[Federal Register Volume 59, Number 114 (Wednesday, June 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14477]


[[Page Unknown]]

[Federal Register: June 15, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-20345; 812-8270]

 

The Variable Annuity Life Insurance Company et al.

June 8, 1994.
AGENCY: Securities and Exchange Commission (the ``SEC'' or 
``Commission'').

ACTION: Notice of application for exemptions under the Investment 
Company Act of 1940 (the ``1940 Act'').

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APPLICANTS: The Variable Annuity Life Insurance Company (``VALIC''), 
Separate Account A of The Variable Annuity Life Insurance Company (the 
``Account''), any other separate account established by VALIC in the 
future to support certain variable annuity contracts issued by VALIC 
(``Other Account''; together with the Account, the ``Separate 
Account,'' unless the context otherwise requires), and The Variable 
Annuity Marketing Company (``VAMCO'').

RELEVANT 1940 ACT SECTIONS: Order requested under section 6(c) under 
the 1940 Act for exemptions from sections 22(e), 26(a)(2)(C), 27(c)(1), 
27(c)(2), and 27(d).

SUMMARY OF APPLICATION: Applicants seek an order to permit (a) the 
deduction of a mortality and expense risk charge from the assets of the 
Account in connection with the offering of certain variable annuity 
contracts and from any Other Account that offers variable annuity 
contracts that are similar in all material respects to contracts 
offered by the Account, and (b) the Account and the Other Accounts to 
comply with redeemability restrictions imposed by the Optional 
Retirement Program of the State University System of Florida (``Florida 
ORP'') as administered by the Division of Retirement of the Florida 
Department of Management Services (``Retirement Division''), in 
connection with the proposed offering of certain variable annuity 
contracts by the Account and the proposed offering by any Other Account 
of contracts similar in all material respects to those offered by the 
Account.

FILING DATES: The application was filed on February 14, 1994 and 
amended on April 20, 1994 and June 3, 1994.

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 SEC's Secretary and 
serving Applicants with a copy of the request, personally or by mail. 
Hearing requests must be received by the SEC by 5:30 p.m. on July 5, 
1994, and must 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 reasons 
for the request, and the issues contested. Persons may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street NW., Washington, DC 20549. 
Applicants, 2929 Allen Parkway, P.O. Box 3206, Houston, Texas 77019.

FOR FURTHER INFORMATION CONTACT: C. Christopher Sprague, Senior Staff 
Attorney, at (202) 942-0670, or Michael V. Wible, Special Counsel, at 
(202) 942-0670, Office of Insurance Products, Division of Investment 
Management.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application is available for a fee from the 
Commission's Public Reference Branch.

Applicants' Representations

    1. VALIC is a stock life insurance company organized under the laws 
of the State of Texas as the successor to Variable Annuity Life 
Insurance Company of America, a District of Columbia life insurance 
company organized in 1955. VALIC transacts business in all 50 states 
and the District of Columbia, and has total assets exceeding $20 
billion. VALIC is an indirect wholly-owned subsidiary of American 
General Corporation, a Texas corporation. VALIC serves as sponsor and 
depositor of the Account. It also serves as the investment adviser of 
American General Series Portfolio Company (the ``Series Company''), a 
diversified, open-end management investment company registered under 
the 1940 Act. Shares of the Series Company are purchased by divisions 
of the Account. VALIC may establish one or more Other Accounts in the 
future, for which it will serve as sponsor and depositor.
    2. The Account is a segregated asset account of VALIC. It was 
established under the Texas Insurance Code on April 18, 1979, pursuant 
to a resolution of VALIC's Board of Directors. The Account is 
registered with the Commission as a unit investment trust. That portion 
of the assets of the Account equal to the reserves and other contract 
liabilities of the Account is not chargeable with liabilities arising 
out of any other business VALIC may conduct. Any income, gains or 
losses, realized or unrealized, from assets allocated to the Account 
are credited to or charged against the Account without regard to other 
income, gains or losses of VALIC. The Account currently funds forms of 
variable annuity contracts that are offered by VALIC (the ``Existing 
Contracts''). VALIC recently registered certain new forms of variable 
annuity contracts (the ``Account Contracts'') funded by the Account. 
The exemptions requested with respect to the operation of the Florida 
ORP and the mortality and expense risk charge would apply to the 
Account Contracts issued by the Account, to contracts offered by the 
Account on a basis that is similar in all material respects to the 
basis on which the Account Contracts are offered (the ``Other 
Contracts''; together with the Account Contracts, the ``Contracts,'' 
unless the context otherwise requires), and to Other Contracts issued 
by Other Accounts.
    3. The Account is subdivided into several divisions, each of which 
invests, or will invest, solely in the shares of a mutual fund. In each 
case, the mutual fund will be a diversified, open-end, management 
investment company registered under the 1940 Act, shares of which are 
registered under the Securities Act of 1933. VALIC serves as investment 
adviser to the Series Company but does not advise certain other 
underlying mutual funds that sell their shares to the Account. At a 
later date, VALIC may determine to create one or more additional or 
replacement divisions of the Account to invest in mutual funds or 
portfolios thereof that may now or in the future be available. 
Similarly, divisions may be combined or eliminated from time-to-time. 
Applicants request that any order the Commission issues in response to 
this Application be deemed to apply under any such circumstances.
    4. VAMCO is a wholly-owned subsidiary of VALIC. It will be the 
principal underwriter of the Account Contracts. VAMCO is the principal 
underwriter of the Existing Contracts. VAMCO may act as principal 
underwriter for any Other Contracts issued by VALIC in the future. 
VAMCO 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.
    5. The Contracts are designed to provide benefits under retirement 
programs that qualify for favorable tax deferred treatment under the 
Internal Revenue Code of 1986, as amended (the ``Code''); they may also 
be used to provide retirement benefits on a non-tax deferred basis. The 
Contracts will be offered in group and individual form, on an immediate 
and deferred annuity basis. The initial and subsequent purchase 
payments for a periodic payment Contract must be at least $30. For 
single payment Contracts, the minimum purchase payment is $1,000 for 
each annuitant. VALIC may waive these minimum payment requirements 
where one purchaser, such as an employer, purchases a number of 
Contracts. Purchase payments under the Contracts are accumulated before 
retirement, and annuity benefits are received after retirement, on a 
variable basis through use of the Separate Account.
    6. VALIC proposes to receive compensation for assuming certain 
mortality and expense risks under the Account Contracts by deducting, 
from the assets of the Separate Account, daily asset charges for such 
risks. VALIC will assume several mortality risks under the Account 
Contracts. First, VALIC will assume a mortality risk by its contractual 
obligation to pay a death benefit to the beneficiary if the annuitant 
under an Account Contract dies during the accumulation period. 
Generally speaking, the Account Contracts provide a death benefit that 
is guaranteed to be the greater of the accumulation value under the 
Account Contract or the sum of the purchase payments, less withdrawals, 
plus, if the annuitant dies before age 70, interest at an annual rate 
of 3%. Thus, VALIC assumes the risk that the annuitant may die during 
the accumulation period at a time when the death benefit guaranteed by 
the Account Contract may be higher than the accumulation value. Second, 
VALIC will assume a mortality risk arising from the fact that the 
Account Contract does not impose any surrender charge on the death 
benefit. Third, VALIC will assume an additional mortality risk by its 
contractual obligation to continue to make annuity payments for the 
entire life of the annuitant under annuity options involving life 
contingencies. This assures each annuitant that neither the annuitant's 
own longevity nor an improvement in life expectancy generally will have 
an adverse effect on the annuity payments received under an Account 
Contract and relieves the annuitant from the risk of outliving the 
amounts accumulated for retirement. At the same time, VALIC assumes the 
risk that annuitants as a group will live a longer time than VALIC's 
annuity tables predict, which would require VALIC to pay out more in 
annuity income than it planned. Fourth, VALIC will assume an additional 
mortality risk under its annuity purchase rate tables which are 
guaranteed for the life of an Account Contract. The tables contained in 
the Account Contracts are based on the 1983 TABLE A annuity table and, 
for variable annuity options, assumed interest rates of 3%, 3\1/2\%, 
4\1/2\% and 5%, respectively.
    7. In addition to mortality risks, VALIC will assume an expense 
risk under the Account Contracts. This is because the maintenance 
charge, described below, deducted under the Account Contracts to cover 
administrative expenses is not expected to be sufficient to cover the 
expenses actually incurred. Administrative expenses include such costs 
as processing purchase payments, annuity payments, surrenders and 
transfers; furnishing confirmation notices and periodic reports; 
calculating mortality and expense risk charges; preparing voting 
materials and tax reports; updating the registration statement for the 
Account Contracts; and actuarial and other expenses.
    8. In order to receive compensation for assuming these mortality 
and expense risks, VALIC will assess each division of the Account a 
daily charge for mortality and expense risks at an annual aggregate 
rate of not less than 1.00% nor more than 1.25%. Under the Account 
Contracts, .80% of the annual charge will, in the case of each 
division, be allocated to the mortality risks that VALIC will assume. 
With respect to divisions that purchase shares of an investment 
portfolio of the Series Company, for which VALIC serves as investment 
adviser (``Inside Funds''), the expense risk component of that charge 
is .20%; as to divisions that purchase shares of a mutual fund, or a 
series thereof, for which VALIC does not serve as investment adviser 
(``Wrapped Funds''), the expense risk component is .45%. VALIC earns an 
advisory fee in connection with its responsibilities as investment 
adviser to the Series Company, the proceeds of which are deposited in 
VALIC's general account. General obligations of VALIC, including any 
expenses incurred for administering the Account Contracts that exceed 
revenues from the fixed maintenance charge, are funded from VALIC's 
general account. The additional revenues generated from VALIC's 
investment advisory activities with regard to the Inside Funds thereby 
reduce the magnitude of risk that VALIC's expenses of administering the 
Account Contracts will exceed revenues. This additional source of 
revenue is not available for investments in divisions investing in 
Wrapped Funds. Because VALIC experiences less risk to the extent it can 
depend on revenues from its investment advisory activities, with regard 
to investments in divisions investing in Inside Funds, it is able to 
impose a lower expense risk charge to those divisions than to the 
divisions investing in Wrapped Funds.
    9. Under the terms of the Account Contracts, the mortality and 
expense risk charge is fixed and may not be increased by VALIC. The 
group Account Contract provides that it may be changed by VALIC, 
subject to applicable regulatory requirements, upon written notice to 
the owner of the Account Contract. However, any change will only apply 
to individuals who become participants under the group Account Contract 
after the effective date of a change. Purchase payments received by 
VALIC from participants or owners existing on the effective date of a 
change would not be affected by the change, and would continue to be 
subject to the same charges as were applicable prior to the change. 
Thus, VALIC will continue to assume the mortality and expense risks, 
described above, based on the charge in effect before the change. 
Although the group Account Contract also provides that VALIC may, at 
its discretion and upon notice, curtail or prohibit new participants, 
VALIC will continue to assume the mortality and expense risks, 
described above, with respect to existing participants and their 
purchase payments, including future purchase payments, held under a 
group Account Contract.
    10. If the mortality and expense risk charge is insufficient to 
cover the expenses and costs assumed, the loss will be borne by VALIC. 
Conversely, if the amounts deducted from the mortality and expense risk 
charge prove more than sufficient, the excess will be profit to VALIC. 
VALIC does not expect to earn a profit from that portion of the 
mortality and expense risk charge which is for the expense risk. It 
does, however, expect to derive a profit from the mortality risk 
charge. To the extent that the surrender charge, described below, is 
insufficient to cover the actual costs of distribution, the expenses 
will be paid from VALIC's general account assets, which will include 
profit, if any, derived from the mortality and expense risk charge.
    11. No front-end sales charge will be imposed when purchase 
payments are applied under the Account Contracts. However, a surrender 
charge may be assessed if the Account Contract is surrendered, or a 
partial surrender or withdrawal is made. The surrender charge is 5% of 
(a) the amount of the preceding 60 months' purchase payments being 
withdrawn, or (b) the amount withdrawn, whichever is less. For purposes 
of the charge, withdrawals are treated as withdrawals of purchase 
payments before any earnings, and the most recent purchase payments are 
treated as being withdrawn first. The amounts obtained from the 
surrender charge will be used to help defray expenses incurred in of 
the sale of the Account Contracts, including commissions and other 
promotional or distribution expenses associated with the printing and 
distribution of prospectuses and sales literature. The surrender charge 
is waived under certain circumstances.
    12. The maintenance charge to be assessed under each Account 
Contract will be an annual charge of $15, deducted in quarterly 
installments in each quarter during which amounts are credited to any 
variable investment option. The charge will be deducted at the end of 
the calender quarter, and at the time of any surrender of the Account 
Contract or transfer of all of such accumulation values to a fixed 
interest option. The maintenance charge may be waived or reduced 
uniformly on all Account Contracts issued under certain plans or 
arrangements which are expected to result in administrative cost 
savings. The maintenance charge is guaranteed not to increase over the 
life of an Account Contract.
    13. Under Contracts subject to a premium tax, the amount of the tax 
may be deducted, either from purchase payments when received, or from 
the amount applied to effect any annuity at the time annuity payments 
commence, depending on applicable law. Premium taxes ranging from zero 
to 3% are currently imposed by certain states and municipalities on 
purchase payments made under the Contracts. VALIC will not make a 
profit on premium taxes.
    14. The Florida ORP is a defined contribution plan designed to 
provide retirement and death benefits to participants through 
individual or group annuity contracts, which may be fixed or variable, 
or combination fixed and variable. The Florida ORP is available to 
certain faculty members within the State University System of Florida 
(the ``Florida University System''), as well as to persons holding 
certain administrative and professional staff positions within the 
Florida University System (collectively, ``Eligible Employees'' or 
``Participants''). The Florida ORP is an alternative to the Florida 
Retirement System, a defined benefit retirement plan, and Eligible 
Employees have the option of participating in the Florida Retirement 
System or the Florida ORP. A statutory presumption deems any employee 
who becomes eligible to participate on or after January 1, 1993 to have 
elected to participate in the Florida ORP, unless such employee 
specifically elects membership in the Florida Retirement System.
    15. Under the Florida ORP, the universities in the Florida 
University System provide for employee retirement benefits by 
contributing a percentage of each Participant's gross compensation 
regardless of service to purchase an annuity when the employee retires. 
The Retirement Division designates companies from which annuity 
contracts may be purchased under the Florida ORP.
    16. Participants in the Florida ORP may themselves contribute, by 
way of salary reduction, a percentage of their respective gross 
compensation (not to exceed the percentage amount contributed by the 
employer). Payments of Participant contributions are made by the 
financial officer of the employer to the Retirement Division, which in 
turn forwards the contributions to the designated company or companies 
contracting for payment of benefits for the Participant under the 
Florida ORP.
    17. The Retirement Division prohibits distributions of employer 
contributions under the Florida ORP to a Participant on a lump sum 
basis (other than upon the Participant's death) or exclusively on the 
basis of a period certain. These restrictions apply only to employer 
contributions and do not limit access to Participant contributions. 
Participants are also free to transfer both employer and Participant 
contributions among the available fixed or variable investment options 
and to substitute entirely a qualified contract offered by any of the 
other companies designated under the Florida ORP.
    18. In order to offer the Contracts under the Florida ORP, the 
Contracts, with respect to accumulations based on employer 
contributions, will provide that: (a) Benefits based on employer 
contributions are payable only upon the Participant's death, retirement 
or termination of employment (as defined in Section 121.021(3) of the 
Florida Statutes); (b) benefit payments will not be made based solely 
on a period certain; (c) accumulations based on employer contributions 
are not subject to withdrawal or surrender and may not be rolled over 
other than to a designated company or companies contracting for payment 
of benefits for the Participant under the Florida ORP; and (d) 
accumulations are not subject to loan, assignment, execution or 
attachment.

Applicants' Legal Analysis

    1. Applicants respectfully request that the Commission, pursuant to 
section 6(c) of the 1940 Act, grant the exemptions from (a) sections 
26(a)(2)(C) and 27 (c)(2) of the 1940 Act in connection with 
Applicants' assessment of a charge for mortality and expense risks 
under the Contracts, and (b) sections 22(e), 27(c)(1), and 27(d) to the 
extent necessary to permit compliance with the Florida ORP as 
administered by the Retirement Division, with respect to the Contracts. 
Applicants believe, based on the grounds set out below, that the 
requested exemptions meet the standards of section 6(c) of the 1940 
Act. Applicants believe that the terms of the relief requested with 
respect to any Other Contracts funded by the Account or any Other 
Account, in the future, are consistent with the standards enumerated in 
section 6(c) of the 1940 Act. Without the requested relief, Applicants 
would have to request and obtain exemptive relief in connection with 
Other Contracts to the extent required. Any such additional request for 
exemption would present no issues under the 1940 Act that have not 
already been addressed in this Application. Applicants submit that the 
requested relief is appropriate in the public interest, because it 
would promote competitiveness in the variable annuity contract market 
by eliminating the need for VALIC to file redundant exemptive 
applications, thereby reducing its administrative expenses and 
maximizing the efficient use of its resources. The delay and expense 
involved in having to repeatedly seek expemptive relief would impair 
VALIC's ability to effectively take advantage of business opportunities 
as they arise.
    2. Applicants further submit that the requested relief is 
consistent with the purposes of the 1940 Act and the protection of 
investors for the same reasons. If VALIC were required to repeatedly 
seek exemptive relief with respect to the same issues addressed in this 
Application, investors would not receive any benefit or additional 
protection thereby. Indeed, they might be disadvantaged as a result of 
VALIC's increased overhead expenses. Thus, Applicants believe that the 
requested exemption is 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.
    3. Sections 26(a)(2)(C) and 27(c)(2) of the 1940 Act prohibit a 
registered unit investment trust, and any depositor thereof or 
principal underwriter thereof, from selling periodic payment plan 
certificates unless the proceeds of all payments (except such amounts 
as are deducted for sales load) are deposited with a trustee or 
custodian having the qualifications prescribed by section 26(a)(1) of 
the 1940 Act and are held under an agreement that provides that no 
payment to the depositor or principal underwriter shall be allowed 
except as a fee, not exceeding such reasonable amount as the Commission 
may prescribe, for bookkeeping and other administrative services.
    4. VALIC proposes to assess each division of the Separate Account 
with a daily charge for mortality and expense risks at the aggregate 
annual rates of not less than 1.00% nor more than 1.25%. Applicants 
represent that the levels of the mortality and expense risk charges are 
within the range of industry practice for comparable annuity contracts. 
Applicants state that they have reviewed publicly available information 
regarding products of other companies taking into consideration such 
factors as minimum death benefit guarantees, guaranteed annuity 
purchase rates, administrative fees, and the existence of charge level 
guarantees. Based upon this review, Applicants have concluded that the 
mortality and expense risk charge is within the range of charges 
determined by industry practice for comparable products. VALIC 
represents that it will maintain at its principal office, and make 
available on request to the Commission and its staff, a memorandum 
setting forth in detail the variable annuity products analyzed and the 
methodology and results of the aforesaid comparative review.
    5. Applicants acknowledge that the surrender charge may be 
insufficient to cover all costs relating to the distribution of the 
Contracts and that, if a profit is realized from the mortality and 
expense risk charges, all or a portion of such profit may be offset by 
distribution expenses not reimbursed by the surrender charge. In such 
circumstances, a portion of the mortality and expense risk charge might 
be viewed as providing for a portion of the costs relating to 
distribution of the Contracts. Notwithstanding the foregoing, VALIC has 
concluded that there is a reasonable likelihood that the proposed 
distribution financing arrangements made with respect to the Contracts 
will benefit the Separate Account and Contract owners. VALIC represents 
that it will maintain at its principal office, and make available on 
request to the Commission and its staff, a memorandum setting out the 
basis for such conclusion.
    6. Moreover, VALIC represents that the Separate Account will invest 
only in an underlying mutual fund that undertakes, in the event it 
should adopt any plan under Rule 12b-1 under the 1940 Act to finance 
distribution expenses, to have such plan formulated and approved by a 
board of directors, a majority of the members of which are not 
``interested persons'' of such fund within the meaning of section 
2(a)(19) of the 1940 Act.
    7. Section 22(e) of the 1940 Act provides that ``[n]o registered 
investment company shall suspend the right of redemption, or postpone 
the date of payment or satisfaction upon redemption of any redeemable 
security in accordance with its terms for more than seven days after 
the tender of such security to the company or its agent designated for 
that purpose for redemption,'' except in certain prescribed 
circumstances. Section 27(c)(1) of the 1940 Act makes it unlawful ``for 
any registered investment company issuing periodic payment plan 
certificates, or for any depositor of or underwriter for such company, 
to sell any such certificate unless such certificate is a redeemable 
security.'' Section 27(d) of the 1940 Act makes it unlawful ``for any 
registered investment company issuing periodic payment plan 
certificates, or for any depositor of or underwriter for such company, 
to sell any such certificate unless the certificate provides that the 
holder thereof may surrender the certificate at any time within the 
first eighteen months after the issuance of the certificate'' and 
receive a specified amount.
    8. Applicants request the exemptive relief from sections 22(e), 
27(c)(1) and 27(d) of the 1940 Act to the extent necessary to permit 
compliance with the Florida ORP, as administered by the Retirement 
Division with respect to the Contracts.
    9. The exemptive relief requested herein is consistent with Rule 
6c-7 under the 1940 Act, which provides exemptions from sections 22(e), 
27(c)(1) and 27(d) of the 1940 Act for registered separate accounts, 
and depositors of or underwriters for such separate accounts, to the 
extent necessary to permit compliance with certain restrictions on 
redemptions involving variable annuity contracts issued to certain 
employees participating in the Texas Optional Retirement Program 
(``Texas ORP'').
    10. The exemptive relief requested herein is also consistent with 
the position taken by the Commission staff in a letter to the American 
Council of Life Insurance (``ACLI'') advising that the staff would not 
recommend enforcement action to the Commission if the registered 
separate accounts issuing variable annuity contracts as funding 
vehicles for retirement plans meeting the requirements of section 
403(b) of the Code comply with the restrictions imposed by subsection 
(11) of that Section.
    11. The Retirement Division's administration of the Florida ORP, 
and its requirement that annuity contracts specifically restrict 
certain rights of redemption, present a direct conflict with the 1940 
Act's redemption provisions discussed above. The terms of the Contracts 
to be offered under the Florida ORP, as required by the Retirement 
Division, clearly permit payment of employer-contributed contract 
benefits only in the event of death, retirement, or termination of 
employment, and are substantially identical to the Texas ORP 
limitations.
    12. The legislative purpose of the Florida ORP is similar to that 
of the statutes discussed above. In each case, the constraints on 
redeemability are designed to ensure that the annuity contract is used 
for the principal purpose of long-term retirement accumulation. Thus, 
without the exemptive relief requested, persons participating in the 
Florida ORP would be denied the opportunity to select the Contracts as 
a funding medium for their retirement benefits. Furthermore, the 
limited restrictions on redemption would be voluntarily assumed by 
Participants (i.e., eligible Employees may elect not to participate in 
the Florida ORP), were not formulated or suggested by Applicants, and 
are reasonable in light of the benefits of participating in the Florida 
ORP. In addition, consistent with the precedents cited above, 
Participants are able to transfer their account values among the 
investment alternatives available under the Contracts (including the 
fixed alternative funded through the general account of VALIC) and to 
qualified contracts of other companies designated under the Florida 
ORP.
    13. As explained above, the requested exemptive relief is 
substantially identical to that requested and obtained in connection 
with similar constraints on redeemability imposed by other governing 
authorities. Applicants submit that the relief requested herein raises 
no novel issues of law or fact.
    14. Applicants will ensure that appropriate disclosure is made to 
Eligible Employees, informing them of the restrictions stated in the 
Florida ORP Contracts. Applicants represent that they will:
    a. Include appropriate disclosure regarding the restrictions on 
redemption imposed by the Retirement Division in each registration 
statement, including the prospectus, relating to the Contracts issued 
in connection with the Florida ORP;
    b. Include appropriate disclosure regarding the restrictions on 
redemption imposed by the Retirement Division in any sales literature 
used in connection with the offer of Contracts to Eligible Employees;
    c. Instruct salespeople who solicit Eligible Employees to purchase 
the Contracts specifically to bring the restrictions on redemption 
imposed by the Retirement Division to the attention of the Eligible 
Employees;
    d. Obtain from each Participant in the Florida ORP who purchases a 
Contract, prior to or at the time of such purchase, a signed statement 
acknowledging the Participant's understanding: (i) of the restrictions 
on redemption imposed by the Retirement Division, and (ii) that other 
investment alternatives are available under the Florida ORP, to which 
the Participant may elect to transfer his or her Contract values; and
    e. Include in any registration statement filed in connection with 
the Contracts a representation that this exemptive application is being 
relied upon and that the provisions of paragraphs (a) through (d) above 
have been complied with.

Applicants' Conclusion

    Applicants request exemptions, pursuant to section 6(c) of the 1940 
Act, from (a) sections 26(a)(2)(C) and 27(c)(2) to the extent necessary 
to permit the assessment of the mortality and expense risk charges and 
(b) sections 22(e), 27(c)(1) and 27(d) to permit compliance with the 
Florida ORP as administered by the Retirement Division, with respect to 
the Contracts as discussed herein. Applicants submit, based on the 
grounds stated herein, that their exemptive request meets the standards 
set out in section 6(c) of the 1940 Act and that the Commission, 
therefore, should grant the requested order.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-14477 Filed 6-14-94; 8:45 am]
BILLING CODE 8010-01-M