Federal Register / Vol. 61, No. 83 / Monday, April 29, 1996 / Notices 18763

1Applicants represent that they will amend the

application during the notice period to include the

Other Accounts.

any Surrender Charge, surrenders will

be deemed to be taken first from any

applicable Free Withdrawal Amount,

next from purchase payments (on a firstin, first-out basis), and finally from

contract earnings (in excess of any Free

Withdrawal Amount). The Company

does not expect that the Surrender

Charge will cover sales and distribution

expenses incurred in connection with

the Contracts.

13. Prior to a Contract’s maturity date,

all or part of the contract value may be

transferred between the subaccounts

without penalty, fee, or charge.

Although currently there are no

restrictions on the frequency of

transfers, the Company reserves the

right to limit transfers to no more than

one in any six-month period.

Applicants’ Legal Analysis

1. Section 6(c) of the 1940 Act

authorizes the SEC to grant an

exemption from any provision, rule or

regulation of the 1940 Act to the extent

that it 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 1940 Act to do so.

2. Sections 26(a)(2)(C) and 27(c)(2) of

the 1940 Act, in relevant part, prohibit

a registered unit investment trust, its

depositor or principal underwriter, from

selling periodic payment plan

certificates unless the proceeds of all

payments, other than sales loads, are

deposited with a qualified bank and

held under arrangements which prohibit

any payment to the depositor or

principal underwriter except a

reasonable fee, as the SEC may

prescribe, for performing bookkeeping

and other administrative duties

normally performed by the bank itself.

3. Applicants seek an order under

Section 6(c) of the 1940 Act granting

exemptions from Sections 26(a)(2)(C)

and 27(c)(2) of the 1940 Act to the

extent necessary to permit the

deduction of a mortality and expenses

risk charge from the assets of the

Accounts under the Contracts.

4. Applicants state that the terms of

the relief requested with respect to any

Future Contracts funded by the

Accounts are consistent with the

standards set forth in Section 6(c) of the

1940 Act. Applicants represent that the

Future Contracts to be funded by the

Accounts will be materially similar to

the Current Contracts. Applicants state

that without the requested relief, the

Company would have to request and

obtain exemptive relief for the Accounts

to fund each Future Contract.

Applicants assert that these additional

requests for exemptive relief would

present no issues under the 1940 Act

not already addressed in this

application, and that the requested relief

is appropriate in the public interest

because the relief will promote

competitiveness in the variable annuity

market by eliminating the Applicants’

need to file redundant exemptive

applications, thereby reducing

administrative expenses and

maximizing efficient use of resources.

5. Applicants represent that the

1.25% mortality and expense risk

charge for the Contracts is reasonable in

relation to the risks assumed by the

Company under the Contracts and is

within the range of industry practice for

comparable annuity contracts, based on

a review of the publicly available

information regarding products of other

companies. The Company represents

that it will maintain at its principal

offices, and make available upon request

to the Commission or its staff, a

memorandum detailing the variable

annuity products analyzed, and the

methodology used in, and the results of,

the comparative review.

6. Applicants acknowledge that the

Surrender Charge may be insufficient to

cover all distribution costs, and that if

a profit is realized from the mortality

and expense risk charge, all or a portion

of such profit may be offset by

distribution expenses not reimbursed by

the Surrender Charge. Notwithstanding

this, the Company has concluded that

there is a reasonable likelihood that the

proposed distribution financing

arrangements made with respect to the

Contracts will benefit Fund ABD, the

Other Accounts,1 and Contract owners.

The basic for such conclusion is set

forth in a memorandum which will be

maintained by the Company at its home

office, and will be available to the

Commission or its staff upon request.

7. The Company also represent that

the Accounts will invest only in

underlying mutual funds which have

undertaken to have a board of directors

or a board of trustees, as applicable, a

majority of whom are not ‘‘interested

persons’’ of such Accounts within the

meaning of Section 2(a)(19) of the 1940

Act, formulate and approve any plan

under Rule 12b–1 (under the 1940 Act)

to finance distribution expenses.

Conclusion

For the reasons set forth above,

Applicants represent that the

exemptions requested are necessary and

appropriate in the public interest and

consistent with the protection of

investors and purposes fairly intended

by the policy and provisions of the 1940

Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–10468 Filed 4–26–96; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21909; File No. 812–9836]

The Travelers Life and Annuity

Company, et al.

April 22, 1996.

AGENCY: U.S. Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (‘‘1940 Act’’).

APPLICANTS: The Travelers Life and

Annuity Company (‘‘Company’’), The

Travelers Fund ABD II for Variable

Annuities (‘‘Fund ABD II’’) and Tower

Square Securities, Inc. (‘‘TSSI’’).

RELEVANT 1940 ACT SECTIONS: Order

requested under Section 6(c) of the 1940

Act for exemptions from Sections

26(a)(2)(C) and 27(c)(2) thereof.

SUMMARY OF APPLICATION: Applicants

and any other separate account

established by the Company (‘‘Other

Accounts,’’ together with Fund ABD,

‘‘Accounts’’) seek an order pursuant to

Section 6(c) of the 1940 Act granting

exemptions from Sections 26(a)(2)(C)

and 27(c)(2) of the 1940 Act to the

extent necessary to permit the

deduction of a mortality and expense

risk charge from the assets of the

Accounts under certain flexible

premium deferred variable annuity

contracts issued by the Company.

FILING DATE: The application was filed

on October 27, 1995, and amended and

restated on March 28, 1996.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the Secretary of

the SEC and serving Applicants with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

May 17, 1996 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 Secretary of the SEC.
18764 Federal Register / Vol. 61, No. 83 / Monday, April 29, 1996 / Notices

ADDRESSES: Secretary, SEC, 450 Fifth

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

Applicants, The Travelers Life and

Annuity Company, One Tower Square,

Hartford, Connecticut 06183, Attention:

Kathleen A. McGah, Counsel and

Assistant Secretary.

FOR FURTHER INFORMATION CONTACT:

Edward P. Macdonald, Staff Attorney, or

Patrice M. Pitts, Special Counsel,

Division of Investment Management,

Office of Insurance Products, at (202)

942–0670.

SUPPLEMENTARY INFORMATION: Following

is a summary of the application. The

complete application is available for a

fee from the Public Reference Branch of

the SEC.

Applicants’ Representations

1. The Company, a stock life

insurance company organized under the

laws of the State of Connecticut in 1973,

is a wholly-owned subsidiary of The

Travelers Insurance Company, which is

an indirect wholly-owned subsidiary of

Travelers Group, Inc. The Company

currently is licensed to do business in

all states except Alabama, Hawaii,

Kansas, Maine, New Hampshire, New

Jersey, North Carolina, Tennessee,

Texas, Wyoming and New York, and

currently is seeking licensure in the

remaining United States except New

York.

2. Fund ABD II was established on

October 17, 1995, as a separate account

under the laws of the State of

Connecticut to fund individual and

group flexible premium deferred

variable annuity contracts and

certificates to be issued by the Company

(the ‘‘Current Contracts’’). Fund ABD II

currently is divided into six

subaccounts, each of which invests its

assets exclusively in the shares of four

open-end management investment

companies.

3. In the future, the Company may

issue through Fund ABD II or the Other

Accounts other contracts (‘‘Future

Contracts’’) that are materially similar to

the Contracts. (Future Contracts and

Current Contracts collectively are

referred to as ‘‘Contracts.’’)

4. TSSI, a broker-dealer registered

with the SEC under the Securities

Exchange At of 1934, is a member of the

National Association of Securities

Dealers, Inc. TSSI is an affiliate of the

Company and an indirect wholly-owned

subsidiary of Travelers Group, Inc. TSSI

will be the distributor of the Contracts.

5. The Contracts are designed to

provide retirement payments and other

benefits for persons covered under plans

qualified for federal income tax

advantages available under the Internal

Revenue Code of 1986, as amended, and

for persons desiring such benefits who

do not qualify for such tax advantages.

Under group contracts, purchase

payments will be made by or on behalf

of a participant who is covered under a

retirement plan. The Contracts provide

for allocation of purchase payments to

the subaccount and/or to a fixed

account. Upon retirement, annuity

payments will be made on a fixed or

variable basis. Fixed payments are based

on the tables shown in the Contract;

however, if a more beneficial payment

table is in effect at the time the first

payment is being determined, it will be

used. Once payments are determined,

they will be assured throughout the

payout period and are fixed in nature.

Variable annuity payments will increase

or decrease during the payout period.

The first variable payment is based on

the tables shown in the Contract, but

subsequent payments will increase or

decrease depending on the net

investment performance of the

underlying mutual funds chosen for

investment during the annuity period. If

the annuitant dies before the maturity

date of the Contract, the Company will

pay a death benefit. Before annuity or

income payments begin, however,

Contract owners may transfer all or part

of their contract value from one

subaccount to another without fees,

penalty or charge. There currently are

no restrictions on the frequency of

transfers, but the Company reserves the

right to limit transfers to no more than

one in any six month period.

6. The Company will assess an annual

contract administrative charge of $30 for

the Contracts. This charge will not be

assessed after an annuity payout has

begun, at the death of the annuitant or

the Contract owner, or if the Contract

owner has a contract value greater than

$40,000 on the assessment date. The

Company also will assess the

subaccount of Fund ABD II a daily asset

charge at an effective rate of 0.15% per

annum for administrative expenses.

These charges cannot be increased

during the life of the Contract. These

charges represent reimbursement for

only the actual administrative costs

expected to be incurred over the life of

the Contracts. The Company will not

profit from these charges.

7. The Company will deduct certain

state and local government premium

taxes. These deductions may be made

when the Contract is purchased, when

the Contract is surrendered, when

retirement payments begin, or upon

payment of a death benefit. Currently

these taxes range from 0.5% to 5% and

depend on the state in which the

Contract owner resides or the Contract

was sold.

8. To compensate itself for assuming

mortality and expense risks, the

Company will assess the subaccount of

Fund ABD II an amount equal on an

annual basis to 1.25% of the daily net

asset value of the subaccount.

Approximately 0.9375% of the daily net

asset value of the subaccount is for

assumption of the mortality risk, and

0.3125% is for assumption of the

expense risk. These charges cannot be

increased during the life of the

Contracts.

9. The Company assumes certain

mortality risks by its contractual

obligation to continue to make annuity

payments for the life of the annuitant,

under annuity options that involve life

contingencies. The Company assumes

additional mortality and expense risks

by its contractual obligation to pay the

death benefit if either the annuitant or

the Contract owner dies prior to the

maturity date. The Company assumes an

expense risk because the administrative

charges may be insufficient to cover

actual administrative expenses.

Although the Company does not expect

to profit from the mortality and expense

risk charge, any profit would be

available to the Company for any proper

corporate purpose, including payment

of distribution expenses.

10. No sales charge is collected or

deducted at the time purchase payments

are applied under the Contracts. A

contingent deferred sales charge

(‘‘Surrender Charge’’) will be assessed

upon certain full or partial surrenders.

A Surrender Charge applies if all or part

of the contract value is surrendered

during the first seven years following a

purchase payment. The Surrender

Charge starts at 6% of a purchase

payment in the first and second years

following the purchase payment, and

reduces to 5% in the third and fourth

years, 4% in the fifth year, 3% in the

sixth year, and 2% in the seventh year

following the payment. There is no

charge after eight years following a

purchase payment.

11. After the first contract year,

Contract owners may surrender up to

10% of their contract value (as of the

beginning of the contract year) without

incurring a Surrender Charge (the ‘‘Free

Withdrawal Amount’’). The Free

Withdrawal Amount applies to partial

surrenders of any amount and to full

surrenders, except where the contract

value is directly transferred to annuity

contracts issued by other financial

institutions.

12. There is no charge on contract

earnings, which equal: (1) The contract

value; minus (2) the sum of all purchase
Federal Register / Vol. 61, No. 83 / Monday, April 29, 1996 / Notices 18765

1Applicants represent that they will amend the

application during the notice period to include the

Other Accounts.

payments received that have not been

previously surrendered; minus (3) the

Free Withdrawal Amount, if applicable.

To determine the amount of any

Surrender Charge, surrenders will be

deemed to be taken first from any

applicable Free Withdrawal Amount,

next from purchase payments (on a firstin, first-out basis), and finally from

contract earnings (in excess of any Free

Withdrawal Amount). The Company

does not expect that the Surrender

Charge will cover sales and distribution

expenses incurred in connection with

the Contracts.

13. Prior to a Contract’s maturity date,

all or part of the contract value may be

transferred between the subaccount

without penalty, fee, or charge.

Although there currently are no

restrictions on the frequency of

transfers, the Company reserves the

right to limit transfers to no more than

one in any six-month period.

Applicants’ Legal Analysis

1. Section 6(c) of the 1940 Act

authorizes the SEC to grant an

exemption from any provision, rule or

regulation of the 1940 Act to the extent

that it 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 1940 Act to do so.

2. Sections 26(a)(2)(C) and 27(c)(2) of

the 1940 Act, in relevant part, prohibit

a registered unit investment trust, its

depositor or principal underwriter, from

selling periodic payment plan

certificates unless the proceeds of all

payments, other than sales loads, are

deposited with a qualified bank and

held under arrangements which prohibit

any payment to the depositor or

principal underwriter except a

reasonable fee, as the SEC may

prescribe, for performing bookkeeping

and other administrative duties

normally performed by the bank itself.

3. Applicants seek an order under

Section 6(c) of the 1940 Act granting

exemptions from Sections 26(a)(2)(C)

and 27(c)(2) of the 1940 Act to the

extent necessary to permit the

deduction of a mortality and expenses

risk charge from the assets of the

Accounts under the Contracts.

4. Applicants state that the terms of

the relief requested with respect to any

Future Contracts funded by the

Accounts are consistent with the

standards set forth in Section 6(c) of the

1940 Act. Applicants represent that the

Future Contracts to be funded by the

Accounts will be materially similar to

the Current Contracts. Applicants state

that without the requested relief, the

Company would have to request and

obtain exemptive relief for the Accounts

to fund each Future Contract.

Applicants assert that these additional

requests for exemptive relief would

present no issues under the 1940 Act

not already addressed in this

application, and that the requested relief

is appropriate in the public interest

because the relief will promote

competitiveness in the variable annuity

market by eliminating the Applicants’

need to file redundant exemptive

applications, thereby reducing

administrative expenses and

maximizing efficient use of resources.

5. Applicants represent that the

1.25% mortality and expense risk

charge for the Contracts is reasonable in

relation to the risks assumed by the

Company under the Contracts, and is

within the range of industry practice for

comparable annuity contracts, based on

a review of the publicly available

information regarding products of other

companies. The Company represents

that it will maintain at its principal

offices, and make available upon request

to the Commission or its staff, a

memorandum detailing the variable

annuity products analyzed, and the

methodology used in, and the results of,

the comparative review.

6. Applicants acknowledge that the

Surrender Charge may be insufficient to

cover all distribution costs, and that if

a profit is realized from the mortality

and expense risk charge, all or a portion

of such profit may be offset by

distribution expenses not reimbursed by

the Surrender Charge. Notwithstanding

this, the Company has concluded that

there is a reasonable likelihood that the

proposed distribution financing

arrangements made with respect to the

Contracts will benefit Fund ABD II, the

Other Accounts,1 and Contract owners.

The basis for such conclusion is set

forth in a memorandum which will be

maintained by the Company at its home

office and will be available to the

Commission or its staff upon request.

7. The Company also represents that

the Accounts will invest only in

underlying mutual funds which have

undertaken to have a board of directors

or a board of trustees, as applicable, a

majority of whom are not ‘‘interested

persons’’ of such Accounts within the

meaning of Section 2(a)(19) of the 1940

Act, formulate and approve any plan

under Rule 12b–1 (under the 1940 Act)

to finance distribution expenses.

Conclusion

For the reasons set forth above,

Applicants represent that the

exemptions requested are necessary and

appropriate in the public interest and

consistent with the protection of

investors and purposes fairly intended

by the policy and provisions of the 1940

Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–10469 Filed 4–26–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37138; File No. SR–Amex96–14]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the American Stock Exchange, Inc.

Relating to the Exchange Board of

Governors

April 23, 1996.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on April 18, 1996, the

American Stock Exchange, Inc.

(‘‘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 Amex. The Commission

is publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Amex proposes to amend Articles

II, III, and XII of the Exchange

Constitution relating to the Board of

Governors (‘‘Board’’), including the

appointment of a second ViceChairman, the inclusion of the second

highest ranking Exchange executive

officer on the Board, and the eligibility

of Governors for nomination to a third

term. The text of the proposed rule

change is available at the Office of the

Secretary, the 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 received on the