Through June 30, 1940, policies having a total face amount of $27,260,008 have been surrendered for paid-up insurance, and 5,044 policies having a total face amount of $6,599,701.04 paid up insurance have been issued. Premium income.-United States Government life-insurance premiums are deposited to the credit of the United States Government life-insurance fund from which are paid claims on account of total permanent disability and death, dividends and refunds. During the fiscal year ended June 30, 1940, premiums amounting to $59,195,825.24 were received on United States Government life-insurance policies. The amount of United States Government life-insurance premiums received to date totals $1,121,535,253.04. United States Government life-insurance fund.-The United States. Government life-insurance fund is a trust fund administered by the Government as trustee for the sole benefit of the policyholders. The Government derives no profit whatever from the administration of the fund which may be used only for the payment of claims under United States Government life-insurance contracts and dividends to the policyholders themselves. All premiums paid on United States Government life insurance and all interest earned thereon are covered into this fund in the United States Treasury. In considering the United States Government life-insurance fund it must be clearly understood that the beneficial interest in the reserves belongs exclusively to the policyholders. Dividends.-Dividends on United States Government life insurance represent a return from the excess of the premiums paid over the actual current cost of the insurance protection, provided the reserves necessary to cover the future liability assumed on account of the combined benefits, including both total permanent disability and death, have been accumulated. All policies of United States Government life insurance include a provision granting benefits on account of total permanent disability, which is exceptionally valuable due to the fact that there is no limit as to the age before which such disability must occur. The premiums charged for this combined benefit, including both death and total permanent disability, are the net premiums for the death benefit only, based on the assumption that the deaths will occur in accordance with the American Experience Table of Mortality and that the invested funds will earn 31⁄2-percent interest. There is no loading added to the net premium for expenses, since the Government pays all the cost of administration as well as the losses resulting from the extra hazard of the military or naval service. The cost of providing the benefits on account of total permanent disability is not the same for all policyholders, but varies with the plan of insurance and the age of the insured. It is greater under the life plans than under the endowment plans for the reason that under the former the protection is continued for the whole period of life, while under the latter, it ceases at the end of the endowment period. Furthermore, the cost under any given plan increases with the age of the insured. Since no additional premium is charged for the benefit granted on account of total permanent disability, it is necessary to make pro vision for the cost of this benefit out of earnings which otherwise would be considered as surplus, if no benefit on account of total permanent disability were provided, before any part of these earnings can be distributed as dividends. The present schedule of dividend payments is the result of an extensive study made by competent and disinterested consulting actuaries of the experience over a period of years under United States Government life insurance and it equitably reflects the sources from which gains and savings are derived. Under this schedule, those policies on which the premiums and earnings to date have been adequate to build up the entire reserves required on account of both the death and total permanent disability benefits provided in the policy are entitled to and are receiving dividends. Those policies which have not yet accumulated the necessary reserves will not become entitled to dividends unless and until the reserves required have been accumulated. The rate of interest charged on loans secured by liens on United States Government life (converted) insurance was fixed by law at not more than 5 percent per annum on and after July 19, 1939. (Sec. 7, Public, No. 198, 76th Cong., approved July 19, 1939). This law reduces the rate of interest earned on funds invested in policy loans and thereby effects the amount of excess earnings available for distribution as dividends. There were 408,901 dividends amounting to $8,781,642.37 paid during the fiscal year ended June 30, 1940. The total dividends paid to date are 8,576,415 amounting to $101,195,972.07. Converted claims.-Through June 30, 1940, a total of 19,090 awards has been made for permanent and total disability of which 6,457 have subsequently been changed to death awards. In addition, there have been 37,460 original death awards or a total of 43,917 such cases. These death awards involved the payment of insurance in the amount of $251,618,687.72, of which $175,891,734.12 was disbursed in lumpsum payments to 32,715 beneficiaries. Death cases numbering 4,119 having insurance amounting to $17,405,663.15 have been terminated due to expiration of installment payments. Payments of converted insurance averaging $35.56 monthly are being made to 10,622 permanently and totally disabled veterans. During the calendar year 1939 awards were made to the beneficiaries of 2,636 deceased veterans, and 1,258 awards were made to veterans with permanent and total disabilities as compared with 2,697 and 1,187 respectively, during the calendar year 1938. An analysis of the principal plans of insurance on which death claims were paid during the calendar year 1939 shows that 27.75 percent of the policies were ordinary life, 23.78 percent were 20-payment life, 15.55 percent 20-year endowment, and 11.75 percent 5-year convertible term. Of the policies on which disability claims were paid during the same period, 32.67 percent were ordinary life, 20.76 percent 20-payment life, 13.79 percent 20-year endowment, and 16.64 percent 5-year convertible term. Term and automatic claims.-The disbursements for term and automatic insurance during this year totaled $19,601,576.82, and to date $2,147,001,479.67, which is $1,692,545,350.51 in excess of the $454,456,129.16 received in premiums. On June 30, 1940, monthly in stallments of term insurance were being paid to 10,944 permanently and totally disabled veterans and to the beneficiaries of 12,258 deceased veterans, as compared with 11,134 disability and 19,097 death awards on June 30, 1939. The decrease in death awards during this year was due principally to the termination of 7,537 cases during this fiscal year by the payment of the last of 240 monthly installments. During the year $1,050,994 was paid on 249 compromise cases authorized under Public, No. 78, Seventy-third Congress, June 16, 1933, of which 177 were disability and 72 death cases. To date $6,222,359 has been paid on 1,525 compromise cases authorized under this act, of which 1,098 were disability and 427 death cases. Permanent total disability payments averaging $48.27 per month are being made on insurance valued at $91,864,494. The States having the largest number of veterans receiving these payments are as follows: California, 949; New York, 949; Pennsylvania, 606; Illinois, 581; and Massachusetts, 455. An analysis of the disabilities for which term insurance is being paid discloses the fact that neuropsychiatric diseases are the disabling cause in 51.72 percent of the awards, general medical and surgical conditions in 25.71 percent, and tuberculosis in 22.57 percent. Awards of insurance to permanently and totally disabled veterans have been terminated in 29,040 cases. In 14.39 percent of these cases the reason for termination was recovery and in 81.83 percent the death of the veteran. Considering the terminations among veterans permanently and totally disabled because of tuberculosis, 13.16 percent recovered, 85.27 percent died. In the neuropsychiatric group, 15.36 percent recovered and 73.44 percent died, while in the general medical and surgical group 17.16 percent recovered and 77.77 percent died. It is noted that of the 12,258 death claims, payments are being made to 4,482 parents, 5,090 widows, 504 children, and 2,182 other beneficiaries. The largest number of active death awards are in the following States: New York, 1,069; California, 1,039; Pennsylvania, 768; and Illinois, 693. Payments of automatic insurance (provided for those who were permanently and totally disabled or who died within 120 days after entrance into service and before making application for term insurance) are being made to 287 permanently and totally disabled veterans of whom 202 or 70.38 percent, are suffering from neuropsychiatric diseases; 47 or 16.38 percent from tuberculosis; and 38 or 13.24 percent from general medical and surgical conditions. In the cases of 81 deceased veterans, this insurance is being paid to their beneficiaries, classified as follows: 51 parents, 21 widows, and 9 children. During this fiscal year, 108 cases were terminated by the payment of the last of 240 monthly installments. FINANCE The actual net disbursements from appropriations and trust funds of the Veterans' Administration (including adjustments on lapsed appropriations) during this fiscal period were as follows: Appropriations: Salaries and expenses. Hospital and domiciliary facilities and services, Veterans' Public Works Administration Act of 1938 (allotment to Army and Navy pensions and military and naval compen- Military and naval insurance_ Adjusted service and dependent pay. Vocational rehabilitation__ Military and naval family allowance_. Trust funds: U. S. Government life-insurance fund_ Adjusted service certificates.. Army allotments_ General post fund__ Funds due incompetent beneficiaries Personal funds of patients, Veterans' Administration__ 1 Credit. Total_ Includes incumbrances. Disbursements $94, 336, 231. 18 117, 365. 70 5,978, 545. 60 7,659, 254. 93 429, 153, 464. 56 19, 601, 576. 82 681, 304. 19 12, 916. 26 1 463. 95 165, 714. 03 2 69, 812, 755. 14 9, 234, 571. 86 1 40. 96 34, 727. 42 128, 332. 07 2,226, 274. 56 639, 126, 696. 89 The amount shown for the appropriation "salaries and expenses" includes net disbursements of $1,652,724.39 from allotments made to other Government agencies for the care and treatment of Veterans' Administration beneficiaries. LEGAL ACTIVITIES LEGISLATION During the second session of the Seventy-sixth Congress and that part of the third session which came within the fiscal year ended June 30, 1940, there were 1,473 bills introduced pertaining to veterans' benefits, many of which had for their purpose material changes in existing laws affecting veterans' relief. Of these, 857 were general bills and 616 were for private relief. After June 30, 1940, there were introduced 270 bills affecting veterans' relief, 183 of which were general bills and 87 providing private relief. For the fiscal year there were 242 official reports furnished committees, Members of Congress, the Bureau of the Budget and the President on proposed legislation. After June 30, 1940, 48 such reports were furnished. In addition to these reports, there were 1,671 miscellaneous letters and memoranda released concerning legislative matters; and 145 such items after the end o. the fiscal year. There were 112 separate drafts of proposed legislation prepared for committees and Members of Congress; and 11 such drafts prepared after the fiscal year. There were 170 digests prepared on pending bills, including a chronology of the legislative action taken thereon. Two hundred fifty-two committee reports and 57 documents became a part of the legislative history during the fiscal year. After June 30, 1940, there were 96 such reports and documents added to the history. Forty résumés and analytical tables of digests of the various laws concerning rights of veterans and their dependents were prepared and 11 legislative studies were conducted. A résumé of laws enacted after June 30, 1940, was also prepared. Sixty-five studies were conducted during the fiscal year on legislative problems and proposals affecting the Veterans' Administration; 11 were completed by enactment of legislation before June 30, 1940, and 11 were completed by legislation enacted thereafter. Seven studies were conducted after June 30, 1940, four of which were completed by enactment of legislation. Digests of laws affecting the Veterans' Administration, which were enacted during that part of the first session of the Seventy-sixth Congress which came within the fiscal year ending June 30, 1940, were, for convenience, included in the report for the fiscal year ended June 30, 1939, along with digests of laws of a similar nature enacted during the earlier part of the first session of that Congress. These digests, 11 in number, are contained on pages 30-35 of the 1939 report. No legislation affecting the Veterans' Administration was enacted during the second session of the Seventy-sixth Congress, which extended from September 21, 1939 to November 3, 1939. The following statement embraces laws enacted during the third session of the Seventy-sixth Congress. New legislation.-Public, No. 412, Seventy-sixth Congress, February 9, 1940, pertaining to sailors and marines of the United States Navy and Marine Corps respectively, their widows and dependent children, provides that if a sailor or marine served as an enlisted man between April 6, 1917, and November 11, 1918, and was discharged for fraudulent enlistment on account of minority or misrepresentation of age, such sailor or marine shall hereafter be held and considered to have been honorably discharged from the naval service on the date of his separation therefrom if his service otherwise was such as would have entitled him to an honorable discharge. Provision is also made for the granting of an honorable discharge certificate. Prior to the enactment of this act, under the provisions of the act of January 19, 1929, relief was afforded only to those sailors and marines who enlisted between April 6, 1917, and November 11, 1918, and included cases of misrepresentation of age. The act of February 9, 1940, establishes greater uniformity with the act of March 3, 1936, Public, No. 467, Seventy-fourth Congress, pertaining to the Army. Public, No. 418, Seventy-sixth Congress, March 2, 1940, grants authority to the Administrator of Veterans' Affairs to transfer by quitclaim deed to the Pennsylvania Railroad Company, for right-ofway purposes, a small strip of land at Veterans' Administration facility, Coatesville, Pa. Public, No. 432, Seventy-sixth Congress, March 14, 1940, authorizes the Administrator of Veterans' Affairs, under regulations to be prescribed by the President, to pay the actual necessary expenses of travel, including lodging and subsistence, or in lieu thereof an allowance based upon the mileage traveled, of any person to or from a Veterans' Administration facility, or other place for the purpose of examination, treatment, or care. It further provides that payment of mileage upon termination of examination, treatment, or care may be made prior to completion of such travel, and further, that when any such person requires an attendant other than an employee of |