Federal Register / Vol. 74, No. 169 / Wednesday, September 2, 2009 / Notices 45487 

1The existing contract referred to in the 

application is registered under the Securities Act of 

1933 File No. 333–155675. 

Status: Closed. 

Matters To Be Considered: Personnel 

matters—selection of the secretary and 

deputy secretary. 

Contact Person for More Information: 

Stephen L. Sharfman, General Counsel, 

Postal Regulatory Commission, 901 New 

York Avenue, NW., Suite 200, 

Washington, DC 20268–0001, 202–789– 

6820 and stephen.sharfman@prc.gov. 

Dated: August 31, 2009. 

Judith M. Grady, 

Acting Secretary. 

[FR Doc. E9–21303 Filed 8–31–09; 4:15 pm] 

BILLING CODE 7710–FW–P 

POSTAL REGULATORY COMMISSION 

Sunshine Act Meetings 

Name of Agency: Postal Regulatory 

Commission. 

Time and Date: Monday, September 

14, 2009, at 3 p.m. 

Place: Commission conference room, 

901 New York Avenue, NW., Suite 200, 

Washington, DC 20268–0001. 

Status: Open. 

Matters To Be Considered: 1. 

Consideration and adoption of FY 2011 

budget. (2) Election of vice-chairman. 

Contact Person for More Information: 

Stephen L. Sharfman, General Counsel, 

Postal Regulatory Commission, 901 New 

York Avenue, NW., Suite 200, 

Washington, DC 20268–0001, 202–789– 

6820 and stephen.sharfman@prc.gov. 

Dated: August 31, 2009. 

Judith M. Grady, 

Acting Secretary. 

[FR Doc. E9–21304 Filed 8–31–09; 4:15 pm] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. IC–28890; File No. 812–13584] 

Jackson National Life Insurance 

Company, et al. 

August 27, 2009. 

AGENCY: The Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of application for an 

order under Section 6(c) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) granting exemptions from the 

provisions of Sections 2(a)(32), 22(c) 

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

1 thereunder to permit the recapture of 

contract enhancements applied to 

purchase payments made under certain 

deferred variable annuity contracts. 

Applicants: Jackson National Life 

Insurance Company (‘‘Jackson 

National’’), Jackson National Separate 

Account—I (the ‘‘JNL Separate 

Account’’), and Jackson National Life 

Distributors LLC (‘‘Distributor,’’ and 

collectively, ‘‘Applicants’’). 

SUMMARY: Summary of Application: 

Applicants seek an order under Section 

6(c) of the Act to exempt certain 

transactions from the provisions of 

Sections 2(a)(32), 22(c), and 27(i)(2)(A) 

of the Act and Rule 22c–1 thereunder, 

to the extent necessary to permit the 

recapture, under specified 

circumstances, of certain contract 

enhancements applied to purchase 

payments made under the deferred 

variable annuity contracts described in 

the application that Jackson National 

has issued 1 and will issue through the 

JNL Separate Account (the ‘‘Contracts’’) 

as well as other contracts that Jackson 

National may issue in the future through 

its existing or future separate accounts 

(‘‘Other Accounts’’) that are 

substantially similar in all material 

respects to the Contracts (‘‘Future 

Contracts’’). Applicants also request that 

the order being sought extend to any 

other Financial Industry Regulatory 

Authority (‘‘FINRA’’) member brokerdealer controlling or controlled by, or 

under common control with, Jackson 

National, whether existing or created in 

the future, that serves as distributor or 

principal underwriter for the Contracts 

or Future Contracts (‘‘Affiliated BrokerDealers’’) and any successors in interest 

to the Applicants. 

DATES: Filing Date: The application was 

filed on October 9, 2008, and amended 

on February 10, 2009, April 23, 2009, 

and August 26, 2009. 

Hearing or Notification of Hearing: An 

order granting the application will be 

issued unless the Commission orders a 

hearing. Interested persons may request 

a hearing by writing to the Secretary of 

the Commission and serving Applicants 

with a copy of the request, personally or 

by mail. Hearing requests should be 

received by the Commission by 5:30 

p.m. on September 21, 2009, and should 

be accompanied by proof of service on 

Applicants, in the form of an affidavit 

or, for lawyers, a certificate of service. 

Hearing requests should state the nature 

of the writer’s interest, the reason for the 

request, and the issues contested. 

Persons may request notification of a 

hearing by writing to the Secretary of 

the Commission. 

ADDRESSES: Secretary, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090. 

Applicants: c/o Jackson National Life 

Insurance Company, Attn: Joan E. Boros, 

Esq., Jorden Burt LLP, 1025 Thomas 

Jefferson Street, NW., Suite 400 East, 

Washington, DC 20007–5208; copies to 

Anthony L. Dowling, Esq., Jackson 

National Life Insurance Company, 1 

Corporate Way, Lansing, Michigan 

48951. 

FOR FURTHER INFORMATION CONTACT: 

Ellen J. Sazzman, Senior Counsel, at 

(202) 551–6762, or Harry Eisenstein, 

Branch Chief, at (202) 551–6795, Office 

of Insurance Products, Division of 

Investment Management. 

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 an applicant using the 

Company name box, at http:// 

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Applicants’ Representations 

1. Jackson National is a stock life 

insurance company organized under the 

laws of the State of Michigan in June 

1961. Its legal domicile and principal 

business address is 1 Corporate Way, 

Lansing, Michigan 48951. Jackson 

National is admitted to conduct life 

insurance and annuity business in the 

District of Columbia and all States 

except New York. Jackson National is 

ultimately a wholly owned subsidiary of 

Prudential plc (London, England). 

2. The JNL Separate Account was 

established by Jackson National on June 

14, 1993, pursuant to the provisions of 

Michigan law and the authority granted 

under a resolution of Jackson National’s 

Board of Directors. Jackson National is 

the depositor of the JNL Separate 

Account. The JNL Separate Account 

meets the definition of a ‘‘separate 

account’’ under the Federal securities 

laws and is registered with the 

Commission as a unit investment trust 

under the Act (File No. 811–8664). The 

JNL Separate Account will fund the 

variable benefits available under the 

Contracts. The registration statement 

relating to the offering of the Contracts 

was filed under the Securities Act of 

1933 (the ‘‘1933 Act’’). 

3. The Distributor is a wholly owned 

subsidiary of Jackson National and 

serves as the distributor of the 

Contracts. The Distributor is registered 

with the Commission as a broker-dealer 

under the Securities Exchange Act of 

1934 (the ‘‘1934 Act’’) and is a member 

of FINRA. The Distributor enters into 

selling group agreements with affiliated 

and unaffiliated broker-dealers. The 

Contracts are sold by licensed insurance 

agents, where the Contracts may be 


jlentini on DSKJ8SOYB1PROD with NOTICES
45488 Federal Register / Vol. 74, No. 169 / Wednesday, September 2, 2009 / Notices 

lawfully sold, who are registered 

representatives of broker-dealers that are 

registered under the 1934 Act and are 

members of FINRA. 

4. The Contracts require a minimum 

initial premium payment of $5,000 or 

$10,000 under most circumstances 

depending on the contract ($2,000 for a 

qualified plan contract). Subsequent 

payments may be made at any time 

during the accumulation phase but 

before the contract anniversary after the 

owner’s 85th birthday. Each subsequent 

payment must be at least $500 ($50 

under an automatic payment plan). 

Prior approval of Jackson National is 

required for aggregate premium 

payments of over $1,000,000. 

5. The Contracts permit owners to 

accumulate contract values on a fixed 

basis through allocations to one of six 

fixed accounts (the ‘‘Fixed Accounts’’), 

including four ‘‘Fixed Account 

Options’’ which offer guaranteed 

crediting rates for specified periods of 

time (currently, 1, 3, 5, or 7 years), and 

two ‘‘DCA+ Fixed Account Options’’ 

(used in connection with dollar cost 

averaging transfers, each of which from 

time to time offers special crediting 

rates). In addition, if certain optional 

guaranteed minimum withdrawal 

benefits are elected, automatic transfers 

of an owner’s contract value may be 

allocated to a ‘‘Guaranteed Minimum 

Withdrawal Benefit (‘GMWB’) Fixed 

Account.’’ The GMWB Fixed Account 

also offers a guaranteed crediting rate 

for a specified period. 

6. The Contracts also permit owners 

to accumulate contract values on a 

variable basis, through allocations to 

one or more of the investment divisions 

of the JNL Separate Account (the 

‘‘Investment Divisions,’’ collectively 

with the Fixed Account and the GMWB 

Fixed Account, the ‘‘Allocation 

Options’’). Under most of the Contracts, 

93 Investment Divisions currently are 

expected to be offered but additional 

Investment Divisions may be offered in 

the future and some could be eliminated 

or combined with other Investment 

Divisions in the future. Similarly, 

Future Contracts may offer additional or 

different Investment Divisions. 

7. Transfers among the Investment 

Divisions are permitted. The first 15 

transfers in a contract year are free; 

subsequent transfers cost $25. Certain 

transfers to, from and among the Fixed 

Account Options are also permitted 

during the Contracts’ accumulation 

phase, but are subject to certain 

adjustments and limitations. Dollar cost 

averaging and rebalancing transfers are 

offered at no charge and do not count 

against the 15 free transfers permitted 

each year. If certain optional guaranteed 

minimum withdrawal benefits are 

elected, automatic transfers may be 

required to and from the GMWB Fixed 

Account according to non-discretionary 

formulas. These automatic transfers also 

do not count against the 15 free transfers 

permitted each year and are without 

charge. 

8. If the owner dies during the 

accumulation phase of the Contracts, 

the beneficiary named by the owner is 

paid a death benefit by Jackson 

National. The Contracts’ base death 

benefit, which applies unless an 

optional death benefit has been elected, 

is a payment to the beneficiary of the 

greater of: (i) Contract value on the date 

Jackson National receives proof of death 

and completed claim forms from the 

beneficiary or (ii) the total premiums 

paid under that Contract minus any 

prior withdrawals (including any 

withdrawal charges, recapture charges, 

or other charges or adjustments to such 

withdrawals). 

9. The owner may also be offered 

certain optional endorsements (for fees 

described in the application) that can 

change the death benefit paid to the 

beneficiary. First, an ‘‘Earnings 

Protection Benefit Endorsement’’ 

generally would add to the death benefit 

otherwise payable an amount equal to a 

specified percentage (that varies with 

the owner’s age at issue) of earnings 

under the Contract up to a cap of 250% 

of remaining premiums (premiums not 

previously withdrawn). 

10. Second, the owner of a Contract 

may be offered six optional death 

benefits (State variations may apply) 

that would replace the base death 

benefit. The optional death benefits 

include: (i) A 5% Roll-Up death benefit, 

(ii) a 6% Roll-Up death benefit, (iii) a 

Highest Quarterly Anniversary Value 

death benefit, (iv) a Combination 5% 

Roll-Up and Highest Quarterly 

Anniversary Value death benefit, (v) a 

Combination 6% Roll-Up and Highest 

Quarterly Anniversary Value death 

benefit, and (vi) a death benefit 

available in conjunction with the 

purchase of the LifeGuard Freedom 

Guaranteed Minimum Withdrawal 

Benefit. 

11. The Contracts offer fixed and 

variable versions of the following four 

types of annuity payment or ‘‘income 

payment’’: life income, joint and 

survivor, life annuity with 120 or 240 

monthly payments guaranteed to be 

paid (although not guaranteed as to 

amount if variable), and income for a 

specified period of 5 to 30 years. 

Jackson National may also offer other 

income payment options. The Contracts 

may also offer an optional Guaranteed 

Minimum Income Benefit (‘‘GMIB’’) 

endorsement. 

12. In addition to the Earnings 

Protection Benefit, GMIB, and optional 

death benefit endorsements described 

above, there are nine different 

Guaranteed Minimum Withdrawal 

Benefit (‘‘GMWB’’) optional 

endorsements. Three variations of the 

GMWB allow, subject to specific 

conditions, partial withdrawals prior to 

the income date that, in total, equal the 

benefit’s Guaranteed Withdrawal 

Balance (‘‘GWB’’). The guarantee is 

effective if gross partial withdrawals 

taken within any one contract year do 

not exceed a specified percentage of the 

GWB. Six variations of the GMWB 

generally allow, subject to specific 

conditions, partial withdrawals prior to 

the income date for the longer of the 

duration of the owner’s life or until total 

periodic withdrawals equal the GWB. 

13. Jackson National will add an 

additional amount to the owner’s 

contract value (a ‘‘Contract 

Enhancement’’) for the initial premium 

payment, and for each subsequent 

premium payment received prior to the 

first contract anniversary following the 

owner’s 85th birthday. Premium 

payments will not be accepted on or 

after the first contract anniversary 

following the owner’s 85th birthday. If 

the owner is age 85 at issue, premium 

payments will not be accepted on or 

after the first contract anniversary. All 

Contract Enhancements are paid from 

Jackson National’s general account 

assets. The Contract Enhancement is 

equal to 6% of the premium payment if 

the adjusted premium, as defined 

below, is less than $100,000 at the time 

the premium payment is received. The 

Contract Enhancement is equal to 8% of 

the premium payments if adjusted 

premium is greater than or equal to 

$100,000 at the time the premium 

payment is received. The adjusted 

premium is determined at the time each 

premium payment is processed and is 

equal to (a) the sum of all premium 

payments processed prior to the receipt 

of the current premium payment plus 

the current premium payment less (b) 

the sum of all partial withdrawals 

processed prior to the receipt of the 

current premium payment (including 

any applicable withdrawal charges, 

recapture charges and other charges or 

adjustments to such withdrawals). 

14. During the first contract year only, 

at the time that a subsequent premium 

payment is received that causes the 

adjusted premium to equal or exceed 

$100,000 when it was less than 

$100,000 before the receipt of the 

premium payment, a retroactive 

Contract Enhancement will be added to 


jlentini on DSKJ8SOYB1PROD with NOTICES
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the contract value equal to 2% of each 

previous premium payment for which a 

6% Contract Enhancement was credited 

and for which no 2% retroactive 

Contract Enhancement has already been 

added. The Contract Enhancement will 

be applied as of the date of the 

subsequent premium payment and there 

will be no adjustments to previous 

contract values. For example, if the 

initial premium payment is equal to 

$50,000, then the initial adjusted 

premium is equal to $50,000 and the 

Contract Enhancement credited to the 

contract value is equal to 6% (since the 

adjusted premium is less than $100,000) 

of the initial premium payment 

(.06*$50,000 = $3,000). If a withdrawal 

equal to $25,000 is taken at the end of 

the third contract month and a premium 

payment equal to $75,000 is made at the 

end of the sixth contract month, then 

the adjusted premium at the time the 

$75,000 subsequent premium payment 

is received is equal to the initial 

premium less the withdrawal plus the 

subsequent premium payment ($50,000 

¥ $25,000 + $75,000 = $100,000). The 

Contract Enhancement credited to the 

contract value at the time of the 

subsequent premium payment is equal 

to 8% (since the adjusted premium is 

equal to or greater than $100,000) of the 

subsequent premium payment plus the 

retroactive Contract Enhancement of 2% 

of the initial premium payment 

(.08*$75,000 + .02*$50,000 = $7,000). 

15. Jackson National will recapture all 

or a portion of any Contract 

Enhancements by imposing a recapture 

charge whenever an owner: (i) Makes a 

total withdrawal within the recapture 

charge period (nine years after a 

premium payment) or a partial 

withdrawal of corresponding premiums 

within the recapture charge period in 

excess of those permitted under the 

Contracts’ free withdrawal provision 

unless the withdrawal is made for 

certain health-related emergencies 

specified in the Contracts; (ii) elects to 

receive payments under an income 

payment option within the recapture 

charge period; or (iii) returns the 

Contract during the free-look period. 

16. The amount of the recapture 

charge varies, depending upon when the 

charge is imposed, as follows: 

CONTRACT ENHANCEMENT RECAPTURE CHARGE

[As a percentage of premium payments] 

Completed Years Since Receipt of Premium .. 0–1 1–2 2–3 3–4 4–5 5–6 6–7 7–8 8–9 9+ 

Recapture Charge ............................................ 6% 5.50% 4.50% 4% 3.50% 3% 2% 1% .50% 0% 

The above specified recapture charge 

percentages apply in all circumstances, 

whether the Contract Enhancement is 

6% at the time of the premium payment, 

or includes the additional 2%. 

Therefore, the recapture charge 

percentage is not higher for premium 

payments that receive the 8% Contract 

Enhancement than those that receive the 

6% Contract Enhancement. For 

example, if the initial premium is 

$50,000 and the Contract Enhancement 

credited to the contract value is 6% of 

$50,000 (.06*$50,000 = $3,000), the 

recapture charge applied when the 

initial premium is withdrawn after the 

free-look period but within the first 

Completed Year is 6% of $50,000 

(.06*$50,000 = $3,000). If the initial 

premium is $100,000 and the Contract 

Enhancement credited to the contract 

value is 8% of $100,000 (.08*$100,000 

= $8,000), the recapture charge applied 

when the initial premium is withdrawn 

is 6% of $100,000 (.06*$100,000 = 

$6,000). 

17. A ‘‘Completed Year’’ is the 

succeeding twelve months from the date 

on which Jackson National receives a 

premium payment. The first Contract 

anniversary begins Completed Year 1–2 

and each successive Completed Year 

begins with the Contract anniversary of 

the preceding Contract year. 

18. The recapture charge percentage 

will be applied to the corresponding 

premium reflected in the amount 

withdrawn or the amount applied to 

income payments that remain subject to 

a recapture charge. The amount 

recaptured will be taken from the 

Investment Divisions and the Fixed 

Account (and the GMWB Fixed 

Account, if applicable) in the proportion 

their respective values bear to the 

contract value. The dollar amount 

recaptured will never exceed the dollar 

amount of the Contract Enhancement 

added to the contract. Recapture charges 

will be applied upon electing to 

commence income payments, even in a 

situation where the withdrawal charge 

is waived. 

19. Jackson National does not assess 

the recapture charge on any payments 

paid out as: Death benefits; withdrawals 

of earnings; withdrawals taken under 

the free withdrawal provision, which 

allows for free withdrawals up to 10% 

of remaining premium, less earnings; 

withdrawals necessary to satisfy the 

required minimum distribution of the 

Internal Revenue Code (if the 

withdrawal requested exceeds the 

required minimum distribution, the 

recapture charge will not be waived on 

the required minimum distribution); if 

permitted by the owner’s State, 

withdrawals of up to $250,000 from the 

JNL Separate Account, the Fixed 

Account or the GMWB Fixed Account 

in connection with the owner’s terminal 

illness or if the owner needs extended 

hospital or nursing home care as 

provided in the Contract; or if permitted 

by the owner’s State, withdrawals of up 

to 25% (12.5% for each of two joint 

owners) of contract value from the JNL 

Separate Account, the Fixed Account or 

the GMWB Fixed Account in 

connection with certain serious medical 

conditions specified in the Contract. 

20. The contract value will reflect any 

gains or losses attributable to a Contract 

Enhancement described above. For 

purposes of determining the recapture 

charge and withdrawal charge, 

withdrawals will be allocated first to 

earnings, if any (which may be 

withdrawn free of any recapture charge 

and withdrawal charge), second to 

premium on a first-in, first-out basis, so 

that all withdrawals are allocated to 

premium to which the lowest (if any) 

withdrawal charges and recapture 

charges apply, and third to Contract 

Enhancements. For all purposes, other 

than for tax purposes and the 

calculation of the Earnings Protection 

Benefit, earnings are defined to be the 

excess, if any, of the contract value over 

the sum of remaining Contract 

Enhancements (the total Contract 

Enhancements, reduced by withdrawals 

of Contract Enhancements) and 

remaining premiums (the total 

premium, reduced by withdrawals that 

incur withdrawal charges and/or 

recapture charges, and withdrawals of 

premiums that are no longer subject to 

withdrawal charges and/or recapture 

charges). Contract Enhancements and 

any gains or losses attributable to a 

Contract Enhancement will be 

considered earnings under the Contract 

for tax purposes and the calculation of 

the Earnings Protection Benefit. 

21. The Contracts have a ‘‘free-look’’ 

period of ten days after the owner 

receives the Contract (or any longer 


jlentini on DSKJ8SOYB1PROD with NOTICES
45490 Federal Register / Vol. 74, No. 169 / Wednesday, September 2, 2009 / Notices 

period required by State law). Contract 

value (or premiums paid, as may be 

required by State law), less the full 

amount of any Contract Enhancement(s) 

is returned upon exercise of free look 

rights by an owner. Therefore, 100% of 

the Contract Enhancement will be 

recaptured under all circumstances if an 

owner returns the Contract during the 

free-look period, but any gain or loss on 

investments of the Contract 

Enhancement would be retained by the 

owner. The dollar amount recaptured 

will never exceed the dollar amount of 

the Contract Enhancement added to the 

contract. A withdrawal charge will not 

be assessed upon exercise of free look 

rights. 

22. The JNL Separate Account 

consists of sub-accounts, each of which 

will be available under the JNL Separate 

Account. The sub-accounts are referred 

to as ‘‘Investment Divisions.’’ The JNL 

Separate Account currently consists of 

93 Investment Divisions. Each 

Investment Division will invest in 

shares of a corresponding series 

(‘‘Series’’) of JNL Series Trust (‘‘Trust’’) 

or JNL Variable Fund LLC (‘‘Fund’’) 

(collectively the ‘‘Trust and Fund’’). Not 

all Investment Divisions may be 

available. The Trust and Fund are openend management investment companies 

registered under the Act and its shares 

are registered under the 1933 Act. 

Jackson National Asset Management, 

LLC (‘‘JNAM’’) serves as the investment 

adviser for all of the Series of the Trust 

and Fund. JNAM has retained subadvisers for each Series. Jackson 

National, at a later date, may determine 

to create additional Investment 

Divisions of the JNL Separate Account 

to invest in any additional Series, or 

other such underlying portfolios or 

other investments as may now or in the 

future be available. Similarly, 

Investment Division(s) of the JNL 

Separate Account may be combined or 

eliminated from time to time. Any 

changes to the Investment Divisions 

offered will be effected in compliance 

with the terms of the Contracts and with 

applicable State and Federal laws. 

23. In addition to the Contract 

Enhancement recapture charges, the 

Contracts may have the following 

charges: mortality and expense risk 

charge of 1.65% (as an annual 

percentage of average daily account 

value); administration charge of 0.15% 

(as an annual percentage of average 

daily account value); contract 

maintenance charge of $35 per year 

(waived if contract value is $50,000 or 

more at the time the charge is imposed); 

Earnings Protection Benefit charge of 

0.30% (as an annual percentage of daily 

account value—only applies if related 

optional endorsement is elected); GMIB 

charge of 0.85% per year (0.2125% per 

quarter) of the ‘‘GMIB Benefit Base’’ (as 

defined in the application); GMWB 

charge ranging from 0.45% to 1.85% per 

year (0.1125% to 0.4650% per quarter) 

of the ‘‘Guaranteed Withdrawal 

Balance’’ (as defined in the application), 

depending upon age at election and 

upon which (if any) GMWB 

endorsement is elected; optional death 

benefit charge ranging from 0.30% to 

1.80% per year (0.0750% to 0.4500% 

per quarter) of the ‘‘GMDB Benefit Base’’ 

(as defined in the application), 

depending upon which (if any) optional 

death benefit endorsement is elected; 

transfer fee of $25 for each transfer in 

excess of 15 in a contract year (for 

purposes of which dollar cost averaging 

and rebalancing transfers are excluded); 

commutation fee that applies only upon 

withdrawals from income payments for 

a fixed period, measured by the 

difference in values paid upon such a 

withdrawal due to using a discount rate 

of 1% greater than the assumed 

investment rate used in computing the 

amounts of income payments; and a 

withdrawal charge that applies to total 

withdrawals, partial withdrawals in 

excess of amounts permitted to be 

withdrawn under the Contract’s free 

withdrawal provision and on the 

income date (the date income payments 

commence) if the income date is within 

a year of the date the Contract was 

issued. 

24. The withdrawal charges shown in 

the table below apply to the Contracts 

and Future Contracts. The amount of the 

withdrawal charge depends upon the 

contribution year of the premium 

withdrawn as follows: 

WITHDRAWAL CHARGE

[As a percentage of premium payments] 

Completed Years Since Receipt of Premium .. 0 1 2 3 4 5 6 7 8 9+ 

Withdrawal Charge ........................................... 7.5% 7% 6% 5.50% 5% 4% 3% 2% 1% 0 

25. Jackson National does not assess 

the withdrawal charge on any payments 

paid out as: Death benefits; election to 

begin income payments after the first 

contract year; cancellation of the 

Contract upon exercise of free look 

rights by an owner; withdrawals of 

earnings; withdrawals taken under the 

free withdrawal provision, which allows 

for free withdrawals up to 10% of 

remaining premium, less earnings; 

withdrawals necessary to satisfy the 

required minimum distribution of the 

Internal Revenue Code (if the 

withdrawal requested exceeds the 

required minimum distribution, the 

withdrawal charge will not be waived 

on the required minimum distribution); 

if permitted by the owner’s State, 

withdrawals of up to $250,000 from the 

Investment Divisions, Fixed Account or 

GMWB Fixed Account of the Contracts 

in connection with the terminal illness 

of the owner of a Contract, or in 

connection with extended hospital or 

nursing home care for the owner; and if 

permitted by the owner’s State, 

withdrawals of up to 25% (12.5% each 

for two joint owners) of contract value 

from the Investment Divisions, Fixed 

Account or GMWB Fixed Account of the 

Contracts in connection with certain 

serious medical conditions specified in 

the Contract. 

Applicants’ Legal Analysis 

1. Applicants state that Section 6(c) of 

the Act authorizes the Commission to 

exempt any person, security or 

transaction, or any class or classes of 

persons, securities or transactions from 

the provisions of the Act and the rules 

promulgated 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 request that the 

Commission, pursuant to Section 6(c) of 

the Act, grant the exemptions requested 

below with respect to the Contracts and 

any Future Contracts funded by the JNL 

Separate Account or Other Accounts 

that are issued by Jackson National and 

underwritten or distributed by the 

Distributor or Affiliated Broker-Dealers. 

Applicants undertake that Future 

Contracts funded by the JNL Separate 

Account or Other Accounts, in the 

future, will be substantially similar in 

all material respects to the Contracts. 

Applicants believe that the requested 

exemptions are appropriate in the 

public interest and consistent with the 

protection of investors and the purposes 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 74, No. 169 / Wednesday, September 2, 2009 / Notices 45491 

fairly intended by the policy and 

provisions of the Act. 

2. Applicants state that Subsection (i) 

of Section 27 of the Act provides that 

Section 27 does not apply to any 

registered separate account funding 

variable insurance contracts, or to the 

sponsoring insurance company and 

principal underwriter of such account, 

except as provided in paragraph (2) of 

the subsection. Paragraph (2) provides 

that it shall be unlawful for such a 

separate account or sponsoring 

insurance company to sell a contract 

funded by the registered separate 

account unless such contract is a 

redeemable security. Section 2(a)(32) 

defines ‘‘redeemable security’’ as any 

security, other than short-term paper, 

under the terms of which the holder, 

upon presentation to the issuer, is 

entitled to receive approximately his 

proportionate share of the issuer’s 

current net assets, or the cash equivalent 

thereof. 

3. Applicants submit that the 

recapture of the Contract Enhancement 

in the circumstances set forth in its 

application would not deprive an owner 

of his or her proportionate share of the 

issuer’s current net assets. A Contract 

owner’s interest in the amount of the 

Contract Enhancement allocated to his 

or her contract value upon receipt of a 

premium payment is not fully vested 

until nine complete years following a 

premium payment. Until or unless the 

amount of any Contract Enhancement is 

vested, Jackson National retains the 

right and interest in the Contract 

Enhancement amount, although not in 

the earnings attributable to that amount. 

Thus, Applicants urge that when 

Jackson National recaptures any 

Contract Enhancement it is simply 

retrieving its own assets, and because a 

Contract owner’s interest in the Contract 

Enhancement is not vested, the Contract 

owner has not been deprived of a 

proportionate share of the JNL Separate 

Account’s assets, i.e., a share of the JNL 

Separate Account’s assets proportionate 

to the Contract owner’s contract value. 

4. In addition, Applicants represent 

that it would be patently unfair to allow 

a Contract owner exercising the freelook privilege to retain the Contract 

Enhancement amount under a Contract 

that has been returned for a refund after 

a period of only a few days. If Jackson 

National could not recapture the 

Contract Enhancement, individuals 

could purchase a Contract with no 

intention of retaining it and simply 

return it for a quick profit. Furthermore, 

Applicants state that the recapture of 

the Contract Enhancement relating to 

withdrawals and to income payments 

within the first nine years of a premium 

contribution is designed to protect 

Jackson National against Contract 

owners not holding the Contract for a 

sufficient time period. It provides 

Jackson National with sufficient time to 

recover the cost of the Contract 

Enhancement, and to avoid the financial 

detriment that would result from a 

shorter recapture period. 

5. Applicants represent that it is not 

administratively feasible to track the 

Contract Enhancement amount in the 

JNL Separate Account after the Contract 

Enhancement(s) is applied. 

Accordingly, the asset-based charges 

applicable to the JNL Separate Account 

will be assessed against the entire 

amounts held in the JNL Separate 

Account, including any Contract 

Enhancement amounts. As a result, the 

aggregate asset-based charges assessed 

will be higher than those that would be 

charged if the Contract owner’s contract 

value did not include any Contract 

Enhancement. 

6. Applicants submit that the 

provisions for recapture of any Contract 

Enhancement under the Contracts do 

not violate Sections 2(a)(32) and 

27(i)(2)(A) of the Act. Sections 26(e) and 

27(i) were added to the Act to 

implement the purposes of the National 

Securities Markets Improvement Act of 

1996 and Congressional intent. The 

application of a Contract Enhancement 

to premium payments made under the 

Contracts should not raise any questions 

as to compliance by Jackson National 

with the provisions of Section 27(i). 

However, to avoid any uncertainty as to 

full compliance with the Act, 

Applicants request an order providing 

exemption from Sections 2(a)(32) and 

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

necessary, to permit the recapture of the 

Contract Enhancements, under the 

circumstances described herein and in 

the Application, without the loss of 

relief from Section 27 provided by 

Section 27(i). 

7. Applicants state that Section 22(c) 

of the Act authorizes the Commission to 

make rules and regulations applicable to 

registered investment companies and to 

principal underwriters of, and dealers 

in, the redeemable securities of any 

registered investment company to 

accomplish the same purposes as 

contemplated by Section 22(a). Rule 

22c–1 under the Act prohibits a 

registered investment company issuing 

any redeemable security, a person 

designated in such issuer’s prospectus 

as authorized to consummate 

transactions in any such security, and a 

principal underwriter of, or dealer in, 

such security, from selling, redeeming, 

or repurchasing any such security 

except at a price based on the current 

net asset value of such security which 

is next computed after receipt of a 

tender of such security for redemption 

or of an order to purchase or sell such 

security. 

8. Applicants state that it is possible 

that someone might view Jackson 

National’s recapture of the Contract 

Enhancements as resulting in the 

redemption of redeemable securities for 

a price other than one based on the 

current net asset value of the JNL 

Separate Account. Applicants contend, 

however, that the recapture of the 

Contract Enhancement does not violate 

Rule 22c–1. The recapture of some or all 

of the Contract Enhancement does not 

involve either of the evils that Section 

22(c) and Rule 22c–1 were intended to 

eliminate or reduce as far as reasonably 

practicable, namely: (i) The dilution of 

the value of outstanding redeemable 

securities of registered investment 

companies through their sale at a price 

below net asset value or repurchase at 

a price above it, and (ii) other unfair 

results, including speculative trading 

practices. To effect a recapture of a 

Contract Enhancement, Jackson 

National will redeem interests in a 

Contract owner’s contract value at a 

price determined on the basis of the 

current net asset value of the JNL 

Separate Account. The amount 

recaptured will be less than or equal to 

the amount of the Contract 

Enhancement that Jackson National paid 

out of its general account assets. 

Although Contract owners will be 

entitled to retain any investment gains 

attributable to the Contract 

Enhancement and to bear any 

investment losses attributable to the 

Contract Enhancement, the amount of 

such gains or losses will be determined 

on the basis of the current net asset 

values of the JNL Separate Account. 

Thus, no dilution will occur upon the 

recapture of the Contract Enhancement. 

Applicants also submit that the second 

harm that Rule 22c–1 was designed to 

address, namely, speculative trading 

practices calculated to take advantage of 

backward pricing, will not occur as a 

result of the recapture of the Contract 

Enhancement. Because neither of the 

harms that Rule 22c–1 was meant to 

address is found in the recapture of the 

Contract Enhancement, Rule 22c–1 

should not apply to any Contract 

Enhancement. However, to avoid any 

uncertainty as to full compliance with 

Rule 22c–1, Applicants request an order 

granting an exemption from the 

provisions of Rule 22c–1 to the extent 

deemed necessary to permit them to 

recapture the Contract Enhancement 

under the Contracts. 


jlentini on DSKJ8SOYB1PROD with NOTICES
45492 Federal Register / Vol. 74, No. 169 / Wednesday, September 2, 2009 / Notices 

1The mandatory redemption dates are as follows: 

Series D—December 22, 2021; and Series E— 

December 11, 2024. 

9. Applicants submit that extending 

the requested relief to encompass Future 

Contracts and Other Accounts is 

appropriate in the public interest 

because it promotes competitiveness in 

the variable annuity market by 

eliminating the need to file redundant 

exemptive applications prior to 

introducing new variable annuity 

contracts. Investors would receive no 

benefit or additional protection by 

requiring Applicants to repeatedly seek 

exemptive relief that would present no 

issues under the Act not already 

addressed in the application. 

10. Applicants submit, for the reasons 

stated herein, that their exemptive 

request meets the standards set out in 

Section 6(c) of the Act, namely, that the 

exemptions requested are appropriate in 

the public interest and consistent with 

the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act and that, 

therefore, the Commission should grant 

the requested order. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–21140 Filed 9–1–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. IC–28891; File No. 812–13617] 

DNP Select Income Fund Inc., et al.; 

Notice of Application 

August 27, 2009. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of application for an 

order under section 6(c) of the 

Investment Company Act of 1940 

(‘‘Act’’) for an exemption from sections 

18(a)(1)(A) and (B) of the Act. 

Applicants: DNP Select Income Fund 

Inc. (‘‘DNP’’) and Duff & Phelps Utility 

and Corporate Bond Trust Inc. (‘‘DUC’’) 

(each of DNP and DUC, a ‘‘Fund’’ and, 

collectively, the ‘‘Funds’’). 

Summary of Application: Applicants 

request an order (‘‘Order’’) granting an 

exemption from sections 18(a)(1)(A) and 

(B) of the Act for a period from the date 

of the Order until October 31, 2010. The 

Order would permit each Fund to issue 

or incur debt subject to asset coverage 

of 200% that would be used to refinance 

the Fund’s issued and outstanding 

auction preferred shares (‘‘APS Shares’’) 

and/or remarketed preferred stock (‘‘RP 

Shares,’’ and, collectively with the APS 

Shares, the ‘‘Preferred Shares’’) issued 

prior to February 1, 2008 that are 

outstanding at the time such post-Order 

debt is issued or incurred. The Order 

also would permit each Fund to declare 

dividends or any other distributions on, 

or purchase, capital stock during the 

term of the Order, provided that such 

post-Order debt has asset coverage of at 

least 200% after deducting the amount 

of such transaction. 

Filing Dates: The application was 

filed on December 29, 2008, and 

amended on June 3, 2009, June 24, 2009, 

and August 26, 2009. Applicants have 

agreed to file an amendment during the 

notice period, the substance of which is 

reflected in this notice. 

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 September 21, 2009, 

and should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090. 

Applicants: c/o Nathan I. Partain, Duff 

& Phelps Investment Management Co., 

200 South Wacker Drive, Suite 500, 

Chicago, IL 60606. 

FOR FURTHER INFORMATION CONTACT: Jill 

Ehrlich, Attorney Adviser, at (202) 551– 

6819, or Mary Kay Frech, Branch Chief, 

at (202) 551–6821 (Division of 

Investment Management, Office of 

Investment Company Regulation). 

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 an applicant using the 

Company name box, at http:// 

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Applicants’ Representations: 

1. Each of the Funds is organized as 

a Maryland corporation and is a closedend management investment company 

registered under the Act. Each Fund is 

advised by Duff & Phelps Investment 

Management Co. (‘‘Duff & Phelps’’). 

DNP has outstanding a class of common 

shares and two series each of APS 

Shares and RP Shares, and DUC has 

outstanding a class of common shares 

and one series of APS Shares. 

2. Applicants state that the Funds 

issued their outstanding Preferred 

Shares for purposes of investment 

leverage to augment the amount of 

investment capital available for use in 

the pursuit of their investment 

objectives. Applicants state that, 

through the use of leverage, the Funds 

seek to enhance the investment return 

available to the holders of their common 

shares by earning a rate of portfolio 

return (which includes the return 

obtained from securities that are 

purchased from the proceeds of 

Preferred Share offerings) that exceeds 

the dividend rate that the Funds pay to 

the holders of the Preferred Shares. 

Applicants represent that holders of 

APS Shares are entitled to receive a 

stated liquidation preference amount of 

$25,000 per share (plus any 

accumulated but unpaid dividends, 

whether or not declared) in any 

liquidation, dissolution or winding up 

of the relevant Fund, before any 

distribution or payment to holders of 

the Fund’s common shares. Applicants 

also state that dividends declared and 

payable on the APS Shares have a 

similar priority over dividends declared 

and payable on the Fund’s common 

shares. In addition, applicants state that 

APS Shares are ‘‘perpetual’’ securities 

and are not subject to mandatory 

redemption by a Fund so long as the 

Fund meets certain asset coverage tests 

specified in its charter. Further, 

applicants state that the APS Shares are 

redeemable at each Fund’s option. 

3. Applicants represent that holders of 

RP Shares are entitled to receive a stated 

liquidation preference amount of 

$100,000 per share (plus any 

accumulated but unpaid dividends, 

whether or not declared) in any 

liquidation, dissolution or winding up 

of DNP, before any distribution or 

payment to holders of its common 

shares. Applicants state that dividends 

declared and payable on the RP Shares 

have a similar priority over dividends 

declared and payable on DNP’s common 

shares. Applicants also state that the RP 

Shares are subject to mandatory 

redemption on a date certain and, 

therefore, are classified as a liability on 

the statement of assets and liabilities 

and the related dividends as interest 

expense on the statement of operations.1

In addition, the RP Shares are subject to 

mandatory redemption if certain asset 


jlentini on DSKJ8SOYB1PROD with NOTICES