Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Notices 54489

1A Policy may terminate when a Policy loan plus

accrued interest exceeds the Policy’s cash value,

less the applicable Surrender Charge, on the next

loan interest due date (or, if greater, on the date the

calculation is made). NELICO notifies the Policy

owner of such pending termination, and the Policy

will terminate 31 days thereafter unless NELICO

has received sufficient repayment to eliminate the

excess Policy loan.

Lending Fund if, at the time of such

acquisition, (i) the Bank is an affiliated

person of the Lending Fund or an

affiliated person of an affiliated person

of the Lending Fund, or (ii) the Lending

Fund is an affiliated person of the

Feeder Fund or an affiliated person of

an affiliated person of the Feeder Fund,

in either case, by means other than by

directly or indirectly owning,

controlling, or holding with the power

of vote 5% or more of the shares of a

Feeder Fund or a Master Fund by the

Lending Fund or an affiliated person of

the Lending Fund.

7. In connection with all matters

requiring a vote of shareholders of a

Feeder Fund, the Bank will pass

through voting rights to those Lending

Funds that have a beneficial interest in

such Lending Fund.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27657 Filed 10–17–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. 22852; File No. 812–10534]

New England Life Insurance Co et al.;

Notice of Application

October 10, 1997.

AGENCY: 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 relief from rule 6e–

2(c)(1) and from certain provisions of

the Act and rules thereunder specified

in paragraph (b) of rule 6e–2; and from

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

Act and rules 6e–2(b)(12) and 22c–1

thereunder.

SUMMARY OF APPLICATION: Applicants

seek exemptive relief to the extent

necessary: (1) To permit them to offer

and sell certain ‘‘hybrid’’ variable life

insurance policies with modified

scheduled premiums (‘‘Policies’’); and

(2) to permit certain other persons

which may become the principal

underwriter for such Policies (‘‘Future

Underwriters’’) to offer and sell such

Policies.

APPLICANTS: New England Life

Insurance Company (‘‘NELICO’’), New

England Variable Life Separate Account

(‘‘Variable Account’’), and New England

Securities Corporation (‘‘New England

Securities’’).

FILING DATE: The application was filed

on February 28, 1997 and amended and

restated on October 3, 1997.

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 November 4, 1997, and should

be accompanied by proof of service on

Applicants in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the requester’s interest, the reason for

the request, and the issues contested.

Persons may request notification of a

hearing by writing to the Secretary of

the Commission.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

N.W., Washington, D.C. 20549;

Applicants, c/o Marie C. Swift, Esq.,

New England Life Insurance Company,

501 Boylston Street, Boston,

Massachusetts 02116.

FOR FURTHER INFORMATION CONTACT:

Lorna MacLeod, Attorney, or Kevin

Kirchoff, Branch Chief, at (202) 942–

0670, Office of Insurance Products,

Division of Investment Management.

SUPPLEMENTARY INFORMATION: Following

is a summary of the application; the

complete application may be obtained

for a fee from the SEC’s Public

Reference Branch, 450 Fifth Street,

N.W., Washington D.C. 20549 (tel. (202)

942–8090).

Applicants’ Representations

1. NELICO is a Massachusetts stock

life insurance company and is a wholly

owned subsidiary of Metropolitan Life

Insurance Company (‘‘MetLife’’).

2. The Variable Account was

established as a separate investment

account of NELICO on January 31, 1983,

under Delaware law, and became

subject to Massachusetts law when

NELICO changed its domicile to

Massachusetts on August 30, 1996. The

Variable Account is registered under the

Act as a unit investment trust. The

Variable Account currently consists of

eighteen investment sub-accounts, each

of which invests its assets in a different

portfolio of the New England Zenith

Fund (the ‘‘Zenith Fund’’), the Variable

Insurance Products Fund (the ‘‘VIP

Fund’’), and the Variable Insurance

Products Fund II (the ‘‘VIP Fund II’’).

3. New England Securities, which will

act as the principal underwriter for the

Polices, is registered with the

Commission as a broker-dealer under

the Securities Exchange Act of 1934 and

is a member of the National Association

of Securities Dealers, Inc (‘‘NASD’’).

4. Scheduled premiums for the Policy

are payable until the insured reaches

age 100. The scheduled premium

amount depends on the face amount of

the Policy, the insured’s age, sex (if the

Policy is sex-based), and underwriting

class, the frequency of premium

payments and any rider benefit

premiums. Scheduled premiums for

substandard and automatic issue classes

reflect additional premiums that are

charged for Policies in those categories.

If all scheduled premiums are paid

when due, the Policy will not lapse and

will retain its minimum death benefit

guarantee, even if unfavorable

investment experience has reduced the

cash value to zero.1

5. The Policy also provides

considerable flexibility with respect to

the timing and amount of premium

payments. An owner of a Policy may

make unscheduled payments at any

time that the Policy is in force on a

premium-paying basis (except any

period during which scheduled

premiums are being waived pursuant to

a waiver-of-premium rider), provided

that the unscheduled payment is at least

$25 (or at least $10 for certain Policies)

and, if required by NELICO, the insured

has submitted evidence of insurability

satisfactory to NELICO. In addition,

NELICO’s consent is required if, in

order to satisfy tax law requirements,

the payment would increase the Policy’s

death benefit by more than it would

increase the cash value. NELICO

reserves the right to prohibit or limit the

amount of unscheduled payments under

a Policy covering a substandard risk

insured or under an automatic issue

Policy.

6. An owner of a Policy may plan to

make a certain amount of unscheduled

payments, subject to NELICO’s

administrative procedures. Each net

unscheduled payment will be allocated

to the same sub-accounts as net

scheduled premiums. At the owner’s

request, NELICO will include the

amount of any unscheduled payments,

planned to be made on the Policy

anniversary, in the premium notice sent

to the owner. However, the owner is

required to pay only the scheduled
54490 Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Notices

2The ‘‘tabular cash value’’ is a hypothetical value

that is used to determine the Option 2 death benefit,

availability of the Special Premium Option, and the

amount of cash value available to be withdrawn

from the Policy. The ‘‘tabular cash value’’ is the

value the Policy would have if: (a) All scheduled

premiums were paid when due; (b) no unscheduled

payments, partial surrenders, partial withdrawals or

loans were made; (c) the cash value in the Policy’s

sub-accounts (and cash value in the fixed account)

earned a 4.5% annual net rate of return; and (d) the

maximum guaranteed cost of insurance rates and

maximum levels of other Policy charges were

deducted.

premium in order to keep the Policy in

force on a premium paying basis.

7. The amount of net scheduled

premiums due is automatically

allocated to the Policy’s sub-accounts,

chosen by the Policy owner, on each

scheduled premium due date. A

scheduled premium which is unpaid as

of its due date is in default, but the

Policy provides a 31-day grace period

for the payment of each scheduled

premium after the first. For 60 days after

the due date of a premium in default,

NELICO will not impose the normal

monthly administrative, minimum

death benefit guarantee and cost of

insurance charges against a Policy’s

cash value. If the scheduled premium in

default is paid, these deductions will be

made retroactively. If the Policy is

surrendered while the premium is in

default, the monthly deduction and a

prorated cost of insurance charge are

deducted from surrender proceeds. If

the insured dies during the grace period

and before the premium is paid, a

prorated portion of the unpaid

scheduled premium, measured from its

due date to the date of death, will be

deducted from the amount otherwise

payable. As owner of a Policy may

choose among several lapse options,

which may include extended term

insurance, fixed paid-up insurance or

variable paid-up insurance, subject to

restrictions set forth in the Policy.

8. An owner of a Policy may also elect

the Special Premium Option, which

permits an owner to skip one or more

scheduled premium payments after the

first Policy year, subject to the following

conditions. NELICO will determine that

payment of a scheduled premium that

has not been paid by the end of the

grace period is not required if: (a) The

Policy’s cash value on the premium due

date (before NELICO advanced the

premium due) exceeds the Policy’s

‘‘tabular cash value’’ on that date by at

least the amount of the scheduled

premium due, including any rider and

substandard risk or automatic issue

premiums due; and (b) immediately

after the Special Premium Option is

exercised, the amount of any Policy loan

outstanding plus accrued interest will

not exceed the Policy’s loan value.2

9. If NELICO permits nonpayment of

a scheduled premium under the Special

Premium Option, NELICO will deduct

from the Policy’s cash value, as of the

premium due date, 91% of the portion

of the annual administrative charge and

of any rider, substandard risk or

automatic issue premiums due on that

date.

10. An owner of a Policy may also

elect an automatic premium loan

option. Under this option, if a

scheduled premium has not been paid

by the end of the grace period, the

Policy’s loan value will be used to pay

the scheduled premium. If an owner of

a Policy has elected both the Special

Premium Option and the automatic

premium loan provision, NELICO will

first determine whether the Special

Premium Option can be used in the

event of nonpayment of a scheduled

premium. If the Special Premium

Option conditions are not met, then

NELICO will determine whether the

premium can be paid by means of an

automatic premium loan.

11. The Policy provides for two

alternate death benefit options. The

Option 1 death benefit is equal to the

greater of: (a) The face amount of the

Policy; or (b) the Policy’s cash value

divided by the net single premium per

$1 of death benefit at the insured’s

attained age. The alternative in (b),

above, means that the death benefit will

not be less than the amount of insurance

which could be purchased on that date

by a net single premium equal to the

Policy’s cash value, and is designed to

ensure that the Policy will satisfy

Federal tax law requirements.

12. The Option 2 death benefit is

equal to the greater of: (a) The face

amount of the Policy plus any excess of

the Policy’s cash value over its ‘‘tabular

cash value’’; or (b) the Policy’s cash

value divided by the net single premium

per $1 of the death benefit at the

insured’s attained age. The Policy does

not provide for changes in death benefit

options.

13. Under either death benefit option,

the death benefit is guaranteed not to be

less than the Policy’s face amount,

regardless of the investment experience

of the Policy’s subaccounts, as long as

scheduled premiums have been paid in

a timely manner or nonpayment has

been permitted in accordance with the

terms of the Policy. However, if Policy

loans plus accrued interest exceed the

Policy’s cash value less the surrender

charge, the Policy may terminate even if

all scheduled premiums have been paid.

14. The Option 1 death benefit

remains fixed in the amount initially

stated in the Policy as long as scheduled

premiums are paid (or need not be paid

pursuant to the Special Premium

Option), until the death benefit is

increased for Federal tax law purposes,

described below. The Option 2 death

benefit varies daily with the net

investment experience of the Variable

Account, but will never be less than the

amount initially stated in the Policy as

long as scheduled premiums are paid

(or need not be paid pursuant to the

Special Premium Option). In order to

qualify the Policy as life insurance for

Federal tax law purposes, the death

benefit will be an amount, if greater

than the amount otherwise provided

under Option 1 or Option 2, as

appropriate, equal to the Policy’s cash

value divided by the net single premium

per $1.00 of death benefit at the

insured’s attained age. Thus, the death

benefit under either Option 1 or Option

2 varies with investment experience

when the cash value is sufficiently large

that the death benefit is increased in

order for the Policy to qualify as life

insurance for Federal tax law purposes.

15. NELICO permits (in states where

it has been approved by the state

insurance department) a Policy owner to

effect a reduction in the Policy’s face

amount (without receiving a

distribution of any of the Policy’s cash

value) but not, without NELICO’s

consent, below NELICO’s minimum face

amount requirements at issue. A

reduction in face amount will reduce

the Policy’s cash value by the amount of

any applicable Surrender Charge, will

also reduce the scheduled premium

level and ‘‘tabular cash value,’’ and may

require a reduction in any related rider

benefits. Generally, the Policy’s death

benefit will also be decreased. However,

if the death benefit at the time of a face

amount reduction is determined by

dividing the cash value by the net single

premium per dollar of death benefit, the

death benefit will not be decreased

unless a Surrender Charge was deducted

from the cash value in connection with

the face amount reduction.

16. NELICO deducts the following

amounts from each scheduled premium

paid under a Policy to arrive at a basic

scheduled premium: (a) Charges for any

supplementary benefits provided by

rider; (b) any extra premiums paid for a

Policy in a substandard risk or

automatic issue class; and (c) an annual

Policy administrative charge. NELICO

does not deduct any of these charges

from unscheduled payments.

17. NELICO also deducts sales load

(5.5%), state premium tax (2.5%), and

federal tax (1%) charges from each basic
Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Notices 54491

3 In all cases, the annualized premium amount to

which the Surrender Charge applies is calculated

based on the premium payment frequency in effect

at the time. Therefore, if basic scheduled premiums

are being paid in quarterly installments rather than

annually at the time of a full or partial surrender,

a reduction in face amount or lapse of a Policy, the

dollar amount of the Surrender Charge may be

higher because the dollar amount of an annual basic

scheduled premium is somewhat higher if it is paid

in installments rather than once a year.

4Certain of the relief requested may not currently

be necessary in light of the structure of the Variable

Account as a ‘‘unit investment trust,’’ but would

become necessary if the Variable Account were to

be restructured as an open-end management

company in the future. The Policies permit such a

restructuring.

scheduled and unscheduled premium

payment made during the life of the

Policy.

18. NELICO deducts from a Policy’s

cash value, on the Policy date and on

the first day of each Policy month, a

monthly deduction, consisting of an

administrative charge and a minimum

death benefit guarantee charge, and a

charge for the cost of providing

insurance protection for the Policy

month equal to the amount at risk

multiplied by the cost of insurance rate

for that month. NELICO also charges the

sub-accounts of the Variable Account

for mortality and expense risks, at an

annual rate of 0.60% (guaranteed not to

exceed 0.90%) of the value of each subaccount’s assets attributable to the

Policies; and charges for investment

advisory and other Fund expenses are

deducted from Fund assets and are

indirectly borne by owners of Policies.

19. During the first eleven Policy

years, NELICO deducts a charge from a

Policy’s cash value upon a full or partial

surrender, upon a reduction in face

amount, or upon lapse of the Policy (the

‘‘Surrender Charge’’). The Surrender

Charge is calculated as a percentage of

basic scheduled premiums, and will be

applied to an amount equal to the total

annualized basic scheduled premiums

for the Policy payable through the

Policy year in which total or partial

surrender, lapse, or face amount

reduction occurs, up to a maximum of

four annualized basic scheduled

premiums.

20. The Surrender Charge rate that

applies in each Policy year is indicated

below:

Policy

year

Percentage Applied to

1 55.00 One annualized basic

scheduled premium.

2 55.00 Two annualized basic

scheduled premiums.

3 36.67 Three annualized basic

scheduled premiums.

4 27.50 Four annualized basic

scheduled premiums.

5* 26.25 Four annualized basic

scheduled premiums.

6* 25.00 Four annualized basic

scheduled premiums.

Policy

year

Percentage Applied to

7* 20.00 Four annualized basic

scheduled premiums.

8* 15.00 Four annualized basic

scheduled premiums.

9* 10.00 Four annualized basic

scheduled premiums.

10* 5.00 Four annualized basic

scheduled premiums.

11* 0.00 Four annualized basic

scheduled premiums.

*End of policy year.

21. For the first four Policy years the

Surrender Charge rate that applies in a

particular year remains level throughout

that year. Beginning in the fifth Policy

year, the Surrender Charge rate declines

on a monthly basis to the end of year

rates shown in the table above.3 The

maximum dollar amount of the charge

applies in Policy years two through

four. The dollar amount of the

Surrender Charge is also limited to an

amount per $1,000 of a Policy’s face

amount. These limits are:

Policy year

1 2 3 4 5 6 7 8 9 10 11

Maximum surrender charge per $1,000 of face amount ............... $47 $44 $42 $39 $37 $35 $33 $31 $29 $27 $25

22. In the case of a partial surrender

or reduction in face amount, the

Surrender Charge is deducted from the

Policy’s cash value in an amount

proportional to the amount of the face

amount surrender.

23. The Surrender Charge is deducted

from the Policy’s available cash value,

regardless of whether the cash value

comes from scheduled premiums,

unscheduled payments or investment

experience. If the applicable Surrender

Charge amount equals or exceeds the

available cash value, there will be no

proceeds paid to the Policy owner upon

surrender or lapse. The Surrender

Charge covers the following expenses:

developmental costs associated with the

Policies (such as actuarial, legal,

systems and other overhead costs),

underwriting, and marketing and other

distribution expenses.

Applicant’s Legal Analysis

Definition of ‘‘Variable Life Insurance

Contract’’

1. Rule 6c–3 grants exemptions from

those provisions of the Act that are

specified in paragraph (b) of Rule 6e–2

(except for Sections 7 and 8(a)) to

certain separate accounts of life

insurance companies that support

variable life insurance policies.

Specifically, the exemptions provided

by Rule 6c–3 are available only to

separate accounts registered under the

Act whose assets are derived solely from

the sale of ‘‘variable life insurance

contracts’’ that meet the definition set

forth in Rule 6e–2(c)(1), and from

certain advances made by the insurer.

The term ‘‘variable life insurance

contract’’ is defined by Rule 6e–2(c)(1)

to include only life insurance policies

that provide a death benefit and a cash

surrender value, both of which vary to

reflect the investment experience of the

separate account, and that guarantee

that the death benefit will not be less

than an initial dollar amount stated in

the policy. Applicants request relief

from the definition of ‘‘variable life

insurance contracts’’ set forth in Rule

6e–2(c)(1) because Applicants must rely

on certain exemptive provisions in Rule

6e–2(b), as described below, in

connection with the issuance and sale of

the Policies.

2. Applicants must avail themselves

of certain relief provided by Rule 6e–

2(b), as set forth below, in order to issue,

sell, and maintain the Policies.4

Applicants request relief to the extent

necessary to permit reliance on the

exemptions provided in each of the

provisions of Rule 6e–2 that are set forth

below, in connection with the issuance

and sale of the Policies.

(a) Paragraph (b)(1)—Sales load is no

longer subject to the specific

quantitative limits set forth in the Act,

and rules thereunder. It is nonetheless

possible that the amount of ‘‘sales load’’

imposed under the Policies would need
54492 Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Notices

to be determined (for example, in

connection with analyzing an exchange

offer involving the Policies; or analyzing

variations in sales load pursuant to

Section 22(d) of the Act). Accordingly,

Applicants seek relief permitting them

to rely on paragraph (b)(1) of Rule 6e–

2.

(b) Paragraph (b)(3)—Relief is

requested to permit the Variable

Account to rely on paragraph (b)(3)(ii) of

Rule 6e–2 in order to effect compliance

with Section 8(b) of the Act (regarding

the filing of a registration statement

with the Commission).

(c) Paragraph (b)(4)—Relief is

requested to permit Applicants to apply

the eligibility restrictions of Section 9 of

the Act in the fashion contemplated by

paragraph (b)(4).

(d) Paragraph (b)(5)—Relief is

requested to permit Applicants to rely

on the exemptions provided from

Section 13(a) of the Act relating to the

imposition by an insurance regulatory

authority of certain requirements on the

investment policies of the Variable

Account; and disapproval by NELICO of

changes in the investment policy of the

Variable Account initiated by contract

owners, under circumstances

contemplated by and in accordance

with the requirements of paragraph

(b)(5).

(e) Paragraph (b)(6)—Relief is

requested to permit Applicants to rely

on the relief provided by paragraph

(b)(15) of Rule 6e–2 (see below), which

in turn refers to the conditions of

paragraph (b)(6).

(f) Paragraph (b)(7)—Relief is

requested to permit Applicants to rely

on the exemptions provided from

Section 15 (a), (b), and (c) relating to an

insurance regulatory authority

disapproving advisory or underwriting

contracts; disapproval by NELICO of

changes in the principal underwriter for

the Variable Account initiated by

contract holders; and disapproval by

NELICO of changes in the investment

adviser to the Variable Account initiated

by contract owners, under

circumstances contemplated by and in

accordance with the requirements of

paragraph (b)(7).

(g) Paragraph (b)(8)—Relief is

requested to permit Applicants to rely

on the exemptions provided from

Section 16(a) relating to an insurance

regulatory authority disapproving or

removing a member of the board of

directors of a separate account, under

circumstances contemplated by and in

accordance with the replacements of

paragraph (b)(8).

(h) Paragraph (b)(9)—Relief is

requested to permit Applicants to rely

on the exemptions provided from

Section 17(f) in order to maintain

separate account assets in the custody of

NELICO or an affiliate thereof, in

accordance with the requirements of

paragraph (b)(9).

(i) Paragraph (b)(10)—Relief is

requested to permit Applicants to rely

on the exemptions provided from

Section 18(i) in order to provide for

variable contract owner voting as

contemplated by and in accordance

with the requirements of paragraph

(b)(10).

(j) Paragraph (b)(12)—Relief is

requested to permit Applicants to rely

on the exemptions provided from

Section 22(d), 22(e) and Rule 22c–1 in

connection with the issuance, transfer

and redemption procedures for the

Policies, including premium processing,

premium rate structure, underwriting

standards, and the benefit provided by

the Policies, as contemplated by and in

accordance with the requirements of

paragraph (b)(12).

(k) Paragraph (b)(14)—Relief is

requested to permit Applicants to rely

on the relief provided by paragraph

(b)(15) of Rule 6e–2 (see below), which

in turn refers to the conditions of

paragraph (b)(14).

(l) Paragraph (b)(15)—Relief is

requested to permit Applicants to rely

on the exemptions provided from

Section 9(a), and to facilitate the voting

by NELICO of shares of management

investment companies held by the

Variable Account in disregard of

contract owner instructions under the

circumstances contemplated by, and in

accordance with the requirements of,

paragraph (b)(15). Relief is also

requested to permit Applicants to rely

on the exemptions provided from

Section 14(a), 15(a), 16(a), and 32(a)(2)

in connection with any registered

management investment company

established by NELICO in the future in

connection with the Policies, in

accordance with the requirements of

paragraph (b)(15), and paragraphs (b)(5),

(b)(7), (b)(8), and (b)(14) of Rule 6e–2.

3. Applicants believe the Option 2

death benefit under the Policies falls

within the requirement that it ‘‘vary to

reflect the investment experience of the

separate account.’’ Although the Option

2 death benefit varies only when the

Policy’s cash value exceeds its ‘‘tabular

cash value,’’ it is analogous to more

conventional scheduled premium

variable life insurance policies, which

provide for death benefits that increase

when investment experience exceeds an

assumed investment rate. A policy

under the Option 1 death benefit,

however, will fail to satisfy this

requirement if the death benefit has not

been otherwise increased to satisfy

Federal tax law requirements.

4. The Policies also contain other

provisions, relating primarily to the

flexibility of premium payments, that

are not specifically addressed in Rule

6e–2. Applicants therefore request relief

to the extent necessary to permit

reliance on the definition of ‘‘variable

life insurance contract’’ in Rule 6e–

2(c)(1), and on the exemptions provided

in each of the provisions of paragraph

(b) of Rule 6e–2 that are set forth above,

under the same terms and conditions

applicable to a separate account that

satisfies the conditions set forth in Rule

6e–2.

5. Applicants submit that the

considerations that led the commission

to adopt Rules 6c–3 and 6e–2 apply

equally to the Variable Account and

NELICO’s Policy, and that the

exemptions provided by these rules

should be granted to the Variable

Account and to the other Applicants on

the terms specified in those rules,

except to the extent that further

exemption from those terms is

specifically requested herein.

Redeemability

6. Section 27(i)(2)(A) of the Act

provides that no registered separate

account funding variable insurance

contracts or its sponsoring insurance

company shall sell such a contract

unless it is a ‘‘redeemable security.’’

Section 2(a)(32) defines a ‘‘redeemable

security’’ as one entitling its holder to

receive ‘‘approximately his

proportionate share’’ of the issuer’s

current net asset value upon

presentation to the issuer. Applicants

request relief from the requirement in

Section 27 that the Policy be a

‘‘redeemable security,’’ and from the

definition of ‘‘redeemable security’’ set

forth in Section 2(a)(32), in connection

with the issuance and sale of the

Policies.

7. Rule 22c–1 requires that a Policy be

redeemed at a price based on the current

net asset value of the Policy next

computed after receipt of the request for

surrender. If the conditions of Rule 6e–

2(b)(12) are satisfied, paragraph (b)(12)

provides certain exemptions from Rule

22c–1. A contingent deferred charge

such as the Surrender Charge may,

however, not be contemplated by Rule

6e–2(b)(12), and thus may be deemed

inconsistent with Rule 6e–2(b)(12), to

the extent that the charge can be viewed

as causing a Policy to be redeemed at a

price based on less than the current net

asset value that is next computed after

full or partial surrender of the Policy.

Accordingly, Applicants request relief

from Rule 22c–1 and Rule 6e–2(b)(12),
Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Notices 54493

1Prudential Insurance Company of America, File

No. 812–8536, Rel. No. IC–19826 (Nov. 8, 1993)

(Notice), Rel. No. IC–19918 (Dec. 2, 1993) (Order).

to the extent necessary to permit the

deduction of the Surrender Charge on

surrender, partial surrender, face

amount reduction or lapse of a Policy.

8. Although Section 2(a)(32) does not

specifically contemplate the imposition

of a charge at the time of redemption,

Applicants assert that such charges are

not necessarily inconsistent with the

definition of ‘‘redeemable security.’’

9. Applicants submit that although

the deferred imposition of the Surrender

Charge (upon surrender or lapse) may

not fall within the historical pattern of

all the provisions described in this

Application, that does not change the

charge’s essential nature. Moreover, the

proposed amendments to Rule 6e–2

would permit a sales charge to be

imposed on a contingent deferred basis.

Contingent deferred charges are also

authorized by Rule 6e–3(T) for policies

able to rely on that rule. Therefore,

Applicants submit that the Surrender

Charge is consistent with the principles

and policies underlying the limitations

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

of the Act and Rules 6e–2(b)(12) and

22c–1 thereunder.

Class Exemption for Future

Underwriters

10. Applicants seek to have the relief

they request extend to underwriters that

may, in the future, act as principal

underwriters of the Policies (‘‘Future

Underwriters’’). Future Underwriters

will be members of the NASD.

11. 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. Further,

Applicants state that, without the

requested class relief, exemptive relief

for any Future Underwriter would have

to be requested and obtained separately.

Applicants assert that such additional

requests for exemptive relief would

present no issues under the Act not

already addressed herein. Applicants

submit that their 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.

Conclusion

For the reasons summarized above,

Applicants assert that the requested

exemptions are appropriate in the

public interest and consistent with the

protection of investors and purposes

fairly intended by the policy and

provisions of the Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27655 Filed 10–17–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22854: File No. 812–10288]

The Prudential Insurance Company of

America, et al.

October 10, 1997.

AGENCY: The Securities and Exchange

Commission (the ‘‘Commission’’).

ACTION: Notice of application for an

order under section 11(a) of the

Investment Company Act of 1940 (the

‘‘1940 Act’’) permitting certain exchange

offers between certain unit investment

trusts and certain open-end

management investment companies.

SUMMARY OF APPLICATION: Applicants

seek an order amending a previous

order 1 (the ‘‘Prior Order’’), which

approved the terms of certain offers of

exchange from interests in certain unit

investment trusts to certain open-end

management investment companies.

Applicants seek an amended order: (1)

To extend relief to open-end

management investment companies that

have succeeded to the assets of those

open-end management investment

companies granted relief in the Prior

Order; (2) to permit exchanges both

ways between the unit investment trusts

and the successor management

investment companies; and (3) to permit

exchanges between the unit investment

trusts and certain other similar current

and future funds.

APPLICANTS: The Prudential Insurance

Company of America (‘‘Prudential’’),

Prudential Dryden Fund (‘‘Dryden

Fund,’’ formerly The Prudential

Institutional Fund (‘‘PIF’’)), The

Prudential Variable Contract Account–

10 (‘‘VCA–10’’), The Prudential Variable

Contract Account–11 (‘‘VCA–11’’), The

Prudential Variable Contract Account–

24 (‘‘VCA–24,’’ collectively with VCA–

10 and VCA–11, the ‘‘Medley separate

accounts’’), Prudential Investment

Management Services LLC (‘‘PIMS’’),

Prudential Jennison Series Fund, Inc.

(‘‘Jennison Fund’’), Prudential

Allocation Fund (‘‘Allocation Fund’’),

Prudential World Fund, Inc. (‘‘World

Fund’’), Prudential Government Income

Fund, Inc. (‘‘Government Income

Fund’’), Prudential MoneyMart Assets,

Inc. (‘‘MoneyMart Fund’’), and

Prudential Securities Incorporated

(‘‘PSI’’).

FILING DATES: The application was filed

on June 20, 1996 and was amended and

restated on July 8, 1997 and September

17, 1997.

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 November 4, 1997, and should

be accompanied by proof of service on

Applicants in the from of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the requester’s interest, the reason for

the request, and the issues contested.

Persons may request notification of a

hearing by writing to the Secretary of

the Commission.

ADDRESSES: Secretary, SEC. 450 Fifth

Street, N.W. Washington, D.C. 20549.

Applicants, c/o Christopher E. Palmer,

Shea & Gardner, 1800 Massachusetts

Ave., N.W., Washington, D.C. 20036.

FOR FURTHER INFORMATION CONTACT:

Ethan D. Corey, Attorney, or Kevin M.

Kirchoff, Branch Chief, Office of

Insurance Products, Division of

Investment Management, at (202) 942–

0670.

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application; the complete application is

available for a fee from the

Commission’s Public Reference Branch,

450 5th Street, N.W., Washington, D.C.

20549 (tel. (202) 942–8090).

Applicants’ Representations

1. Prudential is a mutual life

insurance company organized under

New Jersey Law.

2. The Dryden Fund, formerly PIF, is

an open-end, no-load, registered

management investment company. Prior

to the reorganization described below,

PIF was a series mutual fund with the

following seven series, each of which is

referred to as a ‘‘PIF Fund’’: PIF Growth

Stock Fund, PIF Balanced Fund, PIF

International Stock Fund, PIF Income

Fund, PIF Money Market Fund, PIF

Active Balanced Fund, and PIF Stock

Index Fund. PIF was generally available

only as an investment vehicle to certain

retirement programs and other

institutional investors.

3. The Jennison Fund, the World

Fund, the Government Income Fund,