30244 Federal Register / Vol. 66, No. 108 / Tuesday, June 5, 2001 / Notices

9Emera conducts various businesses in Canada

that would qualify as ‘‘energy-related’’ or ‘‘gasrelated’’ companies under rule 58, but for the fact

that the revenues from these companies are from

Canada. Emera requests that investment in these

companies be excluded from the investment limit

under rule 58 of the Act.

Subsidiaries’’) organized exclusively for

the purpose of acquiring, financing, and

holding the securities of one or more

existing or future Nonutility

Subsidiaries. The Intermediate

Subsidiaries would be organized for the

purpose of acquiring, holding and/or

financing the acquisition of the

securities of or other interest in one or

more EWGs, FUCOs, and Rule 58

Companies. Intermediate Subsidiaries

may also provide management,

administrative, project development,

and operating services to Nonutility

Subsidiaries.

Intermediate Subsidiaries may engage

in development activities

(‘‘Development Activities’’) and

administrative activities

(‘‘Administrative Activities’’) relating to

the permitted businesses of the

Nonutility Subsidiaries. Development

Activities will be limited to due

diligence and design review; market

studies; preliminary engineering; site

inspection; preparation of bid proposals,

including, in connection with, posting

of bid bonds; application for required

permits and/or regulatory approvals;

acquisition of site options and options

on other necessary rights; negotiation

and execution of contractual

commitments with owners of existing

facilities, equipment vendors,

construction firms, power purchasers,

thermal ‘‘hosts,’’ fuel suppliers and

other project contractors; negotiation of

financing commitments with lenders

and other third-party investors; and

such other preliminary activities as may

be required in connection with the

purchase, acquisition, financing or

construction of facilities or the

acquisition of securities of or interests

in new businesses. Administrative

Activities will include ongoing

personnel, accounting, engineering,

legal, financial, and other support

activities necessary to manage Emera’s

investments in Nonutility Subsidiaries.

Applicants state restructuring could

also involve the acquisition of one or

more new special-purpose subsidiaries

(‘‘SPSs’’). The SPS would acquire and

hold direct or indirect interests in any

or all of the Emera System’s existing or

future authorized nonutility businesses.

Applicants may transfer existing

Subsidiaries, or portions of existing

businesses, among the Emera associates

and/or the reincorporation of existing

Subsidiaries in a different jurisdiction.

Emera does not seek authorization to

acquire an interest in any nonassociate

company as part of the authority

requested and states that the

reorganization will not result in the

entry by the Emera System into a new,

unauthorized line of business.

VII. Request To Invest in Rule 58

Companies After the Merger

Applicants state Emera’s post-merger

investment in Canadian energy-related

and gas related companies will be

aggregated with its post-merger

investment in Rule 58 Companies for

purposes of calculating the 15% limit of

consolidated capitalization limit under

rule 58(a)(1)(ii).9

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–14025 Filed 6–4–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–24995; File No. 812–12226]

Sun Life Assurance Company of

Canada (U.S.), et al.

May 30, 2001.

AGENCY: Securities and Exchange

Commission (the ‘‘Commission’’).

ACTION: Notice of application for an

order pursuant to section 11(a) of the

Investment Company Act of 1940 (the

‘‘Act’’) approving the terms of an offer

of exchange and for an order pursuant

to section 6(c) of the Act granting

exemptions from sections 2(a)(32), 22(c)

and 27(i)(2)(A) of the Act and Rule 22c–

1 thereunder to permit the recapture of

certain bonus credits.

Applicants: Sun Life Assurance

Company of Canada (U.S.)(‘‘Sun Life’’),

Sun Life Assurance Company of Canada

(U.S.) Variable Account F (‘‘Variable

Account’’), and Clarendon Insurance

Agency, Inc. (‘‘Clarendon’’).

Summary of Application: Applicants

seek an order approving the terms of a

proposed offer of exchange of MFS

Regatta Choice, a new variable annuity

contract issued by Sun Life and made

available through the Variable Account

(the ‘‘New Contract’’), for MFS Regatta

Gold, an outstanding annuity contract

issued by Sun Life and made available

through the Variable Account (the ‘‘Old

Contract,’’ collectively with the New

Contract, the ‘‘Contracts’’). Applicants

also seek an order to permit the

recapture, from any New Contract

returned to Sun Life during the free look

period, of a 2% bonus payment credited

on amounts transferred to the New

Contract under the proposed offer of

exchange.

Filing Date: The application was filed

on August 16, 2000, and Amendment

No. 1 was filed on May 30, 2001.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the Commission orders a

hearing. Interested persons may request

a hearing by writing to the Secretary of

the Commission and serving Applicants

with a copy of the request, personally or

by mail. Hearing requests must be

received by the Commission by 5:30

p.m. on June 25, 2001, and should be

accompanied by proof of service on

Applicants in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the requester’s interest, the reason for

the request, and the issues contested.

Persons may request notification of a

hearing by writing to the Secretary of

the Commission.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

NW., Washington, DC 20549–0609.

Applicants: Sun Life Assurance

Company of Canada (U.S.), One Copley

Place, Boston, Massachusetts 02116.

FOR FURTHER INFORMATION CONTACT:

Kenneth C. Fang, Attorney, or Keith E.

Carpenter, Branch Chief, at (202) 942–

0670, Office of Insurance Products,

Division of Investment Management.

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application is

available for a fee from the

Commission’s Public Reference Branch,

450 Fifth Street, NW., Washington, DC

20549–0102 (tel. (202) 942–8090).

Applicants’ Representations

Applicants

1. Sun Life is a stock life insurance

company incorporated under the laws of

Delaware on January 12, 1970. Sun Life

does business in 49 states of the United

States, the District of Columbia and

Puerto Rico. Sun Life is an indirect

wholly-owned subsidiary of Sun Life

Assurance Company of Canada (‘‘Sun

Life (Canada)’’). Sun Life (Canada)

completed its demutualization on

March 22, 2000. As a result of the

demutualization, a new holding

company, Sun Life Financial Services of

Canada Inc. (‘‘Sun Life Financial’’), is

now the ultimate parent of Sun Life

(Canada) and Sun Life. Sun Life

Financial, a corporation organized in

Canada, is a reporting company under

the Securities Exchange Act of 1934

with common shares listed on the

Federal Register / Vol. 66, No. 108 / Tuesday, June 5, 2001 / Notices 30245

Toronto, New York, London and Manila

stock exchanges.

The Variable Account is the separate

account in which Sun Life sets aside

and invests assets attributable to the

Contracts. The Variable Account is

organized and registered under the Act

as a unit investment trust (File No. 811–

05846).

3. Clarendon is registered with the

Commission as a broker-dealer and is a

member of the National Association of

Securities Dealers, Inc. Clarendon is the

principal underwriter for the Contracts

and acts as general distributor of certain

other of Sun Life’s variable insurance

products. Clarendon is a wholly-owned

subsidiary of Sun Life.

Reasons for Exchange Offer

4. Applicants assert that, during

recent years, the variable annuity

marketplace has become increasingly

competitive. Many of the purchasers of

variable annuity contracts in the 1980s

and early 1990s are at, or close to, the

expiration of their deferred sales charge

period, and the contract values of many

contracts are no longer subject to a

deferred sales charge. Holders of such

contracts have become ‘‘prime targets’’

for competitors’ variable annuity sales

efforts. In response to these forces, the

market has seen the continuous

introduction of innovative products

with attractive features to catch the eye

of existing and prospective variable

annuity purchasers. Sun Life has

experienced the effects of its

competitors’ offers, which often include

‘‘bonus offers,’’ through the loss of a

substantial portion of its Old Contract

business.

5. Applicants state that Sun Life’s

competitors are permitted to make

attractive offers to Sun Life’s Old

Contract owners because, among other

reasons, offers of exchange to contract

owners of unaffiliated insurance

companies are not prohibited by Section

11 of the Act (nor subject to the

requirements of Rule 11a–2 thereunder)

by virtue of a Commission staff noaction position granted to Alexander

Hamilton Funds (pub. avail. July 20,

1994). Applicants state that the

Alexander Hamilton letter stands for the

proposition that, except for limited

exceptions, exchange offers between

unaffiliated investment companies are

not prohibited under Section 11.

Consistent with Section 11(a), therefore,

a fund may impose a contingent

deferred sales charge on shares

purchased by investors with proceeds of

shares exchanged from an unaffiliated

fund.

6. Applicants assert that, but for the

affiliated nature of the exchange, Sun

Life would be able to offer a bonus

program to its existing Old Contract

owners that is similar to its competitors’

programs. However, unlike its

competitors who may make bonus offers

to Old Contract owners, Sun Life is

constrained from making a similar offer

without first obtaining Commission

approval of the terms of the exchange.

7. Applicants state that, in response to

this competitive situation, Sun Life has

developed an attractive offer (‘‘Exchange

Offer’’) that would give eligible owners

of the Old Contract the opportunity to

exchange their contracts for a New

Contract. On the day the exchange is

effected (the ‘‘Exchange Date’’), eligible

owners would also receive a 2% bonus

based on the total accumulation value

(‘‘Account Value’’) of each Old Contract

surrendered in exchange for a New

Contract (‘‘2% Bonus’’). Withdrawals

made after the free look period under

the New Contract has expired would be

governed by the terms of the New

Contract, including application of the

withdrawal charge (referred to in this

application as the ‘‘contingent deferred

sales charge’’ or ‘‘CDSC’’). If a Contract

owner exercises his or her right to

cancel the New Contract during the free

look period, the 2% Bonus will be

returned to Sun Life and the Old

Contract will be reinstated with an

Account Value that reflects the

investment experience while the New

Contract was held. Applicants state that

the terms of the Exchange Offer, which

will be communicated to eligible

Contract owners in a notification of the

Exchange Offer (the ‘‘Offering Letter’’),

are designed to respond to the business

practicalities of Sun Life’s competitive

situation and to assure that persisting

Contract owners who accept the

Exchange Offer receive an immediate

and enduring economic benefit.

The New Contract

8. The MFS Regatta Choice Contract is

offered pursuant to a registration

statement under the Securities Act of

1933 (the ‘‘1933 Act’’) filed on February

22, 2000, and last amended on April 23,

2001 (File No. 333–30844). Applicants

state that the MFS Regatta Choice

Contract was designed to enhance the

MFS Regatta Gold Contract, adding four

new optional enhanced death benefit

features incorporated in 10 optional

riders and other enhancements. The

MFS Regatta Choice Contract is offered

as individual and group flexible

payment variable annuity contracts for

use in connection with retirement and

deferred compensation plans. It permits

Account Value to be accumulated on a

variable, fixed, or combination of

variable and fixed basis. It requires a

minimum initial purchase payment of

$10,000.

9. Account Values of the New contract

currently may be allocated to subaccounts of the Variable Account that

each invest in one of 29 different

investment company portfolios

(‘‘Underlying Funds’’)—29 mutual

funds sponsored by MFS/Sun Life

Series Trust.

10. Values may also be accumulated

on a guaranteed basis by allocation to

Sun Life’s general account (the ‘‘Fixed

Account’’). Contract owners may select

one or more ‘‘Guarantee Periods’’ from

those available guaranteed interest rates

for the duration of the particular

Guarantee Period(s) selected by the

Contract owner. Sun Life guarantees

that it will credit interest at a minimum

rate of 3% per year, compounded

annually, to amounts allocated to the

Fixed Account. Sun Life may credit

interest at a rate in excess of the

minimum rate; however, it is not

obligated to do so. The Guarantee

Periods are offered pursuant to a

registration statement under the 1933

Act filed on June 12, 2000 (File No.

333–39034).

11. All cash withdrawals of any

guarantee amount from the Fixed

Account, except those effective within

30 days prior to the expiration date of

the Applicable guarantee Period or the

withdrawal of interest credited during

the current Contract year, are subject to

a market value adjustment (‘‘MVA’’).

The MVA reflects the relationship

between the current rate for the

guarantee amount being withdrawn and

the guaranteed interest rate applicable

to the amount being withdrawn. It also

reflects the time remaining in the

applicable Guarantee Period. Generally,

if the guaranteed interest rate is lower

than the applicable current rate, then

application of the MVA will result in a

lower payment upon withdrawal.

Conversely, if the guaranteed interest

rate is higher than the applicable

current rate, the application of the MVA

will result in a higher payment upon

withdrawal.

12. Account Value may be transferred

among the sub-accounts of the Variable

Account without charge, although Sun

Life reserves the right to limit the

number of transfers to 12 in a Contract

year and to charge up to $15 per

transfer. Transfers to and from the Fixed

Account are permitted, subject to

certain restrictions described in the

prospectus for the New Contract.

13. Contract owners may enroll in an

optional Dollar Cost Averaging program

(the ‘‘DCA Program’’) by allocating a

minimum of $1,000 of their purchase

payment into the DCA Program and preVerDate 11<MAY>2000 20:16 Jun 04, 2001 Jkt 194001 PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 E:\FR\FM\05JNN1.SGM pfrm07 PsN: 05JNN1
30246 Federal Register / Vol. 66, No. 108 / Tuesday, June 5, 2001 / Notices

authorizing transfers to any of the subaccounts at regular time intervals.

14. Contract owners may also enroll

in one of three asset allocation models,

each of which represents a combination

of sub-accounts with a different level of

risk. Contract owners who elect an asset

allocation model will have their

investment options automatically

reallocated on a quarterly basis, or as

determined by the terms of the asset

allocation program. The former MFS

asset allocation model, which was

available under the Old Contract but

discontinued in May 1998, will be made

available under New Contracts to

owners of Old Contracts who are

currently participating in that model.

15. Contract owners with an Account

Value of $10,000 or more may

participate in the Systematic

Withdrawal Program. Under the

Systematic Withdrawal Program, a

Contract owner may elect to receive

automatic withdrawals from his or her

Account Value, the amount and

frequency of which is determined by the

Contract owner. An MVA may apply to

withdrawals under the Systematic

Withdrawal Program.

16. Contract owners may enroll in the

Portfolio Rebalancing Program, whereby

funds are transferred among the subaccounts in order to maintain the

percentage allocation the Contract

owner has selected. The transfers may

occur on a quarterly, semi-annual or

annual basis.

17. Contract owners may enroll in the

Secured Future Program, under which

purchase payments are divided between

the Fixed Account and the subaccounts. For the Fixed Account

portion, a portion of the purchase

payment is allocated to a Guarantee

Period of the Contract owner’s choosing,

so that at the end of the Guarantee

Period, the Fixed Account allocation

(including interest) will equal the entire

amount of the original purchase

payment. The remainder of the original

purchase payment will be invested in

the sub-accounts of the Contract owner’s

choosing. At the end of the Guarantee

Period, the Contract owner will be

guaranteed the amount of the original

purchase payment, in addition to the

investment performance of the

subaccounts.

18. Account Value under the New

Contract may be accessed at any time

prior to the annuity commencement

date by means of partial surrenders or

full surrender. The annual withdrawal

amount, which is not subject to the

CDSC, is referred to herein as the ‘‘free

withdrawal amount.’’ During the first

Contract year, the New Contract permits

a free withdrawal amount of up to 15%

of purchase payments made during that

Contract year. After the first Contract

anniversary, the free withdrawal

amount is equal to the amount of all

purchase payments made before the last

seven years that have not been

withdrawn, plus the greater of: (a) All

earnings minus any previous

withdrawals taken during the life of the

Contract, or (b) 15% of the amount of all

purchase payments made during the last

seven years, including the current

Contract year, minus any free

withdrawals taken during the current

Account year. Any unused ‘‘free

withdrawal amount’’ is not cumulative

if it was based upon 15% of all purchase

payments made during the last seven

Contract years, but is cumulative if it

was based on all earnings minus

previous withdrawals.

19. The New Contract provides for a

basic death benefit and 10 optional

death benefit riders, each of which

provides an enhanced death benefit. An

optional death benefit election must be

made, if at all, before the date Sun Life

accepted the Contract owner’s first

purchase payment (the ‘‘Contract Date’’)

and the Contract owner’s 80th birthday

and may not be changed after the New

Contract is issued. Contract owners pay

an additional charge during the

accumulation phase for each optional

death benefit rider elected. The

‘‘Maximum Anniversary Account Value

(‘‘MAV’’) Rider’’ enhances the death

benefit by providing the greater of (a)

any of the basic death benefits, or (b) the

highest Account Value on any Account

anniversary before the Contract owner’s

81st birthday, adjusted for subsequent

purchase payments, partial withdrawals

and charges between that Account

anniversary and the death benefit date.

The ‘‘5% Premium Roll-Up (‘‘5% RollUp’’) Rider’’ enhances the death benefit

by providing the greater of (a) any of the

basic death benefits, or (b) total

purchase payments plus interest

accruals, adjusted for partial

withdrawals. The ‘‘Earnings

Enhancement (‘‘EEB’’) Rider’’ enhances

the death benefit in one of two ways

depending on the Contract owner’s age

on the Contract Date. If the Contract

owner was 69 or younger on the

Contract Date, the enhanced death

benefit is (a) the greatest of any of the

basic death benefit amounts, plus (b)

40% of the difference between Account

Value and net purchase payments,

capped at 40% of net purchase

payments made prior to death,

calculated as of the death benefit date.

If the Contract owner was between 70

and 79 on the Contract Date, the

enhanced death benefit is (a) the

greatest of any of the basic death benefit

amounts, plus (b) 25% of the difference

between Account Value and net

purchase payments, capped at 25% of

net purchase payments made prior to

death, calculated as of the death benefit

date. Net purchase payments under the

EEB Rider will be adjusted for all partial

withdrawals. The ‘‘Earnings

Enhancement Plus (‘‘EEB Plus’’) Rider’’

enhances the death benefit in one of two

ways depending on the Contract

owner’s age on the Contract Date. If the

Contract owner was 69 or younger on

the Contract Date, the enhanced death

benefit is (a) the greatest of any of the

basic death benefit amounts, plus (b)

40% of the difference between Account

Value and net purchase payments, up to

a cap of 100% of net purchase payments

made prior to death, calculated as of the

death benefit date. After the 7th

Contract year, the cap is 100% of the

difference between net purchase

payments and any purchase payments

made within the 12 months prior to

death. If the Contract owner was

between 70 and 79 on the Contract Date,

the enhanced death benefit is (a) the

greatest of any of the basic death benefit

amounts, plus (b) 25% of the difference

between Account Value and net

purchase payments, up to a cap of 40%

of net purchase payments made prior to

death, calculated as of the death benefit

date. After the 7th Contract year, the cap

is 40% of the difference between net

purchase payments and any purchase

payments made within the 12 months

prior to death. The MAV Rider, the 5%

Roll-Up Rider and the EEB Rider may be

combined. The EEB Plus, EEB Plus

MAV and EEB Plus 5% Roll-Up Riders

are designed to be ‘‘comprehensive’’

riders and may not be combined with

each other or with any of the other

death benefit riders. The New Contract

prospectus describes how the death

benefit will be calculated if a Contract

owner elects more than one optional

death benefit rider.

20. The New Contract contains four

annuity payment options. Annuity

options are available on a fixed or

variable basis, or a combination thereof.

21. The New Contract assesses a

CDSC against partial or full surrenders

in excess of the free withdrawal amount.

The length of time from receipt of a

purchase payment to the time of

surrender determines the percentage of

the CDSC. During the first seven years

from each purchase payment, a CDSC

will be assessed against the surrender of

purchase payments that is a percentage

of the amount surrendered (not to

exceed the aggregate amount of the

purchase payments made). The CDSC

Federal Register / Vol. 66, No. 108 / Tuesday, June 5, 2001 / Notices 30247

ranges from 7% in year 1 to 0% in year

7 and after.

22. In certain states, the New Contract

provides for a waiver of the CDSC if the

Contract owner is confined to an eligible

nursing home and has been there for at

least the preceding 180 days, or shorter

period in some states, and at least one

year has passed since the Contract Date.

Additionally, Sun Life does not impose

the CDSC on amounts applied to

provide an annuity, amounts Sun Life

pays as a death benefit, except under the

cash surrender method, or amounts

transferred among the sub-accounts,

between the sub-accounts and the Fixed

Account, or within the Fixed Account.

23. During the life of the New

Contract, Sun Life deducts a mortality

and expense risk charge from the value

of the assets of the Variable Account at

an effective annual rate of 1.00% (if

initial purchase payment was less than

$1 million) and 0.85% (if initial

purchase payment was $1 million or

more). If a Contract owner annuitizes

his New Contract prior to the eighth

Contract year, Sun Life will deduct an

additional 0.25% during the income

phase.

24. During the accumulation phase,

Sun Life deducts an account fee on each

Contract anniversary. During Contract

years one through five, the account fee

is $35. After Contract year five, Sun Life

may change the account fee each year,

but it will never exceed $50. Sun Life

deducts the account fee pro rata from

each sub-account and each Guarantee

Period based on the allocation of

Account Value on a Contract owner’s

Contract anniversary. Sun Life will not

charge the account fee if a Contract

owner’s Account Value has been

allocated only to the Fixed Account

during the applicable Contract year or if

Account Value is $75,000 or more on a

Contract anniversary. During the income

phase, Sun Life deducts an annual

account fee of $35 in equal amounts

from each variable annuity payment

made during the year. No fee is

deducted from fixed annuity payments.

25. Sun Life deducts from the assets

of the Variable Account an

administrative expense charge at an

annual effective rate equal to 0.15%

during both the accumulation phase and

the income phase.

26. Charges for the optional death

benefit riders under the New Contract

will vary based on the particular death

benefit rider elected. The charge (as a

percentage of daily Account Value) for

various death benefit riders are as

follows: 0.15% for the MAV, 5% RollUp and EEB Riders; 0.25% for the EEB

Plus Rider and the combination EEB

and MAV, EEB and 5% Roll-Up, and

MAV and 5% Roll-Up Riders; and

0.40% for the combination EEB and

MAV and 5% Roll-Up, EEB Plus MAV,

and EEB Plus 5% Roll-Up Riders.

27. Charges are deducted from

purchase payments under the New

Contract for premium tax, if applicable,

imposed by a state or other

governmental entity. Certain states

impose a premium tax, currently

ranging up to 3.5%. Sun Life pays

premium taxes at the time imposed

under applicable state law and recovers

premium taxes upon full surrender,

when a death benefit is paid or at

annuitization.

The Old Contract

28. The MFS Regatta Gold Contract is

offered pursuant to a registration

statement under the 1933 Act (File No.

33–41628). The Old Contract is offered

as a flexible payment group and

individual tax-deferred variable annuity

contract. It permits Account Value to be

accumulated on a variable, fixed or

combination variable and fixed basis.

The minimum initial purchase payment

is $5,000 ($10,000 in California, Texas

and Maryland since October 1999).

29. Account Values of the New

Contract currently may be allocated to

the same 29 sub-accounts of the

Variable Account available under the

New Contract, each of which invests in

an Underlying Fund of the MFS/Sun

Life Series Trust.

30. Contract owners may participate

in the DCA Program, Asset Allocation

Program, Systematic Withdrawal

Program, Interest Out Program, Portfolio

Rebalancing Program and Secured

Future Program. Under the Interest Out

Program, the Contract owner may opt to

be paid or reinvest the interest credited

to all Guarantee Periods that the

Contract owner has chosen. The

withdrawals under both the Systematic

Withdrawal Program and the Interest

Out Program are subject to surrender

charges.

31. Account Values may also be

allocated to the one or more Fixed

Account Guarantee Periods made

available from time to time. Sun Life

may change the guaranteed interest rates

it offers from time to time, but no

guaranteed interest rate will ever be less

than 3% per year (4% per year for

Contracts issued before November

1993), compounded annually. Early

withdrawals from an allocation to a

Guarantee Period, including cash

withdrawals, transfers, and

commencement of an annuity, may be

subject to an MVA, which could

increase or decrease Account Value.

Guarantee Periods under the Old

Contract are offered pursuant to a

registration statement under the 1933

Act filed on April 26, 1999 (File No.

333–77041) and will be carried forward

upon exchange to the New Contract.

32. Account Value of an Old Contract

may be accessed by means of partial

surrenders or full surrender. The CDSC

is not applied to the annual free

withdrawal amount equal to 10% of

purchase payments made during the last

seven Contract years, including the

current Contract year, plus all purchase

payments made before the last seven

Contract years that have not been

previously withdrawn. For Old

Contracts issued after November 1994,

the annual withdrawal allowance may

be carried forward and available for use

in future years on a cumulative basis.

33. The Old Contract offers a basic

death benefit determined as of the death

benefit date. The Old Contract offers a

choice of five annuity options. Each

annuity option is available on a variable

or fixed basis or combination thereof.

34. For maintenance of the Old

Contract, an account fee equal to the

lesser of $30 or 2% of the value of the

Old Contract is deducted from the

Account Value of each Old Contract

annually for the first five years of a

Contract. After the fifth year, Sun Life

may change this fee annually, but it will

never exceed the lesser of $50 or 2% of

Account Value.

35. A mortality and expense risk

charge at an annual rate of 1.25% of

daily sub-account value and an

administrative expense charge at an

annual rate of 0.15% of daily subaccount value are deducted from

Account Value.

36. Currently, no fee is imposed on

the twelve transfers allowed per

Contract year; however, Sun Life

reserves the right to impose a transfer

fee of up to $15 per transfer. In addition,

an MVA may be calculated on amounts

transferred from or within the Fixed

Account.

37. Charges for premium taxes, if any,

imposed by a state or other

governmental entity are deducted from

purchase payments under the Old

Contract. Certain states impose a

premium tax, currently ranging up to

3.5%. Sun Life pays premium taxes at

the time imposed under applicable state

law and recovers the premium taxes

upon full surrender, death or

annuitization.

38. Applicants represent that the

features and benefits of the New

Contract will be no less favorable than

under the Old Contract, except for

differences in the annuitization options,

free withdrawal amount and the Fixed

Account Interest Out Program.

Applicants also represent that the fees

30248 Federal Register / Vol. 66, No. 108 / Tuesday, June 5, 2001 / Notices

and charges of the New Contract will be

no higher than those of the Old

Contract, with the exception of the

annual account fee and the CDSC.

Terms of the Exchange Offer

39. Applicants propose to offer

eligible owners of Old Contracts the

opportunity to exchange their Old

Contract for a New Contract by means

of the Exchange Offer. Eligible MFS

Regatta Gold Contract owners will be

permitted to exchange their entire MFS

Regatta Gold Contract for an MFS

Regatta Choice Contract. To be eligible

for the Exchange offer, Contract owners

must (a) Have completed seven or more

Contract years under their Old Contract,

(b) not have made total purchase

payments during the most recent five

Contract years that are greater than 25%

of the purchase payments made prior to

the most recent seven Contract years,

and (c) meet eligibility requirements of

MFS Regatta Choice.

40. Sun Life, from its general account,

will provide a 2% Bonus to each owner

of an Old Contract who accepts the

offer, which is based on the Account

Value of each Old Contract surrendered

in exchange for a New Contract. The

Exchange Offer will provide that, upon

acceptance of the offer, a New Contract

will be issued with an Account Value

equal to 2% greater than the Account

Value of the Old Contract surrendered

in the exchange. The Account Value of

an Old contract (‘‘Exchange Value’’),

together with the 2% Bonus and any

additional purchase payments

submitted with an Internal Exchange

Application Form for the New Contact,

will be applied to the New Contract as

of the Exchange Date. No CDSC will be

deducted upon the surrender of an Old

Contract if received in connection with

the Exchange Offer.

41. If a Contract owner exercises his

or her right to cancel the New Contract

during the free look period, the 2%

Bonus will be returned to Sun Life and

the Old Contract (including amounts

allocated to Guarantee Periods) will be

reinstated with an Account Value that

reflects the investment experience while

the New Contract was held. After

expiration of the New Contract’s free

look period, withdrawals will be

governed by the terms of the New

Contract for purposes of calculating any

CDSC. If a Contract owner surrenders

his New Contract prior to the

completion of the CDSC period, Sun

Life will apply the applicable CDSC

according to the New Contract’s sevenyear schedule. The Exchange Date will

be the issue date of the New Contract for

purposes of determining Contract years

and anniversaries after the Exchange

Date.

42. Sun Life will send the Offering

Letter to eligible Contract owners and

their brokers that will explain the terms

of the Exchange Offer and instruct

eligible owners of Old Contracts to

contact their brokers for assistance with

completing the offer. Contract owners

will be provided with a prospectus for

the New Contract, the Offering Letter

that compares the applicable Contracts

and an Internal Exchange Application

Form.

43. The Offering Letter will advise

owners of an Old Contract that the

Exchange Offer is specifically designed

for those Contract owners who intend to

continue to hold their Contracts as longterm investment vehicles. The Offering

Letter will state that the offer is not

intended for all Contract owners, and

that it is especially not appropriate for

any Contract owner who anticipates

surrendering all or a significant part

(i.e., more than the ‘‘free withdrawal

amount’’ on an annual basis) of his or

her Contract before seven years. The

Offering Letter will also state that

Contract owners with amounts allocated

to Old Contract Guarantee Periods will

experience no change in Guarantee

Period upon acceptance of the Exchange

Offer. The Offering Letter will

encourage Contract owners to carefully

evaluate their personal financial

situation when deciding whether to

accept or reject the Exchange Offer. In

addition, the Offering Letter will

explain how an owner of an Old

Contract contemplating an exchange

may avoid the applicable CDSC on the

New Contract if no more than the

annual ‘‘free withdrawal amount’’ is

surrendered and any subsequent

deposits are held until expiration of the

CDSC period. In this regard, the Offering

Letter will state in concise, plain

English that if the New Contract is

surrendered during the initial CDSC

period, (a) the 2% Bonus may be more

than offset by the CDSC, and (b) a

Contract owner may be worse off then

if he or she had rejected the Exchange

Offer.

44. The Internal Exchange

Application Form, which will

accompany the Offering Letter, will

include an owner acknowledgment

section with check-off boxes setting

forth specific questions designed,

among other things, to determine a

Contract owner’s suitability for the

Exchange Offer. In particular, the form

will seek affirmative confirmation that

an owner does not anticipate a need to

withdraw more than 15% per year (plus

earnings) from the New Contract during

the CDSC period. Other questions on the

form seek owner acknowledgment that

the Exchange Offer is suitable only for

a Contract owner if he or she expects to

hold the New Contract as a long-term

investment and the Contract owner may

be better off rejecting the Exchange Offer

if he or she plans to surrender the New

Contract during the CDSC period. All

boxes on the form must be checked off

with affirmative responses before Sun

Life will process the exchange. After

making a suitability determination,

broker-dealers will be required to

forward completed forms to Sun Life for

processing. In the event Sun Life

receives an incomplete form (i.e., a form

with one or more acknowledgment

boxes not checked off), Sun Life will not

process the exchange, treating the

transaction as ‘‘not in good order.’’ Sun

Life intends to contact any broker-dealer

who submits a form not in good order,

however, in no event will Sun Life

process exchange transactions based on

incomplete forms.

45. The Account Value of an Old

Contract (‘‘Exchange Value’’) together

with the 2% Bonus and any additional

purchase payments submitted with an

Internal Exchange Application Form for

the New Contract will be applied to the

New Contract as of the Exchange Date.

No CDSC will be deducted upon the

surrender of an Old Contract if received

in connection with the Exchange Offer.

If a Contract owner surrenders his New

Contract after the free look period but

prior to the completion of the CDSC

period, Sun Life will apply the CDSC

based on the number of Contract years

payment has been in a New Contract:

7% for Contract years 0–1, 7% for

Contract years 1–2, 6% for Contract

years 2–3, 6% for Contract years 3–4,

5% for Contract years 4–5, 4% for

Contract years 5–6, 3% for Contract

years 6–7, and 0% for Contract years 7

or more. If a Contract owner exercises

his or her right to cancel the New

Contract during the free look period, the

2% Bonus will be returned to Sun Life

and the Old Contract (including

amounts allocated to Guarantee Periods)

will be reinstated with an Account

Value that reflects the investment

experience while the New Contract was

held. The Exchange Date will be the

issue date of the New Contract for

purposes of determining Contract years

and anniversaries after the Exchange

Date.

46. To accept the Exchange Offer, an

owner of an Old Contract must complete

an Internal Exchange Application Form.

Account Values will be allocated to the

same Vairable Account investment

options and the same Guarantee Periods

under the New Contract on the

Exchange Date. Account Values may

Federal Register / Vol. 66, No. 108 / Tuesday, June 5, 2001 / Notices 30249

subsequently be reallocated under the

new Contract (including to new

Guarantee Periods of the Fixed Account)

pursuant to Contract owner instructions.

Payments submitted with the Internal

Exchange Application Form will be

assumed to be payments under the New

Contract as of the date of issue of the

New Contract. Applicants state that no

adverse tax consequences will be

incurred by those Contract owners who

accept the Exchange Offer. As to nonqualified Contracts, the exchanges will

constitute tax-free exchanges pursuant

to Section 1035 of the Internal Revenue

Code. Any exchange with respect to IRA

Contracts will be a direct transfer and

not taxable distributions to Contract

owners.

47. Applicants state that the Exchange

Offer is meant to encourage existing

Contract owners to remain with Sun

Life rather than surrender their

Contracts in exchange for a competitor’s

product offering a similar bonus. If the

New Contract CDSC is not permitted on

the Exchange Value, Applicants believe

that some Contract owners might

exchange their New Contract intending

to take advantage of the 2% Bonus and

then surrender the New Contract

intending to take advantage of the 2%

Bonus and then surrender the New

Contract without a CDSC. Without the

CDSC, Sun Life would have no

assurance that a Contract owner who

accepted the Exchange Offer would

persist for long enough for the 2%

Bonus and payments to registered

representatives to be recouped through

standard fees from the ongoing

operation of the New Contract.

Applicants state that registered

representatives will be paid

commissions for soliciting exchanges

that are less than they normally are paid

for soliciting sales of the New Contract.

Applicants state that compensating

registered representatives for these

exchanges is necessary in order to

provide sufficient incentive for them to

compete with competitors’ registered

representatives.

Applicants’ Conditions

Applicants agree to the following

conditions:

1. The Offering Letter will contain

concise, plain English statements that

(a) The Exchange Offer is suitable only

for Contract owners who expect to hold

their Contracts as long-term investments

and (b) if the New Contract is

surrendered during the initial CDSC

period, the 2% Bonus may be more than

offset by the CDSC and a Contract owner

may be worse off than if he or she had

rejected the Exchange Offer.

2. The Offering Letter will disclose in

concise, plain English each aspect of the

New Contract that will be less favorable

than the Old Contract.

3. Sun Life will send the Offering

Letter directly to eligible contract

owners. A Contract owner choosing to

exchange will then complete and sign

an Internal Exchange Application Form,

which will prominently restate in

concise, plain English the statements

required in Condition No. 1, and return

it to Sun Life. If the Internal Exchange

Application Form is more than two

pages long, Sun Life will use a separate

document to obtain Contract owner

acknowledgment of the statements

required in Condition No. 1.

4. Sun Life will maintain the

following separately identifiable records

in an easily accessible place for the time

periods specified below in this

Condition No. 4, for review by the

Commission upon request: (a) Records

showing the level of exchange activity

and how it relates to the total number

of Contract owners eligible to exchange

(quarterly as a percentage of the number

eligible); (b) copies of any form of

Offering Letter and other written

materials or scripts for presentations by

representatives regarding the Exchange

Offer that Sun Life prepares or

approves, including the dates that such

materials were used; (c) records

containing information about each

exchange transaction that occurs,

including the name of the Contract

owner; Old and New Contract numbers;

the amount of the CDSC waived on

surrender of the Old Contract;

Guarantee Periods carried forward;

optional death benefits selected; Bonus

paid; the name and C.R.D. number of

the registered representative soliciting

the exchange, firm affiliation, branch

office address, telephone number, and

name of the registered representative’s

broker-dealer; commission paid; the

Internal Exchange Application Form

(and separate document, if any, used to

obtain the Contract owner’s

acknowledgment of the statements

required in Condition No. 1) showing

the name, date of birth, address and

telephone number of the Contract

owner, and the date the Internal

Exchange Application Form (or separate

document) was signed; amount of

Account Value exchanged; and

persistency information relating to the

New Contract including the date of any

subsequent surrender and the amount of

CDSC paid on surrender; and (d) logs

showing a record of any Contract owner

complaint about the exchange; state

insurance department inquiries about

the exchange; or litigation, arbitration or

other proceedings regarding any

exchange. The logs will include the date

of complaint or commencement of

proceeding; name and address of the

person making the complaint or

commencing the proceeding; nature of

the complaint or proceeding; and

persons named or involved in the

complaint or proceeding. Applicants

will retain records specified in (a) and

(d) for six years after the date the

records are created, records specified in

(b) for a period of six years after the date

of last issue, and records specified in (c)

for a period of two years after the date

that the initial CDSC period of the New

Contract ends.

Applicants’ Legal Analysis

Section 11

1. Section 11(a) of the Act makes it

unlawful for any registered open-end

company, or any principal underwriter

for such a company, to make or cause

to be made an offer to the holder of a

security of such company, or of any

other open-end investment company, to

exchange his security for a security in

the same or another such company on

any basis other than the relative net

asset values of the respective securities,

unless the terms of the offer have first

been submitted to and approved by the

Commission or are in accordance with

Commission rules adopted under

section 11.

2. Section 11(c) of the Act, in

pertinent part, requires, in effect, that

any offer of exchange of the securities of

a registered unit investment trust for the

securities of any other investment

company be approved by the

Commission or satisfy applicable rules

adopted under section 11, regardless of

the basis of the exchange.

3. The purpose of section 11 of the

Act is to prevent ‘‘switching,’’ the

practice of inducing security holders of

one investment company to exchange

their securities for those of a different

investment company, ‘‘solely for the

purpose of exacting additional selling

charges.’’ That type of practice was

found by Congress to be widespread in

the 1930s prior to adoption of the Act.

4. Section 11(c) of the Act requires

Commission approval (by order or by

rule) of any exchange, regardless of its

basis, involving securities issued by a

unit investment trust, because investors

in unit investment trusts were found by

Congress to be particularly vulnerable to

switching operations.

5. Applicants assert that the potential

for harm to investors perceived in

switching was its use to extract

additional sales charges from those

investors.

30250 Federal Register / Vol. 66, No. 108 / Tuesday, June 5, 2001 / Notices

6. Applicants assert that the terms of

the proposed Exchange Offer do not

present the abuses against which section

11 was intended to protect. The

Exchange Offer was designed to allow

Sun Life to compete on a level playing

field with its competitors who are

making bonus offers to its Contract

owners. No addition sales load or other

fee will be imposed at the time of

exercise of the Exchange Offer.

7. Rule 11a–2, by its express terms,

provides Commission approval of

certain types of offers of exchange of

one variable annuity contract for

another. Applicants assert that other

than the relative net asset value

requirement (which is not satisfied

solely because Contract owners

accepting the offer will be a given a 2%

Bonus) the only part of Rule 11a–2 that

would not be satisfied by the proposed

Exchange Offer is the requirement that

payments under the exchanged contract

(the Old Contract) be treated as if they

had been made under the acquired

contract (the New Contract) on the dates

actually made. This provision of Rule

11a–2 is often referred to as a ‘‘tacking’’

requirement because it has the effect of

‘‘tacking together’’ the CFSC expiration

periods of the exchanged and acquired

contracts.

8. Applicants assert that the absence

of tacking does not mean that an

exchange offer cannot be very attractive

and beneficial to investors. Applicants

state that the proposed Exchange Offer

would assure an immediate and

enduring economic benefit to investors.

The 2% Bonus would be applied

immediately and the fact that assetbased charges would be decreased by

the exchange (except for those who

select two or three additional optional

death benefit riders) would assure that

the benefit would endure. An owner of

an Old Contract who intends to

continue to hold the Contract as a longterm retirement planning vehicle will be

significantly advantaged by the

Exchange Offer because this 2% Bonus

will automatically be added to his or her

Account Value upon receipt of an

enhanced New Contract. No sales charge

will ever be paid on the amounts rolled

over in the exchange unless the New

Contract is surrendered before

expiration of the New Contract’s CDSC

period.

9. Applicants assert that tacking

should be viewed as a useful way to

avoid the need to scrutinize the terms of

an offer of exchange to make sure that

there is not abuse. Tacking is not a

requirement of Section 11. Rather, it is

a creation of a rule designed to approve

the terms of offers of exchange ‘‘sight

unseen.’’ Tacking focuses on the closest

thing to multiple deduction of sales

loads that is possible in a CDSC

context—multiple exposure to sales

loads upon surrender or redemption. If

tacking and other safeguards of Rule

11a–2 are present, there is no need for

the Commission or its staff to evaluate

the terms of the offer. The absence of

tacking in this fully scrutinized Section

11 application will have no impact on

offers made pursuant to the rule on a

‘‘sight unseen’’ basis.

10. Applicants assert that the terms of

the Exchange Offer are better than those

of its competitors. No tacking is

required when Sun Life’s competitors

offer than variable annuity contracts to

owners of Old Contracts or when Sun

Life makes such an offer to competitor’s

contract owners. In those exchanges,

unlike the ones proposed here, the

exchanging Contract owners actually

must pay any remaining CDSC on the

exchanged Contract at the time of the

exchange.

11. To the extent there are differences

in the Contracts, those differences relate

to enhanced contractual features and

charges that are fully described in

prospectuses for the New Contracts.

Furthermore, the Offering Letter will

contain concise, plain English

statements that (a) the Exchange Offer is

suitable only for Contract owners who

expect to hold their Contracts as longterm investments and (b) if the New

Contract is surrendered during the

initial CDSC period, the 2% Bonus may

be more than offset by the CDSC and a

Contract owner may be worse off than

if or she had rejected the Exchange

Offer. Applicants assert that Contract

owners should have the opportunity to

decide, on the basis of full and fair

disclosure, whether the enhancements

of the New Contracts and the 2% Bonus

justify accepting the offer.

Sections 2(a)(32), 22(c), 27(i)(2)(A)

and Rule 22c–1

12. Section 6(c) of the Act authorizes

the Commission to exempt any person,

security or transaction, or any class or

classes of persons, securities or

transactions from the provisions of the

Act and the rules promulgated

thereunder, if and to the extent that

such exemption is necessary or

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the Act. Applicants seek exemption

pursuant to section 6(c) from sections

2(a)(32), 22(c), and 27(i)(2)(A) of the Act

and Rule 22c–1 thereunder to the extent

deemed necessary to permit Sun Life to

issue New Contracts that provide for a

2% Bonus upon exchange and to

recapture the 2% Bonus when a

Contract owner returns a New Contract

to Sun Life for a refund during the free

look period.

13. Applicants assert that with respect

to refunds paid upon the return of the

New Contract within the free look

period, the amount payable by Sun Life

must be reduced by the 2% Bonus

amount. Otherwise, purchasers could

apply for the New Contract for the sole

purpose of exercising the free look

provision and making a quick profit.

Applicants represent that it is not

administratively feasible to track the 2%

Bonus amount in the Variable Account

after the 2% Bonus is applied.

Accordingly, the asset-based charges

applicable to the Variable Account will

be assessed against the entire amounts

held in the Variable Account, including

the 2% Bonus amount, during the free

look period. As a result, during such

period, the aggregate asset-based charges

assessed against a Contract owner’s

Account Value will be higher than those

that would be charged if the Contract

owner’s Account Value did not include

the 2% Bonus.

14. Subsection (i) of Section 27 of the

Act provides that Section 27 does not

apply to any registered separate account

funding variable insurance contracts, or

to the sponsoring insurance company

and principal underwriter of such

account, except as provided in

paragraph (2) of the subsection.

Paragraph (2) provides that it shall be

unlawful for such a separate account or

sponsoring insurance company to sell a

contract funded by the registered

separate account unless such contract is

a redeemable security. Section 2(a)(32)

defines ‘‘redeemable security’’ as any

security, other than short-term paper,

under the terms of the which the holder,

upon presentation to the issuer, is

entitled to receive approximately his

proportionate share of the issuer’s

current net assets, or the cash equivalent

thereof.

15. Applicants submit that the

recapture of the 2% Bonus upon return

of a New Contract during the free look

period would not deprive the owner of

his or her proportionate share of the

issuer’s current net assets. Applicants

assert that a Contract owner’s interest in

the 2% Bonus allocated to his or her

Account Value upon exchange is not

vested until the applicable free look

period has expired without return of the

Contract. Until the right to recapture has

expired and 2% Bonus is vested.

Applicants assert that Sun Life retains

the right and interest in the 2% Bonus,

although not in the earnings attributable

to that amount. Applicants assert that

when Sun Life recaptures the 2%

Bonus, it is merely retrieving its own

Federal Register / Vol. 66, No. 108 / Tuesday, June 5, 2001 / Notices 30251

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b-4.

assets, and the Contract owner has not

been deprived of a proportionate share

of the Variable Account’s assets because

his or her interest in the Bonus amount

has not vested.

16. In addition, Applicants assert that

permitting a Contract owner to retain a

2% Bonus under a New Contract upon

the exercise of the right to cancel during

the free look period would not only be

unfair, but would also encourage

individuals to exchange into a New

Contract with no intention of keeping it

and returning it for a quick profit. The

amounts recaptured equal the 2% Bonus

provided by Sun Life from its general

account assets, and any gain would

remain a part of the Contract owner’s

Account Value. In addition, the amount

the Contract owner receives in the

circumstances where the 2% Bonus is

recaptured will always equal or exceed

the surrender value of the New Contract.

17. Applicants submit that the

provisions for recapture of the 2%

Bonus under the New Contract does not

violate sections 2(a)(32) and 27(i)(2)(A)

of the Act. However, to avoid any

uncertainty as to full compliance with

the Act, Applicants request an

exemption from sections 2(a)(32) and

27(i)(2)(A), to the extent deemed

necessary, to permit the recapture of the

2% Bonus under the circumstance

described in the Application with

respect to the New Contract, without the

loss of relief from section 27 provided

by section 27(i).

18. Section 22(c) of the Act authorizes

the Commission to make rules and

regulations applicable to registered

investment companies and to principal

underwriters of, and dealers in, the

redeemable securities of any registered

investment company to accomplish the

same purposes as contemplated by

section 22(a). Rule 22c–1 thereunder

prohibits a registered investment

company issuing any redeemable

security, a person designated in such

issuer’s prospectus as authorized to

consummate transactions in any such

security, and a principal underwriter of,

or dealer in, such security, from selling,

redeeming, or repurchasing any such

security except at a price based on the

current net asset value of such security

which is next computed after receipt of

a tender of such security for redemption

or of an order to purchase or sell such

security.

19. Sun Life’s recapture of the 2%

Bonus might arguably be viewed as

resulting in the redemption of

redeemable securities for a price other

than one based on the current net asset

value of the Account. Applicants

contend, however, that the recapture of

the Bonus does not violate section 22(c)

and Rule 22c–1. Applicants argue that

the recapture of the 2% Bonus does not

involve either of the evils that Rule 22c–

1 was intended to eliminate or reduce

as far as reasonably practicable, namely:

(a) The dilution of the value of

outstanding redeemable securities of

registered investment companies

through their sale at a price below net

asset value or repurchase at a price

above it, and (b) other unfair results,

including speculative trading practices.

The proposed recapture of the 2%

Bonus does not pose such a threat of

dilution. To effect a recapture of the 2%

Bonus, Sun Life will redeem interests in

a Contract owner’s Contract at a price

determined on the basis of the current

net asset value of that Contract. The

amount recaptured will equal the

amount of the 2% Bonus that Sun Life

paid out of its general account assets.

Although the Contract owner will be

entitled to retain any investment gain

attributable to the 2% Bonus, the

amount of that gain will be determined

on the basis of the current net asset

value of the Contract. Thus, Applicants

state that no dilution will occur upon

the recapture of the 2% Bonus.

Applicants also submit that the second

harm that Rule 22c–1 was designed to

address, namely speculative trading

practices calculated to take advantage of

backward pricing, will not occur as a

result of the recapture of the 2% Bonus.

20. Applicants argue that Section

22(c) and Rule 22c–1 should not apply

because neither of the harms that Rule

22c–1 was meant to address are found

in the recapture of the 2% Bonus.

However, to avoid any uncertainty as to

full compliance with the Act,

Applicants request an exemption from

the provisions of Section 22(c) and Rule

22c–1 to the extent deemed necessary to

permit them to recapture the 2% Bonus

under the New Contract.

Conclusion

For the reasons summarized above,

Applicants submit that the Exchange

Offer is consistent with the protections

provided by Section 11 of the Act and

that approval of the terms of the

Exchange Offer is necessary or

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policies and provisions

of the Act. Applicants further submit

that their request for exemptions from

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

of the Act and Rule 22c–1 thereunder

meet the standards set out in Section

6(c) of the Act. Applicants submit that

the requested order should therefore be

granted.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–14076 Filed 6–4–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–443553; File No. SR–

CBOE–2001–18]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Chicago Board Options Exchange,

Incorporated To Exempt Certain Deepin-the-Money Options Transactions

From the Exchange Marketing Fee

May 25, 2001.

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b-4 thereunder,2

notice is hereby given that on April 10,

2001, the Chicago Board Options

Exchange, Incorporated (‘‘CBOE’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) the proposed rule

change as described in Items, I, II, and

III below, which Items have been

prepared by the CBOE. The Commission

is publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to make a change

to its marketing fee to exempt call/put

‘‘combo’’ transactions from the fee. The

text of the proposed rule change is

available at the CBOE and at the

Commission.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

CBOE included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. The CBOE has

prepared summaries, set forth in

Sections A, B, and C below, of the most

significant aspects of such statements.