[Federal Register Volume 60, Number 132 (Tuesday, July 11, 1995)]
[Notices]
[Pages 35773-35777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16933]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21181; No. 812-9514]
Hartford Life Insurance Company, et al.
June 30, 1995.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').
ACTION: Notice of Application for an Order under the Investment Company
Act of 1940 (``1940 Act'').
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APPLICANTS: Hartford Life Insurance Company (``Hartford''), ITT
Hartford Life and Annuity Insurance Company (``ITT-Hartford'')
(collectively, ``Companies''), Separate Account VL-II of Hartford
(``Account VL-II''), Separate Account VL III of ITT-Hartford (``Account
VL-III'') (collectively, ``Separate Accounts''), any future separate
accounts (``Future Accounts'') of the Companies offering variable life
insurance contracts (``Future Contracts``) that are materially similar
to the last survivor flexible premium variable life insurance contracts
(``Contracts'') offered by the Separate Accounts, and Hartford Equity
Sales Company (``HESCO'').
RELEVANT 1940 ACT SECTIONS: Order requested under Section 6(c) for
exemptions from Sections 27(a)(3) and 27(c)(2) of the 1940 Act and
Rules 6e-3(T)(b)(13)(ii) and 6e-3(T)(c)(4)(v) thereunder.
SUMMARY OF APPLICATION: Applicants seek an order to permit the issuance
of the Contracts in which: (1) Premium payments attributable to the
basic face amount in excess of the target premium and any premium
payments attributable to the supplemental face amount may be subject to
a lower sales load when compared to a subsequent year's premium payment
attributable to the basic face amount up to the target premium; and (2)
a deduction is made from premium payments of an amount that is
reasonably related to the Companies' increased federal tax burden
resulting from the application of Section 848 of the Internal Revenue
Code of 1986, as amended (``Code'').
FILING DATE: The application was filed on March 3, 1995.
HEARING OR NOTIFICATION OF HEARING: An order granting the Application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving Applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on July 24, 1995, and should be accompanied by proof of service on
Applicants in the form of an affidavit or, for lawyers, a certificate
of service. Hearing requests should state the nature of the requestor's
interest, the reason for the request, and the issues contested. Persons
may request notification of a hearing by writing to the Secretary of
the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 5th
Street, NW., Washington, DC 20549. Applicants, c/o Rodney J. Vessels,
Esq., Counsel, ITT Hartford Life Insurance Companies, 200 Hopmeadow
Street, Simsbury, Connecticut 06089.
FOR FURTHER INFORMATION CONTACT:
Yvonne M. Hunold, Assistant Special Counsel, or Wendy Finck
Friedlander, Deputy Chief, at (202) 942-0670, Office of Insurance
Products (Division of Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application; the complete application is available for a fee from the
Commission's Public Reference Branch.
Applicants' Representations
1. Hartford, a Connecticut stock life insurance company, offers
life insurance in all states and the District of Columbia. Hartford is
indirectly wholly-owned by Hartford Fire Insurance Company, a
subsidiary of ITT Corporation.
2. ITT-Hartford, a Wisconsin stock life insurance company, offers
life insurance and annuities in all states, except New York, and in the
District of Columbia. ITT-Hartford is a wholly owned subsidiary of
Hartford.
3. Account VL-II was established by Hartford as a separate account
under the insurance laws of Connecticut. Account VL-III was established
by ITT-Hartford as a separate account under the insurance laws of
Wisconsin. The Separate Accounts have filed registration statements to
register as unit investment trusts under the 1940 Act. Registration
statements also have been filed under the Securities Act of 1933 in
connection with the offering of the Contracts by the Separate Accounts.
Each Separate Account presently is comprised of twenty-two sub-accounts
(``Sub-Accounts''), which invest exclusively in certain open-end
management investment companies or series of such companies
(``Funds'').\1\
\1\ The Funds include: (1) the Hartford Funds--Hartford Advisers
Fund, Inc., Hartford Aggressive Growth Fund, Inc., Hartford Bond
Fund, Inc., Hartford Dividend and Growth Fund, Inc., Hartford Index
Fund, Inc., Hartford International Opportunities Fund, Inc.,
Hartford Mortgage Securities Fund, Inc., Hartford Stock Fund, Inc.,
and HVA Money Market Fund, Inc., which are managed by Hartford
Investment Management Company; (2) The Putnam Funds--PCM Diversified
Income Fund, PCM Global Asset Allocation Fund, PCM Global Growth
Fund, PCM Growth and Income Fund, PCM High Yield Fund, PCM Money
Market Fund, PCM New Opportunities Fund, PCM U.S. Government and
High Quality Bond Fund, PCM Utilities Growth and Income Fund, and
PCM Voyager Fund, which are managed by the Putnam Management
Company, Inc.; and (3) the Fidelity Funds--the Equity-Income
Portfolio, Overseas Portfolio and Asset Manager Portfolio, which are
managed by Fidelity Management & Research Company.
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4. HESCO is the principal underwriter for the Contracts and for
other variable insurance contracts issued by the Companies' other
separate accounts. HESCO is registered as a broker-dealer under the
Securities Exchange Act of 1934.
5. The Policies are last survivor flexible premium variable life
insurance contracts that provide for allocation of premium payments to
the Sub-Accounts or to a fixed account. The cash value and the death
benefit under the Contracts may fluctuate depending on the investment
experience of the Sub-Accounts. There are three Death Benefit Options,
which are payable at the death of the last surviving insured: (a) face
amount; (b) face amount plus account value; or (c) face amount plus a
return of premiums. The minimum death benefit is equal to the account
value multiplied by a specified percentage, which varies according to
certain conditions. The Contracts will not lapse if the cash surrender
value is sufficient to cover monthly fees and charges deducted from
account value or the death benefit guarantee is in effect.
6. Certain fees and charges are deducted under the Contracts,
including a premium expense and processing charge and a state premium
tax charge as well as monthly issue charges, administrative charges,
insurance charges, charges for optional rider benefits, charges for
extra mortality risks, and a charge for mortality and expense risks. In
addition, Applicants propose to deduct from premium payments a front-
end sales load and a charge equal to 1.25% of each premium payment to
cover the estimated cost of the federal income tax treatment under
Section 848 of the Code, commonly referred to as the ``DAC Tax,'' both
of which are discussed below.
[[Page 35774]]
7. Front-End Sales Load Charge. a. The front-end sales load is
based on the amount of the premium paid in relation to the ``Target
Premium,'' \2\ the Contract Year in which the premium is paid, and the
pro-rated amount of the premium payment attributable to the basic face
amount and to the supplemental face amount.\3\
\2\ The ``Target Premium'' is a percentage of the level annual
premium payment, or the ``Guideline Annual Premium,'' necessary to
provide future benefits under the Policy through maturity.
\3\ Premium payments are allocated to the basic face amount and
to the supplemental face amount in the same ratio that the initial
amounts each bear, respectively, to the initial face amount.
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b. Current and maximum front-end sales load for premium payments
attributable to: (1) the basic face amount up to Target Premium, (2)
the basic face amount in excess of the Target Premium, and (3)
supplemental face amount, are as follows:
Front-End Sales Loads
------------------------------------------------------------------------
Basic face amount Supplemental
---------------------------- face amount
Up to target Excess of ---------------
premium target
Contract years -------------- premium
-------------- Current/max
Current/max Current/max (percent)
(percent) (percent)
------------------------------------------------------------------------
1........................... 50.0/50.0 9.0/9.0 4.0/4.0
2-5......................... 15.0/15.0 4.0/4.0 4.0/4.0
6-10........................ 10.0/10.0 4.0/4.0 4.0/4.0
11-20....................... 2.0/2.0 2.0/2.0 2.0/2.0
After 20.................... 0.0/0.0 0.0/2.0 0.0/2.0
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8. Section 848 ``DAC Tax'' Charge. a. Applicants state that the
1.25% charge deducted from each Premium Payment is designed to
reimburse the Companies for their increased federal tax burden
resulting from the application of Section 848 of the Code to the
receipt of those premiums. Section 848, as amended, requires life
insurance companies to capitalize and amortize over ten years certain
general expenses for the current year rather than deduct these expenses
in full from the current year's gross income, as allowed under prior
law. Section 848 effectively accelerates the realization of income from
specified contracts and, consequently, the payment of taxes on that
income. Taking into account the time value of money, Section 848
increases the insurance company's tax burden because the amount of
general deductions that must be capitalized and amortized is measured
by the premiums received under the Contracts.
b. Deductions subject to Section 848 equal a percentage of the
current year's net premiums received (i.e., gross premiums minus return
premiums and reinsurance premiums) under life insurance or other
contracts categorized under this Section. The Contracts will be
categorized as ``specific contracts'' under Section 848 requiring 7.7%
of the net premiums received to be capitalized and amortized under the
schedule set forth in Section 848(c)(1).
c. The increased tax burden on every $10,000 of net premiums
received under the Contracts is quantified by Applicants as follows.
For each $10,000 of net premiums received in a given year, the
Companies' general deductions are reduced by $731.50, or (a) $770
(i.e., 7.7% of $10,000), minus (b) $38.50 (one-half year's portion of
the ten year amortization which may be deducted in the current year).
The remaining $731.50 ($770 less $38.50) is subject to taxation at the
corporate tax rate of 34% and results in $248.71 (.34% x $731.50)
more in taxes for the current year than the Companies otherwise would
have owed prior to OBRA 1990. However, the current tax increase will be
offset partially by deductions allowed during the next ten years, which
result from amortizing the remainder $770 ($77 in each of the following
nine years and $38.50 in year ten).
d. In calculating the present value of these increased future
deductions, the Companies determined that, in their business judgment,
it is appropriate to use a discount rate of 10% for the following
reasons. To the extent that capital must be used by the Companies to
pay the increased federal tax burden under Section 848, such surplus
will be unavailable for investment. Thus, the cost of capital used to
satisfy this increased tax burden under Section 848 is the Companies'
targeted rate of return (i.e., return sought on invested capital),
which is in excess of 10%. Accordingly, Applicants submit that the
targeted rate of return is appropriate for use in this present value
calculation.
e. Applicants also submit that, to the extent that the 10% discount
rate is lower than the Companies' actual targeted rate of return, the
calculation of this increased tax burden will continue to be reasonable
over time, even if the applicable corporate tax rate is reduced, or
their targeted rate of return is lowered.
f. In determining the targeted rate of return used in arriving at
the discount rate, the Companies first identified a reasonable risk-
free rate of return that can be expected to be earned over the long
term. The Companies then determined the premium needed to earn more
than that risk-free rate of return because of the inherently risky
nature of the insurance products it sells. Applicants represent that
these are appropriate factors to consider in determining the Companies'
targeted rate of return.
g. Using a federal corporate tax rate of 34%, and applying a
discount rate of 10%, the present value of the tax effect of the
increased deductions allowable in the following ten years, which
partially offsets the increased tax burden, equals $155.82. The effect
of Section 848 on the Contract, therefore, is an increased tax burden
with a present value of $92.89 for each $10,000 of net premiums (i.e.,
$248.71 less $155.82).
h. Applicants state that the Companies do not incur incremental
federal income tax when they pass on state premium taxes to Contract
Owners because state premium taxes are deductible in computing the
Companies' federal income taxes. Conversely, federal income taxes are
not deductible in computing the Companies' federal income taxes. To
compensate the Companies fully for the impact of Section 848, an
additional charge must be imposed to make them whole for the $92.89
additional tax
[[Page 35775]]
burden attributable to Section 848, as well as the tax on the
additional $92.89 itself. This additional charge can be determined by
dividing $92.89 by the complement of 34% federal corporate income tax
rate (i.e., 66%) resulting in an additional charge of $140.74 for each
$10,000 of net premiums, or 1.41%.
i. Based on prior experience, the Companies reasonably expect to
take almost all future deductions. It is the judgment of the Companies
that a charge of 1.25% would reimburse them for the increased federal
income tax liabilities under Section 848 of the Code. Applicants
represent that the 1.25% charge will be reasonably related to the
Companies' increased federal income tax burden under Section 848 of the
Code. This representation takes into account the benefit to the
Companies of the amortization permitted by Section 848 and the use of a
10% discount rate (which is equivalent to the Companies' targeted rate
of return) in computing the future deductions resulting from such
amortization. Applicants assert that it is appropriate to deduct this
charge, and to exclude the deduction of this charge from sales load,
because it is a legitimate expense of the Companies and not for sales
and distribution expenses.
Applicants' Legal Analysis
A. Exemptive Relief Under Section 27(a)(3) of the 1940 Act and Rule 6e-
3(T)(b)(13)(ii) Thereunder
1. Section 27(a)(3) of the 1940 Act provides that the amount of
sales charge deducted from any of the first twelve monthly payments on
a periodic payment plan certificate may not exceed proportionately the
amount deducted from any other such payment. Section 27(a)(3) further
provides that the sales charge deducted from any subsequent payment may
not exceed proportionately the amount deducted from any other
subsequent payment.
2. Rule 6e-3(T)(b)(13)(ii) provides a partial exemption from the
prohibitions of Section 27(a)(3). Exemptive relief from the
prohibitions of Section 27(a)(3) provided by Rule 6e-3(T)(13)(ii) is
available if the proportionate amount of sales charge deducted from any
premium payment, unless an increase is caused by reductions in the
annual cost of insurance or in sales charge for amounts transferred to
a variable life insurance contract from another plan of insurance. Rule
6e-3(T)(b)(13)(ii) thus permits a decrease in sales load for any
subsequent premium payment but not an increase.
3. Under the Contracts' sales load structure, a subsequent year's
premium payment that is attributable to the basic face amount up to the
Target Premium will be subject to a higher sales charge than premium
payments attributable to the basic face amount in excess of one year's
Target Premium and the supplemental face amount (together, ``Excess
Premium'').\4\ Applicants thus request an exemption from the
requirements of Section 27(a)(3) and Rule 6e-3(T)(b)(13)(ii) because
the Contracts' sales load structure violates the ``stair-step''
provisions in Section 27(a)(3) and because the exemption from Section
27(a)(3) provided by Rule 6e-3(T)(b)(13)(ii) does not apply to the
Contracts' sales load structure.
\4\ For example, in Contract Year 2, premium payments
attributable to the basic face amount in excess of the Target
Premium and premium payments attributable to the supplemental face
amount are subject to a 4% sales load. In Contract Year 3, however,
subsequent premium payments attributable to the basic face amount up
to the Target Premium are subject to a 15% sales load.
4. Applicants state that, had they chosen to impose the higher
front-end sales load equally on all premium payments, the Contracts
would qualify for exemptive relief under Rule 6e-3(T)(b)(13)(ii),
subject to the maximum limits permissible under subparagraph (b)(13)(i)
of the Rule. Applicants represent, however, that the sales load
structure has been designed based on the Companies' operating expenses
for the sale of the Contracts and, thus, reflects in part the lower
overall distribution costs that are associated with Excess Premiums
paid over the life of a Contract. Applicants submit that it would not
be in the best interest of a Contract Owner to require the imposition
of a higher sales load structure than Applicants deem necessary to
adequately defray their expenses.
5. Applicants argue that Section 27(a)(3) was designed to address
the abuse of periodic payment plan certificates under which large
amounts of front end sales loads were deducted so early in the life of
the plan that an investor redeeming in the early periods would recoup
little of his or her investment since only a small portion of the
investor's early payments were actually invested. Applicants submit
that the deduction of a reduced front-end sales load on Excess Premiums
paid in any Contract Year does not have the detrimental effect that
Section 27(a)(3) was designed to prevent because a greater proportion
of the Contracts' sales loads are deducted later than otherwise would
be the case.
6. Applicants state that Rule 6e-3(T)(b)(13)(i) specifically
permits an insurance company to reduce or eliminate its sales loads
with respect to amounts contributed to a variable life insurance
contract in connection with an exchange from another plan of insurance
and, thereafter, to impose the full sales load with respect to
subsequent premium payments. Applicants submit that such sales load
variations normally reflect decreased sales expenses in connection with
the exchanged amounts. Similarly, Applicants submit that the Companies
should be permitted to pass on its reduced sales expenses by forgoing
the extra front-end sales load applicable to any Excess Premium,
notwithstanding that it will impose a front-end sales load on premium
payments in subsequent years as described herein.
7. Applicants also state that Target Premiums and Excess Premium
have different levels of sales expenses because they serve different
purposes. Premium payments up to the Target Premium are applied
primarily to guarantee benefits under the Contracts and have a higher
level of sales expenses than the Excess Premium, which are applied to
increase account values under the Contracts, resulting in an increase
in the investment element of the Contracts. Applicants argue that it is
appropriate to analyze the sales load structure for premium payments up
to and in excess of Target Premium separately from those attributable
to supplemental face amounts. Applicants submit that, when analyzed
separately, both types of sales load comply with Rule 6e-
3(T)(b)(13)(ii).
B. Exemptive Request With Respect to Section 27(c)(2) of the 1940 Act
and Rule 6e-3(T)(c)(4)(v) Thereunder in Connection With Deduction of
Charge for Section 848 Deferred Acquisition Costs
1. Section 27(c)(2) prohibits a registered investment company or
its depositor or underwriter from making any deduction from premium
payments made under periodic payment plan certificates other than a
deduction for ``sales load.'' Section 2(a)(35)\5\ defines ``sales
load'' as the difference between the price of a security to the public
and that portion of the proceeds from its sale which is received and
invested or held for investment, less amounts deducted
[[Page 35776]]
from trustee's or custodian's fees, insurance premiums, issue taxes, or
administrative expenses or fees that are not properly chargeable to
``sales load.''
\5\ Sales loads, as defined under Section 2(a)(35), are limited
by Sections 27(a)(1) and 27(h)(1) to a maximum of 9% of total
payments on periodic payment plan certificates. The proceeds of all
payments (except amounts deducted for ``sales load'') must be held
by a trustee or custodian having the qualifications established
under Section 26(a)(1) for the trustees of unit investment trusts
and held under an indenture or agreement that conforms with the
provisions of Section 26(a)(2) and Section 26(a)(3) of the 1940 Act.
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2. The Separate Accounts are, and the Future Accounts will be,
regulated under the 1940 Act as issuers of periodic payment plan
certificates. Accordingly, the Separate Accounts, the Future Accounts,
the Companies (as depositor), and HESCO (as principal underwriter) are
deemed to be subject to Section 27 of the 1940 Act. Applicants thus
request an order under Section 6(c) of the 1940 Act granting exemptions
from Sections 27(c)(2) of the 1940 Act to allow the deduction of a
charge from premium payments to compensate the Companies for their
increased federal tax burden resulting from the receipt of such premium
payments under the Contracts.
3. Certain provisions of Rule 6e-3(T) provides exemptive relief
from Section 27(c)(2) if the separate account issues flexible premium
variable life insurance contracts, as defined in subparagraph (c)(1) of
that Rule. Rule 6e-3(T)(b)(13)(iii) provides exemptive relief from
Section 27(c)(2) to permit an insurer to make certain deductions, other
than ``sales load,'' including the insurer's tax liabilities from
receipt of premium payments imposed by states or by other governmental
entities. For purposes of variable life insurance contracts issued in
reliance on Rule 6e-3(T), paragraph (b)(1) of the Rule provides an
exemption from the Section 2(a)(35) definition of ``sales load'' by
substituting a new definition provided in paragraph (c)(4) of the Rule.
Under Rule 6e-3(T)(c)(4), ``sales load'' charged during a period is
defined as the excess of any payments made during that period over the
sum of certain specified charges and adjustments, including a deduction
for state premium taxes.
4. Applicants request exemptions from Rule 6e-3(T)(c)(4)(v) under
the 1940 Act to permit the proposed deduction with respect to Section
848 of the Code to be treated as other than ``sales load,'' as defined
under Section 2(a)(35) of the 1940 Act, for purposes of Section 27 and
the exemptions from various provisions of that Section found in Rule
6e-3(T).
5. Applicants assert that the proposed deduction with respect to
Section 848 of the Code arguably is covered by Rule 6e-3(T)(b)(13)(iii)
and should be treated as other than ``sales load.'' Applicants note,
however, that the language of paragraph (c)(4) of Rule 6e-3(T) appears
to require that deductions for federal tax obligations from receipt of
premium payments be treated as ``sales load.'' Under a literal reading
of Rule 6e-3(T)(c)(4), a deduction for an insurer's increased federal
tax burden does not fall squarely into those itemized charges or
deductions, arguably causing the deduction to be treated as part of
``sales load.''
6. Applicants state that they have found no public policy reason
for including a deduction for an insurer's increased federal tax burden
in sales load. Applicants assert that the public policy that underlies
paragraph (b)(13)(i) of Rule 6e-3(T), like that which underlies
paragraphs (a)(1) and (h)(1) of Section 27, is to prevent excessive
sales loads from being charged for the sale of periodic payment plan
certificates. Applicants submit that this legislative purpose is not
furthered by treating a federal income tax charge based on premium
payments as a sales load because the deduction is not related to the
payment of sales commissions or other distribution expenses. Applicants
assert that the Commission has concurred with this conclusion by
excluding deductions for state premium taxes from the definition of
``sales load'' in Rule 6e-3(T)(c)(4).
7. Applicants submit that the source for the definition of ``sales
load'' found in Rule 6e-3(T)(c)(4) supports this analysis. Applicants
believe that, in adopting paragraph (c)(4) of the Rule, the Commission
intended to tailor the general terms of Section 2(a)(35) to variable
life insurance contracts to ease verification by the Commission of
compliance with the sales load limits of subparagraph (b)(13)(i) of the
Rule. Just as the percentage limits of Sections 27(a)(1) and 27(h)(1)
depend on the definition of ``sales load'' in Section 2(a)(35) for
their efficacy, Applicants assert that the percentage limits in
subparagraph (b)(13)(i) of Rule 6e-3(T) depends on paragraph (c)(4) of
that Rule, which does not depart, in principal, from Section 2(a)(35).
8. Applicants submit that the exclusion from the definition of
``sales load'' under Section 2(a)(35) of deductions from premiums for
``issue taxes'' suggests that it is consistent with the policies of the
1940 Act to exclude from the definition of ``sales load'' in Rule 6e-
3(T) deductions made to pay an insure's costs attributable to its
federal tax obligations. Additionally, the exclusion of administrative
expenses or fees that are ``not properly chargeable to sales or
promotional activities'' also suggests that the only deductions
intended to fall within the definition of ``sales load'' are those that
are properly chargeable to sales or promotional activities. Applicants
represent that the proposed deductions will be used to compensate the
Companies for their increased federal tax burden attributable to the
receipt of premiums and not for sales or promotional activities.
Applicants therefore believe the language in Section 2(a)(35) further
indicates that not treating such deductions as sales load is consistent
with policies of the 1940 Act.
9. Finally, Applicants submit that it is probably an historical
accident that the exclusion of premium tax in subparagraph (c)(4)(v) of
Rule 6e-3(T) from the definition of ``sales load'' is limited to state
premium taxes. Applicants note that, when Rule 6e-3(T) was adopted, and
later amended, the additional Section 848 tax burden attributable to
the receipt of premiums did not yet exist.
10. Applicants further submit that the terms of the relief
requested with respect to Future Contracts to be issued through Future
Accounts are also consistent with the standards of Section 6(c).
Without the requested relief, the Applicants would have to request and
obtain such exemptive relief for each Future Contract to be issued
through a Future Account. Such additional requests for exemptive relief
would present no issues under the 1940 Act that have not already been
addressed in this application.
11. The requested relief is appropriate in the public interest
because it would promote competitiveness in the variable life insurance
market by eliminating the need for the Applicants to file redundant
exemptive applications regarding the federal tax charge, thereby
reducing their administrative expenses and maximizing the efficient use
of their resources. Applicants represent that the delay and expense
involved in having to repeatedly seek exemptive relief would impair
their ability to effectively take advantage of business opportunities
as they arise.
12. Applicants further submit that the requested relief is
consistent with the purposes of the 1940 Act and the protection of
investors for the same reasons. If Applicants were required to
repeatedly seek exemptive relief with respect to the same issues
regarding the federal tax charge addressed in this application,
investors would not receive any benefit or additional protection
thereby and might be disadvantaged as a result of the Applicants'
increased overhead expenses.
13. Conditions for Relief. Applicants agree to the following
conditions:
a. The Companies will monitor the reasonableness of the charge to
be deducted pursuant to the requested exemptive relief.
b. The registration statement for each Contract under which the
above-
[[Page 35777]]
referenced federal tax charge is deducted will: (1) disclose the
charge; (2) explain the purpose of the charge; and (3) state that the
charge is reasonable in relation to the relevant Company's increased
federal tax burden under Section 848 of the Code resulting from the
receipt of premium payments.
c. The registration statement for each Contract under which the
above-referenced federal tax charge is deducted will contain as an
exhibit an actuarial opinion as to: (1) The reasonableness of the
charge in relation to the relevant Company's increased federal tax
burden under Section 848 of the Code resulting from the receipt of
premiums; (2) the reasonableness of the targeted rate of return that is
used in calculating such charge; and (3) the appropriateness of the
factors taken into account by the relevant Company in determining such
targeted rate of return.
Conclusion
1. Section 6(c) of the 1940 Act, in pertinent part, provides 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 1940 Act, 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 contract and provisions of the 1940 Act.
2. For the reasons and upon the facts set forth above, Applicants
submit that the requested exemptions from Sections 27(a)(3) and
27(c)(2) of the 1940 Act and paragraphs (b)(13)(ii) and (c)(4) of Rule
6e-3(T) thereunder, are necessary and appropriate in the public
interest and consistent with the protection of investors and the
purposes fairly intended by the contract and provisions of the 1940
Act. Therefore, the standards set forth in Section 6(c) of the 1940 Act
are satisfied.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 95-16933 Filed 7-10-95; 8:45 am]
BILLING CODE 8010-01-M
