[Federal Register Volume 67, Number 78 (Tuesday, April 23, 2002)]
[Rules and Regulations]
[Pages 19848-19884]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-9457]



[[Page 19847]]

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Part III





Securities and Exchange Commission





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17 CFR Parts 230, 239, 270, and 274



Registration Form for Insurance Company Separate Accounts Registered as 
Unit Investment Trusts That Offer Variable Life Insurance Policies; 
Final Rule

  Federal Register / Vol. 67, No. 78 / Tuesday, April 23, 2002 / Rules 
and Regulations  

[[Page 19848]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 239, 270, and 274

[Release Nos. 33-8088; IC-25522; File No. S7-9-98]
RIN 3235-AG37


Registration Form for Insurance Company Separate Accounts 
Registered as Unit Investment Trusts That Offer Variable Life Insurance 
Policies

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; Request for comments on Paperwork Reduction Act 
burden estimate.

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SUMMARY: The Securities and Exchange Commission is adopting a new 
registration form for insurance company separate accounts that are 
registered as unit investment trusts and that offer variable life 
insurance policies. The form is to be used by these separate accounts 
to register under the Investment Company Act of 1940 and to offer their 
securities under the Securities Act of 1933. For these registrants, the 
form will replace the registration form currently used by unit 
investment trusts to register under the Investment Company Act, and the 
registration form currently used by unit investment trusts to offer 
their securities under the Securities Act. The new registration form 
focuses prospectus disclosure on essential information that will assist 
an investor in deciding whether to invest in a particular variable life 
insurance policy. The new form also will minimize prospectus disclosure 
about technical and legal matters, improve disclosure of fees and 
charges, and streamline the registration process by replacing two forms 
that were not specifically designed for variable life insurance 
policies with a single form tailored to these products. The Commission 
is also amending the registration form used by mutual funds to register 
under the Investment Company Act and to offer their shares under the 
Securities Act, to require a fee table for mutual funds that offer 
their shares as investment options for variable life insurance policies 
and variable annuity contracts.

DATES: Effective Date: June 1, 2002.
    Compliance Dates:
    1. Form N-6:
    A. Initial Compliance Date: All new registration statements filed 
on or after December 1, 2002, for separate accounts that are registered 
as unit investment trusts and that offer variable life insurance 
policies must comply with Form N-6.
    B. Final Compliance Date: All insurance company separate accounts 
that are registered as unit investment trusts and that currently offer 
variable life insurance policies with effective registration statements 
must comply with Form N-6 for post-effective amendments that are annual 
updates to their registration statements filed on or after December 1, 
2002, and no later than December 1, 2003.
    2. Form N-1A: All new registration statements, and post-effective 
amendments that are annual updates to effective registration 
statements, filed on or after September 1, 2002, must comply with the 
amendment to Form N-1A.
    Comment Date: Comments on the ``collection of information'' 
requirements within the meaning of the Paperwork Reduction Act of 1995 
for the amendment to Form N-1A should be received by June 1, 2002.

ADDRESSES: Comments should be submitted in triplicate to Jonathan G. 
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, 
NW., Washington, DC 20549-0609. Comments also may be submitted 
electronically at the following E-mail address: [email protected]. 
All comment letters should refer to File No. S7-9-98; this file number 
should be included on the subject line if E-mail is used. All comments 
received will be available for public inspection and copying in the 
Commission's Public Reference Room, 450 Fifth Street, NW, Washington, 
DC 20549-0102. Electronically submitted comment letters also will be 
posted on the Commission's Internet site (http://www.sec.gov). We do 
not edit personal identifying information, such as names or electronic 
mail addresses, from electronic submissions. You should submit only 
information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Mark Cowan, Senior Counsel, Katy 
Mobedshahi, Attorney, or Paul G. Cellupica, Assistant Director, (202) 
942-0721, Office of Disclosure and Insurance Product Regulation, 
Division of Investment Management, Securities and Exchange Commission, 
450 Fifth Street, NW, Washington, DC 20549-0506.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission 
(``Commission'') is adopting new Form N-6 [17 CFR 239.17c; 17 CFR 
274.11d] for insurance company separate accounts that are registered as 
unit investment trusts and that offer variable life insurance policies. 
The form will be used by these separate accounts to register under the 
Investment Company Act of 1940 [15 U.S.C. 80a-1 et seq.] (``Investment 
Company Act'') and to offer their securities under the Securities Act 
of 1933 [15 U.S.C. 77a et seq.] (``Securities Act''). For these 
registrants, the proposed form will replace Forms N-8B-2 [17 CFR 
274.12] and S-6 [17 CFR 239.16], currently used by unit investment 
trusts to register under the Investment Company Act and to offer their 
securities under the Securities Act. In addition, the Commission is 
amending Form N-1A [17 CFR 239.15A; 17 CFR 274.11A] to require a fee 
table for mutual funds that offer their shares as investment options 
for variable life insurance policies and variable annuity contracts. 
The Commission also is adopting technical amendments to rules 134b, 
430, 430A, 495, 496, and 497 under the Securities Act [17 CFR 230.134b, 
230.430, 230.430A, 230.495, 230.496, and 230.497]; rules 8b-11 and 8b-
12 under the Investment Company Act [17 CFR 270.8b-11 and 270.8b-12]; 
and Form N-8B-2 [17 CFR 274.12]. In a companion release, the Commission 
is proposing amendments to Form N-4 [17 CFR 239.17b; 17 CFR 274.11c], 
the registration form for insurance company separate accounts that are 
registered as unit investment trusts and that offer variable annuity 
contracts. These proposed amendments would revise the format of the fee 
table of Form N-4 to require disclosure of the range of expenses for 
all of the investment options offered through a separate account.\1\
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    \1\ Investment Company Act Release No. IC-25521 (April 12, 2002) 
(``Form N-4 Proposing Release'').
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Table of Contents

I. Introduction and Background
II. Discussion
    A. Part A--Information in the Prospectus
    1. Risk/Benefit Summary: Benefits and Risks (Item 2)
    2. Risk/Benefit Summary: Fee Table (Item 3)
    3. General Description of Registrant, Depositor, and Portfolio 
Companies (Item 4)
    4. Charges (Item 5)
    5. Taxes (Item 12)
    B. Part B--Statement of Additional Information
    1. Financial Statements (Item 24)
    2. Performance Data (Item 25)
    3. Illustrations (Item 26)
    C. Part C--Other Information--Exhibits--Actuarial Opinion (Item 
27(1))
    D. Technical Rule Amendments
    E. Adoption of Amendment to Form N-1A
    F. Effective Dates and Transition Period
    G. Form N-1
III. Cost/Benefit Analysis
    A. Background
    B. Benefits

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    C. Costs
    D. Conclusion
IV. Paperwork Reduction Act
V. Effects on Efficiency, Competition, and Capital Formation
VI. Regulatory Flexibility Act Certification
VII. Statutory Authority
Text of Rule Amendments and Forms

I. Introduction and Background

Variable Life Insurance

    Variable life insurance is similar to traditional life insurance, 
except that the cash value and/or death benefit vary based on the 
investment performance of the assets in which the premium payments are 
invested. Under a traditional life insurance policy, premium payments 
are allocated to an insurer's general account and invested, consistent 
with state law requirements, to enable the insurer to meet its death 
benefit and cash value guarantees. The investment return on assets in 
the general account has little or no direct effect on the cash value or 
the death benefit received.
    Premium payments under a variable life policy, in contrast, are 
invested in an insurance company separate account, which generally is 
not subject to state law investment restrictions. A variable life 
policyholder typically is offered a variety of investment options 
(e.g., equity, bond, and money market mutual funds). Death benefits and 
cash values are directly related to performance of the separate 
account, although typically there is a guaranteed minimum death 
benefit.
    Variable life insurance was introduced in the early 1970s. During 
the years from the end of World War II to the late 1960s, there was a 
significant decline in the share of savings dollars invested with life 
insurance companies. In an effort to counteract this trend, insurers 
began to offer a greater variety of products, including equity-based 
products such as variable life insurance.\2\ In recent years, variable 
life insurance has become an increasingly important segment of the 
insurance industry. By 2000, variable life insurance accounted for 
51.3% of first year individual life insurance premiums, and 19.6% of 
total individual life insurance premiums.\3\ Since the early 1990s, 
assets in variable life products have grown substantially, from $4.8 
billion in December 1991 to $42.8 billion in November 2001.\4\
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    \2\ Securities and Exhange Commission (``SEC''), Division of 
Investment Management, Variable Life Insurance and the Petition for 
the Issuance and Amendment of Exemptive Rules at 1-2 (Jan. 1973).
    \3\ American Council of Life Insurers, Life Insurers Fact Book 
101 (2001).
    \4\ Lipper Variable Insurance Products Performance Analysis, 4th 
Quarter 2001 Report, Vol. I at 1-1 (Dec. 31, 2001); Lipper Variable 
Insurance Products Performance Analysis Service, Vol. I at 169 (Jan. 
31, 1992).
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Current Forms for Variable Life Insurance Registration

    A separate account funding a variable life insurance policy most 
commonly is registered as a unit investment trust under the Investment 
Company Act.\5\ Separate accounts registered as unit investment trusts 
are divided into sub-accounts, each of which invests in a different 
open-end management investment company, or mutual fund (``Portfolio 
Company'').\6\
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    \5\ Section 4(2) of the Investment Company Act defines ``unit 
investment trust'' as ``an investment company which (A) is organized 
under a trust indenture, contract of custodianship or agency, or 
similar instrument, (B) does not have a board of directors, and (C) 
issues only redeemable securities, each of which represents an 
undivided interest in a unit of specified securities, but does not 
include a voting trust.'' 15 U.S.C. 80a-4(2).
    \6\ An open-end management investment company is an investment 
company, other than a unit investment trust or face amount 
certificate company, that offers for sale or has outstanding any 
redeemable security of which it is the issuer. Section 4(3) of the 
Investment Company Act [15 U.S.C. 80a-4(3)]; Section 5(a)(1) of the 
Investment Company Act [15 U.S.C. 80a-5(a)(1)]. As an alternative to 
the structure described in the text, a variable life insurance 
separate account can be organized in a single-tier structure, as an 
open-end management investment company. Today, this structure is 
used by few variable life insurance registrants.
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    Both separate account unit investment trusts and the Portfolio 
Companies in which they invest are registered as investment companies 
under the Investment Company Act, and their securities are registered 
under the Securities Act. Investors in variable life insurance policies 
receive the prospectuses for both the separate account unit investment 
trust and the Portfolio Companies. Portfolio Companies, as mutual 
funds, use Form N-1A to register under the Investment Company Act and 
to register their shares under the Securities Act.\7\ Variable life 
separate accounts, as unit investment trusts, register under the 
Investment Company Act on Form N-8B-2 and register their securities 
under the Securities Act on Form S-6.
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    \7\ 17 CFR 274.11A.
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    Forms N-8B-2 and S-6 were designed for non-separate account unit 
investment trusts and were adopted before the establishment of the 
first separate account to fund variable life insurance policies. While 
much of their required disclosure is useful, the forms request some 
information that is not typically of consequence to a buyer of variable 
life insurance. More importantly, many matters that would be 
significant to a buyer of a variable life insurance policy are not 
addressed at all by the forms.
    Another shortcoming of Forms N-8B-2 and S-6 is that they do not 
reflect fundamental improvements that we have made to other investment 
company registration forms, such as Form N-4 for variable annuities and 
Form N-1A for mutual funds, which facilitate clearer and more concise 
disclosure to investors.\8\ As a result, variable life insurance 
prospectuses have often been unnecessarily lengthy and complex.
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    \8\ Form N-1A [17 CFR 274.11A]; Form N-4 [17 CFR 274.11c]; 
Investment Company Act Release No. 13689 (Dec. 22, 1983) [49 FR 614] 
(``N-4 Proposing Release''); Investment Company Act Release No. 
14575 (June 14, 1985) [50 FR 26145] (``N-4 Adopting Release''); 
Investment Company Act Release No. 12927 (Dec. 27, 1982) [48 FR 813] 
(``1982 N-1A Proposing Release''); Investment Company Act Release 
No. 13436 (Aug. 12, 1983) [48 FR 37928] (``1983 N-1A Adopting 
Release''); Investment Company Act Release No. 22528 (Feb. 27, 1997) 
[62 FR 10898], correction [62 FR 24160] (``1997 N-1A Proposing 
Release''); Investment Company Act Release No. 23064 (Mar. 13, 1998) 
[63 FR 13916] (``1998 N-1A Adopting Release'').
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Form N-6
    To address these shortcomings, the Commission issued a release 
proposing Form N-6 for public comment (``Proposing Release'').\9\ 
Unlike the current forms, proposed Form N-6 was specifically tailored 
to variable life insurance. The proposed requirements of the form 
focused on information that is essential to a decision to invest in a 
particular variable life insurance policy, and the form was intended to 
enhance the comparability of information about variable life insurance 
policies. The proposal sought to promote more effective communication 
of information about variable life insurance policies.
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    \9\ Investment Company Act Release No. 23066 (March 13, 1998) 
[63 FR 13988] (``Form N-6 Proposing Release'').
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    All commenters expressed strong support for proposed Form N-6.\10\ 
Commenters stated that proposed Form N-6 would improve the disclosure 
that investors receive about variable life insurance. Commenters 
indicated that proposed Form N-6 would require disclosure of essential 
information in the prospectus in a concise and user-friendly format and 
thus would

[[Page 19850]]

facilitate decision making by investors. Commenters also recommended 
changes to proposed Form N-6 to improve disclosure. We are adopting 
proposed Form N-6 substantially as proposed, with modifications that 
reflect our consideration of commenters' suggestions.
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    \10\ The Commission received 16 comment letters from 13 
commenters on proposed Form N-6. The commenters included two trade 
associations, ten insurance companies, and one attorney. The comment 
letters, as well as a comment summary prepared by the Commission's 
staff, are available for public inspection and copying at the 
Commission's Public Reference Room in File No. S7-9-98. The comment 
summary is also available on the Commission's Internet website at 
http://www.sec.gov/rules/extra/33-7514comsum.htm>.
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    Form N-6 will promote effective disclosure to variable life 
insurance investors, providing the following benefits:
     Tailored Registration Form. Form N-6 will eliminate 
requirements in the current registration forms that are not relevant to 
variable life insurance.\11\ Form N-6 also will include items that are 
specifically addressed to variable life insurance products, such as 
descriptions of contractual provisions relating to premiums, death 
benefits, cash values, surrenders and withdrawals, and loans.\12\
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    \11\ See, e.g., Item 18(d) of Form N-8B-2 (requiring disclosure 
of schedule of distributions made to security holders).
    \12\ Items 7 (premiums), 8 (death benefits and cash values), 9 
(surrenders and withdrawals), and 10 (loans).
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     Plain English. The Commission's plain English rule will 
apply to the front and back cover pages and the risk/benefit summary in 
the variable life insurance prospectus.\13\ This should result in 
better, clearer disclosure to investors.
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    \13\ Rule 421(d) under the Securities Act [17 CFR 230.421(d)].
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     Reducing Complex and Lengthy Prospectus Disclosure. Form 
N-6 will streamline variable life prospectus disclosure by adopting a 
two-part format consisting of a simplified prospectus, designed to 
contain essential information that assists an investor in making an 
investment decision, and a statement of additional information 
(``SAI''), containing more extensive information and detailed 
discussion of matters included in the prospectus that investors could 
obtain upon request.
     Standardized Fee Information. Form N-6 will require 
variable life insurance registrants to provide a uniform, tabular 
presentation of fees and charges, in order to improve the disclosure to 
investors of the often complex charges associated with variable life 
insurance policies and increase the comparability of charges among 
policies.
     Integrated Disclosure Document. Form N-6 will provide 
variable life insurance registrants with an integrated form for 
Investment Company Act and Securities Act registration, eliminating 
unnecessary paperwork and duplicative reporting.
    The adoption of Form N-6 is the latest Commission action reflecting 
our long-standing commitment to improve the quality of disclosure 
available to investment company investors. During the 1980s, the 
Commission introduced the innovative two-part disclosure format for 
mutual funds and variable annuities and adopted uniform fee tables for 
mutual funds and variable annuities.\14\ We have taken significant 
steps in the past few years, including the comprehensive revision of 
Form N-1A, the mutual fund disclosure form, to provide a standardized 
risk/return summary at the beginning of every mutual fund prospectus, 
require mutual funds to prepare disclosure documents using plain 
English, and eliminate prospectus clutter that obscures information 
that is helpful to investors making an investment decision.\15\ Last 
year, we adopted amendments to our rules and forms to improve the 
disclosure that mutual funds provide about their independent directors 
and to require mutual funds to disclose after-tax returns.\16\
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    \14\ Investment Company Act Release No. 16766 (Jan. 23, 1989) 
[54 FR 4772] (``N-4 Fee Table Adopting Release''); Investment 
Company Act Release No. 16244 (Feb. 1, 1988) [53 FR 3192] (``N-1A 
Fee Table Adopting Release''); N-4 Adopting Release, supra note 8; 
1983 N-1A Adopting Release, supra note.
    \15\ 1998 N-1A Adopting Release, supra note 8.
    \16\ Investment Company Act Release No. 24816 (January 2, 2001) 
[66 FR 3734], correction [66 FR 13234]; Investment Company Act 
Release No. 24832 (January 18, 2001) [66 FR 9002] (``After-Tax 
Returns Adopting Release'').
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    Form N-6 is designed to promote more effective communication of 
information about variable life insurance policies. Today's adoption of 
Form N-6 represents a significant step toward our goal of better, 
clearer, more concise disclosure for all investors.

II. Discussion

    We discuss below the significant comments that we received on 
proposed Form N-6 and the Items that we have modified in response to 
comments.

A. Part A--Information in the Prospectus

1. Risk/Benefit Summary: Benefits and Risks (Item 2)
    We are adopting, with modifications, the requirement that a risk/
benefit summary be included at the beginning of every prospectus. The 
risk/benefit summary will provide key information about a policy, 
including its risks and benefits, and is intended to respond to 
investors' strong preference for summary information in a standardized 
format.\17\ It is designed to assist investors in evaluating and 
comparing variable life insurance policies by providing them with key 
information about a policy in a standardized, easily accessible place. 
Commenters generally supported inclusion of the risk/benefit summary in 
the prospectus with suggested modifications, several of which we are 
adopting today.
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    \17\ For example, in connection with an initiative to permit 
mutual funds to use profiles summarizing key information, many 
individual investors wrote to the Commission about the need for 
concise, summary information relating to a fund. See Investment 
Company Act Release No. 23065 (Mar. 13, 1998) [63 FR 13968, 13969] 
(discussing individual investors' strong support for the 
Commission's fund profile proposal).
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    As proposed, the risk/benefit summary would have been required to 
contain specified information in a required order and would not have 
been permitted to contain additional information.\18\ Some commenters 
expressed the view that providing registrants greater flexibility in 
describing policy features would result in more useful and 
understandable disclosure. We agree and have modified the proposed 
requirement to permit the inclusion of additional information and to 
eliminate the ordering requirements of Item 2. As adopted, Item 2 
requires a concise, plain English description of the policy, including 
the benefits and principal risks.
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    \18\ Form N-6 Proposing Release, supra note 9, 63 FR at 14008-
09.
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    We have eliminated the proposed requirement to disclose that part 
of the policy premium is allocated to insurance coverage, part of the 
premium is invested, and part of the premium is used to pay sales loads 
and other charges.\19\ Commenters noted that this disclosure may be 
inaccurate in some cases, e.g., charges may be deducted from cash value 
rather than premium payments. We agree. In addition, we believe that 
this disclosure is unnecessary because the investment and cost aspects 
of the policy are adequately covered elsewhere in the prospectus.\20\
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    \19\ Id. at 14009.
    \20\ See, e.g., Item 3 and Item 7(f).
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    One commenter recommended that registrants be required to discuss 
the risk of replacing one policy with another, which may include 
substantial deferred sales charges on the surrendered policy, an 
additional medical examination, and higher insurance charges. Item 2, 
as proposed and adopted, requires disclosure that variable life 
insurance policies are unsuitable as short-term savings vehicles, and 
we would expect this disclosure to include a discussion of the adverse 
consequences of early

[[Page 19851]]

surrender, such as the payment of deferred sales charges. We have, 
however, determined not to require a separate discussion of replacement 
risks because the risks of a replacement transaction, including the 
risk that a replacement may be unsuitable, are not risks of a 
particular policy, and we believe that the prospectus should focus on 
the policy itself.
    We are concerned, however, that replacement transactions associated 
with variable life insurance policies may not, in all cases, be in the 
best interests of investors. These transactions create a potential for 
sales practice abuses, through which contract owners may be induced to 
make disadvantageous exchanges that result in the payment of additional 
sales charges and broker compensation.\21\ We note that replacement 
transactions involving variable insurance products have been the object 
of increasing regulatory scrutiny in recent years.\22\ We remind 
broker-dealers of their obligation to recommend replacement 
transactions only when they are suitable.\23\ We also urge life 
insurance companies to monitor replacement activity with respect to 
their policies on an ongoing basis.
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    \21\ Cf. NASD Notice to Members 00-44, The NASD Reminds Members 
Of Their Responsibilities Regarding The Sale of Variable Life 
Insurance (July 2000) (discussing need for NASD member firms to 
adopt procedures to ensure that replacement recommendations 
involving variable life insurance policies are suitable).
    \22\ See In the Matter of Raymond A. Parkins, Jr., Admin. Proc. 
File No. 3-10300, Investment Advisers Act Release No. 2010 (Jan. 18, 
2002) (Order Making Findings and Imposing Remedial Sanctions and 
Cease-and-Desist Order) (finding that investment adviser 
fraudulently switched clients' variable annuity investments, and 
barring adviser from association with any broker, dealer, or 
investment adviser for two years); Press Release, NASD Regulation 
Fines Pruco Securities $20 Million (Jul. 8, 1999) (announcing action 
against broker/dealer in connection with the offer and sale of 
variable life insurance policies, including misrepresentations in 
connection with the purchase of new variable life insurance policies 
by existing customers) www.nasdr.com/news/pr1999/ne_section99_170.html> (visited Jan. 24, 2002); Letter from Susan 
Nash, Associate Director, Division of Investment Management, SEC, to 
W. Thomas Conner, National Association for Variable Annuities, Carl 
B. Wilkerson, American Council of Life Insurers, and Paul J. Mason, 
Insurance Marketplace Standards Association (June 19, 2001) 
www.sec.gov/divisions/investment/guidance/nash061901.htm> 
(emphasizing Commission staff's concern with abusive switching of 
variable annuity contracts).
    \23\ See, e.g., NASD Conduct Rule 2310 (Recommendations to 
Customers (Suitability)).
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    Proposed Form N-6 contemplated that risks associated with Portfolio 
Companies would be addressed in the Portfolio Companies' prospectuses, 
not the variable life insurance prospectus. Policies frequently offer 
numerous Portfolio Companies as investment options, and the Commission 
continues to believe that a variable life insurance prospectus may 
become too long and complex if it includes risk information specific to 
each Portfolio Company. As a result, investors are better served by 
consulting the Portfolio Company prospectus for risk information 
relating to the particular Portfolio Companies in which they are 
interested. At the suggestion of commenters, however, we have modified 
Item 2 to expressly permit the inclusion of information about the 
Portfolio Companies.\24\ Whether or not a registrant elects to include 
information about the Portfolio Companies, Item 2 will require a 
statement to the effect that a comprehensive discussion of the risks of 
each Portfolio Company may be found in the Portfolio Company's 
prospectus.
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    \24\ Instruction to Item 2.
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    We have added an instruction to make it clear that if the risk/
benefit summary includes information that responds to the requirements 
of other form items, the information need not be repeated elsewhere in 
the Prospectus.\25\ This could, for example, permit a registrant that 
includes information about the Portfolio Companies in the risk/benefit 
summary to modify or omit discussion of the Portfolio Companies in the 
body of the prospectus.
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    \25\ General Instruction C.3.(a).
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    As these modifications to proposed Form N-6 suggest, we believe 
that it is appropriate to accord registrants broad flexibility to 
include a narrative summary that is most useful to their investors. We 
are, however, concerned that this flexibility would permit a registrant 
to include excessively detailed information in the summary, with the 
result that other important information that is not required by Item 2, 
particularly the fee table required by Item 3, would not be prominently 
located in the prospectus. In order to provide registrants broad 
flexibility to design the narrative summary, while ensuring that policy 
costs will receive the prominence they deserve, we have modified 
proposed Form N-6 to require that the fee table must precede the 
information required by Item 2 if the information provided in response 
to Item 2 exceeds five pages in length.\26\
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    \26\ General Instruction C.3.(a) & C.3.(c)(ii).
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2. Risk/Benefit Summary: Fee Table (Item 3)

Fee Table Required

    We are adopting, substantially as proposed, the requirement that a 
variable life insurance prospectus include a fee table immediately 
following the summary of risks and benefits required by Item 2.\27\ For 
the first time, variable life insurance prospectuses will include a fee 
table similar to those long required for both mutual funds and variable 
annuities.\28\ Our goal is to promote, to the greatest extent possible, 
uniformity, simplicity, and comparability in fee disclosure.
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    \27\ Item 3.
    \28\ Item 3 of Form N-1A; N-1A Fee Table Adopting Release, supra 
note 14; Item 3 of Form N-4; N-4 Fee Table Adopting Release, supra 
note 14.
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    Commenters were divided in their views on the requirement to 
include a tabular presentation of fees and charges at the beginning of 
all variable life insurance policy prospectuses. Commenters that 
supported the fee table noted that it would facilitate comparisons 
among variable life insurance policies and bring variable life 
insurance fee disclosure into general parity with variable annuities 
and mutual funds. Commenters that objected to the requirement asserted 
that the proposed fee table would not provide useful disclosure for a 
prospective investor seeking to evaluate a variable life insurance 
policy or to compare several variable life insurance policies because 
of the complexity of variable life insurance fees and charges. These 
commenters recommended alternatives that would permit issuers to 
provide disclosure of fees and charges in a format of their choosing, 
which could include tabular presentations, flow charts, and narrative 
descriptions.
    As outlined in the Proposing Release, we agree with commenters that 
the fees and charges associated with variable life insurance policies 
often are quite complex for several reasons. First, the structure of 
fees often differs from one policy to another, making comparisons among 
products difficult. Second, fees typically are imposed at several 
levels within a variable life insurance policy, making it difficult to 
assess the aggregate effect of charges. For example, management and 
other expenses may be deducted at the Portfolio Company level, asset-
based charges such as a mortality and expense risk charge may be 
deducted against separate account assets, and other charges, such as 
cost of insurance, may be assessed against a policyholder's individual 
cash value. Third, some variable life charges, particularly cost of 
insurance (i.e., the charge imposed for death benefit coverage), vary 
based upon the individual characteristics of the purchaser and change 
over the life of a policy. The complexity of variable life insurance 
fees and charges makes it more difficult to prescribe a

[[Page 19852]]

standardized disclosure format than for mutual funds or variable 
annuities.
    We continue to believe, however, that the complexity of variable 
life insurance fees and charges makes it particularly important that 
investors receive clear, understandable disclosure about this essential 
aspect of the investment decision. As we noted in the Proposing 
Release, the importance of this disclosure has been heightened since 
the passage of the National Securities Markets Improvement Act of 1996 
(``NSMIA''). NSMIA amended Sections 26 and 27 of the Investment Company 
Act to replace specific limits on the amount, type, and timing of 
charges that applied to variable insurance contracts with a requirement 
that aggregate charges be reasonable in relation to the services 
rendered, the expenses expected to be incurred, and the risks assumed 
by the insurance company.\29\ The increased flexibility to structure 
variable life insurance charges given to insurers by NSMIA increases 
the need for clear, understandable disclosure of charges.\30\
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    \29\ 15 U.S.C. 80a-26; 15 U.S.C. 80a-27; National Securities 
Markets Improvement Act of 1996, Pub. L. No. 104-290 (1996), Section 
205; S. Rep. No. 293, 104th Cong., 2d Sess. 22 (1996); H. Rep. No. 
622, 104th Cong., 2d Sess. 45-46 (1996); Division of Investment 
Management, SEC, Protecting Investors: A Half-Century of Investment 
Company Regulation, at 386-90 (1992) (describing pre-NSMIA 
regulation of variable life insurance policy charges).
    \30\ In addition, in light of NSMIA, the National Association of 
Securities Dealers, Inc. (``NASD'') amended its Conduct Rules to 
eliminate the maximum sales charge limitations applicable to 
variable insurance contracts. Securities Exchange Act Release No. 
42043 (Oct. 20, 1999) [64 FR 58112 (Oct. 28, 1999)] (order approving 
File No. SR-NASD-98-14).
---------------------------------------------------------------------------

    Although we acknowledge the complexities associated with designing 
a fee table for variable life insurance, we agree with those commenters 
who believe that it will facilitate comparison among variable life 
insurance policies.\31\ As we noted in the Proposing Release, in recent 
years, the Commission has observed that a number of variable life 
insurance registrants, on their own initiative, have added relatively 
simple, tabular presentations of fees and charges to their 
prospectuses, including fee tables that conform generally to the format 
we proposed. The Commission believes that these registrants' efforts 
represent a significant step towards enhanced communication with 
investors about fees and charges and that it is appropriate, at this 
time, to extend these efforts to the industry as a whole, by requiring 
variable life insurance prospectuses to include a fee table.
---------------------------------------------------------------------------

    \31\ We note that the Commission's plain English rule encourages 
use of tabular presentations for complex material whenever possible. 
17 CFR 230.421(d).
---------------------------------------------------------------------------

Fee Table Format

    The fee table consists of three separate sections. The first 
section shows policyholder transaction fees, such as sales loads, 
surrender charges, and transfer fees. The second section shows annual 
charges, excluding annual Portfolio Company operating expenses. The 
third section shows annual Portfolio Company operating expenses, 
including management fees, distribution fees, and other expenses.
    We are modifying the proposed four-column format that would have 
required a registrant to identify each charge, when the charge is 
deducted, the amount of the charge, and whether the charge is deducted 
from all policies or only certain policies. Commenters generally 
questioned the need for the fourth column, identifying whether the 
charge is deducted from all policies or only certain policies. We 
agree, and the fee table, as adopted, does not include this column. 
Registrants that desire to indicate that a charge is not applicable to 
all policies may do so through footnotes to the fee table or some 
similar means.
    We are also changing the format of the Portfolio Company operating 
expenses section of the fee table in response to commenters' 
suggestions, so that the presentation of Portfolio Company fees and 
expenses will more closely resemble the presentations required by Forms 
N-1A and N-4. Under proposed Form N-6, Portfolio Company operating 
expenses would have been disclosed in a format similar to that 
prescribed for charges assessed by an insurer under the terms of a 
variable life insurance policy. We agree with a commenter who argued 
that the use of this format would tend to obscure the important 
differences between Portfolio Company charges and charges assessed 
under a variable life insurance policy, such as the fact that Portfolio 
Company expenses are not contractual and may vary from year to year. 
The Commission believes that the format used for mutual fund expenses 
in Forms N-1A and N-4 has provided uniformity, simplicity, and 
comparability in fund fee disclosure, and that presentation of 
Portfolio Company expenses in this format in Form N-6 will facilitate 
understanding of Portfolio Company expenses.\32\
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    \32\ See 1997 N-1A Proposing Release, supra note 8, 62 FR at 
10907 (discussing role of Form N-1A fee table).
---------------------------------------------------------------------------

Requirement To Disclose All Fees and Charges

    We are adopting, as proposed, the requirement that registrants 
disclose all fees and charges, whether or not a specific caption is 
provided for a charge in the fee table.\33\ A number of commenters 
objected to the proposal to require disclosure of all fees and charges, 
particularly charges for riders, in the fee table. These commenters 
noted that rider charges generally apply to a limited number of 
policyholders, are not considered significant features of a policy, and 
could dominate a fee table and detract from the information about the 
base policy. Some commenters recommended instead that the Commission 
limit the disclosure required in the fee table to fees and charges that 
are relevant to most policies or that may be charged to a typical 
investor.
---------------------------------------------------------------------------

    \33\ Instruction 2.(c) to Item 3; Instruction 3.(e) to Item 3.
---------------------------------------------------------------------------

    We share commenters' concern that investors not be overwhelmed by 
information of limited relevance. At the same time, however, we do not 
believe that it is feasible to distinguish between charges for optional 
features that ought to be included in the fee table because they are 
expected to be selected by most or a majority of investors, or by 
``typical'' investors, and charges for optional features that are 
expected to be less popular and hence should be omitted from the fee 
table. We note that in recent years insurers have increasingly offered 
variable insurance products with a variety of so-called ``unbundled'' 
optional features, each of which has a specific charge.\34\ Insurers 
maintain that these ``unbundled'' products are advantageous for 
investors because they allow investors to elect and pay for only those 
features that they want.\35\ However, this trend toward unbundling of 
features and charges would make the task of separating out those 
optional features that will be selected by a ``typical'' investor much 
more difficult. Consequently, we are adopting the requirement as 
proposed. We note, however, that a registrant may

[[Page 19853]]

readily ensure that disclosure of rider charges does not overwhelm 
disclosure of base contract charges by, for example, disclosing rider 
charges at the end of the second section of the fee table, under a 
caption that indicates that the charges are for optional features.
---------------------------------------------------------------------------

    \34\ Timothy C. Pfeifer, Growing Rider Use Furthers Flexibility 
But Also Complexity, National Underwriter Life & Health/Financial 
Services Edition, Sept. 3, 2001, at 22 (describing growth in 
optional riders on both variable annuities and variable life 
insurance); Linda Koco, Shaping Up the Next-Gen VULs, National 
Underwriter-Life & Health/Financial Services Edition, Jan. 1, 2001, 
at 20 (insurance company executive quoted as characterizing the 
variable universal life business as moving toward flexibility and 
unbundling).
    \35\ Timothy C. Pfeifer, Growing Rider Use Furthers Flexibility 
But Also Complexity, supra note 34 (arguing that optional riders 
facilitate policyholder choice).
---------------------------------------------------------------------------

Cost of Insurance

    We are modifying the proposed requirement that registrants disclose 
in the fee table the minimum and maximum cost of insurance charges that 
may be imposed under a variable life insurance policy.\36\ Cost of 
insurance generally is a significant expense item for variable life 
insurance policyholders.\37\ For that reason, the Commission believes 
that it is important for investors to receive information about the 
level of this charge. The Commission also recognizes, however, that 
this charge varies from policyholder to policyholder, based on 
individual characteristics such as age, gender, and risk 
classification, so that the charge does not readily lend itself to 
quantification in a table that applies to all policyholders.
---------------------------------------------------------------------------

    \36\ Instruction 3.(b) to Item 3.
    \37\ See Roger L. Blease, Costs Count: A Best's Policy Reports 
Survey Examines the Costs Incurred with the Life Insurance Portion 
of Variable Universal Life Policies, Best's Review--Life-Health 
Insurance Edition, Jan. 1997, at 37.
---------------------------------------------------------------------------

    Commenters uniformly opposed the proposed requirement to disclose a 
range of the cost of insurance charge, arguing that this approach would 
result in the presentation of numbers that would have little relevance 
to many investors. Commenters, however, were far from uniform in their 
recommendations to address this issue. Some commenters suggested that 
the Commission require separate cost of insurance tables that disclose 
a range of cost of insurance rates for various issue ages, rate 
classes, genders, and policy years, noting that the added complexity of 
a more detailed presentation is outweighed by the benefit of more 
precise information about this charge which often represents the 
largest cost of a policy. Another commenter recommended disclosure of 
the cost of insurance charge for a policyholder with characteristics 
that are fairly representative of purchasers of a policy, which we had 
identified in the Proposing Release as a possible alternative approach 
to disclosure of cost of insurance.\38\ Other commenters preferred a 
requirement to provide narrative disclosure about the cost of 
insurance, such as disclosure of the factors that affect the cost of 
insurance charge and how the cost of insurance charge increases over 
the life of the policy.
---------------------------------------------------------------------------

    \38\ Form N-6 Proposing Release, supra note 9, 63 FR at 13993.
---------------------------------------------------------------------------

    We continue to believe that fee table disclosure of the cost of 
insurance can serve as a flag to prospective investors that this is a 
significant charge which bears further investigation. We are also 
persuaded that disclosure of the range of cost of insurance will more 
effectively demonstrate the significance of this charge if it is 
coupled with disclosure of the cost of insurance paid by a hypothetical 
representative policyholder. While the cost of insurance that will be 
paid by a prospective investor will likely differ from that shown for 
the representative policyholder, disclosure of the cost of insurance 
for the representative policyholder, together with disclosure of the 
minimum and maximum cost of insurance, should give prospective 
investors a general understanding of the range of cost of insurance 
charges. Therefore, we are requiring that registrants include in the 
fee table the cost of insurance charge that would be paid by a 
purchaser of the policy with characteristics (e.g., sex, age, and 
rating classification) that are fairly representative of actual or 
expected purchasers of the policy, in addition to the minimum and 
maximum charges that may be imposed.\39\ The requirements for the 
characteristics of the representative policyholder would be similar to 
the requirements for the characteristics of policyholders used in 
hypothetical illustrations, and the registrant would be required to 
describe these characteristics in a sub-caption for the charge.\40\ To 
further address commenters' concerns that the specific numerical cost 
of insurance information in the fee table would have limited relevance 
to any particular investor, we are also requiring narrative disclosure 
(i) that the cost of insurance varies based on individual 
characteristics; (ii) that the cost of insurance charge or other charge 
shown in the table may not be representative of the charge that a 
particular policyholder will pay; and (iii) how a policyholder may 
obtain more information about the particular cost of insurance or other 
charges that would apply to him or her.
---------------------------------------------------------------------------

    \39\ Instruction 3.(b) to Item 3. This approach also applies to 
other charges that depend on individual policyholder 
characteristics. Id.
    \40\ Instruction 3.(b)(i) to Item 3. Cf. Item 26(c) and (d) 
(specifying requirements for premium amounts, ages, and rating 
classifications to be used in hypothetical illustrations).
---------------------------------------------------------------------------

    Further, we are permitting registrants to supplement this 
disclosure of the range of cost of insurance and the cost of insurance 
for a representative policyholder with additional disclosure concerning 
the cost of insurance, immediately following the fee table.\41\ This 
disclosure might include, for example, an explanation of the factors 
that affect the cost of insurance or tables showing the cost of 
insurance for a spectrum of representative policyholders. Permitting 
this additional disclosure responds to commenters' concerns that simple 
numerical disclosure in the fee table may not be adequate to explain 
the cost of insurance to investors. Allowing additional disclosure will 
also permit registrants to experiment with different approaches, which 
may, over time, assist us in developing a better approach to disclosure 
of cost of insurance charges.
---------------------------------------------------------------------------

    \41\ Instruction 3.(b)(ii) to Item 3.
---------------------------------------------------------------------------

Requirement To Disclose Maximum Charges

    The proposed fee table would have required disclosure of the 
maximum guaranteed charge for each item unless a specific instruction 
directs otherwise (e.g., cost of insurance). Commenters that expressed 
views on this requirement recommended that the form permit registrants 
to disclose current charges along with the guaranteed charges, arguing 
that placing current charge information in a footnote will not 
adequately disclose variations between current and guaranteed charges 
and that disclosing only the guaranteed charge may significantly 
overstate the amount of a charge.
    To address commenters' concerns, the Commission has revised Item 3 
to permit, but not require, registrants to disclose current charges in 
the fee table so long as the current charge disclosure is no more 
prominent than, and does not obscure or impede understanding of, the 
required maximum guaranteed charge disclosure.\42\
---------------------------------------------------------------------------

    \42\ Instruction 1.(f) to Item 3.
---------------------------------------------------------------------------

Captions in the Fee Table

    We are making some technical changes to address commenters' 
concerns regarding the fee table captions. We are modifying the 
Instructions to the fee table to allow a registrant to modify or add 
captions if the captions shown do not provide an accurate description 
of its fees and expenses.\43\ This modification recognizes that, 
following the enactment of NSMIA, insurers have increased flexibility 
to structure variable life insurance charges, subject to a

[[Page 19854]]

requirement that those charges be reasonable in the aggregate.\44\
---------------------------------------------------------------------------

    \43\ Instruction 1.(c) to Item 3.
    \44\ See supra Section II.A.2., ``Fee Table Required'' 
(discussing elimination of limits on variable life insurance charges 
by NSMIA).
---------------------------------------------------------------------------

    The Commission also has revised Item 3 to require the heading 
``Periodic Charges'' instead of ``Annual Charges'' at the beginning of 
the second section of the fee table. This reflects the fact that some 
charges under variable life insurance policies may be assessed at 
intervals other than annually (e.g., a monthly deduction for the cost 
of insurance charge).

Portfolio Company Fees and Charges

    We are adopting, as proposed, the requirement that, for a 
registrant that offers multiple Portfolio Companies, the fee table 
require disclosure of the range of expenses for all of the Portfolio 
Companies.\45\ Commenters were divided regarding how Portfolio Company 
expenses should be disclosed. Some commenters recommended that Form N-6 
require registrants to include a complete presentation of the fees and 
charges for each Portfolio Company. Other commenters either supported 
the Commission's proposal to require disclosure of the range of the 
expenses for all of the Portfolio Companies or recommended that the 
Commission permit issuers to determine how to disclose Portfolio 
Company expenses.
---------------------------------------------------------------------------

    \45\ Instruction 4.(b) to Item 3.
---------------------------------------------------------------------------

    As we stated in the Proposing Release, we are concerned that, 
because variable life fees and charges are complex, and because 
policies frequently offer numerous Portfolio Companies as investment 
options, investors could be overwhelmed by information if the fees and 
charges for each Portfolio Company were required to be separately 
stated in the fee table. For this reason, we have determined not to 
require a complete presentation of the fees and charges for each 
Portfolio Company. To address the concerns of some commenters, however, 
that the particular fees and charges of a specific Portfolio Company 
are more important to investors than the range of fees and charges for 
all Portfolio Companies, we are permitting, but not requiring, 
registrants to include disclosure of the fees and expenses for each 
Portfolio Company, in addition to the disclosure of the range of 
expenses for the Portfolio Companies.\46\ This will provide registrants 
the flexibility to include this detailed information when they 
determine that it would be helpful, and not overwhelming, to investors.
---------------------------------------------------------------------------

    \46\ Instruction 4.(h) to Item 3.
---------------------------------------------------------------------------

    In addition, we are revising Form N-1A to require the prospectus of 
a mutual fund that offers its shares as investment options for variable 
insurance products to include a fee table.\47\ The fee table in Form N-
6 contains a statement referring investors to the Portfolio Company 
prospectuses for more detail concerning Portfolio Company fees and 
expenses. This will ensure that investors in variable life insurance 
policies have access to complete information about Portfolio Company 
fees and expenses.
    We are also adopting, as proposed, the requirement that Portfolio 
Company operating expenses be disclosed before expense reimbursement 
and fee waiver arrangements. Expenses after reimbursement or waiver 
could be disclosed in a footnote. This approach is consistent with Form 
N-1A.\48\
---------------------------------------------------------------------------

    \47\ See Section II.E. infra, ``Adoption of Amendment to Form N-
1A.''
    \48\ Under Form N-1A, the staff has permitted mutual funds with 
fees that are subject to a contractual limitation that requires 
reimbursement or waiver of expenses to add two lines to the fee 
table: one line showing the amount of the reimbursement or waiver, 
and a second line showing the fund's net expenses after subtracting 
the reimbursement or waiver from the total fund operating expenses. 
See Letter from Barry D. Miller, Associate Director, Division of 
Investment Management, SEC, to Craig S. Tyle, General Counsel, 
Investment Company Institute (Oct. 2, 1998). We intend that the 
staff construe the fee table requirements of Form N-6 consistent 
with the approach taken under Form N-1A, to permit the addition of 
one line to the fee table showing the range of net total Portfolio 
Company operating expenses after taking account of contractual 
limitations that require reimbursement or waiver of expenses. This 
additional line should be placed immediately under the ``Total 
Annual [Portfolio Company] Operating Expenses'' line of the fee 
table and should have an appropriate descriptive caption. A footnote 
to the fee table should describe the contractual arrangement.
---------------------------------------------------------------------------

    We have deleted the instruction to the Portfolio Company expenses 
section of the fee table that would have required separate disclosure 
of the portion of ``Other Expenses'' that represents distribution or 
similar expenses deducted from a Portfolio Company's assets other than 
pursuant to a rule 12b-1 plan.\49\ This disclosure will be found in the 
prospectus for any Portfolio Company that deducts expenses of this 
nature, and we do not believe that disclosure of the range of such 
expenses for all Portfolio Companies will be particularly meaningful.
---------------------------------------------------------------------------

    \49\ Form N-6 Proposing Release, supra note 9, 63 FR at 14010 
(Proposed Instruction 4.(d) to Item 3).
---------------------------------------------------------------------------

3. General Description of Registrant, Depositor, and Portfolio 
Companies (Item 4)
    We are adopting, as proposed, Item 4, which requires a concise 
discussion of the organization and operation of the registrant, 
including a discussion of the rights of policyholders to instruct the 
insurance company depositor on the voting of Portfolio Company shares. 
One commenter recommended, consistent with proposed Item 4, that a 
brief discussion of voting rights be included in the prospectus, with 
more technical aspects disclosed in the SAI. Another commenter 
suggested that all information about voting rights be included in the 
SAI, consistent with the approach of Form N-1A for mutual funds.\50\ We 
have decided to retain the requirement that the variable life insurance 
prospectus concisely discuss policyholders' rights with respect to 
voting Portfolio Company shares. Unlike an investor in a mutual fund, 
the owner of a variable life insurance policy does not hold legal title 
to the shares of the underlying Portfolio Companies and a 
policyholder's rights to vote on matters affecting the Portfolio 
Companies are less obvious than the rights of mutual fund investors.
---------------------------------------------------------------------------

    \50\ Item 17(a)(2)(iv) of Form N-1A.
---------------------------------------------------------------------------

4. Charges (Item 5)
    We are adopting Item 5, which requires registrants to describe 
briefly all charges deducted from premiums, cash value, assets of the 
registrant, or any other source, with technical modifications to 
address commenters' concerns. As proposed, Item 5(a) would have 
required registrants to explain what is provided in consideration for 
each charge. We have revised Item 5 to require an explanation of what 
is provided in consideration for ``the charges,'' rather than ``each 
charge.'' Where multiple charges are used as a combined pool of 
resources, a registrant may describe what is provided in consideration 
for the charges as a group. However, where it is possible to identify 
what is provided in consideration for a particular charge, this should 
be separately explained (e.g., use of sales load to pay distribution 
costs of the policy or use of the cost of insurance charge to pay for 
insurance coverage).
    We have also revised the language of Instruction 2 to Item 5(a) to 
avoid confusion between the cost of insurance rate, and the cost of 
insurance charge, which is the cost of insurance rate times the net 
amount at risk. In addition, we have clarified that disclosure 
regarding increased cost of insurance rates for healthy individuals 
attributable to simplified underwriting is required only when 
simplified underwriting would cause healthy individuals to pay higher 
cost of insurance rates than they would pay under a substantially 
similar policy that is offered by the insurer using different 
underwriting methods.
    We have eliminated proposed Item 5(d), which would have required a

[[Page 19855]]

description of the type of operating expenses for which the registrant 
is responsible, and, if the organizational expenses of the registrant 
are to be paid out of its assets, an explanation of how the expenses 
will be amortized and the period of amortization.\51\ We agree with 
commenters who argued that information about expenses paid out of 
separate account assets would be reflected in the fee table, and that 
additional disclosure about these specific categories of expenses would 
not be useful to investors. In addition, we note that organizational 
expenses may no longer be amortized in any event, but must be expensed 
as incurred.\52\
---------------------------------------------------------------------------

    \51\ Cf. Instruction 2(f) to Item 6 of Form N-4 (requiring 
description of the type of operating expenses for which the 
registrant is responsible, and, if the organizational expenses of 
the registrant are to be paid out of its assets, an explanation of 
how the expenses will be amortized and the period over which the 
amortization will occur).
    \52\ See American Institute of Certified Public Accountants' 
Accounting Standards Executive Committee, Statement of Position 98-
5, ``Reporting Costs of Start-up Activities,'' Apr. 1998 (requiring 
all start-up costs and organizational costs to be expensed as 
incurred).
---------------------------------------------------------------------------

5. Taxes (Item 12)
    We are adopting, as proposed, the requirement that registrants 
describe the material tax consequences to the policyholder and 
beneficiary of buying, holding, exchanging, or exercising rights under 
the policy. Registrants are required to discuss the taxation of death 
benefit proceeds, periodic and non-periodic withdrawals, loans, and any 
other distribution that may be received under the policy, as well as 
tax benefits accorded the policy.
    Two commenters expressed the view that tax disclosure in the 
prospectus should be brief, with more extensive, technical disclosure 
located in the SAI. We believe that the requirements we are adopting 
will focus prospectus disclosure on the likely tax consequences to 
policyholders of purchasing a variable life insurance policy. Our 
intent, as we stated in the Proposing Release, is to elicit disclosure 
that is not overly lengthy or technical and that does not use jargon 
that is difficult for the average or typical investor to understand. 
The Commission notes its strong desire that, in revising their 
prospectuses to comply with Form N-6, variable life insurance 
registrants pay particular attention to their existing tax disclosures 
to ensure that these disclosures do not discourage the use of variable 
life insurance prospectuses.

B. Part B--Statement of Additional Information

1. Financial Statements (Item 24)

Location of Financial Statements

    We are adopting the financial statement requirements of proposed 
Form N-6, which were generally supported by commenters and are similar 
to those of Form N-4, substantially as proposed. A variable life 
insurance prospectus will not be required to include the financial 
statements of either the registrant or the insurance company 
depositor.\53\ The full financial statements of the registrant will be 
in the SAI, which will be available to investors upon request, free of 
charge. The SAI will also contain comparative balance sheets for the 
last two fiscal years for the depositor and, in certain cases, a more 
current interim balance sheet for the depositor. We are requiring that 
the other financial statements of the depositor (e.g., statements of 
income and statements of changes in stockholders' equity) be included 
in the registration statement, but they may be included in Part C 
rather than the SAI. We are requiring that these financial statements 
also be made available to investors upon request, free of charge.
---------------------------------------------------------------------------

    \53\ Item 14. If all of the required financial statements of the 
registrant and the depositor are not in the prospectus, Item 14 
requires the prospectus to state where the financial statements may 
be found, and to briefly explain how investors may obtain any 
financial statements not in the SAI.
---------------------------------------------------------------------------

    Form N-6 would permit issuers to incorporate by reference into the 
SAI the required financial statements of the registrant and the 
depositor, subject to the rules of the Commission on incorporation by 
reference.\54\ The financial statements would have to be delivered with 
the SAI in this case.\55\ Two commenters suggested changes to Form N-6 
that would require financial statements to be delivered to an investor 
only if the investor requested an SAI and not if the SAI was delivered 
for other reasons. These commenters noted that one state requires an 
SAI to be delivered to any applicant for a variable life insurance 
policy, and that this state requirement would result in high printing 
costs for variable life insurance policies sold in that state.
---------------------------------------------------------------------------

    \54\ General Instruction D.1.(c).
    \55\ Instruction to Item 15(a)(3)(C).
---------------------------------------------------------------------------

    The Commission has determined to retain the requirements as 
proposed. The financial statements of the registrant may be useful to 
many investors and should be included in the SAI directly or by 
incorporation by reference. Further, the financial condition of the 
depositor is relevant to its ability to pay the insurance benefits 
offered under variable life insurance policies, and therefore many 
investors may find financial information about the depositor useful. 
The proposed approach to depositor financial information, which 
requires that the SAI contain only the depositor's balance sheets, will 
allow a shorter SAI than would be the case if complete financial 
statements of the depositor were required, while still providing 
investors with significant information about the financial condition of 
the depositor in the SAI. We are not persuaded that we should condition 
delivery of the financial statements, which are an integral part of the 
SAI, upon whether an investor has requested the SAI solely in order to 
alleviate the burden of state requirements.\56\
---------------------------------------------------------------------------

    \56\ Cf. Instruction to Item 10(a)(2)(iii) of Form N-1A 
(requiring that any information incorporated by reference into the 
SAI must be delivered with the SAI unless the information has been 
previously delivered in a shareholder report); General Instruction G 
to Form N-4 (SAI must be available to investor upon request at no 
charge, and any information or documents incorporated by reference 
into the SAI must be provided along with the SAI).
---------------------------------------------------------------------------

Preparation of Depositor Financial Statements in Accordance With 
GAAP

    We are revising Instruction 1 to Item 24(b) to clarify when a 
depositor's financial statements must be prepared in accordance with 
generally accepted accounting principles in the United States 
(``GAAP'') and when they may be prepared in accordance with statutory 
requirements.\57\ As adopted, Instruction 1 to Item 24(b), like 
Instruction 1 to Item 23(b) of Form N-4, would provide that a 
depositor's financial statements may be prepared in accordance with 
statutory requirements if the depositor would not have to prepare 
financial statements in accordance with GAAP except for use in a 
registration statement filed on Forms N-3, N-4, or N-6. Instruction 1 
includes a sentence not

[[Page 19856]]

included in Form N-4, clarifying that the depositor's financial 
statements must be prepared in accordance with GAAP if the depositor 
prepares financial information in accordance with GAAP for use by its 
parent in consolidated financial statements in reports under the 
Securities Exchange Act of 1934 (``Exchange Act'') or registration 
statements.\58\ This sentence is consistent with the manner in which 
the Commission staff has construed the existing instructions to Form N-
4.
---------------------------------------------------------------------------

    \57\ GAAP is an accounting term that encompasses the 
conventions, rules, and practices that define accepted accounting at 
a particular time issued by various authoritative bodies including 
the Financial Accounting Standards Board (``FASB'') and the American 
Institute of Certified Public Accountants (``AICPA''). See 
Codification of Financial Reporting Policies of the SEC, Section 
101. Financial statements prepared in accordance with statutory 
requirements, which may vary from state to state, differ from those 
prepared in accordance with GAAP. Statutory requirements are the 
basis of accounting that insurance companies use to comply with the 
financial reporting requirements of state insurance regulations. 
Regulation S-X permits financial statements for mutual life 
insurance companies and wholly owned stock insurance company 
subsidiaries of mutual life insurance companies to be prepared in 
accordance with statutory requirements, except when the applicable 
registration forms specifically provide otherwise. 17 CFR 210.1-
01(a); 17 CFR 210.7-02(b).
    \58\ This requirement would also apply if the depositor provides 
financial information in accordance with GAAP to a parent that is a 
foreign private issuer for purposes of the parent's reconciliation 
to GAAP. See Items 17 and 18 of Form 20-F (describing requirements 
for reconciliation to GAAP).
---------------------------------------------------------------------------

    Ideally, all financial statements for depositors of variable life 
insurance policies would be presented on a GAAP basis because this 
would promote uniformity and consistency of presentation. We believe, 
however, that our approach appropriately recognizes the cost burdens 
that would be imposed if we required GAAP financial statements in cases 
where the depositor is not otherwise required to prepare financial 
information in accordance with GAAP for use in its own registration 
statements or periodic reports or those of its parent company. One 
commenter expressed concern that proposed Form N-6 could require a 
depositor to include financial statements in accordance with GAAP if 
the depositor prepared GAAP financial statements solely for internal 
purposes, for example, in a case where a mutual insurer desires to use 
GAAP financial statements internally for several years before switching 
to GAAP financial statements in its public filings. We wish to clarify 
that Form N-6 would not require the use of GAAP when a depositor 
prepares GAAP financial statements solely for internal purposes.
2. Performance Data (Item 25)
    The Commission is adopting, as proposed, the requirements that the 
SAI include (i) an explanation of how the registrant calculates 
performance data used in advertising, including how charges are 
reflected in the data, and (ii) a quotation of performance for each 
sub-account for which performance data is advertised. In addition, as 
proposed, Form N-6 will neither require disclosure of any historical 
performance information nor prohibit the presentation of historical 
performance information in a variable life insurance prospectus, 
provided that the information is not incomplete, inaccurate, or 
misleading and does not obscure or impede understanding of the 
information that is required to be included.\59\
---------------------------------------------------------------------------

    \59\ General Instruction C.3.(b).
---------------------------------------------------------------------------

    Variable life insurance performance is difficult to measure because 
of the complexity of the product and because policy charges and values 
are linked to individual characteristics of a particular investor. In 
addition, variable life policies provide cash value and death benefits, 
and both of these may be affected over time, in different ways, by 
policy charges and earnings. The Proposing Release identified the 
following three types of performance information that are sometimes 
included in variable life insurance registration statements.
     Portfolio Company performance. This measure is net of 
investment management fees and other Portfolio Company fees and 
expenses, but is not adjusted for fees and expenses imposed on the 
separate account or individual policyholders.
     Portfolio Company performance adjusted for separate 
account asset-based charges. This is a hybrid measure that is net of 
investment management fees, other Portfolio Company fees and expenses, 
and separate account asset-based charges, but is not adjusted for 
charges imposed on individual policyholders.
     Illustrations of cash values and death benefits. These 
illustrations are based on actual investment performance of a Portfolio 
Company and specified assumptions about premiums and the insured 
individual (e.g., sex, age, rating classification), reflecting all of 
the fees and charges at the Portfolio Company, separate account, and 
individual policyholder levels.
    Form N-6 does not require disclosure of any historical performance 
information. We believe, as we stated in the Proposing Release, that, 
at the present time, no method of measuring variable life insurance 
performance has been devised that is useful enough that its disclosure 
should be required. Commenters supported this approach. Commenters 
differed on whether the Commission should restrict the forms of 
performance information permitted in a variable life insurance 
prospectus. Several commenters stated that all of the categories of 
performance information discussed in the Proposing Release may have 
informational value to investors and should be permitted in the 
prospectus, provided that the limitations of the method chosen are 
described. A few commenters expressed concerns about the presentation 
of Portfolio Company performance or Portfolio Company performance 
adjusted for separate account asset-based charges. The commenters who 
were concerned about Portfolio Company performance argued that it does 
not reflect the return a policyholder might receive as accurately as 
would measures that reflect separate account charges. In contrast, a 
commenter who expressed concern about Portfolio Company performance 
adjusted for separate account asset-based charges stated that this 
measure of performance, unlike Portfolio Company performance, has no 
useful meaning but can mislead and cause misunderstanding because it 
reflects some, but not all, policy charges.
    After considering these comments, the Commission has determined not 
to prohibit the use of any type of performance information in the 
separate account prospectus. We agree with the commenters who argued 
that all of the categories of performance information discussed in the 
Proposing Release may provide useful information to investors. We 
emphasize, however, that registrants are responsible for ensuring that 
any presentation of performance information is not incomplete, 
inaccurate, or misleading and does not obscure or impede understanding 
of the information that is required to be included in the prospectus. 
For example, a separate account using performance information that does 
not reflect all charges that a policyholder would incur, directly or 
indirectly, should include sufficient information about the omitted 
charges to ensure that the performance presentation is not misleading. 
In addition, as we indicated in the Proposing Release, we believe that 
Portfolio Company performance information is most appropriately 
included in the Portfolio Company's prospectus, where it can be 
considered along with the risks of investing in the Portfolio Company. 
Registrants should bear this in mind when determining whether it is 
appropriate to include Portfolio Company performance in the prospectus 
for the separate account.
3. Illustrations (Item 26)

Permitted Use of Hypothetical Illustrations

    Commenters supported the Commission's proposal to permit, but not 
require, registrants to include hypothetical illustrations of a 
variable life insurance policy in either the prospectus or the SAI, and 
we are adopting the proposal.\60\ Hypothetical illustrations are 
tabular presentations of

[[Page 19857]]

numbers that demonstrate how the cash value, cash surrender value, and 
death benefit under a policy change over time based on (i) assumed 
gross rates of return of the Portfolio Companies; and (ii) deduction of 
fees and charges for a hypothetical policyholder (e.g., a 40-year-old, 
non-smoking male) with a specified policy face amount and premium 
payment pattern.
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    \60\ Item 26.
---------------------------------------------------------------------------

Requirements for Hypothetical Illustrations

    The Commission proposed requirements for any hypothetical 
illustrations included in the prospectus or SAI, in order to place 
reasonable limits on the assumptions that may be used and discourage 
the presentation of misleading illustrations. We are adopting these 
requirements with modifications, as discussed below. We remind 
registrants that, in addition to complying with these requirements, 
registrants remain responsible for ensuring that illustrations are not 
incomplete, inaccurate, or misleading and do not, because of their 
nature, quantity, or manner of presentation, obscure or impede 
understanding of information required to be included in the prospectus 
or SAI.\61\
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    \61\ General Instruction C.3.(b).
---------------------------------------------------------------------------

    Narrative Information. We are clarifying the requirement that a 
clear and concise explanation of the illustrations precede the 
illustrations. Specifically, the explanation should include a 
description of the expenses reflected in the illustrations; a statement 
that the illustrations are based on assumptions about investment 
returns and policyholder characteristics; a description of the 
circumstances under which actual results for a particular policyholder 
would differ from the illustrations (e.g., when policyholder 
characteristics, expenses, or investment returns differ from those 
illustrated); and whether personalized illustrations are available, 
and, if so, how they may be obtained.\62\ We note, however, that this 
prescribed disclosure is not intended to be exclusive, and that 
registrants should include any additional disclosure concerning the 
assumptions and limitations of the hypothetical illustrations necessary 
to ensure that the hypothetical illustrations are not incomplete, 
inaccurate, or misleading.
---------------------------------------------------------------------------

    \62\ Item 26(a). Disclosure about the availability of 
personalized illustrations would also be required on the back cover 
page of the prospectus. Item 1(b)(1).
---------------------------------------------------------------------------

    Assumed Rates of Return. The Commission proposed to require 
registrants to use gross rates of return of 0% and one other rate not 
exceeding 10%. Additional gross rates of return not greater than 10% 
would have been permitted. As adopted, Form N-6 will require 
registrants to use gross rates of return of 0%, 6%, and one other rate 
not greater than 12%. Additional gross rates of return no greater than 
12% may also be used.\63\ This is consistent with current practice in 
variable life insurance prospectuses, which typically use gross rates 
of 0%, 6%, and 12% in illustrations.\64\ We proposed to require 
registrants using illustrations to use only two rates of return 
because, as the number of rates increases, the potential for 
overwhelming investors with excessive quantitative information that is 
of limited relevance to their particular circumstances also increases. 
We proposed to cap permissible rates at 10% because of our concerns 
that rates above 10% may have a significant tendency to invite 
unrealistic investor expectations and that investors might give undue 
weight to a 12% illustration, when coupled with a 0% illustration, 
because they might discount a 0% illustration as unrealistically low.
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    \63\ Item 26(g).
    \64\ In its comment letters on variable life insurance filings, 
the Commission staff has objected to rates of return greater than 
12%. See Pacific Mutual Life Insurance Company, Division of 
Investment Management no-action letter (Aug. 31, 1990) (describing 
development of staff position regarding use of rates of return in 
excess of 12%). See also NASD Conduct Rules, ``Communications with 
the Public About Variable Life Insurance and Variable Annuities,'' 
IM-2210-2(b)(5)(A)(ii) (requiring variable life insurance 
illustrations used for advertising and sales literature to use a 
rate of 0% and any other rates not greater than 12%).
---------------------------------------------------------------------------

    A number of commenters recommended that Form N-6 require 
registrants using illustrations to use three rates of return, rather 
than two, arguing that the use of three rates more effectively 
demonstrates how variable life insurance policies operate and the 
effect that Portfolio Company returns have on cash values and death 
benefits. In addition, commenters generally recommended that the 
Commission permit illustrations with rates as high as 12%, arguing that 
12% fairly depicts historical stock market returns.
    We have modified our proposal to require registrants to use three 
gross rates of return--0%, 6%, and one other rate not greater than 12%. 
We agree with commenters that the use of three rates of return may 
effectively demonstrate how a variable life insurance policy operates. 
In addition, we are persuaded that illustrations using a 12% rate 
should not be prohibited, in light of historical stock market returns. 
Although historical returns on large company stocks have averaged 10.7% 
from 1926 to the present, returns for these stocks have exceeded 12% 
for many 5-, 10-, 15-, and 20-year periods.\65\ As a result, 
illustrations at a 12% rate, when coupled with illustrations at 0% and 
6% rates, may not be materially misleading. We note that each 
registrant should determine for itself whether the use of a 12% 
illustration is appropriate and not misleading under its particular 
facts and circumstances, such as the historical returns of the policy's 
Portfolio Companies and the actual and expected allocations by 
policyholders to various asset classes. We continue to believe, 
however, that investors might give undue weight to a 12% illustration, 
when coupled only with a 0% illustration, and we therefore believe that 
it is important to require the use of a third, intermediate rate.
---------------------------------------------------------------------------

    \65\ The estimate that annual returns on large company stocks 
have averaged 10.7% from 1926 to 2001 was provided to the Commission 
staff by Ibbotson Associates, Inc. See also Ibbotson Associates, 
Stocks, Bonds, Bills and Inflation Yearbook 25, 27 (2001) (compound 
annual growth rate of 11.0% for index of S&P 500 total returns from 
1926 to 2000, assuming no transaction costs, full reinvestment of 
dividends on stocks or coupons on bonds, and no taxes); id. at 42-49 
(showing compound annual returns for large company stocks and other 
asset classes for 5-, 10-, 15-, and 20-year holding periods).
---------------------------------------------------------------------------

    Premium Amounts. Proposed Item 26(c) would have required that the 
premium amounts used in illustrations not be unduly larger or smaller 
than the actual or expected average policy size. We have modified the 
reference to ``policy size'' to clarify that we are referring to 
premium amount rather than policy face amount.\66\
---------------------------------------------------------------------------

    \66\ Item 26(c).
---------------------------------------------------------------------------

    We have also modified the language of this Item to address the 
concern of a commenter that averaging of premium amounts may result in 
a premium amount that is significantly different from the premium 
amount that is representative of the actual policies sold. We are 
providing that premium amounts used in illustrations be representative 
of the actual or expected ``typical'' premium amount, with flexibility 
to base the typical premium amount on the average or median premium 
amount or another reasonable basis that results in a typical premium 
amount that is fairly representative of actual or expected policy 
sales.
    Rating Classification. We are also modifying proposed Item 26(d), 
which would have required that illustrations be shown for the rating 
classification (e.g., nonsmoker, smoker, preferred, standard) with the 
greatest number of outstanding policies, to address a commenter's 
concern that this requirement may result in a rating

[[Page 19858]]

classification being used that is not representative. For example, if a 
policy uses a large number of narrowly drawn rating classifications, 
the rating classification corresponding to the greatest number of 
outstanding policies may fall at one extreme of the range of rating 
classifications (e.g., the rating classification for healthy 20-year-
old non-smokers) and thus may not be representative for most 
purchasers. We are modifying the Item to provide that if use of the 
rating classification with the greatest number of outstanding policies 
is not fairly representative of policy sales, illustrations should be 
shown for a commonly used rating classification that is fairly 
representative of policy sales.
    Portfolio Company Charges and Expenses. We are adopting as proposed 
the requirement that Portfolio Company management fees and other 
Portfolio Company charges and expenses be reflected using the 
arithmetic average of those charges and expenses for all available 
Portfolio Companies. The average would be based on Portfolio Company 
charges and expenses incurred during the most recent fiscal year or any 
materially greater amount expected to be incurred during the current 
fiscal year.\67\ A number of commenters opposed the required use of an 
arithmetic average, arguing that a weighted average would better 
reflect the proportionate allocations that investors actually make in a 
particular product and would therefore serve as a better proxy for the 
Portfolio Company expenses that a prospective investor might actually 
pay. Four commenters recommended that Form N-6 permit the use of either 
a weighted or an arithmetic average of Portfolio Company expenses, and 
three commenters recommended that the form require the use of a 
weighted average.
---------------------------------------------------------------------------

    \67\ Item 26(h).
---------------------------------------------------------------------------

    We disagree with commenters who recommended that we permit the use 
of either an arithmetic or weighted average of Portfolio Company 
expenses. This approach would lead to inconsistency among 
illustrations, the opportunity for ``cherry-picking'' the method that 
is most favorable from time to time, and the need for complicated rules 
governing when a change in the selected method is permitted. While we 
believe that there is some merit to the argument that a weighted 
average may serve as a better proxy for the Portfolio Company expenses 
that a ``typical'' prospective investor might pay, we note that, for 
any particular investor, a weighted average is not necessarily 
representative of the expenses he or she will pay. In addition, 
computation of a weighted average is significantly more complicated 
than an arithmetic average, for example, requiring adjustments to the 
method to address new variable life insurance policies and the addition 
and removal of Portfolio Companies to or from an existing policy.
    We wish to clarify, however, that although we are requiring the use 
of an arithmetic average of Portfolio Company fees and expenses in 
illustrations included in the prospectus and SAI, we would not object 
if personalized illustrations are provided to a particular investor 
based on a weighted average of the expenses of the Portfolio Companies 
in which the investor already invests or expects to invest, provided 
that the illustrations are not misleading. We believe that 
illustrations prepared in this manner may be significantly more useful 
to a particular investor than personalized illustrations using an 
arithmetic average of Portfolio Company expenses.
    The proposed form would require that hypothetical illustrations 
reflect Portfolio Company charges and expenses without taking into 
account any fee waiver or expense reimbursement arrangements. Two 
commenters recommended that the form permit insurers to take into 
account fee waiver or expense reimbursement arrangements where the 
arrangements are binding either (1) for at least one year or until the 
next prospectus update, or (2) until the end of the current fiscal 
year. One of these commenters argued that as long as the arrangements 
are written commitments for at least one year or until the next 
prospectus update, they reflect the actual fees and expenses that 
policyholders would experience as investors in the Portfolio Companies, 
and therefore illustrations should be able to reflect these ``capped'' 
expenses. The other commenter recommended that whatever expenses are 
actually used in a particular variable life prospectus should be used 
for purposes of hypothetical illustrations.
    We have retained the requirement that hypothetical illustrations be 
based on Portfolio Company expenses before fee waiver or expense 
reimbursement arrangements. This conforms to the fee table in Item 3, 
which requires disclosure of Portfolio Company expenses before expense 
reimbursement and fee waiver arrangements. However, we intend that the 
staff construe the requirements of Form N-6 governing hypothetical 
illustrations consistent with the approach it has taken with the 
expense example of Form N-1A, to permit illustrations to reflect 
Portfolio Company operating expenses after taking account of 
contractual limitations that require reimbursement or waiver of 
expenses, but only for the period of the contractual limitation.\68\
---------------------------------------------------------------------------

    \68\ Under Form N-1A, the staff has permitted mutual funds with 
fees that are subject to a contractual limitation that requires 
reimbursement or waiver of expenses to take account of the 
reimbursement or waiver in calculating the example required by the 
fee table of Item 3, but only for the duration of the contractual 
limitation. Funds may not assume that the reimbursement or waiver 
will continue for periods subsequent to the contractual limitation 
period in calculating expenses shown in the example. Cf. Letter from 
Barry D. Miller, Associate Director, Division of Investment 
Management, SEC, to Craig S. Tyle, General Counsel, Investment 
Company Institute (Oct. 2, 1998) (permitting funds with fees that 
are subject to a contractual limitation that requires reimbursement 
or waiver to add two lines to the fee table showing the amount of 
the reimbursement or waiver and total net expenses).
---------------------------------------------------------------------------

Hypothetical Illustrations Based on Historical Rates of Return

    The Commission requested comment on the use of hypothetical 
illustrations constructed using historical rates of return for the 
Portfolio Companies (``hypothetical historical illustrations'') rather 
than assumed rates of return. Some variable life insurance registrants 
have included these illustrations in their prospectuses, although this 
practice is not widespread. Proposed Form N-6 did not specifically 
address hypothetical historical illustrations, and we are not modifying 
Form N-6 in this regard.
    Commenters' views were mixed. One commenter expressed concern about 
the use of actual historical performance to illustrate hypothetical 
future values and argued that, to the extent actual results are used, 
illustrations lose much of their hypothetical nature, despite any 
disclaimer to the contrary. Another commenter noted that using 
hypothetical historical illustrations in the prospectus would result in 
extremely long illustrations, adding to the complexity of the 
prospectus. Several other commenters argued that the Commission should 
permit the use of hypothetical historical illustrations in the 
prospectus and SAI by registrants who believe they contribute to 
investor understanding of a policy.
    We continue to have a number of concerns about the use of 
hypothetical historical illustrations. While hypothetical illustrations 
that show a pattern of assumed returns, e.g., 0%, 6%, and 12%, may help 
investors understand how different rates of return affect policy 
performance, historical rates of return illustrated in hypothetical 
historical illustrations will not follow a pattern and therefore are 
not useful to an investor attempting to

[[Page 19859]]

understand how a particular change in rates of return might affect 
policy values. In addition, hypothetical historical illustrations have 
limited value in presenting past performance because they depend on the 
particular hypothetical policyholder, face amount, and premium payment 
pattern selected. Hypothetical historical illustrations also tend to 
invite prospective investors to assume that the cash values and death 
benefits presented represent the values that they can expect and may be 
misconstrued as projections. Finally, hypothetical historical 
illustrations can add undue complexity to the information already 
presented to investors.
    Nonetheless, we do not believe that it is appropriate to prohibit 
the use of hypothetical historical illustrations in the prospectus or 
SAI, provided that they are not incomplete, inaccurate, or misleading 
and do not, because of their nature, quantity, or manner of 
presentation, obscure or impede understanding of information that is 
required to be included.\69\ We caution registrants, however, that it 
is incumbent upon them to ensure that any hypothetical historical 
illustrations comply with this standard.
---------------------------------------------------------------------------

    \69\ General Instruction C.3.(b).
---------------------------------------------------------------------------

Personalized Illustrations

    Personalized illustrations are frequently provided by insurers to 
prospective variable life insurance investors at the point of sale. 
These illustrations reflect the investor's particular circumstances, 
including age, sex, risk classification, proposed face amount, and 
expected premium payment pattern. Proposed Form N-6 did not address 
personalized illustrations because these illustrations are customized 
for individual investors, delivered at the point of sale, and are not 
susceptible to inclusion in a prospectus. Form N-6, as adopted, follows 
the approach of the proposal, except that, at the suggestion of several 
commenters, we have added a requirement that registrants who make 
personalized illustrations available disclose that fact and provide a 
toll-free telephone number for requesting personalized 
illustrations.\70\ As a result, insurers may use personalized 
illustrations in sales literature subject to the antifraud provisions 
of the federal securities laws and rule 156 under the Securities Act, 
as long as the sales literature is preceded or accompanied by the 
prospectus.\71\ The antifraud provisions make it unlawful to use 
materially misleading sales literature in connection with the purchase 
or sale of investment company securities.
---------------------------------------------------------------------------

    \70\ Item 1(b)(1); Item 26(a).
    \71\ Section 17(a) of the Securities Act [15 U.S.C. 77q(a)]; 
Section 10(b) of the Securities Exchange Act of 1934 [15 U.S.C. 
78j(b)] and Rule 10b-5 thereunder [17 CFR 240.10b-5]; Rule 156 under 
the Securities Act [17 CFR 230.156]; Section 34(b) of the Investment 
Company Act [15 U.S.C. 80a-33(b)]; Section 2(a)(10)(a) of the 
Securities Act [15 U.S.C. 77b(a)(10)(a)].
---------------------------------------------------------------------------

    A significant number of commenters expressed the view that the 
Commission should prescribe requirements for personalized 
illustrations, either in Form N-6 or in another rulemaking or 
interpretive proceeding. These commenters argued that mandating some 
degree of uniformity would benefit investors, e.g., by facilitating 
comparisons among different policies. The commenters suggested a range 
of approaches, including standards for personalized illustrations that 
are similar to the requirements for hypothetical prospectus 
illustrations, as well as standards conforming, to the extent 
practicable, to the National Association of Insurance Commissioners 
standards for fixed life insurance policy illustrations.\72\
---------------------------------------------------------------------------

    \72\ Cf. NASD Conduct Rules, ``Communications with the Public 
About Variable Life Insurance and Variable Annuities,'' IM-2210-
2(b)(5)(B) (requiring personalized illustrations in sales literature 
to follow all of the standards set forth for hypothetical 
illustrations using assumed rates of return).
---------------------------------------------------------------------------

    The Commission has determined not to propose standards for 
personalized illustrations at this time. Commenters' views on the 
appropriate standards varied significantly, and, in some cases, were 
not specific, and we believe that it would be inadvisable to delay the 
benefits of Form N-6 in order to resolve differing views with respect 
to personalized illustrations.
    In the Proposing Release, we expressed our view that it may be 
misleading to market a variable life insurance policy based on 
illustrations that reflect assumed rates of return and the fees and 
charges of a single Portfolio Company when those fees and charges are 
less than the arithmetic average of fees and charges for all available 
Portfolio Companies. For that reason, we noted our concern about the 
practice of using a single Portfolio Company's fees and charges in 
personalized illustrations. As described above, however, we would not 
object if personalized illustrations are provided to a particular 
investor based on a weighted average of the expenses of the Portfolio 
Companies in which the investor already invests or expects to invest, 
provided that the illustrations are not misleading.\73\ As a result, if 
an investor invests or expects to invest in a single Portfolio Company, 
it is not per se misleading to use that Portfolio Company's fees and 
charges in personalized illustrations for that investor. We remain 
concerned, however, with personalized illustrations that use a single 
Portfolio Company's fees and charges in situations when an investor 
does not invest, or expect to invest, exclusively in that Portfolio 
Company, particularly when that Portfolio Company has low expenses 
relative to other Portfolio Companies.
---------------------------------------------------------------------------

    \73\ See supra Section II.B.3, ``Permitted Use of Hypothetical 
Illustrations; Portfolio Company Charges and Expenses.''
---------------------------------------------------------------------------

C. Part C--Other Information--Exhibits--Actuarial Opinion (Item 27(l))

    We are adopting with modifications proposed Item 27(l), which 
requires an opinion of an actuarial officer of the depositor if a 
registrant includes illustrations in the registration statement. As 
proposed, the actuarial opinion would have been required to indicate 
that: (i) The values illustrated are consistent with the provisions of 
the policy and the depositor's administrative procedures; (ii) the rate 
structure of the policy, and the assumptions selected for the 
illustrations, do not result in an illustration of the relationship 
between premiums and benefits that is materially more favorable than 
for a substantial majority of other prospective policyholders; and 
(iii) the illustrations are based on a commonly used rating 
classification and premium amounts and ages appropriate for the markets 
in which the policy is sold.
    Several commenters objected to the second prong of the actuarial 
opinion requirement, arguing that it would require difficult judgments 
for which there are no established standards. Commenters also noted 
that the requirement that the relationship between premiums and 
benefits not be materially more favorable than for a ``substantial 
majority'' of other prospective policyholders could in some cases 
conflict with other requirements of proposed Form N-6 regarding 
hypothetical illustrations.
    We agree with commenters that modifications are required to our 
proposal. Therefore, we are replacing the second prong of the proposed 
actuarial opinion requirement with a requirement to indicate that the 
policy has not been designed, and the assumptions for the illustrations 
(including sex, age, rating classification, and premium amount and 
payment

[[Page 19860]]

schedule) have not been selected, to make the relationship between 
premiums and benefits, as shown in the illustrations, appear to be 
materially more favorable than for any other prospective purchaser with 
different assumptions.\74\
---------------------------------------------------------------------------

    \74\ Item 27(l)(2).
---------------------------------------------------------------------------

D. Technical Rule Amendments

    When we proposed Form N-6, we also proposed several technical rule 
amendments to accommodate Form N-6. We are adopting these amendments as 
proposed.
    The Commission is amending rules 134b, 430, 430A, 495, 496, and 497 
under the Securities Act and rules 8b-11 and 8b-12 under the Investment 
Company Act to add Form N-6 to the list of forms referenced in those 
rules.\75\ We also are adopting new rules prescribing the use of Form 
N-6 to register insurance company separate accounts that are registered 
as unit investment trusts and that offer variable life insurance 
policies under the Investment Company Act and to register their 
securities under the Securities Act.\76\ Finally, we are amending Form 
N-8B-2 to clarify that Form N-8B-2 is not the proper form for 
Investment Company Act registration of insurance company separate 
accounts registered as unit investment trusts.\77\
---------------------------------------------------------------------------

    \75\ 17 CFR 230.134b, 230.430, 230.430A, 230.495, 230.496, and 
230.497; 17 CFR 270.8b-11 and 270.8b-12.
    \76\ 17 CFR 239.17c; 17 CFR 274.11d.
    \77\ See amendments to Form N-8B-2 and 17 CFR 274.12 
(prescribing Form N-8B-2). The Commission did not propose and is not 
adopting amendments to Form S-6 or 17 CFR 239.16 (prescribing Form 
S-6) because the form and the rule state that Form S-6 is to be used 
to register the securities of unit investment trusts registered on 
Form N-8B-2.
---------------------------------------------------------------------------

E. Adoption of Amendment to Form N-1A

    Currently, Form N-1A does not require a mutual fund that offers its 
shares exclusively as investment options for variable annuity contracts 
and variable life insurance policies to include the fee table in its 
prospectus.\78\ In the Proposing Release, we stated that if Form N-6, 
as adopted, did not require separate disclosure of the operating 
expenses of each Portfolio Company, we would amend Form N-1A to require 
the prospectus of a mutual fund that offers its shares as investment 
options for variable life insurance policies to include a fee 
table.\79\ We also requested comment on whether to eliminate the 
exclusion from the fee table requirement in Form N-1A for mutual funds 
that offer their shares as investment options for variable annuity 
contracts if the exclusion is eliminated for mutual funds that offer 
their shares as investment options for variable life insurance 
policies.\80\
---------------------------------------------------------------------------

    \78\ Item 3 of Form N-1A.
    \79\ Form N-6 Proposing Release, supra note 9, 63 FR at 13994.
    \80\ Id.
---------------------------------------------------------------------------

    The only commenter to address the issue of whether disclosure of 
Portfolio Company expenses should be required in the Portfolio Company 
prospectus supported a requirement that a mutual fund offering its 
shares as investment options to variable life insurance policies 
include a fee table in its prospectus. The commenter agreed that the 
Portfolio Company prospectus is the appropriate location for disclosure 
of Portfolio Company operating expenses, though the commenter also 
suggested that the Form N-6 fee table should not include any Portfolio 
Company operating expenses.
    As proposed, we are amending Form N-1A to eliminate the existing 
exclusion from the fee table requirement for mutual funds that offer 
their shares as investment options for variable life insurance 
policies. This will ensure that variable life investors have access to 
complete information about Portfolio Company fees and expenses. In 
addition, to foster consistent presentation of fund expenses for 
variable annuities and variable life insurance, we are eliminating the 
exclusion from the fee table requirement for mutual funds that offer 
their shares as investment options for variable annuity contracts.\81\
---------------------------------------------------------------------------

    \81\ One commenter encouraged the Commission to make Portfolio 
Company expense disclosure requirements in Forms N-6 and N-4 
consistent, arguing that a requirement to report Portfolio Company 
expenses for variable life prospectuses differently than for 
variable annuity prospectuses would complicate the process of 
preparing registration statements without improving the quality of 
disclosure. In a companion release, we are proposing amendments to 
generally conform the format and instructions for the variable 
annuity fee table to that in Form N-6. See Form N-4 Proposing 
Release, supra note 1. In the Form N-4 Proposing Release, we noted 
that if we adopt changes to the Form N-4 proposals in response to 
comments, we intend to adopt conforming changes to Form N-6. We 
therefore requested that commenters on the proposed amendments to 
the fee table of Form N-4 address how their comments would apply to 
the fee table of Form N-6, and whether a different approach to any 
aspect of fee and expense disclosure is warranted in Form N-6 
because of the differences between variable life insurance and 
variable annuities.
---------------------------------------------------------------------------

F. Effective Dates and Transition Period

    Form N-6 will eventually replace Forms N-8B-2 and S-6 for insurance 
company separate accounts that are registered as unit investment trusts 
and that offer variable life insurance policies. As discussed in the 
Proposing Release, the Commission is providing for a transition period 
after the effective date of Form N-6 that gives registrants sufficient 
time to update their prospectuses or to prepare new registration 
statements under the new Form N-6 requirements.\82\ After the 
transition period, separate accounts that are registered as unit 
investment trusts and that offer variable life insurance policies will 
be permitted to use Forms N-8B-2 and S-6 only if they no longer offer 
their policies to new purchasers. The Commission, however, encourages 
registrants that are no longer offering policies to new purchasers to 
convert to Form N-6 since this format may be beneficial to both 
registrants and continuing investors.
---------------------------------------------------------------------------

    \82\ See Form N-6 Proposing Release, supra note 9, 63 FR at 
14001.
---------------------------------------------------------------------------

    All new registration statements, and post-effective amendments that 
are annual updates to effective registration statements (except for 
separate account registration statements that are no longer used to 
offer variable life insurance policies to new purchasers) filed on or 
after December 1, 2002, must comply with Form N-6. The final compliance 
date for filing amendments to effective registration statements to 
conform with Form N-6 is December 1, 2003. A registrant may, at its 
option, comply with the requirements of Form N-6 at any time after the 
effective date, which the Commission is specifying as June 1, 2002.\83\ 
Registrants on Form N-1A must comply with the amendment to Form N-1A 
with respect to all new registration statements, and post-effective 
amendments that are annual updates to effective registration 
statements, filed on or after September 1, 2002.
---------------------------------------------------------------------------

    \83\ During the transition period, a separate account that is 
using Form N-6 should include in Item 3 a fee table for any 
Portfolio Company whose Form N-1A has not been updated to include a 
fee table as required by the amendment to Form N-1A.
---------------------------------------------------------------------------

    Registrants filing Form N-6 for purposes of updating their existing 
registration statements on Forms N-8B-2 and S-6 will be deemed to be 
filing amendments to Form N-6 and should indicate this on the facing 
sheet. These post-effective amendments should be filed under Securities 
Act rule 485(a) rather than rule 485(b).\84\ Form N-6 will

[[Page 19861]]

require registration statement disclosure that is revised from that 
required by Forms N-8B-2 and S-6 and, in some cases, such as the fee 
table information required by Item 3, completely new. Because post-
effective amendments filed to comply with the requirements of Form N-6 
will involve a number of material changes to disclosure that do not 
fall within the scope of rule 485(b), registrants should file these 
amendments under rule 485(a).\85\ However, we would not object if 
existing Portfolio Companies file their first annual update complying 
with the amendment to Form N-1A pursuant to rule 485(b), provided that 
the post-effective amendment otherwise meets the conditions for 
immediate effectiveness under the rule.
---------------------------------------------------------------------------

    \84\ A post-effective amendment may only be filed under rule 
485(b) under the Securities Act [17 CFR 230.485(b)] if it is filed 
for one or more specified purposes, including to make non-material 
changes to the registration statement. A post-effective amendment 
filed for any purpose not specified in rule 485(b) must be filed 
pursuant to rule 485(a) under the Securities Act [17 CFR 
230.485(a)]. A post-effective amendment filed under rule 485(b) may 
become effective immediately upon filing, while a post-effective 
amendment filed under rule 485(a) generally becomes effective either 
60 days or 75 days after filing, unless the effective date is 
accelerated by the Commission.
    \85\ See N-4 Adopting Release, supra note 8, 50 FR at 26156 n.51 
(variable annuity registrants converting to Form N-3 or Form N-4 
required to file post-effective amendment under rule 485(a)); Letter 
from Barry D. Miller, Associate Director, Division of Investment 
Management, to Craig S. Tyle, Esq., General Counsel, Investment 
Company Institute (May 19, 1998) (post-effective amendments to 
comply with revised Form N-1A should be filed under rule 485(a)).
    The Commission encourages registrants to request selective 
review of their filings, where the filing contains disclosure that 
is not substantially different from the disclosure contained in 
prior filings reviewed by the staff. See Investment Company Act 
Release No. 13768 (Feb. 15, 1984) [49 FR 6708]. Selective review 
enables the staff to concentrate its review on those portions of the 
filing that are changed.
---------------------------------------------------------------------------

    One commenter requested that, because Form N-6 will include 
financial statements in an SAI to be made available to investors upon 
request, the Commission permit existing registrants to make financial 
statements available only upon request while using Forms N-8B-2 and S-6 
during the transition period. We have determined not to adopt the 
commenter's suggestion. We believe that Form N-6, taken as a whole, 
represents a dramatic improvement in the disclosure that investors in 
variable life insurance policies receive. Therefore, we believe that it 
would not generally be appropriate for a post-effective amendment to 
comply with some, but not all, of the requirements of the form.

G. Form N-1

    The Commission requested comment on whether there is any continuing 
need for Form N-1 or whether it could be rescinded. The form currently 
would be used only by an open-end management investment company that is 
a separate account of an insurance company offering variable life 
insurance policies. Today, virtually all separate accounts issuing 
variable life insurance policies are organized as unit investment 
trusts.
    One commenter noted that several contracts registered on Form N-1 
are still in existence, but not actively marketed. The commenter 
recommended that the form be retained because requiring these 
registrants to convert to a new format would be unnecessarily expensive 
and unproductive. The Commission has decided to retain the Form N-1 
because of this continuing need for it.

III. Cost/Benefit Analysis

    The Commission is sensitive to the costs and benefits of its rules. 
In the Proposing Release, we requested comments and empirical data 
regarding the costs and benefits of proposed Form N-6. Many commenters 
stated that the adoption of Form N-6 would significantly benefit the 
variable life insurance industry, by reducing printing and postage 
costs for registrants issuing variable life insurance products, and 
some commenters noted that these savings may be passed on to investors. 
None of these commenters, however, provided specific data quantifying 
the costs or benefits of the proposed form.

A. Background

    Variable life insurance is similar to traditional life insurance, 
except that the cash value and/or death benefit vary based on the 
investment performance of the assets in which the premium payments are 
invested. Premium payments under a variable life insurance policy, 
unlike a traditional life insurance policy, are invested in an 
insurance company separate account, which generally is not subject to 
state law investment restrictions. A variable life policyholder 
typically is offered a variety of investment options (e.g., equity, 
bond, and money market mutual funds). Death benefits and cash values 
are directly related to performance of the separate account, although 
typically there is a guaranteed minimum death benefit.
    A separate account funding a variable life insurance policy most 
commonly is registered as a unit investment trust under the Investment 
Company Act. Separate accounts registered as unit investment trusts are 
divided into sub-accounts, each of which invests in a different 
Portfolio Company. Both separate account unit investment trusts and the 
Portfolio Companies in which they invest are registered as investment 
companies under the Investment Company Act, and their securities are 
registered under the Securities Act. Investors in variable life 
insurance policies receive the prospectuses for both the separate 
account unit investment trust and the Portfolio Companies. Portfolio 
Companies, as mutual funds, use Form N-1A to register under the 
Investment Company Act and to register their shares under the 
Securities Act. Variable life separate accounts, as unit investment 
trusts, register under the Investment Company Act on Form N-8B-2 and 
register their securities under the Securities Act on Form S-6.
    Forms N-8B-2 and S-6 were designed for non-separate account unit 
investment trusts and were adopted before the establishment of the 
first separate account to fund variable life insurance policies. While 
much of their required disclosure is useful, the forms request some 
information that is not typically of consequence to a buyer of variable 
life insurance. More importantly, many matters that would be 
significant to a buyer of a variable life insurance policy are not 
addressed at all by the forms.
    To address these shortcomings, the Commission proposed Form N-6. 
Unlike current Forms S-6 and N-8B-2, Form N-6 is specifically tailored 
to variable life insurance. Form N-6 will streamline variable life 
prospectus disclosure by adopting a two-part format consisting of a 
simplified prospectus, designed to contain essential information that 
assists an investor in making an investment decision, and a statement 
of additional information, containing more extensive information and 
detailed discussion of matters included in the prospectus that 
investors could obtain upon request.

B. Benefits

1. Reduced Printing and Postage Costs
    As described above, Form N-6 will employ a two-part disclosure 
format consisting of a simplified prospectus, and a statement of 
additional information, or SAI. As several commenters on the Proposing 
Release stated, this two-part disclosure format would reduce needless 
printing and postage expenses significantly.\86\ These savings could be 
substantial, because many variable life insurance issuers send an 
updated prospectus to existing policyholders each year.
---------------------------------------------------------------------------

    \86\ See comment letters from John Hancock Mutual Life Insurance 
Company (June 30, 1998), The Equitable Life Assurance Society of the 
United States (July 10, 1998), ReliaStar Financial Corp. (July 16, 
1998), and American Council of Life Insurance (Aug. 10, 1998). The 
comment letters are available for public inspection and copying at 
the Commission's Public Reference Room in File No. S7-9-98.
---------------------------------------------------------------------------

    In particular, under Form N-6 the financial statement disclosure of 
the

[[Page 19862]]

registrant separate account and the insurance company depositor, which 
is currently required to be included in the prospectus for the variable 
life insurance policy, would be presented in the newly created SAI or 
in Part C of the registration statement, and would generally only be 
provided to investors upon request. The financial statements contained 
in variable life insurance prospectuses typically are between 30 and 80 
pages in length, and the printing and postage costs attributable to 
these financial statements may range from $5,400 to $323,000, depending 
on the number of copies printed and the length of the financial 
statements.\87\ Therefore, based on an estimate of 200 variable life 
insurance policies registered with the Commission, the cost savings 
resulting from the exclusion of financial statements from variable life 
insurance prospectuses could range from $1,080,000 to $64,600,000, 
although we believe that an estimate at the lower end of this range is 
more likely.\88\ One insurance company provided the staff with an 
estimate that it would have saved $61,254 overall in the printing costs 
of its 2001 variable life insurance prospectuses, if it had been able 
to exclude the financial statements from its prospectuses.\89\ 
Therefore, the Commission believes that the cost savings to issuers 
resulting from exclusion of financial statements from the Form N-6 
prospectus could be significant. Further, at least some of these cost 
savings could be passed on to investors.
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    \87\ These estimates are based on information supplied to the 
Commission staff by three life insurance companies.
    \88\ The estimate of the number of variable life insurance 
policies is based on the Commission's analysis of data from its 
EDGAR system on the number of initial registration statements and 
post-effective amendments filed on Form S-6 in 2000 and 2001 by 
separate accounts offering variable life insurance policies.
    \89\ This insurer notes that it currently maintains 20 variable 
life prospectuses, which in 2001 included 1007 pages of depositor 
and separate account financial statements.
---------------------------------------------------------------------------

    We note that these cost savings may be reduced if investors in a 
variable life insurance policy request copies of the SAI, which will 
contain many of the financial statements currently required in the Form 
S-6 prospectus, or if registrants must deliver copies of the SAI to 
variable life investors for other reasons, such as to meet state 
regulatory requirements. Some insurers may also need to incur costs in 
setting up and maintaining a system for processing requests for an SAI, 
including a toll-free telephone number. However, based on the staff's 
discussions with issuers regarding other investment company 
registration forms, such as Form N-4 and Form N-1A, we estimate that 
fewer than 1% of investors are likely to request an SAI. Currently, at 
least one state requests that issuers agree to deliver an SAI to 
applicants for a variable contract.\90\
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    \90\ According to a representative of an insurance industry 
group, California currently asks registrants to agree to provide an 
SAI to all applicants for a variable annuity contract in order to 
obtain expedited state approval of the contract.
---------------------------------------------------------------------------

2. Reduced Filing Costs
    The adoption of Form N-6 will allow variable life insurance 
registrants to use a single integrated form for Investment Company Act 
and Securities Act registration, eliminating unnecessary paperwork and 
duplicative reporting. As a result of this simplified registration 
process, the Commission estimates that the annual net cost savings to 
issuers of variable life insurance policies for preparing and filing 
initial registration statements and post-effective amendments on Form 
N-6 will be $2,141,288. The annual costs of filing initial registration 
statements and post-effective amendments on Forms S-6, N-8B-2, and N-6 
are summarized in the tables below, and the discussion that follows:

                              Cost of Initial Filings on Forms S-6, N-8B-2, and N-6
----------------------------------------------------------------------------------------------------------------
                                                                                                   Form N-6, net
                                                     Form S-6       Form N-8B-2      Form N-6      cost savings
----------------------------------------------------------------------------------------------------------------
Number of filings...............................              59              24              59  ..............
Hours per filing................................             850              44             800  ..............
                                                 ---------------------------------------------------------------
    Total hours.................................          50,150            1056          47,200  ..............
                                                 ===============================================================
Internal cost per filing........................         $71,400          $3,696         $67,200           7,896
                                                 ---------------------------------------------------------------
    Total internal costs........................       4,212,600          88,704       3,964,800         336,504
                                                 ===============================================================
External cost per filing........................          30,000               0          20,000          10,000
                                                 ---------------------------------------------------------------
    Total external cost.........................       1,770,000               0       1,180,000         590,000
                                                 ===============================================================
Total costs per filing..........................         101,400           3,696          87,200          17,896
                                                 ---------------------------------------------------------------
    Total filing costs..........................       5,982,600          88,704       5,144,800         926,504
----------------------------------------------------------------------------------------------------------------


                                         Cost of Filing Post-Effective Amendments on Forms S-6, N-8B-2, and N-6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Form S-6 (post-
                                                             effective    Form S-6 (post-                 Form N-6 (post- Form N-6 (post-
                                                            amendments       effective                       effective       effective     Form N-6, Net
                                                             filed as       amendments      Form N-8B-2     amendments      amendments     cost savings
                                                              annual         filed for                       filed as        filed for
                                                             updates)     other reasons)                  annual updates  other reasons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of filings.......................................             200             300              11             200             300  ..............
Hours per filing........................................             100              10              16             100              10
                                                         -----------------------------------------------------------------------------------------------
    Total hours.........................................          20,000            3000             176          20,000            3000  ..............
                                                         ===============================================================================================

[[Page 19863]]

 
Internal costs per filing...............................          $8,400            $840           $1344          $8,400            $840           $1344
                                                         -----------------------------------------------------------------------------------------------
    Total internal costs................................       1,680,000         252,000          14,784       1,680,000         252,000          14,784
                                                         ===============================================================================================
External cost per filing................................          13,500           2,000               0           7,500           2,000           6,000
                                                         -----------------------------------------------------------------------------------------------
    Total external costs................................       2,700,000         600,000               0       1,500,000         600,000       1,200,000
                                                         ===============================================================================================
Total costs per filing..................................          21,900           2,840            1344          15,900           2,840           7,344
                                                         -----------------------------------------------------------------------------------------------
    Total filing costs..................................       4,380,000         852,000          14,784       3,180,000         852,000       1,214,784
--------------------------------------------------------------------------------------------------------------------------------------------------------

Form S6

    The Commission estimates that 59 initial registration statements 
and 500 post-effective amendments are filed by variable life insurance 
policies on Form S-6 annually.\91\ We estimate the hour burden of an 
initial registration statement filed on Form S-6 at 850 hours, which is 
similar to, but slightly greater than, the hour burden of an initial 
registration statement filed on Form N-6, which we estimate to be 800 
hours.\92\ The difference in this hour burden is attributable to the 
fact that Form S-6, on balance, requires more information to be 
included in an initial registration statement than would Form N-6.\93\ 
Thus, we estimate internal costs involved in preparing an initial 
registration statement on Form S-6, based on a weighted average hourly 
wage rate of $84, at $71,400 (850 hours  x  $84).\94\
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    \91\ These estimates are based on the staff's analysis of data 
from the EDGAR system on the number of initial registration 
statements and post-effective amendments filed on Form S-6 in 2000 
by separate accounts offering variable life insurance policies. The 
numbers of initial registration statements and post-effective 
amendments filed on Form S-6 have been consistent in recent years. 
Based on this data, we estimate that there are approximately 200 
registered variable life insurance policies that file at least one 
post-effective amendment per year to update their financial 
statements. In addition to filing at least one annual update by 
post-effective amendment, these variable life insurance policies 
also file an estimated 300 other post-effective amendments annually 
on Form S-6. These 300 other post-effective amendments are generally 
filed pursuant to Securities Act rule 485(b) to make non-material 
changes to the registration statement, and are generally more 
limited and much simpler to prepare than post-effective amendments 
filed for the purpose of annual updates.
    \92\ Form N-6 Proposing Release, supra note 9, 63 FR at 14002. 
The hour burden estimate of 800 hours for Form N-6 is based on the 
hour burden estimate for similar investment company registration 
forms, in particular Form N-1A, which are of similar length and 
complexity. See Investment Company Act Release No. 24082 (Oct. 14, 
1999) [64 FR 59826, 59854 nn. 293-294 (Nov. 3, 1999)] (estimating 
PRA hour burden per portfolio at 800 hours for an initial filing on 
Form N-1A, and 100 hours for a post-effective amendment on Form N-
1A).
    The Commission has estimated the average hour burden of 
preparing Form S-6, for purposes of the Paperwork Reduction Act, to 
be 35 hours per unit investment trust. See Submission for OMB 
Review; Comment Request (Extension of Form S-6) (Nov. 30, 1998) [63 
FR 67152 (Dec. 4, 1998)]. However, the vast majority of investment 
companies filing on Form S-6 are not unit investment trusts offering 
variable life insurance policies. See id. (estimating that ``[e]ach 
year approximately 3,600 investment companies file a Form S-6''). 
The hourly burden and cost of filing a variable life insurance 
policy on Form S-6 are much greater than for other unit investment 
trusts, largely because of the complexity of the product.
    \93\ For example, Form S-6 requires interim financial statements 
to be included in a registration statement in circumstances where 
they would not be required by Form N-6; see Instruction 3 to Item 
24.
    \94\ The Commission's estimate concerning the weighted average 
wage rate to prepare Forms S-6, N-8B-2, and N-6 is based on salary 
information for the securities industry compiled by the Securities 
Industry Association, and on consultation with industry 
representatives regarding the percentage of time required by both 
professional and clerical staff to prepare these forms. See 
Securities Industry Association, Report on Management & Professional 
Earnings in the Securities Industry--2000 (Sept. 2000). The weighted 
average hourly wage rate of $84 per hour includes overhead costs and 
assumes that at least 80% of the total time required to prepare Form 
N-6 would be incurred by attorneys and accountants, and any 
remaining time would be incurred by paralegal staff.
---------------------------------------------------------------------------

    We estimate external costs associated with completing an initial 
registration statement on Form S-6 to be $30,000, compared to $20,000 
on Form N-6. These external costs include all costs associated with 
filing on Form S-6 other than wages, salaries, and fees paid for the 
hour burden. These costs may include, for example, the cost of 
preparing a filing for the EDGAR system (``EDGARization''), typesetting 
of the prospectus (which is typically done before the prospectus is 
filed on EDGAR), and the cost of outside counsel and independent 
auditors in connection with filing on Form S-6. The difference in 
external costs between Form S-6 and Form N-6 is attributable primarily 
to the fact that the required inclusion of financial statements in the 
Form S-6 prospectus results in significantly higher costs for 
typesetting and EDGARization associated with filing a registration 
statement.\95\ Based on an estimate of internal costs of $71,400 and 
external costs of $30,000 per initial registration statement on Form S-
6, therefore, we estimate the total cost to a variable life insurance 
issuer of preparing and filing an initial registration statement on 
Form S-6 to be $101,400. Thus, total annual costs to variable life 
insurance issuers of filing initial registration statements on Form S-6 
are estimated to be $5,982,600 ($101,400  x  59).
---------------------------------------------------------------------------

    \95\ The estimates of these external costs, which are distinct 
from the printing and postage costs described above, are based on 
information supplied to the staff by several life insurance 
companies, in light of their experience in filing on Forms S-6 and 
N-4.
---------------------------------------------------------------------------

    There are also costs associated with filing post-effective 
amendments on Form S-6. The Commission estimates, based on the numbers 
of filings received on EDGAR in 2001, that there are approximately 200 
variable life insurance policies registered with the Commission that 
file at least one post-effective amendment per year to update their 
financial statements. These post-effective amendments may be filed 
pursuant to Securities Act rule 485(a) or rule 485(b). In addition to 
filing at least one post-effective amendment annually to update their 
financial statements, the Commission estimates that these variable life 
insurance policies also file an estimated 300 other post-effective 
amendments annually on Form S-6. These 300 other post-effective 
amendments are generally filed pursuant to Securities Act rule 485(b) 
to make non-material changes to the registration statement, and are 
generally more limited and much simpler to

[[Page 19864]]

prepare than post-effective amendments filed as annual updates.
    We estimate that the cost of preparing and filing a post-effective 
amendment to a previously effective registration statement on Form S-6 
for the purpose of an annual update is $21,900, which reflects internal 
costs of $8,400 (100 hours  x  $84) plus external costs of $13,500. 
While the estimated internal costs of filing an annual update on Form 
S-6 are the same as those for Form N-6, the estimated external costs of 
$13,500 are significantly higher than the comparable $7,500 costs for 
annual updates on Form N-6, largely because of higher costs for 
typesetting and EDGARization resulting from the inclusion of financial 
statements in the Form S-6 prospectus. Thus, the total annual cost to 
variable life insurance issuers of filing post-effective amendments on 
Form S-6 for the purpose of annual updates is $4,380,000 ($21,900  x  
200 filings).\96\
---------------------------------------------------------------------------

    \96\ The cost estimate for preparing and filing a post-effective 
amendment filed as an annual update on Form S-6 was calculated by 
multiplying the estimated number of hours required to prepare this 
type of post-effective amendment on Form S-6 (100 hours) by the 
weighted average hourly wage ($84), and adding other costs 
associated with completing a post-effective amendment of $13,500.
---------------------------------------------------------------------------

    We estimate the cost of preparing and filing a post-effective 
amendment on Form S-6 for a purpose other than an annual update to be 
$2,840, which reflects internal costs of $840 (10 hours  x  $84) plus 
other external costs of $2,000.\97\ These estimated costs are the same 
as those for filing such an amendment on Form N-6.
---------------------------------------------------------------------------

    \97\ The cost estimate for an additional post-effective 
amendment filed on Form S-6 is calculated by multiplying the 
estimated number of hours to prepare the post-effective amendment 
(10 hours) by the weighted average hourly wage ($84) and adding 
other costs associated with completing the post-effective amendment 
of $2,000.
---------------------------------------------------------------------------

    Thus, we estimate that the requirement that variable life insurance 
separate accounts file on Form S-6 results in an annual cost to 
registrants of approximately $11,214,600 ((59  x  $101,400) + (200  x  
$21,900) + (300  x  $2,840)).

Form N-8B-2

    The Commission estimates that variable life insurance separate 
accounts file 24 initial registration statements and 11 post-effective 
amendments on Form N-8B-2 annually. The current estimated cost of 
preparing an initial registration statement on Form N-8B-2 is $3,696, 
and the estimated cost of preparing each post-effective amendment on 
Form N-8B-2 is $1,344.\98\ Thus, we estimate that the requirement that 
variable life insurance separate accounts file on Form N-8B-2 results 
in an annual cost to registrants of approximately $103,488 ((24 x 
$3,696) + (11 x $1,344)).
---------------------------------------------------------------------------

    \98\ The cost estimate for an initial registration statement on 
Form N-8B-2 is calculated by multiplying the estimated number of 
hours to prepare an initial registration statement on Form N-8B-2 
(44 hours) by the weighted average hourly wage ($84). The cost 
estimate for a post-effective amendment on Form N-8B-2 is calculated 
by multiplying the estimated number of hours required to prepare a 
post-effective amendment to Form N-8B-2 (16 hours) by the weighted 
average hourly wage ($84). See Proposed Collection; Comment Request 
(Extension of Form N-8B-2) (May 17, 2001) [66 FR 28764 (May 24, 
2001)] (estimating 44 hours for initial registration statement on 
Form N-8B-2 and 16 hours for post-effective amendment on Form N-8B-
2).
---------------------------------------------------------------------------

Form N-6

    The Commission estimates that approximately 59 initial registration 
statements and 500 post-effective amendments will be filed on Form N-6 
annually.\99\ We estimate that the cost of preparing and filing an 
initial registration statement on Form N-6 will be $87,200, based on an 
estimate of 800 hours and $20,000 in external costs per initial 
registration statement, as described above.\100\ In addition, we 
estimate that the cost of preparing and filing a post-effective 
amendment to a previously effective registration statement for the 
purpose of an annual update is $15,900, based on an estimate of 100 
hours and $7,500 in external costs per annual update post-effective 
amendment, as described above.\101\ The estimated cost of preparing and 
filing a post-effective amendment on Form N-6 for a purpose other than 
an annual update is $2,840.\102\ The total annual cost to issuers of 
variable life insurance policies filing on Form N-6 is therefore 
estimated to be $9,176,800 ((59 x $87,200) + (200 x $15,900) + (300 x 
$2,840)).
---------------------------------------------------------------------------

    \99\ These estimates are based on the staff's analysis of data 
from the EDGAR system on the number of initial registration 
statements and post-effective amendments filed on Form S-6 in 2000 
by separate accounts offering variable life insurance policies. The 
numbers of initial registration statements and post-effective 
amendments filed on Form S-6 have been consistent in recent years. 
Based on this data, we estimate that there are approximately 200 
registered variable life insurance policies that file at least one 
post-effective amendment per year to update their financial 
statements. In addition to filing at least one annual update by 
post-effective amendment, these variable life insurance policies 
will also file an estimated 300 other post-effective amendments 
annually on Form N-6. We expect that these 300 other post-effective 
amendments will generally be filed pursuant to Securities Act rule 
485(b) to make non-material changes to the registration statement, 
and will generally be more limited and much simpler to prepare than 
post-effective amendments filed for the purpose of annual updates.
    \100\ See Form N-6 Proposing Release, supra note 9, 63 FR at 
14002 (estimating burden of preparing initial registration statement 
on Form N-6 at 800 hours and $20,000 in additional costs).
    \101\ See Form N-6 Proposing Release, supra note 9, 63 FR at 
14002 (estimating that 200 separate accounts offering variable life 
insurance policies would file annual post-effective amendments on 
Form N-6, at an hour burden of 100 hours per post-effective 
amendment and cost of $7,110,500 per post-effective amendment); see 
also note 110 infra.
    \102\ The cost estimate for a post-effective amendment filed on 
Form N-6 for a purpose other than an annual update is calculated by 
multiplying the estimated number of hours to prepare the post-
effective amendment (10 hours) by the weighted average hourly wage 
($84) and adding other costs associated with completing the post-
effective amendment of $2,000. We estimate that the hours and cost 
necessary to prepare a post-effective amendment for this purpose on 
Form N-6 will be the same as those needed to prepare this type of 
post-effective amendment on Form S-6.
---------------------------------------------------------------------------

    Thus, we estimate an annual net savings in filing costs to issuers 
of variable life insurance policies of approximately $2,141,288 (total 
annual costs of $9,176,800 associated with filing on Form N-6 compared 
to total annual costs of $11,318,088 associated with filing on Forms S-
6 and N-8B-2).
3. Enhanced Disclosure Information
    Form N-6 will enhance the disclosure provided to investors about 
variable life insurance policies in several respects:
     Tailored Registration Form. Form N-6 will eliminate 
requirements in Forms S-6 and N-8B-2 that are not relevant to variable 
life insurance. Form N-6 also will include items that are specifically 
addressed to variable life insurance products, such as descriptions of 
contractual provisions relating to premiums, death benefits, cash 
values, surrenders and withdrawals, and loans.\103\
---------------------------------------------------------------------------

    \103\ Items 7 (premiums), 8 (death benefits and cash values), 9 
(surrenders and withdrawals), and 10 (loans).
---------------------------------------------------------------------------

     Plain English. The Commission's plain English rule will 
apply to the front and back cover pages and the risk/benefit summary in 
the variable life insurance prospectus.\104\ This should result in 
better, clearer disclosure to investors.
---------------------------------------------------------------------------

    \104\ Rule 421(d) under the Securities Act [17 CFR 230.421(d)].
---------------------------------------------------------------------------

     Reducing Complex and Lengthy Prospectus Disclosure. Form 
N-6 will streamline variable life prospectus disclosure by adopting a 
two-part format consisting of a simplified prospectus, designed to 
contain essential information that assists an investor in making an 
investment decision, and an SAI containing more extensive information 
and detailed discussion of matters included in the prospectus that 
investors could obtain upon request.
     Standardized Fee Information. Form N-6 will require 
variable life insurance registrants to provide a uniform, tabular 
presentation of fees and charges, in order to improve the

[[Page 19865]]

disclosure to investors of the often complex charges associated with 
variable life insurance policies and increase the comparability of 
charges among policies.
    This improved disclosure of the features of variable life insurance 
policies that will result from the adoption of Form N-6 will provide 
several important benefits. First, because of improved disclosure, 
investors will be more informed about the features of different 
policies, and will be able to spend less time searching for a variable 
life insurance contract that is best suited to their particular needs. 
For example, an investor who is interested in finding a variable life 
insurance policy with a particular set of features at the lowest cost 
may be able to do so more easily, because the Form N-6 prospectus 
requires prominent disclosure of the risks and benefits of the policy, 
and a standardized table of the fees and charges assessed by the 
policy. In addition, the improved disclosure required by Form N-6 will 
promote competition among issuers of variable life insurance policies 
as they seek to attract these more informed investors. Thus, improved 
disclosure will result in more efficient allocation of investors' 
assets among competing variable life insurance policies, and also vis-
a-vis other, competing types of financial products. This beneficial 
effect may be somewhat limited, however, by the extent to which 
investors do not rely on a prospectus in choosing whether to purchase a 
variable life insurance policy, but instead may rely on brokers and 
other investment professionals in determining whether to purchase a 
variable life insurance policy. In some cases, investment professionals 
may use the improved disclosure in the prospectus of Form N-6 to make 
more informed sales recommendations to investors.
    Second, the improved disclosure promoted by Form N-6 may promote 
competition among issuers of variable life insurance policies, and 
hence may also result in more efficient asset allocation among variable 
life insurance policies. Although it is not possible to quantify the 
beneficial effects of this increased competition, we believe that they 
may be significant, given that assets in variable life insurance 
products total approximately $42.8 billion, and new variable life 
insurance premiums may equal $6.9 billion per year.\105\
---------------------------------------------------------------------------

    \105\ Lipper Variable Insurance Products Performance Analysis, 
4th Quarter 2001 Report, Vol. I at 1-1, supra note 4; Geraldine 
Murtagh, Variable Life Still Cookin'; 3rd Quarter Sales Surged 29%, 
National Underwriter Life & Health/Financial Services Edition, Jan. 
15, 2001, at 26 (discussing industry survey estimating that new 
variable life insurance premiums equaled $5.18 billion for the first 
9 months of 2000).
---------------------------------------------------------------------------

    Third, because Form N-6, unlike Forms S-6 and N-8B-2, will require 
disclosure specifically tailored to variable insurance policies, the 
adoption of Form N-6 may permit the Commission staff who review 
variable life insurance filings on Form S-6 to review these filings 
more quickly and efficiently, and thus to provide investor protection 
more effectively.
    In connection with the adoption of Form N-6, the Commission is also 
amending Form N-1A, the registration form for open-end management 
investment companies, by removing the current exclusion from the fee 
table requirement of Form N-1A for funds that offer their shares 
exclusively as investment options for variable annuity contracts and 
variable life insurance policies, and requiring that these funds 
include a fee table in their prospectuses. This amendment is being made 
because the fee table in the Form N-6 prospectus will allow variable 
life registrants to disclose the range of expenses for all Portfolio 
Companies offered through a variable life insurance policy in the 
variable life prospectus, rather than having to separately state the 
fees and charges of each Portfolio Company. This amendment to Form N-1A 
will ensure that variable life insurance investors continue to have 
access to complete information about Portfolio Company fees and 
expenses. Further, because currently the requirements for disclosure of 
Portfolio Company fees and expenses in variable annuity and variable 
life prospectuses vary, to a limited extent, from the disclosure 
requirements of Form N-1A, the amendment will produce consistent 
disclosure of fees and expenses by Portfolio Companies that offer their 
shares exclusively through separate accounts and by mutual funds that 
sell shares directly to the public. This more consistent disclosure may 
result in more efficient allocation of assets among variable insurance 
products and mutual funds.

C. Costs

    Variable life insurance issuers will incur a one-time cost for 
training in order for their personnel, particularly lawyers and others 
who are responsible for supervising the preparation of variable life 
insurance filings, to review and analyze the disclosure requirements of 
Form N-6. Although Form N-6 is a new registration form, much of the 
information required by Form N-6 is already required by existing 
registration forms. Further, Form N-6 has been the subject of extensive 
discussion within the variable life insurance industry, and many 
industry participants are already generally familiar with its 
requirements. Therefore, we expect that this one-time cost will be 
significant but limited. Because we expect that in each insurance 
company issuing variable life insurance policies, several lawyers and 
other supervisory professionals will require several hours of training 
in the disclosure requirements of Form N-6, we estimate that this cost 
will be $20,000 for each variable life insurance policy that is 
currently registered on Form S-6 and is actively being sold. Based on 
an estimate of 200 variable life insurance policies that are currently 
registered on Form S-6, we estimate these one-time costs attributable 
to the adoption of Form N-6 at $4,000,000 (200  x  $20,000).
    Further, because Form N-6 will require an insurer issuing a 
variable life insurance policy to deliver an SAI to investors upon 
request, and to maintain a toll-free telephone number for investors to 
use in requesting the SAI, some insurers may need to incur both fixed 
and variable costs in setting up and maintaining a system for 
processing these requests.\106\ However, because only a small 
percentage of investors are expected to request an SAI, these costs may 
be limited. In addition, because Form N-6 will allow financial 
statements to be included in the SAI rather than the prospectus, 
insurers may realize savings on fixed costs associated with typesetting 
the prospectus, regardless of the numbers of investors who request an 
SAI.
---------------------------------------------------------------------------

    \106\ Item 1(b)(1) of Form N-6.
---------------------------------------------------------------------------

    In addition to costs imposed by the adoption of Form N-6, the 
amendments the Commission is adopting to Form N-1A will impose certain 
costs on funds registered on Form N-1A that offer their shares 
exclusively as investment options for variable annuity contracts and 
variable life insurance policies. The Commission estimates that 163 
post-effective amendments on Form N-1A and 9 initial registration 
statements on Form N-1A are filed annually for fund portfolios that 
offer their shares exclusively as investment options for variable 
annuity contracts and variable life insurance policies and hence do not 
include a fee table in their prospectuses.\107\ We estimate that the

[[Page 19866]]

hour burden of adding fee table disclosure to these registration 
statements will be minimal, because the fund portfolios must already 
compile and provide fee table information for issuers of variable 
insurance contracts that include these portfolios as investment 
options, and hence provide information about their fees and expenses in 
the contract prospectuses.
---------------------------------------------------------------------------

    \107\ These estimates are based on the Commission's analysis of 
data from its EDGAR system on the number of initial registration 
statements and post-effective amendments filed on Form N-1A in 2000 
by funds offering shares exclusively to one or more separate 
accounts. The numbers of initial registration statements and post-
effective amendments filed on Form N-1A by these funds have been 
consistent in recent years.
---------------------------------------------------------------------------

    Therefore, we estimate that the average hour burden per Form N-1A 
registration statement for adding this fee information will be 2 hours, 
for either an initial registration statement or a post-effective 
amendment. Based on an estimated number of 10 portfolios per 
registration statement for a fund offering its shares exclusively as 
investment options for variable annuity contracts and variable life 
insurance policies, the average hour burden per portfolio for adding 
this disclosure will be 0.2 hours.\108\ We therefore estimate the 
annual industry cost of the amendments to Form N-1A to be 344 hours, or 
$28,896.\109\
---------------------------------------------------------------------------

    \108\ The Commission has previously estimated that 1,575 funds 
registered on Form N-1A are underlying portfolios for variable 
insurance contracts. See After-Tax Returns Adopting Release, supra 
note 16, 66 FR at 9012. The estimate of ten portfolios per 
registration statement is based on the number of portfolios 
currently registered (1,575) divided by the number of registrants 
filing post-effective amendments (163).
    \109\ This cost estimate was calculated by multiplying the 
annual hour burden (344) by the weighted average hourly wage ($84).
---------------------------------------------------------------------------

D. Conclusion

    Based on information provided in the comment letters and its own 
analysis, the Commission believes that the adoption of Form N-6 will 
permit separate accounts issuing variable life insurance policies to 
register under the Investment Company Act and to offer their securities 
under the Securities Act more efficiently, and that, in the long term, 
the benefits of the new form justify the associated costs.

IV. Paperwork Reduction Act

A. Adoption of Form N-6

    As explained in the Proposing Release, certain provisions of Form 
N-6 contain ``collection of information'' requirements within the 
meaning of the Paperwork Reduction Act of 1995 [44 U.S.C. 3501 et 
seq.]. We published a notice soliciting comments on the collection of 
information requirements in the Proposing Release and submitted these 
requirements to the Office of Management and Budget (``OMB'') for 
review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The 
Commission did not receive any comments on the Paperwork Reduction Act 
portion of the Proposing Release.
    As described above, Form N-6 will be used by insurance company 
separate accounts that are registered as unit investment trusts and 
that offer variable life insurance policies. Form N-6 will provide 
these variable life insurance separate accounts a single, integrated 
form for Investment Company Act and Securities Act registration. For 
these separate accounts, it will replace Form N-8B-2, currently used by 
separate accounts to register as unit investment trusts under the 
Investment Company Act, and Form S-6, currently used by separate 
accounts to offer their securities under the Securities Act. A 
registration statement on Form N-6 will consist of a simplified 
prospectus that is designed to include items that are specifically 
addressed to variable life insurance products, a statement of 
additional information that contains more extensive information that 
investors could obtain upon request, and other information not included 
in the prospectus or the SAI.
    The information required by Form N-6 is primarily for the use and 
benefit of investors. The Form N-6 prospectus will contain essential 
information to assist an investor in making an investment decision, 
such as a description of contractual provisions relating to premiums, 
death benefits, cash values, loans, and surrenders and withdrawals. The 
prospectus will also include a uniform, tabular presentation of fees 
and charges, which will improve disclosure and enhance the 
comparability of charges among policies. Information requirements in 
the current registration forms that are not relevant to variable life 
insurance will be eliminated from the Form N-6 prospectus. The 
information required to be filed with the Commission pursuant to the 
information collection will also permit the verification of compliance 
with securities law requirements and will assure the public 
availability and dissemination of the information.
    In the Proposing Release, the Commission estimated the burden hours 
that would be necessary for the collection of information requirements 
under the proposed Form N-6. We have, however, revised certain 
estimates contained in the Proposing Release based on an analysis of 
the data contained in the Commission's EDGAR system with respect to the 
number of initial registration statements and post-effective amendments 
filed on Forms S-6 and N-8B-2 by separate accounts offering variable 
life insurance in the years 2000 and 2001.
    The Commission estimates that there are approximately 200 variable 
life insurance policies issued by separate accounts registered as unit 
investment trusts. The Commission estimates that these separate 
accounts will file as many as 59 initial registration statements and 
500 post-effective amendments on proposed Form N-6 annually.\110\
---------------------------------------------------------------------------

    \110\ In the Form N-6 Proposing Release, the Commission 
estimated that there would be as many as 50 initial registration 
statements and 200 post-effective amendments that would be filed 
annually on proposed Form N-6. This estimate was based on the fact 
that there were approximately 200 separate accounts issuing variable 
life insurance policies registered with the Commission, and that 
each separate account must file at least on post-effective amendment 
per year to update its financial statements. The Commission 
estimates, based on its analysis of data from the EDGAR filing 
system for 2000 and 2001, that there are approximately 200 variable 
life insurance policies currently registered with the Commission 
filing annual post-effective amendment updates. In addition to 
filing at least one post-effective amendment annually to update 
their financial statements, the Commission estimates, based on EDGAR 
filing data, that these variable life insurance policies also file 
300 additional post-effective amendments annually on Form S-6. These 
300 other post-effective amendments are generally filed pursuant to 
Securities Act rule 485(b) to make non-material changes to the 
registration statement, and are generally more limited and much 
simpler to prepare than post-effective amendments filed as annual 
updates. Accordingly, we estimate the hour burden for each of these 
additional post-effective amendments to be 10 hours. We estimate 
that the number of post-effective amendments filed on Form N-6 as 
annual updates, and the number of post-effective amendments filed on 
Form N-6 for other purposes, will be the same as the numbers of such 
post-effective amendments currently filed on Form S-6.
---------------------------------------------------------------------------

    In the Proposing Release, the Commission estimated that the hour 
burden for preparing and filing an initial registration statement on 
proposed Form N-6 is 800 hours.\111\ We received no comments on this 
estimate, and therefore we continue to estimate that the hour burden 
for an initial filing on Form N-6 is 800 hours. Thus, the annual hour 
burden for preparing and filing initial registration statements on Form 
N-6 would be 47,200 hours (59  x  800 hours). We estimate that the hour 
burden for preparing and filing a post-effective amendment on proposed 
Form N-6 for purposes of an annual update is 100 hours, while 
additional post-effective amendments would require 10 hours. Thus, the 
total annual hour

[[Page 19867]]

burden for preparing and filing post-effective amendments on Form N-6 
would be 23,000 hours ((200  x  100 hours) + (300  x  10 hours)). The 
total annual hour burden for proposed Form N-6, therefore, is estimated 
to be 70,200 hours (47,200 hours + 23,000 hours).
---------------------------------------------------------------------------

    \111\ The hour burden of 800 hours for Form N-6 is based on the 
hour burden estimate for similar investment company registration 
forms, in particular Form N-1A, which are of similar length and 
complexity. See Investment Company Act Release No. 24082 (Oct. 14, 
1999) [64 FR 59826, 59854 nn. 293-294 (Nov. 3 1999)] (estimating PRA 
hour burden per portfolio at 800 hours for an initial filing on Form 
N-1A, and 100 hours for a post-effective amendment on Form N-1A).
---------------------------------------------------------------------------

    The Commission estimates that the cost burden for preparing and 
filing an initial registration statement on proposed Form N-6 is 
$20,000. This cost burden includes all costs associated with filing on 
Form N-6 other than wages, salaries, and fees paid for the hour burden. 
These costs may include, for example, the cost of preparing a filing 
for the EDGAR system (``EDGARization''), typesetting of the prospectus 
(which is typically done before the prospectus is filed on EDGAR), and 
the cost of outside counsel and independent auditors in connection with 
filing on Form N-6. Thus, the annual cost burden for preparing and 
filing initial registration statements would be $1,180,000 (59  x  
$20,000). The Commission estimates that the cost burden for preparing 
and filing a post-effective amendment on proposed Form N-6 for purposes 
of an annual update is $7,500, while the cost of preparing and filing 
an additional post-effective amendment is $2,000. Thus, the total 
annual cost burden for preparing and filing post-effective amendments 
on Form N-6 would be $2,100,000 ((200  x  $7,500) + (300  x  $2,000)). 
The total annual cost burden for proposed Form N-6, therefore, is 
estimated to be $3,280,000 ($2,100,000 + $1,180,000).
    OMB approved the collection requirements contained in Form N-6 (OMB 
Control No. 3235-0503). The title for the collection of information is 
``Form N-6 Under the Investment Company Act of 1940 and the Securities 
Act of 1933, Registration Statement of Variable Life Insurance Separate 
Accounts Registered as Unit Investment Trusts.'' The information 
collection requirements imposed by Form N-6 are mandatory. Responses to 
the collection of information will not be kept confidential. An agency 
may not conduct or sponsor, and a person is not required to respond to, 
a collection of information unless it displays a currently valid OMB 
control number.

B. Amendment to Form N-1A

    Form N-1A, the registration form for open-end management investment 
companies, contains ``collection of information'' requirements within 
the meaning of the Paperwork Reduction Act of 1995 [44 U.S.C. 3501 et 
seq.], and the Commission is submitting the proposed collections of 
information to the Office of Management and Budget for review in 
accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The title for the 
collection of information is ``Form N-1A under the Investment Company 
Act of 1940 and Securities Act of 1933, Registration Statement of Open-
End Management Investment Companies.'' The information collection 
requirements imposed by Form N-1A are mandatory. Responses to the 
collection of information will not be kept confidential. An agency may 
not conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a currently valid control 
number.
    Form N-1A (OMB Control No. 3235-0307) was adopted pursuant to 
section 8(a) of the Investment Company Act [15 U.S.C. 80a-8] and 
section 5 of the Securities Act [15 U.S.C. 77e]. The purpose of Form N-
1A is to meet the registration and disclosure requirements of the 
Securities Act and Investment Company Act and to enable open-end 
management investment companies to provide investors with information 
necessary to evaluate an investment in an investment company.
    The Commission is amending Form N-1A by eliminating the current 
exclusion from the fee table requirement of Form N-1A for funds that 
offer their shares exclusively as investment options for variable 
annuity contracts and variable life insurance policies, and requiring 
that these funds include a fee table in their prospectuses. This 
amendment is being adopted because the fee table in the Form N-6 
prospectus will require variable life registrants to disclose the range 
of expenses for all Portfolio Companies offered through a variable life 
insurance policy, rather than separately stating the fees and charges 
of each Portfolio Company. In addition, the Commission is proposing 
amendments to conform the treatment of fund expenses in the fee table 
of Form N-4, the registration form for variable annuity contracts, to 
that in Form N-6.\112\ The amendment to Form N-1A will ensure that 
investors continue to have access to complete information about 
Portfolio Company fees and expenses.
---------------------------------------------------------------------------

    \112\ See Form N-4 Proposing Release, supra note 1.
---------------------------------------------------------------------------

    The Commission estimates that 163 post-effective amendments on Form 
N-1A and 9 initial registration statements on Form N-1A are filed 
annually for fund portfolios that offer their shares exclusively as 
investment options for variable annuity contracts and variable life 
insurance policies and hence do not include a fee table in their 
prospectuses.\113\ We estimate that the hour burden of adding fee table 
disclosure to these registration statements will be minimal, because 
the fund portfolios must already compile and provide fee table 
information for issuers of variable annuity contracts and variable life 
insurance policies that include these portfolios as investment options, 
and hence provide information about their fees and expenses in the 
contract prospectuses. Therefore, we estimate that the average hour 
burden per registration statement for adding this fee information will 
be 2 hours, for either an initial registration statement or a post-
effective amendment. Based on an estimated number of 10 portfolios per 
registration statement for a fund offering shares exclusively to 
separate accounts, the average hour burden per portfolio for adding 
this disclosure will be 0.2 hours.\114\ Thus, we estimate that the 
amendment to Form N-1A will add 344 hours [(163 post-effective 
amendments + 9 initial registration statements)  x  2 hours] to the 
previous Form N-1A annual burden of 1,145,843 hours, resulting in a new 
total Form N-1A annual hour burden of 1,146,187 hours.
---------------------------------------------------------------------------

    \113\ These estimates are based on the Commission's analysis of 
data from its EDGAR system on the number of initial registration 
statements and post-effective amendments filed on Form N-1A in 2000 
by funds offering shares exclusively to one or more separate 
accounts. The number of initial registration statements and post-
effective amendments filed on Form N-1A by these funds have been 
consistent in recent years.
    \114\ The Commission has previously estimated that 1,575 funds 
registered on Form N-1A are underlying portfolios for variable 
insurance contracts. See After-Tax Returns Adopting Release, supra 
note 16, 66 FR at 9012. The estimate of ten portfolios per 
registration statement is based on the number of portfolios 
currently registered (1,575) divided by the number of registrants 
filing post-effective amendments (163).
---------------------------------------------------------------------------

    We request your comments on the accuracy of our estimate of the 
burden of the amendment to Form N-1A. Pursuant to 44 U.S.C. 
3506(c)(2)(B), the Commission solicits comments to: (i) Evaluate 
whether the proposed collection of information is necessary for the 
proper performance of the functions of the agency, including whether 
the information will have practical utility; (ii) evaluate the accuracy 
of the Commission's estimate of burden of the proposed collection of 
information; (iii) determine whether there are ways to enhance the 
quality, utility, and clarity of the information to be collected; and 
(iv) evaluate whether there are ways to minimize the burden of the 
collection of information on those who are to respond, including 
through the use of automated collection

[[Page 19868]]

techniques or other forms of information technology.
    Persons submitting comments on the collection of information 
requirements should direct the comments to the Office of Management and 
Budget, Attention: Desk Officer for the Securities and Exchange 
Commission, Office of Information and Regulatory Affairs, Room 3208, 
New Executive Office Building, Washington, DC 20503, and should send a 
copy to Jonathan G. Katz, Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW, Washington, DC 20549-0609, with 
reference to File No. S7-9-98. Request for materials submitted to OMB 
by the Commission with regard to this collection of information should 
be in writing, refer to File No. S7-9-98, and be submitted to the 
Securities and Exchange Commission, 450 Fifth Street, NW, Washington, 
DC 20549, Attention: Records Management, Office of Filings and 
Information Services. OMB is required to make a decision concerning the 
collection of information between 30 and 60 days after publication of 
this release. Consequently, a comment to OMB is best assured of having 
its full effect if OMB receives it within 30 days after publication of 
this release.

V. Effects on Efficiency, Competition, and Capital Formation

    Section 2(c) of the Investment Company Act, section 2(b) of the 
Securities Act, and section 3(f) of the Securities Exchange Act of 1934 
require the Commission, when engaging in rulemaking that requires it to 
consider or determine whether an action is consistent with the public 
interest, to consider, in addition to the protection of investors, 
whether the action will promote efficiency, competition, and capital 
formation.\115\ The Commission has considered these factors.
---------------------------------------------------------------------------

    \115\ 15 U.S.C. 77b(b), 78c(f), and 80a-2(c).
---------------------------------------------------------------------------

    The adoption and implementation of Form N-6, and the related 
amendment to Form N-1A, will improve efficiency and competition among 
issuers of variable life insurance policies. Unlike Forms N-8B-2 and S-
6 that currently are used by variable life insurance issuers, Form N-6 
is specifically tailored to variable life insurance. The requirements 
of the form focus on information that is essential to a decision to 
invest in a particular variable life insurance policy, and the form is 
intended to enhance the comparability of information about variable 
life insurance policies. For example, Form N-6 will require variable 
life insurance registrants to provide a uniform, tabular presentation 
of fees and charges assessed by a variable life insurance policy. The 
enhanced disclosure of this essential information about charges and 
other features of a variable life insurance policy will enable 
investors to become more informed about the different aspects of 
variable life insurance policies, and therefore will promote more 
efficient allocation of investors' assets, both among different 
variable life insurance policies and vis-a-vis other, competing types 
of financial products. In addition, the enhanced disclosure required by 
Form N-6 will promote competition among issuers of variable life 
insurance policies as they seek to attract these more knowledgeable 
investors. While investors will be better equipped to make investment 
decisions following the adoption of Form N-6, it is unclear whether 
Form N-6 will affect capital formation.

VI. Regulatory Flexibility Act Certification

    Pursuant to Section 605(b) of the Regulatory Flexibility Act [5 
U.S.C. 605(b)] the Chairman of the Commission has certified that 
proposed Form N-6 does not have a significant economic impact on a 
substantial number of small entities. The initial certification was 
attached to the Proposing Release as Appendix A. We requested comments 
on the certification, but received none. Pursuant to Section 605(b) of 
the Regulatory Flexibility Act [5 U.S.C. 605(b)], the Chairman of the 
Commission also has certified that the amendment to Form N-1A adopted 
as part of this Adopting Release does not have a significant economic 
impact on a substantial number of small entities. Few, if any, small 
entities would be affected by the amendment to Form N-1A, and the 
amendment to Form N-1A would not have a significant economic impact. 
The Chairman's certification, including the reasons therefor, is 
attached to this release as Appendix A.

VII. Statutory Authority

    The Commission is amending its rules and forms, and adding Form N-
6, pursuant to sections 5, 7, 8, 10, and 19(a) of the Securities Act 
[15 U.S.C. 77e, 77g, 77h, 77j, and 77s(a)] and sections 8, 22, 24, 26, 
30, and 38 of the Investment Company Act [15 U.S.C. 80a-8, 80a-22, 80a-
24, 80a-26, 80a-29, and 80a-37]. The authority citations for the 
amendments to the rules and forms precede the text of the amendments.

Text of Rule Amendments and Forms

List of Subjects

17 CFR Parts 230, 270, and 274

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

17 CFR Part 239

    Reporting and recordkeeping requirements, Securities.

    For the reasons set out in the preamble, the Commission amends 
Chapter II, Title 17 of the Code of Federal Regulations as follows.

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

    1. The authority citation for Part 230 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 
77sss, 77z-3, 78c, 78d, 78l, 78m, 78n, 78o, 78t, 78w, 78ll(d), 78mm, 
79t, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30, and 80a-37, unless 
otherwise noted.
* * * * *

    2. Revise Sec. 230.134b to read as follows:


Sec. 230.134b  Statements of additional information.

    For the purpose only of Section 5(b) of the Act (15 U.S.C. 77e(b)), 
the term ``prospectus'' as defined in Section 2(a)(10) of the Act (15 
U.S.C. 77b(a)(10)) does not include a Statement of Additional 
Information filed as part of a registration statement on Form N-1A 
(Sec. 239.15A and Sec. 274.11A of this chapter), Form N-2 (Sec. 239.14 
and Sec. 274.11a-1 of this chapter), Form N-3 (Sec. 239.17a and 
Sec. 274.11b of this chapter), Form N-4 (Sec. 239.17b and Sec. 274.11c 
of this chapter), or Form N-6 (Sec. 239.17c and Sec. 274.11d of this 
chapter) transmitted prior to the effective date of the registration 
statement if it is accompanied or preceded by a preliminary prospectus 
meeting the requirements of Sec. 230.430.

    3. Amend Sec. 230.430 to revise the introductory text of paragraph 
(b) to read as follows:


Sec. 230.430  Prospectus for use prior to effective date.

* * * * *
    (b) A form of prospectus filed as part of a registration statement 
on Form N-1A (Sec. 239.15A and Sec. 274.11A of this chapter), Form N-2 
(Sec. 239.14 and Sec. 274.11a-1 of this chapter), Form N-3 
(Sec. 239.17a and Sec. 274.11b of this chapter), Form N-4 (Sec. 239.17b 
and Sec. 274.11c of this chapter), or Form N-6 (Sec. 239.17c and 
Sec. 274.11d of this chapter) shall be deemed to meet the requirements 
of Section 10 of the Act

[[Page 19869]]

(15 U.S.C. 77j) for the purpose of Section 5(b)(1) thereof (15 U.S.C. 
77e(b)(1)) prior to the effective date of the registration statement, 
provided that:
* * * * *

    4. Amend Sec. 230.430A to revise paragraph (e) before the Note to 
read as follows:


Sec. 230.430A  Prospectus in a registration statement at the time of 
effectiveness.

* * * * *
    (e) In the case of a registration statement filed on Form N-1A 
(Sec. 239.15A and Sec. 274.11A of this chapter), Form N-2 (Sec. 239.14 
and Sec. 274.11a-1 of this chapter), Form N-3 (Sec. 239.17a and 
Sec. 274.11b of this chapter), Form N-4 (Sec. 239.17b and Sec. 274.11c 
of this chapter), or Form N-6 (Sec. 239.17c and Sec. 274.11d of this 
chapter), the references to ``form of prospectus'' in paragraphs (a) 
and (b) of this section and the accompanying Note shall be deemed also 
to refer to the form of Statement of Additional Information filed as 
part of such a registration statement.
* * * * *

    5. Amend Sec. 230.495 to revise paragraphs (a), (c), and (d) to 
read as follows:


Sec. 230.495  Preparation of registration statement.

    (a) A registration statement on Form N-1A (Sec. 239.15A and 
Sec. 274.11A of this chapter), Form N-2 (Sec. 239.14 and Sec. 274.11a-1 
of this chapter), Form N-3 (Sec. 239.17a and Sec. 274.11b of this 
chapter), Form N-4 (Sec. 239.17b and Sec. 274.11c of this chapter), or 
Form N-6 (Sec. 239.17c and Sec. 274.11d of this chapter), shall consist 
of the facing sheet of the applicable form; a prospectus containing the 
information called for by such form; the information, list of exhibits, 
undertakings and signatures required to be set forth in such form; 
financial statements and schedules; exhibits; and other information or 
documents filed as part of the registration statement; and all 
documents or information incorporated by reference in the foregoing 
(whether or not required to be filed).
* * * * *
    (c) In the case of a registration statement filed on Form N-1A 
(Sec. 239.15A and Sec. 274.11A of this chapter), Form N-2 (Sec. 239.14 
and Sec. 274.11a-1 of this chapter), Form N-3 (Sec. 239.17a and 
Sec. 274.11b of this chapter), Form N-4 (Sec. 239.17b and Sec. 274.11c 
of this chapter), or Form N-6 (Sec. 239.17c and Sec. 274.11d of this 
chapter), Parts A and B shall contain the information called for by 
each of the items of the applicable Part, except that unless otherwise 
specified, no reference need be made to inapplicable items, and 
negative answers to any item may be omitted. Copies of Parts A and B 
may be filed as part of the registration statement in lieu of 
furnishing the information in item-and-answer form. Wherever such 
copies are filed in lieu of information in item-and-answer form, the 
text of the items of the form is to be omitted from the registration 
statement, as well as from Parts A and B, except to the extent provided 
in paragraph (d) of the section.
    (d) In the case of a registration statement filed on Form N-1A 
(Sec. 239.15A and Sec. 274.11A of this chapter), Form N-2 (Sec. 239.14 
and Sec. 274.11a-1 of this chapter), Form N-3 (Sec. 239.17a and 
Sec. 274.11b of this chapter), Form N-4 (Sec. 239.17b and Sec. 274.11c 
of this chapter), or Form N-6 (Sec. 239.17c and Sec. 274.11d of this 
chapter), where any item of those forms calls for information not 
required to be included in Parts A and B (generally Part C of such 
form), the text of such items, including the numbers and captions 
thereof, together with the answers thereto, shall be filed with Parts A 
or B under cover of the facing sheet of the form as part of the 
registration statement. However, the text of such items may be omitted, 
provided the answers are so prepared as to indicate the coverage of the 
item without the necessity of reference to the text of the item. If any 
such item is inapplicable, or the answer thereto is in the negative, a 
statement to that effect shall be made. Any financial statements not 
required to be included in Parts A and B shall also be filed as part of 
the registration statement proper, unless incorporated by reference 
pursuant to Sec. 230.411.
* * * * *

    6. Revise Sec. 230.496 to read as follows:


Sec. 230.496  Contents of prospectus and statement of additional 
information used after nine months.

    In the case of a registration statement filed on Form N-1A 
(Sec. 239.15A and Sec. 274.11A of this chapter), Form N-2 (Sec. 239.14 
and Sec. 274.11a-1 of this chapter), Form N-3 (Sec. 239.17a and 
Sec. 274.11b of this chapter), Form N-4 (Sec. 239.17b and Sec. 274.11c 
of this chapter), or Form N-6 (Sec. 239.17c and Sec. 274.11d of this 
chapter), there may be omitted from any prospectus or Statement of 
Additional Information used more than 9 months after the effective date 
of the registration statement any information previously required to be 
contained in the prospectus or the Statement of Additional Information 
insofar as later information covering the same subjects, including the 
latest available certified financial statements, as of a date not more 
than 16 months prior to the use of the prospectus or the Statement of 
Additional Information is contained therein.

    7. Amend Sec. 230.497 to revise paragraphs (c) and (e) to read as 
follows:


Sec. 230.497  Filing of investment company prospectuses--number of 
copies.

* * * * *
    (c) For investment companies filing on Form N-1A (Sec. 239.15A and 
Sec. 274.11A of this chapter), Form N-2 (Sec. 239.14 and Sec. 274.11a-1 
of this chapter), Form N-3 (Sec. 239.17a and Sec. 274.11b of this 
chapter), Form N-4 (Sec. 239.17b and Sec. 274.11c of this chapter), or 
Form N-6 (Sec. 239.17c and Sec. 274.11d of this chapter), within five 
days after the effective date of a registration statement or the 
commencement of a public offering after the effective date of a 
registration statement, whichever occurs later, ten copies of each form 
of prospectus and form of Statement of Additional Information used 
after the effective date in connection with such offering shall be 
filed with the Commission in the exact form in which it was used.
* * * * *
    (e) For investment companies filing on Form N-1A (Sec. 239.15A and 
Sec. 274.11A of this chapter), Form N-2 (Sec. 239.14 and Sec. 274.11a-1 
of this chapter), Form N-3 (Sec. 239.17a and Sec. 274.11b of this 
chapter), Form N-4 (Sec. 239.17b and Sec. 274.11c of this chapter), or 
Form N-6 (Sec. 239.17c and Sec. 274.11d of this chapter), after the 
effective date of a registration statement, no prospectus that purports 
to comply with Section 10 of the Act (15 U.S.C. 77j) or Statement of 
Additional Information that varies from any form of prospectus or form 
of Statement of Additional Information filed pursuant to paragraph (c) 
of this section shall be used until five copies thereof have been filed 
with, or mailed for filing to the Commission.
* * * * *

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

    8. The general authority citation for Part 239 is revised to read 
as follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77sss, 78c, 
78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 
79l, 79m, 79n, 79q, 79t, 80a-8, 80a-24, 80a-26, 80a-29, 80a-30, and 
80a-37, unless otherwise noted.
* * * * *

[[Page 19870]]

    9. Add Sec. 239.17c to read as follows:


Sec. 239.17c  Form N-6, registration statement for separate accounts 
organized as unit investment trusts that offer variable life insurance 
policies.

    Form N-6 shall be used for registration under the Securities Act of 
1933 of securities of separate accounts that offer variable life 
insurance policies and that register under the Investment Company Act 
of 1940 as unit investment trusts. This form is also to be used for the 
registration statement of such separate accounts pursuant to section 
8(b) of the Investment Company Act of 1940 (Sec. 274.11d of this 
chapter).

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

    10. The authority citation for part 270 is amended by adding the 
following citation:

    Authority: 15 U.S.C. 80a-1, et seq., 80a-34(d), 80a-37, 80a-39, 
unless otherwise noted;
* * * * *
    Section 270.8b-11 is also issued under 15 U.S.C. 77s, 80a-8, and 
80a-37.
* * * * *

    11. The authority citation following Sec. 270.8b-11 is removed.

    12. Amend Sec. 270.8b-11 to revise paragraph (b) to read as 
follows:


Sec. 270.8b-11  Number of copies; signatures; binding.

* * * * *
    (b) In the case of a registration statement filed on Form N-1A 
(Sec. 239.15A and Sec. 274.11A of this chapter), Form N-2 (Sec. 239.14 
and Sec. 274.11a-1 of this chapter), Form N-3 (Sec. 239.17a and 
Sec. 274.11b of this chapter), Form N-4 (Sec. 239.17b and Sec. 274.11c 
of this chapter), or Form N-6 (Sec. 239.17c and Sec. 274.11d of this 
chapter), three complete copies of each part of the registration 
statement (including, if applicable, exhibits and all other papers and 
documents filed as part of Part C of the registration statement) shall 
be filed with the Commission.
* * * * *

    13. Amend Sec. 270.8b-12 to revise paragraph (b) to read as 
follows:


Sec. 270.8b-12  Requirements as to paper, printing and language.

* * * * *
    (b) In the case of a registration statement filed on Form N-1A 
(Sec. 239.15A and Sec. 274.11A of this chapter), Form N-2 (Sec. 239.14 
and Sec. 274.11a-1 of this chapter), Form N-3 (Sec. 239.17a and 
Sec. 274.11b of this chapter), Form N-4 (Sec. 239.17b and Sec. 274.11c 
of this chapter), or Form N-6 (Sec. 239.17c and Sec. 274.11d of this 
chapter), Part C of the registration statement shall be filed on good 
quality, unglazed, white paper, no larger than 8\1/2\ x 11 inches in 
size, insofar as practicable. The prospectus and, if applicable, the 
Statement of Additional Information, however, may be filed on smaller-
sized paper provided that the size of paper used in each document is 
uniform.
* * * * *

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

    14. The authority citation for Part 274 is revised to read as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 
78n, 78o(d), 80a-8, 80a-24, 80a-26, and 80a-29, unless otherwise 
noted.

    15. Form N-1A, Item 3 (referenced in Secs. 239.15A and 274.11A) is 
amended by revising the introductory text to read as follows:

    Note: The text of Form N-1A does not and this amendment will not 
appear in the Code of Federal Regulations.

Form N-1A

* * * * *

Item 3. Risk/Return Summary: Fee Table

    Include the following information, in plain English under rule 
421(d) under the Securities Act, after Item 2:
* * * * *

    16. Add Sec. 274.11d to read as follows:


Sec. 274.11d  Form N-6, registration statement of separate accounts 
organized as unit investment trusts that offer variable life insurance 
policies.

    Form N-6 shall be used as the registration statement to be filed 
pursuant to section 8(b) of the Investment Company Act of 1940 by 
separate accounts that offer variable life insurance policies to 
register as unit investment trusts. This form shall also be used for 
registration under the Securities Act of 1933 of the securities of such 
separate accounts (Sec. 239.17c of this chapter).

    17. Revise Sec. 274.12 to read as follows:


Sec. 274.12  Form N-8B-2, registration statement of unit investment 
trusts that are currently issuing securities.

    This form shall be used as the registration statement to be filed, 
pursuant to section 8(b) of the Investment Company Act of 1940, by unit 
investment trusts other than separate accounts that are currently 
issuing securities, including unit investment trusts that are issuers 
of periodic payment plan certificates.

    18. Revise Form N-8B-2 (referenced in Sec. 274.12), General 
Instruction 1, to read as follows:

    Note: The text of Form N-8B-2 does not and this amendment will 
not appear in the Code of Federal Regulations.


Form N-8B-2

* * * * *
    General Instructions for Form N-8B-2.
* * * * *

1. Rule as to Use of Form

    This form shall be used as the form for registration statements 
to be filed, pursuant to Section 8(b) of the Investment Company Act 
of 1940, by unit investment trusts other than separate accounts that 
are currently issuing securities, including unit investment trusts 
that are issuers of periodic payment plan certificates and unit 
investment trusts of which a management investment company is the 
sponsor or depositor.
* * * * *


    19. Add Form N-6 (referenced in Sec. 239.17c and Sec. 274.11d) to 
read as follows:


    Note: The text of Form N-6 will not appear in the Code of 
Federal Regulations.

BILLING CODE 8010-01-P

[[Page 19871]]

[GRAPHIC] [TIFF OMITTED] TR23AP02.000

BILLING CODE 8010-91-C


[[Page 19872]]


    If appropriate, check the following box:
    {time} This post-effective amendment designates a new effective 
date for a previously filed post-effective amendment.
    Omit from the facing sheet reference to the other Act if the 
registration statement or amendment is filed under only one of the 
Acts. Include the ``Approximate Date of Proposed Public Offering'' 
only where securities are being registered under the Securities Act 
of 1933.
    Form N-6 is to be used by separate accounts that are unit 
investment trusts that offer variable life insurance contracts to 
register under the Investment Company Act of 1940 and to offer their 
securities under the Securities Act of 1933. The Commission has 
designed Form N-6 to provide investors with information that will 
assist them in making a decision about investing in a variable life 
insurance contract. The Commission also may use the information 
provided in Form N-6 in its regulatory, disclosure review, 
inspection, and policy-making roles.
    A Registrant is required to disclose the information specified 
by Form N-6, and the Commission will make this information public. A 
Registrant is not required to respond to the collection of 
information contained in Form N-6 unless the Form displays a 
currently valid Office of Management and Budget (``OMB'') control 
number. Please direct comments concerning the accuracy of the 
information collection burden estimate and any suggestions for 
reducing the burden to Secretary, Securities and Exchange 
Commission, 450 5th Street, NW, Washington, DC 20549-0609. The OMB 
has reviewed this collection of information under the clearance 
requirements of 44 U.S.C. 3507.

Contents of Form N-6

General Instructions

A. Definitions
B. Filing and Use of Form N-6
C. Preparation of the Registration Statement
D. Incorporation by Reference

Part A: Information Required in a Prospectus

Item 1. Front and Back Cover Pages
Item 2. Risk/Benefit Summary: Benefits and Risks
Item 3. Risk/Benefit Summary: Fee Table
Item 4. General Description of Registrant, Depositor, and Portfolio 
Companies
Item 5. Charges
Item 6. General Description of Contracts
Item 7. Premiums
Item 8. Death Benefits and Contract Values
Item 9. Surrenders, Partial Surrenders, and Partial Withdrawals
Item 10. Loans
Item 11. Lapse and Reinstatement
Item 12. Taxes
Item 13. Legal Proceedings
Item 14. Financial Statements

Part B: Information Required in a Statement of Additional Information

Item 15. Cover Page and Table of Contents
Item 16. General Information and History
Item 17. Services
Item 18. Premiums
Item 19. Additional Information About Operation of Contracts and 
Registrant
Item 20. Underwriters
Item 21. Additional Information About Charges
Item 22. Lapse and Reinstatement
Item 23. Loans
Item 24. Financial Statements
Item 25. Performance Data
Item 26. Illustrations

Part C: Other Information

Item 27. Exhibits
Item 28. Directors and Officers of the Depositor
Item 29. Persons Controlled by or Under Common Control with the 
Depositor or the Registrant
Item 30. Indemnification
Item 31. Principal Underwriters
Item 32. Location of Accounts and Records
Item 33. Management Services
Item 34. Fee Representation

Signatures

General Instructions

A. Definitions

    References to sections and rules in this Form N-6 are to the 
Investment Company Act of 1940 [15 U.S.C. 80a-1 et seq.] (the 
``Investment Company Act''), unless otherwise indicated. Terms used 
in this Form N-6 have the same meaning as in the Investment Company 
Act or the related rules, unless otherwise indicated. As used in 
this Form N-6, the terms set out below have the following meanings:
    ``Depositor'' means the person primarily responsible for the 
organization of the Registrant and the person, other than the 
trustee or custodian, who has continuing functions or 
responsibilities for the administration of the affairs of the 
Registrant. ``Depositor'' includes the sponsoring insurance company 
that establishes and maintains the Registrant. If there is more than 
one Depositor, the information called for in this Form about the 
Depositor must be provided for each Depositor.
    ``Portfolio Company'' means any company in which the Registrant 
invests.
    ``Registrant'' means the separate account (as defined in section 
2(a)(37) of the Investment Company Act [15 U.S.C. 80a-2(a)(37)]) 
that offers the Variable Life Insurance Contracts.
    ``SAI'' means the Statement of Additional Information required 
by Part B of this Form.
    ``Securities Act'' means the Securities Act of 1933 [15 U.S.C. 
77a et seq.].
    ``Securities Exchange Act'' means the Securities Exchange Act of 
1934 [15 U.S.C. 78a et seq.].
    ``Variable Life Insurance Contract'' or ``Contract'' means a 
life insurance contract that provides for death benefits and cash 
values that may vary with the investment experience of any separate 
account. Unless the context otherwise requires, ``Variable Life 
Insurance Contract'' or ``Contract'' refers to the Variable Life 
Insurance Contracts being offered pursuant to the registration 
statement prepared on this Form.

B. Filing and Use of Form N-6

1. What Is Form N-6 Used For?

    Form N-6 is used by all separate accounts that are registered 
under the Investment Company Act as unit investment trusts and 
offering Variable Life Insurance Contracts to file:
    (a) An initial registration statement under the Investment 
Company Act and amendments to the registration statement;
    (b) An initial registration statement under the Securities Act 
and amendments to the registration statement, including amendments 
required by section 10(a)(3) of the Securities Act [15 U.S.C. 
77j(a)(3)]; or
    (c) Any combination of the filings in paragraph (a) or (b).

2. What Is Included in the Registration Statement?

    (a) For registration statements or amendments filed under both 
the Investment Company Act and the Securities Act or only under the 
Securities Act, include the facing sheet of the Form, Parts A, B, 
and C, and the required signatures.
    (b) For registration statements or amendments filed only under 
the Investment Company Act, include the facing sheet of the Form, 
responses to all Items of Parts A (except Items 1, 2, 3, and 14), B, 
and C (except Items 27 (c), (k), (l), (n), and (o)), and the 
required signatures.

3. What Are the Fees for Form N-6?

    No registration fees are required with the filing of Form N-6 to 
register as an investment company under the Investment Company Act 
or to register securities under the Securities Act. If Form N-6 is 
filed to register securities under the Securities Act and securities 
are sold to the public, registration fees must be paid on an ongoing 
basis after the end of the Registrant's fiscal year. See section 
24(f) [15 U.S.C. 80a-24f-2] and related rule 24f-2 [17 CFR 270.24f-
2].

4. What Rules Apply to the Filing of a Registration Statement on 
Form N-6?

    (a) For registration statements and amendments filed under both 
the Investment Company Act and the Securities Act or only under the 
Securities Act, the general rules regarding the filing of 
registration statements in Regulation C under the Securities Act [17 
CFR 230.400-230.497] apply to the filing of Form N-6. Specific 
requirements concerning investment companies appear in rules 480-485 
and 495-497 of Regulation C.
    (b) For registration statements and amendments filed only under 
the Investment Company Act, the general provisions in rules 8b-1-8b-
32 [17 CFR 270.8b-1-270.8b-32] apply to the filing of Form N-6.
    (c) The plain English requirements of rule 421 under the 
Securities Act [17 CFR 230.421] apply to prospectus disclosure in 
Part A of Form N-6.
    (d) Regulation S-T [17 CFR 232.10-232.903] applies to all 
filings on the Commission's Electronic Data Gathering, Analysis, and 
Retrieval system (``EDGAR'').

[[Page 19873]]

C. Preparation of the Registration Statement

1. Administration of the Form N-6 Requirements

    (a) The requirements of Form N-6 are intended to promote 
effective communication between the Registrant and prospective 
investors. A Registrant's prospectus should clearly disclose the 
fundamental features and risks of the Variable Life Insurance 
Contracts, using concise, straightforward, and easy to understand 
language. A Registrant should use document design techniques that 
promote effective communication.
    (b) The prospectus disclosure requirements in Form N-6 are 
intended to elicit information for an average or typical investor 
who may not be sophisticated in legal or financial matters. The 
prospectus should help investors to evaluate the risks of an 
investment and to decide whether to invest in a Variable Life 
Insurance Contract by providing a balanced disclosure of positive 
and negative factors. Disclosure in the prospectus should be 
designed to assist an investor in comparing and contrasting a 
Variable Life Insurance Contract with other Contracts.
    (c) Responses to the Items in Form N-6 should be as simple and 
direct as reasonably possible and should include only as much 
information as is necessary to enable an average or typical investor 
to understand the particular characteristics of the Variable Life 
Insurance Contracts. The prospectus should avoid including lengthy 
legal and technical discussions and simply restating legal or 
regulatory requirements to which Contracts generally are subject. 
Brevity is especially important in describing the practices or 
aspects of the Registrant's operations that do not differ materially 
from those of other separate accounts. Avoid excessive detail, 
technical or legal terminology, and complex language. Also avoid 
lengthy sentences and paragraphs that may make the prospectus 
difficult for many investors to understand and detract from its 
usefulness.
    (d) The requirements for prospectuses included in Form N-6 will 
be administered by the Commission in a way that will allow variances 
in disclosure or presentation if appropriate for the circumstances 
involved while remaining consistent with the objectives of Form N-6.

2. Form N-6 Is Divided Into Three Parts

    (a) Part A. Part A includes the information required in a 
Registrant's prospectus under section 10(a) of the Securities Act. 
The purpose of the prospectus is to provide essential information 
about the Registrant and the Variable Life Insurance Contracts in a 
way that will help investors to make informed decisions about 
whether to purchase the securities described in the prospectus. In 
responding to the Items in Part A, avoid cross-references to the 
SAI. Cross-references within the prospectus are most useful when 
their use assists investors in understanding the information 
presented and does not add complexity to the prospectus.
    (b) Part B. Part B includes the information required in a 
Registrant's SAI. The purpose of the SAI is to provide additional 
information about the Registrant and the Variable Life Insurance 
Contracts that the Commission has concluded is not necessary or 
appropriate in the public interest or for the protection of 
investors to be in the prospectus, but that some investors may find 
useful. Part B affords the Registrant an opportunity to expand 
discussions of the matters described in the prospectus by including 
additional information that the Registrant believes may be of 
interest to some investors. The Registrant should not duplicate in 
the SAI information that is provided in the prospectus, unless 
necessary to make the SAI comprehensible as a document independent 
of the prospectus.
    (c) Part C. Part C includes other information required in a 
Registrant's registration statement.

3. Additional Matters

    (a) Organization of Information. Organize the information in the 
prospectus and SAI to make it easy for investors to understand. 
Disclose the information required by Items 2 and 3 (the Risk/Benefit 
Summary) in numerical order at the front of the prospectus, except 
that the information required by Item 3 (Risk/Benefit Summary: Fee 
Table) must precede the information required by Item 2 (Risk/Benefit 
Summary: Benefits and Risks) if the information in response to Item 
2 exceeds five pages in length. Do not precede Items 2 and 3 with 
any other Item except the Cover Page (Item 1) or a table of contents 
meeting the requirements of rule 481(c) under the Securities Act [17 
CFR 230.481(c)]. If the discussion in the Risk/Benefit Summary also 
responds to disclosure requirements in other items of the 
prospectus, a Registrant need not include additional disclosure in 
the prospectus that repeats the information in the Risk/Benefit 
Summary.
    (b) Other Information. A Registrant may include, except in the 
Risk/Benefit Summary, information in the prospectus or the SAI that 
is not otherwise required. For example, a Registrant may include 
charts, graphs, or tables so long as the information is not 
incomplete, inaccurate, or misleading and does not, because of its 
nature, quantity, or manner of presentation, obscure or impede 
understanding of the information that is required to be included. 
Specifically, Registrants are free to include in the prospectus 
financial statements required to be in the SAI, and may include in 
the SAI financial statements that may be placed in Part C. The Risk/
Benefit Summary may not include disclosure other than that required 
or permitted by Items 2 and 3.
    (c) Use of Form N-6 to Register Multiple Contracts or Contracts 
Sold in Both the Group and Individual Markets.
    (i) When disclosure is provided in a single prospectus for more 
than one Variable Life Insurance Contract, or for a Contract that is 
sold in both the group and individual markets, the disclosure should 
be presented in a format designed to communicate the information 
effectively. Registrants may order or group the response to any Item 
in any manner that organizes the information into readable and 
comprehensible segments and is consistent with the intent of the 
prospectus to provide clear and concise information about the 
Registrants or Variable Life Insurance Contracts. Registrants are 
encouraged to use, as appropriate, tables, side-by-side comparisons, 
captions, bullet points, or other organizational techniques when 
presenting disclosure for multiple Variable Life Insurance Contracts 
or for Contracts sold in both the group and individual markets.
    (ii) Paragraph (a) requires Registrants to disclose the 
information required by Items 2 and 3 in numerical order at the 
front of the prospectus and not to precede the Items with other 
information, except that the information required by Item 3 must 
precede the information required by Item 2 if the information in 
response to Item 2 exceeds five pages in length. As a general 
matter, Registrants providing disclosure in a single prospectus for 
more than one Variable Life Insurance Contract, or for Contracts 
sold in both the group and individual markets, may depart from the 
requirement of paragraph (a) as necessary to present the required 
information clearly and effectively (although the order of 
information required by each Item must remain the same and 
Registrants must comply with the requirement that Item 3 precede 
Item 2 if the response to Item 2 exceeds five pages in length). For 
example, the prospectus may present all of the Item 2 information 
for several Variable Life Insurance Contracts followed by all of the 
Item 3 information for the Contracts, except that the information 
required by Item 3 must precede the information required by Item 2 
if the information in response to Item 2 exceeds five pages in 
length. Alternatively, the prospectus may present Items 2 and 3 for 
each of several Contracts sequentially, except that the information 
required by Item 3 for any Contract must precede the information 
required by Item 2 for that Contract if the information in response 
to Item 2 for that Contract exceeds five pages in length. Other 
presentations also would be acceptable if they are consistent with 
the Form's intent to disclose the information required by Items 2 
and 3 in a standard order at the beginning of the prospectus and the 
requirement that the information required by Item 3 must precede the 
information required by Item 2 if the information in response to 
Item 2 exceeds five pages in length.
    (d) Dates. Rule 423 under the Securities Act [17 CFR 230.423] 
applies to the dates of the prospectus and the SAI. The SAI should 
be made available at the same time that the prospectus becomes 
available for purposes of rules 430 and 460 under the Securities Act 
[17 CFR 230.430 and 230.460].
    (e) Sales Literature. A Registrant may include sales literature 
in the prospectus so long as the amount of this information does not 
add substantial length to the prospectus and its placement does not 
obscure essential disclosure.

D. Incorporation by Reference

1. Specific Rules for Incorporation by Reference in Form N-6

    (a) A Registrant may not incorporate by reference into a 
prospectus information that Part A of this Form requires to be 
included

[[Page 19874]]

in a prospectus, except as specifically permitted by Part A of the 
Form.
    (b) A Registrant may incorporate by reference any or all of the 
SAI into the prospectus (but not to provide any information required 
by Part A to be included in the prospectus) without delivering the 
SAI with the prospectus.
    (c) A Registrant may incorporate by reference into the SAI or 
its response to Part C information that Parts B and C require to be 
included in the Registrant's registration statement.

2. General Requirements

    All incorporation by reference must comply with the requirements 
of this Form and the following rules on incorporation by reference: 
rule 10(d) of Regulation S-K under the Securities Act [17 CFR 
229.10(d)] (general rules on incorporation by reference, which, 
among other things, prohibit, unless specifically required by this 
Form, incorporating by reference a document that includes 
incorporation by reference to another document, and limits 
incorporation to documents filed within the last 5 years, with 
certain exceptions); rule 411 under the Securities Act [17 CFR 
230.411] (general rules on incorporation by reference in a 
prospectus); rule 303 of Regulation S-T [17 CFR 232.303] (specific 
requirements for electronically filed documents); and rules 0-4, 8b-
23, and 8b-32 [17 CFR 270.0-4, 270.8b-23, and 270.8b-32] (additional 
rules on incorporation by reference for investment companies).

Part A: Information Required in a Prospectus

Item 1. Front and Back Cover Pages

    (a) Front Cover Page. Include the following information, in 
plain English under rule 421(d) under the Securities Act [17 CFR 
230.421(d)], on the outside front cover page of the prospectus:
    (1) The Registrant's name.
    (2) The Depositor's name.
    (3) The types of Variable Life Insurance Contracts offered by 
the prospectus (e.g., group, individual, scheduled premium, flexible 
premium).
    (4) The date of the prospectus.
    (5) The statement required by rule 481(b)(1) under the 
Securities Act.
    Instruction. A Registrant may include on the front cover page 
any additional information, subject to the requirement set out in 
General Instruction C.3.(b).
    (b) Back Cover Page. Include the following information, in plain 
English under rule 421(d) under the Securities Act [17 CFR 
230.421(d)], on the outside back cover page of the prospectus:
    (1) A statement that the SAI includes additional information 
about the Registrant. Explain that the SAI and, if available, 
personalized illustrations of death benefits, cash surrender values, 
and cash values, are available, without charge, upon request, and 
explain how contractowners may make inquiries about their Contracts. 
Provide a toll-free (or collect) telephone number for investors to 
call: to request the SAI and, if available, personalized 
illustrations; to request other information about the Contracts; and 
to make contractowner inquiries.
    Instructions.
    1. A Registrant may indicate, if applicable, that the SAI and 
other information are available on its Internet site and/or by E-
mail request.
    2. A Registrant may indicate, if applicable, that the SAI and 
other information are available from an insurance agent or financial 
intermediary (such as a broker-dealer or bank) through which the 
Contracts may be purchased or sold.
    3. When a Registrant (or an insurance agent or financial 
intermediary through which Contracts may be purchased or sold) 
receives a request for the SAI, the Registrant (or insurance agent 
or financial intermediary) must send the SAI within 3 business days 
of receipt of the request, by first-class mail or other means 
designed to ensure equally prompt delivery.
    (2) A statement whether and from where information is 
incorporated by reference into the prospectus as permitted by 
General Instruction D. Unless the information is delivered with the 
prospectus, explain that the Registrant will provide the information 
without charge, upon request (referring to the telephone number 
provided in response to paragraph (b)(1)).
    Instruction. The Registrant may combine the information about 
incorporation by reference with the statements required under 
paragraph (b)(1).
    (3) A statement that information about the Registrant (including 
the SAI) can be reviewed and copied at the Commission's Public 
Reference Room in Washington, DC. Also state that information on the 
operation of the public reference room may be obtained by calling 
the Commission at 202-942-8090. State that reports and other 
information about the Registrant are available on the Commission's 
Internet site at http://www.sec.gov and that copies of this 
information may be obtained, upon payment of a duplicating fee, by 
writing the Public Reference Section of the Commission, 450 Fifth 
Street, NW, Washington, DC 20549-0102.
    (4) The Registrant's Investment Company Act file number on the 
bottom of the back cover page in type size smaller than that 
generally used in the prospectus (e.g., 8-point modern type).

Item 2. Risk/Benefit Summary: Benefits and Risks

    Include, in plain English under rule 421(d) under the Securities 
Act [17 CFR 230.421(d)], a concise description of the Contract, 
including, but not necessarily limited to, the following 
information:
    (a) Contract Benefits. Summarize the benefits available under 
the Contract, including death benefits, withdrawal and surrender 
benefits, and loans.
    (b) Contract Risks. Summarize the principal risks of purchasing 
a Contract, including the risks of poor investment performance, that 
Contracts are unsuitable as short-term savings vehicles, the risks 
of Contract lapse, limitations on access to cash value through 
withdrawals, and the possibility of adverse tax consequences.
    (c) Portfolio Company Risks. A statement to the effect that a 
comprehensive discussion of the risks of each Portfolio Company may 
be found in the Portfolio Company's prospectus.
    Instruction. Registrants may, but are not required to, include 
information about the Portfolio Companies in response to this Item 
2.

Item 3. Risk/Benefit Summary: Fee Table

    Include the following information, in plain English under rule 
421(d) under the Securities Act [17 CFR 230.421(d)], after Item 2:
    The following tables describe the fees and expenses that you 
will pay when buying, owning, and surrendering the Policy. The first 
table describes the fees and expenses that you will pay at the time 
that you buy the Policy, surrender the Policy, or transfer cash 
value between investment options.

                            Transaction Fees
------------------------------------------------------------------------
                                                When charge     Amount
                    Charge                      is deducted    deducted
------------------------------------------------------------------------
Maximum Sales Charge Imposed on Premiums
 (Load)
Premium Taxes
Maximum Deferred Sales Charge (Load)
Other Surrender Fees
Transfer Fees
------------------------------------------------------------------------

    The next table describes the fees and expenses that you will pay 
periodically during the time that you own the Policy, not including 
[Portfolio Company] fees and expenses.

   Periodic Charges Other Than [Portfolio Company] Operating Expenses
------------------------------------------------------------------------
                                                When charge
                    Charge                           is         Amount
                                                  deducted     deducted
------------------------------------------------------------------------
Cost of Insurance*:
  Minimum and Maximum Charge
  Charge for a [Representative Contractowner]
Annual Maintenance Fee
Mortality and Expense Risk Fees
Administrative Fees
------------------------------------------------------------------------
* [Footnote: Include disclosure required by Instruction 3(b).]


[[Page 19875]]

    The next table describes the [Portfolio Company] fees and 
expenses that you will pay periodically during the time that you own 
the Policy. The table shows the minimum and maximum fees and 
expenses charged by any of the [Portfolio Companies]. More detail 
concerning each [Portfolio Company's] fees and expenses is contained 
in the prospectus for each [Portfolio Company].

              Annual [Portfolio Company] Operating Expenses
      [Expenses that are deducted from [Portfolio Company] assets]
------------------------------------------------------------------------
                                                  Minimum      Maximum
------------------------------------------------------------------------
Management Fees...............................      ______%      ______%
Distribution [and/or Service] (12b-1) Fees....      ______%      ______%
Other Expenses................................      ______%      ______%
                                               -------------------------
    Total Annual [Portfolio Company] Operating      ______%      ______%
     Expenses.................................
------------------------------------------------------------------------

    Instructions.
    1. General.
    (a) Round all dollar figures to the nearest dollar and all 
percentages to the nearest hundredth of one percent.
    (b) Include the narrative explanations in the order indicated. A 
Registrant may modify a narrative explanation if the explanation 
contains comparable information to that shown.
    (c) A Registrant may omit captions if the Registrant does not 
charge the fees or expenses covered by the captions. A Registrant 
may modify or add captions if the captions shown do not provide an 
accurate description of the Registrant's fees and expenses.
    (d) If a Registrant uses one prospectus to offer a Contract in 
both the group and individual variable life markets, the Registrant 
may include narrative disclosure in a footnote or following the 
tables identifying markets where certain fees are either 
inapplicable or waived or lower fees are charged. In the 
alternative, a Registrant may present the information for group and 
individual contracts in another format consistent with General 
Instruction C.3.(c).
    (e) The ``When Charge is Deducted'' column must be used to show 
when a charge is deducted, e.g., upon purchase, surrender or partial 
surrender, policy anniversary, monthly, or daily.
    (f) Under the ``Amount Deducted'' column, the Registrant must 
disclose the maximum guaranteed charge unless a specific instruction 
directs otherwise. The Registrant should include the basis on which 
the charge is imposed (e.g., 0.95% of average daily net assets, $5 
per exchange, $5 per thousand dollars of face amount). The 
Registrant may disclose the current charge, in addition to the 
maximum charge, if the disclosure of the current charge is no more 
prominent than, and does not obscure or impede understanding of, the 
disclosure of the maximum charge. In addition, the Registrant may 
include in a footnote to the table a tabular, narrative, or other 
presentation providing further detail regarding variations in the 
charge. For example, if deferred sales charges decline over time, 
the Registrant may include in a footnote a presentation regarding 
the scheduled reductions in the deferred sales charges. Charges 
assessed on the basis of the face amount should be disclosed as the 
charge per $1000 of face amount.
    2. Transaction Fees.
    (a) ``Other Surrender Fees'' include any fees charged for 
surrender or partial surrender, other than sales charges imposed 
upon surrender or partial surrender.
    (b) ``Transfer Fees'' include any fees charged for any transfer 
or exchange of cash value from the Registrant to another investment 
company, from one sub-account of the Registrant to another sub-
account or the Depositor's general account, or from the Depositor's 
general account to the Registrant.
    (c) If the Registrant (or any other party pursuant to an 
agreement with the Registrant) charges any other transaction fee, 
add another caption describing it and complete the other columns of 
the table for that fee.
    3. Periodic Charges Other Than [Portfolio Company] Operating 
Expenses.
    (a) The Registrant may substitute the term used in the 
prospectus to refer to the Portfolio Companies for the bracketed 
portion of the caption provided.
    (b) For ``Cost of Insurance'' and any other charges that depend 
on Contractowner characteristics, such as age or rating 
classification, the Registrant should disclose the minimum and 
maximum charges that may be imposed for a Contract, and the charges 
that may be paid by a representative Contractowner, using 
appropriate sub-captions. In a footnote to the table, disclose (i) 
that the cost of insurance or other charge varies based on 
individual characteristics; (ii) that the cost of insurance charge 
or other charge shown in the table may not be representative of the 
charge that a particular Contractowner will pay; and (iii) how the 
Contractowner may obtain more information about the particular cost 
of insurance or other charges that would apply to him or her.
    (i) In disclosing cost of insurance or other charges that depend 
on Contractowner characteristics for a representative Contractowner, 
the Registrant should assume characteristics (e.g., sex, age, and 
rating classification) that are fairly representative of actual or 
expected Contract sales, and describe these characteristics in the 
sub-caption for the charge (e.g., ``charge for a 40-year-old non-
smoking female''). The rating classification used for the 
representative Contractowner should be the classification with the 
greatest number of outstanding Contracts (or expected Contracts in 
the case of a new Contract), unless this rating classification is 
not fairly representative of actual or expected Contract sales. In 
this case, the Registrant should use a commonly used rating 
classification that is fairly representative of actual or expected 
Contract sales.
    (ii) The Registrant may supplement this disclosure of the 
minimum charges, maximum charges, and charges for a representative 
Contractowner with additional disclosure immediately following the 
fee table. For example, the additional disclosure may include an 
explanation of the factors that affect the cost of insurance or 
other charge or tables showing the cost of insurance or other charge 
for a spectrum of representative Contractowners.
    (c) ``[Annual] Maintenance Fee'' includes any Contract, account, 
or similar fee imposed on any recurring basis. Any non-recurring 
Contract, account, or similar fee should be included in the 
``Transaction Fees'' table.
    (d) ``Mortality and Expense Risk Fees'' may be listed separately 
on two lines in the table.
    (e) If the Registrant (or any other party pursuant to an 
agreement with the Registrant) imposes any other recurring charge 
other than annual Portfolio Company Operating Expenses, add another 
caption describing it and complete the other columns of the table 
for that charge.
    4. Annual [Portfolio Company] Operating Expenses.
    (a) The Registrant may substitute the term used in the 
prospectus to refer to the Portfolio Companies for the bracketed 
portion of the caption provided.
    (b) If a Registrant has multiple sub-accounts, it should 
disclose the minimum and maximum expenses of any Portfolio Companies 
for each line item. For example, if a Registrant has five sub-
accounts with management fees of 0.50%, 0.70%, 1.00%, 1.10%, and 
1.25%, respectively, it should disclose that management fees range 
from 0.50% to 1.25%. The minimum and maximum amounts disclosed for 
``Total Annual [Portfolio Company] Operating Expenses'' should be 
the minimum and maximum ``Total Annual [Portfolio Company] Operating 
Expenses'' for any Portfolio Company, and not the sum of the minimum 
and maximum amounts disclosed for the individual line items. For 
example, assume a Registrant has three sub-accounts. Sub-account 1 
has management fees of 0.50%, 12b-1 fees of 0.25%, other expenses of 
0.30%, and total expenses of 1.05%; sub-account 2 has management 
fees of 0.90%, 12b-1 fees of 0.00%, other expenses of 0.25%, and 
total expenses of 1.15%; and sub-account 3 has management fees of 
1.00%, 12b-1 fees of 0.00%, other expenses of 0.25%, and total 
expenses of 1.25%. The minimum and maximum amounts to be disclosed 
in the table are: management fees--0.50%-1.00%; 12b-1 fees--0.00%-
0.25%; other expenses--0.25%-0.30%; total annual [Portfolio Company] 
operating expenses--1.05%-1.25%. The total annual [Portfolio 
Company] operating expenses are the expenses of sub-accounts 1 and 
3, respectively, not the sum of the minimum and maximum amounts 
disclosed for the individual line items, which would be 0.75%-1.55%.
    (c)``Management Fees'' include investment advisory fees 
(including any fees based on a Portfolio Company's performance), any 
other management fees payable to a Portfolio Company's investment 
adviser or its affiliates, and administrative fees payable to a 
Portfolio Company's investment adviser or its affiliates that are 
not included as ``Other Expenses.''

[[Page 19876]]

    (d) ``Distribution [and/or Service] (12b-1) Fees'' include all 
distribution or other expenses incurred during the most recent 
fiscal year under a plan adopted pursuant to rule 12b-1 [17 CFR 
270.12b-1].
    (e)(i)``Other Expenses'' include all expenses not otherwise 
disclosed in the table that are deducted from a Portfolio Company's 
assets. The amount of expenses deducted from a Portfolio Company's 
assets are the amounts shown as expenses in the Portfolio Company's 
statement of operations (including increases resulting from 
complying with paragraph 2(g) of rule 6-07 of Regulation S-X [17 CFR 
210.6-07]).
    (ii)``Other Expenses' do not include extraordinary expenses as 
determined under generally accepted accounting principles (see 
Accounting Principles Board Opinion No. 30). If extraordinary 
expenses were incurred by any Portfolio Company that would, if 
included, materially affect the minimum or maximum amounts shown in 
the table, disclose in a footnote to the table what the minimum and 
maximum ``Other Expenses'' would have been had the extraordinary 
expenses been included.
    (f)(i) Base the percentages of ``Annual [Portfolio Company] 
Operating Expenses'' on amounts incurred during the most recent 
fiscal year, but include in expenses amounts that would have been 
incurred absent expense reimbursement or fee waiver arrangements. If 
a Portfolio Company has a fiscal year different from that of the 
Registrant, base the expenses on those incurred during either the 
period that corresponds to the fiscal year of the Registrant, or the 
most recently completed fiscal year of the Portfolio Company. If the 
Registrant or a Portfolio Company has changed its fiscal year and, 
as a result, the most recent fiscal year is less than three months, 
use the fiscal year prior to the most recent fiscal year as the 
basis for determining ``Annual [Portfolio Company] Operating 
Expenses.''
    (ii) If there have been any changes in ``Annual [Portfolio 
Company] Operating Expenses'' that would materially affect the 
information disclosed in the table:
    (A) Restate the expense information using the current fees as if 
they had been in effect during the previous fiscal year; and
    (B) In a footnote to the table, disclose that the expense 
information in the table has been restated to reflect current fees.
    (iii) A change in ``Annual [Portfolio Company] Operating 
Expenses'' means either an increase or a decrease in expenses that 
occurred during the most recent fiscal year or that is expected to 
occur during the current fiscal year. A change in ``Annual 
[Portfolio Company] Operating Expenses'' does not include a decrease 
in operating expenses as a percentage of assets due to economies of 
scale or breakpoints in a fee arrangement resulting from an increase 
in a Portfolio Company's assets.
    (g) A Registrant may reflect minimum and maximum actual 
[Portfolio Company] operating expenses that include expense 
reimbursement or fee waiver arrangements in a footnote to the table. 
If the Registrant provides this disclosure, also disclose the period 
for which the expense reimbursement or fee waiver arrangement is 
expected to continue, or whether it can be terminated at any time at 
the option of a Portfolio Company.
    (h) A Registrant may include additional tables showing annual 
operating expenses separately for each Portfolio Company immediately 
following the required table of ``Annual [Portfolio Company] 
Operating Expenses.'' The additional tables should be prepared in 
the format, and in accordance with the Instructions, prescribed in 
Item 3 of Form N-1A [17 CFR 239.15A; 17 CFR 274.11A] for disclosing 
``Annual Fund Operating Expenses.''
    5. New Registrants. For purposes of this Item, a ``New 
Registrant'' is a Registrant (or sub-account of the Registrant) that 
does not include in Form N-6 financial statements reporting 
operating results or that includes financial statements for the 
Registrant's (or sub-account's) initial fiscal year reporting 
operating results for a period of 6 months or less. The following 
Instructions apply to New Registrants.
    (a) Base the percentages in ``Annual [Portfolio Company] 
Operating Expenses'' on payments that will be made, but include in 
expenses amounts that will be incurred without reduction for expense 
reimbursement or fee waiver arrangements, estimating amounts of 
``Other Expenses.'' Disclose in a footnote to the table that ``Other 
Expenses'' are based on estimated amounts for the current fiscal 
year.
    (b) A New Registrant may reflect in a footnote to the table 
expense reimbursement or fee waiver arrangements that are expected 
to reduce any minimum or maximum [Portfolio Company] operating 
expense or the estimate of minimum or maximum ``Other Expenses'' 
(regardless of whether the arrangement has been guaranteed). If the 
New Registrant provides this disclosure, also disclose the period 
for which the expense reimbursement or fee waiver arrangement is 
expected to continue, or whether it can be terminated at any time at 
the option of a Portfolio Company.

Item 4. General Description of Registrant, Depositor, and Portfolio 
Companies

    Concisely discuss the organization and operation or proposed 
operation of the Registrant. Include the information specified 
below.
    (a) Depositor. Provide the name and address of the Depositor.
    (b) Registrant. Briefly describe the Registrant. Include a 
statement indicating that:
    (1) Income, gains, and losses credited to, or charged against, 
the Registrant reflect the Registrant's own investment experience 
and not the investment experience of the Depositor's other assets;
    (2) The assets of the Registrant may not be used to pay any 
liabilities of the Depositor other than those arising from the 
Contracts; and
    (3) The Depositor is obligated to pay all amounts promised to 
Contractowners under the Contracts.
    (c) Portfolio Companies. Briefly describe the Registrant's sub-
accounts and each Portfolio Company. For each Portfolio Company, 
include:
    (1) Its name;
    (2) Its type (e.g., money market fund, bond fund, balanced fund, 
etc.) or a brief statement concerning its investment objectives; and
    (3) Its investment adviser and any sub-investment adviser.
    Instructions.
    1. Do not describe sub-accounts that fund obligations of the 
Depositor under contracts that are not offered by this prospectus.
    2. Registrants are not required to include detailed information 
about Portfolio Companies in the prospectus. If a Portfolio 
Company's name describes its type, a Registrant need not separately 
provide the Portfolio Company's type or a statement concerning its 
investment objectives.
    (d) Portfolio Company Prospectus. State conspicuously how 
investors may obtain a prospectus and, if available, a fund profile, 
containing more complete information on each Portfolio Company.
    (e) Voting. Concisely discuss the rights of Contractowners to 
instruct the Depositor on the voting of shares of the Portfolio 
Companies, including the manner in which votes will be allocated.

Item 5. Charges

    (a) Description. Briefly describe all charges deducted from 
premiums, cash value, assets of the Registrant, or any other source 
(e.g., sales loads, premium and other taxes, administrative and 
transaction charges, risk charges, contract loan charges, cost of 
insurance, and rider charges). Indicate whether each charge will be 
deducted from premium payments, cash value, the Registrant's assets, 
the proceeds of withdrawals or surrenders, or some other source. 
When possible, specify the amount of any charge as a percentage or 
dollar figure (e.g., 0.95% of average daily net assets, $5 per 
exchange, $5 per thousand dollars of face amount). For recurring 
charges, specify the frequency of the deduction (e.g., daily, 
monthly, annually). Identify the person who receives the amount 
deducted, briefly explain what is provided in consideration for the 
charges, and explain the extent to which any charge can be modified. 
Where it is possible to identify what is provided in consideration 
for a particular charge (e.g., use of sales load to pay distribution 
costs, use of cost of insurance charge to pay for insurance 
coverage), please explain what is provided in consideration for that 
charge separately.
    Instructions.
    1. Describe the sales loads applicable to the Contract and how 
sales loads are charged and calculated, including the factors 
affecting the computation of the amount of the sales load. If the 
Contract has a front-end sales load, describe the sales load as a 
percentage of the applicable measure of premium payments (e.g., 
actual premiums paid, target or guideline premiums). For Contracts 
with a deferred sales load, describe the sales load as a percentage 
of the applicable measure of premium payments (or other basis) that 
the deferred sales load may represent. Percentages should be shown 
in a table. Identify any events on which a deferred sales load is 
deducted (e.g., surrender, partial surrender, increase or decrease 
in face amount). The description of any deferred

[[Page 19877]]

sales load should include how the deduction will be allocated among 
sub-accounts of the Registrant and when, if ever, the sales load 
will be waived (e.g., if the Contract provides a free withdrawal 
amount).
    2. Identify the factors that determine the applicable cost of 
insurance rate. Specify whether the mortality charges guaranteed in 
the contracts differ from the current charges. Identify the factors 
that affect the amount at risk, including investment performance, 
payment of premiums, and charges. Disclose how the cost of insurance 
charge is calculated based on the cost of insurance rate, amount at 
risk, and any other applicable factors. If the Depositor intends to 
use simplified underwriting or other underwriting methods that would 
cause healthy individuals to pay higher cost of insurance rates than 
they would pay under a substantially similar policy that is offered 
by the Depositor using different underwriting methods, state that 
the cost of insurance rates are higher for healthy individuals when 
this method of underwriting is used than under the substantially 
similar policy.
    3. If the Contract's charge for premium or other taxes varies 
according to jurisdiction, identification of the range of current 
premium or other taxes is sufficient.
    4. Identify charges that may be different in amount or method of 
computation when imposed in connection with, or subsequent to, 
increases in face amount of a Contract and briefly describe the 
differences.
    (b) Portfolio Company Charges. State that charges are deducted 
from and expenses paid out of the assets of the Portfolio Companies 
that are described in the prospectuses for those companies.
    (c) Incidental Insurance Charges. If incidental insurance 
benefits (as defined in Rules 6e-2 and 6e-3(T) [17 CFR 270.6e-2, 17 
CFR 270.6e-3(T)]) are offered along with the Contract, state that 
charges also will be made for those benefits.

Item 6. General Description of Contracts

    (a) Contract Rights. Identify the person or persons (e.g., the 
Contractowner, insured, or beneficiary) who have material rights 
under the Contracts, and the nature of those rights.
    (b) Contract Limitations. Briefly describe any provisions for 
and limitations on:
    (1) Allocation of premiums among sub-accounts of the Registrant;
    (2) Transfer of Contract values between sub-accounts of the 
Registrant; and
    (3) Conversion or exchange of Contracts for another contract, 
including a fixed or variable annuity or life insurance contract.
    Instruction. In discussing conversion or exchange of Contracts, 
the Registrant should include any time limits on conversion or 
exchange, the name of the company issuing the other contract and 
whether that company is affiliated with the issuer of the Contract, 
and how the cash value of the Contract will be affected by the 
conversion or exchange.
    (c) Contract or Registrant Changes. Briefly describe the changes 
that can be made in the Contracts or the operations of the 
Registrant by the Registrant or the Depositor, including:
    (1) Why a change may be made (e.g., changes in applicable law or 
interpretations of law);
    (2) Who, if anyone, must approve any change (e.g., the 
Contractowner or the Commission); and
    (3) Who, if anyone, must be notified of any change.
    Instruction. Describe only those changes that would be material 
to a purchaser of the Contracts, such as a reservation of the right 
to deregister the Registrant under the Investment Company Act. Do 
not describe possible non-material changes, such as changing the 
time of day at which Contract values are determined.
    (d) Other Benefits. Identify any other material incidental 
benefits in the Contracts.
    (e) Class of Purchasers. Disclose any limitations on the class 
or classes of purchasers to whom the Contracts are being offered.

Item 7. Premiums

    (a) Purchase Procedures. Describe the provisions of the Contract 
that relate to premiums and the procedures for purchasing a 
Contract, including:
    (1) The minimum initial and subsequent premiums required and any 
limitations on the amount and the frequency of premiums that will be 
accepted. If there are separate limits for each sub-account, state 
these limits;
    (2) Whether required premiums, if any, are payable for the life 
of the Contract or some other term;
    (3) Whether payment of certain levels of premiums will guarantee 
that the Contract will not lapse regardless of the Contract's cash 
value;
    (4) If applicable, under what circumstances premiums may be 
required in order to avoid lapse and how the amount of the 
additional premiums will be determined;
    (5) If applicable, under what circumstances nonpayment of a 
required premium will not cause the Contract to lapse;
    (6) If applicable, under what circumstances premiums in addition 
to the required premiums will be permitted; and
    (7) If applicable, whether the level of the Contract's required 
premiums may change and, if so, how the amount of the change will be 
determined.
    (b) Premium Amount. Briefly describe the factors that determine 
the amount of any required premiums (e.g., face amount, death 
benefit option, and charges and expenses).
    (c) Premium Payment Plans. Identify the premium payment plans 
available. Include the available payment frequencies, payment 
facilities such as employee payroll deduction plans and 
preauthorized checking arrangements, and any special billing 
arrangements. Indicate whether the premium payment plan or schedule 
may be changed.
    (d) Premium Due Dates. Briefly explain the provisions of the 
Contract that relate to premium due dates and the operation of any 
grace period, including the effect of the insured's death during the 
grace period.
    (e) Automatic Premium Loans. If applicable, briefly describe the 
circumstances under which required premiums may be paid by means of 
an automatic premium loan.
    (f) Sub-Account Valuation. Describe the procedures for valuing 
sub-account assets, including:
    (1) An explanation of when the required premiums and additional 
premiums are credited to the Contract's cash value in the sub-
accounts, and the basis (e.g., accumulation unit value) on which 
premiums are credited;
    (2) An explanation, to the extent applicable, that premiums are 
credited to the Contract's cash value on the basis of the sub-
account valuation next determined after receipt of a premium;
    Instruction. If, in any case, a delay occurs between the receipt 
of premiums and the crediting of premiums to the sub-accounts (e.g., 
a delay during the ``free-look'' period), describe where the 
premiums are held in the interim.
    (3) An explanation of when valuations of the assets of the sub-
accounts are made; and
    (4) A statement identifying in a general manner any national 
holidays when sub-account assets will not be valued and specifying 
any additional local or regional holidays when sub-account assets 
will not be valued.
    Instruction. In responding to this paragraph, a Registrant may 
use a list of specific days or any other means that effectively 
communicates the information (e.g., explaining that sub-account 
assets will not be valued on the days on which the New York Stock 
Exchange is closed for trading).

Item 8. Death Benefits and Contract Values

    (a) Death Benefits. Briefly describe the death benefits 
available under the Contract.
    Instruction. Include:
    (i) When insurance coverage is effective;
    (ii) When the death benefit is calculated and payable;
    (iii) How the death benefit is calculated;
    (iv) Who has the right to choose the form of benefit and the 
procedure for choosing the form of benefit, including when the 
choice is made and whether the choice is revocable;
    (v) The forms the benefit may take and the form of benefit that 
will be provided if a particular form has not been elected; and
    (vi) Whether there is a minimum death benefit guarantee 
associated with the Contract.
    Also describe if and how a Contractowner may increase or 
decrease the face amount, including the minimum and the maximum 
amounts, any requirement of additional evidence of insurability, and 
whether charges, including sales load, are affected.
    (b) Charges and Contract Values. Explain how the investment 
performance of the Portfolio Companies, expenses, and deduction of 
charges affect Contract values and death benefits.

Item 9. Surrenders, Partial Surrenders, and Partial Withdrawals

    (a) Surrender. Briefly describe how a Contractowner can 
surrender a Contract, including any limits on the ability to 
surrender, how the proceeds are calculated, and when they are 
payable.
    (b) Partial Surrender and Withdrawal. Indicate generally whether 
and under what circumstances partial surrenders and partial 
withdrawals are available under a Contract, including the minimum 
and maximum amounts that may be surrendered or withdrawn, any limits 
on their availability, how the proceeds are calculated, and when the 
proceeds are payable.

[[Page 19878]]

    (c) Effect of Partial Surrender and Withdrawal. Briefly describe 
whether partial surrenders or partial withdrawals will affect a 
Contract's cash value or death benefit and whether any charge(s) 
will apply.
    (d) Sub-Account Allocation. Describe how partial surrenders and 
partial withdrawals will be allocated among the sub-accounts.
    Instruction. The Registrant should generally describe the terms 
and conditions that apply to these transactions. Technical 
information regarding the determination of amounts available to be 
surrendered or withdrawn should be included in the SAI.
    (e) Revocation Rights. Briefly describe any revocation rights 
(e.g., ``free-look'' provisions), including a description of how the 
amount refunded is determined, the method for crediting earnings to 
premiums during the free-look period, and whether investment options 
are limited during the free-look period.

Item 10. Loans

    Briefly describe the loan provisions of the Contract, including 
any of the following that are applicable.
    (a) Availability of Loans. A brief statement that a portion of 
the Contract's cash surrender value may be borrowed.
    (b) Limitations. Any limits on availability of loans (e.g., a 
prohibition on loans during the first contract year).
    (c) Interest. A statement of the amount of interest charged on 
the loan and the amount of interest credited to the Contract in 
connection with the loaned amount.
    (d) Effect on Cash Value and Death Benefit. A brief explanation 
that amounts borrowed under a Contract do not participate in a 
Registrant's investment experience and that loans, therefore, can 
affect the Contract's cash value and death benefit whether or not 
the loan is repaid. Also, a brief explanation that the cash 
surrender value and the death proceeds payable will be reduced by 
the amount of any outstanding Contract loan plus accrued interest.
    (e) Procedures. The loan procedures, including how and when 
amounts borrowed are transferred out of the Registrant and how and 
when amounts repaid are credited to the Registrant.

Item 11. Lapse and Reinstatement

    (a) Lapse. State when and under what circumstances a Contract will 
lapse.
    (b) Lapse Options. Describe briefly any lapse options available. 
Indicate those that will not apply unless they are elected and those 
that will apply in the absence of an election. Indicate whether the 
availability of any of the lapse options is limited.
    (c) Effect of Lapse. Describe briefly the factors that will 
determine the amount of insurance coverage provided under the available 
lapse options. Describe concisely how the cash value, surrender value, 
and death benefit will be determined. If these values and benefits will 
be determined in the same manner as prior to lapse, a statement to that 
effect is sufficient.
    (d) Reinstatement. State under what circumstances a Contract may be 
reinstated. Explain any requirements for reinstatement, including 
charges to be paid by the Contractowner, outstanding loan repayments, 
and evidence of insurability.

 Item 12.Taxes

    (a) Tax Consequences. Describe the material tax consequences to the 
Contractowner and beneficiary of buying, holding, exchanging, or 
exercising rights under the Contract.
    Instruction. Discuss the taxation of death benefit proceeds, 
periodic and non-periodic withdrawals, loans, and any other 
distribution that may be received under the Contract, as well as the 
tax benefits accorded the Contract and other material tax consequences. 
Describe, if applicable, whether the tax consequences vary with 
different uses of the Contract.
    (b) Effect. Describe the effect, if any, of taxation on the 
determination of cash values or sub-account values.

Item 13. Legal Proceedings

    Describe any material pending legal proceedings, other than 
ordinary routine litigation incidental to the business, to which the 
Registrant, the Registrant's principal underwriter, or the Depositor is 
a party. Include the name of the court in which the proceedings are 
pending, the date instituted, the principal parties involved, a 
description of the factual basis alleged to underlie the proceeding, 
and the relief sought. Include similar information as to any legal 
proceedings instituted, or known to be contemplated, by a governmental 
authority.
    Instruction. For purposes of this requirement, legal proceedings 
are material only to the extent that they are likely to have a material 
adverse effect on the Registrant, the ability of the principal 
underwriter to perform its contract with the Registrant, or the ability 
of the Depositor to meet its obligations under the Contracts.

Item 14. Financial Statements

    If all of the required financial statements of the Registrant and 
the Depositor (see Item 24) are not in the prospectus, state, under a 
separate caption, where the financial statements may be found. Briefly 
explain how investors may obtain any financial statements not in the 
Statement of Additional Information.

Part B: Information Required in a Statement of Additional 
Information

Item 15. Cover Page and Table of Contents

    (a) Front Cover Page. Include the following information on the 
outside front cover page of the SAI:
    (1) The Registrant's name.
    (2) The Depositor's name.
    (3) A statement or statements:
    (A) That the SAI is not a prospectus;
    (B) How the prospectus may be obtained; and
    (C) Whether and from where information is incorporated by reference 
into the SAI, as permitted by General Instruction D.
    Instruction. Any information incorporated by reference into the SAI 
must be delivered with the SAI.
    (4) The date of the SAI and of the prospectus to which the SAI 
relates.
    (b) Table of Contents. Include under appropriate captions (and 
subcaptions) a list of the contents of the SAI and, when useful, 
provide cross-references to related disclosure in the prospectus.

Item 16. General Information and History

    (a) Depositor. Provide the date and form of organization of the 
Depositor, the name of the state or other jurisdiction in which the 
Depositor is organized, and a description of the general nature of the 
Depositor's business.
    Instruction. The description of the Depositor's business should be 
short and need not list all of the businesses in which the Depositor 
engages or identify the jurisdictions in which it does business if a 
general description (e.g., ``life insurance'' or ``reinsurance'') is 
provided.
    (b) Registrant. Provide the date and form of organization of the 
Registrant and the Registrant's classification pursuant to Section 4 
[15 U.S.C. 80a-4] (i.e., a separate account and a unit investment 
trust).
    (c) History of Depositor and Registrant. If the Depositor's name 
was changed during the past five years, state its former name and the 
approximate date on which it was changed. If, at the request of any 
state, sales of contracts offered by the Registrant have been suspended 
at any time, or if sales of contracts offered by the Depositor have 
been suspended during the past five years, briefly describe the reasons 
for and results of the suspension. Briefly describe the nature and 
results of any bankruptcy, receivership, or similar proceeding, or any 
other material reorganization, readjustment, or

[[Page 19879]]

succession of Depositor during the past five years.
    (d) Ownership of Sub-Account Assets. If 10 percent or more of the 
assets of any sub-account are not attributable to Contracts or to 
accumulated deductions or reserves (e.g., initial capital contributed 
by the Depositor), state what percentage those assets are of the total 
assets of the Registrant. If the Depositor, or any other person 
controlling the assets, has any present intention of removing the 
assets from the sub-account, so state.
    (e) Control of Depositor. State the name of each person who 
controls the Depositor and the nature of its business.
    Instruction. If the Depositor is controlled by another person that, 
in turn, is controlled by another person, give the name of each control 
person and the nature of its business.

Item 17. Services

    (a) Expenses Paid by Third Parties. Describe all fees, expenses, 
and costs of the Registrant that are to be paid by persons other than 
the Depositor or the Registrant, and identify those persons.
    (b) Service Agreements. Summarize the substantive provisions of any 
management-related service contract that may be of interest to a 
purchaser of the Registrant's securities, under which services are 
provided to the Registrant, unless the contract is described in 
response to some other item of this form. Indicate the parties to the 
contract, and the total dollars paid and by whom for each of the past 
three years.
    Instructions.
    1. The term ``management-related service contract'' includes any 
contract with the Registrant to keep, prepare, or file accounts, books, 
records, or other documents required under federal or state law, or to 
provide any similar services with respect to the daily administration 
of the Registrant, but does not include the following:
    (a) Any agreement with the Registrant to act as custodian or agent 
to administer purchases and redemptions under the Contracts; and
    (b) Any contract with the Registrant for outside legal or auditing 
services, or contract for personal employment entered into with the 
Registrant in the ordinary course of business.
    2. In summarizing the substantive provisions of any management-
related service contract, include the following:
    (a) The name of the person providing the service;
    (b) The direct or indirect relationships, if any, of the person 
with the Registrant, its Depositor, or its principal underwriter; and
    (c) The nature of the services provided, and the basis of the 
compensation paid for the services for the Registrant's last three 
fiscal years.
    (c) Other Service Providers.
    (1) Unless disclosed in response to paragraph (b) or another item 
of this form, identify and state the principal business address of any 
person who provides significant administrative or business affairs 
management services for the Registrant (e.g., an ``Administrator,'' 
``Sub-Administrator,'' ``Servicing Agent''), describe the services 
provided, and the compensation paid for the services.
    (2) State the name and principal business address of the 
Registrant's custodian and independent public accountant and describe 
generally the services performed by each.
    (3) If the Registrant's assets are held by a person other than the 
Depositor, a commercial bank, trust company, or depository registered 
with the Commission as custodian, state the nature of the business of 
that person.
    (4) If an affiliated person of the Registrant or the Depositor, or 
an affiliated person of the affiliated person, acts as administrative 
or servicing agent for the Registrant, describe the services the person 
performs and the basis for remuneration. State, for the past three 
years, the total dollars paid for the services, and by whom.
    Instruction. No disclosure need be given in response to paragraph 
(c)(4) of this item for an administrative or servicing agent who is 
also the Depositor.
    (5) If the Depositor is the principal underwriter of the Contracts, 
so state.

Item 18. Premiums

    (a) Administrative Procedures. Discuss generally the Registrant's 
administrative rules applicable to premium payments, to the extent that 
they are not discussed in the prospectus.
    Instruction. Examples include information regarding any condition 
applicable to changes in premium payment schedules, any limitations on 
prepayments of premiums, any relevant rules for classifying payments 
made other than in response to a bill or in an amount other than the 
amount billed for, etc.
    (b) Automatic Premium Loans. If the contract provides an automatic 
premium loan option, describe the option, including the circumstances 
under which it will be used to pay a required premium and whether, and 
how, interest will be charged on the loan. Describe any effect not 
described in the prospectus that an automatic premium loan could have 
on the Contract (e.g., how automatic premium loans affect cash value).

Item 19. Additional Information About Operation of Contracts and 
Registrant

    (a) Incidental Benefits. To the extent not described in the 
prospectus, explain the manner in which the purchase or operation of 
other incidental benefits affects the exercise of rights and the 
determination of benefits under the Contract such as whether the 
Contract or any rider provides for a change of insured or for all or a 
portion of the death benefit to be paid while the insured is still 
alive.
    (b) Surrender and Withdrawal. To the extent not described in the 
prospectus, explain the Contract's surrender and withdrawal provisions.
    (c) Material Contracts Relating to the Registrant. Disclose any 
material contract relating to the operation or administration of the 
Registrant.

Item 20. Underwriters

    (a) Identification. Identify each principal underwriter (other than 
the Depositor) of the Contracts, and state its principal business 
address. If the principal underwriter is affiliated with the 
Registrant, the Depositor, or any affiliated person of the Registrant 
or the Depositor, identify how they are affiliated (e.g., the principal 
underwriter is controlled by the Depositor).
    (b) Offering and Commissions. For each principal underwriter 
distributing Contracts of the Registrant, state:
    (1) Whether the offering is continuous; and
    (2) the aggregate dollar amount of underwriting commissions paid 
to, and the amount retained by, the principal underwriter for each of 
the Registrant's last three fiscal years.
    (c) Other Payments. With respect to any payments made by the 
Registrant to an underwriter of or dealer in the Contracts during the 
Registrant's last fiscal year, disclose the name and address of the 
underwriter or dealer, the amount paid and basis for determining that 
amount, the circumstances surrounding the payments, and the 
consideration received by the Registrant. Do not include information 
about:
    (1) Payments made through deduction from premiums paid at the time 
of sale of the Contracts; or
    (2) Payments made from cash values upon full or partial surrender 
of the Contracts or from an increase or decrease in the face amount of 
the Contracts.
    Instructions.

[[Page 19880]]

    1. Information need not be given about the service of mailing 
proxies or periodic reports of the Registrant.
    2. Information need not be given about any service for which total 
payments of less than $5,000 were made during each of the Registrant's 
last three fiscal years.
    3. Information need not be given about payments made under any 
contract to act as administrative or servicing agent.
    4. If the payments were made under an arrangement or policy 
applicable to dealers generally, describe only the arrangement or 
policy.
    (d) Commissions to Dealers. State the commissions paid to dealers 
as a percentage of premiums.

Item 21. Additional Information About Charges

    (a) Sales Load. Describe the method that will be used to determine 
the sales load on the Contracts offered by the Registrant.
    (b) Special Purchase Plans. Describe any special purchase plans 
(e.g., group life insurance plans) or methods that reflect scheduled 
variations in, or elimination of, any applicable charges (e.g., group 
discounts, waiver of deferred sales loads for a specified percentage of 
cash value, investment of proceeds from another Contract, exchange 
privileges, employee benefit plans, or the terms of a merger, 
acquisition, or exchange offer made pursuant to a plan of 
reorganization). Identify each class of individuals or transactions to 
which the plans or methods apply, including officers, directors, 
members of the board of managers, or employees of the Depositor, 
underwriter, Portfolio Companies, or investment adviser to Portfolio 
Companies, and the amount of the reductions, and state from whom 
additional information may be obtained. For special purchase plans or 
methods that reflect variations in, or elimination of, charges other 
than according to a fixed schedule, describe the basis for the 
variation or elimination (e.g., the size of the purchaser, a prior 
existing relationship with the purchaser, the purchaser's assumption of 
certain administrative functions, or other characteristics that result 
in differences in costs or services).
    (c) Underwriting Procedures. Briefly identify underwriting 
procedures used in connection with the Contract and any effect of 
different types of underwriting on the charges in the Contract. Specify 
the basis of the mortality charges guaranteed in the Contracts.
    (d) Increases in Face Amount. Describe in more detail the charges 
assessed on increases in face amount, including the procedures used 
following an increase in face amount to allocate cash values and 
premium payments between the original Contract and incremental 
Contracts.

Item 22. Lapse and Reinstatement

    To the extent that the prospectus does not do so, describe the 
lapse and reinstatement provisions of the Contract. Include a 
discussion of any time limits that apply, how the charge to reinstate 
is determined, and any other conditions that apply to reinstatement. 
Describe the features of any lapse options not described in the 
prospectus, including any factors that will determine the amount or 
duration of the insurance coverage, and the limitations and conditions 
on availability of each lapse option. Identify which contract 
transactions (e.g., loans, partial withdrawals and surrenders, 
transfers) are available while the Contract is continued under a lapse 
option. Indicate when limits on contract transactions are different 
from those that apply prior to lapse.

Item 23. Loans

    (a) Loan Provisions. To the extent that the prospectus does not do 
so, explain the loan provisions of the Contract.
    (b) Amount Available. State how the amount available for a policy 
loan is calculated.
    (c) Effect on Cash Value and Sub-Accounts. Describe how loans and 
loan repayments affect cash value and how they are allocated among the 
sub-accounts.
    (d) Interest. Describe how interest accrues on the loan, when it is 
payable, and how interest is treated if not paid. Explain how interest 
earned on the loaned amount is credited to the Contract and allocated 
to the sub-accounts.
    (e) Other Effects. Describe any other effect not already described 
in the prospectus that a loan could have on the Contract (e.g., the 
effect of a Contract loan in excess of cash value).

Item 24. Financial Statements

    (a) Registrant. Provide financial statements of the Registrant.
    Instruction. Include, in a separate section, the financial 
statements and schedules required by Regulation S-X [17 CFR 210]. 
Financial statements of the Registrant may be limited to:
    (i) An audited balance sheet or statement of assets and liabilities 
as of the end of the most recent fiscal year;
    (ii) An audited statement of operations for the most recent fiscal 
year conforming to the requirements of Rule 6-07 of Regulation S-X [17 
CFR 210.6-07];
    (iii) An audited statement of cash flows for the most recent fiscal 
year if necessary to comply with generally accepted accounting 
principles; and
    (iv) Audited statements of changes in net assets conforming to the 
requirements of Rule 6-09 of Regulation S-X [17 CFR 210.6-09] for the 
two most recent fiscal years.
    (b) Depositor. Provide financial statements of the Depositor.
    Instructions.
    1. Include, in a separate section, the financial statements and 
schedules of the Depositor required by Regulation S-X. If the Depositor 
would not have to prepare financial statements in accordance with 
generally accepted accounting principles except for use in this 
registration statement or other registration statements filed on Forms 
N-3, N-4, or N-6, its financial statements may be prepared in 
accordance with statutory requirements. The Depositor's financial 
statements must be prepared in accordance with generally accepted 
accounting principles if the Depositor prepares financial information 
in accordance with generally accepted accounting principles for use by 
the Depositor's parent, as defined in Rule 1-02(p) of Regulation S-X 
[17 CFR 210.1-02(p)], in any report under sections 13(a) and 15(d) of 
the Securities Exchange Act [15 U.S.C. 78m(a) and 78o(d)] or any 
registration statement filed under the Securities Act.
    2. All statements and schedules of the Depositor required by 
Regulation S-X, except for the consolidated balance sheets described in 
Rule 3-01 of Regulation S-X [17 CFR 210.3-01], and any notes to these 
statements or schedules, may be omitted from Part B and instead 
included in Part C of the registration statement. If any of this 
information is omitted from Part B and included in Part C, the 
consolidated balance sheets included in Part B should be accompanied by 
a statement that additional financial information about the Depositor 
is available, without charge, upon request. When a request for the 
additional financial information is received, the Registrant should 
send the information within 3 business days of receipt of the request, 
by first-class mail or other means designed to ensure equally prompt 
delivery.
    3. Notwithstanding Rule 3-12 of Regulation S-X [17 CFR 210.3-12], 
the financial statements of the Depositor need not be more current than 
as of the end of the most recent fiscal year of the Depositor. In 
addition, when the anticipated effective date of a

[[Page 19881]]

registration statement falls within 90 days subsequent to the end of 
the fiscal year of the Depositor, the registration statement need not 
include financial statements of the Depositor more current than as of 
the end of the third fiscal quarter of the most recently completed 
fiscal year of the Depositor unless the audited financial statements 
for such fiscal year are available. The exceptions to Rule 3-12 of 
Regulation S-X contained in this Instruction 3 do not apply when:
    (i) The Depositor's financial statements have never been included 
in an effective registration statement under the Securities Act of a 
separate account that offers variable annuity contracts or variable 
life insurance contracts; or
    (ii) The balance sheet of the Depositor at the end of either of the 
two most recent fiscal years included in response to this Item shows a 
combined capital and surplus, if a stock company, or an unassigned 
surplus, if a mutual company, of less than $1,000,000; or
    (iii) The balance sheet of the Depositor at the end of a fiscal 
quarter within 135 days of the expected date of effectiveness under the 
Securities Act (or a fiscal quarter within 90 days of filing if the 
registration statement is filed solely under the Investment Company 
Act) would show a combined capital and surplus, if a stock company, or 
an unassigned surplus, if a mutual company, of less than $1,000,000. If 
two fiscal quarters end within the 135 day period, the Depositor may 
choose either for purposes of this test.
    Any interim financial statements required by this Item need not be 
comparative with financial statements for the same interim period of an 
earlier year.

Item 25. Performance Data

    (a) Calculation. If the Registrant advertises any performance data, 
include an explanation of how performance is calculated, whether the 
data reflects all charges, the nature of any charges that are not 
reflected in the data, and the effect on performance of excluding those 
charges. If the Registrant advertises its performance calculated in 
more than one manner, briefly explain the material differences between 
the calculations.
    (b) Quotation. For each sub-account for which the Registrant 
advertises any performance data, furnish:
    (1) a quotation of performance, computed by each of the methods 
used in advertising; and
    (2) the length of and the last day in the period used in computing 
the quotation.

Item 26. Illustrations

    The Registrant may, but is not required to, include a table of 
hypothetical illustrations of death benefits, cash surrender values, 
and cash values in either the prospectus or the SAI. The following 
standards should be used to prepare any table of hypothetical 
illustrations that is included in the prospectus or the SAI:
    (a) Narrative Information. The illustrations should be preceded by 
a clear and concise explanation, including (i) a description of the 
expenses reflected in the illustrations; (ii) that the illustrations 
are based on assumptions about investment returns and Contractowner 
characteristics; (iii) the circumstances under which actual results for 
a particular purchaser of the Contract would differ from the 
illustrations; and (iv) whether personalized illustrations are 
available and, if available, how they may be obtained.
    (b) Headings. The headings should contain the following 
information: sex, age, rating classification (e.g., nonsmoker, smoker, 
preferred, or standard), premium amount and payment schedule, face 
amount, and death benefit option.
    (c) Premiums, Ages. Premium amounts used in the illustrations 
should be representative of the actual or expected typical premium 
amount. The typical premium amount may be based on the average or 
median premium amount or some other reasonable basis that results in a 
typical premium amount that is fairly representative of actual or 
expected Contract sales. Ages used in the illustrations should be 
representative of actual or expected Contract sales.
    (d) Rating Classifications. Illustrations should be shown for the 
rating classification with the greatest number of outstanding Contracts 
(or expected Contracts in the case of a new Contract), unless this 
rating classification is not fairly representative of actual or 
expected Contract sales. In this case, illustrations should be shown 
for a commonly used rating classification that is fairly representative 
of actual or expected Contract sales.
    (e) Years. Illustrated values should be provided for Contract years 
one through ten, for every five years beyond the tenth Contract year, 
and for the year of Contract maturity.
    (f) Illustrated Values. Death benefits and cash surrender values 
should be illustrated at three rates of return and two levels of 
charges (described in paragraphs (g) and (i)). The Registrant may also 
illustrate cash values, but cash values must be accompanied by 
corresponding cash surrender values. All illustrated values should be 
determined as of the end of the Contract year.
    (g) Rates of Return. The Registrant should use gross rates of 
return of 0%, 6%, and one other rate not greater than 12%. Additional 
gross rates of return no greater than 12% may be used. Explain that the 
gross rates of return used in the illustrations do not reflect the 
deductions of the charges and expenses of the Portfolio Companies.
    (h) Portfolio Company Charges. Portfolio Company management fees 
and other Portfolio Company charges and expenses should be reflected 
using the arithmetic average of those charges and expenses incurred 
during the most recent fiscal year for all of the available Portfolio 
Companies or any materially greater amount expected to be incurred 
during the current fiscal year. In determining charges and expenses 
incurred during the most recent fiscal year or expected to be incurred 
during the current fiscal year, include amounts that would have been 
incurred absent expense reimbursement or fee waiver arrangements.
    (i) Other Charges. Values should be illustrated using both current 
and guaranteed maximum charges at the 0% rate of return, the 6% rate of 
return, and one other rate of return no greater than 12%. Illustrated 
values should accurately reflect all charges deducted under the 
Contract (e.g., mortality and expense risk, administrative, cost of 
insurance) as well as the actual timing of the deduction of those 
charges (e.g., daily, monthly, annually). For example, for a Contract 
with a mortality and expense risk charge that is deducted from sub-
account assets at a given annual rate, the illustrated values will be 
lower if the charge is deducted from assets on a daily basis rather 
than on a monthly or annual basis.
    (j) Additional Information. Subject to the requirement set out in 
General Instruction C.3.(b), additional information may be shown as 
part of the illustrations, provided that it is consistent with the 
standards of this Item 26.

Part C: Other Information

Item 27. Exhibits

    Subject to General Instruction D regarding incorporation by 
reference and rule 483 under the Securities Act [17 CFR 230.483], file 
the exhibits listed below as part of the registration statement. Letter 
or number the exhibits in the sequence indicated and file copies rather 
than originals, unless

[[Page 19882]]

otherwise required by rule 483. Reflect any exhibit incorporated by 
reference in the list below and identify the previously filed document 
containing the incorporated material.
    (a) Board of Directors Resolution. The resolution of the board of 
directors of the Depositor authorizing the establishment of the 
Registrant.
    (b) Custodian Agreements. All agreements for custody of securities 
and similar investments of the Registrant, including the schedule of 
remuneration.
    (c) Underwriting Contracts. Underwriting or distribution contracts 
between the Registrant or Depositor and a principal underwriter and 
agreements between principal underwriters or the Depositor and dealers.
    (d) Contracts. The form of each Contract, including any riders or 
endorsements.
    (e) Applications. The form of application used with any Contract 
provided in response to (d) above.
    (f) Depositor's Certificate of Incorporation and By-Laws. The 
Depositor's current certificate of incorporation or other instrument of 
organization and by-laws and any related amendment.
    (g) Reinsurance Contracts. Any contract of reinsurance related to a 
Contract.
    (h) Participation Agreements. Any participation agreement or other 
contract relating to the investment by the Registrant in a Portfolio 
Company.
    (i) Administrative Contracts. Any contract relating to the 
performance of administrative services in connection with administering 
a Contract.
    (j) Other Material Contracts. Other material contracts not made in 
the ordinary course of business to be performed in whole or in part on 
or after the filing date of the registration statement.
    (k) Legal Opinion. An opinion and consent of counsel regarding the 
legality of the securities being registered, stating whether the 
securities will, when sold, be legally issued and represent binding 
obligations of the Depositor.
    (l) Actuarial Opinion. If illustrations are included in the 
registration statement as permitted by Item 26, an opinion of an 
actuarial officer of the Depositor as to those illustrations indicating 
that:
    (1) the illustrations of cash surrender values, cash values, death 
benefits, and/or any other values illustrated are consistent with the 
provisions of the Contract and the Depositor's administrative 
procedures;
    (2) the rate structure of the Contract has not been designed, and 
the assumptions for the illustrations (including sex, age, rating 
classification, and premium amount and payment schedule) have not been 
selected, so as to make the relationship between premiums and benefits, 
as shown in the illustrations, appear to be materially more favorable 
than for any other prospective purchaser with different assumptions; 
and
    (3) the illustrations are based on a commonly used rating 
classification and premium amounts and ages appropriate for the markets 
in which the Contract is sold.
    (m) Calculation. If illustrations are included in the registration 
statement as permitted by Item 26, one sample calculation for each item 
illustrated, e.g., cash surrender value, cash value, and death 
benefits, showing how the illustrated values for the fifth Contract 
year have been calculated. Demonstrate how the annual investment 
returns of the sub-accounts were derived from the hypothetical gross 
rates of return, how charges against sub-account assets were deducted 
from the annual investment returns of the sub-accounts, and how the 
periodic deductions for cost of insurance and other Contract charges 
were made to arrive at the illustrated values. Describe how the 
calculation would differ for other years.
    (n) Other Opinions. Any other opinions, appraisals, or rulings, and 
related consents relied on in preparing the registration statement and 
required by section 7 of the Securities Act [15 U.S.C. 77g].
    (o) Omitted Financial Statements. Financial statements omitted from 
Item 24.
    (p) Initial Capital Agreements. Any agreements or understandings 
made in consideration for providing the initial capital between or 
among the Registrant, Depositor, underwriter, or initial Contractowners 
and written assurances from the Depositor or initial Contractowners 
that purchases were made for investment purposes and not with the 
intention of redeeming or reselling.
    (q) Redeemability Exemption. Disclosure (if not provided elsewhere 
in the registration statement) of insurance procedures for which the 
Registrant and Depositor claim any exemption pursuant to rule 6e-
2(b)(12)(ii) or rule 6e-3(T)(b)(12)(iii) under the Investment Company 
Act.

Item 28. Directors and Officers of the Depositor

    Provide the following information about each director or officer of 
the Depositor:

------------------------------------------------------------------------
   (1)  Name and Principal  Business     (2)  Positions and Offices with
                Address                             Depositor
------------------------------------------------------------------------
 
 

    Instruction. Registrants are required to provide the above 
information only for officers or directors who are engaged directly or 
indirectly in activities relating to the Registrant or the Contracts, 
and for executive officers including the Depositor's president, 
secretary, treasurer, and vice presidents who have authority to act as 
president in his or her absence.

Item 29. Persons Controlled by or Under Common Control With the 
Depositor or the Registrant

    Provide a list or diagram of all persons directly or indirectly 
controlled by or under common control with the Depositor or the 
Registrant. For any person controlled by another person, disclose the 
percentage of voting securities owned by the immediately controlling 
person or other basis of that person's control. For each company, also 
provide the state or other sovereign power under the laws of which the 
company is organized.
    Instructions.
    1. Include the Registrant and the Depositor in the list or diagram 
and show the relationship of each company to the Registrant and 
Depositor and to the other companies named, using cross-references if a 
company is controlled through direct ownership of its securities by two 
or more persons.
    2. Indicate with appropriate symbols subsidiaries that file 
separate financial statements, subsidiaries included in consolidated 
financial statements, or

[[Page 19883]]

unconsolidated subsidiaries included in group financial statements. 
Indicate for other subsidiaries why financial statements are not filed.

Item 30. Indemnification

    State the general effect of any contract, arrangements, or statute 
under which any underwriter or affiliated person of the Registrant is 
insured or indemnified against any liability incurred in his or her 
official capacity, other than insurance provided by any underwriter or 
affiliated person for his or her own protection.

Item 31. Principal Underwriters

    (a) Other Activity. State the name of each investment company 
(other than the Registrant) for which each principal underwriter 
currently distributing the Registrant's securities also acts as a 
principal underwriter, depositor, sponsor, or investment adviser.
    (b) Management. Provide the information required by the following 
table for each director, officer, or partner of each principal 
underwriter named in the response to Item 20:

------------------------------------------------------------------------
    (1)  Name and Principal Business     (2)  Positions and Offices with
                Address                            Underwriter
------------------------------------------------------------------------
 
 

    Instruction. If a principal underwriter is the Depositor or an 
affiliate of the Depositor, and is also an insurance company, the above 
information for officers or directors need only be provided for 
officers or directors who are engaged directly or indirectly in 
activities relating to the Registrant or the Contracts, and for 
executive officers including the Depositor's or its affiliate's 
president, secretary, treasurer, and vice presidents who have authority 
to act as president in his or her absence.
    (c) Compensation From the Registrant. Provide the information 
required by the following table for all commissions and other 
compensation received, directly or indirectly, from the Registrant 
during the Registrant's last fiscal year by each principal underwriter:

 
----------------------------------------------------------------------------------------------------------------
                                                       (3)  Compensation
                                       (2)  Net            on Events
     (1)  Name of Principal          Underwriting       Occasioning the     (4)  Brokerage        (5)  Other
           Underwriter               Discounts and      Deduction of a        Commissions        Compensation
                                      Commissions       Deferred Sales
                                                             Load
----------------------------------------------------------------------------------------------------------------
 
 

    Instructions.
    1. Disclose the type of services rendered in consideration for the 
compensation listed under column (5).
    2. Exclude information about bona fide contracts with the 
Registrant or its Depositor for outside legal or auditing services, or 
bona fide contracts for personal employment entered into with the 
Registrant or its Depositor in the ordinary course of business.
    3. Exclude information about any service for which total payments 
of less than $5,000 were made during each of the Registrant's last 
three fiscal years.
    4. Exclude information about payments made under any agreement 
whereby another person contracts with the Registrant or its Depositor 
to perform as custodian or administrative or servicing agent.

Item 32. Location of Accounts and Records

    State the name and address of each person maintaining physical 
possession of each account, book, or other document required to be 
maintained by section 31(a) [15 U.S.C. 80a30(a)] and the rules under 
that section.

Item 33. Management Services

    Provide a summary of the substantive provisions of any management-
related service contract not discussed in Part A or B, disclosing the 
parties to the contract and the total amount paid and by whom for the 
Registrant's last three fiscal years.
    Instructions.
    1. The instructions to Item 17 also apply to this Item.
    2. Exclude information about any service provided for payments 
totaling less than $5,000 during each of the Registrant's last three 
fiscal years.

Item 34. Fee Representation

    Provide a representation of the Depositor that the fees and charges 
deducted under the Contracts, in the aggregate, are reasonable in 
relation to the services rendered, the expenses expected to be 
incurred, and the risks assumed by the Depositor.

Signatures

    Pursuant to the requirements of (the Securities Act and) the 
Investment Company Act, the Registrant (certifies that it meets all of 
the requirements for effectiveness of this registration statement under 
rule 485(b) under the Securities Act and) has duly caused this 
registration statement to be signed on its behalf by the undersigned, 
duly authorized, in the City of ________, and State of ________on the 
day of ________, ____(Year)
----------------------------------------------------------------------
    Registrant
By--------------------------------------------------------------------
    (Signature and Title)

By--------------------------------------------------------------------
    (Depositor)

By--------------------------------------------------------------------
  (Name of officer of Depositor)--------------------------------------

    (Title)

    Instruction. If the registration statement is being filed only 
under the Securities Act or under both the Securities Act and the 
Investment Company Act, it should be signed by both the Registrant and 
the Depositor. If the registration statement is being filed only under 
the Investment Company Act, it should be signed only by the Registrant.
    Pursuant to the requirements of the Securities Act, this 
registration statement has been signed below by the following persons 
in the capacities and on the dates indicated.
(Signature)    (Title)    (Date)--------------------------------------

    Dated: April 12, 2002.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.

Appendix A

[Note: Appendix A to the preamble will not appear in the Code of 
Federal Regulations]

Regulatory Flexibility Act Certification

    I, Harvey L. Pitt, Chairman of the Securities and Exchange 
Commission, on information and belief, hereby certify, pursuant to 5 
U.S.C. 605(b), that Form N-6 and the related amendment to Form N-1A 
would not have a significant economic impact on a substantial number 
of small entities. Form

[[Page 19884]]

N-6 would be used by insurance company separate accounts registered 
as unit investment trusts that offer variable life insurance 
policies for registration under the Investment Company Act of 1940 
and offer securities under the Securities Act of 1933.
    Form N-6 generally would not have a significant economic impact 
on small entities. Few, if any, registered insurance company 
separate accounts have net assets of less than $50,000,000, when 
separate account assets are aggregated with the assets of the 
sponsoring insurance company. As a result, few, if any, small 
entities within the definitions contained in rule 0-10 under the 
Investment Company Act and rule 157 under the Securities Act would 
be affected by Form N-6.
    The amendment to Form N-1A, the registration form for open-end 
management investment companies, or mutual funds, would eliminate 
the current exclusion from the fee table requirement of Form N-1A 
for mutual funds that offer their shares exclusively as investment 
options for variable annuity contracts and variable life insurance 
policies, and would require that these funds include a fee table in 
their prospectuses.
    Few, if any, small entities within the definition provided in 
rule 0-10 under the Investment Company Act of 1940 would be affected 
by the amendment to Form N-1A. Moreover, the economic impact of the 
amendment would not be significant. A mutual fund that offers its 
shares exclusively as investment options for variable annuity 
contracts and variable life insurance policies would already provide 
fee table information to any issuer of variable annuity contracts or 
variable life insurance policies that includes such a mutual fund as 
an investment option, in order for the issuer to include this 
information in the prospectus for the variable annuity contract or 
variable life insurance policy. Accordingly, the amendment to Form 
N-1A would not have a significant economic impact on a substantial 
number of small entities.

    Dated: April 11, 2002.

Harvey L. Pitt,
Chairman.

[FR Doc. 02-9457 Filed 4-22-02; 8:45 am]
BILLING CODE 8010-01-P