77782 Federal Register / Vol. 69, No. 248 / Tuesday, December 28, 2004 / Notices 

notice. To verify the status of meetings 

call (recording)—(301) 415–1292. 

Contact person for more information: 

Dave Gamberoni (301) 415–1651.

* * * * *

The NRC Commission Meeting 

Schedule can be found on the Internet 

at: http://www.nrc.gov/what-we-do/

policy-making/schedule.html

* * * * *

The NRC provides reasonable 

accommodation to individuals with 

disabilities where appropriate. If you 

need a reasonable accommodation to 

participate in these public meetings, or 

need this meeting notice or the 

transcript or other information from the 

public meetings in another format (e.g.

braille, large print), please notify the 

NRC’s Disability Program Coordinator, 

August Spector, at 301–415–7080, TDD: 

301–415–2100, or by e-mail at 

aks@nrc.gov. Determinations on 

requests for reasonable accommodation 

will be made on a case-by-case basis.

* * * * *

This notice is distributed by mail to 

several hundred subscribers; if you no 

longer wish to receive it, or would like 

to be added to the distribution, please 

contact the Office of the Secretary, 

Washington, DC 20555 (301–415–1969). 

In addition, distribution of this meeting 

notice over the Internet system is 

available. If you are interested in 

receiving this Commission meeting 

schedule electronically, please send an 

electronic message to dkw@nrc.gov.

Dated: December 22, 2004. 

R. Michelle Schroll, 

Office of the Secretary.

[FR Doc. 04–28451 Filed 12–23–04; 9:29 am] 

BILLING CODE 7590–01–M

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. IC–26712; File No. 812–13122] 

Merrill Lynch Life Insurance Group, et 

al. Notice of Application 

December 21, 2004.

AGENCY: The Securities and Exchange 

Commission (‘‘Commission’’).

ACTION: Notice of application (the 

‘‘Application’’) for an order of 

exemption pursuant to Section 6(c) of 

the Investment Company Act of 1940 

(the ‘‘1940 Act’’) from Sections 2(a)(32) 

and 27(i)(2)(a) of the Act and Rule 22c–

1 thereunder to allow recapture of a 

bonus amount. 

Applicants: Merrill Lynch Life 

Insurance Company (‘‘MLLIC’’), Merrill 

Lynch Life Variable Annuity Separate 

Account A (‘‘Account A’’), Merrill 

Lynch Variable Annuity Separate 

Account C (‘‘Account C’’), Merrill Lynch 

Variable Annuity Separate Account D 

(‘‘Account D’’), ML Life Insurance 

Company of New York (‘‘MLNY’’), ML 

of New York Variable Annuity Separate 

Account A (‘‘NY Account A’’), ML of 

New York Variable Annuity Separate 

Account C (‘‘NY Account C’’), ML of 

New York Variable Annuity Separate 

Account D (‘‘NY Account D’’), and 

Merrill Lynch, Pierce, Fenner & Smith 

Incorporated (‘‘MLPF&S’’) (except for 

MLLIC, MLNY, and MLPF&S, each a 

‘‘separate account’’ as defined in 

Section 2(a)(37) of the Investment 

Company Act of 1940, as amended (the 

‘‘Act’’); each separate account 

collectively referred to herein as the 

‘‘Separate Accounts’’) (all foregoing 

parties collectively referred to herein as 

the ‘‘Applicants’’). 

Summary of Application: The 

Applicants request an order exempting 

them with respect to the variable 

annuity contracts described herein (the 

‘‘Contracts’’) and other variable annuity 

contracts that are substantially similar 

in all material respects to the contracts 

described herein, that MLLIC and/or 

MLNY (together, the ‘‘Companies’’) may 

issue in the future (‘‘Future Contracts’’), 

and any other separate accounts of the 

Companies and their successors in 

interest (‘‘Future Accounts’’) that 

support Future Contracts, and certain 

NASD member broker-dealers which in 

the future, may act as principal 

underwriter of such contracts (‘‘Future 

Underwriters’’), from the provisions of 

Sections 2(a)(32) and 27(i)(2)(A) of the 

Act and Rule 22c–1 thereunder, 

pursuant to Section 6(c) of the Act, to 

the extent necessary to permit the 

recapture of all or a portion of the bonus 

amounts (previously attributable to 

premium payments under the bonus 

class of the Contract (the ‘‘XC Class’’)) 

where the bonus amounts were applied 

and a contract owner (‘‘Owner’’) (1) 

returns the Contract during the ‘‘Ten 

Day Right to Review’’ period (the ‘‘Free 

Look Period’’); (2) dies within six 

months of receipt and acceptance by 

MLLIC or MLNY of a premium payment 

(unless the Contract is continued under 

the spousal benefit continuation 

option); or (3) surrenders the Contract 

(in full or in part) or the surrender value 

is paid to the Owner (because the 

Contract has been terminated for 

inactivity) within three years of receipt 

and acceptance by MLLIC or MLNY of 

a premium payment (pursuant to a 

bonus recapture schedule). 

Filing Date: The Application was filed 

on September 3, 2004 and amended on 

December 20, 2004. 

Hearing or Notification of Hearing: An 

order granting the Application will be 

issued unless the Commission orders a 

hearing. Interested person 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 January 18, 2005, 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, 450 Fifth Street, 

NW., Washington, DC 20549. 

Applicants, c/o Edward W. Diffin, Jr., 

Esq., Merrill Lynch Insurance Group, 

Inc., 1300 Merrill Lynch Drive, 2nd 

Floor, Pennington, New Jersey 08534. 

Copies to Mary E. Thornton, Esq., 

Sutherland Asbill & Brennan LLP, 1275 

Pennsylvania Ave., NW., Washington, 

DC 20004.

FOR FURTHER INFORMATION CONTACT:

Robert Lamont, Attorney, at (202) 942–

0676, or Lorna MacLeod, Branch 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 

may be obtained for a fee from the 

Public Reference Branch of the 

Commission, 450 5th Street, NW., 

Washington, DC 20549 (tel. (202) 942–

8090). 

Applicants’ Representations 

1. MLLIC is a stock life insurance 

company that is domiciled in Arkansas. 

MLLIC was incorporated under the laws 

of the State of Washington on January 

27, 1986, and redomesticated to the 

State of Arkansas on August 31, 1991. 

MLLIC is authorized to operate as a life 

insurance company in forty-nine states, 

the District of Columbia, the U.S. Virgin 

Islands, Guam, and Puerto Rico. Its 

principal offices are located at 1300 

Merrill Lynch Drive, 2nd Floor, 

Pennington, New Jersey 08534. MLLIC 

is a wholly owned subsidiary of Merrill 

Lynch Insurance Group, Inc. (‘‘MLIG’’). 

MLLIC is an indirect wholly owned 

subsidiary of Merrill Lynch & Co., Inc., 

a publicly held company whose shares 

are traded on the New York Stock 

Exchange. 

2. MLNY is a stock life insurance 

company that was organized under the 

Federal Register / Vol. 69, No. 248 / Tuesday, December 28, 2004 / Notices 77783

laws of the State of New York on 

November 28, 1973. MLNY is 

authorized to sell life insurance and 

annuities in nine states. Its principal 

offices are located at 222 Broadway, 

14th Floor, New York, New York 10038. 

MLNY is a wholly owned subsidiary of 

MLIG. MLNY also is an indirect wholly 

owned subsidiary of Merrill Lynch & 

Co., Inc. 

3. Account A was established by 

MLLIC under the insurance laws of the 

State of Arkansas on August 6, 1991. 

Account A is registered with the 

Commission under the Act as a unit 

investment trust. The assets of Account 

A support certain individual flexible 

premium variable annuity contracts. A 

registration statement to register 

interests in Account A offered through 

the Contracts has been filed with the 

Commission under the Securities Act of 

1933, as amended (the ‘‘1933 Act’’) on 

Form N–4 (333–118362). Account A is 

a ‘‘separate account’’ as defined in 

Section 2(a)(37) of the Act. MLLIC is the 

legal owner of the assets in Account A. 

Any income, gain, or loss (whether or 

not realized) from the assets of Account 

A are credited to or charged against 

Account A without regard to MLLIC’s 

other income, gain, or loss. Assets of 

Account A equal to its reserves and 

other liabilities under the Contracts may 

not be charged with liabilities arising 

from any other MLLIC business. 

Account A is comprised of various 

subdivisions called subaccounts (the 

‘‘Subaccounts’’), which were established 

to receive and invest premium 

payments under the Contracts and other 

annuity contracts. 

4. Account C was established by 

MLLIC under the insurance laws of the 

State of Arkansas on November 16, 

2001. Account C is registered with the 

Commission under the Act as a unit 

investment trust. The assets of Account 

C support certain individual flexible 

premium variable annuity contracts. A 

registration statement to register 

interests in Account C offered through 

the Contracts will be filed with the 

Commission under the 1933 Act on 

Form N–4 in the near future. Account C 

is a ‘‘separate account’’ as defined in 

Section 2(a)(37) of the Act. MLLIC is the 

legal owner of the assets in Account C. 

Any income, gain, or loss (whether or 

not realized) from the assets of Account 

C are credited to or charged against 

Account C without regard to MLLIC’s 

other income, gain, or loss. Assets of 

Account C equal to its reserves and 

other liabilities under the Contracts may 

not be charged with liabilities arising 

from any other MLLIC business. 

Account C is comprised of various 

Subaccounts.

5. Account D was established by 

MLLIC under the insurance laws of the 

State of Arkansas on June 21, 2002. 

Account D is registered with the 

Commission under the Act as a unit 

investment trust. The assets of Account 

D support certain individual flexible 

premium variable annuity contracts. A 

registration statement to register 

interests in Account D offered through 

the Contracts has been filed with the 

Commission under the 1933 Act on 

Form N–4 (333–119364). Account D is 

a ‘‘separate account’’ as defined in 

Section 2(a)(37) of the Act. MLLIC is the 

legal owner of the assets in Account D. 

Any income, gain, or loss (whether or 

not realized) from the assets of Account 

D are credited to or charged against 

Account D without regard to MLLIC’s 

other income, gain, or loss. Assets of 

Account D equal to its reserves and 

other liabilities under the Contracts may 

not be charged with liabilities arising 

from any other MLLIC business. 

Account D is comprised of various 

Subaccounts. 

6. NY Account A was established by 

MLNY under the insurance laws of the 

State of New York on August 14, 1991. 

NY Account A is registered with the 

Commission under the Act as a unit 

investment trust. The assets of NY 

Account A support certain individual 

flexible premium variable annuity 

contracts. A registration statement to 

register interests in NY Account A 

offered through the Contracts has been 

filed with the Commission under the 

1933 Act on Form N–4 (333–119611). 

NY Account A is a ‘‘separate account’’

as defined in Section 2(a)(37) of the Act. 

MLNY is the legal owner of the assets 

in NY Account A. Any income, gain, or 

loss (whether or not realized) from the 

assets of NY Account A are credited to 

or charged against NY Account A 

without regard to MLNY’s other income, 

gain, or loss. Assets of NY Account A 

equal to its reserves and other liabilities 

under the Contracts may not be charged 

with liabilities arising from any other 

MLNY business. NY Account A is 

comprised of various Subaccounts. 

7. NY Account C was established by 

MLNY under the insurance laws of the 

State of New York on May 16, 2002. NY 

Account C is registered with the 

Commission under the Act as a unit 

investment trust. The assets of NY 

Account C support certain individual 

flexible premium variable annuity 

contracts. A registration statement to 

register interests in NY Account C 

offered through the Contracts will be 

filed with the Commission under the 

1933 Act on Form N–4 in the near 

future. NY Account C is a ‘‘separate 

account’’ as defined in Section 2(a)(37) 

of the Act. MLNY is the legal owner of 

the assets in NY Account C. Any 

income, gain, or loss (whether or not 

realized) from the assets of NY Account 

C are credited to or charged against NY 

Account C without regard to MLNY’s 

other income, gain, or loss. Assets of NY 

Account C equal to its reserves and 

other liabilities under the Contracts may 

not be charged with liabilities arising 

from any other MLNY business. NY 

Account C is comprised of various 

Subaccounts. 

8. NY Account D was established by 

MLNY under the insurance laws of the 

State of New York on July 23, 2002. NY 

Account D is registered with the 

Commission under the Act as a unit 

investment trust. The assets of NY 

Account D support certain individual 

flexible premium variable annuity 

contracts. A registration statement to 

register interests in NY Account D 

offered through the Contracts has been 

filed with the Commission under the 

1933 Act on Form N–4 (333–119797). 

NY Account D is a ‘‘separate account’’

as defined in Section 2(a)(37) of the Act. 

MLNY is the legal owner of the assets 

in NY Account D. Any income, gain, or 

loss (whether or not realized) from the 

assets of NY Account D are credited to 

or charged against NY Account D 

without regard to MLNY’s other income, 

gain, or loss. Assets of NY Account D 

equal to its reserves and other liabilities 

under the Contracts may not be charged 

with liabilities arising from any other 

MLNY business. NY Account D is 

comprised of various Subaccounts. 

9. MLPF&S, an indirect wholly owned 

subsidiary of Merrill Lynch & Co., Inc. 

and an affiliate of the Companies, is the 

principal underwriter and distributor of 

the Contracts. MLPF&S was organized 

in 1958 under the laws of the state of 

Delaware and is registered with the 

Commission as a broker-dealer under 

the Securities Exchange Act of 1934, as 

amended, and is a member of the NASD. 

10. Each Subaccount invests only in 

shares of a designated portfolio of 

certain management investment 

companies (the ‘‘Funds’’). The 

Companies may also make fixed account 

options available under the Contracts in 

the future. 

11. The Contracts are individual 

flexible premium deferred variable 

annuity contracts issued by the 

Companies through the Separate 

Accounts. The Contracts provide for the 

accumulation of values on a variable 

basis during the accumulation period, 

and provide for a variety of annuity 

settlement options. Certain Contracts 

may be purchased on a non-qualified 

tax basis. Certain Contracts also may be 

purchased and used in connection with 

77784 Federal Register / Vol. 69, No. 248 / Tuesday, December 28, 2004 / Notices 

plans qualifying for favorable federal 

income tax treatment. The Contracts 

currently offer four different charge 

structures, each referred to as a ‘‘Class.’’

Each Class, including an XC Class 

described in more detail below, imposes 

different surrender charges and assetbased insurance charges. 

12. The Owner determines at the time 

of application for a Contract how 

premium payments will be allocated 

among the Subaccounts of the 

applicable Separate Account. The 

Owner generally may allocate premium 

payments to up to 20 of any of the 

available Subaccounts. The Contract 

Value, which is the total value of an 

Owner’s interest in the Contract, will 

vary with the investment performance 

of the Subaccounts selected, and the 

Owner bears the entire risk for amounts 

allocated to the Subaccounts. 

13. During the Free Look Period, an 

Owner has the right to return his or her 

Contract within ten days (or longer if 

required by state law). If the Contract is 

returned during the Free Look Period, 

the amount refunded will equal the 

Contract Value as of the date MLLIC or 

MLNY receives the returned Contract. 

However, in those states that require a 

return of premium payments in the 

event of Contract cancellation, the 

Companies will instead return the 

greater of all premium payments paid 

into the Contract (less any withdrawals) 

or the Contract Value as of the date 

MLLIC or MLNY receives the returned 

Contract. 

In states that require a return of 

premium payments, the Companies will 

allocate all premium payments to a 

money market Subaccount during the 

first fourteen days following the 

Contract Date. In those states, the 

Companies bear any investment risk 

associated with the premium payments 

during the Free Look Period; otherwise, 

the Owner will bear any investment risk 

associated with the premium payments 

during the Free Look Period. 

The Companies will not assess 

surrender charges against a Contract 

returned during the Free Look Period. 

The Companies will generally pay the 

refund within seven days after they 

receive the returned Contract. The 

Contract will then be considered void. 

As described in more detail below, the 

Companies intend to recapture bonus 

amounts added to the Contract Value if 

the Owner returns the Contract during 

the Free Look Period.

14. The Owner may surrender the 

Contract or make a partial withdrawal 

from Contract Value during the 

accumulation period. The minimum 

amount that may be withdrawn is $100, 

and at least $5,000 must remain in the 

Contract after a partial withdrawal (and 

any associated surrender charge) is 

made. If an Owner surrenders a Contract 

or takes a partial withdrawal, the 

Companies may deduct a surrender 

charge to compensate them for expenses 

relating to the sale of the Contracts, such 

as commissions, preparation of sales 

literature, and other promotional 

activity. Upon partial withdrawal, the 

Companies also may deduct any 

applicable premium taxes. Upon 

surrender, the Companies also will 

deduct any applicable contract fee, 

accrued but uncollected rider charges, 

and premium taxes. The surrender 

charge will be reduced using the ‘‘free 

withdrawal amount’’ provided for in the 

Contract. The free withdrawal amount is 

the portion of any partial withdrawal or 

surrender that is not subject to a 

surrender charge. The free withdrawal 

amount is the greater of: (a) 10% of the 

amount of each premium subject to a 

surrender charge (not to exceed the 

amount of each premium that had not 

been previously withdrawn as of the 

beginning of the Contract year), less any 

prior withdrawals during that Contract 

year; and (b) the ‘‘gain’’ in the Contract 

plus premiums remaining in the 

Contract that are no longer subject to a 

surrender charge. Any amount 

previously withdrawn from the Contract 

during that Contract year will be taken 

into account in determining the ‘‘free 

withdrawal amount’’ available as of the 

date of the withdrawal request. For the 

purpose of calculating the surrender 

charge, the Companies make 

withdrawals as if gain is withdrawn 

first, followed by premiums. Premium 

payments are assumed to be withdrawn 

on a first-in, first-out (‘‘FIFO’’) basis. 

The surrender charge equals a 

percentage of each premium withdrawn. 

With regard to the XC Class offered 

under the Contracts, each premium is 

subject to the charge for the applicable 

period specified below from the date it 

is received and accepted by MLLIC or 

MLNY, as follows:

Complete years elapsed 

since payment of premium 

Surrender 

charge percentage (as a 

percentage of 

the premium 

payment) 

0 ............................................ 8.0 

1 ............................................ 8.0 

2 ............................................ 7.0 

3 ............................................ 7.0 

4 ............................................ 6.0 

5 ............................................ 6.0 

6 ............................................ 5.0 

7 ............................................ 4.0 

8 ............................................ 3.0 

9 ............................................ 0 

As described in more detail below, 

the Companies may recapture all or a 

portion of the bonus amounts added to 

the Contract Value if the Owner 

surrenders the Contract or makes a 

partial withdrawal within three years of 

MLLIC’s or MLNY’s receipt and 

acceptance of a premium payment. 

15. Under certain circumstances, the 

Contract may be terminated due to 

inactivity. If no premiums have been 

received during the prior 24 months, the 

total of all premiums paid (less any 

partial withdrawals) is less than $2,000, 

and the Contract Value is less than 

$2,000, then the Contract may be 

terminated. No Contract will be 

terminated solely due to negative 

investment performance. Termination 

for inactivity is treated as a surrender 

for purposes of bonus recapture. 

16. During the accumulation period, 

the Companies will pay a death benefit 

upon the Owner’s death (upon the death 

of the first Owner to die if there are CoOwners, or upon the death of the first 

Annuitant if any Owner is not a natural 

person). Unless the Owner selects an 

optional guaranteed minimum death 

benefit (‘‘GMDB’’), the death benefit will 

equal the Contract Value. 

17. The Contracts provide four GMDB 

options that an Owner may select to 

purchase for an additional charge if the 

Owner (or the older Owner, if the 

Contract has Co-Owners, or the 

Annuitant, if the Owner is a non-natural 

person) is age 75 or under. If the Owner 

dies within 90 days of the Contract Date 

or within one year of the date of a 

change of Owner, any GMDB will equal 

the Contract Value. Some GMDB 

options may not be available in every 

state. If the Owner purchases a GMDB, 

the death benefit equals the greater of 

the Contract Value or the GMDB Base. 

The current calculation for each GMDB 

Base is described below. 

18. In addition to the above death 

benefits and for an additional charge, an 

Owner may elect the Additional Death 

Benefit Rider if the Owner (or the older 

Owner, if the Contract has Co-Owners, 

or the older Annuitant, if the Owner is 

a non-natural person) is age 75 or under. 

This rider is designed to help offset 

expenses, including income taxes, 

attributable to payment of death benefit 

proceeds. The Additional Death Benefit 

Rider may not be available in all states. 

Upon payment of the death benefit, the 

Companies may deduct any applicable 

premium taxes. 

19. As described in more detail below, 

the Companies will recapture any bonus 

amounts added to the Contract Value if 

the Owner (the first Owner to die, if 

there are Co-Owners, or the first 

Annuitant, if any Owner is not a natural 

Federal Register / Vol. 69, No. 248 / Tuesday, December 28, 2004 / Notices 77785

person) dies within six months of 

MLLIC’s or MLNY’s receipt and 

acceptance of the corresponding 

premium payment. However, if an 

Owner dies and the Contract is 

continued under the spousal benefit 

continuation option, any bonus amounts 

not previously recaptured will no longer 

be subject to recapture as of the spousal 

continuation date. 

20. If an Owner elects the XC Class 

under the Contracts, then the 

Companies will add a bonus amount to 

the Contract Value each time the Owner 

makes a premium payment. With regard 

to an initial premium payment, the 

Companies will apply the 

corresponding bonus amount to an 

Owner’s Contract Value on the Contract 

Date. With regard to each additional 

premium payment, the Companies will 

apply a corresponding bonus amount to 

an Owner’s Contract Value at the end of 

the valuation period during which that 

premium payment is received and 

accepted at MLLIC’s or MLNY’s Service 

Center. 

21. To calculate each bonus amount, 

the Companies will allocate the 

corresponding premium payment to one 

or more bonus tiers based on the 

amount of cumulative premium 

payments made under the Contract, as 

follows:

If cumulative premium payments are: 

Then 

maximum 

bonus 

amount 

percentage is: 

Then current 

bonus 

percentage is: 

Then 

minimum 

guaranteed 

bonus 

percentage is: 

Less than or equal to $25,000 ............................................................................................................................ 5.0 4.5 3.0 

Greater than $25,000 but less than or equal to $125,000 .................................................................................. 5.5 4.5 3.0 

Greater than $125,000 but less than or equal to $500,000 ................................................................................ 5.5 4.5 3.5 

Greater than $500,000 but less than or equal to $1,000,000 ............................................................................. 6.0 5.5 4.0 

Greater than $1,000,000 ..................................................................................................................................... 7.0 5.5 4.5 

Thus, the Companies may apply 

different bonus percentages to each 

premium payment (unless cumulative 

premium payments are less than or 

equal to $25,000) by breaking out the 

payment according to the ranges in the 

above table and multiplying the portion 

of the payment allocated to each tier by 

that tier’s current bonus amount 

percentage. However, a premium 

payment will only be allocated to the 

first tier if cumulative premium 

payments are less than or equal to 

$25,000. If the initial premium payment 

exceeds $25,000, the first tier will not 

apply and the second tier will apply to 

all cumulative premiums less than or 

equal to $125,000. For example, an 

initial premium payment of $20,000 

would receive a maximum bonus 

amount of $1,000 ($20,000 × 0.05 (tier 

1)). If the initial premium payment is 

$100,000, the maximum bonus amount 

would be $5,500 ($100,000 × 0.055 (tier 

2)). However, an initial premium 

payment of $700,000 would receive a 

maximum bonus amount of $39,500 

($125,000 × 0.055 (tier 2) + $375,000 ×

0.055 (tier 3) + $200,000 × 0.06 (tier 4)). 

No bonus amount (or subsequent 

recapture thereof, as discussed below) 

will be based on a percentage that 

exceeds the maximum bonus amount 

percentages shown in the above table. 

When calculating each bonus amount, 

‘‘cumulative premium payments’’ do 

not include bonus amounts previously 

added to Contract Value. The bonus 

amount is allocated among the 

Subaccounts in the same manner as the 

corresponding premium payment. The 

Companies may change the current 

bonus amount percentage, but it will 

never be less than the minimum 

guaranteed bonus amount percentage 

listed in the table. 

From time to time, the Companies 

may offer promotional programs with 

promotional rates for XC Class Contracts 

issued within specified periods of time 

(each, a ‘‘Promotional Period’’). Such 

promotional programs may apply to 

initial and/or subsequent premium 

payments received during the 

Promotional Period. Initial and/or 

subsequent premium payments received 

after the Promotional Period will receive 

the current bonus amount percentage in 

effect at that time. The Promotional 

Period will never exceed the maximum 

bonus amount. The Companies may 

terminate any promotional programs or 

offer other promotional programs at any 

time in their sole discretion. 

22. If the Owner returns the Contract 

during the Free Look Period, then the 

Owner will not receive any portion of 

the bonus amounts (i.e., the Companies 

will ‘‘recapture’’ the full amount of each 

bonus). In the event of the death of the 

Owner (or upon the death of the first 

Owner to die if there are Co-Owners, or 

upon the death of the first Annuitant if 

any Owner is not a natural person), the 

Companies will recapture any bonus 

amounts corresponding to premium 

payments received and accepted within 

the previous six months of death. Thus, 

under the XC Class, if an optional 

guaranteed minimum death benefit 

(‘‘GMDB’’) is not chosen the death 

benefit equals the Contract Value less 

any bonus amounts credited in the prior 

six months. If a GMDB is chosen, the 

death benefit equals the greater of the 

Contract Value less any bonus amounts 

credited in the prior six months or the 

GMDB Base (as defined above). 

However, in the event the Contract is 

continued under the spousal benefit 

continuation option, any bonus amounts 

not previously recaptured will no longer 

be subject to recapture as of the spousal 

continuation date. In the event of partial 

withdrawal or surrender within three 

years of MLLIC’s or MLNY’s receipt and 

acceptance of a premium payment, the 

Companies may recapture all or a 

portion of the corresponding bonus 

amount based on the bonus recapture 

percentages presented in the following 

schedule.

Completed years since receipt 

and acceptance of premium 

payment 

Bonus recapture percentage for 

surrenders 

and partial 

withdrawals 

0 ................................................ 100 

1 ................................................ 65 

2 ................................................ 30 

3+ .............................................. 0 

23. The Companies will recapture any 

bonus amounts subject to recapture 

from the Owner’s Contract Value at the 

end of the valuation period during 

which the transaction request is 

received and accepted at MLLIC’s or 

MLNY’s Service Center. For each 

premium payment, the bonus amount 

subject to recapture is equal to the 

applicable bonus recapture percentage 

multiplied by (a) minus (b) where: (a) is 

the bonus amount attributable to that 

premium; and (b) is the sum of each 

77786 Federal Register / Vol. 69, No. 248 / Tuesday, December 28, 2004 / Notices 

previously recaptured bonus amount 

attributable to that premium payment 

divided by the bonus recapture 

percentage on the date such amount was 

recaptured. 

24. The Companies will deduct bonus 

amounts subject to recapture based on 

the associated premiums withdrawn 

from the Contract, which are 

determined on a ‘‘first-in, first out’’ (or 

‘‘FIFO’’) basis. Currently, the Companies 

do not recapture any bonus amounts on 

withdrawals that are within the ‘‘free 

withdrawal amount.’’ The Companies 

reserve the right to recapture bonus 

amounts on withdrawals that are within 

the ‘‘free withdrawal amount’’ in the 

future. The amount actually recaptured 

is based on the bonus amount subject to 

recapture multiplied by the ratio of: (i) 

the associated premium payment 

withdrawn that was subject to a 

surrender charge to (ii) the total amount 

of that premium payment remaining in 

the Contract immediately prior to the 

withdrawal that was subject to a 

surrender charge. The Companies will 

deduct any recaptured bonus amounts 

on a pro rata basis from among the 

Subaccounts the Owner is invested in, 

based on the ratio of the Owner’s 

Subaccount value to his or her total 

Subaccount value before the partial 

withdrawal. 

25. If the Companies recapture a 

bonus amount, they will take back the 

bonus amount as if it had never been 

applied. However, the accumulated gain 

or loss on bonus amounts is never 

subject to recapture. Thus, an Owner 

bears any investment loss and retains 

any investment gain attributable to 

bonus amounts. The Companies will not 

re-credit any charges, including assetbased insurance charges, imposed on 

bonus amounts subsequently 

recaptured. 

26. Although not currently permitted, 

in the future the Companies may permit 

an Owner to partially annuitize the 

Contract. Partial annuitizations would 

be considered to be partial withdrawals 

for purposes of calculations under the 

Contract, including bonus recaptures. 

27. In addition to the fees and charges 

discussed above, the Companies deduct 

various other fees and charges. These 

currently include an asset-based 

insurance charge that varies by 

Subaccount (under the XC Class 

Contract this charge currently ranges 

from 1.55% to 1.80% of Subaccount 

assets (guaranteed not to exceed 

2.00%)); a current annual contract fee of 

$50 (guaranteed not to exceed $75), 

which will apply if the greater of 

Contract Value or premiums less 

withdrawals is less than $50,000; 

transfer fee of $25 (guaranteed not to 

exceed $30) for each transfer above 12 

per Contract year; premium taxes or 

other taxes by any governmental entity; 

and fees for optional benefits or riders.

Applicants’ Legal Analysis 

1. The Applicants respectfully request 

that the Commission, pursuant to 

Section 6(c) of the Act, grant the 

exemptions set forth below to permit the 

Applicants to recapture all or a portion 

of bonus amounts attributable to 

premium payments under the Contract’s 

XC Class when an Owner (1) returns the 

Contract during the Free Look Period; 

(2) dies within six months of receipt and 

acceptance by MLLIC or MLNY of a 

premium payment (unless the Contract 

is continued under the spousal benefit 

continuation option); or (3) surrenders 

the Contract (in full or in part) or the 

surrender value is paid to the Owner 

(because the Contract has been 

terminated for inactivity) within three 

years of receipt and acceptance by 

MLLIC or MLNY of a premium payment 

(pursuant to a bonus recapture 

schedule). 

2. Because the provisions described 

below may be inconsistent with a 

recapture of bonus amounts, the 

Applicants request exemptions for the 

Contracts described herein, and for 

Future Contracts, from Sections 2(a)(32) 

and 27(i)(2)(a) of the Act, and Rule 22c–

1 thereunder, pursuant to Section 6(c), 

to the extent necessary to recapture the 

bonus amounts, as described above. The 

Applicants seek exemptions therefrom 

in order to avoid any questions 

concerning the Contracts’ compliance 

with the Act and rules thereunder. For 

the reasons discussed below, the 

exemptions requested herein are 

necessary or appropriate in the public 

interest and consistent with the 

protection of investors and purposes 

fairly intended by the policy and 

provisions of the Act. 

3. To the extent that the bonus 

amount recapture might be seen as a 

discount from the net asset value, or 

might be viewed as resulting in the 

payment to an Owner of less than the 

proportionate share of the issuer’s net 

assets, the bonus amount recapture 

would trigger the need for relief absent 

some exemption from the Act. Rule 6c–

8 provides, in relevant part, that a 

registered separate account, and any 

depositor of such account, shall be 

exempt from Sections 2(a)(32), 22(c), 

27(c)(1), 27(c)(2), and 27(d) of the Act 

and Rule 22c–1 thereunder to the extent 

necessary to permit them to impose a 

deferred sales load on any variable 

annuity contract participating in such 

account. However, the bonus amount 

recapture is not a sales load, but a 

recapture of bonus amounts MLLIC or 

MLNY previously attributed to an 

Owner’s premium payments. The 

Companies provide the bonus amounts 

from their general accounts on a 

guaranteed basis. The Contracts are 

designed to be long-term investment 

vehicles. In undertaking this financial 

obligation, the Companies contemplate 

that an Owner will retain a Contract 

over an extended period, consistent 

with the long-term nature of the 

Contracts. The Companies designed the 

product so that they would recover their 

costs (including the bonus amounts) 

over an anticipated duration while a 

Contract is in force. If an Owner 

withdraws his money during the Free 

Look Period, or a death benefit is paid, 

or a withdrawal or surrender is made, 

before this anticipated period, the 

Companies must recapture the bonus 

amounts subject to recapture in order to 

avoid a loss. 

4. The recapture of bonus amounts 

does not violate Section 2(a)(32) of the 

Act. The bonus amount recapture 

provision pursuant to the Contract’s XC 

Class does not deprive the Owner of his 

or her proportionate share of the issuer’s 

current net assets. In the case of death 

of the Owner, an Owner will have the 

full right to any bonus amounts not 

previously recaptured six months 

following MLLIC’s or MLNY’s receipt 

and acceptance of the corresponding 

premium payment. In the case of partial 

or full surrender, an Owner’s right to a 

portion of a bonus amount not 

previously recaptured will begin one 

year following MLLIC’s or MLNY’s 

receipt and acceptance of the 

corresponding premium payment, and 

an Owner will have the full right to any 

such remaining bonus amount three 

years following MLLIC’s or MLNY’s 

receipt and acceptance of the 

corresponding premium payment. Until 

that time, the Companies retain the right 

and interest in the dollar amount of any 

bonus amounts subject to recapture. 

Thus, when the Companies recapture all 

or a portion of a bonus amount, they are 

only retrieving their own assets, and 

because an Owner does not have an 

interest in the bonus amount, such 

Owner would not be deprived of a 

proportionate share of the applicable 

Separate Account’s assets (the issuer’s 

current net assets) in violation of 

Section 2(a)(32). Therefore, such 

recapture does not reduce the amount of 

the applicable Separate Account’s 

current net assets an Owner would 

otherwise be entitled to receive. 

However, to avoid uncertainty as to full 

compliance with the Act, the Applicants 

request an exemption from the 

Federal Register / Vol. 69, No. 248 / Tuesday, December 28, 2004 / Notices 77787

provisions of Sections (2)(a)(32) and 

27(i)(2)(A) to the extent deemed 

necessary to permit them to recapture 

all or a portion of the bonus amounts 

under the Contracts and Future 

Contracts. 

5. As a result of the bonus amounts 

available under the Contract’s XC Class, 

an Owner who made an initial premium 

payment of $10,000 in the first Contract 

year could be viewed as having a 

Contract Value of $10,400 before any 

earnings accrued. The Companies’

addition of bonus amounts might 

arguably be viewed as resulting in an 

Owner purchasing a redeemable 

security for a price below the current 

net asset value. Further, by recapturing 

the bonus amounts, the Companies 

might arguably be redeeming a 

redeemable security for a price other 

than one based on the current net asset 

value of the applicable Separate 

Account. 

6. An Owner’s interest in his or her 

Contract Value would always be offered 

at a price based on the net asset value 

next calculated after receipt of the order. 

The granting of bonus amounts does not 

reflect a reduction of that price. Instead, 

the Companies will purchase with their 

own general account assets an interest 

in the applicable Separate Account 

equal to the bonus amounts. Because the 

bonus amounts will be paid out of 

MLLIC’s or MLNY’s assets, not the 

applicable Separate Account’s assets, no 

dilution will occur as a result of the 

bonus amounts. 

7. The recapture of bonus amounts 

does not involve either of the two harms 

that the Commission intended to 

eliminate or reduce with Rule 22c–1. 

The Commission’s stated purposes in 

adopting Rule 22c–1 were to avoid or 

minimize: (1) Dilution of the interests of 

other security holders; and (2) 

speculative trading practices that are 

unfair to such holders. These two 

concerns were the result of backward 

pricing, the practice of basing the price 

of a mutual fund share on the net asset 

value per share determined as of the 

close of the market on the previous day. 

Backward pricing allowed investors to 

take advantage of increases or decreases 

in net asset value that were not yet 

reflected in the price, and thereby the 

values of outstanding mutual fund 

shares were diluted. 

8. The proposed recapture of bonus 

amounts under the Contracts does not 

pose such threat of dilution. The bonus 

amount recapture will not alter an 

Owner’s net asset value. The Companies 

will determine an Owner’s surrender 

value (an amount equal to the Contract 

Value reduced by any charges 

(including the surrender charge) and 

increased by any credits applied upon 

surrender) under a Contract in 

accordance with Rule 22c–1 on a basis 

next computed after receipt of an 

Owner’s request for surrender (likewise, 

the calculation of death benefits and 

annuity payment amounts will be in full 

compliance with the forward pricing 

requirement of Rule 22c–1). The amount 

recaptured will equal all or a portion of 

bonus amounts that MLLIC or MLNY 

paid out of its general account assets.

It is not administratively feasible to 

track the bonus amount in the Separate 

Accounts after the Companies apply the 

bonus. As a result, the asset-based 

charges applicable to the Separate 

Accounts will be assessed against the 

entire amount held in the Separate 

Accounts, including the bonus amount, 

during the time the bonus amount is 

subject to recapture. During this time, 

the aggregate asset-based charges 

assessed against an Owner’s Contract 

Value will be higher than those that 

would be charged if the Owner’s 

Contract Value did not include the 

bonus amount, but the increment will 

obviously be only a small percentage of 

the bonus amount. On the other hand, 

an Owner will retain any investment 

benefit from the bonus amount. 

Although an Owner will retain any 

investment gain attributable to the 

bonus amounts, the Companies will 

determine the amount of such gain on 

the basis of the current net asset value 

of the Subaccount. Thus, no dilution 

will occur upon the recapture of bonus 

amounts. 

9. Further, the other harm that Rule 

22c–1 was designed to address 

(speculative trading practices calculated 

to take advantage of backward pricing) 

will not occur as a result of MLLIC’s or 

MLNY’s recapture of a bonus amount. 

Variable annuities are designed for longterm investment, and by their nature, do 

not lend themselves to the kind of 

speculative short-term trading that Rule 

22c–1 was designed to prevent. More to 

the point, the bonus recapture simply 

does not create the opportunity for 

speculative trading. 

10. Rule 22c–1 should have no 

application to a bonus amount, as 

neither of the harms that Rule 22c–1 

was designed to address are present in 

the recapture of bonus amounts. 

However, to avoid uncertainty as to full 

compliance with the Act, the Applicants 

request an exemption from the 

provisions of Rule 22c–1 to the extent 

deemed necessary to permit them to 

recapture bonus amounts available 

through the XC Class under the 

Contracts and Future Contracts. 

11. The Commission should grant the 

exemptions requested in this 

Application, even if the bonus amounts 

described herein arguably conflicts with 

Sections 2(a)(32) or 27(i)(2)(A) of the 

Act or Rule 22c–1 thereunder. The 

bonus amount provisions are generally 

beneficial to Owners. The recapture 

provisions temper this benefit 

somewhat, but only if an Owner 

redeems his or her money under the 

circumstances described herein. While 

there would be a small downside in a 

declining market where an Owner 

would bear any losses attributable to the 

bonus amounts, it is the converse of the 

benefits an Owner would receive on the 

bonus amounts in a rising market. As 

any earnings on bonus amounts applied 

would not be subject to recapture and 

thus would be immediately available to 

an Owner, likewise any losses on bonus 

amounts would also not be subject to 

recapture and thus would be 

immediately available to an Owner. The 

bonus amount recapture provision does 

not diminish the overall value of the 

bonus amounts. 

12. MLLIC’s or MLNY’s recapture of 

bonus amounts is designed to prevent 

anti-selection against it. The risk of antiselection would be that an Owner could 

make significant premium payments 

into the Contract solely in order to 

receive a quick profit from the bonus 

amounts. By recapturing the bonus 

amounts, the Companies protect 

themselves against the risk that an 

Owner will make such large premium 

payments, receive the bonus amounts, 

and then withdraw his or her money 

from the Contract. The Companies 

generally protect themselves from this 

kind of anti-selection, and recover their 

costs in situations where an Owner 

withdraws his or her money early in the 

life of a Contract, by imposing a 

surrender charge. However, where an 

Owner withdraws his money during the 

Free Look Period or a death benefit is 

paid, the Companies do not apply this 

charge. 

13. The Applicants seek relief herein 

not only for themselves with respect to 

the support of the Contracts, but also 

with respect to Future Accounts or 

Future Contracts described herein. The 

Applicants represent that the terms of 

the relief requested with respect to any 

Contracts or Future Contracts funded by 

the Separate Accounts or Future 

Accounts are consistent with the 

standards set forth in Section 6(c) of the 

Act and Commission precedent. The 

Commission has previously granted 

class relief (from certain specified 

provisions of the Act for separate 

accounts that support variable annuity 

contracts) that is materially similar to 

the relief described in this Application. 

77788 Federal Register / Vol. 69, No. 248 / Tuesday, December 28, 2004 / Notices 

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3 In Amendment No. 1, the Amex restated the 

proposed rule change in its entirety.

14. In addition, the Applicants seek 

relief herein with respect to Future 

Underwriters (i.e., a class consisting of 

NASD member broker-dealers that may 

also act as principal underwriter of the 

Contracts and Future Contracts). The 

Commission has regularly granted relief 

to ‘‘future underwriters’’ that are not 

named, and are not affiliates of the 

applicants. The Applicants represent 

that the terms of the relief requested 

with respect to any Future Underwriters 

are consistent with the standards set 

forth in Section 6(c) of the Act and 

Commission precedent. 

15. Without the requested class relief, 

exemptive relief for any Future 

Account, Future Contract, or Future 

Underwriter would have to be requested 

and obtained separately. These 

additional requests for exemptive relief 

would present no issues under the Act 

not already addressed herein. If the 

Applicants were to repeatedly seek 

exemptive relief with respect to the 

same issues addressed herein, investors 

would not receive additional protection 

or benefit, and investors and the 

Applicants could be disadvantaged by 

increased costs from preparing such 

additional requests for relief. The 

requested class relief is appropriate in 

the public interest because the relief 

will promote competitiveness in the 

variable annuity market by eliminating 

the need for the Companies to file 

redundant exemptive applications, 

thereby reducing administrative 

expenses and maximizing efficient use 

of resources. Elimination of the delay 

and the expense of repeatedly seeking 

exemptive relief would enhance the 

Applicants’ ability to effectively take 

advantage of business opportunities as 

such opportunities arise. The 

Applicants’ request for class exemptions 

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, and that an order 

of the Commission including such class 

relief, should, therefore, be granted. Any 

entity that currently intends to rely on 

the requested exemptive order is named 

as an Applicant. Any entity that relies 

upon the requested order in the future 

will comply with the terms and 

conditions contained in this 

Application.

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. 04–28273 Filed 12–27–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[File No. 500–1] 

In the Matter of Artec, Inc.; Order of 

Suspension of Trading 

December 23, 2004. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Artec, Inc. 

(‘‘ATKJ’’) because of questions regarding 

the accuracy of assertions by ATKJ and 

others, on ATKJ’s Web site, in ATKJ’s 

press releases, and in public statements 

to investors concerning, among other 

things, the testing of ATKJ’s Tubercin 

substance for use in treating cancer 

patients. 

The Commission is of the opinion that 

the public interest and the protection of 

investors require a suspension of trading 

in the securities of the above listed 

company. 

Therefore, it is ordered, pursuant to 

Section 12(k) of the Securities Exchange 

Act of 1934, that trading in the above 

listed company is suspended for the 

period from 9:30 a.m. e.s.t. December 

23, 2004 through 11:59 p.m. e.s.t., on 

January 7, 2005.

By the Commission. 

Jill M. Peterson, 

Assistant Secretary.

[FR Doc. 04–28473 Filed 12–23–04; 11:55 

am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50894; File No. SR–Amex–

2004–93] 

Self-Regulatory Organizations; 

American Stock Exchange LLC; Notice 

of Filing and Order Granting 

Accelerated Approval to a Proposed 

Rule Change and Amendment No. 1 

Thereto Relating to Customer 

Transaction Charges for the Trading of 

Nasdaq-100 Index Tracking Stock() 

December 20, 2004. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on November 

22, 2004, the American Stock Exchange 

LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

On December 7, 2004, Amex filed 

Amendment No. 1 to the proposed rule 

change.3 The Commission is publishing 

this notice to solicit comments on the 

proposed rule change, as amended, from 

interested persons. In addition, the 

Commission is granting accelerated 

approval of the proposed rule change.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Amex proposes to amend the 

Amex Equity and Exchange Traded 

Funds and Trust Issued Receipts Fee 

Schedules to provide for customer 

transactions charges for the trading of 

Nasdaq-100 Index Tracking Stock() 

(Symbol: QQQQ) pursuant to the 

Nasdaq Unlisted Trading Privileges 

Plan. The text of the proposed rule 

change, as amended, is available at the 

Office of the Secretary, Amex, and at the 

Commission. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of, and basis for, 

the proposed rule change and discussed 

any comments it had received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item III below. The 

Amex has prepared summaries, set forth 

in Sections A, B, and C below, of the 

most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Effective December 1, 2004, the 

Nasdaq-100 Index Tracking Stock() 

listed on the Nasdaq Stock Market, Inc. 

It trades on Nasdaq under the symbol 

QQQQ. The Amex trades the QQQQ on 

an unlisted trading privileges basis. The 

Amex proposes to amend the Amex 

Equity and Exchange Traded Funds and 

Trust Issued Receipts Fee Schedules 

(‘‘Amex Fee Schedules’’) to provide that 

the customer transaction charges in 

QQQQ would be $.0015 per share ($.15 

per 100 shares), capped at $100 per 

trade. This would be one-fourth of the 

regular customer transaction charge for 

the Nassaq–100 Index Tracking Stock() 

when it was listed on the Amex 

(although the Amex has suspended