Applicants propose that the Insurance Funds be permitted to 
offer and sell Shares to Qualified Plans administered by a trustee. 
Federal tax law permits investment companies to increase their net 
assets by selling shares to Qualified Plans.
    8. Qualified Plans may invest in shares of an investment company as 
the sole investment under the Qualified Plan, or as one of several 
investments. Qualified Plan participants may or may not be given an 
investment choice depending on the terms of the Qualified Plan itself. 
The trustees or other fiduciaries of a Qualified Plan may vote 
investment company shares held by the Qualified Plan in their own 
discretion or, if the applicable Qualified Plan so provides, vote such 
shares in accordance with instructions from participants in such 
Qualified Plans. Applicants have no control over whether trustees or 
other fiduciaries of Qualified Plans, rather than participants in the 
Qualified Plans, have the right to vote under any particular Qualified 
Plan. Each Qualified Plan must be administered in accordance with the 
terms of the Qualified Plan and as determined by its trustee or 
trustees.
    9. Applicants propose that the Insurance Funds may also sell Shares 
to its Adviser for the purpose of providing seed capital to a 
portfolio. The Treasury Regulations permit such sales as long as the 
return on shares held by the adviser or an affiliate is computed in the 
same manner as shares held by Separate Accounts, the adviser or an 
affiliate does not intend to sell the shares to the public, and sales 
to an investment adviser or affiliate are only made in connection with 
the creation of a series of an investment company. Applicants propose 
that the Insurance Funds also be permitted to offer and/or sell Shares 
to the General Accounts of Participating Insurance Companies. The 
Treasury regulations permit sales to general accounts as long as the 
return on shares held by general accounts is computed in the same 
manner as for shares held by Separate Accounts and the Participating 
Insurance Company does not intend to sell the shares to the public.
    10. The use of a common management investment company (or 
investment portfolio thereof) as an investment medium for VLI Accounts, 
VA Accounts, investment advisers, a General Account 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 1940 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 
organized as unit investment trusts (``UITs'') 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 a portfolio 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 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. 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 organized as UITs 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 a 
portfolio 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, the general 
account of an unaffiliated Participating Insurance Company, or a 
Qualified Plan. In other words, Rule 6e-3(T)(b)(15) provides exemptions 
when a VLI Account supporting flexible premium

[[Page 44627]]

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.
    4. As explained below, Applicants maintain that there is no policy 
reason for the sale of Shares to Qualified Plans to prohibit or 
otherwise limit a VLI Account and its Participating Insurance Company 
depositor 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 provides 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 when such 
Shares are also sold to Qualified Plans.
    5. 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 Insurance Funds may also sell their Shares to 
Qualified Plans. Rather, Applicants assert that the proposed sale of 
Shares 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.
    6. For the reasons explained below, Applicants have concluded that 
investment by Qualified Plans in the Insurance 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.
    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, Applicants request exemptions for a class consisting 
of VLI Accounts investing in shares of existing and future portfolios 
of Insurance Funds, their Participating Insurance Company depositors 
and their principal underwriters.
    8. 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 the rules or regulations 
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 and in the public interest, consistent with the 
protection of investors, and consistent with the purposes fairly 
intended by the policy and provisions of the Act.
    9. Section 9(a)(3) of the 1940 Act provides, among other things, 
that it is unlawful for any company to serve as investment adviser or 
principal underwriter of any registered open-end investment company if 
an affiliated person of that company is subject to a disqualification 
enumerated in Sections 9(a)(1) or (2). Rules 6e-2(b)(15)(i) and (ii) 
and Rules 6e-3(T)(b)(15)(i) and (ii) under the Act provide exemptions 
from Section 9(a) under certain circumstances, subject to the 
limitations discussed above on mixed funding, extended mixed funding 
and shared funding. These exemptions limit the application of the 
eligibility restrictions to affiliated individuals or companies that 
directly participate in management of the underlying investment 
company.
    10. 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, so 
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 1940 
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.
    11. 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 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 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 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 Separate 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 Insurance Funds. 
Those individuals who participate in the management of the Insurance 
Funds will remain the same regardless of which VA Accounts, VLI 
Accounts, insurance companies, investment advisers, or Qualified Plans 
invest in the Insurance Funds. Applying the monitoring requirements of 
Section 9(a) of the 1940 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 Qualified 
Plan participants. Moreover, Qualified Plans, unlike separate accounts, 
are not themselves investment companies, and therefore are not subject 
to Section 9 of the 1940 Act. Furthermore, it is not anticipated that a 
Qualified Plan would be an affiliated person of an Insurance Fund 
except by virtue of its holding 5% or more of an Insurance Fund's 
shares.
    12. Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) under the 1940 
Act provide exemptions from pass-through voting requirements with 
respect to several significant matters, assuming the limitations on 
mixed funding, extended mixed funding and shared funding are observed. 
Rules 6e-2(b)(15)(iii)(A) and 6e-3(T)(b)(15)(iii)(A) provide that the 
insurance company may disregard the voting instructions of its variable 
life insurance contract owners with respect to the investments of an 
underlying

[[Page 44628]]

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)).
    13. 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)).
    14. 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.
    15. 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 is 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.
    16. The sale of Shares to Qualified Plans or the Adviser 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 Qualified Plans, not insurance companies. The 
exercise of voting rights by Qualified Plans, whether by trustees, 
other fiduciaries, participants, beneficiaries, or investment managers 
engaged by the Qualified Plans, does not raise the type of issues 
respecting disregard of voting rights that are raised by VLI Accounts. 
With respect to Qualified Plans, which are not registered as investment 
companies under the 1940 Act, there is no requirement to pass through 
voting rights to Qualified Plan participants. Indeed, to the contrary, 
applicable law expressly reserves voting rights associated with 
Qualified Plan assets to certain specified persons.
    17. If a named fiduciary to a Qualified 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 Qualified Plans may have 
their trustee(s) or other fiduciaries exercise voting rights 
attributable to investment securities held by the Qualified Plans in 
their discretion. Some Qualified 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 Qualified Plan participants.
    18. 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 Qualified Plan participants with respect 
to voting Shares. Accordingly, unlike the circumstances surrounding 
Separate Accounts, because Qualified 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 Shares.
    19. In addition, if a Qualified Plan were to hold a controlling 
interest in an Insurance Fund, Applicants do not believe that such 
control would disadvantage other investors in such Insurance 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 
portfolio by a Qualified Plan will not create any of the voting 
complications occasioned by VLI Account investments in the portfolio. 
Unlike VLI Account investments, Qualified Plan investor voting rights 
cannot be frustrated by veto rights of Participating Insurance 
Companies or state insurance regulators.
    20. Where a Qualified Plan provides participants with the right to 
instruct the trustee(s) how to vote portfolio shares, Applicants see no 
reason why such participants 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 VLI Contract owners. The purchase of Shares by 
Qualified Plans that provide voting rights does not present any 
complications not otherwise occasioned by mixed or shared funding.
    21. 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.
    22. For reasons unrelated to the 1940 Act, however, Internal 
Revenue Service Ruling 81-225 (Sept. 25, 1981) effectively deprived VA 
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 Variable Contracts. In particular, Section 817(h) of the 
Code, in effect, requires that the investments made by both VLI 
Accounts and VA 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. In addition, any 
underlying fund, including an Insurance Fund that sells Shares to 
Separate Accounts, would, in effect, be precluded from also selling its 
Shares to the public. Consequently, the Insurance Fund may not sell 
Shares directly to the public.
    23. Applicants assert that the rights of an insurance company or a 
state insurance regulator to disregard the voting instructions of 
owners of

[[Page 44629]]

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.
    24. 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.
    25. 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 under the 1940 Act. Affiliated insurers may be 
domiciled in different states and be subject to differing state law 
requirements. Affiliation does not reduce the potential, if any exists, 
for differences in state regulatory requirements. In any event, the 
conditions set forth below are designed to safeguard against, and 
provide procedures for resolving, any adverse effects that differences 
among state regulatory requirements may produce. If a particular state 
insurance regulator's decision conflicts with the majority of other 
state regulators, then the affected Participating Insurance Company 
will be required to withdraw its separate account investments in the 
relevant portfolio. This requirement will be provided for in the 
Participation Agreement that will be entered into by Participating 
Insurance Companies with an Insurance Fund.
    26. Rules 6e-2(b)(15) and 6e-3(T)(b)(15) under the 1940 Act 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) under the 1940 Act that the 
Participating Insurance Company's disregard of voting instructions be 
reasonable and based on specific good faith determinations.
    27. 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 Insurance Fund's election, to 
withdraw its VLI Accounts' and VA Accounts' investments in the relevant 
portfolio. 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 between the Participating Insurance Company and 
the Insurance Fund.
    28. Applicants assert that there is no reason why the investment 
policies of a portfolio would or should be materially different from 
what these policies would or should be if the portfolio supported only 
VA Accounts or VLI Accounts, whether flexible premium or scheduled 
premium VLI Contracts. Each type of insurance contract is designed as a 
long-term investment program.
    29. Each portfolio 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 Separate Accounts. The sale of all 
Variable Contracts and ultimate success of all Separate Accounts 
depends, at least in part, on satisfactory investment performance, 
which provides an incentive for each Participating Insurance Company to 
seek optimal investment performance.
    30. 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 
portfolio 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 portfolios. Mixed and shared 
funding will broaden the base of potential Variable Contract owner 
investors, which may facilitate the establishment of additional 
portfolios serving diverse goals.
    31. Applicants do not believe that the sale of 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 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 potential conflicts consistent with the best interests of 
Variable Contract owners and Qualified Plan participants.
    32. 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 
portfolio. Applicants have concluded that neither the Code, nor the 
Treasury Regulations nor Revenue Rulings thereunder, present any 
inherent conflicts of interest if Qualified Plans, VLI Accounts, and VA 
Accounts all invest in the same portfolio.
    33. Applicants note that, while there are differences in the manner 
in which

[[Page 44630]]

distributions from VLI Accounts and Qualified Plans are taxed, these 
differences have no impact on the portfolios. When distributions are to 
be made, and a VLI Account or Qualified Plan is unable to net purchase 
payments to make distributions, the VLI Account or Qualified Plan will 
redeem shares of the relevant portfolio at its net asset values in 
conformity with Rule 22c-1 under the 1940 Act (without the imposition 
of any sales charge) to provide proceeds to meet distribution needs. A 
Participating Insurance Company will then make distributions in 
accordance with the terms of the Qualified Plan.
    34. Applicants considered whether it is possible to provide an 
equitable means of giving voting rights to VLI Contract owners and 
Qualified Plans. In connection with any meeting of an Insurance Fund's 
shareholders, the relevant transfer agent will inform each 
Participating Insurance Company, 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 
1940 Act, as applicable, and its Participation Agreement with an 
Insurance Fund. Shares held by a General Account of a Participating 
Insurance Company will be voted by the Participating Insurance Company 
in the same proportion as Shares for which it receives voting 
instructions from its Variable Contract owners. Shares held by 
Qualified Plans will be voted in accordance with applicable law. The 
voting rights provided to Qualified Plans with respect to the Shares 
would be no different from the voting rights that are provided to 
Qualified Plans with respect to shares of mutual funds sold to the 
general public. Furthermore, if a material irreconcilable conflict 
arises because of a Qualified Plan's decision to disregard Qualified 
Plan participant voting instructions, if applicable, and that decision 
represents a minority position or would preclude a majority vote, the 
Qualified Plan may be required, at the election of the relevant 
Insurance Fund, to withdraw its investment in a portfolio, and no 
charge or penalty will be imposed as a result of such withdrawal.
    35. Applicants do not believe that the ability of an Insurance Fund 
to sell Shares directly to its Adviser, Qualified Plans, or General 
Account gives rise to a senior security. ``Senior Security'' is defined 
in Section 18(g) of the 1940 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 Qualified Plans and owners of VLI 
Contracts, VLI Accounts, VA Accounts, Participating Insurance 
Companies, Qualified Plans, and the Adviser only have, or will only 
have, rights with respect to their respective Shares. These parties can 
only redeem such Shares at net asset value. No shareholder of a 
portfolio has any preference over any other shareholder with respect to 
distribution of assets or payment of dividends.
    36. Applicants do not believe that the veto power of state 
insurance commissioners over certain potential changes to portfolio 
investment objectives approved by owners of VLI Contracts creates 
conflicts between the interests of such owners and the interests of 
Qualified 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.
    37. Although Participating Insurance Companies may have to overcome 
regulatory impediments in redeeming shares of a portfolio held by their 
VLI Accounts, the Qualified Plans and the participants in participant-
directed Qualified Plans can make decisions quickly and redeem their 
Shares and reinvest in another investment company or other funding 
vehicle without impediments, or as is the case with most Qualified 
Plans, hold cash pending suitable investment. As a result, conflicts 
between the interests of VLI Contract owners and the interests of 
Qualified Plans and Qualified Plan participants can usually be resolved 
quickly since the Qualified Plans can, on their own, redeem their 
Shares.
    38. 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 Qualified Plan participants from 
future changes in the federal tax laws than that which already exists 
between Variable Contract owners.
    39. Applicants assert that permitting an Insurance Fund to sell 
Shares to its Adviser for the purpose of obtaining seed money or to the 
General Account will enhance management of the Insurance Fund without 
raising significant concerns regarding material irreconcilable 
conflicts among different types of investors. A potential source of 
initial capital is the Adviser or a Participating Insurance Company. 
However, the provision of seed capital by the 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). 
Given the conditions of Treasury Regulation Section 1.817-5(f)(3) and 
the harmony of interest between a portfolio, on the one hand, and its 
Adviser or a Participating Insurance Company, 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 Adviser or by General Accounts, will permit the orderly and 
efficient creation and operation of a portfolio, and reduce the expense 
and uncertainty of using outside parties at the early stages of the 
portfolio's operations.
    40. 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 a portfolio 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.
    41. Participating Insurance Companies will benefit not only from 
the investment expertise of the Adviser, but also from the potential 
cost efficiencies and investment flexibility afforded by larger pools 
of funds. Mixed and shared funding also would permit a greater amount 
of assets available for investment by a portfolio, thereby

[[Page 44631]]

promoting economies of scale, by permitting increased safety through 
greater diversification, or by making the addition of new portfolios 
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.
    42. Applicants also submit that, regardless of the type of 
shareholder in a portfolio, the Adviser is or would be contractually 
and otherwise obligated to manage the portfolio solely and exclusively 
in accordance with that portfolio's investment objectives, policies and 
restrictions, as well as any guidelines established by the Board. Thus, 
each portfolio will be managed in the same manner as any other mutual 
fund.
    43. 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 Shares, as described above, will not 
have any adverse federal income tax consequences to other investors in 
the portfolios.
    44. In addition, Applicants assert that granting the exemptions 
requested herein is in the public interest and will not compromise the 
regulatory purposes of Sections 9(a), 13(a), 15(a), or 15(b) of the 
1940 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 each 
Insurance Fund:
    1. A majority of the Board will consist of persons who are not 
``interested persons'' of an 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 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 will monitor an Insurance 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 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 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 an Insurance Fund are being managed, 
(e) a difference in voting instructions given by VA Contract owners, 
VLI Contract owners, and Qualified Plans or Qualified 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 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 a portfolio 
of an Insurance Fund), the Adviser, and any Qualified Plan that 
executes a Participation Agreement upon becoming an owner of 10% or 
more of the assets of a portfolio (collectively, ``Participants'') will 
report any potential or existing conflicts to the Board. Each 
Participant will be responsible for assisting the Board in carrying out 
the Board's responsibilities under these conditions by providing the 
Board with all information reasonably necessary for the Board to 
consider any issues raised. This responsibility includes, but is not 
limited to, an obligation by each Participating Insurance Company to 
inform the Board whenever Variable Contract owner voting instructions 
are disregarded, and, if pass-through voting is applicable, an 
obligation by each trustee for a 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 
Agreement with an Insurance 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 
Qualified Plans under their Participation Agreement with the relevant 
Insurance Fund, 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, or a majority of 
the disinterested trustees, 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 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 relevant portfolio and reinvesting 
such assets in a different investment vehicle including another 
portfolio, (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 
Qualified Plans from the affected portfolio 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 Insurance Fund, to 
withdraw such Participating Insurance Company's VA Account and VLI 
Account investments in a portfolio, and no charge or penalty will be 
imposed as a result of such withdrawal. If a material irreconcilable 
conflict arises because of a Qualified Plan's decision to disregard 
Qualified Plan participant voting instructions, if applicable, and that 
decision represents a minority position or would preclude a majority 
vote, the Qualified Plan may be required, at the election of the

[[Page 44632]]

Insurance, to withdraw its investment in a portfolio, 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 Insurance 
Fund, and these responsibilities will be carried out with a view only 
to the interests of Variable Contract owners or, as applicable, 
Qualified Plan participants.
    For purposes of this Condition 4, a majority of the disinterested 
trustees of the Board will determine whether or not any proposed action 
adequately remedies any material irreconcilable conflict, but, in no 
event, will an Insurance Fund or the Adviser be required to establish a 
new funding vehicle for any Variable Contract or Qualified 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 Variable 
Contract 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 trustee makes such decision without 
a Plan participant vote.
    5. The 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 1940 Act as interpreted by the Commission. 
However, as to Variable Contracts issued through VA Accounts or VLI 
Accounts not registered as investment companies under the 1940 Act, 
pass-through voting privileges will be extended to Variable Contract 
owners to the extent granted by the Participating Insurance Company. 
Accordingly, such Participating Insurance Companies, 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 their Separate Accounts investing in the relevant 
portfolio calculate voting privileges in a manner consistent with all 
other Participants.
    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 an 
Insurance Fund. Each Participating Insurance Company will vote Shares 
held in its VLI or VA Accounts for which no timely voting instructions 
are received, as well as Shares held in its General Account or 
otherwise attributed to it, in the same proportion as those Shares for 
which voting instructions are received. Each Qualified Plan will vote 
as required by applicable law, governing Qualified Plan documents and 
as provided in this application.
    7. As long as the 1940 Act requires pass-through voting privileges 
to be provided to Variable Contract owners or the Commission interprets 
the Act to require the same, the Adviser or any General Account will 
vote its respective Shares in the same proportion as all votes cast on 
behalf of all Variable Contract owners having voting rights; provided, 
however, that the Adviser or 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 its shares), and, in 
particular, an Insurance 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 Insurance 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 Insurance Fund will act in 
accordance with the Commission's interpretations of the requirements of 
Section 16(a) with respect to periodic elections of trustees and with 
whatever rules the Commission may promulgate thereto.
    9. An Insurance Fund will make Shares available under a Variable 
Contract and/or Qualified Plan at or about the time it accepts any seed 
capital from the Adviser or from a General Account of a Participating 
Insurance Company.
    10. Each Insurance 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 Qualified Plan documents. Each Insurance Fund will 
disclose, in its prospectus that: (a) Shares may be offered to VA 
Accounts and VLI Accounts funding both VA Contracts and VLI Contracts 
and, if applicable, to Plans, (b) due to differences in tax treatment 
and other considerations, the interests of various Variable Contract 
owners participating in an Insurance Fund and the interests of 
Qualified Plan participants investing in an Insurance Fund, if 
applicable, may conflict, and (c) the 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 1940 
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 an Insurance 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 
on behalf of an Insurance Fund such reports, materials or data as the 
Board reasonably may request so that the 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. 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 an Insurance Fund.
    13. All reports of potential or existing conflicts received by the 
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

[[Page 44633]]

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 a portfolio unless the Qualified 
Plan executes an agreement with an Insurance Fund governing 
participation in the portfolio that includes the conditions set forth 
herein to the extent applicable. A Qualified 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.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-18817 Filed 7-25-11; 8:45 am]
BILLING CODE 8011-01-P